-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, SsNYkiynOzGUvivm7lwt8LIOABAiWDQbV2jsf96bsiId13brDLJBY+EGm4/9pLxl b45D39HwlkBOjEZqKRMFUg== 0000914760-95-000047.txt : 19950511 0000914760-95-000047.hdr.sgml : 19950511 ACCESSION NUMBER: 0000914760-95-000047 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950509 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: 95535678 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 MARCH 31, 1995 OR [ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Commission File No. 2-90939C AMERIHOST PROPERTIES, INC. (Exact name of registrant as specified in its charter) DELAWARE 36-3312434 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2400 EAST DEVON AVE., SUITE 280, DES PLAINES, ILLINOIS 60018 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (708) 298-4500 Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No As of May 5, 1995, 5,796,499 shares of the Registrant's Common Stock were outstanding. AMERIHOST PROPERTIES, INC. FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 1995 INDEX PART I: Financial Information Page Consolidated Balance Sheets as of March 31, 1995 and December 31, 1994 Consolidated Statements of Operations for the Three Months Ended March 31, 1995 and 1994 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1995 and 1994 Notes to Consolidated Financial Statements Management's Discussion and Analysis Schedule of Earnings Before Interest/Rent, Taxes and Depreciation/Amortization for the Three Months Ended March 31, 1995 PART II: Other Information Item 6 Exhibits and Reports on Form 8-K Signatures AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
March 31, December 31, 1995 1994 ASSETS (Unaudited) Current assets: Cash and cash equivalents $ 1,598,949 $ 3,026,029 Accounts receivable (including $817,420 and $703,465 from related parties) 2,742,199 2,457,233 Notes receivable (including $1,326,932 and $1,687,178 from related parties) 1,474,662 1,834,908 Prepaid expenses and other current assets 355,647 370,471 Costs and estimated earnings in excess of billings on uncompleted contracts (including $2,850,299 and $1,315,707 from related parties) 3,857,807 2,005,274 Refundable income taxes 133,081 - Total current assets 10,162,345 9,693,915 Investments 2,386,166 2,995,234 Property and equipment: Land 2,785,290 2,240,952 Buildings 11,614,479 9,124,901 Furniture, fixtures and equipment 5,447,818 3,784,608 Construction in progress 2,508,635 2,253,456 Leasehold improvements 1,424,853 791,800 23,781,075 18,195,717 Less accumulated depreciation and amortization 3,166,294 1,729,611 20,614,781 16,466,106 Long-term notes receivable (including $1,002,615 and $1,272,612 from related parties) 2,461,847 2,737,882 Costs of management contracts acquired, net of accumulated amortization of $813,343 and $768,324 561,535 492,253 Other assets, net of accumulated amortization of $1,107,706 and $769,669 2,610,278 2,018,192 5,633,660 5,248,327 $ 38,796,952 $34,403,582 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 5,203,511 $ 3,224,973 Accrued payroll and related expenses 731,783 679,971 Other accrued expenses and current liabilities 905,806 624,740 Current portion of long-term debt 785,611 566,808 Income taxes payable - 415,197 Total current liabilities 7,626,711 5,511,689 Long-term debt, net of current portion 15,082,660 12,975,226 Deferred income 890,833 1,051,457 Commitments Minority interest 1,270,027 1,192,925 Shareholders' equity: Preferred stock, no par value; authorized 100,000 shares; none issued Common stock, $.005 par value; authorized 15,000,000 shares; issued 5,756,874 shares at March 31, 1995, and 5,570,013 shares at December 31, 1994 28,784 27,850 Additional paid-in capital 16,002,925 15,465,891 Deficit (711,821) (428,289) 15,319,888 15,065,452 Less: Stock subscriptions receivable (436,875) (436,875) Notes receivable (956,292) (956,292) 13,926,721 13,672,285 $ 38,796,952 $34,403,582 See notes to consolidated financial statements.
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, (Unaudited)
1995 1994 Revenue: Hotel operations $ 4,114,725 $2,454,086 Development and construction 5,504,823 602,898 Management services 564,454 535,958 Employee leasing 2,973,359 3,240,328 13,157,361 6,833,270 Operating costs and expenses: Hotel operations 3,457,530 2,205,834 Development and construction 5,164,129 768,374 Management services 456,823 517,602 Employee leasing 2,931,187 3,206,435 12,009,669 6,698,245 1,147,692 135,025 Depreciation and amortization 434,919 273,824 Leasehold rents - hotels 451,605 419,820 Corporate general and administrative 467,757 623,745 Operating loss (206,589) (1,182,364) Other income (expense): Interest expense (307,720) (149,442) Interest income 91,536 91,008 Other income 20,159 (22,142) Equity in net income and losses of affiliates (183,528) (204,980) Loss before minority interests and income taxes (586,142) (1,467,920) Minority interests in losses of consolidated subsidiaries and partnerships 112,610 44,428 Loss before income tax benefit (473,532) (1,423,492) Income tax benefit 190,000 569,000 Net loss $ (283,532) $ (854,492) Net loss per share $ (0.05) $ (0.15) See notes to consolidated financial statements.
