-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, M83XagGuJThHPDRulYAd98rgrlH7Q4XOXU3AK3bQqGx0bIIAlctN6iKhAecYb+Kn vHhsS1fImRaP6f/jw6ug6Q== 0000891092-97-000134.txt : 19970512 0000891092-97-000134.hdr.sgml : 19970512 ACCESSION NUMBER: 0000891092-97-000134 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970509 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLSTAR INNS INC /DE/ CENTRAL INDEX KEY: 0000810992 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 770323962 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-22930 FILM NUMBER: 97598723 BUSINESS ADDRESS: STREET 1: 200 E CARRILLO ST STREET 2: STE 300 CITY: SANTA BARBARA STATE: CA ZIP: 93101 BUSINESS PHONE: 8057303354 MAIL ADDRESS: STREET 1: 200 E CARRILLO ST STREET 2: SUITE 300 CITY: SANTA BARBARA STATE: CA ZIP: 93101 FORMER COMPANY: FORMER CONFORMED NAME: ALLSTAR INNS L P /DE/ DATE OF NAME CHANGE: 19920703 10-Q 1 FORM 10-Q ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ---------- FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1997 OR [ ] TRANSITION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 0-22930 ---------- ALLSTAR INNS INC. (Exact name of registrant as specified in its charter) Delaware 77-0323962 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 200 E. Carrillo Street, #300 Santa Barbara, California 93101 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (805-730-3383) Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES _X_ NO ___ ---------- As of March 31, 1997, there were 1,047,443 shares of the Registrant's common stock outstanding. ================================================================================ PART I. FINANCIAL INFORMATION Item 1. Financial Statements ALLSTAR INNS INC. STATEMENTS OF OPERATIONS (In thousands, except per share data) (unaudited) Three Months Ended March 31, ---------------------------- 1997 1996 --------- --------- Revenues: Rent income $ 1,839 $ 8,604 Interest income 480 207 --------- --------- Total revenues 2,319 8,811 Expenses: Administrative and general 4,119 285 Depreciation & amortization 662 2,229 Other expense 5 -- Write-down vacant land value 540 -- Gain from sale of assets (116,408) -- --------- --------- Total expenses (111,082) 2,514 --------- --------- Operating income 113,401 6,297 Interest expense 1,508 4,803 --------- --------- Net income before provision for income taxes 111,893 1,494 Provision (benefit) for income taxes 45,094 (449) --------- --------- Net income $ 66,799 $ 1,943 ========= ========= Net income per common share $ 63.77 $ 1.97 ========= ========= Weighted average common shares outstanding 1,047 985 ========= ========= See accompanying notes. 2 ALLSTAR INNS INC. BALANCE SHEETS March 31, 1997 (unaudited) and December 31, 1996 (audited) (in thousands of dollars) MARCH 31, DECEMBER 31, ASSETS 1997 1996 - ---------------------------------------------- --------- ----------- Current assets: Cash and cash equivalents $ 49,636 $ 15,131 Receivable from Motel 6 -- 3,620 Other current assets 476 29 Deferred tax assets -- 30,320 --------- --------- Total current assets 50,112 49,100 Net property and equipment (Note 3) -- 127,436 Land held for sale 411 1,107 Other assets including leased property under capital lease, less accumulated amortization of $222 (1996) -- 36 --------- --------- $ 50,523 $ 177,679 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) - ---------------------------------------------- Current liabilities: Accounts payable and accrued liabilities $ 3,163 $ 5,215 Deferred Basic Rent -- 3,500 Accrued interest -- 2,032 Federal and State taxes payable 14,774 -- --------- --------- Total current liabilities 17,937 10,747 Total long-term debt (Note 4) -- 204,105 Stockholders' equity (deficit): Preferred stock, $.01 par value, authorized 1,000,000 shares; no shares issued and outstanding at March 31, 1997 and December 31, 1996 -- -- Common stock, $.01 par value, authorized 10,000,000 shares; 1,047,443 shares and 985,710 shares issued and outstanding at March 31, 1997 and December 31, 1996, respectively 10 10 Additional paid-in capital 24,161 21,360 Accumulated equity (deficit) 8,415 (58,543) --------- --------- Total stockholders' equity (deficit) 32,586 (37,173) --------- --------- $ 50,523 $ 177,679 ========= ========= See accompanying notes. 