================================================================================
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 March 31, 2001
----------------------------
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. D/B/A ARLINGTON HOSPITALITY, 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 May 4, 2001, 4,979,269 shares of the Registrant's Common Stock were
outstanding.
================================================================================
AMERIHOST PROPERTIES, INC.
D/B/A ARLINGTON HOSPITALITY, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 2001
INDEX
PART I: Financial Information Page
----------------------------- ----
Consolidated Balance Sheets as of March 31, 2001
and December 31, 2000 4
Consolidated Statements of Operations for the Three Months
Ended March 31, 2001 and 2000 6
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2001 and 2000 7
Notes to Consolidated Financial Statements 9
Management's Discussion and Analysis 14
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 18
PART II: Other Information
--------------------------
Item 6 - Exhibits and Reports on Form 8-K 19
Signatures 19
Page 2
Part I: Financial Information
Item 1: Financial Statements
Page 3
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
===================================================================================================================
March 31, December 31,
2001 2000
--------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents $ 2,583,862 $ 1,728,869
Accounts receivable (including approximately $159,000 and
$361,000 from related parties) 3,090,235 2,663,825
Notes receivable, current portion 618,485 618,485
Prepaid expenses and other current assets 983,648 1,013,053
Refundable income taxes 428,756 -
Costs and estimated earnings in excess of billings on
uncompleted contracts with related parties 136,084 375,780
--------------- --------------
Total current assets 7,841,070 6,400,012
--------------- --------------
Investments in and advances to unconsolidated
hotel joint ventures 6,891,007 7,031,982
--------------- --------------
Property and equipment:
Land 11,676,135 11,226,664
Buildings 59,612,190 60,122,758
Furniture, fixtures and equipment 21,401,171 21,393,936
Construction in progress 1,905,375 850,238
Leasehold improvements 2,876,989 2,875,379
--------------- ---------------
97,471,860 96,468,975
Less accumulated depreciation and amortization 19,597,493 18,666,279
--------------- --------------
77,874,367 77,802,696
--------------- --------------
Notes receivable, less current portion 788,289 801,346
Deferred income taxes 3,524,000 3,402,000
Other assets, net of accumulated amortization of
$921,360 and $805,998 2,628,009 2,704,679
--------------- --------------
6,940,298 6,908,025
$ 99,546,742 $ 98,142,715
=============== ==============
(continued)
Page 4
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
===================================================================================================================
March 31, December 31,
2001 2000
--------------- ----------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,216,883 $ 2,313,640
Bank line-of-credit 7,802,702 3,408,133
Accrued payroll and related expenses 784,317 775,714
Accrued real estate and other taxes 2,081,714 1,937,415
Other accrued expenses and current liabilities 314,850 306,146
Current portion of long-term debt 1,681,253 1,698,538
Income taxes payable - 132,420
--------------- --------------
Total current liabilities 14,881,719 10,572,006
--------------- --------------
Long-term debt, net of current portion 54,309,414 56,905,152
--------------- --------------
Deferred income (Note 11) 12,393,015 12,196,330
--------------- --------------
Commitments
Minority interests 199,934 203,449
---------------- --------------
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 March 31, 2001
and December 31, 2000 24,896 24,896
Additional paid-in capital 13,242,324 13,125,324
Retained earnings 4,932,315 5,552,433
--------------- --------------
18,199,535 18,702,653
Less:
Stock subscriptions receivable (436,875) (436,875)
--------------- --------------
17,762,660 18,265,778
$ 99,546,742 $ 98,142,715
=============== ==============
See notes to consolidated financial statements.
