EXHIBIT 99.3
[ARLINGTON HOSPITALITY, INC. LOGO]
ARLINGTON HOSPITALITY, INC.
2355 South Arlington Heights Road - Suite 400 - 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 2004 FIRST QUARTER RESULTS
ARLINGTON HEIGHTS, Ill., May 17, 2004--Arlington Hospitality, Inc.
(Nasdaq/NM: HOST), a hotel development and management company, today announced
results for the first quarter ended March 31, 2004.
10-Q FILING AND RESULTS CONFERENCE CALL
The company intends to file its form 10-Q with the Securities and
Exchange Commission later today. 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 11:30 a.m. ET today, the company's senior management team will
conduct a conference call to review first quarter 2004 financial results,
followed by a question-and-answer period. Stockholders and other interested
parties may participate in the conference call by calling (800) 240-2430,
reference number 580293.
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FIRST QUARTER RESULTS
Revenues in the 2004 first quarter were down slightly to $17.4 million,
compared to $17.8 million in the same 2003 period, primarily reflecting the sale
of hotels during the past year, resulting in fewer hotels owned and operated by
the company.
Against the backdrop of what is generally regarded as the industry's
seasonally weakest demand period, the company reported a net loss for the 2004
first quarter of approximately $(1,575,000), or $(0.31) per share, compared to a
net loss of approximately $(1,483,000), or $(0.30) per share in the previous
year. These results include non-cash hotel impairment charges of $320,000
pre-tax $(192,000 after tax) and $100,000 pre-tax $(60,000 after tax) in the
2004 and 2003 first quarters, respectively. The first quarter 2004 and 2003
results also include net losses from discontinued operations of $(379,000) and
$(462,000), respectively, including additional impairment charges of $411,000
pre-tax $(246,000 after tax) in the first quarter of 2004, 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. 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. Exclusive of the
impairment charges, the company's results from discontinued operations improved
from a pretax loss of approximately $(769,000) in the first quarter of 2003, to
a pretax loss of approximately $(219,000) in 2004. "The $550,000 pretax,
pre-impairment improvement in discontinued operations reflects the disposition
of three non-strategic hotels in 2003 and strongly
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supports our divestment strategy for our non-AmeriHost Inn hotels," said Jerry
H. Herman, president and chief executive officer. "When taking into account this
improvement in discontinued operations, together with the effect of additional
non-cash impairment charges on certain AmeriHost Inn hotels, our results
improved considerably in the 2004 first quarter, compared to the same period
last year."
Corporate general and administrative expense increased to approximately
$867,000 during the three months ended March 31, 2004, from approximately
$448,000 during the three months ended March 31, 2003. This increase was
comprised primarily of professional fees incurred in connection with special
corporate level strategic projects, including the PMC lease restructuring as
discussed below, expenses incurred in connection with the company's previously
announced plan to add depth to the accounting and finance area, and an
adjustment for director restricted stock compensation.
Net income (loss), and its components, are summarized below for the
quarters ended March 31, 2004 and 2003:
(In thousands)
March 31, March 31,
2004 2003
----------- -----------
Net loss from continuing operations,
before impairment $(1,004,692) $ (960,363)
Impairment provision, net of tax (192,080) (60,000)
----------- -----------
Net loss from continuing operations (1,196,772) (1,020,363)
Discontinued operations, net of tax (378,634) (462,157)
----------- -----------
Net loss $(1,575,406) $(1,482,520)
=========== ===========
Net loss per share - Diluted:
From continuing operations $ (0.24) $ (0.20)
From discontinued operations (0.07) (0.10)
-----------------------------
$ (0.31) $ (0.30)
=============================
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During the quarter, Arlington reduced its long-term mortgage debt from
$65.2 million, as of December 31, 2003, to $60.7 million, as of March 31, 2004.
The reduction was primarily the result of 2004 first quarter hotel sales and
application of the proceeds to pay off the debt. The company has mortgage debt
of approximately $33.3 million related to hotels held for sale. The company
expects to pay off this debt as the hotels are sold.
