-----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, Gh11Z0rUZVNTQXi/Gppy+y6JmBUeNVbHPdGBSSHfow6RefTV0QLFRd2N6hbw+rF8 WWZpGHXhOxtVnbZ18008/A== /in/edgar/work/20001101/0000914760-00-000302/0000914760-00-000302.txt : 20001106 0000914760-00-000302.hdr.sgml : 20001106 ACCESSION NUMBER: 0000914760-00-000302 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20001101 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20001101 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: 8-K SEC ACT: SEC FILE NUMBER: 000-15291 FILM NUMBER: 750622 BUSINESS ADDRESS: STREET 1: 2355 SOUTH ARLINGTON HEIGHTS ROAD STREET 2: SUITE 400 CITY: ARLINGTON HEIGHTS STATE: IL ZIP: 60005 BUSINESS PHONE: 8472285400 MAIL ADDRESS: STREET 1: 2355 SOUTH ARLINGTON HEIGHTS ROAD STREET 2: SUITE 400 CITY: ARLINGOTN HEIGHTS STATE: IL ZIP: 60005 FORMER COMPANY: FORMER CONFORMED NAME: AMERICA POP INC DATE OF NAME CHANGE: 19871111 8-K 1 0001.txt 8-K NOVEMBER 1, 2000 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported) NOVEMBER 1, 2000 ------------------------------- AMERIHOST PROPERTIES, INC. D/B/A ARLINGTON HOSPITALITY, INC. - -------------------------------------------------------------------------------- (Exact name of registrant as specified in charter) DELAWARE 0-15291 36-3312434 - -------------------------------------------------------------------------------- (State of other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 2355 SOUTH ARLINGTON HEIGHTS ROAD, SUITE 400, ARLINGTON HEIGHTS, ILLINOIS 60005 - -------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (847) 228-5400 ----------------------------- N/A - -------------------------------------------------------------------------------- (Former name or former address, if changed since last report) ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (c) Exhibits Exhibit No. ----------- 99.1 Press Release dated October 31, 2000 99.2 Outline for Conference Call held on November 1, 2000 99.3 Letter to Shareholders ITEM 9. REGULATION FD DISCLOSURE On October 31, 2000 the Registrant released its earnings results for the three months ended September 30, 2000 and issued the press release attached hereto as Exhibit 99.1. The outline relating to a conference call held by the Registrant on November 1, 2000 is attached hereto as Exhibit 99.2. The Registrant also intends to issue a letter to its shareholders on November 3, 2000, the full text of which is attached hereto as Exhibit 99.3. -2- 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: November 1, 2000 By: /s/ James B. Dale --------------------------------- James B. Dale Senior Vice President and Chief Financial Officer -3- EX-99.1 2 0002.txt PRESS RELEASE DATED OCTOBER 31, 2000 AMERIHOST PROPERTIES, INC. DBA ARLINGTON HOSPITALITY ANNOUNCES THIRD QUARTER RESULTS RECORD NET INCOME FOR THE QUARTER ARLINGTON HEIGHTS, ILLINOIS, OCTOBER 31, 2000 - Amerihost Properties, Inc. DBA Arlington Hospitality, Inc. (Nasdaq/NM: HOST) today announced its earnings results for the three months ended September 30, 2000. Net income soared to a record $4.6 million, or $0.87 per diluted share for the quarter, compared to $1.5 million or $0.27 per diluted share for the same period last year. As previously announced, the third quarter of 2000 includes a gain of $0.57 per diluted share from the sale of the AmeriHost Inn and AmeriHost Inn & Suites brand names and franchising rights to Cendant Corporation. Cash flow, defined as net income plus depreciation and amortization, grew to $5.8 million or $1.10 per diluted share in the third quarter of this year compared to $2.6 million or $0.48 per diluted share during the same period of 1999. Cash flow, as defined, serves as a supplemental measurement of performance in evaluating the Company's strategy of developing and selling AmeriHost Inn hotels. For the nine-month period ended September 30, 2000, net income was $4.9 million, or $0.92 per diluted share, compared to net income of $574,537 or $0.08 per diluted share for the nine months ended September 30, 1999. Operating income for the nine-month period increased 21.3% to $5.4 million in 2000, from $4.4 million in the nine-month period of 1999. Cash flow, defined as net income plus depreciation and amortization, for the nine-month period increased to $8.2 million or $1.56 per diluted share in 2000, from $4.2 million or $0.70 per diluted share for the same period in 1999. Same Room RevPar for the