-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PJaqLGx4dONSA3PUHjJKBN1P6ooFGjZTcz0689RAYWtzRlykTvQ9te3tOlx/NOHQ /4ZH30mNEEW0n/x97q/YNA== 0000914760-96-000146.txt : 19960827 0000914760-96-000146.hdr.sgml : 19960827 ACCESSION NUMBER: 0000914760-96-000146 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960730 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERIHOST PROPERTIES INC CENTRAL INDEX KEY: 0000778423 STANDARD INDUSTRIAL CLASSIFICATION: 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: 96601199 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, 1996 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: (847) 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 July 29, 1996, 6,023,521 shares of the Registrant's Common Stock were outstanding. AMERIHOST PROPERTIES, INC. FORM 10-Q FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 INDEX PART I: Financial Information Page Consolidated Balance Sheets as of June 30, 1996 and December 31, 1995 4 Consolidated Statements of Operations for the Three and Six Months Ended June 30, 1996 and 1995 6 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1996 and 1995 7 Notes to Consolidated Financial Statements 9 Management's Discussion and Analysis 11 Schedule of Earnings Before Interest/Rent, Taxes and Depreciation/Amortization for the Three and Six Months Ended June 30, 1996 and 1995 17 PART II: Other Information Item 6 Exhibits and Reports on Form 8-K 18 Signatures 18 Part I: Financial Information Item 1: Financial Statements AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30, December 31, 1996 1995 ASSETS Current assets: Cash and cash equivalents $ 2,609,268 $ 1,371,278 Accounts receivable (including $1,146,030 and $802,164 from related parties) 3,448,601 3,270,094 Notes receivable (including $1,839,444 and $1,752,126 from related parties) 2,052,362 1,965,048 Prepaid expenses and other current assets 260,774 188,163 Refundable income taxes - 230,530 Costs and estimated earnings in excess of billings on uncompleted contracts (including $8,137,130 and $3,574,939 from related parties) 8,258,944 3,900,879 Total current assets 16,629,949 10,925,992 Investments 2,388,456 2,388,999 Property and equipment: Land 4,445,693 4,236,309 Buildings 23,776,472 22,075,629 Furniture, fixtures and equipment 10,111,316 9,204,377 Construction in progress 1,560,119 662,159 Leasehold improvements 2,136,925 2,050,654 42,030,525 38,229,128 Less accumulated depreciation and amortization 6,697,538 5,404,102 35,332,987 32,825,026 Long-term notes receivable (including $2,149,082 and $1,450,616 from related parties) 3,541,621 2,863,580 Costs of management contracts acquired, net of accumulated amortization of $1,011,446 and $913,393 859,026 664,110 Other assets (including deferred taxes of $383,000), net of accumulated amortization of $1,719,399 and $1,451,715 2,816,821 2,785,595 7,217,468 6,313,285 $ 61,568,860 $ 52,453,302 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 9,026,420 $ 3,751,097 Bank line-of-credit 1,731,803 2,317,036 Accrued payroll and related expenses 794,597 688,648 Accrued real estate and other taxes 846,377 606,468 Other accrued expenses and current liabilities 814,757 666,352 Current portion of long-term debt 1,129,544 1,042,847 Income taxes payable 307,491 - Total current liabilities 14,650,989 9,072,448 Long-term debt, net of current portion 26,375,235 23,971,481 Deferred income 747,114 686,388 Commitments Minority interests 1,121,970 1,456,226 Shareholders' equity: Preferred stock, no par value; authorized 100,000 shares; none issued - - Common stock, $.005 par value; authorized 15,000,000 shares; issued 6,023,521 shares at June 30, 1996, and 5,977,213 shares at December 31, 1995 30,118 29,886 Additional paid-in capital 17,094,877 16,920,237 Retained earnings 2,941,724 1,709,803 20,066,719 18,659,926 Less: Stock subscriptions receivable (436,875) (436,875) Notes receivable (956,292) (956,292) 18,673,552 17,266,759 $ 61,568,860 $ 52,453,302 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, 1996 1995 1996 1995 Revenue: Hotel operations: AmeriHost Inn hotels $ 2,187,659 $ 136,341 $ 3,493,797 $ 136,341 Other hotels 5,765,426 5,968,660 10,042,784 10,083,385 Development and construction 8,211,296 2,272,540 12,191,098 7,777,364 Management services 694,148 805,619 1,183,830 1,370,073 Employee leasing 2,959,210 3,103,470 5,550,799 6,076,828 19,817,739 12,286,630 32,462,308 25,443,991 Operating costs and expenses: Hotel operations: AmeriHost Inn hotels 1,176,762 63,174 2,062,528 63,174 Other hotels 3,816,470 3,889,327 7,669,555 7,346,858 Development and construction 7,197,907 1,671,697 10,311,585 6,835,826 Management