EXHIBIT 99.3
[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 2004 SECOND QUARTER RESULTS
ARLINGTON HEIGHTS, Ill., August 13, 2004--Arlington Hospitality, Inc.
(Nasdaq/NM: HOST), a hotel development and management company, today announced
results for the second quarter ended June 30, 2004.
10-Q FILING AND RESULTS CONFERENCE CALL
The company expects 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 available shortly on the
company's Web site, www.arlingtonhospitality.com.
At 11 a.m. ET today, the company's senior management team will conduct
a conference call to review second 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
11005111.
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SECOND QUARTER RESULTS
Revenues in the 2004 second quarter improved 21 percent to $18.6
million, compared to $15.3 million in the year-earlier period. The increase was
the result of the sale of four AmeriHost Inn hotels during the second quarter of
2004, versus one in the prior year second quarter, and an increase in incentive
and royalty-sharing fees, partially offset by a decrease in hotel operating
revenue as a result of the decrease in hotels owned and operated by the company.
Net income for the 2004 second quarter was approximately $55,000, or
$0.01 per share, compared to a net loss of approximately $(3.4), million or
$(0.67) per share in the 2003 second quarter. These results include non-cash
hotel impairment charges of $125,000 pre-tax ($75,000 after tax) and $4.6
million pre-tax ($2.7 million after tax) in the second quarter of 2004 and 2003,
respectively. The results also include net losses from discontinued operations
of $(395,000) and $(826,000), in the second quarter of 2004 and 2003,
respectively, including additional impairment charges of $531,000 pre-tax
($319,000 after tax) in the 2004 second quarter, and $862,000 pre-tax ($517,000
after tax) in the second quarter of 2003, related to the non-AmeriHost hotels
classified as discontinued operations.
The non-cash hotel impairment charges have been recorded primarily in
connection with the company's previously announced plan to dispose of 25 to 35
hotels over a two-year period. The additional impairment charges recorded
subsequent to the initial adoption of this plan in 2003 are the result of the
continuous evaluation of current market conditions and other hotel-specific
factors. Discontinued operations relates to the operations of the non-AmeriHost
Inn hotels disposed of, or expected to be disposed of within the next 12 months,
which have been
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reclassified from continuing operations, and includes the non-cash impairment
charges related to those hotels. Discontinued operations also includes
incremental accelerated depreciation of approximately $229,000 and $457,000 in
the second quarter and first six months of 2004, respectively, which was
recorded in connection with a lease modification on one non-AmeriHost Inn hotel
executed in 2004 that accelerated the termination date to November 2005, or
earlier under certain conditions.
Exclusive of the impairment charges and the accelerated depreciation,
the company's results from discontinued operations improved from a pretax loss
of approximately $(1.5) million in the first six months of 2003, to a pretax
loss of approximately $(330,000) in the first six months of 2004. "The
approximate $1.1 million improvement in discontinued operations for the
six-month period underscores the initial success of our divestment strategy for
our non-AmeriHost Inn hotels, which is a critical part of our overall
disposition program," said Jerry H. Herman, president and chief executive
officer. We sold one additional non-AmeriHost Inn hotel thus far in the third
quarter of 2004, and there is another under contract for sale."
Corporate general and administrative expense increased to approximately
$713,000 in the second quarter of 2004, from approximately $515,000 during the
three months ended June 30, 2003. This increase was due primarily to
professional fees incurred in connection with several special corporate
strategic projects, including the addition of depth in the senior accounting and
finance area, and the engagement of an investment banking firm to review the
company's business plan and related strategies.
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Net income (loss), and its components, is summarized below for the
quarters ended June 30, 2004 and 2003:
Three Months Ended June 30, Six Months Ended June 30,
---------------------------- ----------------------------
2004 2003 2004 2003
----------- ----------- ----------- -----------
Net income (loss) from continuing
operations, before impairment $ 525,313 $ 206,597 $ (215,347) $ (646,409)
Impairment provision, net of tax (75,183) (2,738,707) (267,263) (2,798,707)
----------- ----------- ----------- -----------
Net income (loss) from continuing
operations 450,130 (2,532,110) (482,610) (3,445,116)
Discontinued operations (395,285) (825,676) (1,037,951) (1,395,190)
----------- ----------- ----------- -----------
Net income (loss) $ 54,845 $(3,357,786) $(1,520,561) $(4,840,306)
=========== =========== =========== ===========
Net income (loss) per share - Diluted:
From continuing operations $ 0.09 $ (0.51) $ (0.10) $ (0.69)
From discontinued operations (0.08) (0.16) (0.20) (0.28)
----------- ----------- ----------- -----------
$ 0.01 $ (0.67) $ (0.30) $ (0.97)
=========== =========== =========== ===========
During the 2004 second quarter, Arlington paid off $6.7 million and
$10.5 million of mortgage debt in connection with the sale of hotels for the
second quarter and six months ended June 30, 2004, respectively. Total hotel
mortgage debt was $48.5 million as of June 30, 2004, compared to $60.1 million
as of December 31, 2003. The company has mortgage debt of approximately $29.2
million related to hotels held for sale. The company expects to pay off this
debt as the hotels are sold.
