EXHIBIT 99.1
(ARLINGTON HOSPITALITY, INC. LOGO)
ARLINGTON HOSPITALITY, INC.
2355 South Arlington Heights Road o Suite 400 o Arlington Heights, IL 60005
847-228-5400 Fax: 847-228-5409 www.arlingtonhospitality.com
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 FOURTH QUARTER AND 2003 RESULTS
SELLS TWO HOTELS; LINE OF CREDIT TO BE RENEWED THROUGH APRIL 2005
ARLINGTON HEIGHTS, Ill., April 1, 2004--Arlington Hospitality, Inc.
(Nasdaq/NM: HOST), a hotel development and management company, today announced
results for the fourth quarter and year ended December 31, 2003.
The company also announced that it has sold two hotels in March and
entered into a commitment to renew its operating line of credit through April
2005.
10-K FILING AND RESULTS CONFERENCE CALL
The company filed its form 10-K with the Securities and Exchange
Commission yesterday. The document is accessible through the SEC's electronic
filings database at www.sec.gov, and will be on the company's Web site,
www.arlingtonhospitality.com.
At 4 p.m. ET on April 1, 2004, the company's senior management team
will conduct a conference call to review fourth quarter and full-year 2003
financial results, followed by a question-and-answer period. Stockholders and
other interested parties may participate in the conference call by calling (800)
219-6110, reference number 575396.
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FOURTH QUARTER AND 2003 RESULTS
Revenues declined 15.6 percent in the 2003 fourth quarter to $15.1
million, compared to $17.9 million in the same period a year earlier, primarily
reflecting lower revenues from the sale of hotels and fewer hotels owned and
operated by the company.
Net loss for the 2003 fourth quarter was $(1.9) million, compared to a
net loss of $(1.9) million in the previous year. These results include non-cash
hotel impairment charges of $262,000 pre-tax ($157,000 after tax) and $542,000
pre-tax ($320,000 after tax) in the fourth quarter of 2003 and 2002,
respectively. The fourth quarter 2003 and 2002 results also include net losses
from discontinued operations of $168,000 and $472,000, respectively, including
additional impairment charges of $16,000 pre-tax ($10,000 after tax) and
$450,000 pre-tax ($270,000 after tax), respectively, related to the
non-AmeriHost hotels classified as discontinued operations.
For full-year 2003, revenues rose 6.4 percent to $72.6 million from
$68.2 million the prior year, due primarily to the revenue from the sale of more
AmeriHost Inn hotels in 2003. The hotel sales also resulted in a decline in
hotel operating revenues from consolidated AmeriHost Inn hotels during 2003.
Net loss for 2003 was $(5.6) million, compared to a net loss of $(1.7)
million for 2002. These results include non-cash hotel impairment provisions of
approximately $5.1 million pre-tax ($3.0 million after tax) and $542,000 pre-tax
($320,000 after tax) in 2003 and 2002, respectively. In addition, the company
reported a loss from discontinued operations of approximately $1.5 million and
$1.1 million, both net of tax, including approximately $909,000,
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pre-tax ($571,000 after tax) and $450,000 pre-tax ($270,000 after tax) of
additional impairment, in 2003 and 2002, respectively, related to the
non-AmeriHost hotels classified as discontinued operations.
The above-mentioned non-cash hotel impairment charges have been
recorded primarily in connection with the company's previously announced plan
for hotel disposition and increased focus on hotel development. 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 operations.