services 496,384 508,755 869,035 965,578 Employee leasing 2,875,830 3,049,433 5,401,739 5,980,619 15,563,353 9,182,386 26,314,442 21,192,055 4,254,386 3,104,244 6,147,866 4,251,936 Depreciation and amortization 856,357 478,007 1,659,172 912,926 Leasehold rents - hotels 518,172 543,941 964,302 995,546 Corporate general and administrative 521,994 525,289 1,006,646 993,047 Operating income 2,357,863 1,557,007 2,517,746 1,350,417 Other income (expense): Interest expense (619,124) (362,007) (1,284,298) (669,726) Interest income 161,276 160,367 315,635 251,903 Other income (expense) 15,077 (677) 56,986 19,482 Gain on sale of land 404,256 - 404,256 - Equity in net income and losses of affiliates 181,028 96,651 36,389 (86,877) Income before minority interests and income taxes 2,500,376 1,451,341 2,046,714 865,199 Minority interests in (income) loss of consolidated subsidiaries and partnerships (161,794) (90,131) 42,207 22,478 Income before income tax 2,338,582 1,361,210 2,088,921 887,677 Income tax expense 959,000 517,000 857,000 327,000 Net income $ 1,379,582 $ 844,210 $ 1,231,921 $ 560,677 Earnings per share $ 0.20$ 0.14 $ 0.18 $ 0.09 See notes to consolidated financial statements.
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
Six Months Ended June 30, 1996 1995 Cash flows from operating activities: Cash received from customers $ 28,223,649 $ 25,881,307 Cash paid to suppliers and employees (22,704,610) (23,323,406) Interest received 93,950 145,148 Interest paid (1,246,185) (665,120) Income taxes paid (318,979) (687,731) Net cash provided by operating activities 4,047,825 1,350,198 Cash flows from investing activities: Distributions from affiliates 259,800 204,162 Purchase of property and equipment (3,937,049) (5,252,999) Purchase of investments (350,200) (225,050) Increase in notes receivable (2,537,964) (351,550) Collections on notes receivable 1,633,652 780,744 Pre-opening and management contract costs (292,968) (213,016) Sale of investments - 10,000 Sale of land 524,377 - Acquisition of leasehold interest (94,000) (5,000) Increase in organization costs - (1,455) Net cash used in investing activities (4,794,352) (5,054,164) Cash flows from financing activities: Proceeds from issuance of long-term debt 3,339,047 2,170,794 Increase in deferred offering costs (74,456) - Principal payments of long-term debt (871,292) (352,158) Proceeds from issuance of common stock 202,969 - Proceeds from line-of-credit 5,045,931 744,147 Payments on line-of-credit (5,631,164) - Distributions to minority interests (26,518) (53,030) Net cash provided from financing activities 1,984,517 2,509,753 Net increase (decrease) in cash 1,237,990 (1,194,213) Cash and cash equivalents, beginning of period 1,371,278 3,026,029 Cash and cash equivalents, end of period $ 2,609,268 $ 1,831,816 Reconciliation of net income to net cash provided by operating activities: Net income $ 1,231,921 $ 560,677 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,659,172 912,926 Equity in net loss (income) of affiliates before amortization of deferred income (19,931) 147,073 Minority interests in net income of subsidiaries (42,207) (22,478) Amortization of deferred income (16,458) (60,196) Amortization of deferred interest (2,816) (4,286) Amortization of loan discount 22,696 22,696 Increase in deferred income 80,000 - Gain on sale of land (404,256) - Increase in deferred tax asset - (30,000) Compensation paid through issuance of common stock 29,676 213,991 Changes in assets and liabilities, net of effects of acquisitions: Increase in accounts receivable (17,470) (301,578) Increase in interest receivable (218,869) (102,469) Increase in prepaid expenses and other current assets (72,611) (44,998) (Increase) decrease in costs and estimated earnings in excess of billings on uncompleted contracts (4,358,065) 694,793 Increase in other assets (130,454) (232,843) Decrease in refundable income taxes 230,530 - Increase (decrease) in accounts payable 5,275,213 (429,967) Increase in accrued expenses and other current liabilities 478,846 375,677 Increase (decrease) in accrued income taxes 307,491 (330,731) Increase (decrease) in accrued interest 15,417 (18,089) Net cash provided by operating activities $ 4,047,825 $ 1,350,198 See notes to consolidated financial statements.
