EXHIBIT 99.1
[ARLINGTON HOSPITALITY 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 2004 THIRD QUARTER RESULTS
SELLS TWO HOTELS, MOVES FORWARD WITH NEW AMERIHOST IN LARGER MARKETS
ARLINGTON HEIGHTS, Ill., November 15, 2004--Arlington Hospitality, Inc.
(Nasdaq/NM: HOST), a hotel development and management company, today announced
results for the third quarter ended September 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 11:30 a.m. ET tomorrow, November 16, 2004, the company's senior
management team will conduct a conference call to review third 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 11015250.
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THIRD QUARTER RESULTS
For the 2004 third quarter, revenues decreased approximately $8.5
million to $14.8 million, compared to the year-earlier period. The timing of
hotel sales had a significant impact on revenues and operating income for the
third quarter of 2004 compared to the same period in 2003. The company sold two
hotels in the 2004 third quarter at a lower aggregate price than the aggregate
price of three properties sold in the 2003 third quarter. In addition to the
impact of the timing of hotel sales, the company reported lower hotel operating
revenues due to a reduction in the number of consolidated AmeriHost Inn hotels
as a result of the sale of 11 such hotels over the last 12 months. These
decreases were partially offset by an increase in incentive and royalty-sharing
fees.
Net income (loss), and its components, is summarized below for the
three and nine months ended September 30, 2004 and 2003:
<Table>
<Caption>
Three Months Ended September 30, Nine months ended September 30,
2004 2003 2004 2003
----------- ----------- ----------- -----------
Net income (loss) from continuing
operations, before impairment $ (106,578) $ 1,358,708 $ (327,675) $ 712,104
Impairment provision, net of tax (297,876) (84,496) (559,390) (2,883,008)
----------- ----------- ----------- -----------
Net income (loss) from continuing
operations (404,454) 1,274,212 (887,065) (2,170,904)
Discontinued operations (121,679) (191,974) (1,159,629) (1,587,164)
----------- ----------- ----------- -----------
Net income (loss) $ (526,133) $ 1,082,238 $(2,046,694) $(3,758,068)
=========== =========== =========== ===========
Net loss per share - Diluted:
From continuing operations $ (0.08) $ 0.25 $ (0.18) $ (0.43)
From discontinued operations (0.02) (0.03) (0.23) (0.31)
----------- ----------- ----------- -----------
$ (0.10) $ 0.22 $ (0.41) $ (0.74)
=========== =========== =========== ===========
</Table>
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Net loss for the 2004 third quarter was approximately ($526,000), or
($0.10) per share, compared to net income of approximately $1.1 million, or
$0.22 per share, in the 2003 third quarter. The decline was due primarily to an
approximate $1.6 million decrease in operating income from the sale of
consolidated AmeriHost Inn hotels, as a result of the specific hotels sold and
the timing of the sale of these hotels, as discussed above. In addition, certain
professional fees, reported as corporate general and administrative expenses,
were incurred as a result of substantial legal and financial advisory services
involving the company's strategic initiatives and business plan, including
alternatives relating to the previously announced PMC lease modification
consummated on October 4, 2004. These results also include non-cash hotel
impairment charges of approximately $435,000 pre-tax ($298,000 after tax) and
approximately $143,000 pre-tax ($84,000 after tax) in the third quarter of 2004
and 2003, respectively. Furthermore, the results also include net losses from
discontinued operations of approximately ($122,000) and ($192,000), in the third
quarter of 2004 and 2003, respectively. The 2003 third quarter includes
impairment charges of approximately $31,000 pre-tax ($19,000 after tax), 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. 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 reclassified from continuing operations, and includes the
non-cash impairment charges related to those hotels. Discontinued operations
also includes incremental depreciation of approximately
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$216,000 and $647,000 in the 2004 third quarter and first nine months of 2004,
respectively, which was recorded in connection with a lease modification on one
non-AmeriHost Inn hotel executed in the first quarter of 2004 that accelerated
the termination date of the lease to November 2005, or earlier under certain
conditions.
