-----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, PMlQxGNYA2KVKB6WP1XFSrPxLWraPlBLFDktp3+9xxlq13JZKvGnw3CoGqnuK9hj KxvdhHuplhFPOQK7iIEC7w== 0000914760-97-000143.txt : 19970813 0000914760-97-000143.hdr.sgml : 19970813 ACCESSION NUMBER: 0000914760-97-000143 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970812 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: 97657175 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, 1997 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 August 12, 1997, 6,301,397 shares of the Registrant's Common Stock were outstanding. AMERIHOST PROPERTIES, INC. FORM 10-Q FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 INDEX PART I: Financial Information Page Consolidated Balance Sheets as of June 30, 1997 and December 31, 1996 4 Consolidated Statements of Operation for the Three and Six Months Ended June 30, 1997 and 1996 6 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 1997 and 1996 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, 1997 and 1996 18 PART II: Other Information Item 6 - Exhibits and Reports on Form 8-K 19 Signatures 19 Part I: Financial Information Item 1: Financial Statements AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
June 30, December 31, 1997 1996 ASSETS Current assets: Cash and cash equivalents $ 2,798,505 $ 3,029,039 Accounts receivable (including $830,051 and $3,119,905 from related parties) 3,068,635 5,083,973 Notes receivable (including $890,541 and $1,354,461 from related parties) 1,000,616 1,507,276 Prepaid expenses and other current assets 378,818 223,136 Refundable income taxes 811,673 30,629 Costs and estimated earnings in excess of billings on uncompleted contracts (including $2,091,374 and $2,048,259 from related parties) 2,257,381 2,083,259 Total current assets 10,315,628 11,957,312 Investments 1,197,639 1,595,858 Property and equipment: Land 8,872,957 7,334,562 Buildings 37,002,499 27,885,463 Furniture, fixtures and equipment 12,171,764 10,984,572 Construction in progress 8,626,298 4,709,064 Leasehold improvements 1,156,733 2,404,060 67,830,251 53,317,721 Less accumulated depreciation and mortization 7,673,130 7,481,889 60,157,121 45,835,832 Long-term notes receivable (including $4,398,656 and $1,120,888 from related parties) 5,728,420 3,831,504 Costs of management contracts acquired, net of accumulated amortization of $1,300,904 and $1,158,379 995,388 907,404 Other assets (including deferred taxes of $221,000 and $171,000), net of accumulated amortization of $2,408,060 and $2,082,450 3,024,226 2,773,246 9,748,034 7,512,154 $ 81,418,422 $ 66,901,156 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 4,518,120 $ 5,293,184 Bank line-of-credit 6,118,567 1,707,424 Accrued payroll and related expenses 1,030,697 935,120 Accrued real estate and other taxes 870,649 685,796 Other accrued expenses and current liabilities 927,355 828,596 Current portion of long-term debt 1,213,625 1,554,200 Total current liabilities 14,679,013 11,004,320 Long-term debt, net of current portion 42,452,735 32,785,108 Deferred income 709,534 630,899 Commitments Minority interests 1,515,743 1,569,200 Shareholders' equity: Preferred stock, no par value; authorized 100,000 shares; none issued - - Common stock, $.005 par value; authorized 25,000,000 shares; issued 6,301,397 shares at June 30, 1997, and 6,036,921 shares at December 31, 1996 31,507 30,185 Additional paid-in capital 18,552,414 17,170,154 Retained earnings 4,870,643 5,104,457 23,454,564 22,304,796 Less: Stock subscriptions receivable (436,875) (436,875) Notes receivable (956,292) (956,292) 22,061,397 20,911,629 $ 81,418,422 $ 66,901,156 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, 1997 1996 1997 1996 Revenue: Hotel operations: AmeriHost Inn hotels $ 3,377,893 $ 2,187,659 $ 5,774,459 $ 3,493,797 Other hotels 4,900,725 5,765,426 8,932,759 10,042,784 Development and construction 2,309,358 8,211,296 8,443,100 12,191,098 Management services 767,736 694,148 1,372,379 1,183,830 Employee leasing 3,233,526 2,959,210 6,135,831 5,550,799 14,589,238 19,817,739 30,658,528 32,462,308 Operating costs and expenses: Hotel operations: AmeriHost Inn hotels 2,107,253 1,176,762 3,969,807 2,062,528 Other hotels 3,366,595 3,816,470 7,049,452 7,669,555 Development and construction 2,288,743 7,197,907 7,464,213 10,311,585 Management services 517,613 496,384 930,003 869,035 Employee leasing 3,145,727 2,875,830 5,977,338 5,401,739 11,425,931 15,563,353 25,390,813 26,314,442 3,163,307 4,254,386 5,267,715 6,147,866 Depreciation and amortization 1,085,631 856,357 