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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended JUNE 30, 2000
---------------------
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Commission File No. 0-15291
AMERIHOST PROPERTIES, INC.
----------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 36-3312434
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2355 S. ARLINGTON HEIGHTS ROAD, SUITE 400, ARLINGTON HEIGHTS, ILLINOIS 60005
- ---------------------------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 228-5400
--------------
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 August 4, 2000, 4,979,244 shares of the Registrant's Common Stock were
outstanding.
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AMERIHOST PROPERTIES, INC.
FORM 10-Q
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000
INDEX
PART I: Financial Information Page
----------------------------- ----
Item 1 - Financial Statements -
Consolidated Balance Sheets as of June 30, 2000
and December 31, 1999 4
Consolidated Statements of Operations for the Three and
Six Months Ended June 30, 2000 and 1999 6
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2000 and 1999 7
Notes to Consolidated Financial Statements 9
Item 2 - Management's Discussion and Analysis 13
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 18
Schedule of Earnings Before Interest/Rent, Taxes and
Depreciation/Amortization for the Six Months
Ended June 30, 2000 and 1999 19
PART II: Other Information
--------------------------
Item 4 - Submission of Matters to a Vote of Securities Holders 20
Item 6 - Exhibits and Reports on Form 8-K 20
Signatures 20
2
Part I: Financial Information
Item 1: Financial Statements
3
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
=================================================================================================================
June 30, December 31,
2000 1999
-------------------- ----------------
ASSETS
Current assets:
Cash and cash equivalents $ 3,097,070 $ 3,766,323
Accounts receivable (including $1,370,372 and
$213,911 from related parties) 3,989,003 2,480,039
Interest receivable 308,469 471,576
Notes receivable, current portion 518,485 518,485
Prepaid expenses and other current assets 846,803 971,836
Refundable income taxes 377,700 56,876
Costs and estimated earnings in excess of billings on
uncompleted contracts with related parties 1,048,456 834,820
--------------- --------------
Total current assets 10,185,986 9,099,955
--------------- --------------
Investments in and advances to unconsolidated
hotel joint ventures 7,176,899 7,332,806
--------------- --------------
Property and equipment:
Land 10,231,416 8,786,189
Buildings 58,509,141 56,670,991
Furniture, fixtures and equipment 20,540,132 17,758,161
Construction in progress 821,214 1,062,888
Leasehold improvements 3,222,944 1,990,822
Assets held for sale - 7,967,318
--------------- --------------
93,324,847 94,236,369
Less accumulated depreciation and amortization 17,023,525 15,466,013
--------------- --------------
76,301,322 78,770,356
--------------- --------------
Notes receivable, less current portion 720,530 692,662
Deferred income taxes 3,779,000 4,327,000
Other assets, net of accumulated amortization of
$835,770 and $755,547 2,758,507 2,885,388
--------------- --------------
7,258,037 7,905,050
--------------- --------------
$ 100,922,244 $ 103,108,167
=============== ==============
4
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
=================================================================================================================
June 30, December 31,
2000 1999
--------------------- ---------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,868,034 $ 2,623,390
Bank line-of-credit 7,626,096 7,560,214
Accrued payroll and related expenses 853,819 777,725
Accrued real estate and other taxes 2,329,071 2,260,048
Other accrued expenses and current liabilities 742,384 1,127,504
Current portion of long-term debt 1,518,033 1,567,643
--------------- --------------
Total current liabilities 16,937,437 15,916,524
--------------- --------------
Long-term debt, net of current portion 56,266,394 58,781,609
--------------- --------------
Deferred income 12,996,758 14,001,231
--------------- --------------
Commitments
Minority interests 212,081 228,235
--------------- --------------
Shareholders' equity:
Preferred stock, no par value; authorized 100,000 shares;
none issued - -
Common stock, $.005 par value; authorized 25,000,000 shares;
issued and outstanding 4,979,244 shares at June 30, 2000
and 4,968,673 shares at December 31, 1999 24,896 24,843
Additional paid-in capital 13,077,324 13,050,069
Retained earnings 1,844,229 1,542,531
--------------- --------------
14,946,449 14,617,443
Less:
Stock subscriptions receivable (436,875) (436,875)
--------------- --------------
14,509,574 14,180,568
--------------- --------------
$ 100,922,244 $ 103,108,167
=============== ==============
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
5
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
====================================================================
Three Months Ended June 30, Six Months Ended June 30,
------------------------------- --------------------------------
2000 1999 2000 1999
------------- -------------- -------------- ---------------
Revenue:
Hotel operations:
AmeriHost Inn(R)hotels $ 13,346,621 $ 13,189,350 $ 23,758,124 $ 23,197,646
Other hotels 3,281,511 3,663,335 5,754,300 6,098,430
Development and construction 2,990,247 189,287 4,086,765 560,032
Management services 323,395 340,418 613,238 655,074
Employee leasing 1,643,580 1,626,861 3,072,451 3,217,016
Franchising 219,329 79,000 386,854 79,000
-------------- -------------- --------------- ---------------
21,804,683 19,088,251 37,671,732 33,807,198
-------------- -------------- --------------- ---------------
Operating costs and expenses:
Hotel operations:
AmeriHost Inn(R)hotels 8,842,746 8,625,997 17,026,443 16,749,198
Other hotels 2,468,283 2,700,418 4,832,229 5,080,357
Development and construction 2,859,650 168,004 3,774,381 571,555
Management services 188,455 226,354 408,258 511,175
Employee leasing 1,630,607 1,613,840 3,027,587 3,133,933