Page 5
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,
(Unaudited)
===================================================================================================================
2001 2000
--------------- -----------------
Revenue:
Hotel operations:
AmeriHost Inn hotels $ 9,866,663 $ 10,411,503
Other hotels 2,174,338 2,472,789
Development and construction 65,157 1,096,518
Hotel sales and commissions 5,764,695 -
Management services 229,808 289,843
Employee leasing 1,359,882 1,428,871
Other - 167,525
--------------- --------------
19,460,543 15,867,049
--------------- --------------
Operating costs and expenses:
Hotel operations:
AmeriHost Inn hotels 8,185,024 8,183,697
Other hotels 2,175,315 2,363,946
Development and construction 376,168 914,731
Hotel sales and commissions 3,717,468 -
Management services 192,457 219,803
Employee leasing 1,354,914 1,396,980
Other - 237,554
--------------- --------------
16,001,346 13,316,711
--------------- --------------
3,459,197 2,550,338
Depreciation and amortization 1,121,346 1,103,824
Leasehold rents - hotels 1,755,859 1,698,362
Corporate general and administrative 613,628 398,953
--------------- --------------
Operating loss (31,636) (650,801)
Other income (expense):
Interest expense (1,407,573) (1,499,716)
Interest income 147,866 231,757
Other income 43,245 100,861
Equity in net income and losses of affiliates (112,773) 68,751
Gain on sale of assets 315,238 171,579
--------------- --------------
Loss before minority interests and income taxes (1,045,633) (1,577,569)
Minority interests in operations of consolidated
subsidiaries and partnerships 3,515 18,489
--------------- --------------
Loss before income tax (1,042,118) (1,559,080)
Income tax benefit 422,000 655,000
--------------- --------------
Net loss $ (620,118) $ (904,080)
=============== ==============
Net loss per share:
Basic $ (0.12) $ (0.18)
=============== ==============
Diluted $ (0.13) $ (0.18)
=============== ==============-
See notes to consolidated financial statements.
Page 6
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
(Unaudited)
===================================================================================================================
2001 2000
---------------- -----------------
Cash flows from operating activities:
Cash received from customers $ 23,915,752 $ 15,350,850
Cash paid to suppliers and employees (18,602,930) (15,495,191)
Interest received 127,778 311,295
Interest paid (1,400,989) (1,576,971)
Income taxes received (paid) (261,176) 13,517
--------------- --------------
Net cash provided by (used in) operating activities 3,778,435 (1,396,500)
--------------- --------------
Cash flows from investing activities:
Distributions, and collections on advances,
from affiliates 351,348 1,768,667
Purchase of property and equipment (1,974,918) (1,743,365)
Purchase of investments in, and advances
to, minority owned affiliates (1,177,328) (683,895)
Acquisitions of partnership interests,
net of cash acquired (Note 7) (795,384) -
Collections on notes receivable 13,057 23,251
Proceeds from sale of assets - 2,311,344
--------------- --------------
Net cash (used in) provided by investing activities (3,583,225) 1,676,002
--------------- --------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 37,587 800,000
Principal payments on long-term debt (3,889,373) (1,922,636)
Net proceeds from line of credit 4,394,569 26,528
Decrease in minority interest - (5,672)
Other 117,000 13,679
--------------- --------------
Net cash provided by (used in) financing activities 659,783 (1,088,101)
--------------- --------------
Net increase (decrease) in cash 854,993 (808,599)
Cash and cash equivalents, beginning of year 1,728,869 3,766,323
--------------- --------------
Cash and cash equivalents, end of period $ 2,583,862 $ 2,957,724
=============== ==============
(continued)
Page 7
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
(Unaudited)
===================================================================================================================
2001 2000
---------------- ------------------
Reconciliation of net loss to net cash
provided by (used in) operating activities:
Net loss $ (620,118) $ (904,080)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 1,121,346 1,103,824
Equity in net (income) loss of affiliates and
amortization of deferred income 112,773 (68,751)
Minority interests in net income of subsidiaries (3,515) (18,489)
Amortization of deferred gain (217,888) (380,070)
Deferred income taxes (122,000) 207,000
Gain on sale of fixed assets (315,238) (171,579)
Proceeds from sale of hotels 4,230,948 -
Operating income from sale of hotels (513,480) -
Changes in assets and liabilities, net of effects
of acquisition:
Increase in accounts receivable (413,797) (512,448)
Decrease in prepaid expenses and
other current assets 31,344 628,797
Increase in refundable income taxes (561,176) (848,483)
Decrease (increase) in costs and estimated earnings
in excess of billings 239,696 (269,306)
Decrease in other assets 40,548 2,796
(Decrease ) increase in accounts payable (180,907) 40,045
Increase (decrease) in accrued payroll and other accrued
expenses and current liabilities 136,239 (244,781)
Increase (decrease) in accrued interest 6,584 (78,663)
Increase in deferred income 807,076 117,688
--------------- --------------
Net cash provided by (used in) operating activities $ 3,778,435 $ (1,396,500)
=============== ==============
See notes to consolidated financial statements.