1. 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, 1996 and December 31, 1995 and the results of its operations for the three and six months ended June 30, 1996 and 1995 and cash flows for the six months ended June 30, 1996 and 1995. The results of operations for the three and six months ended June 30, 1996, 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 1995 Annual Report on Form 10-K. Certain reclassifications have been made to the 1995 financial statements in order to conform with the 1996 presentation. 2. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, and partnerships in which the Company has a controlling ownership interest. Significant intercompany accounts and transactions have been eliminated. 3. 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. The income tax expense for the three and six months ended June 30, 1996 and 1995 was based on the Company's estimate of the effective tax rate expected to be applicable for the full year. The Company expects the effective tax rate to approximate the Federal and state statutory rates. 4. EARNINGS PER SHARE: Earnings per share of common stock is computed by dividing the net income by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding. The weighted average number of shares used in the computations were 6,764,415 and 6,695,726 for the three and six months ended June 30, 1996, and 6,058,603 and 5,911,803 for the three and six months ended June 30, 1995, respectively. 5. SUPPLEMENTAL CASH FLOW DATA: The following represents the supplemental schedule of noncash investing and financing activities for the six months ended June 30, 1996 and 1995: Six Months Ended June 30, 1996 1995 Purchase of investments through issuance of common stock and decrease in notes and accrued interest receivable $ 143,929 $ 755,692 Reduction of accounts payable through issuance of common stock $ 233,351 During the first six months of 1995, 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 Pro forma financial information has not been given reflecting the acquisitions since it is not considered material to the overall financial statement presentation. 6. HOTEL LEASES: The Company, through its subsidiaries and consolidated partnerships, has leasehold interests ranging from 50.35% to 100% in nine hotels, the operations of which are included in the Company's consolidated financial statements. All of these leases provide for an option to purchase the hotel. Some of the purchase prices are based upon a multiple of gross room revenues for the preceding twelve months and the others are based upon a fixed amount, typically with annual increases based upon the change in the consumer price index. At June 30, 1996, the aggregate purchase price for these nine hotels was approximately $25,750,000. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company is engaged in the development of AmeriHost Inn hotels, its proprietary brand, and the ownership, operation and management of AmeriHost Inn hotels and other mid-price hotels. As of June 30, 1996, there were 26 AmeriHost Inn hotels open, of which ten were wholly-owned, one was majority owned, 13 were minority-owned, and two were managed for unrelated third parties. The Company intends to use primarily the AmeriHost Inn brand when expanding its hotel operations segment. All of the hotels currently under construction will be AmeriHost Inn hotels. As of June 30, 1996, 13 AmeriHost Inn hotels were under construction, of which three will be wholly-owned with the remainder being minority-owned. Same room revenues for all AmeriHost Inns increased approximately 8.1% in the second quarter of 1996 compared to the second quarter of 1995, attributable to an increase of $3.37 in average daily rate and a 1.4% increase in occupancy. Revenues from hotel operations consist of the revenues from all hotels in which the Company has a 100% or controlling ownership or leasehold 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. As a result of the Company's focus on increasing the number of Consolidated Hotels, the Company expects that revenues from the hotel operations segment will increase over time as a percentage of the Company's overall revenues. Development and construction revenues consist of one-time fees for new construction, acquisition and renovation activities performed by the Company for minority-owned hotels and unrelated third parties. The Company also receives management services revenues for management services provided to minority-owned hotels and unrelated third parties. Employee leasing revenues consist of revenues the Company receives for leasing its employees to minority-owned hotels and unrelated third parties. All revenues attributable to development, construction, management and employee leasing services with respect to Consolidated Hotels have been eliminated in consolidation. The second quarter and first six months of 1996 resulted in record revenues, net income, and EBITDA (as defined below). Revenues increased 61.3% and 27.6% to $19.8 million and $32.5 million during the three and