EX-99.1 3 a32381_8kx991.txt PRESS RELEASE FOR IMMEDIATE RELEASE Contact: Media Contact: James B. Dale, Chief Financial Officer Jerry Daly or Carol McCune 847-228-5401, x361 703-435-6293 jimdale@arlingtonhospitality.com jerry@dalygray.com ARLINGTON HOSPITALITY, INC. ANNOUNCES 2003 FIRST QUARTER RESULTS AND SAME-ROOM REVENUE, HOTEL DEVELOPMENT ACTIVITY FOR APRIL 2003 ARLINGTON HEIGHTS, Ill., May 15, 2003 - Arlington Hospitality, Inc. (Nasdaq/NM: HOST), a leading hotel development and management company, primarily of AmeriHost Inns, today announced results for the first quarter ended March 31, 2003. Revenues rose 6.8 percent to $19.2 million, up from $17.9 million in the same period a year earlier due primarily to an increase in hotel real estate sales and commissions and incentive and royalty sharing fees, partially offset by a decrease in revenues related to hotel operations. First quarter 2003 operating loss was $(1.3) million, compared to an operating loss of $(450,000) in the 2002 first quarter. Net loss was $(1.5) million, or $(0.30) per diluted share, compared to a net loss of $(758,000), or $(0.15) per diluted share during the same period a year earlier. The net loss was due primarily to an increase in seasonal hotel operating losses due to a more severe winter and unusually high energy costs at the company's hotels, the weak economy and growing concerns about a war in Iraq. - more - Arlington Hospitality Page 2 OPERATING RESULTS
Three Months Ended Twelve Months Ended March 31, 2003 March 31, 2003 -------------- -------------- Occupancy - current period 49.7% 58.8% Occupancy - prior period 49.9% 56.2% Increase (decrease) (0.4%) 4.6% Average Daily Rate - current period $54.89 $57.15 Average Daily Rate - prior period $55.45 $58.28 Increase (decrease) (1.0%) (1.9%) RevPAR - current period $27.30 $33.62 RevPAR - prior period $27.65 $32.73 Increase (decrease) (1.4%) 2.6%
These results are presented on a "same-room" basis, and include the company's AmeriHost Inn hotels which have been open for at least 13 months during the period presented. Occupancy declined 0.4 percent to 49.7 percent, compared to the prior year's first quarter, and average daily rate (ADR) decreased 1 percent to $54.89. Revenue per available room (RevPAR) was $27.30, off 1.4 percent, compared to the 2002 first quarter. "As has been widely reported, the 2003 first quarter was difficult for the entire hotel industry," said Jerry Herman, Arlington Hospitality president and chief executive officer. "Our AmeriHost Inn hotels continued to outperform their segment of the lodging industry. While the midscale without food & beverage segment of the lodging industry reported a 1.7% decrease in RevPAR for the first quarter, according to Smith Travel Research, our 60 AmeriHost Inn properties opened more than 13 months realized a 1.4 percent decline in same-room RevPAR for the first quarter of 2003. - more - Arlington Hospitality Page 3 "Business transient travel remained very soft but our leisure travel component held up well, especially our weekend business," he noted. "We attribute this to strong `backyard' marketing and a continued focus on building revenues in this tough economy. On a positive note, our results improved each month over the previous month, with March same-room RevPAR up 1.1 percent." Herman continued, "Margins also were under pressure during the quarter, primarily due to higher energy and insurance costs. However, we took proactive and aggressive measures to control costs, especially in labor scheduling and other variable costs. The results of these measures were seen by the end of March, as departmental expenses per room declined during the 2003 first quarter, compared to the same period a year earlier. "Cost containment will remain a priority. We are testing three property energy conservation systems and reviewing opportunities to further reduce real estate taxes, insurance and other costs. In addition, new approaches to revenue enhancement are also a priority, and we are focusing on new sales initiatives that include the Internet, the military/government markets and consortia," he said. APRIL RESULTS Herman noted that April continued the pattern of a difficult operating environment, which was further impacted by the war in Iraq. "Our stabilized AmeriHost Inns continued to outperform the industry and our segment in April with same room RevPAR down only 1.1 percent, compared to industry RevPAR of negative 4 percent to 6 percent and our segment down 3 percent to 5 percent, according to preliminary Smith Travel Research estimates." - more - Arlington Hospitality Page 4
One Month Ended Twelve Months Ended April 30, 2003 April 30, 2003 -------------- -------------- Occupancy - current period 57.3% 58.6% Occupancy - prior period 57.7% 56.4% Increase (decrease) (0.7%) 3.9% Average Daily Rate - current period $56.06 $57.17 Average Daily Rate - prior period $56.23 $58.11 Increase (decrease) (0.3%) (1.6%) RevPAR - current period $32.11 $33.48 RevPAR - prior period $32.44 $32.79 Increase (decrease) (1.1%) 2.1%