Net income (loss), and its components, is summarized below for the
years ended December 31, 2003, 2002 and 2001:
<Table>
<Caption>
(In thousands)
2003 2002 2001
---------- ---------- ----------
Net income (loss) from continuing
operations, before impairment $ (1,123) $ (336) $ 971
Impairment provision, net of tax (3,040) (320) --
---------- ---------- ----------
Net income (loss) from continuing
operations (4,163) (656) 971
Discontinued operations, net of tax (1,456) (1,054) (215)
---------- ---------- ----------
Net income (loss) $ (5,619) $ (1,710) $ 755
========== ========== ==========
Net income (loss) per share - Diluted:
From continuing operations $ (0.83) $ (0.13) $ 0.17
From discontinued operations (0.29) (0.21) $ (.04)
---------- ---------- ----------
$ (1.12) $ (0.34) $ 0.13
========== ========== ==========
</Table>
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"2003 was a year of significant transition for Arlington, as we began
implementing a new strategy that focuses on hotel development and sales rather
than our previous ownership/ operations business model," said Jerry H. Herman,
president and chief executive officer. "We initiated a hotel disposition program
to sell off nearly half of our hotel assets and redeploy the proceeds into an
expanded development program that envisions building or acquiring/converting 10
to 15 AmeriHost Inns annually by the end of 2005. We also significantly
strengthened our hotel development team to match our business goals, and
recently completed the implementation of new marketing efforts to enhance hotel
revenues. In addition, we significantly reduced our mortgage debt, and continued
our efforts to expand the AmeriHost Inn brand owned by Cendant Corporation
(NYSE: CD)."
SELLS TWO HOTELS IN MARCH
In March 2004, the company sold two hotels: the 84-room AmeriHost Inn
in Redding, Calif., and the 60-room AmeriHost Inn in Upper Sandusky, Ohio. Gross
proceeds from the two sales were $7.1 million, and the company subsequently
reduced its hotel mortgage debt by $3.9 million.
LINE OF CREDIT RENEWAL
The company announced that it has entered into a commitment to renew
its line of credit with LaSalle Bank NA through April 30, 2005. Under terms of
the lender's commitment, Arlington's current $5.5 million line limit will be
reduced through hotel sales-related paydowns and/or the passage of time to $3.5
million. In addition, the interest rate will be adjusted to 10 percent annually.
The loan covenants will be similar to those in the existing facility.
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In anticipation of this new reduced limit, the company already has used
some of the proceeds from the two March hotel sales to pay down the current line
of credit to the $4.0 million level. As a result of these hotel sales, the limit
on the renewed line of credit will begin at $4.0 million, stepping down to $3.5
million on February 28, 2005. The commitment is subject to the closing of the
renewed loan by April 30, 2004. "As we begin to shift more to a development
mode, we intend to seek longer-term financing to better align with the duration
of the development and sales cycle times, as well as new construction or
acquisition/conversion financing," Herman said. "We also are considering
engaging an investment advisor in the near future to assist us in achieving this
goal."
AMERIHOST INN ROOM REVENUES
Fourth quarter 2003 same-room revenue per available room (RevPAR) for
the company's AmeriHost Inn hotels increased 1.2 percent to $29.08, compared to
the same period a year earlier. Same-room RevPAR for the AmeriHost Inn hotels
for all of 2003 was down slightly, 0.3 percent, to $32.40. The comparable
midscale without food and beverage segment, according to Smith Travel Research,
was up 3.8 percent and up 0.5 percent, respectively, for the 2003 fourth quarter
and full year.
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ARLINGTON HOSPITALITY'S AMERIHOST INN 2003 RESULTS*
<Table>
<Caption>
Three Months Twelve Months
Ended Ended
December 31 December 31
------------ -------------
Occupancy - 2003 51.5% 56.7%
Occupancy - 2002 51.1% 56.7%
Increase (decrease) 0.8% 0.0%
Average Daily Rate - 2003 $ 56.49 $ 57.15
Average Daily Rate - 2002 $ 56.15 $ 57.25
Increase (decrease) 0.6% (0.2%)
Revenue per Available Room - 2003 $ 29.08 $ 32.40
Revenue per Available Room - 2002 $ 28.71 $ 32.48
Increase (decrease) 1.2% (0.3%)
</Table>
*Same hotel property results for AmeriHost Inns opened at least 13 months during
the period presented.
