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, 1997
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File No. 2-90939C
AMERIHOST PROPERTIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-3312434
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2400 EAST DEVON AVE., SUITE 280, DES PLAINES, ILLINOIS 60018
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 298-4500
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 14, 1997, 6,301,397 shares of the Registrant's Common Stock were
outstanding.
AMERIHOST PROPERTIES, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 1997
INDEX
PART I: Financial Information Page
Consolidated Balance Sheets as of March 31, 1997
and December 31, 1996 4
Consolidated Statements of Operation for the Three
Months Ended March 31, 1997 and 1996 6
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1997 and 1996 7
Notes to Consolidated Financial Statements 9
Management's Discussion and Analysis 11
Schedule of Earnings Before Interest/Rent, Taxes
and Depreciation/Amortization for the Three
Months Ended March 31, 1997 and 1996 17
PART II: Other Information
Item 6 - Exhibits and Reports on Form 8-K 18
Signatures 18
Part I: Financial Information
Item 1: Financial Statements
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
1997 1996
ASSETS
Current assets:
Cash and cash equivalents $ 3,049,475 $ 3,029,039
Accounts receivable (including $1,284,846
and $3,119,905 from related parties) 3,925,022 5,083,973
Notes receivable (including $1,957,718
and $1,354,461 from related parties) 2,110,533 1,507,276
Prepaid expenses and other current assets 520,214 223,136
Refundable income taxes 744,123 30,629
Costs and estimated earnings in excess of
billings on uncompleted contracts
(including $4,629,209 and
$2,048,259 from related parties) 4,715,209 2,083,259
Total current assets 15,064,576 11,957,312
Investments 1,325,202 1,595,858
Property and equipment:
Land 7,722,730 7,334,562
Buildings 31,314,614 27,885,463
Furniture, fixtures and equipment 10,962,960 10,984,572
Construction in progress 3,809,652 4,709,064
Leasehold improvements 1,774,147 2,404,060
55,584,103 53,317,721
Less accumulated depreciation and amortization 7,000,865 7,481,889
48,583,238 45,835,832
Long-term notes receivable (including $631,644
and $1,120,888 from related parties) 3,420,142 3,831,504
Costs of management contracts acquired, net
of accumulated amortization of $1,225,058
and $1,158,379 957,590 907,404
Other assets (including deferred taxes of $221,000
and $171,000), net of accumulated
amortization of $2,320,060 and $2,082,450 2,839,850 2,773,246
7,217,582 7,512,154
$ 72,190,598 $ 66,901,156
(continued)
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
1997 1996
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,281,005 $ 5,293,184
Bank line-of-credit 4,335,668 1,707,424
Accrued payroll and related expenses 785,930 935,120
Accrued real estate and other taxes 748,122 685,796
Other accrued expenses and current liabilities 1,049,709 828,596
Current portion of long-term debt 1,125,799 1,554,200
Total current liabilities 13,326,233 11,004,320
Long-term debt, net of current portion 34,943,487 32,785,108
Deferred income 624,776 630,899
Commitments
Minority interests 1,514,843 1,569,200
Shareholders' equity:
Preferred stock, no par value; authorized 100,000 shares;
none issued - -
Common stock, $.005 par value; authorized 25,000,000 shares;
issued 6,292,197 shares at March 31, 1997, and
6,036,921 shares at December 31, 1996 31,461 30,185
Additional paid-in capital 18,504,160 17,170,154
Retained earnings 4,638,805 5,104,457
23,174,426 22,304,796
Less:
Stock subscriptions receivable (436,875) (436,875)
Notes receivable (956,292) (956,292)
21,781,259 20,911,629
$ 72,190,598 $ 66,901,156
See notes to consolidated financial statements.
