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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the quarterly period ended JUNE 30, 1999
---------------------
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
Commission File No. 0-15291
--------
AMERIHOST PROPERTIES, INC.
--------------------------
(Exact name of Registrant as specified in its charter)
DELAWARE 36-3312434
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
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 August 12, 1999, 5,243,470 shares of the Registrant's Common Stock were
outstanding.
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AMERIHOST PROPERTIES, INC.
FORM 10-Q
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999
INDEX
PART I: Financial Information Page
----------------------------- ----
Item 1 - Financial Statements -
Consolidated Balance Sheets as of June 30, 1999
and December 31, 1998 4
Consolidated Statements of Operations for the Three and
Six Months Ended June 30, 1999 and 1998 6
Consolidated Statements of Cash Flows for the Six Months
Ended June 30, 1999 and 1998 7
Notes to Consolidated Financial Statements 9
Item 2 - Management's Discussion and Analysis 13
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 19
Schedule of Earnings Before Interest/Rent, Taxes and
Depreciation/Amortization for the Six Months
Ended June 30, 1999 and 1998 20
PART II: Other Information
--------------------------
Item 4 - Submission of Matters to a Vote of Securities Holders 21
Item 6 - Exhibits and Reports on Form 8-K 21
Signatures 21
Part I: Financial Information
Item 1: Financial Statements
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
================================================================================
June 30, December 31,
1999 1998
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 5,179,414 $ 4,493,834
Accounts receivable (including $497,580 and $290,859
from related parties) 2,919,772 2,931,216
Notes receivable, current portion 68,061 168,061
Prepaid expenses and other current assets 875,176 902,457
Refundable income taxes 1,231,609 1,261,194
Costs and estimated earnings in excess of billings on
uncompleted contracts with related parties 334,021 649,858
------------ ------------
Total current assets 10,608,053 10,406,620
------------ ------------
Investments in and advances to unconsolidated
hotel joint ventures 5,761,278 5,331,247
------------ ------------
Property and equipment:
Land 10,656,043 11,170,463
Buildings 68,472,857 68,405,566
Furniture, fixtures and equipment 19,841,617 19,081,593
Construction in progress 1,628,188 6,743,319
Leasehold improvements 1,015,342 1,156,174
------------ ------------
101,614,047 106,557,115
Less accumulated depreciation and amortization 15,660,953 15,219,135
------------ ------------
85,953,094 91,337,980
------------ ------------
Notes receivable, less current portion 1,154,425 1,181,962
Deferred income taxes 4,569,000 3,904,000
Other assets, net of accumulated amortization of
$1,812,334 and $1,602,338 3,080,465 3,118,979
------------ ------------
8,803,890 8,204,941
$111,126,315 $115,280,788
============ ============
(continued)
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
June 30, December 31,
1999 1998
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,414,409 $ 5,638,250
Bank line-of-credit 4,110,395 1,961,213
Accrued payroll and related expenses 1,292,761 1,180,674
Accrued real estate and other taxes 2,377,503 2,285,333
Other accrued expenses and current liabilities 943,121 756,308
Current portion of long-term debt 5,526,924 5,508,498
------------- -------------
Total current liabilities 16,665,113 17,330,276
------------- -------------
Long-term debt, net of current portion 65,621,679 66,332,566
------------- -------------
Deferred income 14,736,472 13,164,007
------------- -------------
Commitments
Minority interests 133,284 138,131
------------- -------------
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 5,243,445 shares at June 30,
1999, and 6,089,550 shares at December 31, 1998 26,217 30,448
Additional paid-in capital 14,005,767 17,380,295
Retained earnings 374,658 1,341,940
------------- -------------
14,406,642 18,752,683
Less:
Stock subscriptions receivable (436,875) (436,875)
------------- -------------
13,969,767 18,315,808
------------- -------------
$ 111,126,315 $ 115,280,788
============= =============
See notes to consolidated financial statements.
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
============================================================
Three Months Ended June 30, Six Months Ended June 30,
1999 1998 1999 1998
------------ ------------ ------------ ------------
Revenue:
Hotel operations:
AmeriHost Inn(R)hotels $ 13,189,350 $ 7,683,567 $ 23,197,646 $ 11,843,573
Other hotels 3,663,335 4,230,059 6,098,430 7,560,739
Development and construction 189,287 3,508,010 560,032 6,472,587
Management services 340,418 701,663 655,074 1,303,813
Employee leasing 1,626,861 2,769,635 3,217,016 5,749,931
Franchising 79,000 -- 79,000 --
------------ ------------ ------------ ------------
19,088,251 18,892,934 33,807,198 32,930,643
------------ ------------ ------------ ------------
Operating costs and expenses:
Hotel operations:
AmeriHost Inn(R)hotels 8,625,997 5,109,296 16,749,198 8,782,961
Other hotels 2,700,418 3,039,192 5,080,357 6,102,018
Development and construction 168,004 3,224,753 571,555 6,035,744
Management services 226,354 392,490 511,175 738,456
Employee leasing 1,613,840 2,716,232 3,133,933 5,623,899
Franchising 105,235 -- 192,616 --
------------ ------------ ------------ ------------
13,439,848 14,481,963 26,238,834 27,283,078
------------ ------------ ------------ ------------
5,648,403 4,410,971 7,568,364 5,647,565
Depreciation and amortization 1,388,882 1,543,932 2,543,401 2,797,421
Leasehold rents - hotels 1,943,844 534,604 3,712,119 928,216
Corporate general and administrative 394,660 388,460 777,195 730,720
------------ ------------ ------------ ------------
Operating income 1,921,017 1,943,975 535,649 1,191,208
Other income (expense):
Interest expense (1,617,993) (2,087,785) (3,171,580) (3,558,874)
Interest income 382,190 157,892 615,993 259,014
Other income 490,172 40,578 505,967 98,555
Gain on sale of property -- 161,191 -- 161,191
Equity in net income and losses