six months ended June 30, 1996, respectively, from $12.3 million and $25.4 million during the three and six months ended June 30, 1995, due primarily to expanded hotel operations and significant hotel development and construction activity. Net income for the second quarter increased 63.4% to $1.4 million, or $0.20 per share in 1996, from $844,210, or $0.14 per share in 1995. Net income for the first six months increased 119.7% to $1.2 million, or $0.18 per share in 1996, from $560,677, or $0.09 per share in 1995. Excluding the second quarter gain on the sale of excess land adjacent to a Consolidated Hotel in the amount of $180,076, net of minority interest and income taxes, the Company reported earnings per share of $0.18 and $0.16 during the three and six months ended June 30, 1996. Operating income increased 51.4% and 86.4% to $2.4 million and $2.5 million during the three and six months ended June 30, 1996, respectively, from $1.6 million and $1.4 million during the three and six months ended June 30, 1995. The Company uses EBITDA as a supplemental performance measure along with net income to report its operating results. EBITDA is defined as net income, adjusted to eliminate the impact of (i) interest expense; (ii) leasehold rents for hotels, which the Company considers to be financing costs similar to interest; (iii) income tax expense (benefit), (iv) depreciation; and (v) amortization of intangibles. EBITDA should not be considered as an alternative to net income or cash flows from operating activities as a measure of liquidity. EBITDA increased 46.7% and 64.2% to $4.0 million and $5.7 million during the three and six months ended June 30, 1996, respectively, from $2.7 million and $3.5 million during the three and six months ended June 30, 1995. An EBITDA schedule is included herein. Amerihost had an ownership interest in 53 hotels at June 30, 1996 versus 46 hotels at June 30, 1995 (excluding hotels under construction). This increased ownership was achieved primarily through the development of AmeriHost Inn hotels for the Company's own account and for minority-owned entities. These figures include an increase in Consolidated Hotels from 18 at June 30, 1995 to 25 at June 30, 1996. RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO THE THREE AND SIX MONTHS ENDED JUNE 30, 1995 Revenues increased 61.3% and 27.6% to $19.8 million and $32.5 million during the three and six months ended June 30, 1996, respectively, from revenues of $12.3 million and $25.4 million during the three and six months ended June 30, 1995. These increases were due primarily to significant increases in the Company's hotel development and hotel operations segments. Hotel operations revenue increased 30.3% and 32.5% to $8.0 million and $13.5 million during the three and six months ended June 30, 1996, respectively, as compared to $6.1 million and $10.2 million during the three and six months ended June 30, 1995. This increase was primarily attributable to the addition of seven Consolidated Hotels to the hotel operations segment from July 1, 1995 through June 30, 1996. The Company held a minority ownership position in one of these seven hotels prior to it becoming a Consolidated Hotel in the fourth quarter of 1995 when additional ownership interests were acquired. The hotel operations segment included the operations of 25 Consolidated Hotels comprising 2,570 rooms at June 30, 1996, compared to 18 Consolidated Hotels comprising 2,109 rooms at June 30, 1995 or an increase of 21.9% in total rooms. After considering the Company's ownership interest in the majority-owned Consolidated Hotels, this translates to 2,197 and 1,751 equivalent owned rooms as of June 30, 1996 and 1995, respectively, or an increase of 25.5%. Hotel development revenue increased 261% and 56.8% to $8.2 million and $12.2 million during the three and six months ended June 30, 1996, respectively, from $2.3 million and $7.8 million during the three and six months ended June 30, 1995. These increases were due primarily to the significant increase in hotel development activity performed for entities in which the Company holds a minority ownership interest. The Company was constructing 14 and 16 hotels during the second quarter and first six months of 1996, compared to seven hotels during the three and six months ended June 30, 1995, including five which were opened during the 1995 second quarter resulting in the recognition of revenues for only a portion of the quarter. In addition, the Company was able to make significant progress on certain projects which were hampered by severe weather conditions in the first quarter of 1996. The Company also had several