Page 8
AMERIHOST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2001
================================================================================
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 consolidated financial statements contain all adjustments, which
consist only of recurring adjustments necessary to present fairly the
financial position of Amerihost Properties, Inc. d/b/a Arlington
Hospitality, Inc. and subsidiaries as of March 31, 2001 and December 31,
2000, and the results of its operations and cash flows for the three
months ended March 31, 2001 and 2000. The results of operations for the
three months ended March 31, 2001, are not necessarily indicative of the
results to be expected for the full year. It is suggested that the
accompanying consolidated financial statements be read in conjunction with
the consolidated financial statements and the notes thereto included in
the Company's 2000 Annual Report on Form 10-K. Certain reclassifications
have been made to the 2001 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 entities in which the Company has a
majority ownership interest. Significant intercompany accounts and
transactions have been eliminated.
3. Earnings (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 of 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 (loss) per share:
Three Months Ended March 31,
-----------------------------
2001 2000
------------- -------------
Net loss $ (620,118) $ (904,080)
Impact of convertible partnership interests (40,290) (33,897)
-------------- -------------
$ (660,408) $ (937,977)
============== =============
Weighted average common shares outstanding 4,979,244 4,972,304
Dilutive effect of convertible partnership interests and
common stock equivalents 168,100 249,350
-------------- -------------
Dilutive common shares outstanding 5,147,344 5,221,654
============== =============
Basic net loss per share $ (0.12) $ (0.18)
============== =============
Diluted net loss per share $ (0.13) $ (0.18)
============== =============
Page 9
AMERIHOST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2001
================================================================================
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. A valuation allowance has not been recorded
to reduce the deferred tax assets, as the Company expects to realize all
components of the deferred tax asset in future periods.
The income tax benefit for the three months ended March 31, 2001 and 2000
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 30 hotels as of March 31, 2001 (including 27
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 $27,000. The Company leases one of these hotels from a partnership in
which the Company owns an equity interest of 16.33%. This lease also
provides for additional rent payments of approximately $74,000 per annum,
plus percentage rents computed on room revenues in excess of stipulated
amounts. The leases expire through March 2014.
The three leases, other than the REIT leases, provide for an option to
purchase the hotel. The purchase prices are based upon a fixed amount
approximating the fair value at the lease commencement, subject to
increases in the CPI index. At March 31, 2001, the aggregate purchase
price for these three leased hotels was approximately $11,500,000.
6. Limited partnership guaranteed distributions:
---------------------------------------------
The Company is a general partner in two partnerships, and had been a
general partner in a third partnership, where the Company had guaranteed
minimum annual distributions to the limited partners in the amount of 10%
of their original capital contributions. On September 18, 2000, the
Company finalized the terms of the purchase of the remaining ownership
interests from its partners in these three joint ventures for a total of
$2,444,800. One of these acquisitions was completed in January 2001, with
the remaining two to be completed on or before December 31, 2001.
7. Investments:
------------
Effective January 1, 2001, the Company acquired the remaining ownership
interest in one hotel joint venture. The following is a summary of this
acquisition:
Property and equipment acquired $ 2,100,058
Other assets acquired 37,023
Long-term debt assumed (1,238,763)
Other liabilities assumed (102,934)
--------------
Cash paid, net of cash acquired $ 795,384
=============
Page 10
AMERIHOST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2001
================================================================================
8. Sale/Leaseback of hotels:
-------------------------
In 1998 and 1999, the Company completed the sale of 30 AmeriHost Inn
hotels to a Real Estate Investment Trust ("REIT") for $73 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. In January
2001, the Company amended the master lease with the REIT to provide for
the sale of eight hotels under specified terms, and to extend the initial
lease term by five years. The amendment provides for four increases in
rent payments of 0.25% each, if these hotels are not purchased by an
unrelated third party or the Company by the dates specified. The remaining
deferred gain will be recognized over the remaining term of the lease, as
extended, as a reduction of leasehold rent expense.