of affiliates 204,931 100,978 39,716 45,057
------------ ------------ ------------ ------------
Income (loss) before minority
interests and income taxes 1,380,317 316,829 (1,474,255) (1,803,849)
Minority interests in (income) loss of
consolidated subsidiaries and partnerships (51,608) 25,541 (90,027) 233,128
------------ ------------ ------------ ------------
Income (loss) before income taxes 1,328,709 342,370 (1,564,282) (1,570,721)
Income tax expense (benefit) 531,000 140,000 (597,000) (644,000)
------------ ------------ ------------ ------------
Income (loss) before extraordinary item 797,709 202,370 (967,282) (926,721)
Extraordinary item - early extinguishment
of debt, net of income tax (Note 8) -- (332,738) -- (332,738)
------------ ------------ ------------ ------------
Net income (loss) $ 797,709 $ (130,368) $ (967,282) $ (1,259,459)
============ ============ ============ ============
Income (loss) per share - Basic, before
extraordinary item $ 0.14 $ 0.03 $ (0.16) $ (0.15)
Net income (loss) per share - Basic $ 0.14 $ (0.02) $ (0.16) $ (0.20)
Income (loss) per share - Diluted, before
extraordinary item $ 0.13 $ 0.03 $ (0.16) $ (0.16)
Net income (loss) per share - Diluted $ 0.13 $ (0.02) $ (0.16) $ (0.21)
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
============================================================
1999 1998
------------ ------------
Cash flows from operating activities:
Cash received from customers $ 34,598,891 $ 33,776,529
Cash paid to suppliers and employees (34,575,439) (31,194,600)
Interest received 541,586 401,399
Interest paid (3,194,130) (3,562,132)
Income taxes (paid) received (38,415) 627,311
------------ ------------
Net cash (used in) provided by operating activities (2,673,137) 48,507
------------ ------------
Cash flows from investing activities:
Distributions, and collections on advances,
from affiliates 526,215 565,547
Purchase of property and equipment (5,223,273) (7,606,572)
Purchase of investments in, and advances
to, minority owned affiliates (967,500) (1,624,143)
Acquisitions of partnership interests,
net of cash acquired 260,648 (2,936,962)
Collections on notes receivable 127,537 82,942
Preopening and management contract costs -- (133,938)
Proceeds from sale of assets 12,795,197 64,443,899
------------ ------------
Net cash provided by investing activities 6,997,528 52,790,773
------------ ------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 7,115,492 9,385,888
Principal payments on long-term debt (9,429,852) (46,727,686)
Net proceeds from line of credit 2,149,182 2,068,246
Decrease in minority interest (94,874) (39,074)
Common stock repurchases (3,378,759) (142,424)
------------ ------------
Net cash used in financing activities (3,638,811) (35,455,050)
------------ ------------
Net increase in cash 685,580 17,384,230
Cash and cash equivalents, beginning of year 4,493,834 2,349,503
------------ ------------
Cash and cash equivalents, end of period $ 5,179,414 $ 19,733,733
============ ============
(continued)
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
============================================================
1999 1998
----------- -----------
Reconciliation of net loss to net cash (used in) provided by operating
activities:
Net loss $ (967,282) $(1,259,459)
Adjustments to reconcile net loss to net cash (used in) provided by operating
activities:
Depreciation and amortization 2,543,401 2,797,421
Equity in net (income) loss of affiliates and
amortization of deferred income (42,531) (46,119)
Minority interests in net income of subsidiaries 90,027 (233,128)
Amortization of deferred interest and loan discount 22,696 19,880
Amortization of deferred gain (701,100) --
Deferred income taxes (665,000) (6,749,000)
Gain on sale of investments, property and equipment -- (161,191)
Changes in assets and liabilities, net of effects of
acquisition:
Decrease in accounts receivable 120,686 337,644
Increase in prepaid expenses and
other current assets (46,838) (75,512)
Decrease in reserve on note receivable (75,000) --
Decrease in refundable income taxes 29,585 2,342,734
Decrease in costs and estimated earnings
in excess of billings 315,837 236,189
Increase in other assets (316,033) (850,644)
Decrease in accounts payable (3,244,094) (1,522,288)
Increase in accrued payroll and other accrued
expenses and current liabilities 383,552 470,728
Decrease in accrued interest (45,246) (25,954)
(Decrease) increase in deferred income (75,797) 377,629
Increase in accrued income taxes -- 4,389,577
----------- -----------
Net cash (used in) provided by operating activities $(2,673,137) $ 48,507
=========== ===========
See notes to consolidated financial statements.
AMERIHOST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 1999
============================================================
1. BASIS OF PREPARATION:
---------------------
The financial statements included herein have been prepared by the Company,
without audit. In the opinion of the Company, the accompanying unaudited
financial statements contain all adjustments, which consist only of
recurring adjustments necessary to present fairly the financial position of
Amerihost Properties, Inc. and subsidiaries as of June 30, 1999 and
December 31, 1998 and the results of its operations and cash flows for the
six months ended June 30, 1999 and 1998. The results of operations for the
six months ended June 30, 1999 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 1998 Annual
Report on Form 10-K. Certain reclassifications have been made to the 1998
financial statements in order to conform with the 1999 presentation.
2. PRINCIPLES OF CONSOLIDATION:
----------------------------
The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiaries, and partnerships in which the Company has a
majority ownership interest. Significant intercompany accounts and
transactions have been eliminated.
3. INCOME (LOSS) PER SHARE:
------------------------
Basic income (loss) per share of common stock is computed by dividing net
income (loss) by the weighted average number of shares of common stock
outstanding. Diluted income (loss) per share of common stock is computed by
dividing the adjusted net income (loss) by the weighted average number of
shares of common stock and dilutive common stock equivalents outstanding.