Arlington paid off approximately $8.7 million and $19.1 million of
mortgage debt in connection with the sale of hotels during the 2004 third
quarter and nine month period, respectively. Total hotel mortgage debt was
approximately $41.7 million as of September 30, 2004, compared to $60.1 million
on December 31, 2003.
Third quarter 2004 incentive and royalty-sharing revenues improved 42
percent to approximately $376,000, 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, and the growing stream of
royalty-sharing fees received from Cendant as the number of non-Arlington owned
AmeriHost Inn franchisees expands.
PMC LEASE RESTRUCTURED OCTOBER 4, 2004
Arlington modified its leases on 20 hotels owned by PMC Commercial
Trust ("PMC") (AMEX: PCC) shortly after the close of the 2004 third quarter. The
new arrangement reduces the monthly cash lease payments and provides for an
accelerated exit strategy, consistent with the company's strategic business plan
to divest many of its existing hotels and increase focus on development of
larger hotels in secondary markets. Key provisions of the modified lease, which
became effective October 1, 2004 include:
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o An immediate 19 percent reduction in monthly cash lease
payments for the 20 hotels, at an approximate $1.0 million
annual savings to Arlington.
o The early termination of the leases upon the sale of all 20
leased AmeriHost Inns to third parties over the next four
years, compared to the original 2013 and 2014 lease
termination dates.
"This restructuring is a major milestone for Arlington," said Herman.
"It allows us to convert an unfavorable long-term lease to more favorable terms,
while creating an orderly exit strategy. We believe these modifications will
reduce our former aggregate lease payment obligation through 2014 from
approximately $47.2 million to an estimated aggregate of $10.0 million to $12.0
million, plus a shortfall obligation of approximately $8.0 million to $9.5
million, depending on the ultimate timing and pricing of the hotel sales. Our
intention is to sell these hotels as AmeriHost Inn hotels, thereby mitigating
any shortfall obligation with the incentives received from the Cendant
agreement. We expect to receive incentive fees from Cendant of approximately
$3.0 to $4.0 million from the sale of the 20 leased hotels, and to utilize these
fees to reduce the anticipated shortfall obligation to approximately $4.0 to
$6.5 million. This modification was critical in positioning the company for
future growth."
DISCONTINUED OPERATIONS LOSSES REDUCED SIGNIFICANTLY
The company continues to aggressively work to reduce losses from
discontinued operations. Exclusive of impairment charges, incremental
depreciation, and a franchise termination fee accrual, the company's losses from
discontinued operations were reduced significantly from a pretax loss of
approximately ($1.9) million in the first nine months of 2003, to a pretax loss
of approximately ($243,000) in the first nine months of 2004. "We continue to
make solid inroads in reducing losses from the non-strategic, non-AmeriHost Inn
hotels,
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primarily through the sale of these assets," said James B. Dale, chief financial
officer. "We sold two wholly owned, non-AmeriHost Inns during the 2004 third
quarter and in November 2004, we sold our joint venture ownership interest in
one additional non-AmeriHost Inn, reducing our non-AmeriHost Inn properties to
three, all of which are for sale."
AMERIHOST INN OPERATIONS
Same-room revenue per available room (RevPAR) in the 2004 third
quarter, for the company's 48 AmeriHost Inn hotels improved 0.5 percent to
$38.13, compared to the same period in 2003. The comparable midscale hotel,
without food and beverage, segment in the United States, according to Smith
Travel Research, rose 6.6 percent for the 2004 third quarter. RevPAR for the
company's AmeriHost Inn hotels began to regain momentum in September 2004, up
5.9 percent.