The REIT has sold three of their hotels to unrelated third parties,
including two during the three months ended March 31, 2001. Consequently,
the Company has terminated the leases with the REIT for these hotels and
recognized revenue from the sale of these hotels, which is classified as
hotel sales and commissions in the accompanying consolidated financial
statements. The unamortized deferred gain related to the initial sale of
each of these hotels was recognized upon termination of the respective
leases.
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 and construction, consisting of development, construction and
renovation of hotels for unconsolidated joint ventures and unrelated third
parties, (3) hotel sales and commissions, resulting from the sale of
AmeriHost Inn hotels, (4) hotel management, consisting of hotel management
activities and (5) employee leasing, consisting of the leasing of
employees to various hotels. 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 three months ended March 31, 2001
and 2000, for each business segment, which is the information utilized by
the Company's decision makers in managing the business:
Revenues 2001 2000
-------- ------------- -------------
Hotel operations $ 12,041,001 $ 12,884,292
Hotel development and construction 65,157 1,096,518
Hotel sales and commissions 5,764,695 -
Hotel management 229,808 289,843
Employee leasing 1,359,882 1,428,871
Other - 167,525
------------- -------------
$ 19,460,543 $ 15,867,049
============= =============
Operating costs and expenses
----------------------------
Hotel operations $ 10,360,339 $ 10,547,643
Hotel development and construction 376,168 914,731
Hotel sales and commissions 3,717,468 -
Hotel management 192,457 219,803
Employee leasing 1,354,914 1,396,980
Other - 237,554
------------- -------------
$ 16,001,346 $ 13,316,711
============= =============
Page 11
AMERIHOST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2001
================================================================================
9. Business segments (continued):
------------------------------
Operating income (loss) 2001 2000
---------------------- ------------- -------------
Hotel operations $ (1,158,322) $ (433,900)
Hotel development and construction (317,404) 177,030
Hotel sales and commissions 2,047,227 -
Hotel management 22,951 58,201
Employee leasing 4,171 31,312
Other - (71,496)
Corporate (630,259) (401,948)
------------- -------------
$ (31,636) $ (650,801)
============= =============
Identifiable assets
-------------------
Hotel operations $ 93,186,444 $ 91,288,124
Hotel development and construction 746,048 1,813,014
Hotel management (79,335) 246,834
Employee leasing 148,243 481,529
Other - 68,517
Corporate 5,545,342 6,649,099
------------- -------------
$ 99,546,742 $ 100,547,117
============= =============
Capital expenditures
--------------------
Hotel operations $ 1,928,072 $ 1,592,157
Hotel development and construction - 5,018
Hotel management 12,959 21,261
Employee leasing - -
Other - 18,732
Corporate 33,887 106,197
------------- -------------
$ 1,974,918 $ 1,743,365
============= =============
Depreciation/Amortization
-------------------------
Hotel operations $ 1,083,125 $ 1,082,186
Hotel development and construction 6,393 4,757
Hotel management 14,400 11,840
Employee leasing 797 579
Other - 1,467
Corporate 16,631 2,995
------------- -------------
$ 1,121,346 $ 1,103,824
============= =============
10. Commitments:
------------
As a result of the sale of two hotels by the REIT in the first quarter
(Note 5), the Company is obligated to purchase another two of the
sale/leaseback properties. These transactions are expected to close prior
to June 30, 2002.
