EXHIBIT 99.1
[AH LOGO]
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 2005 FIRST QUARTER RESULTS
ARLINGTON HEIGHTS, Ill., May 16, 2005 -- Arlington Hospitality, Inc.
(Nasdaq/SmallCap: HOST), a hotel development and management company, today
announced financial and operating results for the first quarter ended March 31,
2005.
10-Q FILING AND FIRST QUARTER CONFERENCE CALL
The company expects to file its form 10-Q 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 on the company's Web site,
www.arlingtonhospitality.com.
At 3 p.m. ET on Tuesday, May 17, 2005, the company's chairman and
senior management will conduct a conference call to discuss the first quarter
results and current 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 11030677.
FIRST QUARTER 2005 RESULTS
In the 2005 first quarter, revenues were $12.5 million, a decrease of
$4.5 million from $17.0 million in the same period a year earlier. The lower
revenues were due primarily to a $1.5
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Page 2
million decrease in hotel operating revenue, as the company had divested 13
consolidated AmeriHost Inn hotels over the last 15 months, and a $2.7 million
decrease in aggregate sale prices of the particular consolidated AmeriHost Inn
hotels sold during the first quarter of 2005, compared to the aggregate sale
prices of those sold in the first quarter of 2004. The revenue decrease was
partially offset by a 28.7 percent increase in incentive and royalty-sharing
fees during the 2005 first quarter, to approximately $325,000. The improvement
is due to the amortization of a larger number of development incentive fees
received from Cendant Corporation (NYSE: CD) and an increase in royalty-sharing
fees received from Cendant.
Net loss in the 2005 first quarter was approximately $(1.5) million, or
($0.30) per share, compared to net loss of approximately $(1.6) million, or
($0.31) per share, in the 2004 first quarter. The 2004 first quarter results
include impairment charges of $320,000 pre-tax ($192,000 after tax). No
impairment charges were recorded in the 2005 first quarter. Net loss from
continuing operations was $(1.5) million, or ($0.31) per share, during the first
quarter of 2005, compared to ($933,000), or ($0.18) per share, during the first
quarter of 2004.
The decrease in operating loss to ($542,000) during the first quarter
of 2005, from ($686,000) during the first quarter of 2004, was due primarily to
the capital lease accounting treatment for 17 of the PMC leased hotels pursuant
to a fourth quarter 2004 lease modification whereby the leasehold rent expense
decreased, at the same time depreciation, interest and leasehold termination
expense increased. In addition, there were no impairment charges in the first
quarter of 2005 and corporate general and administrative expense decreased
approximately $274,000, or 32 percent. These reductions in operating loss were
partially offset by lower operating income
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Page 3
realized from the sale of hotels in the first quarter of 2005, compared to 2004,
the reduction in the number of consolidated hotels and increased due diligence
and entitlement costs for new hotel development sites.
The results also include net income from discontinued operations of
$36,000 in the 2005 first quarter, compared to a net loss of ($643,000) in the
first quarter of 2004. Discontinued operations relates to the operations of all
the company's consolidated non-AmeriHost Inn hotels. Discontinued operations for
the 2005 first quarter include the results of three hotels, two of which were
disposed of during the first quarter, compared to the results of five hotels in
the same period a year earlier.
"With the pending sale of our last non-AmeriHost Inn hotel, expected to
be consummated within the next three months, we will wrap up this important
component of our formal hotel disposition program implemented nearly two years
ago," said Kenneth M. Fell, Arlington's chairman of the board. "We continue to
work towards the sale of certain AmeriHost Inn hotels and obtaining the
necessary financing to achieve our development plans."
During the quarter, Arlington paid down $4.0 million in long-term
mortgage debt, primarily in conjunction with the sale of two consolidated hotels
in the 2005 first quarter. The company has reduced its debt by $42.6 million
since it announced its Operation Sell program in the summer of 2003.
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AMERIHOST INN OPERATIONS
Same-room revenue per available room (RevPAR) in the 2005 first
quarter, for the company's 46 AmeriHost Inn hotels was basically flat compared
to the 2004 first quarter, at $27.40.
Trailing
Three Months Twelve Months
Ended Ended
March 31 March 31
------------ -------------
Occupancy - 2005 47.8% 56.6%
Occupancy - 2004 48.9% 56.3%
Increase (decrease) (2.2)% (0.5%)
Average Daily Rate - 2005 $57.35 $58.15
Average Daily Rate - 2004 $56.11 $57.53
Increase (decrease) 2.2% 1.1%
RevPAR - 2005 $27.40 $32.91
RevPAR - 2004 $27.46 $32.40
Increase (decrease) (0.2)% 1.6%
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, Ohio
and Wisconsin) rose 4.1 percent in the first quarter of 2005. "The negative
variance in RevPAR growth between our AmeriHost Inn hotels and the results
reported by Smith Travel Research is due primarily to the company's smaller
hotels located in smaller, rural markets, which are lagging behind the hotels
located in and around urban and secondary markets," Fell said. "Many of our
hotels with RevPAR growth below the Smith Travel Research industry segment
average are included in our hotel disposition plan."
