EXHIBIT 99.1
(ARLINGTON HOSPITALITY, INC. LETTERHEAD)
For Immediate Release
CONTACT: MEDIA CONTACT:
James B. Dale, Chief Financial Officer Jerry Daly or Carol McCune
847-228-5401 x 361 703-435-6293
jimdale@arlingtonhospitality.com jerry@dalygray.com
ARLINGTON HOSPITALITY, INC. ANNOUNCES THIRD QUARTER RESULTS
ARLINGTON HEIGHTS, Ill., November 17, 2003--Arlington Hospitality, Inc.
(Nasdaq/NM: HOST), a hotel development and management company, today announced
results for the third quarter and nine months ended September 30, 2003.
Arlington is the nation's largest owner and operator of AmeriHost Inn hotels, a
mid-market, limited service hotel brand with 103 properties located in 22 states
and Canada. Arlington Hospitality owns and operates 57 AmeriHost Inn hotels.
Cendant Corporation (NYSE: CD) is the franchisor of the AmeriHost Inn brand.
THIRD QUARTER AND YEAR TO DATE 2003 RESULTS
Revenues increased 49.7 percent and 14.2 percent to $23.8 million and
$57.4 million, respectively, during the three and nine months ended September
30, 2003, compared to $15.9 million and $50.3 million during the same periods a
year earlier, due primarily to increases in hotel sales and commissions and
incentive and royalty-sharing fees. Revenues from consolidated AmeriHost Inn
hotels decreased during the three and nine months ended September 30, 2003, due
primarily to the sale of hotels and a 1.5 percent and 1.2 percent decrease in
same room revenue for these hotels for the three and nine months ended September
30, 2003, respectively.
Net income for the third quarter was $1.1 million, compared to net
income of $746,000 during the third quarter of 2002. Net loss for the nine
months ended September 30, 2003, was ($3.8) million, compared to net income of
approximately $222,000 for the same period in 2002. These results include
non-cash hotel impairment provisions in 2003 and discontinued operations related
to non-AmeriHost Inn hotels, which have been recorded in connection with the
company's previously announced plan for hotel disposition and hotel
development/repositioning.
Net income (loss), and its components, is summarized as follows for the
three and nine months ended September 30, 2003, compared to September 30, 2002:
<Table>
<Caption>
Three Months Ended September 30, Nine months Ended September 30,
--------------------------------- ---------------------------------
2003 2002 2003 2002
-------------- -------------- -------------- --------------
Net income (loss) from continuing
operations, before impairment $ 1,201,438 $ 774,400 $ 412,568 $ 803,538
Impairment provision, net of tax (84,496) -- (2,883,008) --
-------------- -------------- -------------- --------------
Net income (loss) from continuing
operations $ 1,116,942 $ 774,400 $ (2,470,440) $ 803,538
Discontinued operations (34,704) (28,713) (1,287,628) (581,535)
-------------- -------------- -------------- --------------
Net income (loss) $ 1,082,238 $ 745,687 $ (3,758,068) $ 222,003
============== ============== ============== ==============
Net income (loss) per share - Diluted:
From continuing operations $ 0.23 $ 0.15 $ (0.48) $ 0.15
From discontinued operations (0.01) (0.01) (0.26) (0.11)
-------------- -------------- -------------- --------------
$ 0.22 $ 0.14 $ (0.74) $ 0.04
============== ============== ============== ==============
</Table>
Following the July 2003 announcement of a plan to dispose of 25 to 30
hotels over the next two years, the company recorded hotel impairment charges
based on the difference between the carrying value of the hotels identified for
sale and their anticipated net realizable values. Discontinued operations
relates to the operations of the non-AmeriHost Inn hotels sold, or expected to
be sold within the next 12 months, which have been reclassified from continuing
2
operations and includes a non-cash impairment charge related to these hotels
taken during the three and nine months ended September 30, 2003.
"The third quarter marks the beginning of a significant shift in the
company's strategy," said Jerry Herman, president and chief executive officer.
"We now are focusing our attention on both development, primarily through joint
ventures, which we refer to as Operation Growth, and our hotel disposition plan,
which we refer to as Operation Sell. The sale of 25 to 30 hotels will allow us
to pay down more than 50 percent of our debt, increase our operating cash flow,
accelerate the benefits of sales and royalty-sharing fees related to our
agreements with Cendant and provide capital for future hotel development or
other strategic alternatives."