third quarter of 2000 compared to the third quarter of 1999 for all AmeriHost Inn hotels was up 6.9%. This growth in Same Room RevPar was the result of a small increase in Average Daily Rate to $58.88 and a 6.5% increase in occupancy for the quarter, which resulted in a RevPar of $41.62. Arlington Hospitality, Inc. October 31, 2000 Page 1 of 5 Same Room RevPar for the first nine months of 2000 for all AmeriHost Inn hotels was up 7.6%. This growth was the result of a 6.8% increase in occupancy and a slight increase in Average Daily Rate. These results are for all AmeriHost Inn hotels open at least 13 full months as of September 30, 2000. Arlington Chairman, President & CEO, Michael P. Holtz, commented, "The third quarter of this year was significantly impacted by the improved operating margins in the hotel operations segment and the initial impact of the sale of the AmeriHost Inn brand name and franchising rights to Cendant Corporation. However, this is just the beginning of the numerous financial incentives the Company may realize as a result of this transaction. As we continue to develop and build AmeriHost Inn hotels, Arlington Hospitality will continue to realize more of the benefits from this transaction". - -------------------------------------------------------------------------------- ARLINGTON HOSPITALITY, INC. PROPERTY OWNERSHIP AND ROOM MANAGEMENT AS OF SEPTEMBER 30, 2000 Hotel Properties # of Rooms AmeriHost Inn(R) Hotels Consolidated hotels 60 3,812 Minority owned hotels 10 652 Franchised only hotels 10 611 Under Construction 2 128 -- ----- SUBTOTAL 82 5,203 Other Hotels Consolidated hotels 7 936 Minority owned hotels 3 349 Managed only hotels 3 573 -- ----- SUBTOTAL 13 1,858 -- ----- GRAND TOTAL 95 7,061 AMERIHOST INN(R) HOTEL BRAND SAME ROOM REVPAR PERFORMANCE Three Months Ended Nine Months Ended September 30, September 30, 2000 1999 2000 1999 AmeriHost Inn(R) Average Daily Rate ($) $58.88 $58.60 $57.38 $57.06 Occupancy (%) 70.7% 66.4% 62.8% 58.8% RevPAR ($) $41.62 $38.93 $36.03 $33.58 - -------------------------------------------------------------------------------- Arlington Hospitality, Inc. October 31, 2000 Page 2 of 5 ARLINGTON HOSPITALITY, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS (UNAUDITED) =====================================================================================================================
ASSETS September 30, December 31, 2000 1999 ----------------------- ------------------------ Current assets: Cash and cash equivalents $ 2,773,806 $ 3,766,323 Accounts receivable 3,889,228 2,901,615 Notes receivable 518,485 568,485 Prepaid expenses and other current assets 907,461 971,836 Refundable income taxes - 56,876 Costs and estimated earnings in excess of billings on uncompleted contracts 1,034,626 834,820 ----------------------- ------------------------ Total current assets 9,123,606 9,099,955 Investments in and advances to affiliates 6,838,524 7,332,806 Property and equipment, net 78,175,513 78,770,356 Long-term notes receivable 714,188 692,662 Other assets, net 6,238,817 7,212,388 ----------------------- ------------------------ $ 101,090,648 $ 103,108,167 ======================= ======================== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 3,816,283 $ 2,623,390 Bank line-of-credit - 7,560,214 Accrued expenses and other current liabilities 3,855,177 4,165,277 Income taxes payable 2,502,297 - Current portion of long-term debt 1,435,120 1,567,643 ----------------------- ------------------------ Total current liabilities 11,608,877 15,916,524 Long-term debt, net of current portion 57,425,947 58,781,609 Deferred income 12,665,665 14,001,231 Minority interests 238,667 228,235 Shareholders' equity 19,151,492 14,180,568 ----------------------- ------------------------ $ 101,090,648 $ 103,108,167 ======================= ======================== Arlington Hospitality, Inc. October 31, 2000 Page 3 of 5
ARLINGTON HOSPITALITY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) =================================================================================================================