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE THREE MONTHS ENDED MARCH 31, (Unaudited)
1995 1994 Cash flows from operating activities: Cash received from customers $ 11,304,689 $ 7,171,318 Cash paid to suppliers and employees (10,840,119) (8,265,962) Interest received 72,469 25,798 Interest paid (310,371) (140,183) Income taxes paid (358,278) (2,100) Net cash used in operating activities (131,610) (1,211,129) Cash flows from investing activities: Distributions from affiliates 19,219 74,128 Purchase of property and equipment (2,209,105) (1,654,030) Purchase of investments (5,000) (11,075) Increase in notes receivables (206,202) (476,588) Collections on notes receivables 126,463 28,637 Cost of management contracts acquired (114,301) - Sale of investments 10,000 - Increase in organization costs - (6,043) Net cash used in investing activities (2,378,926) (2,044,971) Cash flows from financing activities: Proceeds from issuance of long-term debt 1,224,263 1,935,242 Principal payments of long-term debt (140,807) (49,150) Proceeds from line of credit - 200,000 Increase in minority interests - 445,000 Net cash provided from financing activities 1,083,456 2,531,092 Net decrease in cash (1,427,080) (725,008) Cash, beginning of period 3,026,029 1,885,335 Cash, end of period $ 1,598,949 $ 1,160,327 Reconciliation of net loss to net cash used in operating activities: Net loss $ (283,532) $ (854,492) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 434,919 273,824 Equity in net loss of affiliates before amortization of deferred income 198,428 223,139 Minority interests in net losses of subsidiaries (112,610) (44,428) Amortization of deferred income (14,900) (18,159) Amortization of deferred interest (2,143) (2,143) Amortization of loan discount 11,348 11,348 Increase in deferred tax asset - (569,000) Compensation paid through issuance of common stock 364 - Changes in assets and liabilities net of effects of acquisitions: Increase in accounts receivable (20,298) (418,580) Increase in interest receivable (16,924) (63,067) Decrease (increase) in prepaid expenses and other current assets 24,784 (55,950) (Increase) decrease in costs and estimated earnings in excess of billings (1,852,533) 744,166 Increase in refundable income taxes (548,278) (2,100) Increase in other assets (129,723) (268,887) Increase (decrease) in accounts payable 2,019,490 (1,369,625) Increase in accrued expenses and other current liabilities 173,997 1,192,701 Decrease in accrued interest (13,999) (2,089) Increase in deferred income - 12,213 Net cash used in operating activities $ (131,610 $ (1,211,129) See notes to consolidated financial statements.
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: BASIS OF PREPARATION: The financial statements included herein have been prepared by the Company, without audit. In the opinion of the Company, the accompanying unaudited financial statements contain all adjustments, which consist only of recurring adjustments necessary to present fairly the financial position of Amerihost Properties, Inc. and subsidiaries as of March 31, 1995 and December 31, 1994 and the results of its operations for the three month periods ended March 31,1995 and 1994, and statements of cash flows for the three months ended March 31, 1995 and 1994. The results of operations for the three months ended March 31, 1995, are not necessarily indicative of the results to be expected for the full year. It is suggested that the accompanying financial statements be read in conjunction with the financial statements and the notes thereto included in the Company's 1994 Annual Report on Form 10-K. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, and ownership interests in the following partnerships: Sullivan Motel Associates, Ltd. (45.7%), White River Junction, VT 393 Limited Partnership (83.3%), Metropolis, IL 1292 Limited Partnership (54.9%), Tuscola, Illinois 593 Limited Partnership (68.75%), Dayton, Ohio 1291 Limited Partnership (49.5%), Bowling Green, Ohio 590 Limited Partnership (62.33%) and Findlay, Ohio 391 Limited Partnership (50.67%). Significant intercompany accounts and transactions have been eliminated. CONSTRUCTION ACCOUNTING: Development fee revenue from construction/renovation projects is recognized over the period beginning with the execution of contracts and ending with the commencement of construction/renovation. Construction fee revenue from construction/renovation projects is recognized on the percentage-of-completion method, generally based on the ratio of costs incurred to estimated total contract costs. Revenue from contract change orders is recognized to the extent costs incurred are recoverable. Profit recognition begins when construction reaches a progress level sufficient to estimate the probable outcome. Provision is made for anticipated future losses in full, at the time they are identified. CONCENTRATION OF CREDIT RISK: Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of temporary cash investments, accounts receivable and notes receivable. The Company invests in temporary cash balances in financial instruments of highly rated financial institutions generally with maturities of less than three months. A substantial portion of accounts receivable are from hotels located in the midwestern United States, where collateral is generally not