Franchising 160,441 105,235 397,995 192,616
-------------- -------------- --------------- ---------------
16,150,182 13,439,848 29,466,893 26,238,834
-------------- -------------- --------------- ---------------
5,654,501 5,648,403 8,204,839 7,568,364
Depreciation and amortization 1,022,847 1,388,882 2,126,671 2,543,401
Leasehold rents - hotels 1,716,679 1,943,844 3,415,041 3,712,119
Corporate general and administrative 404,216 394,660 803,169 777,195
-------------- -------------- --------------- ---------------
Operating income 2,510,759 1,921,017 1,859,958 535,649
Other income (expense):
Interest expense (1,442,870) (1,617,993) (2,942,586) (3,171,580)
Interest income 201,983 382,190 433,740 615,993
Other income 11,096 490,172 111,957 505,967
Gain on sale of property 840,257 - 1,011,836 -
Equity in net income and losses
of affiliates (57,140) 204,931 11,611 39,716
-------------- -------------- --------------- ---------------
Income (loss) before minority
interests and income taxes 2,064,085 1,380,317 486,516 (1,474,255)
Minority interests in (income) loss of
consolidated subsidiaries and partnerships (20,307) (51,608) (1,818) (90,027)
-------------- -------------- --------------- ---------------
Income (loss) before income taxes 2,043,778 1,328,709 484,698 (1,564,282)
Income tax expense (benefit) 838,000 531,000 183,000 (597,000)
-------------- -------------- --------------- ---------------
Net income (loss) $ 1,205,778 $ 797,709 $ 301,698 $ (967,282)
============== ============== =============== ===============
Net income (loss) per share - Basic $ 0.24 $ 0.14 $ 0.06 $ (0.16)
Net income (loss) per share - Diluted $ 0.23 $ 0.13 $ 0.05 $ (0.16)
6
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
====================================================================
2000 1999
------------------ ----------------
Cash flows from operating activities:
Cash received from customers $ 36,209,343 $ 34,598,891
Cash paid to suppliers and employees (33,192,522) (34,581,069)
Interest received 594,030 541,586
Interest paid (3,020,809) (3,194,130)
Income taxes received (paid) 44,176 (38,415)
--------------- ---------------
Net cash provided by (used in) operating activities 634,218 (2,673,137)
--------------- ---------------
Cash flows from investing activities:
Distributions, and collections on advances,
from affiliates 2,280,584 526,215
Purchase of property and equipment (4,067,133) (5,223,273)
Purchase of investments in, and advances
to, minority owned affiliates (2,122,277) (967,500)
Acquisitions of partnership interests,
net of cash acquired - 260,648
Collections on notes receivable 72,133 127,537
Proceeds from sale of assets 5,023,020 12,795,197
--------------- ---------------
Net cash provided by investing activities 1,186,327 6,997,528
--------------- ---------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 1,224,439 7,115,492
Principal payments on long-term debt (3,789,455) (9,429,852)
Net proceeds from line of credit 65,882 2,149,182
Decrease in minority interest (17,972) (94,874)
Common stock repurchases - (3,378,759)
Other 27,308 -
--------------- ---------------
Net cash used in financing activities (2,489,798) (3,638,811)
--------------- ---------------
Net (decrease) increase in cash (699,253) 685,580
Cash and cash equivalents, beginning of year 3,766,323 4,493,834
--------------- ---------------
Cash and cash equivalents, end of period $ 3,097,070 $ 5,179,414
=============== ===============
(continued)
7
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
====================================================================
2000 1999
--------------- ---------------
Reconciliation of net income (loss) to net
cash provided by (used in) operating activities:
Net income (loss) $ 301,698 $ (967,282)
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization 2,126,671 2,543,401
Equity in net (income) loss of affiliates and
amortization of deferred income (11,611) (42,531)
Minority interests in net income of subsidiaries 1,818 90,027
Amortization of deferred interest and loan discount - 22,696
Amortization of deferred gain (755,994) (701,100)
Deferred income taxes 548,000 (665,000)
Gain on sale of investments, property and equipment (1,011,836) -
Changes in assets and liabilities, net of effects
of acquisition:
(Increase) decrease in accounts receivable (1,508,964) 120,686
Decrease (increase) in prepaid expenses and
other current assets 285,353 (46,838)
Decrease in reserve on note receivable - (75,000)
(Increase) decrease in refundable income taxes (320,824) 29,585
(Increase) decrease in costs and estimated earnings
in excess of billings (213,636) 315,837
Decrease (increase) in other assets 23,107 (316,033)
Increase (decrease) in accounts payable 1,244,644 (3,244,094)
(Decrease) increase in accrued payroll and other accrued
expenses and current liabilities (161,595) 383,552
Decrease in accrued interest (78,223) (45,246)
Increase (decrease) in deferred income 165,640 (75,797)
------------- ---------------
Net cash provided by (used in) operating activities $ 634,218 $ (2,673,137)
============= ===============
See notes to consolidated financial statements.
8
AMERIHOST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
====================================================================
1. BASIS OF PREPARATION:
---------------------
The financial statements included herein have been prepared by the Company,
without audit. In the opinion of the Company, the accompanying unaudited
financial statements contain all adjustments, which consist only of
recurring adjustments necessary to present fairly the financial position of
Amerihost Properties, Inc. and subsidiaries as of June 30, 2000 and
December 31, 1999 and the results of its operations and cash flows for the
six months ended June 30, 2000 and 1999. The results of operations for the
six months ended June 30, 2000 are not necessarily indicative of the
results to be expected for the full year. It is suggested that the
accompanying financial statements be read in conjunction with the financial
statements and the notes thereto included in the Company's 1999 Annual
Report on Form 10-K. Certain reclassifications have been made to the 1999
financial statements in order to conform with the 2000 presentation.