Three Months Ended September 30, Nine Months Ended September 30, ------------------------------- -------------------------------- 2000 1999 2000 1999 ------------- ------------- -------------- -------------- Revenue: Hotel operations: AmeriHost Inn(R)hotels $14,533,022 $14,681,959 $38,291,146 $37,879,605 Other hotels 3,769,565 3,912,792 9,523,865 10,011,222 Development and construction 3,610,293 5,287,436 7,697,058 5,847,468 Management services 320,996 287,128 934,234 942,202 Employee leasing 1,434,228 1,532,218 4,506,679 4,749,234 Franchising 199,422 92,066 586,276 171,066 ------------- ------------- -------------- -------------- 23,867,526 25,793,599 61,539,258 59,600,797 ------------- ------------- -------------- -------------- Operating costs and expenses: Hotel operations: AmeriHost Inn hotels 9,090,650 9,175,390 26,117,093 25,924,588 Other hotels 2,630,603 2,851,594 7,462,832 7,931,951 Development and construction 3,591,327 4,493,261 7,365,708 5,064,816 Management services 208,447 206,080 616,705 717,255 Employee leasing 1,423,474 1,501,205 4,451,061 4,635,138 Franchising 82,859 295,420 480,854 488,036 ------------- ------------- -------------- -------------- 17,027,360 18,522,950 46,494,253 44,761,784 ------------- ------------- -------------- -------------- 6,840,166 7,270,649 15,045,005 14,839,013 Depreciation and amortization 1,177,305 1,115,039 3,303,976 3,658,440 Leasehold rents - hotels 1,644,293 1,840,290 5,059,334 5,552,409 Corporate general and administrative 484,428 404,259 1,287,597 1,181,454 ------------- ------------- -------------- -------------- Operating income 3,534,140 3,911,061 5,394,098 4,446,710 Other income (expense): Interest expense (1,410,867) (1,630,309) (4,353,453) (4,801,889) Interest income 153,666 167,711 587,406 783,704 Other income 160,173 36,046 272,130 542,013 Gain on sale of property 5,506,883 283,187 6,518,719 283,187 Equity in net income and losses of affiliates (54,410) (45,735) (42,799) (6,019) ------------- ------------- -------------- -------------- Income before minority interests and income taxes 7,889,585 2,721,961 8,376,101 1,247,706 Minority interests in income of consolidated subsidiaries and partnerships (88,667) (152,142) (90,485) (242,169) ------------- ------------- -------------- -------------- Income before income taxes 7,800,918 2,569,819 8,285,616 1,005,537 Income tax expense (3,159,000) (1,028,000) (3,342,000) (431,000) Net Income $ 4,641,918 $ 1,541,819 $ 4,943,616 $ 574,537 ============== ============== =============== =============== Income per common share - diluted $ 0.87 $ 0.27 $ 0.92 $ 0.08 ============== =============== =============== =============== Weighted average shares outstanding - diluted basis 5,295,676 5,507,679 5,274,032 6,011,270 ============= ============= ============== ============== Arlington Hospitality, Inc. October 31, 2000 Page 4 of 5
Statements about future results made in this release may constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and the current economic environment. These statements are not guarantees of future performance. They involve a number of risks and uncertainties that are difficult to predict. Actual results could differ materially from those expressed or implied in the forward-looking statements. Important assumptions and other important factors that could cause results to differ materially from those in the forward-looking statements are specified in the Form 10-K for the year ended December 31, 1999 for the Company. Arlington Hospitality, Inc. is a hotel development and management company that owns, builds and manages mid-priced hotels. Currently, Arlington manages 84 properties (with an ownership position in 81 of these hotels) in 18 states, including 71 AmeriHost Inn hotels, for a total of 6,382 rooms. An additional two AmeriHost Inn hotels are currently under construction. Arlington Hospitality, Inc. (formerly Amerihost Properties, Inc.) founded the AmeriHost Inn hotel brand in 1989, and in September 2000, sold the brand and its franchising rights to Cendant Corporation. Additional information about the Company can be found at its web site: "www.arlingtonhospitality.com." MEDIA CONTACT: INVESTOR CONTACTS: Rebecca Hayne James Dale - CFO Alexander and Walsh 847-228-5400, Ext. 361 847-604-9800 Arlington Hospitality, Inc. October 31, 2000 Page 5 of 5 EX-99.2 3 0003.txt CONFERENCE CALL OUTLINE 2000 THIRD QUARTER CONFERENCE CALL WITH SHAREHOLDERS MIKE - ---- o WELCOMES EVERYONE AND INTRODUCES THE COMPANY OFFICIALS ON THE CALL o Jim Dale - Chief Financial Officer o Mike Holtz - President and CEO o Certain statements made during this conference call can be construed as forward-looking statements within the meaning of Section 27A of the Securities