Second quarter 2004 incentive and royalty-sharing revenues improved 42
percent to approximately $317,000, compared to the like period a year earlier.
This improvement was a result of the amortization of a greater number of
development incentive fees received from Cendant Corporation ("Cendant") (NYSE:
CD) in connection with the sale of AmeriHost hotels,
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and the growing stream of royalty-sharing fees received from Cendant as the
AmeriHost Inn brand expands.
AMERIHOST INN ROOM REVENUE
In the 2004 second quarter, same-room revenue per available room
(RevPAR) for the company's 55 AmeriHost Inn hotels improved 5.0 percent to
$35.56, compared to the same period in 2003. The comparable midscale without
food and beverage segment, according to Smith Travel Research, rose 6.7 percent
for the 2004 second quarter.
Three Months Six Months Twelve Months
Ended Ended Ended
June 30 June 30 June 30
------- ------- -------
Occupancy - 2004 62.0% 55.2% 56.7%
Occupancy - 2003 59.1% 54.0% 56.0%
Increase (decrease) 4.9% 2.2% 1.3%
Average Daily Rate - 2004 $57.34 $56.57 $57.25
Average Daily Rate - 2003 $57.31 $56.03 $56.92
Increase (decrease) 0.1% 1.0% 0.6%
RevPAR - 2004 $35.56 $31.23 $32.44
RevPAR - 2003 $33.88 $30.26 $31.87
Increase (decrease) 5.0% 3.8% 2.0%
"The Midwest, where most of our hotels are located, continues to
recover at a slower pace than the nation as a whole," Herman noted. "Despite
this slow recovery, we are gaining market share over our competitors. Our
AmeriHost Inn hotels finished 2003 with a RevPAR market share index of 97.3,
according to Smith Travel Research. Our AmeriHost Inn
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hotel RevPAR index improved to 99.2 in the first quarter, and reached 100.0 for
the six months ended June 30, 2004."
PMC LEASE RESTRUCTURING UPDATE
A subsidiary of the company extended its temporary letter agreement
with PMC Commercial Trust ("PMC") (AMEX: PCC) through August 31, 2004, as part
of its on-going discussions to restructure its leases with PMC and to allow for
the sale of the hotels to third parties. The temporary letter agreement deferred
a portion of the base rent from March through July, which reduced the monthly
payments from approximately $445,000 to approximately $360,000. In addition, the
company was able to use $200,000 of its security deposit held with PMC to
partially fund the payments. The company paid the full base rent of
approximately $445,000 for the month of August 2004. Upon the expiration of the
temporary letter agreement on August 31, 2004, the deferred portion of the base
rent (approximately $434,000) plus the $200,000 needed to restore the security
deposit to its March 12, 2004 balance will be payable to PMC in four equal
monthly installments beginning September 1, 2004.
Herman continued, "Our goal remains to restructure these leases and
thereby reduce our monthly base rent payments and improve cash flow. In
addition, our objective is to terminate the 21 hotel leases through the sale of
all of the leased hotels over a period of a few years."
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,
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if at all, or that a restructuring will improve operations and cash flow, or
allow for the sale of the hotels to third-party operators.
STRATEGIC ADVISOR ENGAGED
In July, Arlington announced that Houlihan Lokey Howard & Zukin is
providing investment banking services, including a review of Arlington's
business plan and related strategies, for the purpose of assisting the company
in optimally structuring and obtaining new debt or equity financing, as needed.
However, there can be no assurance as to the availability and form of such
financing, and whether this financing will be on terms acceptable to the
company.
DISPOSITION PROGRAM
In the 2004 second quarter, Arlington sold four wholly owned AmeriHost
Inn hotels for total gross proceeds to the company of $7.6 million. The company
paid down approximately $6.7 million in debt from the proceeds. Additionally,
the company facilitated the sale of one unconsolidated non-AmeriHost Inn owned
by a joint venture in which the company is a partner.
