-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, EuTqGe3SGGJYOlab24FaMeeXYXDkuLOR3URu6gcS1wMmc9p+CdhdFVDkXYFoFG7R 9ML1Io9tn/fZPo62uVvpDw== 0000914760-95-000078.txt : 19950807 0000914760-95-000078.hdr.sgml : 19950807 ACCESSION NUMBER: 0000914760-95-000078 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950804 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERIHOST PROPERTIES INC CENTRAL INDEX KEY: 0000778423 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 363312434 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15291 FILM NUMBER: 95559196 BUSINESS ADDRESS: STREET 1: 2400 E DEVON AVE STE 280 CITY: DES PLAINES STATE: IL ZIP: 60018 BUSINESS PHONE: 7082984500 MAIL ADDRESS: STREET 1: 2400 E DEVON AVE STREET 2: SUITE 280 CITY: DES PLAINES STATE: IL ZIP: 60018 FORMER COMPANY: FORMER CONFORMED NAME: AMERICA POP INC DATE OF NAME CHANGE: 19871111 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [x] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended JUNE 30, 1995 OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File No. 2-90939C AMERIHOST PROPERTIES, INC. (Exact name of registrant as specified in its charter) DELAWARE 36-3312434 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2400 EAST DEVON AVE., SUITE 280, DES PLAINES, ILLINOIS 60018 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (708) 298-4500 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No As of August 4, 1995, 5,937,414 shares of the Registrant's Common Stock were outstanding. AMERIHOST PROPERTIES, INC. FORM 10-Q FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1995 INDEX PART I: Financial Information Page Consolidated Balance Sheets as of June 30, 1995 and December 31, 1994 4 Consolidated Statements of Operations for the Three and Six Months Ended June 30, 1995 and 1994 6 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1995 and 1994 7 Notes to Consolidated Financial Statements 9 Management's Discussion and Analysis 14 Schedule of Earnings Before Interest/Rent, Taxes and Depreciation/Amortization for the Three and Six Months Ended June 30, 1995 and 1994 18 PART II: Other Information Item 6 Exhibits and Reports on Form 8-K 19 Signatures 19 AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30, December 31, 1995 1994 ASSETS Current assets: Cash and cash equivalents $ 1,831,816 $ 3,026,029 Accounts receivable (including $470,297 and $703,465 from related parties) 3,135,535 2,457,233 Notes receivable (including $826,932 and $1,687,178 from related parties) 974,662 1,834,908 Prepaid expenses and other current assets 473,363 370,471 Costs and estimated earnings in excess of billings on uncompleted contracts (including $587,877 and $1,315,707 from related parties) 1,310,481 2,005,274 Total current assets 7,725,857 9,693,915 Investments 2,486,011 2,995,234 Property and equipment: Land 3,607,463 2,240,952 Buildings 15,511,241 9,124,901 Furniture, fixtures and equipment 6,601,917 3,784,608 Construction in progress 2,942,163 2,253,456 Leasehold improvements 1,520,688 791,800 30,183,472 18,195,717 Less accumulated depreciation and amortization 3,940,335 1,729,611 26,243,137 16,466,106 Long-term notes receivable (including $982,960 and $1,272,612 from related parties) 2,432,914 2,737,882 Costs of management contracts acquired, net of accumulated amortization of $867,078 and $768,324 606,516 492,253 Other assets (including deferred taxes of $517,000 and $487,000), net of accumulated amortization of $1,193,510 and $769,669 2,701,908 2,018,192 5,741,338 5,248,327 $ 42,196,343 $ 34,403,582 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,789,812 $ 3,224,973 Bank line-of-credit 744,147 - Accrued payroll and related expenses 818,807 679,971 Accrued real estate and other taxes 566,016 362,409 Other accrued expenses and current liabilities 462,410 262,331 Current portion of long-term debt 821,549 566,808 Income taxes payable 84,466 415,197 Total current liabilities 6,287,207 5,511,689 Long-term debt, net of current portion 18,231,191 12,975,226 Deferred income 843,394 1,051,457 Commitments Minority interests 1,398,555 1,192,925 Shareholders' equity: Preferred stock, no par value; authorized 100,000 shares; none issued Common stock, $.005 par value; authorized 15,000,000 shares; issued 5,937,414 shares at June 30, 1995, and 5,570,013 shares at December 31, 1994 29,687 27,850 Additional paid-in capital 16,667,088 15,465,891 Retained earnings (deficit) 132,388 (428,289) 16,829,163 15,065,452 Less: Stock subscriptions receivable (436,875) (436,875) Notes receivable (956,292) (956,292) 15,435,996 13,672,285 $ 42,196,343 $ 34,403,582 See notes to consolidated financial statements.