projects in various stages of pre-construction development during both six month periods. Hotel management revenue decreased 13.8% and 13.6% to $694,148 and $1.2 million during the three and six months ended June 30, 1996, respectively, from $805,619 and $1.4 million during the three and six months ended June 30, 1995. While the number of hotels managed for third parties and minority- owned entities increased from 37 hotels at June 30, 1995 to 39 hotels at June 30, 1996, the total number of rooms managed decreased by 73. The addition of six management contracts (426 rooms) from July 1, 1995 to June 30, 1996 was offset by the termination of three management contracts (397 rooms) with minority-owned entities as a result of a hotel sale or temporary closing during renovation, and the one minority-owned hotel (102 rooms) which became a Consolidated Hotel in the fourth quarter of 1995 due to the Company acquiring additional ownership interests in this hotel. The Company does not recognize management fees from Consolidated Hotels. The total management fee revenues generated during the three and six months ended June 30, 1996 from the six management contracts added since July 1, 1995 were lower than the management fee revenues generated during the three and six months ended June 30, 1995 from the four minority-owned hotels terminated as discussed above. In addition, same room revenues decreased for all hotels managed for third parties. Employee leasing revenue decreased 4.7% and 8.7% to $3.0 million and $5.6 million during the three and six months ended June 30, 1996, respectively, from $3.1 million and $6.1 million during the three and six months ended June 30, 1995, as the six hotels added from July 1, 1995 through June 30, 1996 representing 426 rooms, incurred lower payroll costs than the four hotels representing 499 rooms which were terminated as discussed above. Total operating costs and expenses increased 69.5% and 24.2% to $15.6 million (78.5% of total revenues) and $26.3 million (81.1% of total revenue) during the three and six months ended June 30, 1996, respectively, from $9.2 million (74.7% of total revenues) and $21.2 million (83.3% of total revenues) during the three and six months ended June 30, 1995. Operating costs and expenses in the hotel operations segment increased 26.3% and 31.3% to $5.0 million and $9.7 million during the three and six months ended June 30, 1996, respectively, from $4.0 million and $7.4 million during the three and six months ended June 30, 1995, resulting primarily from the addition of seven Consolidated Hotels to this segment and are directly related to the 30.3% and 32.5% increase in segment revenue during the three and six months ended June 30, 1996. Hotel operations segment operating costs and expenses as a percentage of segment revenue decreased to 62.8% and 71.9% during the three and six months ended June 30, 1996, respectively, from 64.7% and 72.5% during the three and six months ended June 30, 1995, due primarily to improvements in operating efficiency and the increase in newly constructed AmeriHost Inn hotels, whose operating costs are typically lower than the older, acquired hotels. Operating costs and expenses from hotels other than AmeriHost Inn hotels increased to 66.2% and 76.4% of hotel revenues during the three and six months ended June 30, 1996 from 65.2% and 72.9% of hotel revenues during the three and six months ended June 30, 1995, due primarily to the conversion of three Consolidated Hotels to AmeriHost Inn hotels and higher expenses associated with the severe weather conditions in the first quarter of 1996. Operating costs and expenses for the hotel development segment increased 331% and 50.9% to $7.2 million and $10.3 million during the three and six months ended June 30, 1996, respectively, from $1.7 million and $6.8 million during the three and six months ended June 30, 1995, consistent with the increase in hotel development revenues. Operating costs and expenses in the hotel development segment as a percentage of segment revenue increased to 87.7% during the three months ended June 30, 1996 from 73.6% during the three months ended June 30, 1995. The second quarter of 1996 contained a significant level of construction activity which has higher operating costs than pre-construction development activity. The second quarter of 1995 contained a relatively higher portion of pre-construction development activity which has lower associated operating costs. Operating costs and expenses in the hotel development segment as a percentage of segment revenue decreased to 84.6% from 87.9% during the six months ended June 30, 1996, due primarily to the timing