3 ALLSTAR INNS INC. STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT) Period from January 1, 1997 to March 31, 1997 (in thousands) (unaudited) Common Stock Additional Accumulated ---------------- Paid-in Equity Shares Amount Capital (Deficit) ------ ------ ------- --------- Balance, January 1, 1997 986 $ 10 $21,360 $(58,543) Net income -- -- -- 66,799 Employee Stock Options 61 -- 1,838 -- Vesting of 1995's Restricted Stock Plan -- -- 963 -- Reserved payments to retained earnings -- -- -- 159 ----- ---- ------- -------- Balance, March 31, 1997 1,047 10 $24,161 $ 8,415 ===== ==== ======= ======== See accompanying notes. 4 ALLSTAR INNS INC. STATEMENTS OF CASH FLOWS (in thousands of dollars) (unaudited) Three Months Ended March 31, ---------------------------- 1997 1996 --------- --------- Cash flows from operating activities: Cash received $ 1,960 $ 10,523 Cash paid to suppliers and employees (1,995) (509) Interest paid (1,508) (6,507) --------- --------- Net cash (used in) provided by operating activities (1,543) 3,507 Cash flows from investing activities: Capital expenditures -- -- Total proceeds from sale of motels to the Motel 6 Operator 243,028 -- Payment of long-term debt from proceeds from the sale of motels (204,062) -- Refund of deferred Basic Rent (3,212) -- Proceeds from land sales 121 -- --------- --------- Net cash provided by investing activities 35,875 -- Cash flows from financing activities: Payments under credit agreements -- (1,057) Principal payments - mortgages (43) (302) Proceeds from exercise of stock options 216 -- Net cash provided by (used in) financing activities 173 (1,359) --------- --------- Net increase in cash and cash equivalents 34,505 2,148 --------- --------- Cash and cash equivalents at beginning of period 15,131 13,518 --------- --------- Cash and cash equivalents at end of period $ 49,636 $ 15,666 ========= ========= (Continued on next page) 5 ALLSTAR INNS INC. STATEMENTS OF CASH FLOWS (in thousands of dollars) (unaudited) (continued) Three Months Ended March 31, ---------------------------- 1997 1996 --------- --------- Reconciliation of net income to net cash provided by operating activities: Net income $ 66,799 $ 1,943 Adjustment to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 662 2,228 Write-down vacant land value 540 -- Refund of deferred Basic Rent 3,212 -- Gain from sale of assets (116,408) -- Proceeds from land sales in escrow 142 -- Tax benefit resulting from the exercise of employee stock options and the vesting of restricted stock 2,585 -- Write-off obligation under capital lease 83 -- Changes in assets and liabilities: Decrease in receivable from Motel 6 3,620 1,704 (Increase) decrease in other current assets (447) 7 Decrease (increase) in deferred tax assets 30,320 (449) Decrease in accounts payable and accrued liabilities (2,052) (297) Decrease in deferred Basic Rent (3,500) -- Decrease in accrued interest (2,032) (1,704) Increase in Federal and State taxes payable 14,774 -- Increase in additional paid-in capital -- 75 Increase in accumulated equity (deficit) 159 -- --------- --------- Net cash (used in) provided by operating activities $ (1,543) $ 3,507 ========= ========= See accompanying notes. 6 Item 1. Financial Statements (continued) ALLSTAR INNS INC. NOTES TO FINANCIAL STATEMENTS (unaudited) 1. History and Basis of Presentation Allstar Inns Inc. was originally organized as a privately-owned corporation in 1982 to purchase 52 motels. The acquisition was consummated on April 28, 1983. On February 11, 1987 a partnership (the "Partnership") was formed and succeeded to the business and operations of the original company on April 3, 1987. On November 25, 1993 the Partnership merged with and into Allstar Inns Inc. (the "Company"). In July 1992, the security holders of the Company approved a plan that placed the business and operations of the Company's motels under the management of Motel 6 Operating L.P., a Delaware limited partnership (the "Motel 6 Operator"). The Company entered into a Management Contract which provided that the Motel 6 Operator would operate and manage all the Company's motels through December 31, 2011. The Motel 6 Operator also had an option to purchase the Company's motels between January 1, 1997 and December 31, 1998 at a price fixed by formula (zero value to the Stockholders at December 31, 1994). In May 1995, the security holders of the Company approved the plan to terminate the Management Contract effective January 1, 1995 and replace it with a Master Lease Agreement under terms of which the Motel 6 Operator would lease the Company's motels through December 31, 2009. Under the Master Lease Agreement, the Motel 6 Operator had an option (the "Purchase Option") to purchase the