required, and from hotel operators for the development and construction of hotels pursuant to written contracts. Notes receivable are primarily from hotel operating entities generally located in the midwestern and southern United States, and two of the Company's officers. CASH EQUIVALENTS: The Company considers all investments with a maturity of three months or less to be cash equivalents. INVESTMENTS: Investments in affiliates are accounted for using the equity method, under which method the original investment is increased (decreased) by the Company's share of affiliates' earnings (losses), and is reduced by dividends or distributions when received. Other investments are recorded at cost. PROPERTY AND EQUIPMENT: Property and equipment are stated at cost. Depreciation is being provided for assets placed in service by use of the straight-line and accelerated methods over their estimated useful lives. Leasehold improvements are being amortized by use of the straight-line method over the term of the lease. For each classification of property and equipment, depreciable periods are as follows: Building 31.5-39 years Furniture, fixture and equipment 5-7 years Leasehold improvements 3-10 years COST OF MANAGEMENT CONTRACTS ACQUIRED: The costs of management contracts acquired includes amounts paid to acquire management contracts and pre-opening costs incurred in connection with new management contracts. These amounts are being amortized by use of the straight-line method over periods ranging from two to five years. OTHER ASSETS: Costs in excess of net assets of subsidiary Costs in excess of net assets of various consolidated partnerships are amortized on a straight-line basis over a period of 31.5 years. Organization costs Organization costs are being amortized by use of the straight-line method over a period of five years. Investment in leases Investment in leases represents the amounts paid for the acquisition of leasehold interests for certain hotels. These costs are being amortized by use of the straight-line method over the lives of the leases. Deferred subordinated note costs Deferred subordinated note costs represents the costs incurred in obtaining the 7% subordinated notes. These costs are being amortized by use of the straight-line method over the life of the debt. Franchise fees Franchise fees represent the initial franchise fees paid to franchisors for certain hotels and are being amortized by use of the straight-line method over the term of the franchise license, ranging from 10 to 20 years. DEFERRED INCOME: Deferred income represents that portion of fees earned from entities in which the Company holds an ownership interest which is equal to the Company's proportional ownership interest in the entity. The balance of the fees are recorded in income as earned. The deferred income is being amortized over the life of the operating assets owned by the affiliated entity. Also included in deferred income is the unamortized portion of loan points collected from a loan made to an unaffiliated party in connection with the acquisition of management contracts. These are being amortized into interest income over the life of the loan. INCOME TAXES: Deferred income taxes are provided on the differences in the bases of the Company's assets and liabilities determined for tax and financial reporting purposes. Deferred income taxes have been calculated under the liability method as prescribed by Statement of Financial Accounting Standards No. 109 "Accounting for Income Taxes." NET LOSS PER SHARE: Computations of net loss per share of common stock are computed by dividing net loss by the weighted average number of shares of common stock and dilutive common stock equivalents outstanding. Common stock equivalents include stock options and warrants. The weighted average number of shares used in the computations were 5,756,353 and 5,651,335 for the three months ended March 31, 1995 and 1994, respectively. RECLASSIFICATIONS: Certain reclassifications have been made to the 1994 financial statements in order to conform with the 1995 presentation. 2. SHAREHOLDERS' EQUITY: REVERSE STOCK SPLIT: During 1989, the Company effected a 1-for-50 reverse stock split. Each holder of the Company's Common Stock was entitled to receive one new share for every 50 shares held as of the close of business on August 22, 1989. Any fractional shares resulting from the reverse split were acquired by the Company and retired. Through March 31, 1995, 19.06 of aggregate fractional shares were acquired by the Company at $4.63 per share and retired. AUTHORIZED SHARES: The Company's corporate charter authorizes 15,000,000 shares of Common Stock and 100,000 shares of Preferred Stock without par value. The Preferred Stock may be issued in series and the Board of Directors shall determine the voting powers, designations, preferences and relative participating, optional or other special rights and the qualifications, limitations or restrictions thereof. DIVIDEND RESTRICTIONS: Pursuant to the terms of the Company's subordinated notes (Note 3), no dividends may be paid on any capital stock of the Company until such notes have been paid in full. REGISTRATION OF COMMON STOCK: Pursuant to agreements with certain shareholders who executed agreements not to sell in connection with a public offering of 1,550,000 shares of the Company's Common Stock in May 1993, the Company filed a shelf registration statement on Form S-3 with the Securities and Exchange Commission. This filing registered a total of 1,359,084 shares and became effective on December 28, 1993. 