The Company is a general partner in three partnerships where the limited
partners have the right at certain times and under certain conditions to
convert their limited partner interests into 249,350 shares of the
Company's common stock. The following are the calculations of basic and
diluted earnings per share:
Three Months Ended June 30, Six Months Ended June 30,
--------------------------------- --------------------------------
1999 1998 1999 1998
-------------- ---------------- --------------- ----------------
Income (loss) before extraordinary item $ 797,709 $ 203,370 $ (967,282) $ (926,721)
Extraordinary item - (332,738) - (332,738)
-------------- -------------- --------------- --------------
Net income (loss) 797,709 (130,368) (967,282) (1,259,459)
Impact of convertible
partnership interests (13,730) (30,931) (47,945) (126,089)
-------------- --------------- --------------- ---------------
Net income (loss) available to
common shareholders $ 783,979 $ (161,299) $ (1,015,227) $ (1,385,548)
============== ================ ================ ===============
Weighted average common
shares outstanding 5,846,627 6,196,525 5,947,294 6,203,553
Dilutive effect of convertible
partnership interests and
common stock equivalents 299,371 376,225 249,350 376,225
Dilutive common shares outstanding 6,145,998 6,572,750 6,196,644 6,579,778
============== =============== =============== ==============
Income (loss) per share - Basic, before
extraordinary item $ 0.14 $ 0.03 $ (0.16) $ (.015)
Extraordinary item - (0.05) - (0.05)
-------------- --------------- --------------- ---------------
Net income (loss) per share - Basic $ 0.14 $ (0.02) $ (0.16) $ (0.20)
============== =============== =============== ==============
Income (loss) per share - Diluted, before
extraordinary item $ 0.13 $ 0.03 $ (0.16) $ (0.16)
Extraordinary item - (0.05) - (0.05)
-------------- --------------- --------------- ---------------
Net income (loss) per share - Diluted $ 0.13 $ (0.02) $ (0.16) $ (0.21)
============== =============== =============== ==============
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.
The income tax expense (benefit) for the six months ended June 30, 1999 and
1998 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 35 hotels as of June 30, 1999 (including 30
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 $9,500
to $26,667. The Company leases or subleases three of these hotels from
partnerships in which the Company owns equity interests of up to 16.33%.
These three leases also provide for additional rent payments ranging from
$36,000 to $72,000 per annum, plus percentage rents equal to 10% of room
revenues in excess of stipulated amounts. The leases and sub-leases expire
through March 23, 2009.
The five leases, other than the sale/leaseback hotels, provide for an
option to purchase the hotel. Some of the purchase prices are based upon a
multiple of gross room revenues for the preceding twelve months with a
specified maximum, and the others are based on a fixed amount. At June 30,
1999, the aggregate purchase price for these leased hotels was
approximately $16,230,000 (Note 10).
6. LIMITED PARTNERSHIP GUARANTEED DISTRIBUTIONS:
---------------------------------------------
The Company is a general partner in three partnerships where the Company
has guaranteed minimum annual distributions to the limited partners in the
amount of 10% of their original capital contributions.
7. INVESTMENTS:
------------
Effective January 1, 1999, the Company acquired the remaining ownership
interest in one hotel joint venture. The following is a summary of this
acquisition:
Fair value of assets acquired $ 1,570,109
Cash acquired 85,314
--------------
Liabilities assumed $ 1,655,423
==============
8. SALE/LEASEBACK OF HOTELS:
-------------------------
On June 30, 1998, the Company completed the sale of 26 AmeriHost Inn(R)
hotels to PMC Commercial Trust ("PMC") for $62.2 million. The company
completed the sale of four additional AmeriHost Inn(R) hotels to PMC during
March 1999 for $10.8 million. Upon the sales to PMC, the Company entered
into agreements to lease back the hotels for an initial term of ten years,
with two five year renewal options. The lease payments are fixed at 10% of
the sale price for the first three years. Thereafter, the lease payments
are subject to a CPI increase with a 2% annual maximum. The Company has
deferred the gain on the sale of these hotels pursuant to sale/leaseback
accounting. This deferral will be recognized over the initial term of the
lease as a reduction of leasehold rent expense.
In connection with the sale of the 26 hotels in 1998, the Company expensed
deferred loan costs in the amount of $332,738, net of income taxes,
associated with the early extinguishment of mortgage debt.
9. BUSINESS SEGMENTS:
------------------
Effective in 1998, the Company adopted Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and Related
Information," which establishes standards for the way companies report
information about operating segments in both interim and annual financial
statements and related disclosures. The adoption did not change the
Company's reportable 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 franchising, (3) hotel development, consisting of
development, construction and renovation activities, (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, 1999 and 1998, for each business segment, which is the
information utilized by the Company's decision makers in managing the
business:
Revenues 1999 1998
-------- --------------- --------------
Hotel operations $ 29,296,076 $ 19,404,312
Hotel franchising 79,000 -
Hotel development 560,032 6,472,587
Hotel management 655,074 1,303,813
Employee leasing 3,217,016 5,749,931
-------------- -------------
$ 33,807,198 $ 32,930,643
============== =============
Operating costs and expenses
----------------------------
Hotel operations $ 21,829,555 $ 14,884,979
Hotel franchising 192,616 -
Hotel development 571,555 6,035,744
Hotel management 511,175 738,456
Employee leasing 3,133,933 5,623,899
-------------- -------------
$ 26,238,834 $ 27,283,078
============== =============
Operating income
----------------
Hotel operations $ 1,280,699 $ 1,063,129
Hotel franchising (113,616) -
Hotel development (24,601) 399,064
Hotel management 121,818 382,966
Employee leasing 81,078 124,232
Corporate (809,729) (778,183)
--------------- --------------
$ 535,649 $ 1,191,208
============== ==============
Identifiable assets
-------------------
Hotel operations $ 101,605,819 $ 104,076,512
Hotel franchising 155,198 -
Hotel development 576,480 2,309,240
Hotel management 630,718 899,660
Employee leasing 710,875 978,985
Corporate 7,447,225 7,016,391
-------------- -------------
$ 111,126,315 $ 115,280,788
============== =============
Capital Expenditures
--------------------
Hotel operations $ 5,279,232 $ 7,515,169
Hotel franchising 6,598 -
Hotel development 144 52,596
Hotel management 51,017 22,747
Employee leasing - 1,380
Corporate 17,913 14,680
-------------- -------------
$ 5,354,904 $ 7,606,572
============== =============
Depreciation/Amortization
-------------------------
Hotel operations $ 2,473,703 $ 2,527,987
Hotel franchising - -
Hotel development 13,078 37,779
Hotel management 22,080 182,392
Employee leasing 2,006 1,800
Corporate 32,534 47,463
-------------- -------------
$ 2,543,401 $ 2,797,421
============== =============
10. SUBSEQUENT EVENT:
-----------------
On July 1, 1999, the Company sold two hotels for a total gross sales price
of $5.5 million. In conjunction with the sale, the Company entered into
management and staffing agreements with one of the buyers. In addition, the
Company entered into a franchise agreement with both buyers. The Company
expects to realize approximately $1.2 million in pre-tax gains from the
sales.
