10-Q 1 q1122902.txt FIRST QUARTER 2002 10Q UNITED STATES 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, 2002. or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _________ to ____________ Commission File Number: 33-78866 ---------------------- MOA HOSPITALITY, INC. (Exact name of registrant as specified in its charter) Delaware 33-0166914 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) ---------------------- 701 Lee Street, Suite 1000 Des Plaines, Illinois 60016 (847) 803-1200 (Address, including zip code, and telephone number, including area code, of registrant's principal executive offices) ---------------------- 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 Number of shares of Common Stock, $.01 par value outstanding as of November 30, 2002: 800,000 INDEX TO FORM 10-Q Page Part I Financial Information Item 1. Financial Statements Condensed consolidated balance sheets - March 31, 2002 2 (unaudited) and December 31, 2001. Condensed consolidated statements of operations - 3 Three months ended March 31, 2002 and 2001 (unaudited). Condensed consolidated statements of cash flows - 4 Three months ended March 31, 2002 and 2001 (unaudited). Notes to condensed consolidated financial statements - 5 March 31, 2002 (unaudited). Item 2. Management's Discussion and Analysis of Financial 9 Condition and Results of Operations General 9 Results of Operations 10 Liquidity and Capital Resources 13 Part II Other Information Item 1. Legal Proceedings 15 Item 2. Changes in Securities 15 Item 3. Defaults upon Senior Securities 15 Item 4. Submission of Matters to a Vote of Security Holders 15 Item 5. Other Information 15 Item 6. Exhibits and Reports on Form 8-K 15 Signatures 16 Certifications 17 PART I - FINANCIAL INFORMATION Item 1. Financial Statements MOA HOSPITALITY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data) March 31, December 31, 2002 2001 ------------- ------------- ( Unaudited ) ASSETS Current Assets: Cash and cash equivalents $ 3,662 $ 3,152 Accounts receivable from property operations 1,323 1,461 Operating supplies and prepaid expenses 2,282 2,313 Current portion of mortgage and notes receivable 133 233 ------------- ------------- Total Current Assets 7,400 7,159 Investment property: Operating properties, net of accumulated depreciation 198,363 206,172 Land held for development 10,812 9,585 ------------- ------------- Total investment property 209,175 215,757 Other Assets: Deposits and other assets 3,397 2,915 Mortgage and other notes receivable, less current portion 31,383 28,081 Net deferred tax asset 1,182 2,537 Financing and other deferred costs, net of accumulated amortization of $16,490 in 2002 and $17,013 in 2001 8,243 8,934 ------------- ------------- Total Other Assets 44,205 42,467 ------------- ------------- Total Assets $ 260,780 $ 265,383 ============= ============= LIABILITIES, MINORITY INTERESTS AND STOCKHOLDERS' EQUITY Current Liabilities: Trade accounts payable $ 1,732 $ 1,521 Real estate taxes payable 1,437 1,460 Accrued interest payable 2,780 2,043 Nonrefundable lease deposits and purchase price credits 24,086 23,296 Other liabilities for leased locations 5,630 4,581 Deferred income 6,594 5,475 Other accounts payable and accrued expenses 468 3,317 Current portion of long-term debt 30,111 31,667 ------------- ------------- Total Current Liabilities 72,838 73,360 Long-term debt, less current portion: Mortgage and other notes payable 173,135 175,250 12% Senior Subordinated Notes, net of unamortized discount of $206 in 2002 and $223 in 2001 11,321 11,304 ------------- ------------- Total Long-term debt, excluding current portion 184,456 186,554 ------------- ------------- Total Liabilities 257,294 259,914 ------------- ------------- Stockholders' equity: Common stock, $.01 par value, 1,500,000 shares authorized; 800,000 shares issued and outstanding 8 8 Additional paid-in capital 15,294 15,294 Retained deficit (11,816) (9,833) ------------- ------------- Total Stockholders' Equity 3,486 5,469 ------------- ------------- Total Liabilities and Stockholders' Equity $ 260,780 $ 265,383 ============= ============= See accompanying notes to condensed consolidated financial statements. MOA HOSPITALITY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands except share data) Three Months Ended March 31 ------------------------ 2002 2001 ---------- ---------- Revenues: Motel operating revenues $ 7,657 $ 9,600 Lease revenues 2,897 2,893 Vending revenues 842 329 Other revenues 650 593 ---------- ---------- Total revenues 12,046 13,415 Costs and expenses: Motel operating expenses 4,684 5,824 Marketing and royalty fees 543 714 General and administrative 1,562 1,786 Lease expenses 281 226 Vending expenses 687 381 Depreciation and amortization 2,966 3,514 ---------- ---------- Total direct expenses 10,723 12,445 ---------- ---------- Net operating income 1,323 970 Interest expense 4,577 5,132 ---------- ---------- Income (loss) from operations before minority interest and income taxes (3,254) (4,162) Minority interests - 13 ---------- ---------- Income (loss) from continuing operations before income taxes (3,254) (4,149) Income tax expense (benefit) (1,266) (1,615) ---------- ---------- Income (loss) from continuing operations (1,988) (2,534) Discontinued operations (including net gain on disposal of $147 and $0, respectively) net of income tax of $3 and ($70) 5 (109) ---------- ---------- Net income (loss) $ (1,983) $ (2,643) ========== ========== Income (loss) per common share (basic and diluted): Income (loss) per common share from continuing operations $ (2.49) $ (3.17) ========== ========== Net Income (loss) per common share $ (2.48) $ (3.30) ========== ========== Weighted average number of common shares outstanding 800,000 800,000 ========== ========== See accompanying notes to condensed consolidated financial statements. MOA HOSPITALITY, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands)