2. PRINCIPLES OF CONSOLIDATION:
----------------------------
The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiaries, and partnerships in which the Company has a
majority ownership interest. Significant intercompany accounts and
transactions have been eliminated.
3. INCOME (LOSS) PER SHARE:
------------------------
The Company calculates earnings per share in accordance with Financial
Accounting Standards Board ("FASB") Statement No. 128, "Earnings Per
Share" (FAS 128). Basic earnings per share ("EPS") is calculated by
dividing the income (loss) available to common shareholders by the
weighted average number of common shares outstanding for the period,
without consideration for common stock equivalents. The Company excluded
stock options which had an anti-dilution effect on the EPS computations.
Diluted EPS gives effect to all dilutive potential common shares
outstanding for the period. The following are the calculations of basic
and diluted earnings per share:
Three Months Ended June 30, Six Months Ended June 30,
-------------------------------- ---------------------------------
2000 1999 2000 1999
-------------- --------------- --------------- --------------
Net income (loss) $ 1,205,778 $ 797,709 $ 301,698 $ (967,282)
Impact of convertible
partnership interests (15,894) (13,730) (49,226) (47,945)
-------------- --------------- --------------- --------------
Net income (loss) available to
common shareholders $ 1,189,884 $ 783,979 $ 252,472 $ (1,015,227)
============== =============== =============== ===============
Weighted average common
shares outstanding 4,974,984 5,846,627 4,973,658 5,947,294
Dilutive effect of convertible
partnership interests and
common stock equivalents 289,540 299,371 292,720 249,350
-------------- --------------- --------------- --------------
Dilutive common shares outstanding 5,264,524 6,145,998 5,266,378 6,196,644
============== =============== =============== ==============
Net income (loss) per share - Basic $ 0.24 $ 0.14 $ 0.06 $ (0.16)
============== =============== =============== =============
Net income (loss) per share - Diluted $ 0.23 $ 0.13 $ 0.05 $ (0.16)
============== =============== =============== =============
9
AMERIHOST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
====================================================================
4. INCOME TAXES:
-------------
Deferred income taxes are provided on the differences in the bases of the
Company's assets and liabilities determined for tax and financial reporting
purposes and relate principally to depreciation of property and equipment
and deferred income.
The income tax expense (benefit) for the six months ended June 30, 2000 and
1999 was based on the Company's estimate of the effective tax rate expected
to be applicable for the full year. The Company expects the effective tax
rate to approximate the Federal and state statutory rates.
5. HOTEL LEASES:
-------------
The Company leases 33 hotels as of June 30, 2000 (including 29
sale/leaseback hotels - Note 8), the operations of which are included in
the Company's consolidated financial statements. All of these leases are
triple net and provide for monthly base rent payments ranging from $14,000
to $26,667. The Company leases or subleases two of these hotels from
partnerships in which the Company owns equity interests of up to 16.33%.
These two leases also provide for additional rent payments ranging from
approximately $37,000 to $74,000 per annum, plus percentage rents equal to
10% of room revenues in excess of stipulated amounts. The leases and
sub-leases expire through March 23, 2009, except for the two leases from
partnerships in which the Company owns an equity interest which expired
December 31, 1999. The Company is continuing to operate these hotels under
the same terms as provided in the original lease.
The four leases, other than the sale/leaseback hotels, provide for an
option to purchase the hotel. Some of the purchase prices are based upon a
multiple of gross room revenues for the preceding twelve months with a
specified maximum, and the others are based on a fixed amount. At June 30,
2000, the aggregate purchase price for these leased hotels was
approximately $14,030,000.
6. LIMITED PARTNERSHIP GUARANTEED DISTRIBUTIONS:
---------------------------------------------
The Company is a general partner in three partnerships where the Company
has guaranteed minimum annual distributions to the limited partners in the
amount of 10% of their original capital contributions.
7. INVESTMENTS:
------------
Effective January 1, 1999, the Company acquired the remaining ownership
interest in one hotel joint venture. The following is a summary of this
acquisition:
Fair value of assets acquired $ 1,916,070
Cash acquired (260,648)
--------------
Liabilities assumed $ 1,655,423
==============
8. SALE/LEASEBACK OF HOTELS:
-------------------------
On June 30, 1998, the Company completed the sale of 26 AmeriHost Inn(R)
hotels to a Real Estate Investment Trust ("REIT") for $62.2 million. The
company completed the sale of four additional AmeriHost Inn(R) hotels to
the same REIT during March 1999 for $10.8 million. Upon the sales to the
REIT, the Company entered into agreements to lease back the hotels for an
initial term of ten years, with two five year renewal options. The lease
payments are fixed at 10% of the sale price for the first three years.
Thereafter, the lease payments are subject to a CPI increase with a 2%
annual maximum. The Company has deferred the gain on the sale of these
hotels pursuant to sale/leaseback accounting. This deferral will be
recognized over the initial term of the lease as a reduction of leasehold
rent expense.
On June 16, 2000, one hotel owned by the REIT was sold. Accordingly, the
lease with the REIT for this hotel was terminated. The remaining
unamortized gain of approximately $402,000 was recognized as a gain on
sale of property in the accompanying financial statements.