of the pre-construction development activity as well as the construction activity. Hotel management segment operating costs and expenses decreased 2.4% and 10.0% to $496,384 and $869,035 during the three and six months ended June 30, 1996, respectively, from $508,755 and $1.0 million during the three and six months ended June 30, 1995 due to an increase in capitalized pre-opening costs associated with new hotels and management contracts, and efficiencies achieved in the management of all hotels operated and/or managed. Employee leasing operating costs and expenses decreased 5.7% and 9.7% to $2.9 million and $5.4 million during the three and six months ended June 30, 1996, respectively, from $3.0 million and $6.0 million during the three and six months ended June 30, 1995, and is consistent with the 4.7% and 8.7% decrease in segment revenue during the three and six month periods. Depreciation and amortization expense increased 79.2% and 81.7% to $856,357 and $1.7 million during the three and six months ended June 30, 1996, respectively, from $478,007 and $912,926 during the three and six months ended June 30, 1995. This increase was primarily attributable to the addition of seven Consolidated Hotels to the hotel operations segment and the resulting depreciation and amortization therefrom. Leasehold rents - hotels decreased 4.7% and 3.1% to $518,172 and $964,302 during the three and six months ended June 30, 1996, respectively, from $543,941 and $1.0 million during the three and six months ended June 30, 1995. The decrease was due to the termination of one leased Consolidated Hotel in the second quarter of 1995 as a result of the sale of the hotel, partially offset by the addition of one leased Consolidated Hotel to the hotel operations segment in the fourth quarter of 1995 (the Company had held a minority ownership position in this hotel prior to acquiring additional ownership interests which resulted in a majority ownership position). Corporate general and administrative expense remained relatively stable, decreasing 0.6% to $521,994 in the second quarter of 1996 from $525,289 in the second quarter of 1995. During the six month period, corporate general and administrative expense increased slightly by 1.4% to $1,006,646 in the 1996 period from $993,047 in the 1995 period. The Company's operating income increased $800,856 and $1.2 million, or 51.4% and 86.4%, to $2.4 million and $2.5 million during the three and six months ended June 30, 1996, respectively, from $1.6 million and $1.3 million during the three and six months ended June 30, 1995. Operating income from the hotel operations segment increased to $1.7 million and $1.4 million during the three and six months ended June 30, 1996 from $1.2 million and $1.1 million during the three and six months ended June 30, 1995, resulting primarily from the addition of seven Consolidated Hotels from July 1, 1995 to June 30, 1996. Operating income from the hotel development segment increased to $1.0 million and $1.8 million during the three and six months ended June 30, 1996 compared to $597,799 and $935,298 during the three and six months ended June 30, 1995, due to the significant level of hotel development and construction activity. The hotel management segment generated operating income of $136,163 and $197,542 during the three and six months ended June 30, 1996 compared to $235,981 and $291,447 during the three and six months ended June 30, 1995. These decreases were due primarily to the net reduction in total rooms managed for minority-owned entities and unrelated third parties as well as the elimination of management fees from Consolidated Hotels. Employee leasing operating income increased slightly during the second quarter, to $81,805 in 1996 from $52,463 in 1995. During the six month period, employee leasing operating income increased to $145,910 in 1996 from $93,060 in 1995. Interest expense was $619,124 and $1.3 million during the three and six months ended June 30, 1996, respectively, as compared to $362,007 and $669,726 during the three and six months ended June 30, 1995. These increases are primarily attributable to the increase in mortgage financing for Consolidated Hotels. The Company's share of equity in income (loss) of affiliates increased 87.3% to $181,028 in the second quarter of 1996 from $96,651 in the same quarter of 1995. Equity in income (loss) of affiliates increased to $36,389 during the six months ended June 30, 1996 compared to ($86,877) during the same period in 1995. These improvements in equity in operations of affiliates are primarily due to the sale of one hotel in the second quarter of 1996 and the acquisition of