and Exchange Act of 1934, as amended. These statements are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in this presentation. o First of all, let me take a moment to comment on our new name, Arlington Hospitality, Inc. As most of you have seen from our recent press release, we are now doing business as Arlington Hospitality, Inc., and all subsidiaries that had the name Amerihost in their name have also changed. Technically, the Amerihost Properties, Inc. name will exist until the next regularly scheduled shareholders' meeting. For all intents and purposes, we are now Arlington Hospitality, Inc. Our symbol on Nasdaq will remain as HOST. Now let's talk about the important news for the quarter. o Jim Dale, our Chief Financial Officer, will review the financial results for the quarter, and I will talk about the operations and direction of the Company. We will then open the discussion to any questions you might have. JIM - --- o REVIEW OF THE PRESS RELEASE FOR THE QUARTER ENDED September 30, 2000. o Net income increased to $0.87 per diluted share during this year's third quarter compared to $0.27 per diluted share during the same quarter last year. o As previously announced, the Cendant transaction accounted for about $0.57 per share of the net income for the quarter. Mike will discuss this transaction further. o Without the Cendant transaction, Net Income increased to $0.30 per diluted share from $0.27 per diluted share last year during the third quarter. o Even though hotel operations revenues were slightly down as the result of selling hotels, operating income for this segment was actually up as margins improved from 19.7% in 1999 to 20.8% this year. 1 o Total Company revenues for the quarter decreased 7.5% to $23.9 million in 2000 from $25.8 million in 1999 with the majority of the decrease coming from the Hotel Development segment. o Revenues and Operating Income in the Hotel Development segment were down in the third quarter of 2000 versus last year's third quarter as the Company had only three joint venture deals under construction during the current quarter. During last year's third quarter, we sold two hotels which had been open less than twelve months resulting in approximately $5.2 million in revenue and nearly $1.0 million in operating profit for the Development segment. Remember, our accounting policy is that if we sell a hotel within 12 months from the opening date, then we will book the revenues and profits in the Development segment; otherwise, we will record only the net profit in the "Gain on Sale" line, below Operating Income. o Cash flow, defined as Net Income plus Depreciation and Amortization, increased to $1.10 per share in the third quarter 2000 from $0.48 per share in the third quarter of 1999. YEAR TO DATE RESULTS: o Net Income increased $4.4 million during the first nine months of 2000 to a profit of $4.9 million in 2000 from a profit of $575,000 in 1999. o Total Revenues increased 3.3% in 2000 to $61.5 million in 2000 from $59.6 million in 1999. o Hotel Operations revenues were down slightly, again as the result of the sale of hotels, but Operating Income for this segment was up over $1.01 million as the result of stronger Operating Income margins. o Margins in Operating Income for the Hotel Operations segment increased on a year-to-date basis to 12.5% in 2000 from 10.3% last year. o Cash Flow (Net Income plus Depreciation and Amortization) increased to $8.2 million in 2000 from $4.2 million in 1999. o We made significant progress improving our debt to equity ratio, from 2.41 as of December 31, 1999 to 1.85 as of September 30, 2000. For this calculation, we are using long-term debt plus the line-of-credit versus total shareholders' equity plus deferred income, which has already been realized by the Company from a cash standpoint. Overall, we are very happy with the record net income for the quarter as well as year to date, and the financial strength of the Company. 