EXHIBIT 99.1
[AH 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 FOURTH QUARTER AND YEAR END RESULTS
SALE OF NON-AMERIHOST HOTELS NEAR COMPLETE; LINE OF CREDIT RENEWED
ARLINGTON HEIGHTS, Ill., March 31, 2005--Arlington Hospitality, Inc.
(Nasdaq/SmallCap: HOST), a hotel development and management company, today
announced results for the fourth quarter and year ended December 31, 2004.
10-K FILING AND YEAR-END UPDATE CONFERENCE CALL
The company expects to file its form 10-K with the Securities and Exchange
Commission later today. The document will be 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 on Wednesday, April 13, 2005, the company's senior management
will conduct a conference call to discuss its future strategies, followed by a
question-and-answer period. Stockholders and other interested parties may
participate in the conference call by calling (800) 218-0204, reference number
11027515.
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FOURTH QUARTER 2004 RESULTS
For the 2004 fourth quarter, revenues decreased approximately $1.9 million
to $13.0 million, compared to the fourth quarter of 2003. The decrease was due
primarily to fewer hotels in the company's portfolio and the timing of hotel
sales. The decrease was partially offset by an increase in incentive and
royalty-sharing fees, and an increase in comparable hotel operating revenues.
Net loss for the 2004 fourth quarter was approximately $3.6 million, or
($0.72) per share, compared to net loss of approximately $1.9 million, or
($0.37) per share, in the 2003 fourth quarter. These results include non-cash
hotel impairment charges of $411,000 pre-tax ($287,000 after tax) in the 2004
fourth quarter, compared to $262,000 pre-tax ($177,000 after tax) in the 2003
fourth quarter.
The increase in operating loss for the fourth quarter was due primarily to
the decrease in hotel development activity, the decrease in the number of hotels
in the company's portfolio, and the operating income generated by the sale of
the specific hotels sold in each quarter. The company sold two hotels during the
fourth quarter of 2003, generating operating income of $207,000, compared to the
sale of two hotels during the fourth quarter of 2004, generating an operating
loss of $(174,000).
The results also include net losses from discontinued operations of ($1.0
million) in the 2004 fourth quarter, compared to ($321,000) in the fourth
quarter of 2003. Discontinued operations relates to the net results of
operations of all the company's non-AmeriHost Inn hotels, which the company has
determined no longer fit its strategic plan and have been sold or are
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being marketed for sale. The discontinued operations include non-cash impairment
and accelerated depreciation charges related to these hotels of approximately
$819,000 and $10,000, net of tax, during the fourth quarter of 2004 and 2003,
respectively. The accelerated depreciation charge relates to the early
termination of a hotel lease, pursuant to a 2004 lease modification that
provided for the sale of the hotel by the landlord in February 2005.
FULL YEAR 2004 RESULTS
Revenues for the year 2004 declined 10.5 percent to $63.4 million, compared
to $70.9 million in the prior year. The decrease was due primarily to lower
revenues as a result of fewer hotels in the company's portfolio and lower
revenues from the sale of Consolidated AmeriHost Inn hotels, partially offset by
an increase in incentive and royalty-sharing fees, which rose 39.2 percent in
2004 to $1.4 million, compared to $1.0 million in 2003. The increase in
incentive and royalty-sharing fees was a result of the amortization of a greater
number of development incentive fees received from Cendant Corporation (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.
Substantial professional fees, approximately $889,000, reported as
corporate general and administrative expenses, were incurred in 2004 as a result
of extensive legal and financial advisory services involving several strategic
alternatives, particularly relating to the company's previously announced PMC
lease modification consummated in October 2004. The vast majority of these fees
are considered to be nonrecurring.
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Net loss for 2004 was ($5.6 million), compared to a net loss of ($5.6
million) for 2003. These results include non-cash hotel impairment provisions of
approximately $1.3 million pre-tax ($880,000 after tax) and $5.1 million pre-tax
($3.2 million after tax) in 2004 and 2003, respectively.
The results also include a loss from discontinued operations of
approximately ($2.2 million) in 2004, compared to ($1.9 million) in 2003, net of
tax, related to the non-AmeriHost hotels classified as discontinued operations.
Discontinued operations includes approximately $3.0 million pre-tax ($1.8
million after tax), and $910,000, pre-tax ($546,000 after tax) in 2004 and 2003,
respectively, of additional impairment charges and accelerated depreciation
related to the terminated non-AmeriHost Inn hotel lease, as discussed above.