Company's motels prior to the end of 1998 at a price of $40.0 million plus assumption by the Motel 6 Operator of all indebtedness secured by the Company's motels. The Purchase Option was exercised by the Motel 6 Operator in January 1997. Pursuant to the Master Lease Agreement as approved by the stockholders at the Company's 1995 Annual Meeting, effective as of January 30, 1997, all of the Company's motels were sold to the Motel 6 Operator and its assignees for a fixed price of $40.0 million plus the assumption of approximately $206 million of debt secured by the motels. Since January 30, 1997 the Company has sold three additional parcels of vacant land and, as of April 29, 1997 holds only two parcels of vacant land which the Company also intends to sell for cash. The accompanying unaudited condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, all adjustments, consisting of normal recurring adjustments, which are necessary for a fair presentation of financial position and results of operations have been made. These financial statements should be read in conjunction with the Annual Report on Form 10-K for the fiscal year ended December 31, 1996. The results of operations for the period from January 1, 1997 to March 31, 1997 are not indicative of the results for the full year. 7 2. Net Income Per Share Net Income per common share is calculated by dividing net income by the weighted average number of common shares outstanding. As of March 31, 1997 there were 1,047,443 outstanding Shares ("Shares") of common stock. 3. Property and Equipment Property and equipment is stated at cost and consists of the following at March 31, 1997 and December 31, 1996 (in thousands of dollars): March 31, December 31, 1997 1996 -------- -------- Land ..................................... $ -- $ 30,843 Buildings and improvements ............... -- 166,199 Furniture and equipment .................. -- 42,477 Leasehold interests ...................... -- 2,498 -------- -------- -- 242,017 Less accumulated depreciation and amortization ....................... -- 114,581 -------- -------- Net property and equipment ............... $ -- $127,436 ======== ======== All of the Company's motel assets were sold to the Motel 6 Operator and its assignees on January 30, 1997. In March 1995, the FASB issued Statement No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of. The statement, which is effective for fiscal years beginning after December 15, 1995, requires that an entity evaluate long-lived assets and certain other identifiable intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amounts of the asset may not be recoverable. An impairment loss meeting the recognition criteria is to be measured as the amount by which the carrying amount for financial reporting purposes exceeds the fair value of the asset. The Company adopted this statement in 1996 and the adoption of the statement has had no effect on the Company's financial position or results of operations. 8 4. Long-Term Debt (in thousands) March 31, December 31, 1997 1996 -------- -------- Wells Fargo Bank mortgage loans maturing 1998 .............................. $ -- $102,105 Coast Federal Bank mortgage loans maturing 1998 .............................. -- 44,643 Great Western Bank and WHC-One Investors, L.P. mortgage loans maturing 2005 and 2006 ..................... -- 20,317 Motel 6 Lender secured subordinated loans maturing 1998 ........................ -- 37,040 -------- -------- Total long-term debt .............. $ -- $204,105 ======== ======== As a result of the sale of the Company's motel assets, all of the Company's lenders were paid-in-full by the Motel 6 Operator and its assignees as required by the Purchase Option. 5. Dividends The Company did not declare or pay dividends to its stockholders during the period January 1, 1997 through March 31, 1997. 6. Litigation From time to time, the Company is a party to lawsuits arising in the ordinary course of its business. Substantially all of the claims made in these lawsuits (other than any claims for punitive damages made in certain actions) are covered by the Company's insurance policies. Management believes that such lawsuits arising in the ordinary course of business will not have a material adverse effect on the financial statements of the Company. Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition Results of Operations General At a closing held in Santa Barbara, California, the Motel 6 Operator and its assignees purchased the Company's 71 motels at a fixed price of $40.0 million plus assumption of the debt secured by the motels of approximately $206 million. The sale of the motel properties constitutes a sale of substantially all of the assets of the Company. The Company, since the closing and through April 29, 1997, has sold three parcels of vacant land for $.3 million and is in the process of disposing of two additional parcels of vacant land constituting the balance of the Company's real estate holdings. 9 The Company is and will be subject to substantial Federal and State taxes on the gain realized by the sale of its motel assets and any gain realized on the disposition of the additional parcels of vacant land. On March 14, 1997, the Board of Directors of the Company approved and recommended, subject to stockholder approval, a Plan of Complete Liquidation and Dissolution (the "Plan"). At the Company's Annual Meeting of stockholders on May 8, 1997, the stockholders approved the Plan. (For a more detailed description of the Plan, refer to the Company's 1997 Proxy Statement which was mailed to the Company's stockholders in April 1997.) At a meeting of the Board of Directors held immediately after the Annual Meeting of stockholders, the Board of Directors resolved that the Company would promptly make an initial cash distribution to stockholders of $29.3 million, or $28.00 per share, and set May 8, 1997 as the record date for determining the stockholders entitled to receive their pro rata portion of such distribution. As approved by the stockholders, the Plan provides for the Company to be liquidated (i) by the sale of its remaining assets, (ii) after paying or providing for all its claims, obligations and expenses, by distributing cash to its stockholders pro rata and, (iii) if required by the Plan or deemed necessary by the Board of Directors, by distributions of its assets from time to time to one or more liquidating trusts established for the benefit of the then stockholders, or by a final distribution of its then remaining assets to a liquidating trust established for the benefit of the then stockholders. Should the Board of Directors determine that one or more liquidating trusts are required by the Plan or are otherwise necessary, appropriate or desirable, approval of the Plan will constitute stockholder approval of the appointment by the Board of Directors of one or more trustees to any such liquidating trusts and the execution of liquidating trust agreements with the trustees on such terms and conditions as the Board of Directors, in its absolute discretion, shall determine. Total revenues for the first three months of 1997 were $2.3 million consisting of $1.8 million for one month of Basic and Debt Service Rent income and $.5 interest income earned from short term investments. Previous year revenues of $8.8 million is comprised of a full year of Basic Rent and three months of debt service rent. Administrative and general expenses were $4.1 million for the first three months of 1997 compared to $.3 million for the same period last year. As a result of the exercise of the Purchase Option, the Company was required under FASB Statement 123 -- Accounting for Stock-Based Compensation, to expense the fair market value of employee stock options of $2.7 million; and recognize as an expense employee severance pay of $1.3 million payable through December 31, 1998. Depreciation and amortization for the first three months of 1997 versus the same period last year was $.6 million and $2.2 million, respectively. The difference is due to there being only one month of depreciation and amortization expense for 1997 compared to three months of expenses for 1996. Write-down of vacant land for the first three months of 1997 was $.5 million versus nothing for the same period last year. This resulted from the reduction of the carrying value of land based on a sales program to recognize the liquidation and dissolution of the Company. 