10
AMERIHOST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
====================================================================
9. BUSINESS SEGMENTS:
------------------
The Company's business is primarily involved in five segments: (1) hotel
operations, consisting of the operations of all hotels in which the
Company has a 100% or majority ownership or leasehold interest, (2) hotel
development, consisting of development, construction and renovation
activities, as well as the sale of newly constructed hotels held for sale,
(3) hotel management, consisting of hotel management activities and (4)
employee leasing, consisting of the leasing of employees to various
hotels, and (5) AmeriHost Inn(R) hotel franchising. Results of operations
of the Company's business segments are reported in the consolidated
statements of operations. The following represents revenues, operating
costs and expenses, operating income, identifiable assets, capital
expenditures and depreciation and amortization for the six months ended
June 30, 2000 and 1999, for each business segment, which is the
information utilized by the Company's decision makers in managing the
business:
Revenues 2000 1999
-------- --------------- --------------
Hotel operations $ 29,512,424 $ 29,296,076
Hotel development 4,086,765 560,032
Hotel management 613,238 655,074
Employee leasing 3,072,451 3,217,016
Hotel franchising 386,854 79,000
-------------- --------------
$ 37,671,732 $ 33,807,198
============== =============
Operating costs and expenses
----------------------------
Hotel operations $ 21,858,672 $ 21,829,555
Hotel development 3,774,381 571,555
Hotel management 408,258 511,175
Employee leasing 3,027,587 3,133,933
Hotel franchising 397,995 192,616
-------------- -------------
$ 29,466,893 $ 26,238,834
============== =============
Operating income
----------------
Hotel operations $ 2,155,315 $ 1,280,699
Hotel development 302,871 (24,601)
Hotel management 181,300 121,818
Employee leasing 43,706 81,078
Hotel franchising (14,075) (113,616)
Corporate (809,159) (809,729)
-------------- -------------
$ 1,859,958 $ 535,649
============== =============
Identifiable assets
-------------------
Hotel operations $ 91,591,369 $ 101,605,819
Hotel development 2,371,539 576,480
Hotel management 149,742 630,718
Employee leasing 978,064 710,875
Hotel franchising 119,390 155,198
Corporate 5,712,140 7,447,225
--------------- -------------
$ 100,922,244 $ 111,126,315
============== =============
11
AMERIHOST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2000
====================================================================
9. BUSINESS SEGMENTS (CONTINUED):
------------------------------
Capital Expenditures 2000 1999
-------------------- -------------- --------------
Hotel operations $ 3,901,214 $ 5,279,232
Hotel development 7,942 144
Hotel management 28,875 51,017
Employee leasing - -
Hotel franchising 21,839 6,598
Corporate 107,263 17,913
--------------- -------------
$ 4,067,133 $ 5,354,904
============== =============
Depreciation/Amortization
-------------------------
Hotel operations $ 2,083,396 $ 2,473,703
Hotel development 9,513 13,078
Hotel management 23,680 22,080
Employee leasing 1,158 2,006
Hotel franchising 2,934 -
Corporate 5,990 32,534
--------------- -------------
$ 2,126,671 $ 2,543,401
============== =============
10. SUPPLEMENTAL CASH FLOW DATA:
-----------------------------
The following represents the supplemental schedule of noncash and
financing activities for the period ended June 30, 2000:
Notes receivable from sale of hotel $ 100,000
=========
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
-----------------------------------------------------------------------
GENERAL
The Company is engaged in the development of AmeriHost Inn(R) hotels, its
proprietary brand, and the ownership, operation and management of AmeriHost
Inn(R) hotels and other mid-price hotels. As of June 30, 2000, there were 77
AmeriHost Inn(R) hotels open, of which 58 were wholly-owned or leased, one was
majority-owned, 10 were minority-owned, and eight were owned and operated by
franchisees. A total of six AmeriHost Inn(R) hotels were opened during the past
eighteen months. The Company intends to use the AmeriHost Inn(R) brand when
expanding its hotel operations segment. As of June 30, 2000, one wholly-owned
AmeriHost Inn(R) hotel and four minority-owned AmeriHost Inn(R) hotels were
under construction. Same room revenues for all AmeriHost Inn(R) hotels
(including minority owned and franchised) increased approximately 8.5% and 8.1%
during the second quarter and first six months of 2000, compared to the second
quarter and first six months of 1999, respectively, attributable to a decrease
of $0.14 and an increase of $0.36 in average daily rate, and a 8.9% and 6.9%
increase in occupancy, respectively. These results relate to the 77AmeriHost
Inn(R) hotels that were operating for at least thirteen full months during the
three and six months ended June 30, 2000.
Revenues from hotel operations consist of the revenues from all hotels in which
the Company has a 100% or majority ownership or leasehold interest
("Consolidated" hotels). Investments in other entities in which the Company has
a minority ownership interest are accounted for using the equity method.
Development and construction revenues consist of one-time fees for new
construction and renovation activities performed by the Company for
minority-owned hotels and unrelated third parties. The Company also receives
revenue from management and employee leasing services provided to minority-owned
hotels and unrelated third parties.
Revenues from Consolidated AmeriHost Inn(R) hotels increased 1.2% and 2.4% to
$13.3 and $23.8 million during the second quarter and first six months of 2000,
from revenues of $13.2 and $23.2 million during the second quarter and first six
months of 1999, due primarily to an increase in same room revenues, offset by
the sale of hotels to franchisees. Combined revenues from the hotel management
and employee leasing segments were flat during the second quarter of 2000
compared to the second quarter of 1999, and decreased by 4.8% during the first
six months of 2000, due primarily to the sale of hotels under management
contracts. Revenues from Consolidated non-AmeriHost Inn(R) hotels decreased
10.4% and 5.6% during the second quarter and first six months of 2000, compared
to 1999, as a result of the sale of two non-AmeriHost Inn(R) hotels offset by
the renovation of one Consolidated non-AmeriHost Inn(R) hotel and the increased
occupancy therefrom. Total revenues increased 14.2% and 11.4% to $21.8 and $37.7
million during the second quarter and first six months of 2000, from $19.1 and
$33.8 million during the second quarter and first six months of 1999. The
Company recorded a net income of $1.2 million and $301,698 for the second
quarter and first six months of 2000, or $0.23 and $0.05 per diluted share,
compared to a net income of $797,709 and a net loss of $(967,282) for the second
quarter and first six months of 1999, or $0.13 and ($0.16) per diluted share in
1999.