<Table>
<Caption>
Three Months Nine Months Twelve Months
Ended Ended Ended
September 30 September 30 September 30
------------ ------------ ------------
Occupancy - 2004 63.7% 57.9% 56.2%
Occupancy - 2003 64.0% 57.2% 55.6%
Increase (decrease) (0.5%) 1.2% 1.1%
Average Daily Rate - 2004 $ 59.88 $ 57.73 $ 57.44
Average Daily Rate - 2003 $ 59.26 $ 57.18 $ 56.94
Increase (decrease) 1.0% 1.0% 0.9%
RevPAR - 2004 $ 38.13 $ 33.42 $ 32.31
RevPAR - 2003 $ 37.95 $ 32.72 $ 31.69
Increase (decrease) 0.5% 2.6% 2.3%
</Table>
"Most of our hotels are located in the Midwest, which still lags behind
the nation as a whole in economic recovery," Herman noted. "The success of our
marketing programs is encouraging in this still-difficult operating environment.
We closed 2003 with a RevPAR market share index of 97.3, according to Smith
Travel Research. For the third consecutive
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quarter, we have improved our market share--from an index of 99.2 at the end of
the first quarter of 2004, to an index of 100.5 as of September 30, 2004. We
continue to work hard to increase this index."
Hotel operating margins for the 2004 third quarter continued to be
under pressure. "We, at last, are beginning to achieve some pricing power, as
the economy begins to slowly rebound in our primary markets, and we were able to
increase room rates in the later part of the 2004 third quarter. We are rolling
out an energy conservation program that we tested at several properties earlier
this year to 35 hotels by year end," Herman said. "At the hotels involved in the
test program, we are seeing considerable energy cost savings and expect to
receive a payback on our investment within the first 18 to 24 months. Cost
containment remains a constant focus, and we continue to expand our marketing
efforts through our Operation Heads in Beds initiative. Finally, we expect to
see margin improvement as we sell off our older AmeriHost Inn hotels located in
tertiary markets, and the non-AmeriHost Inn properties."
OPERATION SELL UPDATE
In the 2004 third quarter, Arlington sold two wholly owned AmeriHost
Inn hotels and two non-AmeriHost Inn hotels for total gross proceeds to the
company of approximately $7.3 million. In addition, the company facilitated the
sale of one leased AmeriHost Inn hotel in the 2004 third quarter on behalf of
PMC, the landlord, resulting in the termination of the lease with Arlington.
For the nine months ended September 30, 2004, the company has sold a
total of eight wholly-owned AmeriHost Inn hotels and two wholly-owned,
non-AmeriHost Inn hotels. In addition, Arlington facilitated the sale of one
non-AmeriHost Inn hotel owned by a joint venture
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in which it was a partner, and facilitated the sale of one leased AmeriHost Inn
hotel on behalf of PMC, as discussed above.
Following the close of the 2004 third quarter, the company sold one
wholly-owned, AmeriHost Inn hotel and its ownership interest in a joint venture
that owns and operates a non-AmeriHost Inn hotel. Both transactions will be
reported in the company's fourth quarter results.
Since the company announced its plans to dispose of 25 to 30 hotels in
July 2003, the company has sold 18 hotels, exclusive of the sale of the PMC
hotel and the sale of our ownership interest in a non-AmeriHost Inn joint
venture. "We currently have eight additional hotels under sale contracts,
including PMC hotels, and we expect the sales pipeline to remain active," Herman
said. "We are on target with our original disposition schedule of our Operation
Sell program. We believe the rebounding economy and improving lodging industry
fundamentals will benefit our sales efforts."
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 September 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
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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 may be
obtained from 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 broke ground on an 82-room AmeriHost Inn & Suites in Lansing,
Mich. during the third quarter of 2004 for a joint venture in which it is a
partner. This project features one of Arlington's new 80- to 90-room hotel
designs, developed specifically for larger markets. The hotel is expected to
open in the 2005 second quarter.