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
1997 1996
Revenue:
Hotel operations:
AmeriHost Inn hotels $ 2,396,566 $ 1,306,138
Other hotels 4,032,034 4,277,358
Development and construction 6,133,742 3,979,802
Management services 604,643 489,682
Employee leasing 2,902,305 2,591,588
16,069,290 12,644,568
Operating costs and expenses:
Hotel operations:
AmeriHost Inn hotels 1,862,554 885,766
Other hotels 3,682,857 3,853,085
Development and construction 5,175,470 3,113,679
Management services 412,390 372,651
Employee leasing 2,831,611 2,525,909
13,964,882 10,751,090
2,104,408 1,893,478
Depreciation and amortization 1,156,293 802,815
Leasehold rents - hotels 534,632 446,130
Corporate general and administrative 582,150 484,652
Operating (loss) income (168,667) 159,881
Other income (expense):
Interest expense (810,007) (665,173)
Interest income 135,449 154,359
Other income 3,810 41,909
Gain on sale of property 1,744,599 -
Contractual termination expenses (1,697,448) -
Equity in net income and losses of affiliates (241,101) (144,638)
Loss before minority interests and income taxes (1,033,365) (453,662)
Minority interests in (income) loss of
consolidated subsidiaries and partnerships 158,713 204,001
Loss before income tax (874,652) (249,661)
Income tax benefit 409,000 102,000
Net loss $ (465,652) $ (147,661)
Loss per share $ (0.08) $ (0.02)
See notes to consolidated financial statements.
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
Three Months Ended
March 31,
1997 1996
Cash flows from operating activities:
Cash received from customers $ 14,664,611 $ 11,839,312
Cash paid to suppliers and employees (15,466,686) (11,868,154)
Interest received 72,956 59,039
Interest paid (814,297)(639,973)
Income taxes paid (110,352) (44,882)
Net cash used in operating activities (1,653,768) (654,658)
Cash flows from investing activities:
Distributions from affiliates 21,515 107,044
Purchase of property and equipment (5,238,136) (1,327,158)
Purchase of investments (100) (250,000)
Increase in notes receivable (1,128,914) (1,121,233)
Collections on notes receivable 1,037,019 1,050,766
Pre-opening and management contract costs (116,865) (169,827)
Proceeds from sales of property 3,390,576 -
Contractual termination costs (1,443,891) -
Net cash used in investing activities (3,478,796) (1,710,408)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 3,348,584 1,699,638
Principal payments of long-term debt (1,581,144) (223,572)
Proceeds from exercise of common stock options 789,075 -
Proceeds from line-of-credit 4,828,244 1,559,128
Payments on line-of-credit (2,200,000) (500,000)
Decrease in minority interests (31,759) (13,259)
Net cash provided from financing activities 5,153,000 2,521,935
Net increase in cash 20,436 156,869
Cash and cash equivalents, beginning of period 3,029,039 1,371,278
Cash and cash equivalents, end of period $ 3,049,475 $ 1,528,147
(Continued)
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
Three Months Ended
March 31,
1997 1996
Reconciliation of net loss to net cash used
in operating activities:
Net loss $ (465,652) $ (147,661)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 1,156,293 802,815
Equity in net loss (income) of affiliates and
amortization of deferred income 241,101 144,638
Minority interests in net income of subsidiaries (158,713) (204,001)
Amortization of deferred interest and loan discount 9,940 9,940
Increase in deferred income 3,425 -
Gain on sale of property (1,744,599) -
Increase in deferred tax asset (50,000) -
Contractual termination costs 1,697,448 -
Compensation paid through issuance of common stock and
common stock options 302,065 -
Changes in assets and liabilities:
Decrease (increase) in accounts receivable 1,220,036 (1,272,382)
Increase in interest receivable (61,082) (93,912)
Increase in prepaid expenses and other
current assets (297,078) (66,515)
(Increase) decrease in costs and estimated earnings in
excess of billings on uncompleted contracts (2,631,950) 425,217
Increase in other assets (274,164) (45,027)
Increase in refundable income taxes (469,352) (146,882)
Decrease in accounts payable (12,179) (166,827)
(Decrease) increase in accrued expenses and other
current liabilities (103,669) 92,087
(Decrease) increase in accrued interest (15,638) 13,852
Net cash used in operating activities $ (1,653,768) $ (654,658)
See notes to consolidated financial statements.