2,241,924 1,659,172 Leasehold rents - hotels 529,958 518,172 1,064,590 964,302 Corporate general and administrative 487,049 521,994 1,069,199 1,006,646 Operating income 1,060,669 2,357,863 892,002 2,517,746 Other income (expense): Interest expense (877,385) (619,124) (1,687,392) (1,284,298) Interest income 205,251 161,276 340,700 315,635 Other income (expense) 32,274 15,077 36,084 56,986 Gain on sale of property - 404,256 1,744,599 404,256 Contractual termination expenses - - (1,697,448) - Equity in net income and losses of affiliates 31,688 181,028 (209,413) 36,389 Income (loss) before minority interests and income taxes 452,497 2,500,376 (580,868) 2,046,714 Minority interests in (income) loss of consolidated subsidiaries and partnerships (59,659) (161,794) 99,054 42,207 Income (loss) before income tax 392,838 2,338,582 (481,814) 2,088,921 Income tax expense (benefit) 161,000 959,000 (248,000) 857,000 Net income (loss) $ 231,838 $ 1,379,582 $ (233,814) $ 1,231,921 Earnings (loss) per share $ 0.03 $ 0.20 $ (0.05)$ 0.18 See notes to consolidated financial statements.
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED)
Six months ended June 30, 1997 1996 Cash flows from operating activities: Cash received from customers $ 32,767,188 $ 28,223,649 Cash paid to suppliers and employees (28,567,741) (22,704,610) Interest received 283,601 93,950 Interest paid (1,677,367) (1,246,185) Income taxes paid (338,902) (318,979) Net cash provided by operating activities 2,466,779 4,047,825 Cash flows from investing activities: Distributions from affiliates 101,850 259,800 Purchase of property and equipment (17,282,611) (3,937,049) Purchase of investments (100) (350,200) Increase in notes receivable (3,319,251) (2,537,964) Collections on notes receivable 1,698,233 1,633,652 Pre-opening and management contract costs (230,508) (292,968) Proceeds from sales of property 3,390,576 524,377 Acquisition of leasehold interest - (94,000) Contractual termination costs (1,551,650) - Net cash used in investing activities (17,193,461) (4,794,352) Cash flows from financing activities: Proceeds from issuance of long-term debt 11,223,467 3,339,047 Principal payments of long-term debt (1,837,020) (871,292) Proceeds from exercise of common stock options 789,075 - Proceeds from line-of-credit 9,011,144 5,045,931 Payments on line-of-credit (4,600,000) (5,631,164) Decrease in minority interests (90,518) (26,518) Increase in deferred offering costs - (74,456) Proceeds from issuance of common stock - 202,969 Net cash provided from financing activities 14,496,148 1,984,517 Net increase (decrease) in cash (230,534) 1,237,990 Cash and cash equivalents, beginning of period 3,029,039 1,371,278 Cash and cash equivalents, end of period $ 2,798,505 $ 2,609,268 Reconciliation of net income (loss) to net cash provided by operating activities: Net income (loss) $ (233,814) $ 1,231,921 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 2,241,924 1,659,172 Equity in net loss (income) of affiliates and amortization of deferred income 227,568 (19,931) Minority interests in net income of subsidiaries (99,054) (42,207) Amortization of deferred interest and loan discount 19,879 19,880 Increase in deferred income 166,260 63,542 Gain on sale of property (1,744,599) (404,256) Increase in deferred tax asset (50,000) - Contractual termination costs 1,697,448 - Compensation paid through issuance of common stock and common stock options 350,365 29,676 Changes in assets and liabilities: Decrease (increase) in accounts receivable 2,062,284 (17,470) Increase in interest receivable (54,282) (218,869) Increase in prepaid expenses and other current assets (156,997) (72,611) Increase in costs and estimated earnings in excess of billings on uncompleted contracts (174,122) (4,358,065) Increase in other assets (612,856) (130,454) (Increase) decrease in refundable income taxes (536,902) 230,530 (Decrease) increase in accounts payable (820,282) 5,275,213 Increase in accrued expenses and other current liabilities 196,630 478,846 Increase in accrued income taxes - 307,491 (Decrease) increase in accrued interest (12,671) 15,417 Net cash provided by operating activities $ 2,466,779 $ 4,047,825 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, 1997 and December 31, 1996 and the results of its operations for the three and six months ended June 30, 1997 and 1996 and cash flows for the six months ended June 30, 1997 and 1996. The results of operations for the six months ended June 30, 1997 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 1996 Annual Report on Form 10-K. Certain reclassifications have been made to the 1996 financial statements in order to conform with the 1997 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 majority 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 (benefit) for the three and six months ended June 30, 1997 and 1996 was based on the Company's estimate of the effective tax rate expected to be applicable for the full year. A $50,000 reduction in the deferred tax asset reserve was made during the six months ended June 30, 1997. The Company expects the effective tax rate to approximate the Federal and state statutory rates. 