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended June 30, Six Months Ended June 30, 1995 1994 1995 1994 Revenue: Hotel operations $ 6,105,001 $ 3,912,354 $ 10,219,726 $ 6,366,440 Development and construction 2,272,540 3,534,256 7,777,364 4,137,154 Management services 805,619 710,647 1,370,073 1,246,604 Employee leasing 3,103,470 3,499,101 6,076,828 6,739,430 12,286,630 11,656,358 25,443,991 18,489,628 Operating costs and expenses: Hotel operations 3,952,501 2,501,751 7,410,032 4,707,585 Development and construction 1,671,697 3,363,474 6,835,826 4,131,852 Management services 508,755 467,738 965,578 985,340 Employee leasing 3,049,433 3,466,262 5,980,619 6,672,697 9,182,386 9,799,225 21,192,055 16,497,474 3,104,244 1,857,133 4,251,936 1,992,154 Depreciation and amortization 478,007 263,975 912,926 537,799 Leasehold rents - hotels 543,941 440,783 995,546 860,604 Corporate general and administrative 525,289 447,809 993,047 1,093,940 Operating income (loss) 1,557,007 704,566 1,350,417 (500,189) Other income (expense): Interest expense (362,007) (200,258) (669,726) (349,700) Interest income 160,367 77,631 251,903 168,106 Other income (expense) (677) 25,126 19,482 25,909 Equity in net income and losses of affiliates 96,651 125,498 (86,877) (79,483) Income (loss) before minority interests and income taxes 1,451,341 732,563 865,199 (735,357) Minority interests in (income) loss of consolidated subsidiaries and partnerships (90,131) (58,260) 22,478 (13,832) Income (loss) before income tax 1,361,210 674,303 887,677 (749,189) Income tax expense (benefit) 517,000 269,000 327,000 (300,000) Net income (loss) $ 844,210 $ 405,303 $ 560,677 $ (449,189) Earnings (loss) per share $ 0.14 $ 0.07 $ 0.09 $ (0.08) See notes to consolidated financial statements.
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE SIX MONTHS ENDED JUNE 30, (UNAUDITED)
1995 1994 Cash flows from operating activities: Cash received from customers $ 25,881,307 $ 16,477,999 Cash paid to suppliers and employees (23,323,406) (16,698,003) Interest received 145,148 224,627 Interest paid (665,120) (351,789) Income taxes paid (687,731) 221,305 Net cash provided by (used in) operating activities 1,350,198 (125,861) Cash flows from investing activities: Distributions from affiliates 204,162 182,842 Purchase of property and equipment (5,252,999) (3,740,707) Purchase of investments (225,050) (383,961) Increase in notes receivables (351,550) (666,589) Collections on notes receivables 780,744 774,711 Cost of management contracts acquired (213,016) - Sale of investments 10,000 25,000 Leasehold interest acquisition costs (5,000) - Increase in organization costs (1,455) (12,978) Net cash used in investing activities (5,054,164) (3,821,682) Cash flows from financing activities: Proceeds from issuance of long-term debt 2,170,794 2,741,251 Principal payments of long-term debt (352,158) (151,724) Proceeds from line of credit 744,147 950,000 Payments on line of credit - (780,000) Distributions to minority interests (53,030) - Contributions from minority interests - 690,056 Net cash provided from financing activities 2,509,753 3,449,583 Net decrease in cash (1,194,213) (497,960) Cash and cash equivalents, beginning of period 3,026,029 1,885,335 Cash and cash equivalents, end of period $ 1,831,816 $ 1,387,375 Reconciliation of net income (loss) to net cash provided by (used in) operating activities: Net income (loss) $ 560,677 $ (449,189) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 912,926 537,824 Equity in net loss of affiliates before amortization of deferred income 147,073 123,080 Minority interests in net (income) losses of subsidiaries (22,478) 13,832 Amortization of deferred income (60,196) (38,098) Amortization of deferred interest (4,286) (4,286) Amortization of loan discount 22,696 22,696 Gain on sale of investment - (25,000) Increase in deferred tax asset (30,000) (300,000) Compensation paid through issuance of common stock 213,991 60,236 Changes in assets and liabilities net of effects of acquisitions: Increase in accounts receivable (301,578) (2,134,473) (Increase) decrease in interest receivable (102,469) 56,521 Increase in prepaid expenses and other current assets (44,998) (24,969) Decrease in costs and estimated earnings in excess of billings 694,793 710,048 Decrease in refundable income taxes - 221,305 Increase in other assets (232,843) (431,602) (Decrease) increase in accounts payable (429,967) 212,990 Increase in accrued expenses and other current liabilities 375,677 1,312,717 Decrease in accrued interest (18,089) (2,089) Decrease in accrued income taxes (330,731) - Increase in deferred income - 12,596 Net cash provided by (used in) operating activities $ 1,350,198 $ (125,861) See notes to consolidated financial statements.