Page 12
AMERIHOST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2001
================================================================================
11. Sale of AmeriHost Inn Brand Names and Franchising Rights:
---------------------------------------------------------
Effective September 30, 2000, the Company completed the sale of the
AmeriHost Inn and AmeriHost Inn & Suites brand names and franchising
rights to Cendant Corporation ("Cendant"). The Company simultaneously
entered into franchise agreements with Cendant for its AmeriHost Inn
hotels. The Company received an initial payment of approximately $5.5
million upon closing and recorded a gain from this payment, net of closing
costs of approximately $5.2 million. The agreement with Cendant also
provides for additional incentives to the Company as the AmeriHost Inn and
AmeriHost Inn & Suites brand names are expanded. Certain of these
incentives are deferred for accounting purposes and amortized into income
over a 76 month period, in accordance with Staff Accounting Bulletin No.
101. As a result of the Cendant transaction, the Company intends to create
net income and cash flow by building and selling AmeriHost Inn hotels. As
such, the sales price and related cost basis are recorded as hotel sales
and commission revenue and operating expense in the accompanying
consolidated financial statements upon consummation of the sale of an
AmeriHost Inn hotel.
Page 13
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
-----------------------------------------------------------------------
General
The Company is engaged in the development and sale of AmeriHost Inn hotels, and
the ownership, operation and management of AmeriHost Inn hotels and other
mid-price hotels. As of March 31, 2001, the Company had 68 AmeriHost Inn hotels
open, of which 56 were wholly-owned or leased, one was majority-owned, and 11
were minority-owned. The Company opened four AmeriHost Inn hotels during the
past fifteen months. The Company intends to use the AmeriHost Inn brand when
expanding its hotel operations segment. As of March 31, 2001, five wholly-owned
AmeriHost Inn hotels were under construction. Same room revenues for all
AmeriHost Inn hotels owned and operated by the Company, including minority owned
hotels, increased approximately 0.3% during the first quarter of 2001, compared
to the first quarter of 2000, attributable to an increase of $0.98 in average
daily rate offset by a 0.4% decrease in occupancy. These results relate to the
67 AmeriHost Inn hotels that were operating for at least thirteen full months
during the three months ended March 31, 2001.
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 fees for new construction and
renovation activities performed by the Company for minority-owned hotels and
unrelated third parties. The Company records commissions and revenue from the
sale of its AmeriHost Inn hotels, based upon the net sale price, as these sales
are considered part of the Company's strategy of building and selling hotels,
and therefore expanding the AmeriHost Inn brand. 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 hotels decreased 5.2% to $9.9 million
during the first quarter of 2001, from revenues of $10.4 million during the
first quarter of 2000, due primarily to the sale of hotels to franchisees.
Revenues from the development segment decreased 94.1% to $65,157 from $1.1
million in 2000 due to the decrease in hotel development activity for minority
owned and third party entities. Revenues from hotel sales and commissions was
$5.8 million during the three months ended March 31, 2001, as a result of the
sale of four AmeriHost Inn hotels. Revenues from hotel management and employee
leasing segments decreased by 7.5% in total during the first quarter of 2001,
due primarily to the sale of hotels under management contracts. Revenues from
Consolidated non-AmeriHost Inn hotels decreased 12.1% during the first quarter
of 2001, compared to 2000, as a result of the sale of one non-AmeriHost Inn
hotel. Total revenues increased 22.7% to $19.5 million during the first quarter
of 2001, from $15.9 million during the first quarter of 2000. The Company
recorded a net loss of $620,118 for the first quarter of 2001, or ($0.13) per
diluted share, compared to a net loss of $904,080, or ($0.18) per diluted share
in 2000.
After developing and operating the AmeriHost Inn brand name for approximately 10
years, the Company decided to begin franchising this brand in 1999. As
previously announced, on September 30, 2000, the Company sold the AmeriHost Inn
and AmeriHost Inn & Suites brand names and franchising rights to Cendant
Corporation. Cendant is the world's largest franchising company with hotel brand
names such as Days Inn, Super 8 and Wingate. The Company received $5.5 million
upon closing. The agreement with Cendant also provides for additional long-term
incentives to the Company as the AmeriHost Inn brands are expanded, including
royalty sharing and a fee each time a hotel owned by the Company is sold to an
operator who becomes a Cendant franchisee. In conjunction with this transaction,
the Company has begun doing business as Arlington Hospitality, Inc. and intends
to legally adopt this name pending shareholder approval at its next regularly
scheduled shareholder meeting.