In 1999, the Company began to franchise the AmeriHost Inn(R) brand name.
Currently, the Company is qualified to sell AmeriHost Inn(R) franchises in all
states, Canada and Mexico. To date, the Company has entered into 30 AmeriHost
Inn(R) franchise agreements. However, the Company does not anticipate the
franchising activity to have a significant impact on the operations of the
Company in 2000, and there can be no assurance that the Company will be
successful in selling AmeriHost Inn(R) franchises in the future. The results for
the first six months of 2000 were consistent with the Company's primary
objective of increasing the number of franchised AmeriHost Inn(R) hotels,
including the sale of five AmeriHost Inn(R) hotels owned or operated by the
Company to franchisees.
The Company uses EBITDAR as a supplemental performance measure, along with net
income, to report its operating results. EBITDAR is defined as net income before
extraordinary items, adjusted to eliminate the impact of (i) interest expense;
(ii) interest and other income; (iii) leasehold rents for hotels, which the
Company considers to be financing costs similar to interest; (iv) income tax
expense (benefit), (v) depreciation and amortization; and (vi) gains or losses
from property transactions. EBITDAR should not be considered as an alternative
to operating income (as determined in accordance with Generally Accepted
Accounting Principles, "GAAP") as an indicator of the Company's operating
performance or to cash flows from operating activities (as determined in
accordance with GAAP) as a measure of liquidity. EBITDAR, as defined by the
Company, is included herein due to numerous requests by investors and analysts.
Management believes that investors and analysts find it to be a useful tool for
measuring the Company's ability to service debt. EBITDAR decreased 4.3% and
increased 9.9% to $5.2 and $7.4 million during the second quarter and six months
13
ended June 30, 2000, respectively, from $5.4 and $6.7 million during the second
quarter and six months ended June 30, 1999. An EBITDAR schedule is included
herein.
Amerihost had an ownership interest in 79 hotels at June 30, 2000 versus 89
hotels at June 30, 1999 (excluding hotels under construction). The decreased
ownership of AmeriHost Inn(R) hotels for the Company's own account and for
minority-owned entities was due to the sale of AmeriHost Inn(R) hotels to
franchisees and non-AmeriHost Inn(R) hotels to unrelated third parties. These
figures include a net decrease of eight Consolidated hotels, from 74 at June 30,
1999 to 66 at June 30, 2000.
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2000 COMPARED
TO THE THREE AND SIX MONTHS ENDED JUNE 30, 1999
Revenues increased 14.2% and 11.4% to $21.8 million and $37.7 million during the
three and six months ended June 30, 2000, respectively, from $19.1 million and
$33.8 million during the three and six months ended June 30, 1999. The increase
in revenue was primarily due to an increase in hotel development revenues.
Hotel operations revenue decreased 1.3% and increased 0.7% to $16.6 million and
$29.5 million during the three and six months ended June 30, 2000 respectively,
from $16.9 million and $29.3 million during the three and six months ended June
30, 1999. Revenues from Consolidated AmeriHost Inn(R) hotels increased 1.2% and
2.4% to $13.3 million and $23.8 million during the three and six months ended
June 30, 2000, respectively, from $13.2 million and $23.2 million during the
three and six months ended June 30, 1999. These changes were attributable
primarily to an increase in same room revenues, offset by the sale of eight
Consolidated AmeriHost Inn(R) hotels. The change in Consolidated AmeriHost
Inn(R) hotel revenue was offset by a 10.4% and 5.6% decrease in Consolidated
other brand hotel revenue during the three and six month periods, respectively.
This decrease was primarily the result of the sale of two non-AmeriHost Inn(R)
Consolidated hotels. The hotel operations segment included the operations of 66
Consolidated hotels (including 59 AmeriHost Inn(R) hotels) comprising 4,686
rooms at June 30, 2000, compared to 74 Consolidated hotels (including 65
AmeriHost Inn(R) hotels) comprising 5,220 rooms at June 30, 1999. After
considering the Company's ownership interest in the majority-owned Consolidated
hotels, this translates to 4,443 and 4,951 equivalent owned rooms as of June 30,
2000 and 1999, respectively, or a decrease of 10.3%. Recently, the Company has
experienced an increase in competition in certain markets, primarily from newly
constructed hotels. As a result, there is increased downward pressure on
occupancy levels and average daily rates. The Company believes that as the
number of AmeriHost Inn(R) hotels increases, the greater the benefits will be at
all locations from marketplace recognition and repeat business. In addition, the
Company typically builds new hotels in growing markets where it anticipates a
certain level of additional hotel development.
Hotel development revenue increased 1,479.7% and 629.7% to $3.0 million and $4.1
million during the three and six months ended June 30, 2000, respectively, from
$189,287 and $560,032 during the three and six months ended June 30, 1999. The
Company was not constructing any hotels for minority-owned entities or unrelated
third parties during the second quarter of 1999, compared to four hotels during
the three months ended June 30, 2000. However, the Company also had several
additional projects in various stages of pre-construction development during
both six-month periods.
Hotel management revenue decreased 5.0% and 6.4% to $323,395 and $613,238 during
the three and six months ended June 30, 2000, respectively, from $340,418 and
$655,074 during the three and six months ended June 30, 1999. The number of
hotels managed for third parties and minority-owned entities decreased from 18
hotels, representing 1,696 rooms, at June 30, 1999 to 16 hotels, representing
1,574 rooms, at June 30, 2000. The decrease in revenue is primarily due to a
7.2% reduction in rooms under contract partially offset by increases in same
room revenues of those hotels.