STRATEGIC PLAN UPDATE "We have made significant progress refining our strategic plan," Herman commented. "We intend to take advantage of our historic strengths in hotel development and to maximize the benefits of our relationship with Cendant Corporation (NYSE: CD), from which we receive significant development and royalty-sharing fees as part of our sale of the AmeriHost Inn brand name to Cendant in 2000." Herman noted that incentive and royalty-sharing fee revenue from Cendant increased 88 percent to $206,000 during the 2003 first quarter from the same period a year earlier. "While the fees currently are a small percentage of our results, our business plan focuses on increasing them substantially in the years ahead. "We now are evaluating the possible sale of a substantial portion of our non-AmeriHost Inn hotels and between 25 and 35 AmeriHost properties over the next two years," he said. "We have selected a national hotel broker to help us identify suitable properties and expect to present a finalized plan to our board - more - Arlington Hospitality Page 5 within the next two months. If adopted, we expect the successful implementation of this plan will have a significant positive impact on the company, including the reduction of debt levels and the generation of cash to pursue new hotel development and other strategic objectives, while also maximizing our fee income stream from Cendant." REAL ESTATE ACTIVITY During the 2003 first quarter, Arlington Hospitality sold two company-owned hotels, located in Willows, Calif., and Battle Creek, Mich., and facilitated the sale of a hotel owned by a joint venture in Newark, Ohio. "The onset of the war created a pause in most of our real estate activities as lenders became more cautious until the outcome of the war was apparent," Herman said. "Several sales transactions in progress were delayed or cancelled. Since the major hostilities ceased, however, activity has picked up considerably. We currently have six properties under contract to sell, with significant interest in additional hotels." HOTEL DEVELOPMENT Arlington Hospitality has taken preliminary steps to realign the company to be more focused on the expected rebound of hotel development. "We have refined our development criteria to include adding larger, secondary markets, particularly in the Midwest, where the AmeriHost brand has high consumer awareness, and in California. We have three sites under contract and are looking at six to eight additional sites. "We will ramp up our development pipeline as the industry rebounds over the next few quarters, and we are optimistic about the opportunities we see ahead. Development is at the bottom of the cycle, according to Lodging Econometrics, and there is demand for new product. As the economy rebounds, we - more - Arlington Hospitality Page 6 expect to see a substantial increase in the company's hotel development activities, subject to rigorous underwriting, site selection, and market criteria. With our development and construction expertise, our goal in the next few years is to build 10 to 15 new hotels annually." Herman noted that most of the company's future development will be through joint ventures. "Joint ventures will enable us to place the greatest number of properties under development in the shortest amount of time," he said. "Since the cessation of major hostilities in Iraq, we have seen a heightened interest by existing and potential joint venture partners." As announced earlier this week, Arlington Hospitality opened a 96-room AmeriHost Inn owned by a joint venture in Columbus, Ohio, near Rickenbacker Airport, and expects to open an 84-room, company-owned AmeriHost Inn in Redding, Calif., either late in the second or early in the third quarter 2003. CENDANT RELATIONSHIP "We continue to work closely with Cendant to develop an aggressive growth strategy for the AmeriHost brand," Herman said. "We both agree that with development at a cyclical low, now is a good time to focus on expanding the brand." CORPORATE LINE OF CREDIT FACILITY The company renewed its $6.5 million bank line of credit through April 30, 2004. Terms are prime plus 250 basis points, with a floor of 6.75 percent. As of March 31, 2003, Arlington had $6 million outstanding on the credit line. - more - Arlington Hospitality Page 7 STOCK PURCHASES The board of directors has authorized the company to buy back, at any time and without notice, up to 1 million shares of its common stock under certain conditions. The company did not purchase any shares of its common stock on the open market during the first quarter. However, certain senior management and board members have acquired approximately 75,000 common shares to date in 2003. Due to senior management travel obligations, the company will conduct a conference call on Monday, May 19, 2003 at 11:30 Eastern Time to review first quarter 2003 financial results and year-to-date progress, followed by a question and answer period. Stockholders and other interested parties may listen to the conference call by calling (800) 218-0713, pass code 538729. A recording