Net loss, and its components, are summarized below for the 12 months ended
December 31, 2004, 2003, and 2002:
(In thousands)
2004 2003 2002
--------- --------- ----------
Net loss from continuing
operations, before impairment $ (2,574) $ (501) $ (7)
Impairment provision, net of tax (880) (3,209) (369)
--------- --------- ---------
Net loss from continuing
operations (3,454) (3,710) (376)
Discontinued operations, net of tax (2,183) (1,909) (1,334)
--------- --------- ---------
Net loss $ (5,637) $ (5,619) $ (1,710)
========= ========= =========
Net loss per share - Diluted:
From continuing operations $ (0.69) $ (0.74) $ (0.08)
From discontinued operations (0.43) (0.38) $ (0.26)
--------- --------- ---------
$ (1.12) $ (1.12) $ (0.34)
========= ========= =========
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SALE OF NON-AMERIHOST HOTELS NEARLY COMPLETE
The company continued to make significant progress in reducing losses from
discontinued operations throughout the year. Exclusive of impairment charges,
incremental depreciation, and a franchise termination fee accrual, the company's
losses from discontinued operations decreased significantly from a pretax loss
of approximately ($2.3 million) in 2003, to a pretax loss of approximately
($546,000) in 2004. "We continued to dispose of our non-strategic, non-AmeriHost
Inns, resulting in a significant reduction of the losses associated with those
properties," said James B. Dale, chief financial officer. "We sold two wholly
owned non-AmeriHost Inn hotels and our joint-venture ownership interest in one
additional non-AmeriHost Inn hotel during 2004. In the first quarter of 2005, a
joint venture in which we have a majority ownership interest sold its
non-AmeriHost Inn hotel, and the lease for another non-AmeriHost Inn hotel was
terminated. We have only one remaining non-AmeriHost Inn property and it is
currently under contract for sale."
AMERIHOST INN OPERATIONS
Same-room revenue per available room (RevPAR) in the 2004 fourth quarter,
for the company's 47 AmeriHost Inn hotels improved 0.2 percent to $29.71,
compared to the same period in 2003. Same-room RevPAR for the full year 2004 for
the company's AmeriHost Inn hotels improved 1.8 percent to $32.56, compared to
2003. According to Smith Travel Research, the comparable mid-scale hotel without
food and beverage segment in the East North Central region of the United States
(defined by Smith Travel Research as Illinois, Indiana, Michigan,
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Ohio and Wisconsin) rose 3.9 percent in 2004. The company's AmeriHost Inn same
room RevPAR increase was lower than the results reported by Smith Travel
Research for the East North Central region of the U.S. due primarily to the
company's hotel locations in smaller, rural markets, which are lagging behind
the hotels located in and around urban and secondary markets.
During 2004, the company continued to improve its RevPAR market share
index. The company began the year with a 97.3 RevPAR index, which improved to an
index of 101.0 as of December 31, 2004, according to Smith Travel Research.
Three Months Twelve Months
Ended Ended
December 31 December 31
----------- -----------
Occupancy - 2004 51.5% 56.4%
Occupancy - 2003 52.1% 56.0%
Increase (decrease) (1.2)% 0.7%
Average Daily Rate - 2004 $57.70 $57.72
Average Daily Rate - 2003 $56.86 $57.11
Increase (decrease) 1.5% 1.1%
RevPAR - 2004 $29.71 $32.56
RevPAR - 2003 $29.65 $32.00
Increase (decrease) 0.2% 1.8%
"We made significant progress in 2004 towards achieving the company's
transition plan," said Kenneth M. Fell, Arlington's chairman of the board. "A
critical achievement was the restructuring of our lease agreement with PMC,
which resulted in a significant reduction in our rent payments and allows us to
accelerate our exit strategy for those properties as AmeriHost Inns. The
prolonged negotiation with PMC contributed much higher than expected legal and
financial advisory fees and delayed our new hotel development program, which
remains a top priority for 2005."
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Fell continued, "We believe there is significant new hotel development
opportunity as the industry is entering the earliest stage of recovery. In order
to attain our goal of accelerating our hotel development program, we will need
to obtain additional capital. We are in discussions and negotiations with
potential partners and lenders to obtain such capital, however we have not
received any firm commitments."
2004 AND 2005 YTD SIGNIFICANT EVENTS
The company made significant progress on a number of fronts in the past 15
months, including:
- Real Estate Sales - During the 2004 fourth quarter, the company sold one
wholly owned AmeriHost Inn hotel. In addition, the company sold its
ownership interest in one non-AmeriHost Inn hotel held in a joint venture,
and facilitated the sale of an AmeriHost Inn leased from PMC Commercial
Trust.
In 2004, Arlington Hospitality divested 15 hotels plus one vacant land
parcel. The hotel sales include 11 wholly owned hotels, two hotels in which
Arlington was a joint-venture partner, and two hotels leased from PMC.
During 2004, Arlington paid off approximately $18.5 million of mortgage
debt in connection with the sale of hotels. Total hotel mortgage debt was
approximately $42.2 million at year-end 2004, compared to $60.1 million on
December 31, 2003.