4. EARNINGS (LOSS) PER SHARE: Earnings (loss) per share of common stock is computed by dividing adjusted net income (loss) 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 7,209,637 and 7,098,599 for the three and six months ended June 30, 1997, and 6,764,415 and 6,695,726 for the three and six months ended June 30, 1996, 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, 1997 and 1996:
Six Months Ended June 30, 1997 1996 Purchase of investments through issuance of common stock and decrease in notes and accrued interest receivable $ - $ 143,929 Accrued contractual termination costs $ 145,798 $ -
6. HOTEL LEASES: The Company, through its subsidiaries and consolidated partnerships, has leasehold interests in five hotels ranging from 61.5% to 100%, 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, 1997, the aggregate purchase price for these five hotels was approximately $16,230,000. 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, 1997, there were 51 AmeriHost Inn hotels open, of which 19 were wholly-owned, two were majority-owned, 28 were minority-owned, and two were managed for unrelated third parties. A total of 25 AmeriHost Inn hotels were opened during the past twelve months, including two hotels which were converted from another brand affiliation. The Company intends to use 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, 1997, 15 AmeriHost Inn hotels were under construction, of which 11 will be wholly-owned, three will be minority-owned, and one will be owned by an unrelated third party. Same room revenues for all AmeriHost Inn hotels increased approximately 5.6% in the second quarter of 1997 compared to the second quarter of 1996, attributable to an increase of $2.83 in average daily rate and a 0.04% increase in occupancy. These results relate to the 24 AmeriHost Inn hotels that were operating for at least thirteen full months at June 30, 1997. 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 revenue from 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 results for the second quarter and first six months of 1997 were consistent with the Company's primary objective of increasing the number of wholly-owned, Consolidated AmeriHost Inn hotels. Due to the Company's focus on developing and constructing a significant number of Consolidated AmeriHost Inn hotels during the second quarter and first six months of 1997, the Company recognized lower revenues and profits from the development and construction of hotels for minority-owned and unrelated third parties during these periods. In addition, the Company disposed of several non-AmeriHost Inn hotels during the past twelve months, as part of the Company's plan to invest all available resources into the AmeriHost Inn hotel brand. Although this strategy has a short-term negative impact on revenues and earnings, the Company believes that the long-term benefits will be substantial. Revenues from AmeriHost Inn hotels increased 54.4% to $3.4 million in the second quarter of 1997, from revenues of $2.2 million in the second quarter of 1996, due to the addition of 10 Consolidated AmeriHost Inn hotels during the past twelve months and an increase in same room revenues. Revenues from the hotel management and employee leasing segments increased by 9.5% in total during the second quarter due primarily to the increase in same room revenues and the net addition of nine minority-owned hotels. These increases were offset by a decrease in non-AmeriHost Inn hotel revenues as a result of the disposition of four hotels during the past twelve months and a decrease in hotel development and construction revenue from joint ventures, resulting in a decrease in total revenues of 26.4% to $14.6 million during the three months ended June 30, 1997, from $19.8 million during the three months ended June 30, 1996. Revenues from the first six months of 1997 followed a similar trend, with revenues from AmeriHost Inn hotels increasing 