================================================================================
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, 2001
----------------------------
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File No. 0-15291
-------
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
--------------
AMERIHOST PROPERTIES, INC.
--------------------------
(Former name, former address and former fiscal year, if changed
since last report)
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 9, 2001, 4,984,156 shares of the Registrant's Common Stock were
outstanding.
================================================================================
ARLINGTON HOSPITALITY, INC.
FORM 10-Q
FOR THE SIX MONTHS ENDED JUNE 30, 2001
INDEX
PART I: Financial Information Page
----------------------------- ----
Consolidated Balance Sheets as of June 30, 2001
and December 31, 2000 (unaudited) 4
Consolidated Statements of Operations for the Three and Six
Months Ended June 30, 2001 and 2000 (unaudited) 6
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 2001 and 2000 (unaudited) 7
Notes to Consolidated Financial Statements 9
Management's Discussion and Analysis 14
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 19
PART II: Other Information
--------------------------
Item 4 - Other Information 20
Item 6 - Exhibits and Reports on Form 8-K 20
Signatures 20
Page 2
Part I: Financial Information
Item 1: Financial Statements
Page 3
ARLINGTON HOSPITALITY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
====================================================================================================================
June 30, December 31,
2001 2000
--------------- -----------------
ASSETS
Current assets:
Cash and cash equivalents $ 2,273,461 $ 1,728,869
Accounts receivable, net of allowance of $100,000 at June 30, 2001
and December 31, 2000 (including approximately $126,000 and
$361,000 from related parties) 2,567,932 2,288,865
Interest receivable 532,442 374,960
Notes receivable, current portion 618,453 618,485
Prepaid expenses and other current assets 869,233 1,013,053
Refundable income taxes 776,933 -
Costs and estimated earnings in excess of billings on
uncompleted contracts with related parties 89,723 375,780
--------------- --------------
Total current assets 7,728,177 6,400,012
--------------- --------------
Investments in and advances to unconsolidated
hotel joint ventures 7,262,495 7,031,982
--------------- --------------
Property and equipment:
Land 12,091,295 11,226,664
Buildings 61,095,937 60,122,758
Furniture, fixtures and equipment 22,238,357 21,393,936
Construction in progress 2,711,978 850,238
Leasehold improvements 2,897,101 2,875,379
--------------- ---------------
101,034,668 96,468,975
Less accumulated depreciation and amortization 20,702,046 18,666,279
--------------- --------------
80,332,622 77,802,696
--------------- --------------
Notes receivable, less current portion 788,289 801,346
Deferred income taxes 3,088,000 3,402,000
Other assets, net of accumulated amortization of
$960,427 and $805,998 2,880,286 2,704,679
--------------- --------------
6,756,575 6,908,025
$ 102,079,869 $ 98,142,715
=============== ==============
(continued)
Page 4
ARLINGTON HOSPITALITY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
====================================================================================================================
June 30, December 31,
2001 2000
--------------- ----------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,967,040 $ 2,313,640
Bank line-of-credit 6,593,702 3,408,133
Accrued payroll and related expenses 716,474 775,714
Accrued real estate and other taxes 2,204,018 1,937,415
Other accrued expenses and current liabilities 377,332 306,146
Current portion of long-term debt 1,744,660 1,698,538
Income taxes payable - 132,420
--------------- --------------
Total current liabilities 14,603,226 10,572,006
--------------- --------------
Long-term debt, net of current portion 57,331,166 56,905,152
--------------- --------------
Deferred income (Note 11) 11,982,271 12,196,330
--------------- --------------
Commitments and contingencies
Minority interests 234,239 203,449
--------------- --------------
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 4,984,156 shares at June 30, 2001
and 4,979,244 shares at December 31, 2000 24,921 24,896
Additional paid-in capital 13,256,010 13,125,324
Retained earnings 5,084,911 5,552,433
--------------- --------------
18,365,842 18,702,653
Less:
Stock subscriptions receivable (436,875) (436,875)
--------------- --------------
17,928,967 18,265,778
--------------- --------------
$ 102,079,869 $ 98,142,715
=============== ==============
See notes to consolidated financial statements.