In July, the company sold one wholly owned non-AmeriHost Inn hotel.
Since the company announced its plan to dispose of 25 to 30 hotels in July 2003,
the company has sold 14 hotels. "We currently have five additional hotels under
sale contracts, and the pipeline remains active," Herman said. "We remain on
schedule with the pace of our Operation Sell program, and we hope that a
recovering economy and improving lodging industry fundamentals will further
assist us in achieving our Operation Sell goals."
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Since the beginning of 2003, the company has disposed of five of its 10
non-AmeriHost Inn hotels to date, including the hotel sold in July, which have
been classified as discontinued operations.
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 June 30, 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.
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 847-228-5401, extension 312, or e-mailing
stevem@arlingtonhospitality.com.
DEVELOPMENT PROGRAM UPDATE
Arlington opened a new, 79-room hotel in Weirton, W. Va., during the
second quarter for a joint venture in which the company holds a minority
ownership interest position. The company
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has secured a land parcel in Lansing, Mich. and is finalizing its arrangements
with a joint venture to build an 82-room AmeriHost Inn on this site. The company
expects to break ground on this site within 60 days, pending final permitting
approvals. The company also has four additional sites in California and Virginia
under agreement, pending completion of due diligence and the arrangement of both
debt and equity financing. The company anticipates that all of the future
development projects will feature the new 80- to 90-room hotel prototype design,
which was created for larger markets. However, there can be no assurances that
any of these transactions will be completed as contemplated.
INDUSTRY GOVERNANCE RECOGNITION
During the quarter, Arlington was honored as having the lodging
industry's top performing board of directors for the year 2003 by HVS Executive
Search, a division of HVS International. The award is presented each year to the
board of directors that is most effective in leading a public lodging company.
The ranking is based on a corporate governance model that compares board makeup,
independence, committee structure, conflicts of interest and a commitment to
pay-for-performance. "Our board has a firm commitment to good governance and
will continue to have open communications with our shareholders and the
investment community," commented Kenneth M. Fell, chairman of the board of
directors.
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 105-property,
mid-market, limited-service hotel brand owned and
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presently franchised in 20 states and Canada by Cendant Corporation (NYSE: CD).
Currently, Arlington Hospitality, Inc. owns or manages 57 properties in 15
states, including 52 AmeriHost Inn hotels, for a total of 4,157 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 and
report on Form 10-Q for the three months ended March 31, 2004 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
================================================================================
June 30, December 31,
2004 2003
(Unaudited)
----------- ------------
ASSETS
Current assets:
Cash and cash equivalents $ 3,998,318 $ 3,623,550
Accounts receivable, less an allowance of $76,500
at June 30, 2004 and December 31, 2003 (including
approximately $371,000 and $382,000 from related parties) 2,011,205 1,289,492
Notes receivable, current portion 116,042 146,000
Prepaid expenses and other current assets 568,755 1,142,032
Refundable income taxes 226,792 975,316
Costs and estimated earnings in excess of billings on
uncompleted contracts 327,349 1,232,481
Assets held for sale - other brands 11,442,589 10,603,160
Assets held for sale - AmeriHost Inn hotels 21,651,810 28,162,442
----------- -----------
Total current assets 40,342,860 47,174,473
----------- -----------
Investments in and advances to unconsolidated
hotel joint ventures 2,953,165 3,309,344
----------- -----------
Property and equipment:
Land 5,972,227 5,735,489
Buildings 28,694,754 31,174,776
Furniture, fixtures and equipment 10,516,445 13,176,842
Construction in progress 320,701 312,925
Leasehold improvements 115,239 2,396,689
----------- -----------
45,619,366 52,796,721
Less accumulated depreciation and amortization 11,602,986 13,242,842
----------- -----------
34,016,380 39,553,879
----------- -----------
Notes receivable, less current portion 800,000 867,500
Deferred income taxes 7,085,644 6,071,000
Other assets, net of accumulated amortization of
approximately $580,000 and $633,000 2,263,670 2,737,217
----------- -----------