Herman noted that the company concurrently implemented a restructuring
plan, reducing corporate and regional operations staff by approximately 20
percent, resulting in an expected annual savings of approximately $580,000. Some
of these savings will be partially offset by the addition of key personnel,
primarily in the development and finance areas.
ASSETS HELD FOR SALE AND DISCONTINUED OPERATIONS
In accordance with SFAS No. 144, "Accounting for Long-Lived Assets,"
the company's hotel assets earmarked for sale within the next 12 months have
been classified as "held for sale" on the accompanying balance sheet as of
September 30, 2003.
The operations of the non-AmeriHost Inn hotels that have been
determined to be discontinued operations have been reclassified from the
company's continuing operations and presented as "discontinued operations" on
the consolidated statements of operations. In addition, the "discontinued
operations" include $517,000 of after tax, non-cash impairment charges related
to these hotels recorded in the second quarter of 2003, plus $19,000, after tax,
recorded in the third quarter of 2003. These hotels are considered to be
"discontinued operations" since they
3
have been sold, or are expected to be sold within the next 12 months, and the
company will have no continuing involvement after their disposition.
Although certain AmeriHost Inn hotels have been classified as "held for
sale" on the accompanying consolidated balance sheet, the operations of these
hotels has not been treated as "discontinued operations" in the consolidated
statement of operations due to the company's long-term royalty-sharing agreement
with Cendant for all AmeriHost Inn hotels, which provides for a revenue stream
to the company after the properties are sold to a new or existing AmeriHost Inn
franchisee.
AMERIHOST INN ROOM REVENUES
Third quarter 2003 same-room revenue per available room (RevPAR) for
the company's AmeriHost Inn hotels was essentially flat at $37.91, compared to
the 2002 third quarter, and compared to a 2.2 percent estimated increase in 2003
third quarter RevPAR for the midscale without food and beverage segment of the
hotel industry, according to Smith Travel Research. Occupancy and average daily
rate (ADR) at the company's AmeriHost Inn hotels were unchanged at 64.3 percent
and $58.91, respectively.
For the first nine months of 2003, same-room RevPAR for the company's
AmeriHost Inn hotels decreased 0.7 percent to $33.46, compared to the same
period in 2002, and compared to a 0.5 percent estimated RevPAR decrease for the
midscale without food and beverage segment of the hotel industry for the first
nine months of 2003, according to Smith Travel Research. Occupancy at the
company's AmeriHost Inn hotels declined 0.3 percent to 58.3 percent, while ADR
decreased 0.4 percent to $57.34.
On a trailing 12-month basis, RevPAR decreased 0.8 percent, based on a
0.5 percent decrease in occupancy and a 0.2 percent decrease in ADR, compared to
an estimated 0.2 percent
4
RevPAR increase for the midscale without food and beverage segment for the
trailing 12 months, according to Smith Travel Research.
ARLINGTON HOSPITALITY'S AMERIHOST INN THIRD QUARTER 2003 RESULTS*
<Table>
<Caption>
Three Months Nine months Twelve Months
Ended Ended Ended
September 30 September 30 September 30
------------ ------------ ------------
Occupancy - 2003 64.3% 58.3% 57.0%
Occupancy - 2002 64.3% 58.5% 57.3%
Increase (decrease) 0.0% (0.3)% (0.5)%
Average Daily Rate - 2003 $ 58.91 $ 57.34 $ 57.12
Average Daily Rate - 2002 $ 58.89 $ 57.56 $ 57.21
Increase (decrease) 0.0% (0.4)% (0.2)%
RevPAR - 2003 $ 37.91 $ 33.46 $ 32.56
RevPAR - 2002 $ 37.86 $ 33.67 $ 32.78
Increase (decrease) 0.0% (0.7)% (0.8)%
</Table>
*Results are presented on a "same-room" basis, and include the company's
AmeriHost Inn hotels, which have been open for at least 13 months during the
period, presented.
"Leisure travel held up well during the quarter but business travel
continues to be sluggish," Herman said. "We also were impacted in certain
markets by the addition of new competitive hotels."
During the quarter, Arlington launched a number of new national,
regional and local sales and marketing initiatives. "We are placing particular
emphasis on revenue management and achieving higher market penetration. We are
implementing significant training programs at the property level and new
technological/Internet initiatives, and we continue to add strength to our team.
Last week, Bill Hobbs joined the company as our new vice president of sales and
marketing and will be working closely with our operational and sales teams."