10 Gain from sale of assets of $116.4 million for the first quarter of 1997 reflects the gain from the sale of the Company's motels to the Motel 6 Operator as a result of exercising the Purchase Option. Interest expense for the first three months of 1997 compared to the same period last year was $1.5 million and $4.8 million, respectively. This year's decrease was due to there being only one months interest charges included in 1997's total, whereas there were three months of charges in 1996's total. The provision for income taxes of $45.1 million for the first three months of 1997 is the Federal and State tax liability on the gain from sale of assets to the Motel 6 Operator. Liquidity and Capital Resources At March 31, 1997, the Company had $49.6 million of cash and cash equivalents, an increase of approximately $34.5 million from December 31, 1996. As of March 31, 1997, the Company had no borrowing capacity. EBITDA was $114.1 million for the three months ended March 31, 1997 compared to $8.5 million for the same period last year. EBITDA, as used above, is defined as earnings before interest expense, income taxes, depreciation and amortization. The increase was the result of the $116.4 million gain from sale of assets resulting from the Motel 6 Operator exercising the Purchase Option. Net cash used by operating activities for the first three months of 1997 was $(1.5) million compared to $3.5 provided by operating activities for the same period in 1996. This year's results included no Basic Rent receipts from the Motel 6 Operator, whereas last year's results included $3.5 million of Basic Rent receipts. Net cash provided in investing activities was $35.9 million for the first three months of 1997 and -0- for the same period last year. This year's favorable variance was due to the receipt of $35.8 million of proceeds from the sale of the Company's motels to the Motel 6 Operator. Net cash provided by financing activities was $.2 million for the first three months of 1997 versus $(1.4) million used by financing activities for the same period last year. This year's favorable results were due to not having to make payments under credit agreements because, as a result of the exercise of the purchase option, all of the Company's long-term debt was paid-off in full. Last year's results contained $1.1 million of these payments. The Company is subject to substantial Federal and State taxes on the gain realized by the sale of its motel assets and any gain realized on the disposition of the additional parcels of vacant land. As approved by the Board of Directors and the stockholders of the Company, the Plan of Complete Liquidation and Dissolution of the Company (the "Plan") provides for the Company to distribute pro rata to the Company's stockholders all its remaining cash, including the proceeds of any sale or disposition, except such cash or assets as are required for paying or making provisions for the claims and obligations of the Company. The Board of Directors resolved that the Company would make an initial cash distribution to stockholders of $29.3 million, or $28.00 per share, and set May 8, 1997 as the record date for determining the 11 stockholders entitled to receive their pro rata portion of such distribution. A more detailed description of the Plan is provided in the Company's 1997 Proxy Statement which was mailed to the Company's stockholders in April 1997. PART II. OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits filed as part of this Form 10-Q: (2.1) Plan of Complete Liquidation and Dissolution of Allstar Inns Inc. (incorporated herein by reference to Exhibit A of the Company's 1997 Proxy Statement filed with the Securities and Exchange Commission on March 19, 1997). (b) The Company filed a Form 8-K with the Securities and Exchange Commission dated February 11, 1997. This report related to the sale by the Company on January 30, 1997 of its motels pursuant to the exercise of a purchase option by the operator of such motels. 12 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. May 9, 1997 ALLSTAR INNS INC. BY: /S/ Edward J. Gallagher ---------------------------- Edward J. Gallagher Vice Chairman - Principal Accounting Officer BY: /S/ Edward A. Paul ---------------------------- Edward A. Paul Vice President - Principal Financial Officer 13 EXHIBIT INDEX ------------- Exhibit Number Description Page - ------ ----------- ---- 2.1 Plan of Complete Liquidation and Dissolution of Allstar Inns Inc. (incorporated herein by reference to Exhibit A of the Company's 1997 Proxy Statement filed with the Securities and Exchange Commission on March 19, 1997). EX-27 2 FINANCIAL DATA SCHEDULE
5 This schedule contains summary information extracted from the financial statements of Part I. Item 1. of the March 31, 1997 Form 10-Q and is qualified in its entirety by reference to such financial statements. 1,000 3-MOS DEC-31-1997 MAR-31-1997 49636 0 476 0 0 50112 411 0 50523 17937 0 0 0 10 32576 50523 0 2319 0 0 5326 (116408) 1508 111893 45094 66799 0 0 0 66799 63.77 63.77
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