The Company uses cash flow, defined as net income plus depreciation and
amortization, as a supplemental performance measure, along with net income, to
report its operating results. Net income plus depreciation is not defined by
Generally Accepted Accounting Principles ("GAAP"), however the Company believes
it provides relevant information about its operations and is necessary for an
understanding of the Company's operations, given its significant investment in
real estate. Cash flow, as defined, should not be considered as an alternative
to operating income (as determined in accordance with GAAP) as an indicator of
the Company's operating performance or to
Page 14
cash flows from operating activities (as determined in accordance with GAAP) as
a measure of liquidity. Cash flow, as defined, increased 150.9% to $501,228
during 2001, from $199,744 during 2000.
Amerihost had an ownership interest in 77 hotels at March 31, 2001 versus 82
hotels at March 31, 2000 (excluding hotels under construction). The increased
ownership from the development of AmeriHost Inn hotels for the Company's own
account and for minority-owned entities was offset by the sale of AmeriHost Inn
hotels to franchisees and non-AmeriHost Inn hotels to unrelated third parties.
These figures include a net decrease of five Consolidated hotels, from 68 at
March 31, 2000 to 63 at March 31, 2001.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2001 COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 2000
Revenues increased 22.7% to $19.5 million during the three months ended March
31, 2001, from $15.9 million during the three months ended March 31, 2000.
Revenues increased from the sale of four Consolidated AmeriHost Inn hotels,
partially offset by decreases in all other segments.
Hotel operations revenue decreased 6.6% to $12.0 million during the three months
ended March 31, 2001, from $12.9 million during the three months ended March 31,
2000. Revenues from Consolidated AmeriHost Inn hotels decreased 5.2% to $9.9
million during the three months ended March 31, 2001, from $10.4 million during
the three months ended March 31, 2000. These decreases were attributable
primarily to the sale of seven Consolidated AmeriHost Inn hotels to franchisees
during the remainder of 2000 and the first quarter of 2001, partially offset by
the opening of two newly constructed hotels during the same period and the
acquisition of one AmeriHost Inn hotel from an existing joint venture. Same room
revenues for the Consolidated AmeriHost Inn hotels increased 1.1%. Revenue from
Consolidated other brand hotels decreased 12.1% during the three month period,
due to a same room revenue decrease of 8.8% and the sale of one non-AmeriHost
Inn hotel during the second half of 2000. The hotel operations segment included
the operations of 63 Consolidated hotels (including 57 AmeriHost Inn hotels)
comprising 4,449 rooms at March 31, 2001, compared to 68 Consolidated hotels
(including 61 AmeriHost Inn hotels) comprising 4,807 rooms at March 31, 2000.
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 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 decreased 94.1% to $65,157 during the three months
ended March 31, 2001, from $1.1 million during the three months ended March 31,
2000. Hotel development revenues are directly related to the number of hotels
being developed and constructed for minority-owned entities or unrelated third
parties. The Company was not constructing any hotels for minority-owned entities
during the first quarter of 2001, compared to four hotels during the three
months ended March 31, 2000. However, the Company had several additional
projects in various stages of pre-construction development during both three
month periods.
The Company recorded $5.8 million in hotel sales and commission revenue in
connection with the sale of AmeriHost Inn hotels during the first quarter of
2001. The Company and the REIT which owns certain of the Company's leased
hotels, closed on the sale of four AmeriHost Inn hotels during the first quarter
of 2001. The Company intends to continue to build and sell AmeriHost Inn hotels
in order to maximize the value inherent in the Cendant transaction while
enhancing net income and cash flow.
Hotel management revenue decreased 20.7% to $229,808 during the three months
ended March 31, 2001 from $289,843 during the three months ended March 31, 2000.