Hobbs previously was director of marketing for AmericInns International
and is the former director of national sales for Baymont Inns & Suites. "For the
past dozen years, Bill has concentrated on the limited-service segment in
secondary and tertiary markets. He knows our
5
customer and the strengths of our locations. We are excited to have him on board
and look forward to his adding value to our sales and marketing efforts," Herman
added.
"We have become much more aggressive in our marketing efforts and in
taking command of our electronic distribution channels to better control our
rooms inventory and pricing. We believe these programs will have a long-term
positive impact on the company's operations."
NEW BUSINESS PLAN UPDATE
1. Hotel Sales
During the third quarter, the company sold three wholly owned
hotels, located in Fontana, Calif., Jacksonville, Ill., and New
Martinsville, W.Va. Following the close of the quarter, the company
sold two wholly owned AmeriHost Inn hotels in Kenton, Ohio and
Parkersburg South, W. Va., and a joint venture in which the company is
a partner, sold a Days Inn located in New Philadelphia, Ohio.
"We are moving forward rapidly and as prudently as possible,"
Herman said. "We engaged the national hotel brokerage firm of Thompson
Calhoun Fair, which already is evaluating initial offers on several
hotels."
Year to date, the company has sold eight wholly owned
AmeriHost Inn hotels generating net hotel sales revenues of
approximately $22.9 million. In addition, the company facilitated the
sale of three hotels owned by joint ventures in which the company was a
partner, including one AmeriHost Inn and two non-AmeriHost Inn hotels.
Arlington currently has one hotel under contract for sale,
which is expected to be consummated during the next six months. The
company currently is in active pre-contract negotiations on several
additional properties. The revenue and profit/loss from
6
the sale of hotels, as well as the reduction of debt, will be reported
in the company's financial statements as of the date the sale
transactions close. When the company has hotels under contract for
sale, even with nonrefundable cash deposits in certain cases, certain
conditions to closing remain, and there can be no assurance that these
sales will be consummated as anticipated.
The amount of revenue described above relates solely to
completed sales activities. Any forecasted amounts from closed or
pending sales could differ from the final amounts included in the
company's applicable quarterly and annual financial statements when
issued. Furthermore, such forecasted amounts do not represent guidance
on, or forecasts of, the results of the company's entire consolidated
operations, which are reported on a quarterly basis.
Information on Arlington's hotels being brokered for sale by
Thompson Calhoun Fair can be found at www.tcfhotels.com, or by calling
Mark Fair at 404-995-8970.
2. Development Activity
In the third quarter, the company began construction on a
79-room AmeriHost Inn hotel in Weirton, W.Va. for a joint venture in
which the company has a minority ownership interest. The company
currently has several other projects in the pre-construction
development phase, including a site near Columbus, Ohio's airport, a
site in Lansing, Mich., and several sites in California.
During the quarter, the company substantially enhanced the
depth of its development team. Stephen Miller joined the company in the
new position of senior vice president-real estate/business development
to head up the company's accelerated hotel development program. Stephen
Harris joined Arlington as senior vice president,
7
construction and development. He will spearhead new construction
activities, as well as oversee the company's capital expenditure,
preventative maintenance and energy management programs.
"Our development department now is fully staffed, and we are
ramping up quickly," said Herman. "We are exploring opportunities with
a number of possible joint venture partners and have been identifying
attractive sites. Our goal is to reach a level of developing 10 to 15
hotels a year by the end of 2005, primarily in larger markets,
particularly in the Midwest where the AmeriHost brand has high consumer
awareness, and in California."
For more information regarding turnkey development services,
and on all hotels owned by the company, contact Steve Miller via email
at stevem@arlingtonhospitality.com or by telephone at (847) 228-5401,
ext. 312.
3. Cendant Relationship
In the third quarter, the number of AmeriHost Inns franchised
by companies other than Arlington increased to 46, up from 10 at the
end of 2000. Incentive and royalty-sharing fees more than doubled to
$265,000 in the 2003 third quarter, compared to the same period in
2002. For the nine months, these fees increased nearly 80 percent to
$695,000, compared to the like period a year earlier.
"We are working closely with Cendant and expect to see
substantially increased efforts to grow the AmeriHost brand through
franchisees in addition to Arlington," Herman noted. "We are pleased
that Cendant has added three AmeriHost Inn properties to the system in
the third quarter, and Cendant has indicated that their pipeline for
AmeriHost Inns is increasing."