additional ownership interests in another hotel causing it to become a Consolidated Hotel, both of which had been accounted for by the equity method. Distributions from affiliates decreased slightly to $152,756 in the second quarter of 1996 from $184,943 in the second quarter of 1995. Distributions from affiliates increased to $259,800 during the six months ended June 30, 1996, compared to $204,162 during the same period in 1995. LIQUIDITY AND CAPITAL RESOURCES The Company has four main sources of cash from operating activities: (i) revenues from hotel operations; (ii) fees from development, construction and renovation projects; (iii) fees from management contracts; and (iv) fees from employee leasing services. 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. Fees from development, construction and renovation projects are typically received within 15 to 45 days from billing. 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 from the equity or lending source. Management fee revenues are typically received by the Company within five working days from the end of each month. Cash from the Company's employee leasing segment is typically received 24 to 48 hours prior to the pay date. During the first six months of 1996, the Company received cash from operations of $4.0 million, compared to $1.4 million in the first six months of 1995, or an increase in cash provided by operations of $2.6 million. The increase in cash flow from operations during the first six months of 1996, when compared to 1995, can be attributed to the significant level of hotel construction activity in 1996 and expanded hotel operations. A significant number of projects were started in the fourth quarter of 1995, resulting in a significant amount of construction fees received in the first six months of 1996 when the majority of the construction activity on these hotels was performed. Increased hotel ownership and operation activity also contributed to the increase in cash flow from operations. The Company invests cash in three principal areas: (i) the purchase of property and equipment through the construction and renovation of Consolidated Hotels; (ii) the purchase of equity interests in hotels; and (iii) loans to affiliated and non-affiliated hotels for the purpose of construction, renovation and working capital. During the first six months of 1996, the Company used $4.8 million in investing activities compared to $5.1 million in the first six months of 1995. During the first six months of 1996, the Company used $3.9 million to purchase property and equipment for Consolidated Hotels, used $350,200 for the purchase of equity interests, and used $904,312 for loans, net of loan collections. During the first six months of 1995, the Company used cash primarily for the purchase of $5.3 million in property and equipment for Consolidated Hotels, used $225,050 for the purchase of minority equity interests in hotels, and received $429,194 in net repayments of notes receivable from minority-owned hotels. In addition, the Company received distributions from investments in minority-owned hotels of $259,800 in the first six months of 1996, compared to $204,162 in the first six months of 1995. Cash received from financing activities was $2.0 million during the first six months of 1996 compared to $2.5 million during the first six months of 1995. In 1996, the primary factors were net proceeds of $2.5 million from the mortgage financing of Consolidated Hotels, net of principal repayments, and $585,233 in net reductions to the Company's operating line-of-credit. In 1995, the contributing factors were proceeds of $1.8 million from the mortgage financing of Consolidated Hotels, net of principal repayments, and net proceeds of $744,147 from the Company's operating line-of-credit. At June 30, 1996, the Company had $1.7 million outstanding under its operating line-of-credit. The Company's line-of-credit was renewed and increased effective May 1, 1996 to $5,000,000. The operating line-of-credit (i) is collateralized by a security interest in certain of the Company's assets, including its interest in various joint ventures; (ii) bears interest at an annual rate equal to the lending bank's base rate plus 1/2% (with a minimum interest rate of 7.5%); and (iii) matures May 1, 1997. The same bank providing the operating line-of-credit has agreed to provide a $7.5 million line-of-credit to be used for construction financing on hotel projects, of which $5.0 million must be used on contracts which have firm commitments for permanent mortgage financing when the construction is completed. At June 30, 1996, the Company also had outstanding $2.25 million of