The number of hotels managed for third parties and minority-owned entities
decreased from 17 hotels, representing 1,635 rooms, at March 31, 2000 to 16
hotels, representing 1,318 rooms, at March 31, 2001. The decrease was the result
of the termination of two management contracts (121 rooms) with minority-owned
entities as a result of the sale or buyout of the hotel, and the termination of
one management contract for a hotel with an unrelated third party (324 rooms).
Page 15
Employee leasing revenue decreased 4.8% to $1.4 million during the three months
ended March 31, 2001 from $1.4 million during the three months ended March 31,
2000, due primarily to the reduction in hotels managed for minority-owned
entities and unrelated third parties as described above, and the associated
decrease in payroll costs which is the basis for the employee leasing revenue.
Total operating costs and expenses increased 20.2% to $16.0 million during the
three months ended March 31, 2001, from $13.3 million during the three months
ended March 31, 2000, or 82.2% and 83.9% of total revenues during the three
months ended March 31, 2001 and 2000, respectively. Operating costs and expenses
in the hotel operations segment decreased 1.8% to $10.4 million from $10.5
million during the three months ended March 31, 2001 and 2000, respectively. A
decrease in operating costs associated with the fewer number of hotels included
in this segment (63 hotels at March 31, 2001 versus 68 hotels at March 31,
2000), were partially offset by significant increases in energy costs,
inflationary increases in operating expenses and the greater number of
stabilized hotels. Consequently, hotel operational efficiency dropped as total
operating costs and expenses as a percentage of segment revenue increased to
86.0% during the three months ended March 31, 2001, from 81.9% during the three
months ended March 31, 2000. Operating costs and expenses as a percentage of
revenues from the Consolidated AmeriHost Inn hotels increased to 83.0% during
the three months ended March 31, 2001, from 78.6% during the three months ended
March 31, 2000.
Operating costs and expenses for the hotel development segment decreased 58.9%
to $376,168 during the three months ended March 31, 2001 from $914,731 during
the three months ended March 31, 2000, consistent with the 94.1% decrease in
hotel development revenues for the three months ended March 31, 2001. Operating
costs and expenses in the hotel development segment as a percentage of segment
revenue increased during the three months ended March 31, 2001 due to the
decrease in hotel construction activity. Hotel management segment operating
costs and expenses decreased 12.4% to $192,457 during the three months ended
March 31, 2001, from $219,803 during the three months ended March 31, 2000. This
decrease was due to the decrease in the number of hotels managed for
minority-owned hotels and unaffiliated third parties. Employee leasing operating
costs and expenses decreased 3.0% to $1.35 million during the three months ended
March 31, 2001, from $1.4 million during the three months ended March 31, 2000,
which is consistent with the 4.8% decrease in segment revenue for the three
months ended March 31, 2001.
Depreciation and amortization expense remained constant at $1.1 million during
the three months ended March 31, 2000 and 2001. The increase attributable to the
additional four hotels opened during 2000 was offset by the hotels sold during
the first three months of 2001.
Leasehold rents - hotels increased 3.4% to $1.8 million during the three months
ended March 31, 2001, from $1.7 million during the three months ended March 31,
2000. This increase was due primarily to the extension of the hotel leases with
a REIT, partially offset by the sale of two leased AmeriHost Inn hotels during
the first three months of 2001.
Corporate general and administrative expense increased 53.8% to $613,628 during
the three months ended March 31, 2001, from $398,953 during the three months
ended March 31, 2000, which can be attributed primarily to expense related to
stock options issued to consultants, transition accounting fees, and the growth
of the Company.
The Company had an operating loss of ($31,636) during the three months ended
March 31, 2001, compared to an operating loss of ($650,801) during the three
months ended March 31, 2000. The following discussion of operating income (loss)
by segment is exclusive of any corporate general and administrative expense.