On August 6, 1999, the Company terminated the lease for one hotel pursuant
to the sale of the hotel by the owner.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
-----------------------------------------------------------------------
OF OPERATIONS
- -------------
GENERAL
The Company is engaged in the development of AmeriHost Inn(R) hotels, its
proprietary brand, and the ownership, operation and management of AmeriHost
Inn(R) hotels and other mid-price hotels. As of June 30, 1999, there were 77
AmeriHost Inn(R) hotels open, of which 64 were wholly-owned or leased, one was
majority-owned, and 12 were minority-owned. A total of 10 AmeriHost Inn(R)
hotels were opened during the past twelve months. The Company intends to use the
AmeriHost Inn(R) brand when expanding its hotel operations segment. Same room
revenues for all AmeriHost Inn(R) hotels (including minority-owned and
managed-only) increased approximately 5.3% and 7.0% during the second quarter
and first six months of 1999, compared to the second quarter and first six
months of 1998, respectively, attributable to an increase of $2.52 and $2.34 in
average daily rate, and a .7% and 2.5% increase in occupancy. These results
relate to the 67 and 69 AmeriHost Inn(R) hotels that were operating for at least
thirteen full months during the three and six month periods ended June 30, 1999.
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. 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 and renovation activities performed by the Company for
minority-owned hotels and unrelated third parties. The Company also receives
revenue from management and employee leasing services provided to minority-owned
hotels and unrelated third parties.
The results for the first six months of 1999 were consistent with the Company's
objective of increasing the number of wholly-owned or leased, Consolidated
AmeriHost Inn(R) hotels. Due to the Company's focus on developing and
constructing a significant number of Consolidated AmeriHost Inn(R) hotels during
1998 and the first six months of 1999, as well as acquiring the remaining
ownership interests in a significant number of AmeriHost Inn(R) hotels which
were previously minority-owned, the Company recognized lower revenues from the
development and construction of hotels for minority-owned and unrelated third
parties during 1999. In addition, the Company disposed of one Consolidated
non-AmeriHost Inn(R) hotel during the second quarter of 1998, as part of the
Company's plan to invest all available resources into the AmeriHost Inn(R) hotel
brand. Although this strategy has a short-term negative impact on revenues and
earnings, the Company believes that the long-term benefits will be substantial.
Revenues from Consolidated AmeriHost Inn(R) hotels increased 71.7% and 95.9% to
$13.2 million and $23.2 million during the second quarter and first six months
of 1999, respectively, from revenues of $7.7 million and $11.8 million during
the second quarter and first six months of 1998, due to the net addition of 22
Consolidated AmeriHost Inn(R) hotels during the past twelve months. Revenues
from the hotel management and employee leasing segments decreased by 43.3% and
45.1% in total during the second quarter and first six months of 1999, due
primarily to the acquisition of the remaining ownership interest in 17
minority-owned joint venture hotels during the last twelve months, 16 of which
are AmeriHost Inn(R) hotels. Revenues from Consolidated non-AmeriHost Inn(R)
hotels decreased 13.4% and 19.3% during the second quarter and first six months
of 1999, compared to 1998, primarily as a result of the disposition of one
Consolidated non-AmeriHost Inn(R) hotel during the second quarter of 1998. Total
revenues increased 1.0% and 2.7% to $19.1 million and $33.8 million during the
second quarter and first six months of 1999, respectively, from $18.9 million
and $32.9 million during the second quarter and first six months of 1998. The
Company recorded a net income of $797,709 for the second quarter of 1999, or
$0.13 per diluted share, compared to a net loss of ($130,368), or ($0.02) per
diluted share in 1998.
After approximately 10 years of developing and using the AmeriHost Inn(R) name
exclusively for the Company's own account and for joint ventures in which the
Company maintains an ownership interest, the Company has begun to franchise the
AmeriHost Inn(R) brand name. Currently, the Company is qualified to sell
AmeriHost Inn(R) hotel franchises in all 50 states and expects to be qualified
in several foreign countries by the end of the third quarter 1999. To date, the
Company has entered into five AmeriHost Inn(R) franchise agreements. However,
the Company does not anticipate the franchising activity to have a significant
impact on the operations of the Company in 1999, and there can be no assurance
that the Company will be successful in selling AmeriHost Inn(R) franchises in
the future.
The Company uses EBITDA as a supplemental performance measure, along with net
income, to report its operating results. EBITDA is defined as net income before
extraordinary items, adjusted to eliminate the impact of (i) interest expense;
(ii) interest and other income; (iii) leasehold rents for hotels, which the
Company considers to be financing costs similar to interest; (iv) income tax
expense (benefit), (v) depreciation and amortization; and (vi) gains or losses
from property transactions. EBITDA should not be considered as an alternative to
operating income (as determined in accordance with Generally Accepted Accounting
Principles, "GAAP") as an indicator of the Company's operating performance or to
cash flows from operating activities (as determined in accordance with GAAP) as
a measure of liquidity. EBITDA, as defined by the Company, is included herein
due to numerous requests by investors and analysts. Management believes that
investors and analysts find it to be a useful tool for measuring the Company's
ability to service debt. EBITDA increased 30.3% and 29.8% to $5.4 million and
$6.7 million during the three and six months ended June 30, 1999, respectively,
from $4.1 million and $5.2 million during the three and six months ended June
30, 1998. An EBITDA schedule is included herein.