Arlington's 2004 first quarter incentive and royalty-sharing revenues
improved 38 percent to approximately $283,000, compared to the same period in
2003. This improvement was a result of the amortization of a greater number of
development incentive fees received from Cendant in connection with the sale of
AmeriHost hotels, and the growing stream of royalty-sharing fees received from
Cendant as the brand expands.
During 2004, the company also amended (i) the partnership agreement for
a non-AmeriHost Inn hotel, and (ii) a lease agreement for another non-AmeriHost
Inn hotel. In the first transaction, the company renegotiated its hotel
joint-venture arrangement, under which the joint-venture partner agreed to fund
all future cash-flow needs of the hotel property, without any funding obligation
to Arlington, and without any dilution of ownership to Arlington. In addition,
as part of this transaction, management responsibilities were transferred from
an affiliate of Arlington to an affiliate of the joint-venture partner. In the
second transaction, in which the company is a lessee, the term on such hotel
lease was shortened from six years to a maximum of 18 months, and the annual
lease payments were significantly reduced through the end of the lease. The
company estimates that the transactions affecting these two joint ventures will
save over $250,000 in cash flow annually.
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AMERIHOST INN ROOM REVENUE
During the first quarter of 2004, same-room revenue per available room
(RevPAR) for the company's AmeriHost Inn hotels improved 2.3 percent to $26.95,
compared to the same period last year. The comparable midscale without food and
beverage segment, according to Smith Travel Research, rose 6.3 percent for the
2004 first quarter.
One Month Three Months
Ended Ended
March 31 March 31
-------- --------
Occupancy - 2004 54.8% 48.5%
Occupancy - 2003 54.2% 48.9%
Increase (decrease) 1.1% (0.8%)
Average Daily Rate - 2004 $55.42 $55.60
Average Daily Rate - 2003 $54.70 $54.48
Increase (decrease) 1.3% 2.1%
RevPAR - 2004 $30.38 $26.95
RevPAR - 2003 $29.65 $26.66
Increase (decrease) 2.6% 2.3%
"Many of our hotels are located in the Midwest, an area which is
recovering more slowly than the economy as a whole," Herman said. "For example
in the first quarter the hotel industry in the aggregate in Illinois, Michigan
and Ohio had significantly lower improvements in RevPAR, compared to a 6.3
percent improvement for the mid-market without food and beverage segment
nationwide. We are encouraged to see a positive increase in both average rate
and occupancy across our system, and are beginning to reap the benefits from a
number of our newly enacted sales initiatives."
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Last week, the company reported a significant increase in same room
RevPAR comparisons for the month of April. Herman said that the revenue results
from April point to it being a "breakthrough" month for the company. "For the
first time in more than three years, we saw a noticeable increase in mid-week
business travel," he said. "It is encouraging to see RevPAR increase 6.8 percent
in April.
"Equally as important is that we are increasing our share of the market
over our competitors. We gained market share in the 2003 fourth quarter,
finishing the year with a market share of 97.3, according to Smith Travel
Research. That trend continued in the first quarter, partially as a result of
our new sales and marketing initiatives, as our share rose to 99.2, compared to
the competition."
LINE OF CREDIT RENEWED
In late April, the company completed a one-year renewal of its line of
credit with LaSalle Bank NA through April 30, 2005. The line has a maximum
availability of $4.0 million at a 10 percent annual interest rate. The maximum
availability will step down to $3.5 million on February 28, 2005.
"We now are moving into a development mode focus, and will seek
longer-term financing that will better align with the development and sales
cycle," Herman said. "We are in discussions with an investment advisor, whom we
expect to engage shortly, to determine how to best structure our future
financing needs."
PMC LEASE RESTRUCTURING UPDATE
As previously announced, the company entered into a temporary letter
agreement with PMC Commercial Trust (PMC) (AMEX: PCC), which recently was
extended through May 2004. The
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temporary letter agreement deferred a portion of the March, April and May base
rent, providing for reduced payments, from approximately $445,000 to
approximately $360,000, per month. In addition, the company was able to use
$200,000 of the security deposit to partially fund the payments. The deferred
portion of the March, April and May 2004 rent payments of approximately
$264,000, plus the $200,000 required to restore the security deposit to its
March 12, 2004 balance, will be payable to PMC in four equal monthly payments,
beginning June 1, 2004.