2 MIKE - ---- o Thank you for your participation in today's call. As most of you are well aware, the third quarter of the year is historically the best for the Company, and this year is no exception. The two major differences this year are the very nice increase in Operating Income Margins in the Hotel Operations segment of the Company and of course, the impact of the transaction with Cendant. We'll talk about the Cendant deal in a moment. First of all, let me review the recurring numbers from the various segments of the Company. HOTEL OPERATIONS: - ----------------- Same Room Revenues for the third quarter for the AmeriHost Inn hotel brand increased 6.9% over the same period a year ago. This is the result of an increase in occupancy of 6.5% to 71% and an increase of $0.28 in ADR to $58.88 for the quarter. This resulted in a RevPar of $41.62 for the third quarter of this year. For the past 21 months, the AmeriHost Inn hotel brand has been a leader in our segment of the hotel industry, the mid-priced without food and beverage, in RevPar increases. We are working very hard to continue this trend. The quarter went as follows with regard to Same Room Revenues: o July Up 5.5% o August Up 6.8% o Sept. Up 8.8% For the nine months ended September 30, 2000, Same Room Revenues for the AmeriHost Inn hotel brand are up 7.6%. This includes an occupancy increase of 6.8% and an Average Daily Rate increase of $0.32 for a RevPar increase of $2.45. Our major competitive advantage has been and will continue to be CONSISTENCY. All of our hotels have the exact same amenity package and offer the same great service at every location. In addition, every AmeriHost Inn hotel is rated three-diamond with AAA. As we outlined for you in past conference calls, our focus is to expand our hotel development and operations segments and become more of a "fee based" Company. To that end, let me take a moment to update you on our progress in each of the following strategies: (1) BRAND EXPANSION STRATEGY: o We should start construction on around eight new AmeriHost Inn hotels during 2000. As of today, your Company has opened four hotels so far this year, has two under construction, and expects to break ground on an additional two hotels by the end of the year. 3 o Today, we have 71 AmeriHost Inn hotels open excluding ten third-party franchised hotels with Cendant. o Our strategy here is to enhance our development of new AmeriHost Inn hotels and build about 12 to 15 AmeriHost Inn & Suites hotels per year. (2) OWNERSHIP STRATEGY: o So far this year, we have sold seven AmeriHost Inn hotels. This consists of three joint venture AmeriHost Inn hotels and four consolidated AmeriHost Inn hotels. In addition, we currently have three other AmeriHost Inn hotels under contract for sale. All of these are consolidated and owned 100% by your Company. None of these are less than 12 months old. o We also have two non-AmeriHost Inn hotels under contract to sell. o Here is a quick recap of our hotel ownership: 9/30/00 9/30/99 ------- ------- Consolidated AmeriHost Inn hotels..................60 62 Joint Venture AmeriHost Inn hotels.................10 12 Consolidated other hotels.......................... 7 8 Managed Only and JV non-AmeriHost Inn hotels....... 6 6 -- -- TOTAL HOTELS.......................................83 88 (3) HOTEL OPERATIONS STRATEGY: o OBJECTIVE: To increase same room revenues by 7 to 9% over the next 12 months. o STRATEGIES: (a) Focus our marketing efforts on our regional sales blitzes of primary and secondary feeder markets. This has proven to be very successful for the Company, and we will continue to expand this even further. (b) We continue to improve our web site. We have recently added a "virtual reality" tour of our hotels to our web site. The response has been great. It's obvious that even though a small portion of our reservations are generated through the Internet, this is one of the fastest growing areas for us in terms of growth in volume. We will continue to improve our 4 focus in this area. Internet reservation volume has increased 229% during the first nine months of this year. (c) Continue to work to improve results through our reservation center. We are up 68% this year in Net Room Nights booked through our toll-free reservation system. GDS bookings, including those booked over the Internet, are the main reason for the large increase in reservation volume. Systems such as Sabre, Apollo and Worldspan are actually matching the reservation volume of our toll-free number. This is expected to continue to grow as the use of the Internet expands with the travelling population. (d) Focus on improving our operations margins. We have made significant progress in this area as seen on our operations numbers for the quarter and the year. With revenues down slightly, our Operating Income in this segment increased by over $1.0 million for