65.3% to $5.8 million from $3.5 million during the first six months of 1996, and revenues from hotel management and employee leasing increasing by 11.5% in total during the first six months of 1997 compared to 1996. These increases were also offset by the decreases in non- AmeriHost Inn hotel revenue as well as hotel development and construction revenue, resulting in a decrease in total revenues of 5.6% to $30.7 million during the six months ended June 30, 1997, from $32.5 million during the six months ended June 30, 1996. Net income was also impacted by the disposition of non-AmeriHost Inn hotels and the lower hotel development and construction activity for minority-owned and unaffiliated entities. In addition, a significant number of Consolidated AmeriHost Inn hotels opened during the last twelve months. These hotels generally were operating in the first six months of 1997 during their initial stabilization period, when revenues are typically lower. Net income for the second quarter decreased to $231,838, or $0.03 per share in 1997, from $1.4 million, or $0.20 per share in 1996. Excluding the gain on the sale of excess land in the amount of $180,076, net of minority interest and income taxes, earnings per share was $0.18 for the second quarter of 1996. Net loss was ($233,814), or ($0.05) per share, for the six months ended June 30, 1997, compared to net income of $1.2 million, or $0.18 per share, for the six months ended June 30, 1996. The Company sold two Consolidated hotels during the first quarter of 1997, resulting in a total gain, net of minority interests, of $1.7 million. These gains were offset by a non-recurring charge of $1.7 million from the termination of a consulting agreement with Urban 2000 Corp. (a company owned by the Company's Chairman of the Board and a former officer/director) and the departure of an officer/director. Excluding the gains from property sales and the non-recurring charge, earnings (loss) per share was ($0.05) and $0.16 for the six months ended June 30, 1997 and 1996, respectively. 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) interest and other income; (iii) leasehold rents for hotels, which the Company considers to be financing costs similar to interest; (iv) income tax expense (benefit), (v) depreciation and amortization; (vi) gains or losses from property transactions; and (vii) non-recurring charges. EBITDA should not be considered as an alternative to net income or cash flows from operating activities as a measure of liquidity. EBITDA decreased 31.2% and 22.3% to $2.6 million and $4.1 million during the three and six months ended June 30, 1997, respectively, from $3.9 million and $5.3 million during the three and six months ended June 30, 1996. An EBITDA schedule is included herein. The Company has retained an investment banking firm to review strategic alternatives for the Company. During the second quarter of 1997, the Company and its joint venture partners had postponed the development of additional hotels which were expected to begin construction during the second quarter. Instead, the Company focused on the development of several wholly-owned AmeriHost Inn hotels. Consequently, the Company realized lower levels of revenues and profits in the second quarter of 1997 from the development and construction of hotels for minority-owned entities. The Company intends to increase its hotel development activity for joint ventures during the second half of 1997. Amerihost had an ownership interest in 68 hotels at June 30, 1997 versus 53 hotels at June 30, 1996 (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 a net increase of five Consolidated hotels, from 25 at June 30, 1996 to 30 at June 30, 1997. RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1997 COMPARED TO THE THREE AND SIX MONTHS ENDED JUNE 30, 1996 Revenues decreased 26.4% and 5.6% to $14.6 million and $30.7 million during the three and six months ended June 30, 1997, respectively, from revenues of $19.8 million and $32.5 million during the three and six months ended June 30, 1996. Increases in revenues from the Consolidated AmeriHost Inn hotels, the hotel management segment and the employee leasing segment were more than offset by decreases in the hotel development and construction segment and the non- AmeriHost Inn hotel operations segment. Hotel operations revenue increased 4.1% and 8.7% to $8.3 million and $14.7 million during the three and six months ended June 30, 1997, respectively, from $8.0 million and $13.5 million during the three and six months ended June 30, 