1. BASIS OF PREPARATION:
The financial statements included herein have been prepared by the Company,
without audit. In the opinion of the Company, the accompanying unaudited
financial statements contain all adjustments, which consist only of recurring
adjustments necessary to present fairly the financial position of Amerihost
Properties, Inc. and subsidiaries as of March 31, 1997 and December 31, 1996
and the results of its operations for the three months ended March 31, 1997
and 1996 and cash flows for the three months ended March 31, 1997 and 1996.
The results of operations for the three months ended March 31, 1997, are not
necessarily indicative of the results to be expected for the full year. It
is suggested that the accompanying financial statements be read in
conjunction with the financial statements and the notes thereto included in
the Company's 1996 Annual Report on Form 10-K. Certain reclassifications
have been made to the 1996 financial statements in order to conform with the
1997 presentation.
2. PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiaries, and partnerships in which the Company has a
majority ownership interest. Significant intercompany accounts and
transactions have been eliminated.
3. INCOME 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.
The income tax benefit for the three months ended March 31, 1997 and 1996 was
based on the Company's estimate of the effective tax rate expected to be
applicable for the full year and a $50,000 reduction in the deferred tax
asset reserve. The Company expects the effective tax rate to approximate the
Federal and state statutory rates.
4. LOSS PER SHARE:
Loss per share of common stock is computed by dividing adjusted net loss by
the weighted average number of shares of common stock and dilutive common
stock equivalents outstanding. The weighted average number of shares used in
the computations were 7,031,219 for the three months ended March 31, 1997,
and 5,976,293 for the three months ended March 31, 1996.
5. SUPPLEMENTAL CASH FLOW DATA:
The following represents the supplemental schedule of noncash investing and
financing activities for the three months ended March 31, 1997 and 1996:
Three Months Ended
March 31,
1997 1996
Purchase of investments through issuance of
common stock and decrease in notes and
accrued interest receivable $ - $ 143,929
Accrued contractual termination costs $ 253,557 $ -
6. HOTEL LEASES:
The Company, through its subsidiaries and consolidated partnerships, has
leasehold interests ranging from 50.35% to 100% in seven hotels, the
operations of which are included in the Company's consolidated financial
statements. All of these leases provide for an option to purchase the
hotel. Some of the purchase prices are based upon a multiple of gross room
revenues for the preceding twelve months and the others are based upon a
fixed amount, typically with annual increases based upon the change in the
consumer price index. At March 31, 1997, the aggregate purchase price for
these seven hotels was approximately $21,505,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company is engaged in the development of AmeriHost Inn hotels, its
proprietary brand, and the ownership, operation and management of AmeriHost Inn
hotels and other mid-price hotels. As of March 31, 1997, there were 45
AmeriHost Inn hotels open, of which 16 were wholly-owned, two were majority
owned, 25 were minority-owned, and two were managed for unrelated third parties.
The Company intends to use primarily the AmeriHost Inn brand when expanding its
hotel operations segment. All of the hotels currently under construction will
be AmeriHost Inn hotels. As of March 31, 1997, 17 AmeriHost Inn hotels were
under construction, of which 11 will be wholly-owned, five will be minority-
owned, and one which will be owned by an unrelated third party. Same room
revenues for all AmeriHost Inns increased approximately 4.1% in the first
quarter of 1997 compared to the first quarter of 1996, attributable to an
increase of $2.44 in average daily rate and a 0.3% increase in occupancy.
Revenues from hotel operations consist of the revenues from all hotels in which
the Company has a 100% or controlling 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 or cost method.
As a result of the Company's focus on increasing the number of Consolidated
Hotels, the Company expects that revenues from the hotel operations segment will
increase over time as a percentage of the Company's overall revenues.
Development and construction revenues consist of one-time fees for new
construction, acquisition and renovation activities performed by the Company for
minority-owned hotels and unrelated third parties. The Company also receives
management services revenue for management services provided to minority-owned
hotels and unrelated third parties. Employee leasing revenues consist of
revenues the Company receives for leasing its employees to minority-owned hotels
and unrelated third parties. All revenues attributable to development,
construction, management and employee leasing services with respect to
Consolidated Hotels have been eliminated in consolidation.