8
4. Balance Sheet
As a result of the sale of three hotels in the third quarter,
Arlington paid off mortgage debt of approximately $5.8 million in the
2003 third quarter. The company has paid off additional mortgage debt
of $4.1 million so far in the fourth quarter, including the mortgage
debt of one consolidated joint venture. The company estimates that
hotel disposition proceeds from Operation Sell will enable Arlington to
reduce debt by more than 50 percent from year-end 2002 levels.
Year-to-date, Arlington has paid down $16.5 million of debt.
OTHER MATTERS
From time to time, the company may utilize cash to purchase its own
common stock. Currently, the board of directors has authorized the company to
buy back, at any time and without notice, up to 1,000,000 shares of it own
common stock under certain conditions. Year to date, the company has purchased
36,800 shares under this authorization.
ABOUT ARLINGTON HOSPITALITY
Arlington Hospitality, Inc. is a hotel development and management
company that builds, operates and sells mid-market hotels, primarily the
AmeriHost Inn brand. Currently, Arlington Hospitality, Inc. owns or manages 64
properties in 17 states, including 57 AmeriHost Inn hotels, for a total of 4,655
rooms, with additional AmeriHost Inn & Suites hotels under development. The
AmeriHost Inn brand is a mid-market, limited service hotel brand with more than
100 properties located in 22 states and Canada.
This press release may contain forward-looking statements.
Forward-looking statements are statements that are not historical, including
statements regarding management's intentions, beliefs, expectations,
representations, plans or predictions of the future, and are typically
identified by words such as "believe," "expect," "anticipate," "intend,"
"estimate," "may," "will," "should," and "could." There are numerous risks and
uncertainties that could cause actual results to differ materially from those
set forth in the forward-looking statements. For a
9
discussion of these factors, see the Company's report on Form 10-Q for the
quarter ended September 30, 2003 under the section headed "Management's
Discussion and Analysis of Financial Condition and Results of Operations-Factors
Affecting Future Performance."
10
ARLINGTON HOSPITALITY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
September 30, December 31,
2003 2002
------------ ------------
ASSETS (UNAUDITED)
Current assets:
Cash and cash equivalents $ 4,079,236 $ 3,969,515
Accounts receivable, less allowance of $150,000
at September 30, 2003 and December 31, 2002 (including
approximately $273,000 and $166,000 from related parties) 2,390,547 2,064,463
Notes receivable, current portion -- 100,000
Prepaid expenses and other current assets 475,852 975,432
Refundable income taxes 1,009,480 1,574,776
Costs and estimated earnings in excess of billings on
uncompleted contracts 898,367 1,479,101
Assets held for sale - non-AmeriHost Inn hotels 11,921,652 --
Assets held for sale - AmeriHost Inn hotels 23,832,212 --
------------ ------------
Total current assets 44,607,346 10,163,287
------------ ------------
Investments in and advances to unconsolidated
hotel joint ventures 3,335,741 4,291,504
------------ ------------
Property and equipment:
Land 7,002,362 13,418,378
Buildings 39,277,983 76,849,071
Furniture, fixtures and equipment 15,232,786 26,553,701
Construction in progress 320,246 6,447,039
Leasehold improvements 2,396,309 2,760,906
------------ ------------
64,229,686 126,029,095
Less accumulated depreciation and amortization 16,313,014 26,417,755
------------ ------------
47,916,672 99,611,340
------------ ------------
Notes receivable, less current portion 1,017,875 782,083
Deferred income taxes 5,088,000 2,427,000
Other assets, net of accumulated amortization of
approximately $928,000 and $1,259,000 2,776,863 2,658,500
------------ ------------
8,882,738 5,867,583
------------ ------------
$104,742,497 $119,933,714
============ ============
</Table>
(continued)
11
ARLINGTON HOSPITALITY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<Table>
<Caption>
September 30, December 31,
2003 2002
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY (UNAUDITED)
Current liabilities:
Accounts payable $ 2,295,234 $ 3,965,028
Bank line-of-credit 2,250,000 6,384,287
Accrued payroll and related expenses 497,942 827,353