~~September~~Three ~~30,~~Months ~~December~~Ended March 31, ~~2001 2000~~ ----------------------- 2002 2001 ---------- ---------- ~~(Unaudited)~~Cash ~~ASSETS~~flows ~~Current~~used ~~Assets:~~in ~~Cash~~operating ~~and~~activities: ~~cash~~Net ~~equivalents~~loss $ 8(1,~~081~~983) $ 4(2,~~230~~643) ~~Accounts~~Adjustments ~~receivable~~to ~~from~~reconcile ~~property~~net ~~operations~~loss ~~2,172~~to ~~1,537~~cash ~~Operating~~provided ~~supplies~~by ~~and~~operating ~~prepaid~~activities: ~~expenses 1~~Depreciation,~~772~~ ~~2,032~~amortization ~~Current~~and ~~portion~~accretion of ~~mortgage~~discount ~~and~~on notes ~~receivable~~3,031 ~~227 6~~3,~~185~~654 ~~-------------~~Minority ~~-------------~~interests ~~Total~~of ~~Current~~others ~~Assets~~in ~~12,252~~net ~~13,984~~loss ~~Investment~~from ~~property:~~operations ~~Operating~~- ~~properties,~~(13) ~~net~~Deferred ofincome ~~accumulated~~taxes ~~depreciation 216~~1,~~956~~355 ~~232,366~~(241) ~~Land~~Gain ~~held~~on ~~for~~sale ~~development~~of ~~13,358~~properties ~~8,366~~(147) -~~------------~~ ~~-------------~~Change ~~Total~~in ~~investment~~assets ~~property~~and ~~230,314 240,732 Other Assets~~liabilities: ~~Deposits~~(Increase) ~~and~~decrease ~~other~~in assets: ~~1,783~~Accounts ~~2,399~~receivable ~~Mortgage~~139 ~~and~~(4) ~~other~~Operating ~~notes receivable~~supplies, ~~less~~prepaid ~~current portion 19~~expenses,~~854~~ ~~19,403~~deposits ~~Financing~~ and other ~~deferred~~assets ~~costs,~~(289) ~~net~~(165) ofIncrease ~~accumulated~~(decrease) ~~amortization~~in ofliabilities: ~~$16,491~~Accounts inpayable ~~2001~~ and ~~$14,413~~accrued inexpenses ~~2000~~647 91,~~819~~023 ~~11,165~~Accrued ~~-------------~~interest ~~-------------~~payable ~~Total~~745 ~~Other~~492 ~~Assets 31,456 32,967~~ ----------~~---~~ ------------- ~~Total~~Net ~~Assets~~cash $provided ~~274,022~~by $operating ~~287~~activities 3,~~683~~498 ~~============= ============= LIABILITIES~~2,103 ~~MINORITY~~Cash ~~INTERESTS~~flows ~~AND~~provided ~~STOCKHOLDERS'~~by ~~EQUITY~~investing ~~Current Liabilities~~activities: ~~Trade~~Acquisition ~~accounts~~and ~~payable~~development $of ~~516~~investment $properties (1,~~109~~227) ~~Real estate taxes payable~~ (1,~~548~~676) ~~1,373~~Refurbishment ~~Accrued~~of ~~interest~~investment ~~payable~~properties ~~2,444~~(375) ~~2,003~~(778) ~~Other~~Net ~~accounts~~proceeds ~~payable~~from ~~and~~sale ~~accrued~~of ~~expenses~~investment ~~3,267~~properties 62,~~924~~460 ~~Other~~- ~~liabilities,~~Cash ~~including~~restricted ~~nonrefundable~~for ~~lease~~refurbishment ~~deposits~~ of ~~$21,442~~properties in(135) ~~2001~~661 ~~and~~Collections ~~$19,597~~on inmortgage ~~2000~~and ~~31,206~~other ~~24,432~~notes ~~Current~~receivable ~~portion~~39 ~~of long-term debt 33~~6,~~458~~304 ~~28,519~~ ----------~~---~~ ------------- ~~Total~~Net ~~Current~~cash ~~Liabilities~~provided ~~72,439~~by ~~64,360~~investing ~~Net~~activities ~~deferred~~762 ~~tax~~4,511 ~~liabilty~~Cash ~~522~~flows ~~995~~provided ~~Long-term~~by ~~debt,~~(used ~~less~~in) ~~current~~financing ~~portion~~activities: ~~Mortgage~~Proceeds ~~and~~from ~~other~~ notes payable ~~175,120~~711 ~~192~~1,~~902~~824 ~~12%~~Repayment ~~Senior Subordinated Notes, net~~ of ~~unamortized~~notes ~~discount~~payable ~~of $220~~(4,~~000~~383) ~~in 2001 and $351~~(7,~~000~~094) inDeferred ~~2000~~financing ~~13,256~~costs ~~13,125~~(78) - ------------ ------------- ~~Total~~Net ~~Long-term~~cash ~~debt,~~used ~~excluding~~in ~~current~~financing ~~portion~~activities ~~188~~(3,~~376~~750) ~~206~~(5,~~027~~270) ----------~~---~~ ------------- ~~Total~~Net ~~Liabilities~~increase ~~261~~in cash and cash equivalents 510 1,~~337~~344 ~~271~~Cash and cash equivalents at beginning of period 3,~~382~~152 3,162 ----------~~---~~ ------------- ~~Minority~~Cash ~~Interests~~and -cash ~~2,014~~equivalents ~~Stockholders'~~at ~~equity:~~end ~~Common~~of ~~stock,~~period $~~.01~~ ~~par value~~3,662 1$ 4,~~500,000~~506 ~~shares~~========== ~~authorized;~~=========== ~~800,000~~Supplementary ~~shares~~disclosure ~~issued~~of ~~and~~cash ~~outstanding~~flow 8information: 8Cash ~~Additional~~ paid~~-in~~ ~~capital~~during ~~15,294~~the ~~15,294~~period ~~Retained~~for ~~deficit~~interest (2$ 3,~~617)~~877 (1$ 4,~~015)~~692 ~~-------------~~========== ~~-------------~~=========== ~~Total~~Cash ~~Stockholders'~~paid ~~Equity~~(net ~~12,685~~of ~~14,287~~refunds ~~-------------~~received) ~~-------------~~during ~~Total~~the ~~Liabilities~~period ~~and~~for ~~Stockholders'~~income ~~Equity~~taxes $ ~~274,022~~- $ ~~287,683~~- ==========~~===~~ =============

See accompanying notes to condensed consolidated financial statements. MOA HOSPITALITY, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS March 31, 2002 (Unaudited) 1. Basis of Presentation The accompanying unaudited interim condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the three-month period ended March 31, 2002 are not necessarily indicative of the results that may be expected for the year ended December 31, 2002. For further information, refer to the consolidated financial statements and footnotes thereto included in MOA Hospitality, Inc. and Subsidiaries' Annual Report on Form 10-K for the year ended December 31, 2001. The terms "MOA" and the "Company" mean MOA Hospitality, Inc. and its subsidiaries. Certain reclassifications of prior-period amounts have been made to conform with current-period presentation which have not changed operations or stockholders' equity. 2. Divestitures and Leasing Activities In January through March 31, 2002, the Company leased an additional three of its lodging facilities to third party operators under terms similar to previous operating leases executed by the Company. Subsequent to March 31, 2002 through September 30, 2002, the Company leased an additional two of its lodging facilities to third party operators under terms similar to previous operating leases executed by the Company. In January through March 31, 2002, the Company sold two of its lodging facilities for approximately $3.7 million for a gain of approximately $147,000. Deferred purchase price credits and non-refundable security deposits aggregating approximately $280,000 were credited to the buyers in connection with these sales. An additional property was sold to a related party at a price believed by management to represent fair market value for $3,500,000 resulting in a deferred gain of $1,120,000 and a note receivable of $3,240,000. Subsequent to March 31, 2002 through September 30, 2002, the Company sold three of its lodging facilities for approximately $4.7 million in cash for a loss of approximately $169,000. In accordance with SFAS 144 "Accounting for the Impairment or Disposal of Long Lived Assets," effective for financial statements issued for fiscal years beginning after December 31, 2001, net income and gain/(loss) on sales of real estate for properties sold subsequent to December 31, 2001 are reflected in the consolidated statements of