Revenues increased 27.1% to $16.1 million during the three months ended March
31, 1997, from $12.6 million during the three months ended March 31, 1996, due
primarily to expanded hotel operations and significant hotel development and
construction activity. Net loss for the first quarter increased to ($465,652),
or ($0.08) per share in 1997, from ($147,661), or ($0.02) per share in 1996.
The Company sold two Consolidated Hotels during the first quarter of 1997,
resulting in a total gain, net of minority interests, of $1.7 million. These
gains were offset by a non-recurring charge of $1.7 million from the termination
of a consulting agreement with Urban 2000 Corp. (a company owned by the
Company's Chairman of the Board and a former officer/director) and the departure
of an officer/director. The Company incurred an operating loss of ($168,667)
during the three months ended March 31, 1997, compared to operating income of
$159,881 during the three months ended March 31, 1996. The decrease in
operating income was primarily attributable to the impact of seasonality
associated with a greater number of Consolidated Hotels and the significant
number of hotels operating during their initial stabilization period immediately
after opening.
The Company uses EBITDA as a supplemental performance measure along with net
income to report its operating results. EBITDA is defined as net income,
adjusted to eliminate the impact of (i) interest expense; (ii) interest and
other income; (iii) leasehold rents for hotels, which the Company considers to
be financing costs similar to interest; (iv) income tax expense (benefit), (v)
depreciation and amortization; (vi) gains or losses from property transactions;
and (vii) non-recurring charges. EBITDA should not be considered as an
alternative to net income or cash flows from operating activities as a measure
of liquidity. EBITDA for both the first quarter of 1997 and 1996 was $1.5
million. An EBITDA schedule is included herein.
The Company is currently in the process of evaluating certain unsolicited
proposals received for the acquisition of its common stock. During this
evaluation process, the Company has postponed the development of additional
hotels for minority-owned entities which were expected to begin construction
during the second quarter of 1997. Consequently, the Company does not expect to
realize the anticipated levels of revenues and profits in the second quarter of
1997 from the development and construction of hotels for minority-owned
entities.
Amerihost had an ownership interest in 63 hotels at March 31, 1997 versus 49
hotels at March 31, 1996 (excluding hotels under construction). This increased
ownership was achieved primarily through the development of AmeriHost Inn hotels
for the Company's own account and for minority-owned entities. These figures
include an increase in Consolidated Hotels from 24 at March 31, 1996 to 28 at
March 31, 1997.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1997 COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 1996
Revenues increased 27.1% to $16.1 million during the three months ended March
31, 1997, from revenues of $12.6 million during the three months ended March 31,
1996. These increases were due primarily to significant increases in the
Company's hotel development and hotel operations segments.
Hotel operations revenue increased 15.1% to $6.4 million during the three months
ended March 31, 1997, compared to $5.6 million during the three months ended
March 31, 1996. This increase was primarily attributable to the net addition of
four Consolidated Hotels to the hotel operations segment from April 1, 1996
through March 31, 1997. The Company opened seven newly constructed Consolidated
AmeriHost Inn hotels during this twelve month period, and acquired the remaining
ownership interest in one hotel causing it to become a Consolidated Hotel.
These eight additions were offset by the sale of three Consolidated Hotels and
the lease termination of one Consolidated Hotel during this same period. The
hotel operations segment included the operations of 28 Consolidated Hotels
comprising 2,531 rooms at March 31, 1997, compared to 24 Consolidated Hotels
comprising 2,516 rooms at March 31, 1996. After considering the Company's
ownership interest in the majority-owned Consolidated Hotels, this translates to
2,216 and 2,143 equivalent owned rooms as of March 31, 1997 and 1996,
respectively, or an increase of 3.4%.
Hotel development revenue increased 54.1% to $6.1 million during the three
months ended March 31, 1997, from $4.0 million during the three months ended
March 31, 1996. The Company was constructing eight hotels for minority-owned
entities or unrelated third parties during the first quarter of 1997, compared
to fourteen hotels during the three months ended March 31, 1996. The Company
also had several additional projects in various stages of pre-construction
development during both three month periods. The increase in segment revenue
was due primarily to the significant progress achieved during the first quarter
of 1997 on the eight hotels compared to the progress achieved on the 14 hotels
during the first quarter of 1996, and the nature of five construction contracts
in progress during the 1996 first quarter whereby the Company recognized only a
construction management fee instead of the full development revenues.