Page 5
ARLINGTON HOSPITALITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000
(UNAUDITED)
=================================================================================================================
Three Months Ended June 30, Six Months Ended June 30,
----------------------------- ------------------------------
2001 2000 2001 2000
----------- ----------- ------------ -----------
Revenue:
Hotel operations:
AmeriHost Inn hotels $12,251,152 $13,346,621 $22,117,815 $23,758,124
Other hotels 2,963,923 3,281,511 5,138,261 5,754,300
Development and construction 42,018 2,990,247 107,175 4,086,765
Hotel sales and commissions 93,373 - 5,858,068 -
Management services 242,090 323,395 471,898 613,238
Employee leasing 1,370,134 1,643,580 2,730,016 3,072,451
Other - 219,329 - 386,854
------------- ------------- --------------- ---------------
16,962,690 21,804,683 36,423,233 37,671,732
------------- ------------- --------------- ---------------
Operating costs and expenses:
Hotel operations:
AmeriHost Inn hotels 8,507,534 8,842,746 16,692,558 17,026,443
Other hotels 2,098,862 2,468,283 4,274,177 4,832,229
Development and construction 211,256 2,859,650 587,424 3,774,381
Hotel sales and commissions - - 3,717,468 -
Management services 159,455 188,455 351,912 408,258
Employee leasing 1,341,867 1,630,607 2,696,781 3,027,587
Other - 160,441 - 397,995
------------- ------------- --------------- ---------------
12,318,974 16,150,182 28,320,320 29,466,893
------------- ------------- --------------- ---------------
4,643,716 5,654,501 8,102,913 8,204,839
Depreciation and amortization 1,148,002 1,022,847 2,269,348 2,126,671
Leasehold rents - hotels 1,705,280 1,716,679 3,461,139 3,415,041
Corporate general and administrative 411,804 404,216 1,025,432 803,169
------------- ------------- --------------- ---------------
Operating income 1,378,630 2,510,759 1,346,994 1,859,958
Other income (expense):
Interest expense (1,389,474) (1,442,870) (2,797,047) (2,942,586)
Interest income 122,163 201,983 270,029 433,740
Other income 63,143 11,096 106,388 111,957
Gain on sale of property 275,207 840,257 590,445 1,011,836
Equity in net income and (losses)
of affiliates (159,767) (57,140) (272,540) 11,611
------------- ------------- --------------- ---------------
Income (loss) before minority
interests and income taxes 289,902 2,064,085 (755,731) 486,516
Minority interests in (income) loss of
consolidated subsidiaries and partnerships (34,306) (20,307) (30,791) (1,818)
------------- ------------- --------------- ---------------
Income (loss) before income taxes 255,596 2,043,778 (786,522) 484,698
Income tax expense (benefit) 103,000 838,000 (319,000) 183,000
------------- ------------- --------------- ---------------
Net income (loss) $ 152,596 $ 1,205,778 $ (467,522) $ 301,698
============== ============== =============== ===============
Net income (loss) per share - Basic $ 0.03 $ 0.24 $ (0.09) $ 0.06
Net income (loss) per share - Diluted $ 0.03 $ 0.23 $ (0.10) $ 0.05
See notes to consolidated financial statements.