operations as "Discontinued operations" for both periods presented. Below is a summary of the results of operations of these properties through their respective disposition dates: For the Three Months Ended March 31 --------------------------- ( in thousands ) --------------------------- 2002 2001 ------------ ------------ Revenues: Motel operating revenues $ 220 $ 270 Lease revenues 8 37 ------------ ------------ Total revenues 228 307 Costs and expenses: Motel operating expenses 223 232 Marketing and royalty fees 26 29 Lease expenses 1 4 Depreciation and amortization 62 112 ------------ ------------ Total direct expenses 312 377 ------------ ------------ Net operating income (84) (70) Interest expense 55 109 ------------ ------------ Income (loss) from operations (139) (179) Gain (loss) on sale of properties 147 - ------------ ------------ Income (loss) before income taxes 8 (179) Income tax expense (benefit) 3 (70) ------------ ------------ Net income (loss) $ 5 $ (109) ============ ============ 3. Mortgage and Other Notes Payable In January through March 31, 2002 the Company was advanced $654,000 on loans of $7 million for construction advances on one property under construction bringing the total advanced to $3.2 million. During April through September 30, 2002, the Company was advanced an additional $2.3 million on loans of $7 million for construction advances on one property under construction bringing the total advanced to $5.5 million. In April 2002, a subsidiary of the Company purchased a vending company for $210,000 by issuing a note payable of $110,000 with monthly principal and interest payments of $10,400, due March 1, 2003. Goodwill of $120,000 and fixed assets of $90,000 were preliminarily recorded as a result of this transaction. 4. Income Taxes Income tax expense differs from the amounts computed by applying the U.S. federal income tax rate of 34% to income before income taxes principally as a result of state income taxes. 5. Contingencies The Company is involved in various legal proceedings arising in the ordinary course of business. The Company does not believe that any of these actions, either individually or in the aggregate, will have a material adverse effect on the Company's business, results of operations or financial condition. 6. Related Parties In March 2002 one property was sold to a related party at a price believed by management to represent fair market value for $3,500,000 resulting in a deferred gain of $1,120,000 and a note receivable of $3,240,000. During the quarter ended March 31, 2002, the Company received approximately $38,000 in management fees from related parties. 7. Reclassifications Certain reclassifications have been made to previously reported 2001 statements in order to provide comparability with the 2002 statements reported herein. Theses reclassifications have not changed the 2001 results or stockholders' equity. 8. Segments As of March 31, 2002, the Company, directly and through subsidiaries, owned 111 lodging facilities in 38 states. The Company owns a 100% interest in all of its properties. The Company operates thirty-five of its motels and leases seventy-six of its motels to third party tenants pursuant to operating leases. The Company separately evaluates the performance of each of its motels. Three months ended March 31 ----------------------- 2002 2001 ---------- ---------- Motel operations: Motel operating revenue: Room revenues $ 6,799 $ 8,732 Ancillary motel revenues 858 868 ---------- ---------- Total motel operating revenues 7,657 9,600 Motel costs and expenses: Motel operating expenses 4,684 5,824 Marketing and royalty fees 543 714 Depreciation and amortization 1,314 1,593 ---------- ---------- Total motel direct expenses 6,541 8,131 ---------- ---------- 1,116 1,469 Lease Operations Lease revenues 2,897 2,893 Lease expenses 281 226 Depreciation and amortization 1,467 1,674 ---------- ---------- 1,149 993 Vending Operations Vending revenues 842 329 Vending expenses 687 381 Depreciation and amortization 144 76 ---------- ---------- 11 (128) Corporate Operations Other revenues 650 593 General and administrative expenses: Management Company Operations 1,142 1,472 Construction/Acquisition and Divestiture 5 34 Vending - general and administrative 415 280 ---------- ---------- Total general and administrative expenses 1,562 1,786 Depreciation and amortization 41 171 ---------- ---------- (953) (1,364) ---------- ---------- Net operating income 1,323 970 Interest expense 4,577 5,132 ---------- ---------- Loss from operations before minority interests (3,254) (4,162) Minority interests - 13 ---------- ---------- Loss from continuing operations before income taxes (3,254) (4,149) Income tax expense (benefit) (1,266) (1,615) ---------- ---------- Loss from continuing operations (1,988) (2,534) Discontinued operations (including net gain on disposal of $147 and $0) net of income tax of $3 and $(70) 5 (109) ---------- ---------- Net Loss $ (1,983) $ (2,643) ========== ========== Total Assets: Motel Operations $ 109,897 $ 141,016 Lease Operations 113,599 117,039 Other Operations 37,284 23,019 ---------- ---------- $ 260,780 $ 281,074 ========== ========== Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CERTAIN STATEMENTS UNDER THE CAPTION "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS," CONSTITUTE "FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 AND AS SUCH, SPEAK ONLY AS OF THE DATE MADE. FORWARD-LOOKING STATEMENTS ARE NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM HISTORICAL RESULTS OR THOSE ANTICIPATED AT THE TIME OF THE FORWARD-LOOKING STATEMENTS ARE MADE, INCLUDING, WITHOUT LIMITATION, RISKS AND UNCERTAINTIES ASSOCIATED WITH THE FOLLOWING: GENERAL REAL ESTATE, TRAVEL AND NATIONAL AND INTERNATIONAL ECONOMIC CONDITIONS, INCLUDING THE SEVERITY AND DURATION OF THE DOWNTURN RESULTING FROM THE SEPTEMBER 11, 2001 TERRORIST ATTACKS ON NEW YORK AND WASHINGTON, D.C.; SUCH FORWARD-LOOKING STATEMENTS INVOLVE KNOWN AND UNKNOWN RISKS AND UNCERTAINTIES AND OTHER FACTORS WHICH MAY CAUSE THE ACTUAL RESULTS, PERFORMANCE OR ACHIEVEMENTS OF THE COMPANY TO BE MATERIALLY DIFFERENT FROM ANY FUTURE RESULTS, PERFORMANCE OR ACHIEVEMENTS EXPRESSED OR IMPLIED BY SUCH FORWARD-LOOKING STATEMENTS. SUCH FACTORS INCLUDE, AMONG OTHERS, THE FOLLOWING: THE COMPANY'S ABILITY TO OBTAIN FINANCING, COMPETITION, INTEREST RATE FLUCTUATIONS, OR GENERAL BUSINESS AND ECONOMIC CONDITIONS. THIS DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE INTERIM