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: BASIS OF PREPARATION: The financial statements included herein have been prepared by the Company, without audit. In the opinion of the Company, the accompanying unaudited financial statements contain all adjustments, which consist only of recurring adjustments necessary to present fairly the financial position of Amerihost Properties, Inc. and subsidiaries as of June 30, 1995 and December 31, 1994 and the results of its operations for the three and six month periods ended June 30, 1995 and 1994, and statements of cash flows for the six months ended June 30, 1995 and 1994. The results of operations for the three and six months ended June 30, 1995, are not necessarily indicative of the results to be expected for the full year. It is suggested that the accompanying financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's 1994 Annual Report on Form 10-K. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, and ownership interests in the following partnerships: Sullivan Motel Associates, Ltd. (45.7%), White River Junction, VT 393 Limited Partnership (83.3%), Metropolis, IL 1292 Limited Partnership (54.9%), Tuscola, Illinois 593 Limited Partnership (68.75%), Dayton, Ohio 1291 Limited Partnership (60.0%), Bowling Green, Ohio 590 Limited Partnership (63.3%), Findlay, Ohio 391 Limited Partnership (51.3%), and Altoona, PA 892 Limited Partnership (62.8%). Significant intercompany accounts and transactions have been eliminated. CONSTRUCTION ACCOUNTING: Development fee revenue from construction/renovation projects is recognized over the period beginning with the execution of contracts and ending with the commencement of construction/renovation. Construction fee revenue from construction/renovation projects is recognized on the percentage-of-completion method, generally based on the ratio of costs incurred to estimated total contract costs. Revenue from contract change orders is recognized to the extent costs incurred are recoverable. Profit recognition begins when construction reaches a progress level sufficient to estimate the probable outcome. Provision is made for anticipated future losses in full, at the time they are identified. CONCENTRATION OF CREDIT RISK: Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments, accounts receivable and notes receivable. The Company invests in temporary cash balances in financial instruments of highly rated financial institutions generally with maturities of less than three months. A substantial portion of accounts receivable are from hotels located in the midwestern United States, where collateral is generally not required, and from hotel operators for the development and construction of hotels pursuant to written contracts. Notes receivable are primarily from hotel operating entities generally located in the midwestern and southern United States, and two of the Company's officers. CASH EQUIVALENTS: The Company considers all investments with a maturity of three months or less to be cash equivalents. INVESTMENTS: Investments in affiliates are accounted for using the equity method, under which method the original investment is increased (decreased) by the Company's share of affiliates' earnings (losses), and is reduced by dividends or distributions when received. Other investments are recorded at cost. PROPERTY AND EQUIPMENT: Property and equipment are stated at cost. Depreciation is being provided for assets placed in service by use of the straight-line and accelerated methods over their estimated useful lives. Leasehold improvements are being amortized by use of the straight-line method over the term of the lease. For each classification of property and equipment, depreciable periods are as follows: Building 31.5-39 years Furniture, fixture and equipment 5-7 years Leasehold improvements 3-10 years COST OF MANAGEMENT CONTRACTS ACQUIRED: The costs of management contracts acquired includes amounts paid to acquire management contracts and pre-opening costs incurred in connection with new management contracts. These amounts are being amortized by use of the straight-line method over periods ranging from two to five years. OTHER ASSETS: Costs in excess of net assets of subsidiary Costs in excess of net assets of various consolidated partnerships are amortized on a straight-line basis over a period of 31.5 years. Organization costs Organization costs are being amortized by use of the straight-line method over a period of five years. Investment in leases Investment in leases represents the amounts paid for the acquisition of leasehold interests for certain hotels. These costs are being amortized by use of the straight-line method over the lives of the leases. Deferred subordinated note costs Deferred subordinated note costs represents the costs incurred in obtaining the 7% subordinated notes. These costs are being amortized by use of the straight-line method over the life of the debt. Franchise fees Franchise fees represent the initial franchise fees paid to franchisors for certain hotels and are being amortized by use of the straight-line