Page 6
ARLINGTON HOSPITALITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
==================================================================================================================
2001 2000
---------------- -----------------
Cash flows from operating activities:
Cash received from customers $ 37,508,895 $ 36,209,343
Cash paid to suppliers and employees (28,816,393) (33,192,522)
Interest received 101,262 594,030
Interest paid (2,798,308) (3,020,809)
Income taxes received (paid) (276,353) 44,176
--------------- ---------------
Net cash provided by operating activities 5,719,103 634,218
--------------- ---------------
Cash flows from investing activities:
Distributions, and collections on advances,
from affiliates 475,409 2,280,584
Purchase of property and equipment (5,569,952) (4,067,133)
Purchase of investments in, and advances
to, minority owned affiliates (1,847,326) (2,122,277)
Acquisitions of partnership interests,
net of cash acquired (795,384) -
Collections on notes receivable 13,089 72,133
Proceeds from sale of assets - 5,023,020
--------------- ---------------
Net cash (used in) provided by investing activities (7,724,164) 1,186,327
--------------- ---------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 3,500,162 1,224,439
Principal payments on long-term debt (4,266,789) (3,789,455)
Net proceeds from line of credit 3,185,569 65,882
Decrease in minority interest - (17,972)
Issuance of common stock 13,711 -
Other 117,000 27,308
--------------- ----------------
Net cash provided by (used in) financing activities 2,549,653 (2,489,798)
--------------- ---------------
Net increase (decrease) in cash 544,592 (699,253)
Cash and cash equivalents, beginning of year 1,728,869 3,766,323
--------------- ---------------
Cash and cash equivalents, end of period $ 2,273,461 $ 3,097,070
=============== ===============
(continued)
Page 7
ARLINGTON HOSPITALITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
===================================================================================================================
2001 2000
---------------- -----------------
Reconciliation of net income (loss) to net
cash provided by operating activities:
Net income (loss) $ (467,522) $ 301,698
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 2,269,348 2,126,671
Equity in net (income) loss of affiliates and
amortization of deferred income 272,540 (11,611)
Minority interests in net income of subsidiaries 30,791 1,818
Amortization of deferred gain (431,588) (755,994)
Deferred income taxes 314,000 548,000
Gain on sale of property and equipment (590,445) (1,011,836)
Proceeds from sale of hotels 4,724,468 -
Income from sale of hotels (986,189) -
Changes in assets and liabilities, net of effects
of acquisition:
Increase in accounts receivable (255,169) (1,508,964)
(Increase) decrease in prepaid expenses and
other current assets (23,008) 285,353
Increase in refundable income taxes (909,353) (320,824)
Decrease (increase) in costs and estimated earnings
in excess of billings 286,057 (213,636)
(Increase) decrease in other assets (292,228) 23,107
Increase in accounts payable 569,250 1,244,644
Increase (decrease) in accrued payroll and other accrued
expenses and current liabilities 261,026 (161,595)
Decrease in accrued interest (1,261) (78,223)
Increase in deferred income 948,386 165,640
------------- --------------
Net cash provided by operating activities $ 5,719,103 $ 634,218
============= ==============
See notes to consolidated financial statements.
Page 8
ARLINGTON HOSPITALITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 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 Arlington Hospitality, Inc. and subsidiaries as of
June 30, 2001 and December 31, 2000, and the results of its operations and
cash flows for the three and six months ended June 30, 2001 and 2000. The
results of operations for the three and six months ended June 30, 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 2000
financial statements in order to conform with the 2001 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 June 30, Six Months Ended June 30,
-------------------------------- ---------------------------------
2001 2000 2001 2000
--------------- ------------- --------------- --------------
Net income (loss) $ 152,596 $ 1,205,778 $ (467,522) $ 301,698
Impact of convertible
partnership interests (18,391) (15,894) (58,681) (49,226)
-------------- ------------- --------------- --------------
Net income (loss) available to
common shareholders $ 134,205 $ 1,189,884 $ (526,203) $ 252,472
============== ============= =============== ==============
Weighted average common
shares outstanding 4,980,484 4,974,984 4,979,953 4,973,658
Dilutive effect of convertible
partnership interests and
common stock equivalents 248,771 289,540 168,100 292,720
-------------- ------------- --------------- --------------
Dilutive common shares outstanding 5,229,255 5,264,524 5,148,053 5,266,378
============== ============= =============== ==============
Net income (loss) per share - Basic $ 0.03 $ 0.24 $ (0.09) $ 0.06
============== ============= ============== ==============
Net income (loss) per share - Diluted $ 0.03 $ 0.23 $ (0.10) $ 0.05
============== ============= ============== ==============
Page 9
ARLINGTON HOSPITALITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 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 expense (benefit) for the three and six months ended June
30, 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 29 hotels as of June 30, 2001 (including 26
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.