"Our objective is to restructure the leases in order to reduce our
monthly base rent payments, improve cash flow, and to provide for the orderly
sale of all 21 of the leased hotels over a period of time," Herman said. "The
temporary letter agreement also provides for the gathering and sharing of
certain hotel and financial information about the company's operations. Our
discussions are progressing in a timely fashion; however, there still are a
number of issues that need to be resolved."
While the objective of the current discussions is to reach an agreement
prior to the expiration of the temporary letter agreement, as extended, there
can be no assurances that the leases will be restructured on terms and
conditions acceptable to the company and its subsidiary, if at all, or that a
restructuring will improve operations and cash flow, or provide for the sale of
the hotels to third-party operators.
DISPOSITION PROGRAM UPDATE
The company sold two AmeriHost Inn hotels in the 2004 first quarter,
bringing to eight the number of hotels sold as part of the company's previously
announced plan to dispose of 25 to 30 hotels over a two-year period. The hotels,
located in Upper Sandusky, Ohio and Redding, Calif.,
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were sold for $7.1 million in gross proceeds. Since the program's inception, the
company has generated gross proceeds of approximately $23.3 million and paid
down a total of approximately $14.1 million in debt.
The company's hotel assets designated for sale within the next 12
months have been classified as "held for sale" on the accompanying balance sheet
as of March 31, 2004. The operations of the non-AmeriHost Inn hotels to be sold
have been reclassified from the company's continuing operations and presented as
"discontinued operations" in the consolidated statements of operations.
"Our pipeline is quite active, and we currently have six hotels under
contract and are well along on negotiations on a number of other hotels," Herman
said. "We are currently seeing considerably more interest in our hotels, as the
potential buyers seek to take advantage of the seasonally stronger summer
months, as well as the improving economy and hotel industry fundamentals."
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.
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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.
DEVELOPMENT PROGRAM UPDATE
Shortly after the close of the 2004 first quarter, Arlington opened a
new, 79-room hotel in Weirton, W. Va. The company also is evaluating several
properties in the Midwest and California for use of its new 80- to 90-room hotel
prototype design, which was created for larger markets.
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 104-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 63 properties in 15 states, including 55
AmeriHost Inn hotels, for a total of 4,590 rooms, with additional AmeriHost Inn
& Suites hotels under development.
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" as they may be updated in the
company's subsequent SEC filings.
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ARLINGTON HOSPITALITY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
================================================================================
March 31, December 31,
2004 2003
----------- ------------
(unaudited)
ASSETS
Current assets:
Cash and cash equivalents $ 4,972,805 $ 3,623,550
Accounts receivable, less an allowance of $76,500
at March 31, 2004 and December 31, 2003 (including
approximately $975,000 and $382,000 from related parties) 2,255,281 1,289,492
Notes receivable, current portion - 146,000
Prepaid expenses and other current assets 664,635 1,142,032
Refundable income taxes 228,197 975,316
Costs and estimated earnings in excess of billings on
uncompleted contracts 142,766 1,232,481
Assets held for sale - other brands 10,276,601 10,603,160
Assets held for sale - AmeriHost Inn hotels 22,351,372 28,162,442
----------- -----------
Total current assets 40,891,659 47,174,473
----------- -----------
Investments in and advances to unconsolidated
hotel joint ventures 3,215,243 3,309,344
----------- -----------
Property and equipment:
Land 5,735,489 5,735,489
Buildings 31,177,381 31,174,776
Furniture, fixtures and equipment 13,394,351 13,176,842
Construction in progress 319,711 312,925
Leasehold improvements 2,396,689 2,396,689