Hotel management revenue increased 23.5% to $604,643 during the three months
ended March 31, 1997, from $489,682 during the three months ended March 31,
1996. The number of hotels managed for third parties and minority-owned
entities increased from 36 hotels, representing 3,447 rooms, at March 31, 1996
to 45 hotels, representing 3,767 rooms, at March 31, 1997. The addition of
management contracts for 16 newly constructed hotels (968 rooms) was partially
offset by the termination of four management contracts (426 rooms) with
minority-owned entities as a result of the sale of the hotel, the termination of
two management contracts (113 rooms) with minority-owned hotels which became
Consolidated Hotels due to the Company acquiring additional ownership interests,
and the termination of one management contract with an unrelated third party.
Management fee revenues were also impacted in the first quarters of 1997 and
1996 by newly constructed hotels operating during their initial stabilization
period when revenues are typically lower. The management contracts terminated,
all of which were for hotels other than the AmeriHost Inn brand, were typically
for larger hotels compared to the 16 hotels added during the twelve months ended
March 31, 1997. The Company does not recognize management fees from
Consolidated Hotels.
Employee leasing revenue increased 12.0% to $2.9 million during the three months
ended March 31, 1997, from $2.6 million during the three months ended March 31,
1996, due primarily to the addition of hotels managed for third parties and
minority-owned entities as described above, and the associated increase in
payroll costs which is the basis for the employee leasing revenue.
Total operating costs and expenses increased 29.9% to $14.0 million (86.9% of
total revenues) during the three and months ended March 31, 1997, from $10.8
million (85.0% of total revenues) during the three months ended March 31, 1996.
Operating costs and expenses in the hotel operations segment increased 17.0% to
$5.5 million during the three months ended March 31, 1997, from $4.7 million
during the three months ended March 31, 1996, resulting primarily from the net
addition of four Consolidated Hotels to this segment and is directly related to
the 15.1% increase in segment revenue during the three months ended March 31,
1997. Hotel operations segment operating costs and expenses as a percentage of
segment revenue increased to 86.3% during the three months ended March 31, 1997,
from 84.9% during the three months ended March 31, 1996, due primarily to a
significant number of hotels operating during their initial stabilization period
when revenues are typically lower.
Operating costs and expenses for the hotel development segment increased 66.2%
to $5.2 million during the three months ended March 31, 1997, from $3.1 million
during the three months ended March 31, 1996, consistent with the 54.1% increase
in hotel development revenues. Operating costs and expenses in the hotel
development segment as a percentage of segment revenue increased to 84.4% during
the three months ended March 31, 1997, from 78.2% during the three months ended
March 31, 1996. The first quarter of 1997 contained a significant level of
construction activity which has high operating costs in relation to the revenue
recognized. The first quarter of 1996 also contained a significant level of
construction activity, however certain contracts were accounted for as a
construction manager where the operating costs are significantly lower in
relation to the revenue recognized. Hotel management segment operating costs
and expenses increased 10.7% to $412,390 during the three months ended March 31,
1997, from $372,651 during the three months ended March 31, 1996 consistent with
the 23.5% increase in segment revenues, and partially offset by the termination
in the first quarter of 1997 of certain contractual payments which had been made
to co-managers. Employee leasing operating costs and expenses increased 12.1%
to $2.8 million during the three months ended March 31, 1997, from $2.5 million
during the three months ended March 31, 1996, and is consistent with the 12.0%
increase in segment revenue.
Depreciation and amortization expense increased 44.0% to $1.2 million during the
three months ended March 31, 1997, from $802,815 during the three months ended
March 31, 1996. This increase was primarily attributable to the net addition of
four Consolidated Hotels to the hotel operations segment and the resulting
depreciation and amortization therefrom.