CONDENSED CONSOLIDATED HISTORICAL FINANCIAL STATEMENTS OF THE COMPANY AND THE NOTES THERETO INCLUDED ELSEWHERE HEREIN. THE SUPPLEMENTAL HISTORICAL OPERATING RESULTS PRESENTED BELOW FOR THE THREE MONTHS ENDED MARCH 31, 2002 AND 2001 HAVE BEEN PREPARED ON THE SAME BASIS AS THE INTERIM CONDENSED CONSOLIDATED HISTORICAL FINANCIAL STATEMENTS AND, IN THE OPINION OF THE COMPANY, INCLUDE ALL ADJUSTMENTS (CONSISTING ONLY OF NORMAL RECURRING ADJUSTMENTS) NECESSARY TO PRESENT FAIRLY THE INFORMATION SET FORTH THEREIN. General MOA operates principally in the economy limited service segment of the lodging industry. As a result, its average room rates tend to be lower than the average room rates of full service lodging facilities. However, due to the limited nature of the public space and ancillary services provided by limited service motels, the Company's expenses tend to be lower than those of full service lodging facilities. The profitability of the lodging industry in general is significantly dependent upon room rental rates and occupancy rates. Due to the fixed nature of a relatively high portion of the Company's expenses, changes in either room rates or occupancy rates result in significant changes in the operating profit of the Company's motels. The United States lodging industry has experienced downward pressure on RevPAR and occupancy throughout 2001 due to the overall slowdown in the economy. Such pressure was substantially increased as a result of the September 11, 2001 terrorist attacks on New York and Washington D.C. On a same store basis, through the first quarter, RevPAR and occupancy have decreased to $29.89 and 60.08%, respectively, for 2002 versus $30.56 and 61.35 % for 2001. The Company is actively working with its managers and lessees to reduce operating and overhead expenses and has curtailed or postponed non-essential capital expenditure activities; however, there can be no assurance that the results of such efforts will be sufficient to enable the Company to continue meeting its obligations as they come due. Three Months Ended March 31, 2002 Compared to the Three Months Ended March 31, 2001 The following chart presents certain historical operating results and statistics discussed herein and is being provided as a supplement to the condensed consolidated financial statements presented elsewhere herein.

Supplemental Operating Results and Statistics ---------------------------------------------------------------------- Three Months Ended ~~Nine~~March ~~Months~~31 ~~Ended~~---------------------------------------------------------------------- ~~September~~Motels 30Owned ~~September~~Acquisitions/ 30Both Periods Divestitures (6) Consolidated ------------------ --------- ------------- ---------------------- 2002 2001 ~~2000~~2002 2001 ~~2000~~2002 2001 -------- ---- ---- -------- -- ---------- ---------- ---------- ~~Revenues~~(dollars in thousands, except Other data) Motel operations: Motel operating revenues: Room revenues $ 136,~~653~~588 $ 176,~~458~~779 $ ~~35,845~~211 $ 471,~~442~~953 ~~Lease~~$ ~~revenues 3~~6,~~206~~799 ~~2,822~~$ 8,~~954~~732 ~~7,334~~Ancillary ~~Vending~~motel revenues ~~624~~837 ~~287~~818 ~~1,375~~21 ~~767~~50 ~~Other~~858 ~~revenues~~868 ~~542 766 1,749 2,235~~ -------- ---- ---- -------- -- ---------- ---------- ---------- Total ~~revenues~~motel ~~18,025~~operating ~~21,333~~revenues 477,~~923~~425 577,~~778~~597 ~~Costs~~232 ~~and expenses: Motel operating expenses 5~~2,~~932~~003 7,~~759~~657 189,~~530~~600 ~~25,530~~Motel ~~Marketing~~costs and ~~royalty~~expenses: ~~fees~~Motel ~~965~~operating ~~1,188~~expenses 24,~~549~~407 34,~~380~~589 ~~General~~277 ~~and administrative~~ 1,~~377~~235 ~~1,463~~ 4,~~652~~684 45,~~309~~824 ~~Lease~~Marketing ~~expenses~~and ~~440~~royalty ~~115~~fees ~~618~~528 ~~310~~552 ~~Vending~~15 ~~expenses~~162 ~~533~~543 ~~338~~714 ~~1,357 761~~ Depreciation and amortization 31,~~422~~271 31,~~829~~314 1043 279 1,~~649~~314 101,~~988~~593 --------~~----~~ --------~~----~~ ------------ ------------ ~~Total direct expenses 12,669 14,692 38,355 45,278~~ ------------ ------------ ~~------------~~Total ~~------------~~motel ~~Net~~direct ~~operating~~expenses ~~income 5~~6,~~356~~206 6,~~641~~455 ~~9,568~~335 121,~~500~~676 ~~Interest expense 5,142~~ 6,~~180~~541 158,~~651~~131 ~~19,025~~ -------- ---- ---- -------- -- ---------- ---------- ---------- ~~Income~~$ ~~(loss)~~1,219 ~~from~~$ ~~operations~~1,142 ~~214~~$ ~~461~~ (~~6,083~~103) (6$ 327 1,~~525)~~116 ~~Minority~~1,469 ~~interests~~======== -======== ~~(35)~~========== ~~(20)~~========== ~~(11)~~Lease ~~Gain~~operations: ~~(loss)~~Lease onrevenues ~~sale~~2,897 of2,893 ~~properties~~Lease ~~820~~expenses ~~(67)~~281 3226 Depreciation and amortization 1,~~479~~467 1,~~017~~674 ------------ ------------ 1,149 993 Vending operations: Vending revenues 842 329 Vending expenses 687 381 Depreciation and amortization 144 76 ------------ ------------ ~~Income~~11 (~~loss~~128) ~~before~~Corporate ~~income~~operations ~~taxes~~Other revenues, net 650 593 General and ~~extraordinary~~administrative ~~item~~expenses: ~~1,034~~Management ~~359~~Company (2Operations 1,~~624)~~142 (51,~~519)~~472 ~~Income~~Construction/Acquisition ~~tax~~and ~~expense~~Divestiture ~~(benefit)~~5 ~~403~~34 ~~140~~Vending ~~(1,021)~~general ~~(2,148)~~and ~~------------~~administrative ~~------------~~415 280 ------------ ------------ ~~Income~~Total ~~(loss)~~general ~~before~~and ~~extraordinary~~administrative ~~item~~expenses ~~631 219 (~~1,~~603)~~562 (31,~~371)~~786 ~~Gain~~Depreciation onand ~~early~~amortization ~~extinguishment~~41 of171 ~~debt, net of applicable income taxes of $1,437~~ - - - ~~2,255~~ -------~~-----~~ ------------ (953) (1,364) ------------ ------------ Net operating income ~~(loss)~~ $ ~~631 $ 219 $ (~~1,~~603)~~323 $ ~~(1,116)~~970 ============ ============ ~~============~~Other ~~============~~data: ~~Income~~Number of motels at period end (~~loss~~5) ~~per~~32 ~~common~~32 ~~share:~~3 ~~Income~~12 35 44 Number of rooms at period end (~~loss~~5) ~~before~~2,760 ~~extraordinary~~2,762 ~~item~~288 $1,006 03,048 3,768 Occupancy percentage (5) 60.7908% $61.35% 039.2773% $52.72% (258.~~00)~~62% $58.39% ADR (~~4.21~~1) ~~Extraordinary~~(5) ~~item~~$ -44.15 -$ -44.45 2$ 34.8248 ~~------------~~$ ~~------------~~16.77 ~~------------~~$ ~~------------~~43.67 ~~Net~~$ ~~Income~~46.47 REVPAR (~~loss~~2) ~~per common share~~ (~~basic~~5) ~~and~~$ ~~diluted)~~29.89 $ 030.7956 $ 014.27 $ (29.~~00)~~07 $ (128.~~39)~~77 ~~============~~$ ~~============~~29.60 ~~============~~Net ~~============~~operating ~~Weighted~~income ~~average~~margin ~~number~~(3) of10.98% ~~common~~7.23% ~~shares~~Net ~~outstanding~~motel ~~800,000~~revenue ~~800,000~~margin ~~800,000~~(4) ~~800,000~~(5) ~~============~~37.78% ~~============~~36.24% ~~============~~3.90% ~~============~~31.03% 35.74% 35.07%