Three of the 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 June
30, 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
ARLINGTON HOSPITALITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 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 four of their hotels to unrelated third parties,
including one during the three months ended June 30, 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 six months ended June 30, 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 $ 27,256,076 $ 29,512,424
Hotel development and construction 107,175 4,086,765
Hotel sales and commissions 5,858,068 -
Hotel management 471,898 613,238
Employee leasing 2,730,016 3,072,451
Other - 386,854
------------- -------------
$ 36,423,233 $ 37,671,732
============= =============
Operating costs and expenses
Hotel operations $ 20,966,735 $ 21,858,672
Hotel development and construction 587,424 3,774,381
Hotel sales and commissions 3,717,468 -
Hotel management 351,912 408,258
Employee leasing 2,696,781 3,027,587
Other - 397,995
------------- -------------
$ 28,320,320 $ 29,466,893
============= =============
Page 11
AMERIHOST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001
================================================================================
9. BUSINESS SEGMENTS (CONTINUED):
------------------------------
Operating income 2001 2000
---------------- -----------------------------------------
Hotel operations $ 635,297 $ 2,155,315
Hotel development and construction (493,034) 302,871
Hotel sales and commissions 2,140,600 -
Hotel management 91,185 181,300
Employee leasing 31,641 43,706
Other - (14,075)
Corporate (1,058,695) (809,159)
------------- -------------
$ 1,346,994 $ 1,859,958
============= =============
Identifiable assets
-------------------
Hotel operations $ 96,073,082 $ 91,591,369
Hotel development and construction 534,644 2,371,539
Hotel management (167,925) 149,742
Employee leasing 176,593 978,064
Other - 119,390
Corporate 5,463,475 5,712,140
------------- -------------
$ 102,079,869 $ 100,922,244
============= =============
Capital expenditures
-------------------- -
Hotel operations $ 5,474,253 $ 3,901,214
Hotel development and construction 5,975 7,942
Hotel management 43,722 28,875
Employee leasing - -
Other - 21,839
Corporate 46,001 107,263
------------- -------------
$ 5,569,951 $ 4,067,133
============= =============
Depreciation/Amortization
-------------------------
Hotel operations $ 2,192,905 $ 2,083,396
Hotel development and construction 12,786 9,513
Hotel management 28,800 23,680
Employee leasing 1,594 1,158
Other - 2,934
Corporate 33,263 5,990
------------- -------------
$ 2,269,348 $ 2,126,671
============= =============
10. COMMITMENTS AND CONTINGENCIES:
------------------------------
As a result of the sale of two hotels by the REIT in the first quarter,
pursuant to the Amended Master Lease (Note 8), the Company is obligated to
purchase another two of the sale/leaseback properties. One of these
transactions was closed during the third quarter of 2001, and the second
one is expected to close prior to June 30, 2002.
Page 12
ARLINGTON HOSPITALITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001
================================================================================
10. COMMITMENTS AND CONTINGENCIES (CONTINUED):
------------------------------------------
As At June 30, 2001, the Company had $6.6 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, 2001. The lender has indicated the line-of-credit will be
extended.