method over the term of the franchise license, ranging from 10 to 20 years. DEFERRED INCOME: Deferred income represents that portion of fees earned from entities in which the Company holds an ownership interest which is equal to the Company's proportional ownership interest in the entity. The balance of the fees are recorded in income as earned. The deferred income is being amortized over the life of the operating assets owned by the affiliated entity. Also included in deferred income is the unamortized portion of loan points collected from a loan made to an unaffiliated party in connection with the acquisition of management contracts. These are being amortized into interest income over the life of the loan. INCOME TAXES: Deferred income taxes are provided on the differences in the bases of the Company's assets and liabilities determined for tax and financial reporting purposes. Deferred income taxes have been calculated under the liability method as prescribed by Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes." EARNINGS (LOSS) PER SHARE: Computations of earnings (loss) per share of common stock are computed by dividing net income (loss) by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding. Common stock equivalents include stock options and warrants. The weighted average number of shares used in the computations were 6,058,603 and 5,911,803 for the three and six months ended June 30, 1995, and 5,567,634 and 5,614,587 for the three and six months ended June 30, 1994, respectively. RECLASSIFICATIONS: Certain reclassifications have been made to the 1994 financial statements in order to conform with the 1995 presentation. 2. SHAREHOLDERS' EQUITY: REVERSE STOCK SPLIT: During 1989, the Company effected a 1-for-50 reverse stock split. Each holder of the Company's Common Stock was entitled to receive one new share for every 50 shares held as of the close of business on August 22, 1989. Any fractional shares resulting from the reverse split were acquired by the Company and retired. Through June 30, 1995, 19.06 of aggregate fractional shares were acquired by the Company at $4.63 per share and retired. AUTHORIZED SHARES: The Company's corporate charter authorizes 15,000,000 shares of Common Stock and 100,000 shares of Preferred Stock without par value. The Preferred Stock may be issued in series and the Board of Directors shall determine the voting powers, designations, preferences and relative participating, optional or other special rights and the qualifications, limitations or restrictions thereof. DIVIDEND RESTRICTIONS: Pursuant to the terms of the Company's subordinated notes (Note 3), no dividends may be paid on any capital stock of the Company until such notes have been paid in full. REGISTRATION OF COMMON STOCK: Pursuant to agreements with certain shareholders who executed agreements not to sell in connection with a public offering of 1,550,000 shares of the Company's Common Stock in May 1993, the Company filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission. This filing registered a total of 1,359,084 shares and became effective on December 28, 1993. 3. SUBORDINATED DEBENTURES: On October 9, 1992, the Company completed the private placement of $4,500,000 7% Subordinated Notes. The notes are unsecured, and subordinated in right of payment to all senior indebtedness, which includes all indebtedness outstanding on October 9, 1992. The Notes are due October 9, 1999, with interest payable quarterly at the rate of 7% per annum. The proceeds to the Company, net of commissions, legal and accounting fees and other costs of the offering were $4,030,346. During 1993, in accordance with certain provisions on the Notes, the Company prepaid 50% of the principal amount, resulting in a principal balance of $2,250,000 as of June 30, 1995. For each $1,000 principal amount loaned to the Company, the noteholder also received common stock purchase warrants, representing the right to purchase 375 shares of the Company's Common Stock at an exercise price of $4.00 per share for a period of five years from the date of issuance of the warrants. Warrants to purchase a total of 46,875 shares are outstanding at June 30, 1995. 4. SUPPLEMENTAL CASH FLOW DATA: The following represents the supplemental schedule of noncash investing and financing activities for the six months ended June 30, 1995 and 1994: Six Months Ended June 30, 1995 1994 Purchase of investments through issuance of common stock and decrease in notes receivable $ 755,692 $ 198,000 Reduction of accounts payable through issuance of common stock $ 233,351 The Company acquired additional partnership interests in four hotels for 244,015 shares of the Company's common stock. In conjunction with the acquisitions, liabilities were assumed as follows: Fair value of assets acquired $ 6,070,768 Issuance of common stock (818,345) Liabilities assumed $ 5,252,423 Proforma financial information has not been given reflecting the acquisitions since it is not considered material to the overall financial statement presentation. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company is primarily engaged in the development and ownership/operation of mid-market hotels. The consolidated financial statements include the operations of all hotels in which the Company has a 100% or controlling ownership interest ("Consolidated Hotels"). Investments in other entities in which the Company has a minority ownership interest are accounted for using the equity or cost method. The Company also provides hotel development and management services to unrelated third parties and entities in which the Company has a minority ownership interest on a fee-for-service or contract basis. The second quarter of 1995 resulted in record revenues of $12.3 million, an increase of 5.4% from $11.7 million in the second quarter of 1994. The second quarter net income increased to $844,210 in 1995 from $405,303 in 1994. Operating income increased from $704,566 in the second quarter of 1994 to $1.6 million in the 1995 second quarter, while earnings before interest/rents, taxes and depreciation/amortization ("EBITDA") increased to a record $2.7 million in the second quarter of 1995 from $1.6 million in the second quarter of 1994, or an increase of $1.2 million. The improved performance was primarily attributable to hotel operations and hotel development. Amerihost had an ownership interest in 46 hotels at June 30, 1995 versus 39 hotels at June 30, 1994, increasing equivalent owned rooms by 22.7%. These figures include an increase in Consolidated Hotels from 12 at June 30, 1994 to 18 at June 30, 1995. This increased ownership, as well as an 8.7% increase in same room revenue during the second quarter of 1995 compared to the same quarter in 1994 for all Consolidated Hotels, had a significant impact on the hotel operations segment's revenues and profit. The 8.7% increase in same room revenue resulted primarily from a 6.5% increase in occupancy and a $0.46 increase in average daily rate, compared with the second quarter of 1994. The hotel operations segment generated revenues of $6.1 million in the second quarter of 1995, compared to $3.9 million in the 1994 second quarter. Operating income in this segment increased 57.8% from $773,756 in the second quarter of 1994 to $1.2 million in the 1995 second quarter. During the second quarter of 1995, the Company was constructing ten hotels, five of which were completed during the quarter. Several additional hotels were also in various stages of the pre-construction development process. The Company has an ownership position in seven of these ten hotels, including 100% ownership of three. Seven of these ten hotels are the Company's own brand, AmeriHost Inn. AmeriHost Inns offer certain amenities including an indoor pool area, whirlpool suites, an exercise room, and a free continental breakfast which assists the property in obtaining favorable occupancy and average daily rates, and an efficient layout designed to control operating costs. Going forward, the Company plans to continue to develop and construct hotels for both itself, which will contribute to the hotel operations segment, and unrelated third parties and entities in which the Company has a minority equity interest, which will contribute to the hotel development segment. RESULTS OF OPERATIONS Record revenues of $12.3 million for the three months ended June 30, 1995 increased 5.4% from revenues of $11.7 million for the three months ended June 30, 1994. This increase was due primarily to a significant increase in the Company's hotel operations segment, partially offset by a decrease in the hotel development segment, and to a lesser extent, a decrease in the employee leasing segment. Hotel operations revenue increased 56.0% to $6.1 million in the second quarter of 1995, as compared to $3.9 million in the second quarter of 1994. This increase was attributable to increases in same room occupancy and average daily rates and the addition of six Consolidated Hotels to the hotel operations segment since June 30, 1994. The Company held a minority ownership position in four of these six hotels prior to these hotels becoming Consolidated Hotels in 1995 when additional ownership interests were acquired. The second quarter of 1995 included the operations of 18 Consolidated Hotels comprising 2,109 rooms compared to 12 Consolidated Hotels comprising 1,423 rooms in the second quarter of 1994 or an increase of 48.2% in total rooms. Excluding minority interests in the Consolidated Hotels, this translates to 1,751 and 1,313 equivalent owned rooms as of June 30, 1995 and 1994, respectively, or an increase of 33.4%. The average daily rates for the same room Consolidated Hotels increased $0.46 from $47.86 in the second quarter of 1994 to $48.32 in the second quarter of 1995, while occupancy increased 6.5%. Excluding the construction of Consolidated Hotels, the Company was constructing seven hotels in the second quarter of 1995, versus four hotels in the second quarter of 1994, and had several projects in various stages of pre-construction development. Although more projects were under construction during the 1995 second quarter, revenues from the