------------------------------------------------ (1) ADR represents room revenues divided by the total number of rooms occupied. (2) REVPAR represents total motel operating revenues divided by the total number of rooms available. (3) Net operating income margin represents net operating income divided by total motel operating revenues plus lease revenues plus vending revenues plus corporate other revenues. (4) Net motel revenue margin represents total motel operating revenues less motel operating expenses and marketing and royalty fees, divided by motel room revenues. (5) At March 31, 2002 and March 31, 2001, and for the three months periods then ended, excludes amounts related to the seventy-six motels and seventy-four motels, respectively, which are leased to third party tenants. (6) Includes newly aquired properties, newly leased properties and properties which were leased that the Company is now operating. Effective January 1, 2002 the Company adopted the provisions of Statement of Financial Accounting Standards No. 144 ("SFAS 144"), "Accounting for the Impairment or Disposal of Long-Lived Assets." SFAS 144 addresses the financial accounting and reporting for the impairment or disposal of long-lived assets. SFAS 144 extends the reporting requirements of discontinued operations to include components of an entity that have either been disposed of or are classified as held for sale. During the three months ended March 31, 2002, the Company disposed of three properties. The operating results of theses properties have been reclassified as discontinued operations in the unaudited consolidated statements of operations for each of the periods included herein. Total revenues consist principally of motel operating revenues. Motel operating revenues are derived from room rentals and ancillary motel revenues such as charges to guests for food and beverage service, long distance telephone calls, and fax machine use. Lease revenues are derived from properties leased to third parties. Vending revenues are derived from vending machines used in the motels and also vending machines placed in non owned locations. Other revenues include interest income, and other miscellaneous income. Total revenues decreased to $12,046,000 for the three months ended March 31, 2002 from $13,415,000 for the three months ended March 31, 2001, a decrease of $1,369,000 or 10.2%. Motel revenues decreased to $7,657,000 for the three months ended March 31, 2002 from $9,600,000 for the three months ended March 31, 2001, a decrease of $1,943,000 or 20.2%. The motel revenues for motels owned during both periods decreased approximately $172,000 and revenues for motels acquired and divested since January 1, 2001 decreased by $1,771,000. Motel revenues for motels owned during both periods decreased by 2.3%. The decrease in motel revenues for motels owned during both periods was attributable to a combined decrease in the average daily rate ("ADR") and the occupancy rate. The ADR for the motels owned during both periods decreased to $44.15 for the three months ended March 31, 2002 from $44.45 for the three months ended March 31, 2001, a decrease of $0.30 or less than 1%. The occupancy for the motels owned during both periods decreased to 60.1% for the three months ended March 31, 2002 from 61.35% for the three months ended March 31, 2001, a decrease of 2.1%. Revenue per available room ("REVPAR") for motels owned during both periods decreased to $29.89 for the three months ended March 31, 2002 from $30.56 for the three months ended March 31, 2001, a decrease of $.67 or 2.2%. The acquired and divested motels had an occupancy percentage of 39.73%, an ADR of $34.48 and REVPAR of $14.27 for the period, which they were owned by the Company in 2002. Motel operating expenses include payroll and related costs, utilities, repairs and maintenance, property taxes, insurance, linens and other operating supplies. Motel operating expenses decreased to $4,684,000 for the three months ended March 31, 2002 from $5,824,000 for the three months ended March 31, 2001, a net decrease of $1,140,000 or 19.6%. Motel operating expenses for motels acquired and divested since January 1, 2001 decreased to $277,000 for the three months ended March 31, 2002 from $1,235,000 for the three months ended March 31, 2001, a decrease of $958,000 or 77.6%. The decrease consists of a decrease of $182,000 or 4% in the costs of operating the motels owned during both periods. The cost of operating motels owned during both periods decreased to $4,407,000 for the three months ended March 31, 2002 from $4,589,000 for the three months ended March 31, 2001. The decrease in operating costs is principally due to decreased labor and related costs, a decrease in repairs and maintenance expenditures and a decrease in energy related costs. Motel operating expenses as a percentage of motel revenues increased to 61.2% for the three months ended March 31, 2002 from 60.7% for the three months ended March 31, 2001. Motel operating expenses as a percentage of motel revenues for the motels owned in both periods decreased to 59.4% for the three months ended March 31, 2002 from 60.4% for the three months ended March 31, 2001. Marketing and royalty fees include media advertising, billboard rental expense, advertising fund contributions and royalty charges paid to franchisors and other related marketing expenses. Marketing and royalty fees decreased to $543,000 for the three months ended March 31, 2002 from $714,000 for the three months ended March 31, 2001, a decrease of $171,000 or 23.9%. The marketing and royalty fees for motels owned during both periods decreased to $528,000 for the three months ended March 31, 2002 from $552,000 for the three months ended March 31, 2001, a decrease of $24,000 or 4.3%. For the motels owned during both periods, marketing and royalty fees as a percentage of room revenues decreased to 8% for the three months ended March 31, 2002 from 8.1% for the three months ended March 31, 2001. Marketing and royalty fees for motels acquired and divested since January 1, 2001 decreased