On June 30, 1998, the Company completed the sale of 26 AmeriHost Inn(R) hotels
to PMC Commercial Trust ("PMC") for $62.2 million. The Company sold an
additional four AmeriHost Inn(R) hotels to PMC during March 1999 for $10.8
million. Upon the sale to PMC, the Company entered into agreements to lease back
the hotels for an initial term of ten years, with two five year renewal options.
The lease payments are fixed at 10% of the sale price for the first three years.
Thereafter, the lease payments are subject to a CPI increase with a 2% annual
maximum. The Company has deferred the gain on the sale of these hotels pursuant
to sale/leaseback accounting. This deferral will be recognized over the initial
term of the lease as a reduction of leasehold rent expense.
Amerihost had an ownership interest in 89 hotels at June 30, 1999 versus 82
hotels at June 30, 1998 (excluding hotels under construction). This increased
ownership was achieved primarily through the development of AmeriHost Inn(R)
hotels for the Company's own account and for minority-owned entities. These
figures include a net increase of 23 Consolidated hotels, from 51 at June 30,
1998 to 74 at June 30, 1999.
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1999
COMPARED TO THE THREE AND SIX MONTHS ENDED JUNE 30, 1998
Revenues increased 1.0% and 2.7% to $19.1 million and $33.8 million during the
three and six months ended June 30, 1999, respectively, from $18.9 million and
$32.9 million during the three and six months ended June 30, 1998. The increase
in revenue from the Consolidated AmeriHost Inn(R) hotels was partially offset by
the decreases from the hotel management and employee leasing segments, a
decrease from the hotel development and construction segment, as well as the
decrease from non-AmeriHost Inn(R) hotel operations.
Hotel operations revenue increased 41.5% and 51.0% to $16.9 million and $29.3
million during the three and six months ended June 30, 1999, respectively, from
$11.9 million and $19.4 million during the three and six months ended June 30,
1998. Revenues from Consolidated AmeriHost Inn(R) hotels increased 71.7% and
95.9% to $13.2 million and $23.2 million during the three and six months ended
June 30, 1999, respectively, from $7.7 million and $11.8 million during the
three and six months ended June 30, 1998. These increases were attributable
primarily to the addition of 22 Consolidated AmeriHost Inn(R) hotels from July
1, 1998 through June 30, 1999, including the addition of seven newly constructed
Consolidated AmeriHost Inn(R) hotels, and the acquisition of additional
ownership interest in 16 existing hotels causing them to become Consolidated
AmeriHost Inn(R) hotels, as well as an increase in same room revenues, offset by
the sale of one Consolidated AmeriHost Inn(R) hotel. The increase in
Consolidated AmeriHost Inn(R) hotel revenue was offset by a 13.4% and 19.3%
decrease in Consolidated other brand hotel revenue during the three and six
month periods, respectively. This decrease was primarily the result of the sale
of one non-AmeriHost Inn(R) Consolidated hotel, partially offset by the
acquisition of one non-AmeriHost Inn(R) Consolidated hotel. The hotel operations
segment included the operations of 74 Consolidated hotels (including 65
AmeriHost Inn(R) hotels) comprising 5,220 rooms at June 30, 1999, compared to 51
Consolidated hotels (including 43 AmeriHost Inn(R) hotels) comprising 3,758
rooms at June 30, 1998. After considering the Company's ownership interest in
the majority-owned Consolidated hotels, this translates to 4,951 and 3,461
equivalent owned rooms as of June 30, 1999 and 1998, respectively, or an
increase of 43.1%. Recently, the Company has experienced an increase in
competition in certain markets, primarily from newly constructed hotels. As a
result, there is increased downward pressure on occupancy levels and average
daily rates. The Company believes that as the number of AmeriHost Inn(R) hotels
increases, the greater the benefits will be at all locations from marketplace
recognition and repeat business. In addition, the Company typically builds new
hotels in growing markets where it anticipates a certain level of additional
hotel development.
Hotel development revenue decreased 94.6% and 91.4% to $189,287 and $560,032
during the three and six months ended June 30, 1999, respectively, from $3.5
million and $6.5 million during the three and six months ended June 30, 1998.
The Company was not constructing any hotels for minority-owned entities or
unrelated third parties during the second quarter of 1999, compared to five
hotels during the three months ended June 30, 1998. However, the Company also
had several additional projects in various stages of pre-construction
development during both six-month periods.
Hotel management revenue decreased 51.5% and 49.8% to $340,418 and $655,074
during the three and six months ended June 30, 1999, respectively, from $701,663
and $1.3 million during the three and six months ended June 30, 1998. The number
of hotels managed for third parties and minority-owned entities decreased from
38 hotels, representing 3,006 rooms, at June 30, 1998 to 18 hotels, representing
1,696 rooms, at June 30, 1999. The addition of management contracts for three
newly constructed hotels (192 rooms) was more than offset by the termination of
two management contracts (120 rooms) with minority-owned entities as a result of
the sale of the hotels (non-AmeriHost Inn(R) hotels), the termination of 17
management contracts (1,100 rooms) with minority-owned hotels which became
Consolidated hotels due to the Company acquiring additional ownership interests,
and the termination of four management contracts for non-AmeriHost Inn(R) hotels
with unrelated third parties (282 rooms) as a result of the sale of the hotels
in one of the four instances.
Employee leasing revenue decreased 41.3% and 44.1% to $1.6 million and $3.2
million during the three and six months ended June 30, 1999, respectively, from
$2.8 million and $5.7 million during the three and six months ended June 30,
1998, due primarily to the reduction in hotels managed for minority-owned
entities and unrelated third parties as described above, and the associated
decrease in payroll costs which is the basis for the employee leasing revenue.
Franchising realized revenues of $79,000 during its initial three months of
operation, the second quarter of 1999, consisting primarily of initial franchise
fees from newly franchised hotels.