Employee leasing revenue increased 1.0% and decreased 4.5% to $1.6 million and
$3.0 million during the three and six months ended June 30, 2000, respectively,
from $1.6 million and $3.2 million during the three and six months ended June
30, 1999, due primarily to the reduction in hotels managed for minority-owned
entities and unrelated third parties as described above offset by increases in
payroll costs which is the basis for the employee leasing revenue.
Franchising revenue increased 177.6% and 389.7% to $219,329 and $386,854 during
the three and six months ended June 30, 2000, respectively, from $79,000 in
revenues during the three and six months ended June 30, 1999, due primarily to
2000 being the first full year of operations for this segment.
Total operating costs and expenses increased 20.2% and 12.3% to $16.1 million
(74.1% of total revenues) and $29.5 million (78.2% of total revenues) during the
three and six months ended June 30, 2000, respectively, from $13.4 million
14
(70.4% of total revenues) and $26.2 million (77.6% of total revenues) during the
three and six months ended June 30, 1999 primarily due operating costs and
expenses from the development segment as described below. Operating costs and
expenses in the hotel operations segment remained essentially flat as
anticipated inflationary increases were offset by the reduction in the number of
Consolidated hotels. Hotel operations segment operating costs and expenses as a
percentage of segment revenue increased to 68.0% during the three months ended
June 30, 2000, from 67.2% during the three months ended June 30, 1999, due
primarily to increased labor costs in certain markets. Hotel operations segment
operating costs and expenses as a percentage of segment revenue decreased to
74.1% during the six months ended June 30, 2000, from 74.5% during the six
months ended June 30, 1999. Operating costs and expenses as a percentage of
revenues for the Consolidated AmeriHost Inn(R) hotels changed only slightly
during both the three and six month periods ended June 30, 2000.
Operating costs and expenses for the hotel development segment increased
1,602.1% to $2.9 million during the three months ended June 30, 2000, from
$168,004 during the three months ended June 30, 1999, consistent with the
1,479.7% increase in hotel development revenues for the three months ended June
30, 2000. Operating costs and expenses for the hotel development segment
increased 560.4% to $3.8 million during the six months ended June 30, 2000, from
$571,555 during the six months ended June 30, 1999, consistent with the 629.7%
increase in hotel development revenues for the six months ended June 30, 2000.
Operating costs and expenses in the hotel development segment as a percentage of
segment revenue increased to 95.6% during the three months ended June 30, 1999,
from 88.8% during the three months ended June 30, 1999. The second quarter of
1999 consisted primarily of hotel pre-construction development activity, which
results in a lower percentage of operating costs compared to construction
activity. The second quarter of 2000 consisted of a greater amount of
construction activity, which resulted in higher operating costs in relation to
the revenue recognized. Operating costs and expenses in the hotel development
segment as a percentage of segment revenue decreased to 92.4% during the six
months ended June 30, 2000, from 102.1% during the six months ended June 30,
1999, as a result of the increased hotel development and construction activity.
Hotel management segment operating costs and expenses decreased 16.7% and 20.1%
to $188,455 and $408,258 during the three and six months ended June 30, 2000,
respectively, from $226,354 and $511,175 during the three and six months ended
June 30, 1999. This decrease was primarily due to the decrease in the number of
hotels operated and managed for unrelated third parties and minority-owned
entities. Employee leasing operating costs and expenses increased 1.0% and
decreased 3.4% to $1.6 million and $3.0 million during the three and six months
ended June 30, 2000, respectively, from $1.6 million and $3.1 million during the
three and six months ended June 30, 1999, which is consistent with the 1.0%
increase and 4.5% decrease in segment revenue for the three and six months ended
June 30, 2000.
Franchising segment operating costs and expenses increased 52.5% and 106.6% to
$160,441 and $397,995 during the three and six months ended June 30, 2000,
respectively, from $105,235 and $192,616 during the three and six months ended
June 30, 1999, which was the initial six months of operations.
Depreciation and amortization expense decreased 26.4% and 16.4% to $1.0 million
and $2.1 million during the three and six months ended June 30, 2000,
respectively, from $1.4 million and $2.5 million during the three and six months
ended June 30, 1999. The decrease was primarily attributable to the sale of nine
consolidated hotels that closed in 1999 and the first six months of 2000,
partially offset by the net addition of six Consolidated hotels to the hotel
operations segment opened during 1999, and the resulting depreciation and
amortization therefrom.
Leasehold rents - hotels decreased 11.7% and 8.0% to $1.7 million and $3.4
million during the three and six months ended June 30, 2000, respectively,
compared to $1.9 million and $3.7 million during the three and six months ended
June 30, 1999. The decrease was primarily attributable to the termination of two
leased hotels as a result of the lessor selling these hotels during the past
twelve months.
Corporate general and administrative expense increased 2.4% and 3.3% to $404,216
and $803,169 during the three and six months ended June 30, 2000, respectively,
from $394,660 and $777,195 during the three and six months ended June 30, 1999,
and can be attributed primarily to the overall growth of the Company.