to $15,000 for the three months ended March 31, 2002 from $162,000 for the three months ended March 31, 2001. Franchise fees declined due to the leasing of properties to third parties and also the sales of properties in the second and third quarter of 2001. Lease operations increased to $1,149,000 for the three months ended March 31, 2002 from $993,000 for the three months ended March 31, 2001, an increase of $156,000 as a result fully depreciated furniture and fixtures on various properties. Vending operations increased to $11,000 for the three months ended March 31, 2002 from a$128,000 loss for the three months ended March 31, 2001, an increase of $139,000, which is the result of the addition of new vending accounts. Corporate general and administrative expenses are segregated by the Company into three separate areas: Management Company Operations, Construction/Acquisition and Divestiture Division and Vending general and administrative. Included in the Management Company Operations, which is the division responsible for the motel operations, are the costs associated with training, marketing, purchasing, administrative support, property related legal and accounting costs. The major components of these costs are salaries, wages and related expenses, travel, rent and other administrative expenses. The general and administrative expenses for the Management Company Operations decreased $330,000 to $1,142,000 for the three months ended March 31, 2002 from $1,472,000 for the three months ended March 31, 2001, a decrease of 22.4% as a result of approximately $25,000 lower travel expenditures and $240,000 of discounts given on early notes receivable payoff in the first quarter of 2001 versus none in the first quarter of 2002 with the remaining $65,000 spread out among various other items. The general and administrative expenses associated with Construction/Acquisition and Divestiture Division decreased $29,000 from $34,000 for the three months ended March 31, 2001 to $5,000 for the three months ended March 31, 2002. Vending General and Administrative expenses increased $135,000 to $415,000 for the three months ended March 31, 2002 from $280,000 for the three months ended March 31, 2001. As a percentage of total motel operating revenues, Management Company Operations general and administrative expenses was 14.3% for the three months ended March 31, 2002 and 14.9% for the three months ended March 31, 2001. Depreciation and amortization decreased to $2,966,000 for the three months ended March 31, 2002 from $3,514,000 for the three months ended March 31, 2001, a net decrease of $548,000 or 15.6%. This is the result of amortization expense on corporate of $13,000 at March 31, 2002 compared to $120,000 at March 31, 2001 on various loan costs which are now fully amortized. Also, there was a reduction in depreciation expense on furniture and fixtures which were fully depreciated at March 31, 2002 compared to March 31, 2001 of approximately $428,000. Net operating income increased to $1,323,000 for the three months ended March 31, 2002 from $970,000 for the three months ended March 31, 2001, an increase of $353,000 or 36.4%. The increase in net operating income included a decrease of $632,000 in net motel revenues (motel revenues less motel operating expenses and marketing and royalty fees). Of the $632,000 decrease in net motel revenues, an increase of $34,000 resulted from the motels owned during both periods or an increase of 1.4%. Net motel revenues for motels acquired and divested since January 1, 2001 decreased $666,000. The remaining net increase is a result of the increased leasing activities and the reduction of management general and administrative expenses. Net operating income as a percent of total revenues was 11% for the three months ended March 31, 2002 as compared to 7.2% for the three months ended March 31, 2001. Interest expense decreased to $4,577,000 for the three months ended March 31, 2002 from $5,132,000 for the three months ended March 31, 2001, a decrease of $555,000. The decrease in interest expense is reflective of the lower average amount of outstanding borrowings during the first quarter of 2002 as compared to the first quarter 2001. Discontinued operations increased to $5,000 for the three months ended March 31, 2002 compared to a loss of $109,000 for the three months ended March 31, 2001 as a result of the sale of properties. Net loss decreased to $1,983,000 for the three months ended March 31, 2002 from $2,643,000 for the three months ended March 31, 2001. Liquidity and Capital Resources The Company's primary uses of its capital resources include debt service, capital expenditures and working capital. In addition, on a discretionary basis, the Company utilizes its capital resources for the development and acquisition of motel properties. The Company's debt service requirements consist of the obligation to make interest and principal payments on its outstanding indebtedness. In January through March 31, 2002 the Company was advanced $654,000 on loans of $7 million for construction advances on one property under construction bringing the total advanced to $3.2 million. During April through September 30, 2002, the Company was advanced an additional $2.3 million on loans of $7 million for construction advances on one property under construction bringing the total advanced to $5.5 million. In April 2002, a subsidiary of the Company purchased a vending company for $210,000 by issuing a note payable of $110,000 with monthly principal and interest payments of $10,400, due March 1, 2003. Goodwill of $120,000 and fixed assets of $90,000 were preliminarily recorded as a result of this transaction. The Company believes it has or will be able to obtain adequate resources to meet its near-term maturing debt and other obligations. The Company's capital expenditure requirements principally include capital improvements and refurbishment of its lodging facilities as part of its ongoing operating strategy to provide well-maintained facilities. The Company made capital expenditures (exclusive of acquisitions and development of properties) of $375,000 and $778,000 for the three months ended March 31, 2002 and 2001, respectively. In addition, as of March 31, 2002, the Company had $527,000 of cash restricted for future refurbishment of motel properties, in accordance with certain debt agreements. Management is not aware of any unusual required level of future capital expenditures necessary