----------- -----------
53,023,621 52,796,721
Less accumulated depreciation and amortization 14,033,627 13,242,842
----------- -----------
38,989,994 39,553,879
----------- -----------
Notes receivable, less current portion 966,042 867,500
Deferred income taxes 7,121,423 6,071,000
Other assets, net of accumulated amortization of
approximately $1,066,000 and $1,311,000 2,529,389 2,737,217
----------- -----------
10,616,854 9,675,717
----------- -----------
$93,713,748 $99,713,413
=========== ===========
ARLINGTON HOSPITALITY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
================================================================================
March 31, December 31,
2004 2003
------------ ------------
(unaudited)
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,499,428 $ 2,768,402
Bank line-of-credit 4,000,000 3,850,000
Accrued payroll and related expenses 380,709 393,815
Accrued real estate and other taxes 1,992,265 1,980,015
Other accrued expenses and current liabilities 1,585,082 1,407,511
Current portion of long-term debt 1,195,050 1,195,050
Liabilities of assets held for sale - other brands 9,396,312 9,585,492
Liabilities of assets held for sale - AmeriHost Inns 24,442,718 28,540,561
------------ ------------
Total current liabilities 45,491,564 49,720,846
------------ ------------
Long-term debt, net of current portion 26,250,445 26,513,398
------------ ------------
Deferred income 11,405,455 11,361,927
------------ ------------
Commitments and contingencies
Minority interests 183,122 329,819
------------ ------------
Shareholders' equity:
Preferred stock, no par value; authorized 100,000 shares;
none issued - -
Common stock, $.005 par value; authorized at 25,000,000 shares;
issued and outstanding 5,038,174 shares at March 31, 2004,
and 4,994,956 shares at December 31, 2003 25,191 24,975
Additional paid-in capital 13,391,231 13,220,302
Retained earnings (deficit) (2,596,385) (1,020,979)
------------ ------------
10,820,037 12,224,298
Less:
Stock subscriptions receivable (436,875) (436,875)
------------ ------------
Total shareholders' equity 10,383,162 11,787,423
------------ ------------
$ 93,713,748 $ 99,713,413
============ ============
ARLINGTON HOSPITALITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
================================================================================
Revenue:
2004 2003
------------ ------------
Hotel operations:
AmeriHost Inn hotels $ 7,819,524 $ 8,522,509
Other hotels 370,710 336,835
Development and construction 1,200,654 1,479,978
Hotel sales and commissions 6,839,249 6,443,290
Management services 100,622 111,154
Employee leasing 562,276 517,407
Incentive and royalty sharing 283,408 205,655
Office building rental 173,907 177,228
------------ ------------
$ 17,350,350 $ 17,794,056
------------ ------------
Operating costs and expenses:
Hotel operations:
AmeriHost Inn hotels 7,029,163 7,664,409
Other hotels 439,049 450,089
Development and construction 1,480,392 1,592,127
Hotel sales and commissions 5,543,601 5,240,817
Management services 90,381 64,933
Employee leasing 545,130 501,922
Office building rental 41,112 49,552
------------ ------------
15,168,828 15,563,849
------------ ------------
2,181,522 2,230,207
Depreciation and amortization 863,610 1,034,035
Leasehold rents - hotels 1,256,545 1,270,127
Corporate general and administrative 867,227 447,831
Impairment provision 320,133 100,000
------------ ------------
Operating loss (1,125,993) (621,786)
Other income (expense):
Interest expense (974,874) (1,095,394)
Interest income 125,938 119,959
Other income (expense) 20,135 (1,333)
Equity in net income and (losses) from
unconsolidated joint ventures (6,166) (74,446)
------------ ------------
Loss before minority interests and income taxes (1,960,960) (1,673,000)
Minority interests in operations of consolidated joint ventures 33,812 28,363
------------ ------------
Loss before income tax (1,994,772) (1,701,363)
Income tax benefit 798,000 681,000
------------ ------------
Net loss from continuing operations (1,196,772) (1,020,363)
Discontinued operations, net of tax (378,634) (462,157)
------------ ------------
Net loss $ (1,575,406) $ (1,482,520)
============ ============
Net loss from continuing operations per share:
Basic $ (0.24) $ (0.20)
Diluted $ (0.24) $ (0.20)
Net loss per share:
Basic $ (0.31) $ (0.30)
Diluted $ (0.31) $ (0.30)