the first 9 months of this year. This is good, but we still have a long way to go in this area. We continue to be negatively impacted by the shortage of labor for our hotels this year. This shortage of labor has forced us to increase hourly wages and incur a higher payroll expense as a result of increased overtime. Trends indicate that this problem decreases as our hotels become more established in their respective markets and we develop a solid "base" of core associates for that hotel. We continue to work on new and creative methods to overcome our staffing shortages and minimize the effect this has on our operations. (4) RECAP OF THE STATE OF THE HOTEL INDUSTRY Statistics from "Smith Travel Research" as printed in Lodging Outlook. o OCCUPANCY 9 MONTHS --------- -------- o Overall hotel industry...................... Up .08% o Mid-priced without F&B...................... Down 0.3% o AmeriHost Inn hotels........................ Up 7.6% o AVERAGE DAILY RATE ------------------ o Overall hotel industry...................... Up 4.8% o Mid-priced without F&B...................... Up 4.6% o AmeriHost Inn hotels........................ Up 1.0% 5 o RevPar NUMBERS -------------- o Overall hotel industry...................... Up 5.5% o Mid-priced without F & B.................... Up 4.3% o AmeriHost Inn hotels........................ Up 7.6% o Overall hotel industry.................Supply Up 3.1% Demand Up 3.9% o Mid-priced without F&B.................Supply Up 10.6% Demand Up 10.2% THE CENDANT TRANSACTION - ----------------------- On September 30, 2000 we closed the Cendant deal. I truly believe that this could be one of the most important deals in the Company's history. Let me tell you why: First of all, we just couldn't hit the ball in the franchise segment. We all know and agree that in order for the brand to succeed, we must have faster growth. What better way to make that happen than to team up with the world's largest franchiser, Cendant. When we first started to talk about doing something together, several things were very important from our perspective: o First and foremost, that we get paid a fair price for our brand o Second, that we have an incentive to continue to grow the brand o Third, that we structure the deal in such a way that your Company receives a long-term, on-going source of revenues and profits from the deal I am confident that we have attained each of these and probably more. Here's where your Company has made or will make its profits: 1. An initial payment that was recorded this quarter of $5.1 million, pre-tax net of closing costs. 2. Preferred franchise agreements on all our owned AmeriHost Inn hotels. 3. Royalty sharing whereby our Company will receive a percentage of royalty fees paid to Cendant for the AmeriHost Inn brand for the next 25 years. 4. Incentive fees from Cendant as we develop and sell AmeriHost Inn hotels that execute a franchise agreement with Cendant. In our filing with our third quarter 10-Q is a copy of all these documents. However, certain confidential information has been deleted from these documents. I am certain that you can understand the reasons for this. 6 (5) CONCLUSION We continue to show strong results from our hotel segment with regard to RevPar growth. Even as the industry has slowed, we continue to recognize viable new markets for new development. While we have closed our franchise segment in the Company, we have a tremendous potential with Cendant to build the brand. Our strategy of building and selling will become more pronounced in the months to come. Our internal goals call for us to start construction of a new AmeriHost Inn hotel for each one that we sell. We appear to be right on course to accomplish just that this year. We expect to sell between 8 to 10 AmeriHost Inns this year and our development plans call for the start of between 8 to 10 new hotels this year. If we can continue this strategy of building and selling on somewhat of an equalized basis, this will prove to be a very effective way to grow the brand and increase our value in the franchise segment from our deal with Cendant. We are also going about the task of selling hotels differently. Most of our leads now come from the Internet, so much so, that we have now set up our own web site: "hotelsforsaleonline.com." By utilizing the Internet, we should be able to sell more hotels without the use of a broker. This may save anywhere