1996. This increase was attributable primarily to the net addition of five Consolidated hotels to the hotel operations segment from July 1, 1996 through June 30, 1997, and an increase in same room revenues. The Company opened seven newly constructed Consolidated AmeriHost Inn hotels during this twelve month period, and acquired additional ownership interests in three hotels causing them to become Consolidated hotels. These ten additions were offset by the sale of three non-AmeriHost Inn Consolidated hotels and the lease termination of two non-AmeriHost Inn Consolidated hotels during this same period. The hotel operations segment included the operations of 30 Consolidated hotels comprising 2,469 rooms at June 30, 1997, compared to 25 Consolidated hotels comprising 2,570 rooms at June 30, 1996. After considering the Company's ownership interest in the majority-owned Consolidated hotels, this translates to 2,249 and 2,197 equivalent owned rooms as of June 30, 1997 and 1996, respectively, or an increase of 2.4%. Hotel development revenue decreased 71.9% and 30.7% to $2.3 million and $8.4 million during the three and six months ended June 30, 1997, respectively, from $8.2 million and $12.2 million during the three and six months ended June 30, 1996. The decrease was due to the decrease in hotel development and construction activity performed for unrelated entities or entities in which the Company holds a minority ownership interest. The Company was constructing eight and ten hotels for minority-owned entities or unrelated third parties during the second quarter and first six months of 1997, respectively, including six hotels which opened during the first six months of 1997, compared to fourteen and sixteen hotels during the three and six months ended June 30, 1996. The Company also had several additional projects in various stages of pre-construction development during both six month periods. Hotel management revenue increased 10.6% and 15.9% to $767,736 and $1.4 million during the three and six months ended June 30, 1997, respectively, from $694,148 and $1.2 million during the three and six months ended June 30, 1996. The number of hotels managed for third parties and minority-owned entities increased from 39 hotels, representing 3,620 rooms, at June 30, 1996 to 48 hotels, representing 3,963 rooms, at June 30, 1997. The addition of management contracts for 16 newly constructed hotels (982 rooms) was partially offset by the termination of three management contracts (366 rooms) with minority-owned entities as a result of the sale of the hotel, the termination of three management contracts (173 rooms) with minority-owned hotels which became Consolidated hotels due to the Company acquiring additional ownership interests, and the termination of one management contract with an unrelated third party. Management fee revenues were also impacted in the first quarters of 1997 and 1996 by newly constructed hotels operating during their initial stabilization period when revenues are typically lower. The management contracts terminated, all of which were for hotels other than the AmeriHost Inn brand, were typically for larger hotels compared to the 16 hotels added during the twelve months ended June 30, 1997. The Company does not recognize management fee revenue from Consolidated hotels. Employee leasing revenue increased 9.3% and 10.5% to $3.2 million and $6.1 million during the three and six months ended June 30, 1997, respectively, from $3.0 million and $5.6 million during the three and six months ended June 30, 1996, due primarily to the addition of hotels managed for minority-owned entities as described above, and the associated increase in payroll costs which is the basis for the employee leasing revenue. Total operating costs and expenses decreased 26.6% and 3.5% to $11.4 million (78.3% of total revenues) and $25.4 million (82.8% of total revenues) during the three and six months ended June 30, 1997, respectively, from $15.6 million (78.5% of total revenues) and $26.3 million (81.1% of total revenues) during the three and six months ended June 30, 1996. Operating costs and expenses in the hotel operations segment increased 9.6% and 13.2% to $5.5 million and $11.0 million during the three and six months ended June 30, 1997, respectively, from $5.0 million and $9.7 million during the three and six months ended June 30, 1996. These increases resulted primarily from the net addition of five Consolidated hotels to this segment and are directly related to the 4.1% and 8.7% increases in segment revenue during