to maintain its existing properties. Capital repairs and maintenance expenses on leased properties are funded by lessees. For the three months ended March 31, 2001, cash and cash equivalents increased $510,000. This increase consisted of $762,000 of funds provided by investing activities and $3,750,000 of funds used by financing activities and $3,498,000 of funds provided by operations. Net investing activities of $762,000 include: $1,227,000 of cash utilized for motel development and $375,000 expended on refurbishment of existing properties, offset by $39,000 of cash provided from the collections on mortgage and other notes receivable, $2,460,000 net proceeds from the sale of investment properties and a change in cash restricted for refurbishment of $135,000. Cash used in financing activities includes: $4,383,000 of cash utilized to repay indebtedness, $711,000 from proceeds from notes payable and $78,000 expended on deferred financing costs. The Company believes it has or will be able to obtain adequate resources to meet its near-term maturing debt and other obligations, either from operating cash flows or refinancing, including the maturity of the remaining $11.3 million 12% Senior Subordinated Notes in 2004. PART II - OTHER INFORMATION Item 1. Legal Proceedings The Company is involved in various legal proceedings arising in the ordinary course of business. The Company does not believe that any of these actions, either individually or in the aggregate, will have a material adverse effect on the Company's business, results of operations or financial condition. See Note 5 of the Notes to the Condensed Consolidated Financial Statements. Item 2. Changes in Securities Not Applicable Item 3. Defaults upon Senior Securities Not Applicable Item 4. Submission of Matters to a Vote of Security Holders Not Applicable Item 5. Other Information Not Applicable Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Not Applicable (b) Reports on Form 8-K: Not Applicable 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. MOA HOSPITALITY, INC. December 19, 2002 By: /s/ Kurt M. Mueller ------------------------------------------ Kurt M. Mueller President and Chief Financial Officer December 19, 2002 By: /s/ Blane P. Evans ------------------------------------------ Blane P. Evans Secretary and Treasurer CERTIFICATIONS Written Statement of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes- Oxley Act of 2002. I, Kurt M. Mueller, certify that: 1. I have reviewed this quarterly report on Form 10-Q of MOA Hospitality, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 3. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report. Date: December 19, 2002 /s/ Kurt M. Mueller ----------------------- Kurt M. Mueller Chief Financial Officer CERTIFICATIONS Written Statement of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes- Oxley Act of 2002. I, Paul F. Wallace, certify that: 1. I have reviewed this quarterly report on Form 10-Q of MOA Hospitality, Inc.; 2. Based on my knowledge, this quarterly report does not contain any untrue statements of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report; 4. Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report. Date: December 19, 2002 /s/ Paul F. Wallace ----------------------- Paul F. Wallace Chief Executive Officer

Nine Months Ended September 30 --------------------------- 2001 2000 ------------ ------------ Cash flows used in operating activities: Net loss $ (1,603) $ (1,116) Adjustments to reconcile net loss to cash used in operating activities: Depreciation, amortization and accretion of discount on notes 10,779 11,064 Minority interests of others in net loss from operations 20 11 Deferred income taxes (473) 2,421 Gain on early extinguishment of debt - (3,692) Gain on sale of properties (3,479) (1,017) Change in assets and liabilities: (Increase) decrease in assets: Accounts receivable (635) (309) Operating supplies, prepaid expenses, deposits and other assets (278) (5,970) Increase (decrease) in liabilities: Accounts payable and accrued expenses 2,122 3,005 Accrued interest payable 441 2,058 ------------ ------------ Net cash provided by operating activities 6,894 6,455 Cash flows provided by investing activities: Acquisition and development of investment properties (4,992) (2,201) Refurbishment of investment properties (2,398) (3,909) Net proceeds from sale of investment properties 4,357 7,241 Cash restricted for refurbishment of properties 664 (627) Collections on mortgage and other notes receivable 12,657 6,917 ------------ ------------ Net cash provided by investing activities 10,288 7,421 Cash flows provided by (used in) financing activities: Proceeds from notes payable 12,883 11,979 Repayment of notes payable (25,724) (16,645) Deferred financing costs (490) (591) ------------ ------------ Net cash used in financing activities (13,331) (5,257) ------------ ------------ Net increase in cash and cash equivalents 3,851 8,619 Cash and cash equivalents at beginning of period 4,230 4,422 ------------ ------------ Cash and cash equivalents at end of period $ 8,081 $ 13,041 ============ ============ Supplementary disclosure of cash flow information: Cash paid during the period for interest $ 15,079 $ 16,809 ============ ============ Cash paid (net of refunds received) during the period for income taxes $ 20 $ 172 ============ ============

Three months ended Nine months ended September 30 September 30 ---------------------- ------------------------ 2001 2000 2001 2000 --------- --------- ---------- ---------- Motel operations: Motel operating revenue: Room revenues $ 12,870 $ 16,356 $ 33,041 $ 44,257 Ancillary motel revenues 783 1,102 2,804 3,185 --------- --------- ---------- ---------- Total motel operating revenues 13,653 17,458 35,845 47,442 Motel costs and expenses: Motel operating expenses 5,932 7,759 18,530 25,530 Marketing and royalty fees 965 1,188 2,549 3,380 Depreciation and amortization 1,505 1,753 4,751 6,076 --------- --------- ---------- ---------- Total motel direct expenses 8,402 10,700 25,830 34,986 --------- --------- ---------- ---------- 5,251 6,758 10,015 12,456 Lease Operations Lease revenues 3,206 2,822 8,954 7,334 Lease expenses 440 115 618 310 Depreciation and amortization 1,632 1,700 5,088 4,076 --------- --------- ---------- ---------- 1,134 1,007 3,248 2,948 Vending Operations Vending revenues 624 287 1,375 767 Vending expenses 533 338 1,357 761 Depreciation and amortization 97 52 259 148 --------- --------- ---------- ---------- (6) (103) (241) (142) Corporate Operations Other revenues 542 766 1,749 2,235 General and administrative expenses: Management Company Operations 944 1,121 3,500 3,383 Construction/Acquisition and Divestiture 84 230 226 607 Vending - general and administrative 349 112 926 319 --------- --------- ---------- ---------- Total general and administrative expenses 1,377 1,463 4,652 4,309 Depreciation and amortization 188 324 551 688 --------- --------- ---------- ---------- (1,023) (1,021) (3,454) (2,762) --------- --------- ---------- ---------- Net operating income 5,356 6,641 9,568 12,500 Interest expense 5,142 6,180 15,651 19,025 --------- --------- ---------- ---------- Loss from operations 214 461 (6,083) (6,525) Minority interests - (35) (20) (11) Gain (loss) on sale of properties 820 (67) 3,479 1,017 --------- --------- ---------- ---------- Income (loss) before income taxes and extraordinary item 1,034 359 (2,624) (5,519) Income tax expense (benefit) 403 140 (1,021) (2,148) --------- --------- ---------- ---------- Income (loss) before extraordinary item 631 219 (1,603) (3,371) Gain on early extinguishment of debt - - - 2,255 --------- --------- ---------- ---------- Net income (loss) $ 631 $ 219 $ (1,603) $ (1,116) ========= ========= ========== ========== Total Assets: Motel Operations $ 130,184 $ 150,348 Lease Operations 117,244 122,035 Corporate and other 26,594 38,892 ---------- ---------- $ 274,022 $ 311,275 ========== ==========

Supplemental Operating Results and Statistics -------------------------------------------------------------------------- (unaudited) Three Months Ended September 30 ------------------------------------------------------------------------- Motels Owned Acquisitions/ Both Periods Divestitures Consolidated ---------------------- ----------------------- ----------------------- 2001 2000 2001 2000 2001 2000 ---------- ---------- ---------- ----------- ---------- ---------- (dollars in thousands, except Other data) Motel operations: Motel operating revenues: Room revenues $ 12,393 $ 13,018 $ 477 $ 3,338 $ 12,870 $ 16,356 Ancillary motel revenues 909 958 (126) 144 783 1,102 ---------- ---------- ---------- ----------- ---------- ---------- Total motel operating revenues 13,302 13,976 351 3,482 13,653 17,458 Motel costs and expenses: Motel operating expenses 5,809 5,600 123 2,159 5,932 7,759 Marketing and royalty fees 918 929 47 259 965 1,188 Depreciation and amortization 1,461 1,650 44 103 1,505 1,753 ---------- ---------- ---------- ----------- ---------- ---------- Total motel direct expenses 8,188 8,179 214 2,521 8,402 10,700 ---------- ---------- ---------- ----------- ---------- ---------- $ 5,114 $ 5,797 $ 137 $ 961 5,251 6,758 ========== ========== ========== =========== Lease operations: Lease revenues 3,206 2,822 Lease expenses 440 115 Depreciation and amortization 1,632 1,700 ---------- ---------- 1,134 1,007 Vending operations: Vending revenues 624 287 Vending expenses 533 338 Depreciation and amortization 97 52 ---------- ---------- (6) (103) Corporate operations: Other revenues, net 542 766 General and administrative expenses: Management Company Operations 944 1,121 Construction/Acquisition and Divestiture 84 230 Vending general and administrative 349 112 ---------- ---------- Total general and administrative expenses 1,377 1,463 Depreciation and amortization 188 324 ---------- ---------- (1,023) (1,021) ---------- ---------- Net operating income $ 5,356 $ 6,641 ========== ========== Other data: Number of motels at period end (5) 37 37 3 8 40 45 Number of rooms at period end (5) 3,096 3,104 196 787 3,292 3,891 Occupancy percentage (5) 77.18% 79.73% 51.61% 68.07% 75.78% 78.32% ADR (1) (5) $ 56.34 $ 59.91 $ 52.12 $ 46.46 $ 56.18 $ 54.83 REVPAR (2) (5) $ 46.67 $ 48.91 $ 27.03 $ 33.20 $ 45.59 $ 45.78 Net operating income margin (3) 29.71% 31.13% Net motel revenue margin (4) (5) 53.04% 54.55% 37.95% 31.88% 52.49% 52.04%

Supplemental Operating Results and Statistics -------------------------------------------------------------------------- (unaudited) Nine Months Ended September 30 -------------------------------------------------------------------------- Motels Owned Acquisitions/ Both Periods Divestitures Consolidated ----------------------- ---------------------- ----------------------- 2001 2000 2001 2000 2001 2000 ---------- ---------- ---------- ---------- ---------- ---------- (dollars in thousands, except Other data) Motel operations: Motel operating revenues: Room revenues $ 30,257 $ 30,904 $ 2,784 $ 13,353 $ 33,041 $ 44,257 Ancillary motel revenues 2,600 2,699 204 486 2,804 3,185 ---------- ---------- ---------- ---------- ---------- ---------- Total motel operating revenues 32,857 33,603 2,988 13,839 35,845 47,442 Motel costs and expenses: Motel operating expenses 16,496 15,745 2,034 9,785 18,530 25,530 Marketing and royalty fees 2,325 2,295 224 1,085 2,549 3,380 Depreciation and amortization 4,441 4,472 310 1,604 4,751 6,076 ---------- ---------- ---------- ---------- ---------- ---------- Total motel direct expenses 23,262 22,512 2,568 12,474 25,830 34,986 ---------- ---------- ---------- ---------- ---------- ---------- $ 9,595 $ 11,091 $ 420 $ 1,365 10,015 12,456 ========== ========== ========== ========== Lease operations: Lease revenues 8,954 7,334 Lease expenses 618 310 Depreciation and amortization 5,088 4,076 ---------- ---------- 3,248 2,948 Vending operations: Vending revenues 1,375 767 Vending expenses 1,357 761 Depreciation and amortization 259 148 ---------- ---------- (241) (142) Corporate operations: Other revenues, net 1,749 2,235 General and administrative expenses: Management Company Operations 3,500 3,383 Construction/Acquisition and Divestiture 226 607 Vending general and administrative 926 319 ---------- ---------- Total general and administrative expenses 4,652 4,309 Depreciation and amortization 551 688 ---------- ---------- (3,454) (2,762) ---------- ---------- Net operating income $ 9,568 $ 12,500 ========== ========== Other data: Number of motels at period end (5) 37 37 3 7 40 44 Number of rooms at period end (5) 3,096 3,104 195 600 3,291 3,704 Occupancy percentage (5) 70.11% 71.21% 60.68% 58.96% 69.44% 69.91% ADR (1) (5) $ 51.00 $ 51.00 $ 39.76 $ 143.38 $ 50.31 $ 49.58 REVPAR (2) (5) $ 38.83 $ 39.49 $ 27.19 $ 87.62 $ 38.00 $ 37.35 Net operating income margin (3) 19.97% 21.63% Net motel revenue margin (4) (5) 46.39% 50.36% 26.22% 22.23% 44.69% 41.87%

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