2003 HIGHLIGHTS
o DISPOSITION PROGRAM UPDATE--In July 2003, the company unveiled a plan
to dispose of 25 to 30 hotels over a two-year period. From January 1,
2003 through July 2003, the company had sold five hotels and, for the
full year, sold 11 hotels, a single-year Arlington record.
In accordance with SFAS No. 144, "Accounting for Long-Lived Assets,"
the company's AmeriHost Inn hotel assets designated for sale within the next 12
months have been classified as "held for sale" on the accompanying balance sheet
as of December 31, 2003. The operations of these hotels have 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 and remain AmeriHost Inns. The operations of the non-AmeriHost Inn
hotels to be sold
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under the disposition program have been reclassified from the company's
continuing operations and presented as "discontinued operations" on the
consolidated statements of operations.
"With the economy and hotel industry showing signs of recovery, we are
seeing increased interest from potential buyers of our hotels," he noted. "We
have engaged multiple brokers to assist in the marketing of our hotels. We
currently have five hotels under sales agreements and are marketing an
additional 20 properties. At this time, we believe we will achieve total net
proceeds of between $11.9 million and $12.3 million as a result of the plan we
refer to as Operation Sell (including hotels already sold), which falls within
the lower end of our previously announced range of $11.5 million to $14.7
million."
It should be noted that 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. 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 can be
obtained by calling Steve Miller, Senior Vice-President of Real Estate and
Business Development, at 847-228-5400, extension 312, or e-mailing
stevem@arlingtonhospitality.com.
o DEVELOPMENT PROGRAM UPDATE--The company revamped its development
program, enhancing and expanding its development team with the hiring
of three experienced industry
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veterans. The company began construction on one hotel and opened four hotels
during 2003.
"Steve Miller and his team came on board in the second half of 2003 and
have conducted a thorough review of development opportunities in certain regions
of the country. Based on their research, we will first focus our future
development in markets where we have a proven track record, California and the
Midwest. We also have identified certain areas in the Southeastern U.S. where we
might possibly expand the AmeriHost Inn brand. We expect to break ground on at
least one property in the Midwest during the second quarter, using our 80- to
90-room design, which was created for larger markets."
"Most of the development, which will be the updated design in larger
markets, is expected to be in joint ventures or building for third parties, and
our outreach efforts to these parties is scaling up," Herman pointed out.
o LEASE RESTRUCTURING UPDATE--The company also announced February 26,
2004 that it, on behalf of a wholly-owned subsidiary, was attempting to
restructure the terms of 21 long-term leases on AmeriHost Inn hotels
with its hotel landlord, PMC Commercial Trust (AMEX: PCC). Arlington
announced on March 16, 2004 that the parties entered into a temporary
letter agreement that expires on April 30, 2004 and provides that base
rent will continue to accrue at the rate of approximately $445,000 per
month, as set forth in the lease agreements. However, the base rent
payments due and payable on March 1, 2004 and April 1, 2004 were
reduced to approximately $360,000 per month. Additionally, the
company's subsidiary was allowed to utilize $200,000 of its security
deposit held with PMC to help fund these payments.
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When the temporary letter agreement expires on April 30, 2004, the
company's deferred portion of the base rent (approximately $170,000) will be
due, and the security deposit must be restored by $200,000 to its March 12, 2004
balance. The temporary agreement also provided for the gathering and sharing of
certain information regarding a possible restructuring of the lease.