the three and six months ended June 30, 1997, respectively. Hotel operations segment operating costs and expenses as a percentage of segment revenue increased to 66.1% and 74.9% during the three and six months ended June 30, 1997, respectively, from 62.8% and 71.9% during the three and six months ended June 30, 1996, due primarily to a greater number of hotels in the first six months of 1997 operating during their initial stabilization period, when revenues are typically lower. Operating costs and expenses for the hotel development segment decreased 68.2% and 27.6% to $2.3 million and $7.5 million during the three and six months ended June 30, 1997, respectively, from $7.2 million and $10.3 million during the three and six months ended June 30, 1996, consistent with the 71.9% and 30.7% decrease in hotel development revenues for the three and six months ended June 30, 1997. Operating costs and expenses in the hotel development segment as a percentage of segment revenue increased to 99.1% and 88.4% during the three and six months ended June 30, 1997, respectively, from 87.7% and 84.6% during the three and six months ended June 30, 1996. The second quarter and first six months of 1997 consisted primarily of construction activity which has high operating costs in relation to the revenue recognized. The second quarter and first six months of 1996 also consisted of a significant level of construction activity, however also included a greater level of development activity which has lower operating costs in relation to the revenue recognized. In addition, the periods in 1996 included contracts whereby the Company acted as construction manager, recognizing operating costs which were significantly lower in relation to the revenue recognized. Hotel management segment operating costs and expenses increased 4.3% and 7.0% to $517,613 and $930,003 during the three and six months ended June 30, 1997, respectively, from $496,384 and $869,035 during the three and six months ended June 30, 1996. These increases are consistent with the 10.6% and 15.9% increases in segment revenues for the three and six months ended June 30, 1997, respectively, with the first six months of 1997 being partially offset by the termination in the first quarter of 1997 of certain contractual payments which had been made to co-managers. Employee leasing operating costs and expenses increased 9.4% and 10.7% to $3.1 million and $6.0 million during the three and six months ended June 30, 1997, respectively, from $2.9 million and $5.4 million during the three and six months ended June 30, 1996, which are consistent with the 9.3% and 10.5% increases in segment revenue for the three and six months ended June 30, 1997, respectively. Depreciation and amortization expense increased 26.8% and 35.1% to $1.1 million and $2.2 million during the three and six months ended June 30, 1997, respectively, from $856,357 and $1.7 million during the three and six months ended June 30, 1996. These increases were primarily attributable to the net addition of five Consolidated hotels to the hotel operations segment and the resulting depreciation and amortization therefrom. Leasehold rents - hotels increased 2.3% and 10.4% to $529,958 and $1.1 million during the three and six months ended June 30, 1997, respectively, from $518,172 and $964,302 during the three and six months ended June 30, 1996. The increases during the second quarter and first six months of 1997 compared to the same periods in 1996 were primarily due to the increase in percentage rents for certain hotels which are based on the hotel's operating revenues, partially offset by the sale of a leased Consolidated Hotel and the termination of the lease for another Consolidated Hotel in the first quarter of 1997. Corporate general and administrative expense decreased 6.7% to $487,049 during the three months ended June 30, 1997, from $521,994 during the three months ended June 30, 1996. Corporate general and administrative expense increased 6.2% to $1.1 million during the first six months of 1997, from $1.0 million during the first six months of 1996. The fluctuations were primarily due to the Company's overall growth, operational efficiencies and the allocation of costs associated with hotel development activity. The Company's operating income decreased 55.0% and 64.6% to $1.1 million and $892,002 during the three and six months ended June 30, 1997, respectively, from $2.4 million and $2.5 million during the three and six months ended June 30, 1996. The following discussion of operating income