of the call will be available by telephone until midnight on Monday, May 26, by dialing (800) 405-2236, reference number 538729. Arlington Hospitality, Inc. is a hotel development and management company that builds, operates and sells mid-market hotels, primarily the AmeriHost Inn brand. Arlington Hospitality, Inc. currently owns or manages 72 properties in 17 states, including 62 AmeriHost Inn hotels, for a total of 5,305 rooms, with one additional AmeriHost Inn & Suites hotel under construction. The AmeriHost Inn brand is a mid-market, limited service hotel brand, created by Arlington in 1989 and sold to Cendant Corporation in 2000. The brand has approximately 100 properties located in 20 states. For more information about Arlington Hospitality, visit the company's web site at www.arlingtonhospitality.com. - more - Arlington Hospitality Page 8 The statements appearing in this press release can be construed as forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities 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 the forward-looking statements, including without limitation, risks relating to the development and operation of hotels, the timing, consummation and final terms of hotel sales, the availability of capital to finance growth, geopolitical events, competition and the historical cyclicality of the lodging industry. ARLINGTON HOSPITALITY, INC. AND SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEETS
March 31, December 31, 2003 2002 --------------- ---------------- ASSETS (UNAUDITED) Current assets: Cash and cash equivalents $ 4,345,504 $ 3,969,515 Accounts receivable 2,387,653 2,064,463 Notes receivable, current portion 100,000 100,000 Prepaid expenses and other current assets 959,606 975,432 Refundable income taxes 2,179,948 1,574,776 Costs and estimated earnings in excess of billings on uncompleted contracts 767,629 1,479,101 --------------- -------------- Total current assets 10,740,340 10,163,287 Investments in and advances to unconsolidated hotel joint ventures 4,292,450 4,291,504 Property and equipment, net 94,958,370 99,611,340 Notes receivable, less current portion 927,708 782,083 Deferred income taxes 2,428,000 2,427,000 Other assets 2,484,400 2,658,500 --------------- -------------- $ 115,831,268 $ 119,933,714 =============== ============== LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,928,478 $ 3,965,028 Bank line-of-credit 5,980,000 6,384,287 Accrued payroll and related expenses 871,916 827,353 Accrued real estate and other taxes 2,192,603 1,969,297 Other accrued expenses and current liabilities 1,651,431 1,974,350 Current portion of long-term debt 5,243,995 4,038,301 --------------- -------------- Total current liabilities 18,868,423 19,158,616 Long-term debt, net of current portion 69,352,642 72,203,688 Deferred income 11,302,028 10,867,418 Minority interests 294,313 333,888 Shareholders' equity 16,013,862 17,370,104 --------------- -------------- $ 115,831,268 $ 119,933,714 =============== ==============
ARLINGTON HOSPITALITY, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, (UNAUDITED)
2003 2002 --------------- ---------------- Revenue: Hotel operations: AmeriHost Inn hotels $ 8,332,009 $ 9,159,927 Other hotels 1,890,968 2,256,553 Development and construction 1,479,978 1,803,750 Hotel sales and commissions 6,443,290 3,359,867 Management services 111,154 233,937 Employee leasing 517,407 852,361 Incentive and royalty sharing 205,655 109,564 Office building rental 177,228 161,670 --------------- -------------- 19,157,689 17,937,629 --------------- -------------- Operating costs and expenses: Hotel operations: AmeriHost Inn hotels 7,359,119 7,285,328 Other hotels 2,372,159 2,889,300 Development and construction 1,604,727 1,997,567 Hotel sales and commissions 5,240,817 2,030,948 Management services 88,633 154,530 Employee leasing 506,122 820,637 Office building rental 1,552 16,823 --------------- -------------- 17,173,129 15,195,133 --------------- -------------- 1,984,560 2,742,496 Depreciation and amortization 1,352,623 1,323,689 Leasehold rents - hotels 1,334,977 1,481,812 Corporate general and administrative 455,331 387,159 Impairment provision 100,000 - --------------- -------------- Operating loss (1,258,371) (450,164) Other income (expense): Interest expense (1,294,969) (1,423,674) Interest income 119,959 123,830 Other income (expense) (2,270) 60,010 Equity in net income and (losses) from unconsolidated joint ventures (74,446) 86,968 Gain on sale of assets - 327,076 --------------- -------------- Loss before minority interests and income taxes (2,510,097) (1,275,954) Minority interests in operations of consolidated subsidiaries and partnerships 39,576 13,203 --------------- -------------- Loss before income tax (2,470,521) (1,262,751) Income tax benefit 988,000 505,000 --------------- -------------- Net loss $ (1,482,521) $ (757,751) =============== ============== Net loss per share - diluted $ (0.30) $ (0.15) =============== ============== Weighted average shares outstanding - diluted basis 5,005,395 5,126,181 =============== ===============