"Resolving this issue is a top priority for us," said Herman. "We
currently are in a fact-exchanging stage and expect to move into further
negotiations. Of course, there can be no assurance of the outcome of such
negotiations and our efforts for a mutually beneficial restructuring of the
lease."
o STRENGTHENED THE BALANCE SHEET--During the year, the company used the
proceeds from the sale of 10 hotels to reduce the company's long-term
mortgage debt by $16.5 million. As of December 31, 2003, the company's
total mortgage debt and line of credit balance was $69.7 million, or
15.7 percent lower than the December 31, 2002 total balance of $82.6
million. The company expects to continue reducing its long-term
mortgage debt through Operation Sell.
o ENHANCED CENDANT FEES--"During the year, the AmeriHost Inn brand broke
through the 100-property barrier, a significant milestone," Herman
noted. The brand ended the year with 103 hotels, including opening the
first property in Canada. The number of AmeriHost Inns franchised by
companies other than Arlington increased to 46 properties in 2003, up
from 10 hotels at the end of 2000. As a result, Arlington's incentive
and royalty sharing fees rose 38 percent to $278,000 in the 2003 fourth
quarter and improved 65 percent to $972,000 for the year, compared to
the same 2002 periods.
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COMMON STOCK UPDATE
In the 2003 fourth quarter, the company completed a 1-for-100 reverse
stock split, which immediately was followed by a 100-for-1 forward split. The
shares of approximately 800 stockholders who owned less than 100 shares each, or
approximately 33,000 common shares in the aggregate, were redeemed by the
company, resulting in an approximate 40 percent reduction in our number of
shareholders. Shareholders owning 100 or more shares prior to the split were not
affected by this transaction.
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 million shares of its own
common stock under certain conditions. In 2003, the company purchased 36,800
shares under this authorization in addition to the reverse-forward spilt
purchases.
ABOUT ARLINGTON HOSPITALITY
Arlington Hospitality, Inc. is a hotel development and management
company that builds, operates and sells mid-market hotels. Arlington is the
nation's largest owner and franchisee of AmeriHost Inn hotels, a 103-property
mid-market, limited-service hotel brand owned and presently franchised in 22
states and Canada by Cendant Corporation (NYSE: CD). Currently, Arlington
Hospitality, Inc. owns or manages 62 properties in 16 states, including 55
AmeriHost Inn hotels, for a total of 4,511 rooms, with one additional AmeriHost
Inn & Suites hotels under construction.
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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 discussion of these factors,
see the Company's report on Form 10-K for the year ended December 31, 2003 under
the section headed "Management's Discussion and Analysis of Financial Condition
and Results of Operations-Risk Factors."
ARLINGTON HOSPITALITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<Table>
<Caption>
Three Months Ended December 31, Year Ended December 31,
------------------------------- -----------------------------
2003 2002 2003 2002
------------ ------------ ------------ ------------
Revenue:
Hotel Operations:
AmeriHost Inn hotels $ 8,569,402 $ 9,634,098 $ 39,823,522 $ 43,216,506
Other hotels 303,402 514,975 1,639,306 2,274,089
Development and construction 1,718,783 1,439,268 4,196,878 7,180,222
Hotel sales and commissions 3,756,685 5,116,763 22,831,102 10,017,080
Management services 92,865 194,161 445,862 957,801
Employee leasing 193,428 618,152 1,858,103 3,267,491
Incentive and royalty sharing fees 277,625 201,947 972,219 588,938
Office building rental and other 212,618 198,527 749,782 669,769
------------ ------------ ------------ ------------
15,124,808 17,917,890 72,516,774 68,171,896
------------ ------------ ------------ ------------
Operating costs and expenses:
Hotel operations:
AmeriHost Inn hotels 7,200,073 7,895,175 30,624,701 31,570,220