by segment is exclusive of any corporate overhead cost allocation. Operating income from the AmeriHost Inn hotels increased 4.8% to $785,140 during the three months ended June 30, 1997 from $748,997 during the three months ended June 30, 1996, resulting primarily from the addition of Consolidated AmeriHost Inn hotels to the segment and an increase in same room revenues. The increased impact of seasonality in the first quarter of 1997 associated with a greater number of Consolidated AmeriHost Inn hotels and the impact of the significant number of Consolidated AmeriHost Inn hotels operating in the first six months of 1997 during their initial stabilization period resulted in a 6.1% decrease in operating income from the AmeriHost Inn hotels to $921,494 during the six months ended June 30, 1997 from $981,351 during the six months ended June 30, 1996. Operating income from the hotel development segment decreased 99.7% and 48.9% to $2,559 and $942,772 during the three and six months ended June 30, 1997, respectively, from $996,262 and $1.8 million during the three and six months ended June 30, 1996. The decrease in hotel development operating income was due to the decrease in hotels developed and constructed for third parties and minority-owned entities during the second quarter of 1997, which more than offset the increase realized in the first quarter of 1997. Operating income from the hotel management segment increased 19.9% and 40.9% to $163,237 and $278,251 during the three and six months ended June 30, 1997, respectively, from $136,163 and $197,542 during the three and six months ended June 30, 1996. This increase was due primarily to the net addition of nine hotel management contracts with minority-owned and unaffiliated entities during the twelve month period ended June 30, 1997. Employee leasing operating income increased 6.2% and 7.4% to $86,899 and $156,693 during the three and six months ended June 30, 1997, respectively, from $81,805 and $145,910 during the three and six months ended June 30, 1996, due to the increase in employee leasing agreements with minority-owned entities. Interest expense increased 41.7% and 31.4% to $877,385 and $1.7 million during the three and six months ended June 30, 1997, respectively, from $619,124 and $1.3 million during the three and six months ended June 30, 1996. This increase was primarily attributable to the additional mortgage financing of newly constructed Consolidated AmeriHost Inn hotels. The Company's share of equity in income (loss) of affiliates decreased 82.5% to $31,688 during the three months ended June 30, 1997, from $181,028 during the three months ended June 30, 1996. Equity in income (loss) of affiliates decreased to ($209,413) during the six months ended June 30, 1997 from $36,389 during the first six months of 1996. The decreases in equity of affiliates during the three and six month periods were primarily due to the significant number of newly constructed minority-owned hotels which were operating during their initial stabilization period, when revenues are typically lower, the increasing impact of seasonality as the number of minority-owned hotels increases and the sale of a minority-owned hotel during the second quarter of 1996. Distributions from affiliates were $101,850 during the first six months of 1997 compared to $259,800 during the first six months of 1996. 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 is 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 typically are received by the Company within five working days from the end of each month. Cash from the Company's employee leasing segment typically is received 24 to 48 hours prior to the pay date. During the first six months of 1997, the Company received cash from operations of $2.5 million, compared to $4.0 million during the first six months of 1996, or a decrease in cash received from operations of $1.6 million. The decrease in cash flow from operations during the first six months of 1997, when compared to 1996, can be attributed to a significant decrease in hotel development and construction activity for minority-owned entities. In addition, the decrease can also be attributed to the increasing impact of seasonality and the significant number of hotels operating during their initial stabilization period as the number of Consolidated hotels increased from 25 hotels at June 30, 1996 to 30 hotels at June 30, 1997. 