Total operating costs and expenses decreased 7.2% and 3.8% to $13.4 million
(70.4% of total revenues) and $26.2 million (77.6% of total revenues) during the
three and six months ended June 30, 1999, respectively, from $14.5 million
(76.7% of total revenues) and $27.3 million (82.9% of total revenues) during the
three and six months ended June 30, 1998. Operating costs and expenses in the
hotel operations segment increased 39.0% and 46.7% to $11.3 million and $21.8
million during the three and six months ended June 30, 1999, respectively, from
$8.1 million and $14.9 million during the three and six months ended June 30,
1998. These increases resulted primarily from the net addition of 23
Consolidated hotels to this segment and are directly related to the 71.7% and
95.9% increase in Consolidated AmeriHost Inn(R) revenues during the three and
six months ended June 30, 1999, respectively, offset by the 13.4% and 19.3%
decrease in non-AmeriHost Inn(R) hotel revenues during the three and six months
ended June 30, 1999. Hotel operations segment operating costs and expenses as a
percentage of segment revenue decreased to 67.2% during the three months ended
June 30, 1999, from 68.4% during the three months ended June 30, 1998. Hotel
operations segment operating costs and expenses as a percentage of segment
revenue decreased to 74.5% during the six months ended June 30, 1999, from 76.7%
during the six months ended June 30, 1998. Operating costs and expenses as a
percentage of revenues for the Consolidated AmeriHost Inn(R) hotels decreased
slightly during both the three and six month periods ended June 30, 1999 due
primarily to fewer AmeriHost Inn(R) hotels operating during their
pre-stabilization period in the second quarter and first six months of 1999 than
in 1998.
Operating costs and expenses for the hotel development segment decreased 94.8%
to $168,004 during the three months ended June 30, 1999, from $3.2 million
during the three months ended June 30, 1999, consistent with the 94.6% decrease
in hotel development revenues for the three months ended June 30, 1998.
Operating costs and expenses for the hotel development segment decreased 90.5%
to $571,555 during the six months ended June 30, 1999, from $6.0 million during
the six months ended June 30, 1998, consistent with the 91.4% decrease in hotel
development revenues for the six months ended June 30, 1999. Operating costs and
expenses in the hotel development segment as a percentage of segment revenue
decreased to 88.8% during the three months ended June 30, 1999, from 91.9%
during the three months ended June 30, 1998. The second quarter of 1999
consisted primarily of hotel pre-construction development activity, which
results in a lower percentage of operating costs compared to construction
activity. The second quarter of 1998 consisted of a greater amount of
construction activity, which resulted in higher operating costs in relation to
the revenue recognized. Operating costs and expenses in the hotel development
segment as a percentage of segment revenue increased to 102.1% during the six
months ended June 30, 1999, from 93.3% during the six months ended June 30,
1998, as a result of the decreased hotel development and construction activity
in relation to the segment operating costs.
Hotel management segment operating costs and expenses decreased 42.3% and 30.8%
to $226,354 and $511,175 during the three and six months ended June 30, 1999,
respectively, from $392,490 and $738,456 during the three and six months ended
June 30, 1998. This decrease was due to the decrease in the number of hotels
operated and managed for unrelated third parties and minority-owned entities.
Employee leasing operating costs and expenses decreased 40.6% and 44.3% to $1.6
million and $3.1 million during the three and six months ended June 30, 1999,
respectively, from $2.7 million and $5.6 million during the three and six months
ended June 30, 1998, which is consistent with the 41.3% and 44.1% decrease in
segment revenue for the three and six months ended June 30, 1999. Franchising
had operating costs and expenses of $105,235 and $192,616 during the three and
six months ended June 30, 1999, which is the initial six months of operations.
Depreciation and amortization expense decreased 10.0% and 9.1% to $1.4 million
and $2.5 million during the three and six months ended June 30, 1999,
respectively, from $1.5 million and $2.8 million during the three and six months
ended June 30, 1998. The decrease was primarily attributable to the sale and
leaseback of 26 hotels on June 30, 1998 and the sale of five additional hotels
that closed in 1999, partially offset by the net addition of 17 Consolidated
hotels to the hotel operations segment and the resulting depreciation and
amortization therefrom. The Company does not recognize any depreciation on the
assets sold in the sale/leaseback transaction.
Leasehold rents - hotels increased 263.6% and 300% to $1.9 million and $3.7
million during the three and six months ended June 30, 1999, respectively,
compared to $534,604 and $928,216 during the three and six months ended June 30,
1998. The increase is attributable to the sale and leaseback transaction with
PMC. The Company anticipates leasehold rents - hotels to increase significantly
in comparison to 1998, but to remain relatively constant after 1999.
Corporate general and administrative expense increased 1.6% and 6.4% to $394,660
and $777,195 during the three and six months ended June 30, 1999, respectively,
from $388,460 and $730,720 during the three and six months ended June 30, 1998,
and can be attributed primarily to the overall growth of the Company.
The Company's operating income remained constant at $1.9 million during the
three months ended June 30, 1999 and 1998. The Company's operating income
decreased by 55% during the six months ended June 30, 1999 to $535,649 from $1.2
million for the six months ended June 30, 1998. The following discussion of
operating income by segment is exclusive of any corporate general and
administrative expense. Operating income from Consolidated AmeriHost Inn(R)
hotels increased 30.1% and 30.9% to $1.9 million and $1.6 million during the
three and six months ended June 30, 1999, respectively, from $1.5 million and
$1.2 million during the three and six months ended June 30, 1998. These
increases in operating income were due to the increased number of Consolidated
AmeriHost Inn(R) hotels and the increase in same room revenues as a significant
number of recently opened Consolidated AmeriHost Inn(R) hotels were still
operating in 1998 during their pre-stabilization period when revenues are
typically lower. Operating income from the hotel development segment decreased
to $14,744 during the three months ended June 30, 1999, from $265,200 during the
three months ended June 30, 1998 and decreased to ($24,601) during the first six
months of 1999 from $399,064 during the first six months of 1998. 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 1998, compared with the second
quarter and first six months of 1999, and the overall decrease in the number of
hotels developed and constructed for third parties and minority-owned entities
during 1999. The hotel management segment had operating income of $103,023 and
$121,818 during the three and six months ended June 30, 1999, from operating
income of $216,010 and $382,965 during the three and six months ended June 30,
1998. This decrease was due primarily to fewer hotels managed during the past
twelve months for unrelated third parties and minority-owned properties, and the
expensing of start-up costs as incurred during 1999. Employee leasing operating
income decreased 77.3% and 34.7% to $11,916 and $81,077 during the three and six
months ended June 30, 1999, respectively, from $52,503 and $124,232 during the
three and six months ended June 30, 1998, due to the decrease in employee
leasing agreements with minority-owned entities and unrelated third parties.