Operating loss from Consolidated AmeriHost Inn hotels increased to ($671,448)
during the three months ended March 31, 2001, from ($3,683) during the three
months ended March 31, 2000. This increase in operating loss was due to the
increase in operating costs and expenses as explained above in the first quarter
of 2001 as compared to the first quarter of 2000. Operating income from the
hotel development segment including the sale of hotels increased to operating
income of $1.7 million during the three months ended March 31, 2001, from
operating income of $177,030 during the three months ended March 31, 2000. The
fluctuation in hotel development operating income was due to the timing of
hotels sold during the first quarter 2001 versus those developed and constructed
for third parties and minority-owned entities during the first quarter of 2000.
The hotel management segment operating income decreased 60.6% to
Page 16
$22,951 during the three months ended March 31, 2001, from $58,200 during the
three months ended March 31, 2000. This decrease was due primarily to fewer
properties managed for minority-owned entities and third parties. Employee
leasing operating income decreased to $4,171 during the three months ended March
31, 2001, from $31,312 during the three months ended March 31, 2000, due to the
decrease in employee leasing agreements with minority-owned entities and
unrelated third parties.
Interest expense decreased 6.1% to $1.4 million during the three months ended
March 31, 2001 from $1.5 million during the three months ended March 31, 2000.
The decrease was attributable to the decrease in Consolidated hotels with
mortgage financing.
The Company's share of equity in income (loss) of affiliates decreased to
$(112,773) during the three months ended March 31, 2001, from $68,751 during the
three months ended March 31, 2000. The fluctuation in equity of affiliates
during the three months ended March 31, 2001, compared to the three months ended
March 31, 2000, was primarily due to the sale of a minority owned hotel at a
significant gain during the first quarter of 2000. Distributions from affiliates
were $7,884 during the three months ended March 31, 2001, compared to $262,232
during the three months ended March 31, 2000.
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; (iii) fees from
management contracts; (iv) fees from employee leasing services; and (v)
incentive fees and royalty sharing pursuant to the Cendant transaction. 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 as of or prior to the pay date.
During the first three months of 2001, the Company received cash from operations
of $3.8 million, compared to cash used in operations of $1.4 million during the
first three months of 2000, or an increase in cash provided by operations of
$5.2 million. The increase in cash flow from operations during the first three
months of 2001, when compared to 2000, can be primarily attributed to the sale
of four hotels.
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 three months of 2001, the
Company used $3.6 million in investing activities compared to receiving $1.7
million during the first three months of 2000. During the first three months of
2001, the Company bought out a partner's interest in one joint venture for
$795,384, used $2.0 million to purchase property and equipment for Consolidated
AmeriHost Inn hotels, and used $765,980 for investments in and advances to
affiliates, net of distributions and collections on advances from affiliates.
During the first three months of 2000, the Company received $2.3 million from
the sale of one hotel, used $1.7 million to purchase property and equipment for
Consolidated AmeriHost Inn hotels, and received $1.1 million in distributions
and collections on advances from affiliates, net of investments in and advances
to affiliates.
Cash provided by financing activities was $659,783 during the first three months
of 2001 compared to cash used in financing activities of $1.1 million during the
first three months of 2000. In 2001, the primary factors were principal
repayments of $3.9 million, including the repayment of mortgages in connection
with the sale of hotels, offset by $4.4 million in proceeds from the line of
credit. In 2000, the contributing factors were principal repayments of $1.9
million, including the repayment of mortgages in connection with the sale of a
hotel, offset by $800,000 in proceeds from the mortgage financing of
Consolidated hotels.
Page 17
At March 31, 2001, the Company had $7.8 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, 2001.
The Company expects cash from operations to be sufficient to pay all operating
and interest expenses in 2001.
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
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.
Page 18
PART II: Other Information
Item 6. Exhibits and Reports on Form 8-K:
- -------
(a) 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.
--------------------------
D/B/A ARLINGTON HOSPITALITY, INC.
---------------------------------
Registrant
Date: May 4, 2001
By: /s/ James B. Dale
-------------------------------
James B. Dale
Treasurer/Senior Vice President,
Finance
By: /s/ Michael E. Kirk
-------------------------------
Michael E. Kirk
Corporate Controller