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DEVELOPMENT
On May 5, 2005, the company opened a newly constructed hotel in
Lansing, Mich. The new 82-room AmeriHost Inns & Suites hotel, in which Arlington
is a joint-venture partner and manager, is approximately one-third larger than
the average size of most of the hotels in the company's existing portfolio. The
three-story building features an attractive two-story lobby, a meeting room, a
breakfast room, guest laundry, and a large, indoor swimming pool, spa and
fitness center.
The company also broke ground in May on an 87-room AmeriHost Inn and
Suites at the Columbus, Ohio airport, in which it is a joint-venture partner.
The hotel utilizes the company's first new "T" shaped design, which contains
more public space and includes many of the same features as the Lansing, Mich.
hotel, plus a business center, a sundries shop, and an expanded lobby and
breakfast area with fireplace. This design is expected to be used frequently in
the company's future development projects.
The company has five additional sites under purchase contracts in
California and along the Eastern seaboard, pending arrangement of both debt and
equity financing. The company is negotiating with a number of potential
joint-venture partners and mortgage lenders to provide the funding for these
projects.
NEED FOR FURTHER RESTRUCTURING OF LEASED HOTEL PORTFOLIO
The company has been in discussions with PMC Commercial Trust (AMEX:
PCC) ("PMC"), the landlord for 18 AmeriHost Inn hotels Arlington currently
operates, with the goal of further modifying the existing leases. The leases
were modified in October 2004. The October
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modifications included partially reduced rent payments and a plan to terminate
the leases over a four-year period upon the sale of the hotels, with a
significant termination fee payable to PMC, and subject to substantial,
above-market hotel value guarantees by Arlington in favor of PMC. However,
through the first quarter of 2005, the 18 hotels continue to operate at a
significant negative cash flow, even after the reduced lease payment.
Over the past five years, the cash flow from the leased properties has
been insufficient to cover the lease payments to PMC, yet throughout this period
Arlington continued to fund these significant operating deficiencies using other
sources, primarily proceeds from the sale of owned hotels. Arlington's board of
directors has decided that it is in the best interest of the company to no
longer fund the lease payments at the present rate. As such, the company did not
pay PMC the May 2005 lease payment, and as of May 13, 2005, upon expiration of
the stated cure period, Arlington is in default of the lease agreements.
PMC is entitled to pursue all remedies under the leases, including
terminating the leases, taking possession of the hotels, and seeking recovery
against the company, as guarantor of the leases, for payments due under the
leases. Arlington is hopeful that future discussions with PMC will lead to an
amicable settlement of the lease defaults wherein the PMC leases will be amended
to provide for restructured lease payments and the elimination of above-market
hotel value guarantees. In the event an amicable settlement of the default
cannot be reached, the company will consider all of its alternatives, as more
fully described in the company's report on form 10-Q for the three months ended
March 31, 2005 as filed with the Securities and Exchange Commission.
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HOTEL SALES
In the 2005 first quarter, Arlington completed the disposition of six
properties as follows. The company sold one wholly owned AmeriHost Inn, one
AmeriHost Inn held in an unconsolidated joint venture, one non-AmeriHost Inn
held in a consolidated joint venture and one vacant land parcel. In addition,
the lease for a non-AmeriHost Inn hotel was terminated pursuant to the sale of
the hotel by the landlord, and the PMC lease was terminated for an AmeriHost
Inn hotel upon its sale pursuant to the October 2004 PMC lease
modification.
The company currently has eight properties under contract for sale,
including two PMC leased hotels and the company's last remaining non-AmeriHost
Inn hotel.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
The company continues to review candidates for its president and CEO
position, which became vacant December 31, 2004. Stephen Miller, the company's
senior development officer, currently serves as interim president and chief
executive officer.
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 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 3,098 rooms, with one additional AmeriHost
Inn & Suites hotel 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, 2004 and report on Form 10-Q
for the three months ended March 31, 2005, under the section headed
"Management's Discussion and Analysis of Financial Condition and Results of
Operations - Risk Factors."