Leasehold rents - hotels increased 19.8% to $534,632 during the three months
ended March 31, 1997, from $446,130 during the three months ended March 31,
1996. The increase during the first quarter of 1997 compared to the first
quarter of 1996 was due primarily to the increase in percentage rents for
certain hotels which are based on the hotel's operating revenues. During March
1997, one leased Consolidated Hotel was sold and the lease for another
Consolidated Hotel was terminated.
Corporate general and administrative expense increased 20.1% to $582,150 during
the three months ended March 31, 1997, from $484,652 during the three months
ended March 31, 1996. The increase was due primarily to the Company's overall
growth.
The Company incurred an operating loss of ($168,667) during the three months
ended March 31, 1997, compared to operating income of $159,881 during the three
months ended March 31, 1996. Operating loss from the hotel operations segment
increased to ($683,946) during the three months ended March 31, 1997 from
($303,039) during the three months ended March 31, 1996, resulting primarily
from the increased impact of seasonality associated with the net addition of
four Consolidated Hotels from April 1, 1996 to March 31, 1997 and the impact of
the significant number of Consolidated Hotels operating during their initial
stabilization period during the first quarter of 1997. Operating income from
the hotel development segment increased 10.7% to $940,214 during the first
quarter of 1997 compared to $848,996 during the first quarter of 1996. Although
more hotels were under construction during the first quarter of 1996, the
Company made greater progress on the projects under construction and development
during the 1997 first quarter, compared to the progress made on the projects
under construction and development during the 1996 first quarter. The hotel
management segment generated operating income of $115,014 during the three
months ended March 31, 1997 compared to $61,379 during the three months ended
March 31, 1996. This increase was due primarily to the net addition of nine
hotel management contracts with minority-owned entities during the twelve month
period ended March 31, 1997. Employee leasing operating income increased
slightly during the first quarter, to $69,795 in 1997 from $64,105 in 1996.
Interest expense was $810,007 during the three months ended March 31, 1997, as
compared to $665,173 during the three months ended March 31, 1996. This
increase was primarily attributable to the increase in mortgage financing for
newly constructed Consolidated Hotels.
The Company's share of equity in income (loss) of affiliates increased 66.7% to
($241,101) during the three months ended March 31, 1997, from ($144,638) during
the three months ended March 31, 1996. The decrease in equity of affiliates was
primarily due to the significant number of newly constructed minority-owned
hotels which were operating during their initial stabilization period when
revenues are typically lower and the increasing impact of seasonality as the
number of minority-owned hotels increases. Distributions from affiliates were
$21,515 in the first quarter of 1997 compared to $107,044 in the first quarter
of 1996.
LIQUIDITY AND CAPITAL RESOURCES
The Company has four main sources of cash from operating activities: (i)
revenues from hotel operations; (ii) fees from development, construction and
renovation projects; (iii) fees from management contracts; and (iv) fees from
employee leasing services. Cash from hotel operations is typically received at
the time the guest checks out of the hotel. A portion of the Company's hotel
operations revenues is generated through other businesses and contracts and are
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
are typically received by the Company within five working days from the end of
each month. Cash from the Company's employee leasing segment is typically
received 24 to 48 hours prior to the pay date.
During the first three months of 1997, the Company used cash for operations of
$1.7 million, compared to $654,658 in the first three months of 1996, or an
increase in cash used in operations of $999,110. The decrease in cash flow from
operations during the first three months of 1997, when compared to 1996, can be
attributed to the increasing impact of seasonality and the significant number of
hotels operating during their initial stabilization period as the number of
Consolidated Hotels increased from 24 hotels at March 31, 1996 to 28 hotels at
March 31, 1997. The impact from hotel operations was partially offset by a
significant amount of hotel development and construction activity in both the
first quarter of 1997 and 1996.