between 2% to 3% of the sales price or about $75,000 per hotel sold. As we continue with our strategy of building and selling, we should accomplish two very important objectives: 1. Build the AmeriHost Inn hotel brand 2. Increase Net Income and EPS for the Company While we do believe that Net Income and EPS will continue to grow accordingly under this strategy, Revenues and EBITDA will be in a continual state of flux as the hotels are sold and then replaced with new hotels. I must stress that we are not liquidating our portfolio, but merely utilizing our expertise in the development segment to grow the brand and bring increased value to the Company. I would like to thank you for your time and attention today and would now like to open the lines for any questions. EX-99.3 4 0004.txt LETTER TO SHAREHOLDERS November 3, 2000 Dear Shareholders: This has truly been a great quarter for your Company. After months of negotiation, we closed on the sale of the AmeriHost Inn name and franchising rights to the world's largest franchiser, Cendant Corporation. As a result, the profits generated for the third quarter and year to date 2000 are record results. However, the initial cash and profits recorded in the third quarter are just the beginning of the benefits your Company will realize as a result of our deal with Cendant. There are basically four points that will financially impact your Company. 1. An initial payment that was recorded this quarter of $5.1 million, net of closing costs. 2. Preferred franchise agreements with Cendant on all our owned AmeriHost Inn hotels. 3. Royalty sharing whereby our Company will receive a percentage of royalty fees paid to Cendant for the AmeriHost Inn brand for the next 25 years. 4. Incentive fees from Cendant as we develop and sell AmeriHost Inn hotels that execute a franchise agreement with Cendant. We are truly excited about the future of our Company and the AmeriHost Inn brand with Cendant. To avoid confusion going forward as we develop the AmeriHost Inn brand with Cendant, and as part of our agreement with Cendant, we have begun doing business as Arlington Hospitality, Inc. Our symbol on Nasdaq: HOST will remain the same. In addition, the names of our hotels will remain as AmeriHost Inn hotels and operate under a franchise agreement with Cendant. Technically, our name change will not be official until our next regularly scheduled shareholder meeting, subject to shareholder approval. Another significant event for Arlington Hospitality this quarter was the appointment of KPMG LLP as our new auditors. After evaluating many accounting firms, the Company's Audit Committee and Board of Directors decided to retain the services of a world renowned accounting firm to not only provide audit and tax services, but to guide and consult with senior management through the many changes occurring in our industry. One of our primary objectives this year was to bring the Company's debt to equity ratio to 2:1 or better. Our debt to equity ratio is computed using total long-term debt compared to total shareholders' equity plus deferred income. Deferred income has been included since the Company has already received the cash benefit and the accounting treatment is merely a deferral and amortization of the profit. I am proud to say that our debt to equity ratio, as defined, now stands at 1.85:1. Our objective is to better manage this ratio and other financial ratios and to be stronger than industry averages. The outlook for the future of Arlington Hospitality appears very strong. Our objective to start construction on up to 15 new AmeriHost Inn & Suites hotels through next year appears right on target. In addition, we are optimistic about the prospects of selling at least 15 hotels to Amerihost Inn franchisees through the end of next year. Remember, our goal is to sell one AmeriHost Inn hotel for each one that we build. We are committed to increasing the shareholder value of Arlington Hospitality, Inc. Our Board of Directors and management team are extremely focused in this area. Our primary objective of increasing profitability is now being realized. Our next step is to communicate our business plan more thoroughly to the Wall Street community. I would like to thank you for your commitment to the Company and look forward to future prosperity. Sincerely, Michael P. Holtz Chairman of the Board President and CEO -----END PRIVACY-ENHANCED MESSAGE-----