The company has secured debt and equity commitments for an 87-room
AmeriHost Inn & Suites at the Columbus, Ohio airport, and expects to begin
construction in the near future, pending finalizing all closing conditions. The
company has four additional development sites in California and one in Virginia
under agreement, pending completion of due diligence and the arrangement of both
debt and equity financing. These developments are also expected to utilize the
new, larger prototype design. However, there can be no assurance that any of
these transactions will be completed as contemplated.
"We are ramping up our development program as fast as prudently
possible," Herman said. "As the outlook for an improving hotel economy continues
to gain momentum, we expect to increase our hotel development activities."
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
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AmeriHost Inn hotels, a 106-property, mid-market, limited-service hotel brand
owned and presently franchised in 20 states and Canada by Cendant Corporation
(NYSE: CD). Currently, Arlington Hospitality, Inc. owns or manages 51 properties
in 15 states, including 48 AmeriHost Inn hotels, for a total of 3,672 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
reports on Form 10-Q for the periods ended March 31, 2004, June 30, 2004, and
September 30, 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
================================================================================
<Table>
<Caption>
September 30, December 31,
2004 2003
(Unaudited)
----------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 3,303,941 $ 3,623,550
Accounts receivable, less an allowance of $76,500
at September 30, 2004 and December 31, 2003 (including
approximately $283,000 and $382,000 from related parties) 1,870,567 1,289,492
Notes receivable, current portion 116,042 146,000
Prepaid expenses and other current assets 690,048 1,142,032
Refundable income taxes 201,227 975,316
Costs and estimated earnings in excess of billings on
uncompleted contracts 658,163 1,232,481
Assets held for sale - other brands 7,989,911 10,603,160
Assets held for sale - AmeriHost Inn hotels 15,835,968 28,162,442
----------- -----------
Total current assets 30,665,867 47,174,473
----------- -----------
Investments in and advances to unconsolidated
hotel joint ventures 3,224,533 3,309,344
----------- -----------
Property and equipment:
Land 5,469,977 5,735,489
Buildings 28,504,291 31,174,776
Furniture, fixtures and equipment 9,357,438 13,176,842
Construction in progress 320,981 312,925
Leasehold improvements 96,736 2,396,689
----------- -----------
43,749,423 52,796,721
Less accumulated depreciation and amortization 11,397,270 13,242,842
----------- -----------
32,352,153 39,553,879
----------- -----------
Notes receivable, less current portion 800,000 867,500
Deferred income taxes 7,353,763 6,071,000
Other assets, net of accumulated amortization of
approximately $580,000 and $633,000 2,039,396 2,737,217
----------- -----------
10,193,159 9,675,717
----------- -----------
$76,435,712 $99,713,413
=========== ===========
</Table>
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ARLINGTON HOSPITALITY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
================================================================================
<Table>
<Caption>
September 30, December 31,
2004 2003
(Unaudited)
------------ ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 1,733,906 $ 2,768,402
Bank line-of-credit 1,750,000 3,850,000
Accrued payroll and related expenses 277,310 393,815
Accrued real estate and other taxes 2,239,980 1,980,015
Other accrued expenses and current liabilities 1,303,243 1,407,511
Current portion of long-term debt 1,254,240 1,195,050
Liabilities of assets held for sale - other brands 7,077,290 9,585,492
Liabilities of assets held for sale - AmeriHost Inns 15,923,880 28,540,561
------------ ------------
Total current liabilities 31,559,849 49,720,846
------------ ------------
Long-term debt, net of current portion 23,255,114 26,513,398
------------ ------------
Deferred income 11,431,901 11,361,927
------------ ------------