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) loans to affiliated
and non-affiliated hotels for the purpose of construction, renovation and
working capital. During the first three months of 1997, the Company used $3.5
million in investing activities compared to $1.7 million in the first three
months of 1996. During the first three months of 1997, the Company used $5.2
million to purchase property and equipment for Consolidated Hotels, used $1.4
million for the termination of certain contractual agreements, used $91,895 for
loans, net of loan collections, and received $3.4 million from the sale of
hotels. During the first three months of 1996, the Company used cash primarily
for the purchase of $1.3 million in property and equipment for Consolidated
Hotels, used $250,000 for the purchase of minority equity interests in hotels,
and used $70,467 for loans, net of repayments from minority-owned hotels. In
addition, the Company received distributions from investments in minority-owned
hotels of $21,515 in the first three months of 1997, compared to $107,044 in the
first three months of 1996.
Cash received from financing activities was $5.2 million during the first three
months of 1997 compared to $2.5 million during the first three months of 1996.
In 1997, the primary factors were net proceeds of $1.8 million from the mortgage
financing of Consolidated Hotels, net of principal repayments, net proceeds of
$789,075 from the exercise of common stock purchase options, and $2.6 million in
net proceeds from the Company's operating line-of-credit. In 1996, the
contributing factors were proceeds of $1.5 million from the mortgage financing
of Consolidated Hotels, net of principal repayments, and net proceeds of $1.1
million from the Company's operating line-of-credit.
At March 31, 1997, the Company had $4.3 million outstanding under its operating
line-of-credit. The Company's line-of-credit was renewed and increased
effective May 1, 1996 to $5.0 million. The operating line-of-credit (i) is
collateralized by a security interest in certain of the Company's assets,
including its interest in various joint ventures; (ii) 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 (iii) matures June 1, 1997. The same bank providing
the operating line-of-credit also provides a $7.5 million line-of-credit to be
used for construction financing on hotel projects, of which $5.0 million must be
used on contracts which have firm commitments for permanent mortgage financing
when the construction is completed. There was no balance outstanding on the
construction line-of-credit at March 31, 1997. At March 31, 1997, the Company
also had outstanding $2.25 million of its 7% Subordinated Notes which are
unsecured obligations due October 9, 1999 and which pay interest quarterly.
Pursuant to the terms of the 7% Subordinated Notes, no dividends may be paid on
any capital stock of the Company until the 7% Subordinated Notes have been paid
in full. At the Company's sole discretion, the 7% Subordinated Notes may be
prepaid at any time without prepayment penalty.
The Company expects cash from operations to be sufficient to pay all operating
and interest expenses in 1997.
SEASONALITY
The lodging industry, in general, is seasonal in 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 and 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 an increased 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 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.
IMPACT OF NEW ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings Per Share." The new standard simplifies the methods for computing
earnings per share and requires the presentation of two new amounts, basic and
diluted earnings per share. When the Company adopts SFAS No. 128, it expects to
report the following restated amounts for the three months ended March 31:
1997 1996
Basic $ (0.08) $ (0.02)
Diluted $ (0.08) $ (0.02)
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1996
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 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 1996, and
as such, speak only as of the date made.
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
SCHEDULE OF EARNINGS BEFORE INTEREST/RENT,
TAXES AND DEPRECIATION/AMORTIZATION
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
1997 1996
Revenue $ 16,069,290 $ 12,644,568
Operating costs and expenses 13,964,882 10,751,090
2,104,408 1,893,478
Corporate general and administrative (582,150) (484,652)
Equity in net income and losses
of affiliates (241,101) (144,638)
Earnings before minority interests 1,281,157 1,264,188
Minority interests in earnings of
consolidated subsidiaries and
partnerships, excluding minority
interest in gain on sale of hotel 205,314 204,001
Earnings before interest/rent, taxes
and depreciation/amortization $ 1,486,471 $ 1,468,189
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
Exhibit No.
4.a Warrants to purchase common stock - Michael P. Holtz
4.b Warrants to purchase common stock - Russell J. Cerqua
27.0 Financial Data Schedule
(b)Reports on Form 8-K:
There were no reports on Form 8-K filed during this period
covered by this report.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERIHOST PROPERTIES, INC.
Registrant
Date: May 14, 1997
By: /s/ Russell J. Cerqua
Russell J. Cerqua
Treasurer/Executive Vice President, Finance
By: /s/ James B. Dale
James B. Dale
Vice President, Finance/Corporate Controller