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Year to date in 2005, the company has divested five hotels including one
wholly owned hotel, three hotels held by joint ventures, and one hotel
which was leased from PMC. In addition, a vacant land parcel, next to the
company's headquarters, was sold. The company currently has nine hotels
under contract for sale, including three leased hotels, which are expected
to be consummated within the next six months. Since the company announced
its plans to sell 25 to 30 hotels in July 2003, the company has sold 21
hotels, exclusive of the sale of the PMC hotels and sale of the company's
ownership interest in a non-AmeriHost Inn joint venture.
- Development--The company is on schedule to open within the next 60 days
an 82-room AmeriHost Inn & Suites in Lansing, Mich. for a joint venture in
which the company is an equity partner. In addition, the company expects to
begin construction on a new 87-room AmeriHost Inn & Suites at the Columbus,
Ohio airport. This development, for the first time, will utilize the
company's new and larger prototype design (80 - 100 rooms). The funding for
this project has been fully committed, and the company expects to break
ground on the project in the near future, as weather permits.
The company has five additional development sites in California and North
Carolina under purchase agreement, pending completion of due diligence and
the arrangement of both debt and equity financing. These developments
expect to utilize AmeriHost's new, larger prototype design. Arlington is in
the process of identifying and negotiating with a
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number of joint venture partners and mortgage lenders to provide the
funding for the company's development plan.
For more information regarding Arlington's hotels for sale and development
opportunities either on a joint venture or turnkey basis, contact Stephen
Miller, Senior Vice President - Real Estate and Business Development via
email at stevem@arlingtonhospitality.com, or by telephone at
(847) 228-5401, ext. 312.
- PMC Lease Modification--Arlington modified its leases on 20 hotels owned
by PMC effective October 1, 2004. The new arrangement reduced the monthly
cash lease payments by 19 percent, 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, primarily in joint ventures. The leases will
be terminated upon the sale of each of the remaining18 leased AmeriHost
Inns to third parties over the next four years, compared to the original
2013 and 2014 lease termination dates. Since October 1, 2004, the company
has facilitated the sale of two leased hotels, with three additional PMC
leased hotels under sale contracts. If hotel sales are not made on a timely
basis as required by the leases, as amended, the monthly cash lease
payments increase to the original contractual amounts.
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The company estimates the restructuring will reduce its former aggregate
lease payment obligation through 2014 from approximately $47.2 million to
an estimated aggregate obligation of $10.0 million to $12.0 million,
depending on the ultimate timing and pricing of the hotel sales, plus a
promissory note payable to PMC for the aggregate anticipated shortfall of
the net sale proceeds to the original stated values in the lease.
- Operating Line of Credit Renewed--The company has successfully renewed
its operating line of credit with LaSalle Bank N.A. The renewed facility
expires April 30, 2006, and continues to bear interest at the fixed rate of
10 percent per annum. The initial maximum availability under the renewed
facility is $4.0 million; however, this maximum will be reduced to $3.5
million by May 1, 2005, reducing further to $3.0 million on July 31 and to
$2.5 million on October 31, 2005. There is no prepayment penalty on this
renewed facility and the company is seeking increased, longer-term and less
costly financing to replace this facility.
- President and Chief Executive Officer--The company has been conducting a
search for a president and chief executive officer to replace the former
president/CEO who resigned effective December 31, 2004. The company expects
to name a new president/CEO by the end of the second quarter of 2005.
Stephen Miller, the company's senior development officer, currently serves
as interim chief executive officer.
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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 108-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 45 properties in 12 states, including 44 AmeriHost Inn hotels,
for a total of 3,076 rooms, with additional AmeriHost Inn & Suites hotels under
construction.