Commitments and contingencies
Minority interests 219,262 329,819
------------ ------------
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 5,040,598 shares at September 30, 2004,
and 4,994,956 shares at December 31, 2003 25,203 24,975
Additional paid-in capital 13,399,556 13,220,302
Retained earnings (deficit) (3,067,673) (1,020,979)
------------ ------------
10,357,086 12,224,298
Less:
Stock subscriptions receivable (387,500) (436,875)
------------ ------------
Total shareholders' equity 9,969,586 11,787,423
------------ ------------
$ 76,435,712 $ 99,713,413
============ ============
</Table>
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ARLINGTON HOSPITALITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
================================================================================
<Table>
<Caption>
Three Months Ended September 30, Nine Months Ended September 30,
---------------------------------- -------------------------------
2004 2003 2004 2003
--------------- --------------- ------------- --------------
Revenue:
AmeriHost Inn hotel operations $ 9,378,850 $ 11,725,203 $ 26,790,374 $ 31,292,257
Development and construction 299,008 380,834 1,889,694 2,478,095
Hotel sales 4,109,179 10,040,670 18,386,384 19,074,417
Management services 97,773 124,542 300,599 352,997
Employee leasing 382,607 605,993 1,505,766 1,664,675
Incentive and royalty sharing 376,111 264,945 976,525 694,594
Office building rental 175,591 180,941 524,885 537,163
------------- ------------- ------------- --------------
14,819,119 23,323,128 50,374,227 56,094,198
------------- ------------- ------------- --------------
Operating costs and expenses:
AmeriHost Inn hotel operations 6,620,210 8,108,425 20,750,339 23,594,346
Development and construction 668,764 591,467 2,790,749 2,727,944
Hotel sales 4,094,016 8,382,581 15,580,227 15,637,779
Management services 47,727 65,918 163,438 205,677
Employee leasing 357,703 585,582 1,427,618 1,612,296
Office building rental 45,350 45,967 121,310 142,383
------------- ------------- ------------- --------------
11,833,770 17,779,940 40,833,681 43,920,425
------------- ------------- ------------- --------------
2,985,349 5,543,188 9,540,546 12,173,773
Depreciation and amortization 518,280 625,640 1,584,936 2,540,350
Leasehold rents - hotels 1,173,963 1,211,727 3,567,054 3,649,980
Corporate general and
administrative 1,170,989 526,848 2,750,799 1,489,686
Impairment provision 435,491 143,496 880,929 4,808,008
------------- ------------- ------------- --------------
Operating income (loss) (313,374) 3,035,477 756,828 (314,251)
Other income (expense):
Interest expense (740,484) (1,026,407) (2,556,739) (3,266,510)
Interest income 86,040 109,565 316,006 350,446
Other income (expense) 14,218 (115,167) 37,185 (73,147)
Gain on sale of assets) 283,690 400,000 283,690 400,000
Extinguishment of debt 112,429 (61,994) (122,590) (141,227)
Equity in net income and (losses)
of unconsolidated joint ventures 15,661 (138,020) 26,523 (412,282)
------------- ------------- ------------- --------------
Income (loss) before minority
interests and income taxes (541,820) 2,203,454 (1,259,097) (3,456,971)
Minority interests in operations of
consolidated joint ventures (49,634) (47,242) (137,645) (128,933)
------------- ------------- ------------- --------------
Income (loss) before income taxes (591,454) 2,156,212 (1,396,742) (3,585,904)
Income tax (expense) benefit 187,000 (882,000) 509,677 1,415,000
------------- ------------- ------------- --------------
Net income (loss) from continuing
operations (404,454) 1,274,212 (887,065) (2,170,904)
Discontinued operations, net of tax (121,679) (191,974) (1,159,629) (1,587,164)
------------- ------------- ------------- --------------
Net income (loss) $ (526,133) $ 1,082,238 $ (2,046,694) $ (3,758,068)
============== ============= ============== ==============
Net income (loss) from continuing operations per share:
Basic $ (0.08) $ 0.26 $ (0.18) $ (0.43)
Diluted $ (0.08) $ 0.25 $ (0.18) $ (0.43)
Net income (loss) per share:
Basic $ (0.10) $ 0.22 $ (0.41) $ (0.74)
Diluted $ (0.10) $ 0.22 $ (0.41) $ (0.74)
</Table>
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