Interest expense decreased 22.5% and 10.9% to $1.6 million and $3.2 million
during the three and six months ended June 30, 1999, respectively, from $2.1
million and $3.6 million during the three and six months ended June 30, 1998.
This decrease was primarily attributable to the sale and leaseback transaction
with PMC, whereby the Company does not incur any interest expense on the sold
hotels after the sale dates, partially offset by additional mortgage financing
of newly constructed and acquired Consolidated hotels.
The Company's share of equity in income (loss) of affiliates increased 102.9% to
$204,931 during the three months ended June 30, 1999, from $100,978 during the
three months ended June 30, 1998. The Company's share of equity in income (loss)
of affiliates decreased 11.9% to $39,716 during the six months ended June 30,
1999, from $45,057 during the six months ended June 30, 1998. The increase in
equity of affiliates during the second quarter was primarily attributable to the
sale of one minority-owned property in the second quarter of 1999 at a
significant gain. Distributions from affiliates were $126,756 during the six
months ended June 30, 1999, compared to $367,734 during the six months ended
June 30, 1998.
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. 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 1999, the Company used cash for operations of
$2.7 million, compared to cash provided from operations of $48,507 during the
first six months of 1998, or an increase in cash used by operations of $2.7
million. The decrease in cash flow from operations during the first six months
of 1999, when compared to 1998, can be attributed to the increasing impact of
seasonality as the number of Consolidated hotels increased from 51 hotels at
June 30, 1998 to 74 hotels at June 30, 1999, a significant number of hotels
still operating during their pre-stabilization period, and a decrease in cash
flow from the hotel development. In addition, the first six months of 1999 had
significantly less revenue from the development and construction of hotels for
minority-owned entities.
The Company invests cash in three principal areas: (i) the purchase of property
and equipment through the construction and renovation of Consolidated hotels;
(ii) the purchase of equity interests in hotels; and (iii) the making of loans
to affiliated and non-affiliated hotels for the purpose of construction,
renovation and working capital. During the first six months of 1999, the Company
received $7.0 million from investing activities compared to receiving $52.8
million during the first six months of 1998. During the first six months of
1999, the Company received $12.8 million from the sale of five hotels, used $5.2
million to purchase property and equipment for Consolidated AmeriHost Inn(R)
hotels, and used $441,285 for investments in and advances to affiliates, net of
distributions and collections, and used $260,648 for the acquisition of a hotel
partnership interest, net of cash acquired. During the first six months of 1998,
the Company received $64.4 million from the sale of hotels, used $7.6 million to
purchase property and equipment for Consolidated AmeriHost Inn(R) hotels, used
$1.1 million for investments in and advances to affiliates, net of distributions
and collections, and used $2.9 million for the acquisition of hotel partnership
interests, net of cash acquired.
Cash used in financing activities was $3.6 million during the first six months
of 1999 compared to cash used by financing activities of $35.5 million during
the first six months of 1998. In 1999, the primary factors were principal
repayments of $9.4 million, including the repayment of mortgages in connection
with the sale of hotels, offset by $7.1 million in proceeds from the mortgage
financing of Consolidated hotels, and net proceeds of $2.1 million on the
Company's operating line-of-credit. Also, the Company used cash of $3.4 million
to repurchase its own common stock. In 1998, the contributing factors were
repayments of $37.3 million from the mortgage financing of Consolidated hotels,
net of principal repayments, and $2.1 million in net proceeds from the Company's
operating line-of-credit.
At June 30, 1999, the Company had $4.1 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 May 15, 2000. At June 30, 1999,
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 penalty. The Company plans to repay the 7%
Subordinated Notes when due with operational cash flow and, if necessary,
proceeds from its line-of-credit.
The Company expects cash from operations to be sufficient to pay all operating
and interest expenses in 1999.
YEAR 2000
The Year 2000 issue is the result of computer systems that use two digits rather
than four to define the applicable year, which may prevent such systems from
accurately processing dates ending in the year 2000 and after. This could result
in system failures or in miscalculations causing disruption of operations,
including, but not limited to, an inability to process transactions, to send and
receive electronic data, or to engage in routine business activities and
operations.
In 1997, the Company established a Year 2000 task force to develop and implement
a Year 2000 compatibility program. The Company has developed a Year 2000
compatibility plan, and has completed the audit, assessment and scope phases of
the plan. The Company has completed an inventory of the software applications
that it uses and has determined which applications are not Year 2000 compatible.
The Company's compatibility plan includes purchasing and installing software
releases which are Year 2000 compatible as well as testing these systems. The
Company's goal is to be substantially Year 2000 compatible by October 1, 1999,
to allow for any remaining testing during the remainder of 1999.
In addition, the Company has begun evaluating computer hardware, such as
personal computers, as well as furniture and equipment used at the Company's
hotels. The Company is presently in the process of evaluating these systems for
Year 2000 compatibility. The Company's goal is to complete the remediation of
these systems by October 1, 1999.