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 June 30, 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 five AmeriHost Inn hotels during the
past twelve months. The Company intends to use the AmeriHost Inn brand when
expanding its hotel operations segment. As of June 30, 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, decreased approximately 2.5% during the second quarter of 2001, compared
to the second quarter of 2000, attributable to an increase of $2.67 in average
daily rate offset by a 6.9% decrease in occupancy. These results relate to the
63 AmeriHost Inn hotels that were operating for at least thirteen full months
during the three months ended June 30, 2001. During the first six months of
2001, same room revenue for all AmeriHost Inn hotels owned and operated by the
Company decreased approximately 1.4%, attributable to an increase in average
daily rate of $1.96 offset by a 4.2% decrease in occupancy. These results relate
to the 63 AmeriHost Inn hotels that were operating for at least thirteen full
months during the six months ended June 30, 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 8.2% and 6.9% to $12.3
million and $22.1 million during the three and six months ended June 30, 2001,
from revenues of $13.3 million and $23.8 million during the three and six months
ended June 30, 2000, respectively, due primarily to the sale of hotels to
franchisees. Revenues from the development segment decreased 98.6% and 97.4% to
$42,018 and $107,175 during the three and six months ended June 30, 2001, from
$3.0 million and $4.1 million for the three and six months ended June 30, 2000,
respectively, due to the decrease in hotel development activity for minority
owned and third party entities. Revenues from hotel sales and commissions was
$5.9 million during the six months ended June 30, 2001, as a result of the sale
of five AmeriHost Inn hotels, including one in the second quarter. Revenues from
hotel management and employee leasing segments decreased by 18.0% and 13.1% in
total during the three and six months ended June 30, 2001, respectively, due
primarily to the sale or termination of hotels under management contracts.
Revenues from Consolidated non-AmeriHost Inn hotels decreased 9.7% and 10.7%
during the three and six months ended June 30, 2001, respectively, compared to
2000, as a result of the sale of one non-AmeriHost Inn hotel. Total revenues
decreased 22.2% and 3.3% to $17.0 million and $36.4 million during the three and
six months ended June 30, 2001, from $21.8 million and $37.7 million during the
three and six months ended June 30, 2000. The Company recorded net income of
$152,596 for the second quarter of 2001, or $0.03 per diluted share, compared to
net income of $1.2 million or $0.23 per diluted share in 2000. The Company
recorded a net loss of ($467,522) for the six months ended June 30, 2001, or
($0.10) per diluted share, compared to net income of $301,698, or $0.05 per
diluted share, for the six months ended June 30, 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
Page 14
a hotel owned by the Company is sold to an operator who becomes a Cendant
franchisee. In conjunction with this transaction, the Company has changed its
name to Arlington Hospitality, Inc.
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 cash flows from operating activities
(as determined in accordance with GAAP) as a measure of liquidity. Cash flow, as
defined, was $1.3 million during the second quarter of 2001, compared to $2.2
million during the second quarter of 2000. Cash flow, as defined, was $1.8
million during the first six months of 2001, compared to $2.4 million during the
first six months of 2000.
Amerihost had an ownership interest in 77 hotels at June 30, 2001 versus 79
hotels at June 30, 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 three Consolidated hotels, from 66 at
June 30, 2000 to 63 at June 30, 2001.
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2001 COMPARED
TO THE THREE AND SIX MONTHS ENDED JUNE 30, 2000
Revenues decreased 22.2% and 3.3% to $17.0 million and $36.4 million during the
three and six months ended June 30, 2001, respectively, from $21.8 million and
$37.7 million during the three and six months ended June 30, 2000. The decrease
in revenue was primarily due to decreases in hotel development revenues and
hotel operating revenues.
Hotel operations revenue decreased 8.5% and 7.7% to $15.2 million and $27.3
million during the three and six months ended June 30, 2001 respectively, from
$16.6 million and $29.5 million during the three and six months ended June 30,
2000. Revenues from Consolidated AmeriHost Inn(R) hotels decreased 8.2% and 6.9%
to $12.3 millioN and $22.1 million during the three and six months ended June
30, 2001, respectively, from $13.3 million and $23.8 million during the three
and six months ended June 30, 2000. These decreases were attributable primarily
to a decrease in same room revenues, and the sale of six Consolidated AmeriHost
Inn hotels. Revenues from Consolidated other brand hotels decreased 9.7% and
10.7% to $3.0 million and $5.2 million during the three and six months ended
June 30, 2001, respectively. These decreases were primarily the result of the
sale of two non-AmeriHost Inn Consolidated hotels. The hotel operations segment
included the operations of 63 Consolidated hotels (including 57 AmeriHost Inn(R)
hotels) comprising 4,446 rooms at June 30, 2001, compared to 66 Consolidated
hotels (including 59 AmeriHost Inn hotels) comprising 4,686 rooms at June 30,
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 98.6% and 97.4% to $42,018 and $107,175
during the three and six months ended June 30, 2001, respectively, from $3.0
million and $4.1 million during the three and six months ended June 30, 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
or unrelated third parties during the first six months of 2001, compared to four
hotels during the first six months of 2000. However, the Company also had
several additional projects in various stages of pre-construction development
during both six-month periods.