Other hotels 324,073 538,615 1,855,957 2,144,693
Development and construction 2,011,352 1,636,611 4,739,296 7,205,328
Hotel sales and commissions 3,549,398 4,630,779 19,328,404 8,159,459
Management services 74,706 210,193 280,383 714,648
Employee leasing 186,418 615,588 1,798,714 3,208,708
Office building rental and other 71,849 (60,161) 214,232 56,757
------------ ------------ ------------ ------------
13,417,869 15,466,800 58,841,687 53,059,813
------------ ------------ ------------ ------------
1,706,939 2,451,090 13,675,087 15,112,083
Depreciation and amortization 834,564 1,116,813 3,602,049 4,338,641
Leasehold rents - hotels 1,230,229 1,251,994 5,033,210 5,112,019
Corporate general and administrative 929,799 670,010 2,419,485 2,198,640
Hotel impairment adjustments 261,773 542,019 5,069,781 542,019
------------ ------------ ------------ ------------
Operating income (loss) (1,549,426) (1,129,746) (2,449,438) 2,920,764
------------ ------------ ------------ ------------
Other income (expense):
Interest expense (820,611) (1,001,245) (4,087,120) (4,762,527)
Interest income 117,092 79,987 467,538 489,747
Other income (expense) 65,222 237,616 (62,928) 329,959
Gain on sale of fixed assets -- -- 400,000 727,076
Equity in net income and (losses) of affiliates (312,293) (352,208) (724,575) (412,094)
------------ ------------ ------------ ------------
Income (loss) before minority interests
and income taxes (2,500,016) (2,165,596) (6,456,523) (707,094)
Minority interests in operations of
consolidated subsidiaries and partnerships (33,371) (30,104) (162,304) (121,088)
------------ ------------ ------------ ------------
Income (loss) before income taxes (2,533,387) (2,195,700) (6,618,827) (828,162)
Income tax benefit (expense) 841,000 736,000 2,456,000 172,000
------------ ------------ ------------ ------------
Net income (loss) from continuing operations (1,692,387) (1,459,700) (4,162,827) (656,162)
Discontinued operations, net of tax (168,125) (472,235) (1,455,753) (1,053,770)
------------ ------------ ------------ ------------
Net income (loss) $ (1,860,512) $ (1,931,935) $ (5,618,580) $ (1,709,932)
============ ============ ============ ============
Net income (loss) from continuing operations
per share-diluted $ (0.34) $ (0.29) $ (0.83) $ (0.13)
Net income (loss) per share-diluted $ (0.37) $ (0.39) $ (1.12) $ (0.34)
Weighted average common shares outstanding -
diluted 5,012,205 4,959,259 5,011,572 4,958,438
</Table>
ARLINGTON HOSPITALITY, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
<Table>
<Caption>
December 31, December 31,
2003 2002
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 3,623,550 $ 3,969,515
Accounts receivable 1,289,492 2,064,463
Notes receivable 146,000 100,000
Prepaid expenses and other current assets 1,142,032 975,432
Refundable income taxes 975,316 1,574,776
Costs and estimated earnings in excess of
billings on uncompleted contracts 1,232,481 1,479,101
Assets held for sale - other brands 10,603,160 --
Assets held for sale - AmeriHost hotels 28,162,442 --
------------ ------------
Total current assets 47,174,473 10,163,287
Investments in and advances to unconsolidated
hotel joint ventures 3,309,344 4,291,504
Property and equipment, net 39,553,879 99,611,340
Notes receivable, less current portion 867,500 782,083
Deferred income taxes 6,071,000 2,427,000
Other assets, net 2,737,217 2,658,500
------------ ------------
$ 99,713,413 $119,933,714
============ ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,768,402 $ 3,965,028
Bank line-of-credit 3,850,000 6,384,287
Accrued expenses and other current liabilities 3,781,341 4,771,000
Current portion of long-term debt 1,195,050 4,038,301
Liabilities of assets held for sale - other brands 9,585,492 --
Liabilities of assets held for sale - AmeriHost Inns 28,540,561 --
------------ ------------
Total current liabilities 49,720,846 19,158,616
Long-term debt, net of current portion 26,513,398 72,203,688
Deferred income 11,361,927 10,867,418
Minority interests 329,819 333,888
Shareholders' equity 11,787,423 17,370,104
------------ ------------
$ 99,713,413 $119,933,714
============ ============
</Table>