10,149,314 9,675,717
----------- -----------
$87,461,719 $99,713,413
=========== ===========
ARLINGTON HOSPITALITY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
================================================================================
June 30, December 31,
2004 2003
(Unaudited)
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,336,694 $ 2,768,402
Bank line-of-credit 3,250,000 3,850,000
Accrued payroll and related expenses 64,743 393,815
Accrued real estate and other taxes 2,161,198 1,980,015
Other accrued expenses and current liabilities 915,088 1,407,511
Current portion of long-term debt 1,089,350 1,195,050
Liabilities of assets held for sale - other brands 9,430,953 9,585,492
Liabilities of assets held for sale - AmeriHost Inns 23,040,649 28,540,561
------------ ------------
Total current liabilities 42,288,675 49,720,846
------------ ------------
Long-term debt, net of current portion 23,183,922 26,513,398
------------ ------------
Deferred income 11,313,699 11,361,927
------------ ------------
Commitments and contingencies (Note 13)
Minority interests 237,320 329,819
------------ ------------
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 June 30, 2004,
and 4,994,956 shares at December 31, 2003 25,191 24,975
Additional paid-in capital 13,391,327 13,220,302
Retained earnings (deficit) (2,541,540) (1,020,979)
------------ ------------
10,874,978 12,224,298
Less:
Stock subscriptions receivable (436,875) (436,875)
------------ ------------
Total shareholders' equity 10,438,103 11,787,423
------------ ------------
$ 87,461,719 $ 99,713,413
============ ============
ARLINGTON HOSPITALITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
================================================================================
Three Months Ended June 30, Six Months Ended June 30,
------------------------------ ------------------------------
2004 2003 2004 2003
------------ ------------ ------------ ------------
Revenue:
AmeriHost Inn hotel operations $ 9,592,000 $ 11,044,545 $ 17,411,524 $ 19,567,054
Development and construction 390,031 617,283 1,590,686 2,097,261
Hotel sales 7,437,957 2,590,457 14,277,205 9,033,747
Management services 102,204 117,301 202,826 228,455
Employee leasing 560,884 541,275 1,123,159 1,058,682
Incentive and royalty sharing 317,006 223,994 600,414 429,649
Office building rental 175,387 178,995 349,294 356,223
------------ ------------ ------------ ------------
18,575,469 15,313,850 35,555,108 32,771,071
------------ ------------ ------------ ------------
Operating costs and expenses:
AmeriHost Inn hotel operations 7,101,402 7,761,903 14,130,129 15,485,921
Development and construction 641,592 544,350 2,121,984 2,136,477
Hotel sales 6,080,327 2,093,614 11,623,928 7,334,431
Management services 25,330 74,826 115,712 139,759
Employee leasing 524,785 524,792 1,069,915 1,026,714
Office building rental 34,849 46,865 75,960 96,417
------------ ------------ ------------ ------------
14,408,285 11,046,350 29,137,628 26,219,719
------------ ------------ ------------ ------------
4,167,184 4,267,500 6,417,480 6,551,352
Depreciation and amortization 514,325 956,387 1,066,656 1,914,710
Leasehold rents - hotels 1,196,545 1,219,127 2,393,090 2,438,254
Corporate general and administrative 712,582 515,006 1,579,809 962,837
Impairment provision 125,305 4,564,512 445,439 4,664,512
------------ ------------ ------------ ------------
Operating income (loss) 1,618,427 (2,987,532) 932,486 (3,428,961)
Other income (expense):
Interest expense (841,381) (1,144,709) (1,816,255) (2,240,103)
Interest income 104,028 120,922 229,966 240,881
Other income (expense) (94,470) 43,353 (74,335) 42,021
Equity in net income and (losses)
of unconsolidated joint ventures 17,026 (199,815) 10,861 (274,262)
------------ ------------ ------------ ------------
Income (loss) before minority
interests and income taxes 803,630 (4,167,781) (717,277) (5,660,424)
Minority interests in operations of
consolidated joint ventures (54,198) (53,329) (88,010) (81,692)
------------ ------------ ------------ ------------
Income (loss) before income taxes 749,432 (4,221,110) (805,287) (5,742,116)
Income tax (expense) benefit (299,302) 1,689,000 322,677 2,297,000
------------ ------------ ------------ ------------
Net income (loss) from continuing
operations 450,130 (2,532,110) (482,610) (3,445,116)
Discontinued operations, net of tax (395,285) (825,676) (1,037,951) (1,395,190)
------------ ------------ ------------ ------------
Net income (loss) $ 54,845 $ (3,357,786) $ (1,520,561) $ (4,840,306)
============ ============ ============ ============
Net income (loss) from continuing operations per share:
Basic $ 0.09 $ (0.51) $ (0.10) $ (0.69)
Diluted $ 0.09 $ (0.51) $ (0.10) $ (0.69)
Net income (loss) per share:
Basic $ 0.01 $ (0.67) $ (0.30) $ (0.97)
Diluted $ 0.01 $ (0.67) $ (0.30) $ (0.97)