Page 15
The Company recorded $93,373 and $5.9 million in hotel sales and commission
revenue during the three and six months ended June 30, 2001, respectively. The
Company and the REIT which owns certain of the Company's leased hotels, closed
on the sale of five AmeriHost Inn hotels during the first six months of 2001,
including one in the second quarter. 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 25.1% and 23.1% to $242,090 and $471,898
during the three and six months ended June 30, 2001, respectively, from $323,395
and $613,238 during the three and six months ended June 30, 2000. The number of
hotels managed for third parties and minority-owned entities was 16 hotels,
representing 1,574 rooms, at June 30, 2000 versus 16 hotels, representing 1,318
rooms, at June 30, 2001. The decrease in revenues was primarily due to the
termination of one management contract for a 324 room hotel and the sale or
buyout of minority owned AmeriHost Inn hotels, offset by the addition of two
minority owned AmeriHost Inn hotels.
Employee leasing revenue decreased 16.6% and 11.2% to $1.4 million and $2.7
million during the three and six months ended June 30, 2001, respectively, from
$1.6 million and $3.1 million during the three and six months ended June 30,
2000, due primarily to the reduction in rooms 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 decreased 23.7% and 3.9% to $12.3 million
(72.6% of total revenues) and $28.3 million (77.8% of total revenues) during the
three and six months ended June 30, 2001, respectively, from $16.2 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, primarily due to decreases in
operating costs and expenses from the hotel operations and hotel development
segments as described below. Operating costs and expenses in the hotel
operations segment decreased 8.5% and 4.1% to $10.6 million and $21.0 million
during the three and six months ended June 30, 2001, respectively. A decrease in
operating costs associated with the fewer number of hotels included in this
segment (63 hotels at June 30, 2001 versus 66 hotels at June 30, 2000), were
partially offset by significant increases in energy costs, inflationary
increases in operating expenses and the greater number of stabilized hotels.
Hotel operations segment operating costs and expenses as a percentage of segment
revenue increased to 69.7% and 76.9% during the three and six months ended June
30, 2001, from 68.0% and 74.1% during the three and six months ended June 30,
2000. Operating costs and expenses as a percentage of revenues for the
Consolidated AmeriHost Inn hotels increased to 69.4% and 75.5% during the three
and six months ended June 30, 2001, from 66.3% and 71.7% during the three and
six months ended June 30, 2000.
Operating costs and expenses for the hotel development segment decreased 92.6%
and 84.4%, to $211,256 and $587,424 during the three and six months ended June
30, 2001, from $2.9 million and $3.8 million during the three and six months
ended June 30, 2000, consistent with the 98.6% and 97.4% decrease in hotel
development revenues for the three and six months ended June 30, 2001. Operating
costs and expenses in the hotel development segment as a percentage of segment
revenue increased during the three and six month periods ended June 30, 2001 due
to the decrease in hotel construction activity.
Hotel management segment operating costs and expenses decreased 15.4% and 13.8%
to $159,455 and $351,912 during the three and six months ended June 30, 2001,
respectively, from $188,455 and $408,258 during the three and six months ended
June 30, 2000. These decreases were primarily due to the decrease in the number
of hotel rooms operated and managed for unrelated third parties and
minority-owned entities. Employee leasing operating costs and expenses decreased
17.7% and 10.9% to $1.3 million and $2.7 million during the three and six months
ended June 30, 2001, respectively, from $1.6 million and $3.0 million during the
three and six months ended June 30, 2000, which is consistent with the 16.6% and
11.2% decrease in segment revenue for the three and six months ended June 30,
2001.