ARLINGTON HOSPITALITY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31,
2005 December 31,
(Unaudited) 2004
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 3,817,089 $ 2,558,384
Accounts receivable, less an allowance of $76,500
at March 31, 2005 and December 31, 2004 (including
approximately $806,000 and $372,000 from related parties) 2,137,851 1,365,454
Notes receivable, current portion 126,042 76,042
Prepaid expenses and other current assets 684,584 808,478
Refundable income taxes 91,099 67,538
Costs and estimated earnings in excess of billings on
uncompleted contracts 228,327 467,144
Assets held for sale - AmeriHost Inn hotels 19,771,036 19,214,269
Assets held for sale - other brands 4,596,684 6,525,844
Capital lease assets held for sale - AmeriHost Inn hotels 15,078,787 15,379,638
------------ ------------
Total current assets 46,531,499 46,462,791
------------ ------------
Investments in and advances to unconsolidated
hotel joint ventures 1,798,449 1,970,095
Property and equipment:
Land 3,926,886 5,138,978
Buildings 25,262,838 26,579,543
Furniture, fixtures and equipment 8,890,200 9,172,897
Construction in progress -- 313,458
Leasehold improvements 96,735 96,735
Capital lease assets 11,525,669 13,088,840
------------ ------------
49,702,329 54,390,451
Less accumulated depreciation and amortization 11,499,879 11,423,246
------------ ------------
38,202,450 42,967,205
------------ ------------
Notes receivable, less current portion 375,000 450,000
Deferred income taxes 10,046,846 9,210,846
Other assets, net of accumulated amortization of
approximately $765,000 at March 31, 2005
and $673,000 at December 31, 2004 2,113,964 2,300,704
------------ ------------
Total long term assets 52,536,709 56,898,850
------------ ------------
Total assets $ 99,068,208 $103,361,641
============ ============
ARLINGTON HOSPITALITY, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31,
2005 December 31,
(Unaudited) 2004
------------- -------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,873,925 $ 2,321,786
Bank line-of-credit 4,000,000 2,225,000
Accrued payroll and related expenses 691,142 566,889
Accrued real estate and other taxes 1,679,879 1,860,480
Other accrued expenses and current liabilities 1,723,361 1,181,677
Current portion of long-term debt 906,120 1,130,701
Liabilities of assets held for sale - AmeriHost Inns 18,139,489 18,491,277
Liabilities of assets held for sale - other brands 4,804,078 6,939,989
Capital lease obligations of assets held for sale
- AmeriHost Inn hotels 17,842,178 18,077,035
------------- -------------
Total current liabilities 52,660,172 52,794,834
------------- -------------
Long-term debt, net of current portion 20,849,449 22,046,112
Capital lease obligation 13,979,739 15,641,463
------------- -------------
Total long term liabilities 34,829,188 37,687,575
------------- -------------
Deferred income 6,331,182 6,125,788
Commitments and contingencies
Minority interests 224,885 246,063
Shareholders' equity:
Preferred stock, no par value; authorized 100,000 shares;
none issued -- --
Common stock, $.005 par value; authorized at 25,000,000 shares;
4,956,123 and 4,956,098 were issued and outstanding at
March 31, 2005 and December 31, 2004 respectively 24,781 24,781
Additional paid-in capital 13,140,324 13,140,256
Retained deficit (8,142,324) (6,657,656)
------------- -------------
Total shareholders' equity 5,022,781 6,507,381
------------- -------------
Total liabilities and shareholders' equity $ 99,068,208 $ 103,361,641
============= =============
ARLINGTON HOSPITALITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
Revenue 2005 2004
------------ ------------
Hotel operations $ 6,354,302 $ 7,819,524
Development and construction 1,017,224 1,200,654
Hotel sales and commissions 4,188,600 6,839,249
Management services 43,599 100,622
Employee leasing 324,591 562,276
Incentive and royalty sharing 364,761 283,408
Office building rental 162,156 173,907
------------ ------------
12,455,233 16,979,639
------------ ------------
Operating costs and expenses:
Hotel operations 5,936,270 7,028,727
Development and construction 1,479,703 1,480,392
Hotel sales and commissions 3,524,337 5,543,601
Management services 28,030 90,381
Employee leasing 300,712 545,130
Office building rental 134,290 41,112
------------ ------------
11,403,342 14,729,343
------------ ------------
Depreciation and amortization 731,991 552,331
Leasehold rents - hotels 172,856 1,196,545
Corporate general and administrative 593,505 867,227
Impairment provision -- 320,133
Lease termination expense 95,376 --
------------ ------------
Operating loss (541,837) (685,940)
Other income (expense):
Interest expense (2,229,904) (974,874)
Interest income 4,917 125,938
Other income 980 20,135
Equity in net income (losses) from unconsolidated joint ventures 413,141 (6,166)
------------ ------------
Loss before minority interests and income taxes (2,352,703) (1,520,907)
Minority interests in operations of consolidated joint ventures (23,950) (33,812)
------------ ------------
Loss before income tax (2,376,653) (1,554,719)
Income tax benefit 856,000 621,979
------------ ------------
Net loss from continuing operations (1,520,653) (932,740)
Discontinued operations, net of tax 35,985 (642,666)
------------ ------------
Net Loss $ (1,484,668) $ (1,575,406)
============ ============
Net loss per share from continuing operations:
Basic $ (0.31) $ (0.18)
Diluted $ (0.31) $ (0.18)
Net loss per share:
Basic $ (0.30) $ (0.31)
Diluted $ (0.30) $ (0.31)