The Company's operating income increased 30.7% and 247.2% to $2.5 million and
$1.9 million during the three and six months ended June 30, 2000, respectively,
from $1.9 million and $535,649 during the three and six months ended June 30,
1999. The following discussion of operating income by segment is exclusive of
any corporate general and administrative expense. Operating income from
Consolidated AmeriHost Inn(R) hotels increased 16.4% and 38.7% to $2.3 million
and $2.2 million during the three and six months ended June 30, 1999,
respectively, from $1.9 million and $1.6 million during the three and six months
ended June 30, 1999. These increases in operating income were due to the
increase in same room revenues as a significant number of recently opened
Consolidated AmeriHost Inn(R) hotels were still operating in 1999 during their
15
pre-stabilization period when revenues are typically lower. Operating income
from the hotel development segment increased to $125,840 during the three months
ended June 30, 2000, from $14,744 during the three months ended June 30, 1999
and increased to $302,870 during the first six months of 2000 from ($24,601)
during the first six months of 1999. The fluctuations in hotel development
operating income were due to the timing of hotels developed and constructed for
third parties and minority-owned entities during the second quarter and first
six months of 2000, compared with the second quarter and first six months of
1999, and the overall increase in the number of hotels developed and constructed
for third parties and minority-owned entities during 2000. The hotel management
segment had operating income of $123,101 and $181,300 during the three and six
months ended June 30, 2000, from operating income of $103,023 and $121,818
during the three and six months ended June 30, 1999. This increase was due
primarily to a reduction in general and administrative costs for the management
segment partially offset by fewer hotels managed during the past twelve months
for unrelated third parties and minority-owned properties. Employee leasing
operating income increased 4.0% and decreased 46% to $12,394 and $43,706 during
the three and six months ended June 30, 2000, respectively, from $11,916 and
$81,077 during the three and six months ended June 30, 1999, due primarily to
the decrease in employee leasing agreements with minority-owned entities and
unrelated third parties.
Interest expense decreased 10.8% and 7.2% to $1.4 million and $2.9 million
during the three and six months ended June 30, 2000, respectively, from $1.6
million and $3.2 million during the three and six months ended June 30, 1999.
This decrease was primarily attributable to the aforementioned sales of hotels
whereby the Company does not incur any interest expense on the sold hotels after
the sale dates, partially offset by the mortgage financing of newly constructed
Consolidated hotels.
The Company's share of equity in income (loss) of affiliates decreased to
($57,140) during the three months ended June 30, 2000, from $204,431 during the
three months ended June 30, 1999. The Company's share of equity in income (loss)
of affiliates decreased 70.8% to $11,611 during the six months ended June 30,
2000, from $39,716 during the six months ended June 30, 1999. The decrease in
equity of affiliates during the second quarter and first six months of 2000 was
primarily attributable to the sale of one minority-owned property in the second
quarter of 1999 at a significant gain. Distributions from affiliates were
$282,389 during the six months ended June 30, 2000, compared to $126,756 during
the six months ended June 30, 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company has five main sources of cash from operating activities: (i)
revenues from hotel operations; (ii) fees from development, construction and
renovation projects including the sale of hotel assets held for sale; (iii) fees
from management contracts; (iv) fees from employee leasing services; and (v)
fees from franchisees. Cash from hotel operations is typically received at the
time the guest checks out of the hotel. Approximately 10% of the Company's hotel
operations revenues is generated through other businesses and contracts and is
usually paid within 30 to 45 days from billing. Fees from development,
construction and renovation projects are typically received within 15 to 45 days
from billing. Due to the procedures in place for processing its construction
draws, the Company typically does not pay its contractors until the Company
receives its draw from the equity or lending source. Management fee revenues
typically are received by the Company within five working days from the end of
each month. Cash from the Company's employee leasing segment typically is
received 24 to 48 hours prior to the pay date. Franchise fees consist of
up-front fees that are received at the time of receiving the franchise
application or at the time of signing the franchise agreement and franchise
royalty fees are typically received 10 to 30 days from billing.
During the first six months of 2000, the Company provided cash from operations
of $634,218, compared to cash used in operations of $2.7 million during the
first six months of 1999, or an increase in cash provided by operations of $3.3
million. The increase in cash flow from operations during the first six months
of 2000, when compared to 1999, can be attributed to the increasing stability of
Consolidated hotels as a greater number began to emerge from the
pre-stabilization period, and increase in cash flow from the hotel development.
The first six months of 1999 had significantly less revenue from the development
and construction of hotels for minority-owned entities.
The Company invests cash in three principal areas: (i) the purchase of property
and equipment through the construction and renovation of Consolidated hotels;
(ii) the purchase of equity interests in hotels; and (iii) the making of loans
to affiliated and non-affiliated hotels for the purpose of construction,
renovation and working capital. During the first six months of 2000, the Company
received $1.2 million from investing activities compared to receiving $7.0
million during the first six months of 1999. During the first six months of
2000, the Company received $5.0 million from the sale of three hotels, used $4.1
million to purchase property and equipment for Consolidated AmeriHost Inn(R)
hotels, and provided $158,307 from distributions and collections from
affiliates, net of investments in and advances to affiliates. During the first
six months of 1999, the Company received $12.8 million from the sale of hotels,
16
used $5.2 million to purchase property and equipment for Consolidated AmeriHost
Inn(R) hotels, used $441,285 for investments in and advances to affiliates, net
of distributions and collections, and used $260,648 for the acquisition of hotel
partnership interests, net of cash acquired.
Cash used in financing activities was $2.5 million during the first six months
of 2000 compared to cash used by financing activities of $3.6 million during the
first six months of 1999. In 2000, the primary factors were principal repayments
of $3.8 million, including the repayment of mortgages in connection with the
sale of hotels, offset by $1.2 million in proceeds from the mortgage financing
of Consolidated hotels, and net proceeds of $65,882 on the Company's operating
line-of-credit. In 1999, the contributing factors were principal repayments of
$2.3 million on the mortgage financing of Consolidated hotels, net of proceeds
from the issuance of long-term debt, $2.1 million in net proceeds from the
Company's operating line-of-credit and common stock repurchases of $3.4 million.
At June 30, 2000, the Company had $7.6 million outstanding under its operating
line-of-credit. The operating line-of-credit (i) has a limit of $8.5 million;
(ii) is collateralized by a security interest in certain of the Company's
assets, including its interest in various joint ventures; (iii) bears interest
at an annual rate equal to the lending bank's base rate plus 1/2% (with a
minimum interest rate of 7.5%); and (iv) matures August 15, 2000. The lender has
indicated the line-of-credit will be extended for an additional one-year period.