In addition to reviewing its internal systems, the Company has had formal
communications with its significant customers, vendors and freight companies
concerning Year 2000 compliance, including electronic commerce. There can be no
assurance that the systems of other companies that interact with the Company
will be sufficiently Year 2000 compatible so as to avoid an adverse impact on
the Company's operations, financial condition and results of operations. The
Company does not believe that its products and services involve any Year 2000
risks. The Company does not presently anticipate that the costs to address the
Year 2000 issue will have a material adverse effect on the Company's financial
condition, results of operation or liquidity.
The Company presently anticipates that it will complete its Year 2000 assessment
and remediation by October 1, 1999. However, there can be no assurance that the
Company will be successful in implementing its Year 2000 remediation plan
according to the anticipated schedule. In addition, the Company may be adversely
affected by the inability of other companies whose systems interact with the
Company to become Year 2000 compatible and by potential interruptions of
utility, communication or transportation systems as a result of Year 2000
issues.
Although the Company expects its internal systems to be Year 2000 compliant as
described above, the Company intends to prepare a contingency plan that will
specify what it plans to do if it or important external companies are not Year
2000 compatible in a timely manner. The Company expects to prepare its
contingency plan during 1999.
THIS IS A YEAR 2000 READINESS DISCLOSURE STATEMENT WITHIN THE MEANING OF THE
YEAR 2000 INFORMATION AND READINESS DISCLOSURE ACT (P.L. 105-271).
This report contains certain forward-looking statements which involve risks and
uncertainties. When used in this report, the words "believe," "anticipate,"
"think," "intend," "goal," "forecast," "expect," and similar expressions
identify forward-looking statements. Forward-looking statements include, but are
not limited to, statements concerning anticipated income from operations and net
income for fiscal 1999. Such statements are subject to certain risks and
uncertainties which would cause actual results to differ materially from those
expressed or implied by such forward-looking statements. Readers are cautioned
not to place undue reliance on those forward-looking statements which speak only
as of the date of this report.
SEASONALITY
The lodging industry, in general, is seasonal by nature. The Company's hotel
revenues are generally greater in the second and third calendar quarters than in
the first and fourth quarters due to weather conditions in the markets in which
the Company's hotels are located, as well as general business and leisure travel
trends. This seasonality can be expected to continue to cause quarterly
fluctuations in the Company's revenues, and is expected to have a greater impact
as the number of Consolidated hotels increases. Quarterly earnings may also be
adversely affected by events beyond the Company's control, such as extreme
weather conditions, economic factors and other general factors affecting travel.
In addition, hotel construction is seasonal, depending upon the geographic
location of the construction projects. Construction activity in the Midwest may
be slower in the first and fourth calendar quarters due to weather conditions.
INFLATION
Management does not believe that inflation has had, or is expected to have, any
significant adverse impact on the Company's financial condition or results of
operations for the periods presented.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
All statements contained herein that are not historical facts, including, but
not limited to, statements regarding the Company's hotels under construction and
the operation of AmeriHost Inn(R) hotels are based on current expectations.
These statements are forward looking in nature and involve a number of risks and
uncertainties. Actual results may differ materially. Among the factors that
could cause actual results to differ materially are the following: the
availability of sufficient capital to finance the Company's business plan on
terms satisfactory to the Company; competitive factors, such as the introduction
of new hotels or renovation of existing hotels in the same markets; changes in
travel patterns which could affect demand for the Company's hotels; changes in
development and operating costs, including labor, construction, land, equipment,
and capital costs; general business and economic conditions; and other risk
factors described from time to time in the Company's reports filed with the
Securities and Exchange Commission. The Company wishes to caution readers not to
place undue reliance on any such forward looking statements, which statements
are made pursuant to the Private Securities Litigation Reform Act of 1995 and,
as such, speak only as of the date made.
ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- --------
The Company's exposure to market risk for changes in interest rates relates
primarily to the Company's long-term debt obligations. The Company has no 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. II.
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
SCHEDULE OF EARNINGS BEFORE INTEREST/RENT,
TAXES AND DEPRECIATION/AMORTIZATION
(UNAUDITED)
===========================================================
Three Months Ended June 30, Six Months Ended June 30,
---------------------------- ----------------------------
1999 1998 1999 1998
------------ ------------ ------------ ------------
Revenue $ 19,088,251 $ 18,892,934 $ 33,807,198 $ 32,930,643
Operating costs and expenses 13,439,848 14,481,963 26,238,834 27,283,078
------------ ------------ ------------ ------------
5,648,403 4,410,971 7,568,364 5,647,565
Corporate general and administrative (394,660) (388,460) (777,195) (730,720)
Equity in net income and losses
of affiliates 204,931 100,978 39,716 45,057
------------ ------------ ------------ ------------
Earnings before minority interests 5,458,674 4,123,489 6,830,885 4,961,902
Minority interests in earnings of
consolidated subsidiaries and
partnerships (51,608) 25,541 (90,027) 233,128
------------ ------------ ------------ ------------
Earnings before interest/rent, taxes
and depreciation/amortization $ 5,407,066 $ 4,149,030 $ 6,740,858 $ 5,195,030
============ ============ ============ ============
PART II: Other Information
Item 4. Submission of Matters to a Vote of Securities Holders:
- -------
The annual shareholders' meeting was held on May 27, 1999. One
matter was voted as follows:
Matter 1: Election of Directors
Director For Against Abstain
-------- --- ------- -------
Michael P. Holtz 4,615,731 1,775 256,309
Russell J. Cerqua 4,617,056 450 256,309
Reno J. Bernardo 4,616,206 1,300 256,309
Salomon J. Dayan 4,617,116 390 256,309
Jon K. Haahr 4,617,116 390 256,309
Item 6. Exhibits and Reports on Form 8-K:
- -------
(a) Exhibits:
Exhibit No.
-----------
27 Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during this
period covered by this report.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERIHOST PROPERTIES, INC.
--------------------------
Registrant
Date: August 13, 1999
By: /s/ James B. Dale
---------------------------------------
James B. Dale
Treasurer/Senior Vice President, Finance
By: /s/ Michael E. Kirk
---------------------------------------
Michael E. Kirk
Corporate Controller