Depreciation and amortization expense increased 12.2% and 6.7% to $1.1 million
and $2.3 million during the three and six months ended June 30, 2001,
respectively, from $1.0 million and $2.1 million during the three and six
Page 16
months ended June 30, 2000. The increases were primarily attributable to the
additional four hotels opened during 2001, offset by the sale of five
consolidated hotels that closed in 2001.
Leasehold rents - hotels decreased 0.7% and increased 1.4% to $1.7 million and
$3.5 million during the three and six months ended June 30, 2001, respectively,
compared to $1.7 million and $3.4 million during the three and six months ended
June 30, 2000. The fluctuations were primarily attributable to the termination
of three leased hotels during the first six months of 2001 as a result of the
lessor selling these hotels, offset by the extension of the hotel leases with a
REIT.
Corporate general and administrative expense increased 1.9% and 27.7% to
$411,804 and $1.0 million during the three and six months ended June 30, 2001,
respectively, from $404,216 and $803,169 during the three and six months ended
June 30, 2000, and can be attributed primarily to the overall growth of the
Company, and the recognition of expenses during the first quarter of 2001
related to the issuance of stock options and transitional accounting fees.
The Company's operating income decreased 45.1% and 27.6% to $1.4 million and
$1.3 million during the three and six months ended June 30, 2001, respectively,
from $2.5 million and $1.9 million during the three and six months ended June
30, 2000. The following discussion of operating income by segment is exclusive
of any corporate general and administrative expense. Operating income from
Consolidated AmeriHost Inn hotels decreased 35.6% and 65.3% to $1.5 million and
$782,398 during the three and six months ended June 30, 2001, respectively, from
$2.3 million and $2.3 million during the three and six months ended June 30,
2000. These decreases in operating income were due to the decrease in the number
of consolidated AmeriHost Inn hotels operated by the Company, a decrease in same
room revenues, and increases in certain hotel operating expenses including
energy costs. Operating income from the hotel development segment decreased to
($175,630) during the three months ended June 30, 2001, from $125,840 during the
three months ended June 30, 2000 and decreased to ($493,035) during the first
six months of 2001 from $302,870 during the first six months of 2000. 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 2001, compared with the second
quarter and first six months of 2000, and the overall decrease in the number of
hotels developed and constructed for third parties and minority-owned entities
during 2001. The hotel management segment had operating income of $68,235 and
$91,185 during the three and six months ended June 30, 2001, compared to
operating income of $123,101 and $181,300 during the three and six months ended
June 30, 2000. These decreases were due primarily to a reduction in the number
of hotel rooms managed during the past twelve months for unrelated third parties
and minority-owned properties. Employee leasing operating income increased to
$27,470 during the three months ended June 20, 2001, from $12,394 during the
three months ended June 30, 2000, and decreased to $31,641 during the six months
ended June 30, 2001, from $43,706 during the six months ended June 30, 2000, due
primarily to the decrease in employee leasing agreements with minority-owned
entities and unrelated third parties, and the allocation of certain costs.
Interest expense decreased 3.7% and 5.0% to $1.4 million and $2.8 million during
the three and six months ended June 30, 2001, respectively, from $1.4 million
and $2.9 million during the three and six months ended June 30, 2000. 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 as well as the reduction of interest rates on certain floating
rate loan agreements, partially offset by the mortgage financing of newly
constructed Consolidated hotels.
The Company's share of equity in income (loss) of affiliates decreased to
($159,767) during the three months ended June 30, 2001, from ($57,140) during
the three months ended June 30, 2000. The Company's share of equity in income
(loss) of affiliates decreased to ($272,540) during the six months ended June
30, 2001, from $11,611 during the six months ended June 30, 2000. The decrease
in equity of affiliates during the second quarter and first six months of 2001
was primarily attributable to the sale of two minority-owned properties in the
first half of 2000 at a significant gain. Distributions from affiliates were
$10,059 during the six months ended June 30, 2001, compared to $282,389 during
the six months ended June 30, 2000.