its 7% Subordinated Notes which are unsecured obligations due October 9, 1999 and which pay interest quarterly. Pursuant to the terms of the 7% Subordinated Notes, no dividends may be paid on any capital stock of the Company until the 7% Subordinated Notes have been paid in full. At the Company's sole discretion, the 7% Subordinated Notes may be prepaid at any time without prepayment penalty. The Company expects cash from operations to be sufficient to pay all operating and interest expenses in 1996. SEASONALITY The lodging industry, in general, is seasonal in nature. The Company's hotel revenues are generally greater in the second and third calendar quarters than in the first and fourth quarters due to weather conditions in the markets in which the Company's hotels are located and general business and leisure travel trends. This seasonality can be expected to continue to cause quarterly fluctuations in the Company's revenues. Quarterly earnings may also be adversely affected by events beyond the Company's control such as extreme weather conditions, economic factors and other factors affecting travel. In addition, hotel construction is seasonal, depending upon the geographic location of the construction projects. Construction activity in the Midwest may be slower in the first and fourth calendar quarters due to weather conditions. 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. IMPACT OF NEW ACCOUNTING STANDARDS In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This Statement establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles, and goodwill related to those assets to be held and used and for long-lived assets and certain identifiable intangibles to be disposed of. The Company adopted this standard on January 1, 1996, the impact of which was not material. PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 All statements contained herein that are not historical facts, including but not limited to, statements regarding the Company's hotels under construction and the operation of AmeriHost Inn hotels are based on current expectations. These statements are forward looking in nature and involve a number of risks and uncertainties. Actual results may differ materially. Among the factors that could cause actual results to differ materially are the following: the availability of sufficient capital to finance the Company's business plan on terms satisfactory to the Company; competitive factors, such as the introduction of new hotels or renovation of existing hotels in the same markets; changes in travel patterns which could affect demand for the Company's hotels; changes in development and operating costs, including labor, construction, land, equipment, and capital costs; general business and economic conditions; and other risk factors described from time to time in the Company's reports filed with the Securities and Exchange Commission. The Company wishes to caution readers not to place undue reliance on any such forward looking statements, which statements are made pursuant to the Private Securities Litigation Reform Act of 1995, and as such, speak only as of the date made. 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, 1996 1995 1996 1995 Revenue $ 19,817,739 $ 12,286,630 $ 32,462,308 $ 25,443,991 Operating costs and expenses 15,563,353 9,182,386 26,314,442 21,192,055 4,254,386 3,104,244 6,147,866 4,251,936 Corporate general and administrative (521,994) (525,289) (1,006,646) (993,047) Interest income 161,276 160,367 315,635 251,903 Other income (expense) 15,077 (677) 56,986 19,482 Equity in net income and losses of affiliates 181,028 96,651 36,389 (86,877) Earnings before minority interests 4,089,773 2,835,296 5,550,230 3,443,397 Minority interests in earnings of consolidated subsidiaries and partnerships, excluding minority interest in gain on sale of land (62,751) (90,131) 141,250 22,478 Earnings before interest/rent, taxes and depreciation/amortization $ 4,027,022 $ 2,745,165 $ 5,691,480 $ 3,465,875
PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K: (a) Exhibits: Exhibit 27 - 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: July 29, 1996 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 summary financial information extracted from Amerihost Properties, Inc.'s Form 10-Q and is qualified in its entirety by reference to such Form 10-Q filing. 6-MOS DEC-31-1996 JUN-30-1996 2,609,268 0 13,759,907 0 0 16,629,949 42,030,525 6,697,538 61,568,860 14,650,989 0 0 0 30,118 18,643,434 61,568,860 19,817,739 19,817,739 15,563,353 15,563,353 1,896,523 0 619,124 2,338,582 959,000 1,379,582 0 0 0 1,379,582 0.20 0.20
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