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) the making of loans to affiliated and non-affiliated hotels for the purpose of construction, renovation and working capital. During the first six months of 1997, the Company used $17.2 million in investing activities compared to $4.8 million in the first six months of 1996. During the first six months of 1997, the Company used $17.3 million to purchase property and equipment for Consolidated AmeriHost Inn hotels, used $1.6 million for the termination of certain contractual agreements, used $1.6 million for loans, net of loan collections, and received $3.4 million from the sale of hotels. During the first six months of 1996, the Company used cash primarily for the purchase of $3.9 million in property and equipment for Consolidated hotels, used $350,200 for the purchase of minority equity interests in hotels, used $904,312 for loans, net of repayments from minority-owned hotels, and received $524,377 from the sale of excess land. In addition, the Company received distributions from investments in minority-owned hotels of $101,850 during the first six months of 1997, compared to $259,800 during the first six months of 1996. Cash received from financing activities was $14.5 million during the first six months of 1997 compared to $2.0 million during the first six months of 1996. In 1997, the primary factors were proceeds of $9.4 million from the mortgage financing of Consolidated hotels, net of principal repayments, net proceeds of $789,075 from the exercise of common stock purchase options, and net proceeds of $4.4 million from the Company's operating line-of-credit. In 1996, the contributing factors were proceeds of $2.5 million from the mortgage financing of Consolidated hotels, net of principal repayments, and net repayments of $585,233 on the Company's operating line-of-credit. At June 30, 1997, the Company had $6.1 million outstanding under its operating line-of-credit. The Company's line-of-credit was renewed and increased to $10.0 million effective May 1, 1997. 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, 1998. At June 30, 1997, 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 1997. SEASONALITY The lodging industry, in general, is seasonal by 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, as well as general business and leisure travel trends. This seasonality can be expected to continue to cause quarterly fluctuations in the Company's revenues, and is expected to have a greater impact as the number of Consolidated hotels increases. Quarterly earnings may also be adversely affected by events beyond the Company's control such as extreme weather conditions, economic factors and other general 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 February 1997, the Financial Accounting Standards Board issued SFAS No. 128, "Earnings Per Share." The new standard simplifies the methods for computing earnings per share and requires the presentation of two new amounts, basic and diluted earnings per share. When the Company adopts SFAS No. 128, it expects to report the following restated amounts for the three and six months ended June 30:
Three months ended Six months ended 1997 1996 1997 1996 Basic $ 0.04 $ 0.23 $ (0.04) $ 0.21 Diluted $ 0.03 $ 0.20 $ (0.05) $ 0.18
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, 1997 1996 1997 1996 Revenue $ 14,589,238 $ 19,817,739 $ 30,658,528 $ 32,462,308 Operating costs and expenses 11,425,931 15,563,353 25,390,813 26,314,442 3,163,307 4,254,386 5,267,715 6,147,866 Corporate general and administrative (487,049) (521,994) (1,069,199) (1,006,646) Equity in net income and losses of affiliates 31,688 181,028 (209,413) 36,389 Earnings before minority interests 2,707,946 3,913,420 3,989,103 5,177,609 Minority interests in earnings of consolidated subsidiaries and partnerships, excluding minority interest in gain on sale of property (59,659) (62,751) 145,655 141,250 Earnings before interest/rent, taxes and depreciation/amortization $ 2,648,287 $ 3,850,669 $ 4,134,758 $ 5,318,859
PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K: (a) Exhibits: Exhibit No. 27.0 Financial Data 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 12, 1997 By: /s/ Russell J. Cerqua Russell J. Cerqua Treasurer/Executive Vice President, Finance By: /s/ James B. Dale James B. Dale Vice President, Finance/Corporate Controller EX-27 2
5 6-MOS DEC-31-1997 JUN-30-1997 2,798,505 0 6,326,632 0 0 10,315,628 67,830,251 7,673,130 81,418,422 14,679,013 0 0 0 31,507 22,029,890 81,418,422 30,658,528 30,658,528 25,390,813 25,390,813 4,375,713 0 1,687,392 (481,814) (248,000) (233,814) 0 0 0 (233,814) (0.05) (0.05)
-----END PRIVACY-ENHANCED MESSAGE-----