Company's hotel development segment decreased from $3.5 million in the second quarter of 1994 to $2.3 million in the second quarter of 1995. Five of the seven hotels under construction during the second quarter of 1995 were opened during the quarter resulting in the recognition of the remaining revenues for only part of the quarter. Conversely, the four projects in the second quarter of 1994 were under construction for the entire or majority portion of the quarter with revenues recognized accordingly. The increase in hotel operations revenue was partially offset by a decrease in employee leasing revenues. Hotel management and employee leasing revenues are a direct function of the number of unrelated and minority owned properties managed by the Company. While the number of Consolidated Hotels increased from 12 to 18, the Company managed 37 hotels for third parties and minority owned entities at both June 30, 1994 and 1995. The addition of seven management contracts from July 1, 1994 to June 30, 1995 was offset by the loss of three management contracts with third parties and the four minority owned hotels which became Consolidated Hotels in the first and second quarters of 1995 due to the Company acquiring additional ownership interests in these hotels. Management and employee leasing revenues from the Consolidated Hotels are eliminated in consolidation. Three hotel management contracts were terminated towards the end of the 1994 second quarter, after management and employee leasing fees were recognized for the majority of the quarter. In addition, three management and employee leasing contracts with minority owned hotels did not commence until later in the 1995 second quarter. As a result, employee leasing revenue decreased 11.3% from $3.5 million to $3.1 million in the second quarter. Hotel management revenues increased 13.4% from $710,647 in the second quarter of 1994 to $805,619 in the second quarter of 1995 as the timing of the commencement and termination of management contracts was more than offset by higher management fee revenues on the remaining properties. Operating costs and expenses decreased 6.3% to $9.2 million (74.7% of total revenues) in the second quarter from $9.8 million (84.1% of total revenues) in the second quarter of 1994. Operating costs and expenses for the hotel development segment decreased from $3.4 million in the second quarter of 1994 to $1.7 million in the second quarter of 1995, and are directly related to the decrease in construction revenue during 1995 compared to the 1994 second quarter, as explained above. Operating costs and expenses in the hotel operations segment increased 58.0% from $2.5 million in the second quarter of 1994 to $4.0 million in the second quarter of 1995, resulting primarily from the addition of six Consolidated Hotels to this segment and is directly related to the 56.0% increase in segment revenue. Hotel management segment operating costs and expenses increased 8.8% in the second quarter from $467,738 in 1994 to $508,755 in 1995 due to the changes in hotels managed for third parties and minority owned entities, and a decrease in pre-opening costs associated with new hotels and management contracts. Employee leasing operating costs and expenses decreased 12.0% from $3.5 million in the second quarter of 1994 to $3.0 million in 1995 and is directly related to the 11.3% decrease in employee leasing revenues. Depreciation and amortization expense increased 81.1% to $478,007 in the second quarter of 1995 from $263,975 in the second quarter of 1994. This increase was primarily attributable to the addition of six Consolidated Hotels to the hotel operations segment and the resulting depreciation and amortization therefrom. Leasehold rents - hotels increased 23.4% to $543,941 in the second quarter of 1995 from $440,783 in 1994. The increase was due to the addition of two leased Consolidated Hotels to the hotel operations segment (the Company had held a minority ownership position in these hotels prior to 1995 when additional ownership interests were acquired), partially offset by a decrease in leasehold rents for four other Consolidated Hotels pursuant to a lease amendment which provided for reduced lease payments and extended the termination date to December 31, 1999. Corporate general and administrative expense increased 17.3% from $447,808 in the second quarter of 1994 to $525,289 in the second quarter of 1995, and can be attributed to an increase in public relations expenses and a decrease in costs allocated to specific development projects. The Company's operating income in the second quarter increased $852,441, from $704,566 in 1994 to $1.6 million in 1995, or 121.0%. Operating income from the hotel operations segment increased 57.8% from $773,756 in the second quarter of 1994 to $1.2 million in the second quarter of 1995, resulting primarily from an increase in Consolidated Hotels from 12 to 18, an increase in same room revenues, and the controlling of costs. The hotel development segment generated operating income of $597,799 in the second quarter of 1995 compared to $167,975 in 1994, despite higher revenues in the second quarter of 1994. This increase is due to a larger volume of construction activity during the second quarter of 1994 which has higher revenue and a lower gross profit margin than pre- construction development activity. The second quarter of 1995 contained a larger portion of pre-construction development activity. The hotel management segment generated operating income of $235,981 in the second quarter of 1995 compared to $206,367 in 1994, due primarily to the achievement of operational efficiencies, offset by a decrease in the allocation of pre-opening costs associated with new hotels and management contracts. Employee leasing operating income increased during the second quarter, from $31,565 in 1994 to $52,463 in 1995. The Company uses a supplemental performance measure along with net income to report its operating results. Earnings before interest/rent, taxes and depreciation/amortization ("EBITDA") is not defined by generally accepted accounting principles, but the Company believes it provides relevant information about its operations and is necessary for an understanding of the Company's operations. For purposes of EBITDA, the Company considers leasehold rents for hotels to be financing costs similar to interest. EBITDA for the second quarter of 1995 was a record $2.7 million as compared to $1.6 million in the second quarter of 1994. The significant changes resulting in the increase in EBITDA from the second quarter of 1994 to 1995 are discussed above. An EBITDA schedule is included herein. Interest expense was $362,007 in the second quarter of 1995 as compared to $200,258 in the second quarter of 1994. This increase is primarily attributable to an increase in mortgage financing of the Company's Consolidated Hotels. The Company's share of equity in net income of affiliates decreased from $125,498 in the second quarter of 1994 to $96,651 in the same quarter of 1995. This decrease in equity in income of affiliates is due to the four hotels becoming Consolidated Hotels, which were previously accounted for by the equity method, pursuant to the acquisition of additional ownership interests. This decrease was partially offset by increases in occupancy and average daily rates at these hotels. Distributions from affiliates increased to $184,943 in the second quarter of 1995 from $108,714 in 1994. In the second quarter of 1995, the Company recorded an income tax expense of $517,000 compared to $269,000 in the second quarter of 1994, which increase is directly attributable to the increase in net income. LIQUIDITY AND CAPITAL RESOURCES Over the years, the Company has financed its growth through a combination of cash provided from operations, long-term debt financing and public and private issuances of Common Stock. During the second quarter of 1995, the Company experienced an increase in cash from operations of $1.5 million, compared to an increase of $1.1 million in the second quarter of 1994, or an improvement of $396,539 from 1994 to 1995. The increase in cash flow from operations during the second quarter of 1994 to 1995 can be attributed to the increased hotel ownership and operation activity and improvements in occupancy and average daily rates over the second quarter of 1994, which contributed to the increase in net income from $405,303 in the second quarter of 1994 to $844,210 in the second quarter of 1995. In addition to the positive cash flow from operations of $1.4 million during the first six months of 1995, the Company received $2.5 million through the financing of hotel projects during the same period. These increases to cash were more than offset by the use of $5.1 million in cash for investing activities during the first six months of 1995, primarily for the construction of hotel properties. As a result, cash decreased $1.2 million during the six months ended June 30, 1995. The Company has four main sources of cash from operating activities: fees from development, construction and renovation projects; revenues from hotel operations; fees from management contracts; and fees from employee leasing. Fees from development, construction and renovation projects are typically received within 15 to 45 days from billing. During the second quarter of 1995, development, construction and renovation projects contributed $597,799 to the Company's operating income compared to $167,975 in the second quarter of 1994. Due to the procedures in place for processing its construction draws, the Company typically does not pay its contractors until the Company receives its draw. Cash from hotel operations is typically received at the time the guest checks out of the hotel. A portion of the Company's hotel operations revenues is generated through other businesses and contracts and are usually paid within 30 to 45 days from billing. Hotel operations experienced operating income of $1.2 million during the second quarter of 1995 compared to $773,756 during the second quarter of 1994. Management fee revenues are typically received by the Company within five working days from the end