Page 17
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)
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 24 to 48 hours prior to the pay
date.
During the first six months of 2001, the Company provided cash from operations
of $5.7 million, compared to $634,218 during the first six months of 2000, or an
increase in cash provided by operations of $5.1 million. The increase in cash
flow from operations during the first six months of 2001, when compared to 2000,
can be attributed primarily to the sale of five 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 six months of 2001, the Company
used $7.7 million in investing activities compared to receiving $1.2 million
during the first six months of 2000. During the first six months of 2001, the
Company bought out a partner's interest in one joint venture for $795,384, used
$5.6 million to purchase property and equipment for Consolidated AmeriHost Inn
hotels, and used $1.4 million for investments in and advances to affiliates, net
of distributions and collections on advances from affiliates. During the first
six months of 2000, the Company received $5.0 million from the sale of hotels,
used $4.1 million to purchase property and equipment for Consolidated AmeriHost
Inn hotels, and received $158,307 in distributions and collections on advances
to affiliates, net of investments in and advances to affiliates.
Cash provided by financing activities was $2.5 million during the first six
months of 2001 compared to cash used by financing activities of $2.5 million
during the first six months of 2001. In 2001, the primary factors were principal
repayments of $4.3 million on the mortgage financing of Consolidated hotels,
including the repayment of mortgages in connection with the sale of hotels,
offset by $3.5 million in proceeds from the mortgage financing of Consolidated
hotels, and net proceeds of $3.2 million on the Company's operating
line-of-credit. In 2000, the contributing factors were principal repayments of
$3.8 million on the mortgage financing of Consolidated hotels, including the
repayment of mortgages in connection with the sale of hotels, offset by $1.2
million in proceeds from the issuance of long-term debt, and $65,882 in net
proceeds from the Company's operating line-of-credit.
At June 30, 2001, the Company had $6.6 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, 2001. The lender has
indicated the line-of-credit will be extended.
The Company expects cash from operations, including proceeds from the sale of
hotels, to be sufficient to pay all operating and interest expenses in 2001, as
well as commitments to purchase hotel assets.
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
Page 18
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.
The table below provides information about financial instruments that are
sensitive to changes in interest rates, for each interest rate sensitive asset
or liability as of June 30, 2001. The carrying amounts reflected approximate the
estimated fair values. As the table incorporates only those exposures that
existed as of June 30, 2001, it does not consider those exposures or positions
which could arise after that date. Moreover, the information presented therein
is merely an estimate and has limited predictive value. As a result, the
ultimate realized gain or loss with respect to interest rate fluctuations will
depend on the exposures that arise during future periods, hedging strategies and
prevailing interest rates at the time.
Average Nominal
Carrying Value Interest Rate
-------------- ---------------------
Operating line of credit - variable rate $ 6,593,702 7.25%
Mortgage debt - fixed rate $ 30,419,719 8.20%
Mortgage debt - variable rate $ 28,656,107 8.67%
Page 19
PART II: Other Information
Item 4. Submission of Matters to a Vote of Securities Holders:
- -------
The annual shareholders' meeting was held on May 24, 2001. Two
matters were voted as follows:
Matter 1: Election of Directors
Director For Against Abstain
-------------------- -------------- ------------ --------
Michael P. Holtz 3,955,177 940 10,050
Russell J. Cerqua 3,955,517 600 10,050
Reno J. Bernardo 3,951,742 4,375 10,050
Salomon J. Dayan 3,955,217 890 10,050
Jon K. Haahr 3,955,292 825 10,050
Thomas J. Romano 3,952,142 3,975 10,050
Matter 2: Proposal to Approve the Amendment to the Company's
Amended and Restated Articles of Incorporation to
Change the Company's Name.
For Against Abstain
-------------- ------------ --------
3,942,552 15,801 7,814
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.
ARLINGTON HOSPITALITY, INC.
---------------------------
Registrant
Date: August 9, 2001
By: /s/ James B. Dale
----------------------------------------
James B. Dale
Treasurer/Senior Vice President, Finance
Page 20