The Company expects cash from operations to be sufficient to pay all operating
and interest expenses in 2000.
YEAR 2000
The following disclosure is a Year 2000 readiness disclosure statement pursuant
to the Year 2000 Readiness Disclosure Act.
In order to minimize or eliminate the effect of the Year 2000 risk on our
business systems and applications, we identified, evaluated, implemented and
tested changes to our computer systems, applications and software necessary to
achieve Year 2000 compliance. Our computer systems and equipment successfully
transitioned to the Year 2000 with no significant issues. Costs incurred to
achieve Year 2000 compliance were not material. We continue to keep our Year
2000 project management in place to monitor latent problems that could surface
at key dates or events in the future. We do not anticipate any significant
problems related to these events.
SEASONALITY
The lodging industry, in general, is seasonal by nature. The Company's hotel
revenues are generally greater in the second and third calendar quarters than in
the first and fourth quarters due to weather conditions in the markets in which
the Company's hotels are located, as well as general business and leisure travel
trends. This seasonality can be expected to continue to cause quarterly
fluctuations in the Company's revenues, and is expected to have a greater impact
as the number of Consolidated hotels increases. Quarterly earnings may also be
adversely affected by events beyond the Company's control, such as extreme
weather conditions, economic factors and other general factors affecting travel.
In addition, hotel construction is seasonal, depending upon the geographic
location of the construction projects. Construction activity in the Midwest may
be slower in the first and fourth calendar quarters due to weather conditions.
INFLATION
Management does not believe that inflation has had, or is expected to have, any
significant adverse impact on the Company's financial condition or results of
operations for the periods presented.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
All statements contained herein that are not historical facts, including, but
not limited to, statements regarding the Company's hotels under construction and
the operation of AmeriHost Inn(R) hotels are based on current expectations.
These statements are forward looking in nature and involve a number of risks and
uncertainties. Actual results may differ materially. Among the factors that
could cause actual results to differ materially are the following: the
availability of sufficient capital to finance the Company's business plan on
terms satisfactory to the Company; competitive factors, such as the introduction
of new hotels or renovation of existing hotels in the same markets; changes in
travel patterns which could affect demand for the Company's hotels; changes in
development and operating costs, including labor, construction, land, equipment,
and capital costs; general business and economic conditions; and other risk
factors described from time to time in the Company's reports filed with the
Securities and Exchange Commission. The Company wishes to caution readers not to
place undue reliance on any such forward looking statements, which statements
17
are made pursuant to the Private Securities Litigation Reform Act of 1995 and,
as such, speak only as of the date made.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- --------
The Company's exposure to market risk for changes in interest rates relates
primarily to the Company's long-term debt obligations. The Company has some cash
flow exposure on its long-term debt obligations to changes in market interest
rates. The Company primarily enters into long-term debt obligations in
connection with the development and financing of hotels. The Company maintains a
mix of fixed and floating debt to mitigate its exposure to interest rate
fluctuations.
The Company's management believes that fluctuations in interest rates in the
near term would not materially affect the Company's consolidated operating
results, financial position or cash flows as the Company has limited risks
related to interest rate fluctuations.
18
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
SCHEDULE OF EARNINGS BEFORE INTEREST/RENT,
TAXES AND DEPRECIATION/AMORTIZATION
(UNAUDITED)
====================================================================
Three Months Ended June 30, Six Months Ended June 30,
-------------------------------- ---------------------------------
2000 1999 2000 1999
-------------- -------------- --------------- --------------
Revenue $ 21,804,683 $ 19,088,251 $ 37,671,732 $ 33,807,198
Operating costs and expenses 16,150,182 13,439,848 29,466,893 26,238,834
-------------- -------------- --------------- --------------
5,654,501 5,648,403 8,204,839 7,568,364
Corporate general and administrative (404,216) (394,660) (803,169) (777,195)
Equity in net income and losses
of affiliates (57,140) 204,931 11,611 39,716
-------------- -------------- --------------- --------------
Earnings before minority interests 5,193,145 5,458,674 7,413,281 6,830,885
Minority interests in earnings of
consolidated subsidiaries and
partnerships (20,307) (51,608) (1,818) (90,027)
-------------- -------------- --------------- --------------
Earnings before interest/rent, taxes
and depreciation/amortization $ 5,172,838 $ 5,407,066 $ 7,411,463 $ 6,740,858
============== =============== =============== ==============
19
PART II: Other Information
Item 4. Submission of Matters to a Vote of Securities Holders:
- -------
The annual shareholders' meeting was held on June 1, 2000. One
matter was voted as follows:
Matter 1: Election of Directors
Director For Against Abstain
-------- --- ------- -------
Michael P. Holtz 3,606,461 1,589 343,448
Russell J. Cerqua 3,607,786 264 343,448
Reno J. Bernardo 3,607,677 373 343,448
Salomon J. Dayan 3,607,902 148 343,448
Jon K. Haahr 3,607,902 148 343,448
Thomas J. Romano 3,607,902 148 343,448
Item 6. Exhibits and Reports on Form 8-K:
- -------
(a) Exhibits:
Exhibit No.
-----------
27.0 Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during this
period covered by this report.
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.
AMERIHOST PROPERTIES, INC.
--------------------------
Registrant
Date: August 4, 2000
By: /s/ James B. Dale
----------------------------------------
James B. Dale
Treasurer/Senior Vice President, Finance
By: /s/ Michael E. Kirk
----------------------------------------
Michael E. Kirk
Corporate Controller
20