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, 2004, 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)
Three Months Ended December 31, Year Ended December 31,
------------------------------- -----------------------
2004 2003 2004 2003
---- ---- ---- ----
Revenue:
Hotel operations $ 7,158,266 $ 8,569,402 $ 33,948,640 $ 39,861,661
Development and construction 1,690,284 1,718,783 3,579,978 4,196,878
Hotel sales and commissions 3,051,540 3,756,685 21,535,227 22,831,102
Management services 78,560 92,865 379,159 445,862
Employee leasing 437,603 193,428 1,943,369 1,858,103
Incentive and royalty sharing fees 377,051 277,625 1,353,576 972,219
Office building rental and other 177,030 212,618 701,915 749,782
------------ ------------ ------------ ------------
12,970,334 14,821,406 63,441,864 70,915,607
------------ ------------ ------------ ------------
Operating costs and expenses:
Hotel operations 6,297,487 7,116,757 27,047,828 30,711,104
Development and construction 2,177,913 2,011,352 4,968,662 4,739,296
Hotel sales and commissions 3,225,768 3,549,398 18,719,752 19,187,177
Management services 46,217 74,706 209,655 280,383
Employee leasing 412,799 186,418 1,840,417 1,798,714
Office building rental and other 49,469 71,849 170,779 214,232
------------ ------------ ------------ ------------
12,209,653 13,010,480 52,957,093 56,930,906
------------ ------------ ------------ ------------
760,681 1,810,926 10,484,771 13,984,701
Depreciation and amortization 749,097 741,276 2,334,033 3,281,626
Leasehold rents - hotels 150,676 1,173,230 3,717,730 4,823,210
Leasehold termination 370,266 370,266 -
Corporate general and administrative 747,258 929,799 3,498,057 2,419,485
Impairment provision 410,738 261,772 1,291,667 5,069,780
------------ ------------ ------------ ------------
Operating income (loss) (1,667,354) (1,295,151) (726,982) (1,609,400)
------------ ------------ ------------ ------------
Other income (expense):
Interest expense (2,011,228) (820,611) (4,567,967) (4,087,120)
Interest income 44,160 117,092 360,166 467,538
Other income (expense) (48,678) 65,220 (11,492) (7,930)
Extinguishment of debt (23,838) - (146,428) (141,227)
Gain on sale of fixed and other assets 183,545 - 283,688 400,000
Equity in net income and (losses) from
unconsolidated subsidiaries joint ventures (121,663) (312,293) (95,141) (724,575)
------------ ------------ ------------ ------------
Loss before minority interests and income taxes (3,645,056) (2,245,743) (4,904,156) (5,702,714)
Minority interests in operations of
consolidated subsidiaries and partnerships (26,800) (33,371) (164,444) (162,304)
------------ ------------ ------------ ------------
Loss before income taxes (3,671,856) (2,279,114) (5,068,600) (5,865,018)
Income tax benefit 1,105,000 740,000 1,614,677 2,155,000
------------ ------------ ------------ ------------
Net loss from continuing operations (2,566,856) (1,539,114) (3,453,923) (3,710,018)
Discontinued operations, net of tax (1,023,125) (321,398) (2,182,754) (1,908,562)
------------ ------------ ------------ ------------
Net loss $ (3,589,981) $ (1,860,512) $ (5,636,677) $ (5,618,580)
============ ============ ============ ============
Net loss from continuing operations per share:
Basic $ (0.51) $ (0.31) $ (0.69) $ (0.74)
Diluted $ (0.51) $ (0.31) $ (0.69) $ (0.74)
Net loss per share:
Basic $ (0.72) $ (0.37) $ (1.12) $ (1.12)
Diluted $ (0.72) $ (0.37) $ (1.12) $ (1.12)
ARLINGTON HOSPITALITY, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
- --------------------------------------------------------------------------------
December 31, December 31,
2004 2003
--------------------------------
ASSETS
Current assets:
Cash and cash equivalents $ 2,558,384 $ 3,623,550
Accounts receivable 1,365,454 1,289,492
Notes receivable 76,042 146,000
Prepaid expenses and other current assets 808,478 1,142,032
Refundable income taxes 67,538 975,316
Costs and estimated earnings in excess of
billings on uncompleted contracts 467,144 1,232,481
Assets held for sale - other brands 6,525,844 10,603,160
Assets held for sale - AmeriHost Inn Hotels 19,214,269 28,162,442
Capital lease assets held for sale - AmeriHost Inn Hotels 15,379,638 ---
------------ ------------
Total current assets 46,462,791 47,174,473
Investments in and advances to unconsolidated
hotel joint ventures 1,970,095 3,309,344
Property and equipment, net 42,967,205 39,553,879
Notes receivable, less current portion 450,000 867,500
Deferred income taxes 9,210,846 6,071,000
Other assets, net 2,300,704 2,737,217
------------ ------------
$103,361,641 $ 99,713,413
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LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,321,786 $ 2,768,402
Bank line-of-credit 2,225,000 3,850,000
Accrued expenses and other current liabilities 3,609,046 3,781,341
Current portion of long-term debt 1,130,701 1,195,050
Liabilities of assets held for sale - other brands 6,939,989 9,585,492
Liabilities of assets held for sale - AmeriHost Inns 18,491,277 28,540,561
Capital lease obligations of capital lease assets held for sale -
AmeriHost Inn Hotels 18,077,035 ---
------------ ------------
Total current liabilities 52,794,834 49,720,846
Long-term debt, net of current portion, and capital lease 37,687,575 26,513,398
obligations
Deferred income 6,125,788 11,361,927
Minority interests 246,063 329,819
Shareholders' equity 6,507,381 11,787,423
------------ ------------
$103,361,641 $ 99,713,413
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