of each month. The hotel management segment contributed $235,981 to the Company's operating income in the second quarter of 1995 compared to $206,367 in 1994. Cash from the Company's employee leasing segment is typically received 24 to 48 hours prior to the pay date. The employee leasing segment contributed $52,463 and $31,565 in operating income during the second quarter of 1995 and 1994, respectively. During the second quarter of 1995, the Company used $2.7 million in investing activities compared to $1.8 million during the second quarter of 1994. The Company invests cash in three principal areas: the purchase of minority equity interests in hotels; the purchase of property and equipment through the construction and renovation of Consolidated Hotels; and loans to affiliated and non-affiliated hotels for the purpose of construction, renovation and working capital. In the second quarter of 1994, the Company used cash primarily for the purchase of $1.5 million in property and equipment for Consolidated Hotels and $378,961 for the purchase of investments. In the second quarter of 1995, the Company used $3.0 million to purchase property and equipment for Consolidated Hotels, received $508,933 in loan repayments from affiliates, net of loans made, and used $225,050 for the purchase of investments. The Company enters into agreements with contractors for the construction of Consolidated Hotels, including hotels under construction at June 30, 1995, after both the construction and long-term mortgage financing is in place. Typically, investments in hotels generate positive cash flow after a stabilization period ranging from 90 to 180 days depending upon the geographic location of the hotel and time of year the hotel is opened. As an equity holder, additional cash proceeds can be realized by the Company upon the sale of the properties. Cash received from financing activities was $1.4 million in the second quarter of 1995 compared to $918,491 in the 1994 second quarter. In 1994, the contributing factors were proceeds of $806,009 from the mortgage financing of Consolidated Hotels, and $245,056 in equity contributions from minority owners. In 1995, the primary factors were proceeds of $946,531 from the mortgage financing of hotels and $744,147 in proceeds from the Company's line-of-credit. The $744,147 was outstanding on the line-of-credit at June 30, 1995. The Company's line-of-credit was increased effective May 1, 1995 to $3,500,000 and expires on May 1, 1996. The Company expects cash from operations to be sufficient to pay all operating and interest expenses in 1995. SEASONALITY Revenues from all of the Company's business segments are heavily dependent on hotel occupancy, which results in significant seasonal variations in the Company's revenues, with lower revenues usually in the first and fourth quarters of each year. The impact of seasonality may be diminished as the Company expands into warmer climates. INFLATION Management does not believe that inflation has had, or is expected to have, any significant adverse impact on the Company's financial condition or results of operations for the periods presented. AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES SCHEDULE OF EARNINGS BEFORE INTEREST/RENT, TAXES AND DEPRECIATION/AMORTIZATION (UNAUDITED)
Three Months Ended June 30, Six Months Ended June 30, 1995 1994 1995 1994 Revenue $ 12,286,630 $ 11,656,358 $ 25,443,991 $ 18,489,628 Operating costs and expenses 9,182,386 9,799,225 21,192,055 16,497,474 3,104,244 1,857,133 4,251,936 1,992,154 Corporate general and administrative (525,289) (447,809) (993,047) (1,093,940) Interest income 160,367 77,631 251,903 168,106 Other income (expense) (677) 25,126 19,482 25,909 Equity in net income and losses of affiliates 96,651 125,498 (86,877) (79,483) Earnings before minority interests 2,835,296 1,637,579 3,443,397 1,012,746 Minority interests in earnings of consolidated subsidiaries and partnerships (90,131) (58,260) 22,478 (13,832) Earnings before interest/rent, taxes and depreciation/amortization $ 2,745,165 $ 1,579,319 $ 3,465,875 $ 998,914
PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K: (a) Exhibits: Exhibit xxvii - Financial Statement Schedule (b) Reports on Form 8-K: There were no reports on Form 8-K filed during this period covered by this report. Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Amerihost Properties, Inc. Registrant Date: August 4, 1995 By: /s/ Russell J. Cerqua Russell J. Cerqua Treasurer/Senior Vice President, Finance By: /s/ James B. Dale James B. Dale Corporate Controller EX-27 2
5 This schedule contains second quarter summary financial information extracted from Amerihost Properties, Inc.'s 1995 second quarter Form 10-Q and is qualified in its entirety by reference to such From 10-Q filing. 6-MOS DEC-31-1995 JUN-30-1995 1,831,816 0 5,420,678 0 0 7,725,857 30,183,472 3,940,335 42,196,343 6,287,207 0 29,687 0 0 15,406,309 42,196,343 12,286,630 12,286,630 9,182,386 9,182,386 1,547,237 0 362,007 1,361,210 (517,000) 844,210 0 0 0 844,210 .14 .14
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