Accrued real estate and other taxes 2,363,238 1,969,297
Other accrued expenses and current liabilities 1,174,735 1,974,350
Current portion of long-term debt 2,997,471 4,038,301
Liabilities of assets held for sale - non-AmeriHost Inn hotels 10,974,939 --
Long-term debt of assets held for sale - AmeriHost Inn hotels 23,105,654 --
------------- -------------
Total current liabilities 45,659,213 19,158,616
------------- -------------
Long-term debt, net of current portion 33,657,471 72,203,688
------------- -------------
Deferred income 11,407,184 10,867,418
------------- -------------
Commitments and contingencies
Minority interests 296,449 333,888
------------- -------------
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 5,012,788 shares at September 30,
2003, and 4,962,817 shares at December 31, 2002 25,064 24,814
Additional paid-in capital 13,294,458 13,184,564
Retained earnings 839,533 4,597,601
14,159,055 17,806,979
Less:
Stock subscriptions receivable (436,875) (436,875)
------------- -------------
13,722,180 17,370,104
------------- -------------
$ 104,742,497 $ 119,933,714
============= =============
</Table>
12
ARLINGTON HOSPITALITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30,
(UNAUDITED)
<Table>
<Caption>
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------- -------------------------------
2003 2002 2003 2002
------------- ------------- ------------- -------------
Revenue:
Hotel operations:
AmeriHost Inn hotels $ 11,718,099 $ 12,737,246 $ 31,254,120 $ 33,582,408
Other hotels 489,724 753,804 1,335,904 1,759,114
Development and construction 380,834 929,983 2,478,095 5,740,954
Hotel sales and commissions 10,040,670 -- 19,074,417 4,900,317
Management services 124,542 266,931 352,997 763,640
Employee leasing 605,993 929,164 1,664,675 2,649,339
Incentive and royalty sharing 264,945 130,623 694,594 386,992
Office building rental 180,941 153,254 537,164 471,242
------------- ------------- ------------- -------------
23,805,748 15,901,005 57,391,966 50,254,006
------------- ------------- ------------- -------------
Operating costs and expenses:
Hotel operations:
AmeriHost Inn hotels 8,027,206 8,271,494 23,424,628 23,675,045
Other hotels 644,396 521,634 1,531,884 1,606,078
Development and construction 591,467 944,824 2,727,944 5,568,717
Hotel sales and commissions 8,444,575 -- 15,779,006 3,528,680
Management services 65,918 165,628 205,677 504,455
Employee leasing 585,582 916,318 1,612,296 2,593,120
Office building rental 45,966 71,297 142,383 116,918
------------- ------------- ------------- -------------
18,405,110 10,891,195 45,423,818 37,593,013
------------- ------------- ------------- -------------
5,400,638 5,009,810 11,968,148 12,660,993
Depreciation and amortization 701,352 1,088,454 2,767,485 3,221,828
Leasehold rents - hotels 1,262,727 1,240,536 3,802,981 3,860,025
Corporate general and administrative 526,848 755,036 1,489,686 1,528,630
Impairment provision 143,496 -- 4,808,008 --
------------- ------------- ------------- -------------
Operating income (loss) 2,766,215 1,925,784 (900,012) 4,050,510
Other income (expense):
Interest expense (1,026,406) (1,234,343) (3,266,509) (3,761,282)
Interest income 109,565 151,538 350,446 409,760
Other income (170,171) 53,107 (128,150) 92,344
Gain on sale of assets 400,000 400,000 400,000 727,076
Equity in net income and (losses)
of affiliates (138,020) 61,697 (412,282) (59,886)
------------- ------------- ------------- -------------
Income (loss) before minority
interests and income taxes 1,941,183 1,357,783 (3,956,507) 1,458,522
Minority interests in (income) loss of
consolidated partnerships (47,241) (44,383) (128,933) (90,984)
------------- ------------- ------------- -------------
Income (loss) before income taxes 1,893,942 1,313,400 (4,085,440) 1,367,538
Income tax expense (benefit) 777,000 539,000 (1,615,000) 564,000
------------- ------------- ------------- -------------
Net income (loss) from continuing
Operations 1,116,942 774,400 (2,470,440) 803,538
Discontinued operations, net of
tax (34,704) (28,713) (1,287,628) (581,535)
------------- ------------- ------------- -------------
Net income (loss) $ 1,082,238 $ 745,687 $ (3,758,068) $ 222,003
============= ============= ============= =============
Net income (loss) per share
Basic $ 0.22 $ 0.15 $ (0.74) $ 0.04
Diluted $ 0.22 $ 0.14 $ (0.74) $ 0.04
</Table>