3. SUBORDINATED DEBENTURES: On October 9, 1992, the Company completed the private placement of $4,500,000 7% Subordinated Notes. The notes are unsecured, and subordinated in right of payment to all senior indebtedness, which includes all indebtedness outstanding on October 9, 1992. The Notes are due October 9, 1999, with interest payable quarterly at the rate of 7% per annum. The proceeds to the Company, net of commissions, legal and accounting fees and other costs of the offering were $4,030,346. During 1993, in accordance with certain provisions on the Notes, the Company prepaid 50% of the principal amount, resulting in a principal balance of $2,250,000 at March 31, 1995. For each $1,000 principal amount loaned to the Company, the noteholder also received common stock purchase warrants, representing the right to purchase 375 shares of the Company's Common Stock at an exercise price of $4.00 per share for a period of five years from the date of issuance of the warrants. Warrants to purchase a total of 46,875 shares are outstanding at March 31, 1995. 4. SUPPLEMENTAL CASH FLOW DATA: The following represents the supplemental schedule of noncash investing and financing activities for the three month periods ending March 31, 1995 and 1994: Three Months Ended March 31, 1995 1994 Purchase of investments through issuance of common stock and decrease in notes receivable $ 304,253 $ 150,000 Reduction of accounts payable through issuance of common stock $ 233,351 The Company acquired additional partnership interests in three hotels for 134,400 shares of the Company's common stock. In conjunction with the acquisition, liabilities were assumed as follows: Fair value of assets acquired $ 2,907,246 Issuance of common stock (454,094) Liabilities assumed $ 2,453,152 Proforma financial information has not been given reflecting the acquisitions since it is not considered material to the overall financial statement presentation. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS GENERAL The Company is primarily engaged in the development and ownership/operation of mid-market hotels. The consolidated financial statements include the operations of all hotels in which the Company has a 100% or controlling ownership interest ("Consolidated Hotels"). Investments in other entities in which the Company has a minority ownership interest are accounted for using the equity or cost method. The Company also provides hotel development and management services to unrelated third parties and entities in which the Company has a minority ownership interest on a fee-for-service or contract basis. The first quarter of 1995 resulted in record revenues of $13.2 million, an increase of 92.5% from $6.8 million in the first quarter of 1994. The Company typically experiences a net loss in the first quarter of each year due to the seasonal fluctuations in hotel occupancy and average daily rates. The first quarter net loss decreased to a net loss of $283,532 in 1995 from a net loss of $854,492 in the first quarter of 1994. The Company's operating loss decreased from a loss of $1.2 million in 1994 to a loss of $206,589 in 1995, while earnings before interest/rents, taxes and depreciation/amortization ("EBITDA") increased to a record $720,712 in the first quarter of 1995 from a loss of $580,406 in the first quarter of 1994. The improved performance was primarily attributable to hotel operations and hotel development. Amerihost had an ownership interest in 44 hotels at March 31, 1995 versus 39 hotels at March 31, 1994, increasing equivalent owned rooms by 16.7%. This increased ownership, as well as a 13.1% increase in same room revenues during the first quarter of 1995 compared to the same quarter in 1994 for all hotels in which the Company has an ownership interest, had a significant impact on the hotel operations segment's revenues and profit and the Company's equity in income and loss of its minority owned hotel investments. The 13.1% increase in same room revenues resulted primarily from a 7.3% increase in occupancy and a $1.06 increase in average daily rate, compared with the first quarter of 1994. The hotel operations segment generated revenues of $4.1 million in the first quarter of 1995, compared to $2.5 million in the 1994 first quarter. The operating loss in this segment decreased 60.4% from a loss of $375,380 in the first quarter of 1994 to a loss of $148,566 in the 1995 first quarter. During the first quarter of 1995, the Company was constructing nine hotels, one of which was completed in February 1995, and was in various stages of the pre-construction development process for several additional hotels. The Company has an ownership position in seven of these nine hotels, including 100% ownership of three. Seven of these nine hotels are the Company's own brand, Amerihost Inn. Amerihost Inns offer certain amenities including an indoor pool area, whirlpool suites, an exercise room, and a free continental breakfast which assists the property in obtaining favorable occupancy and average daily rates, and an efficient layout designed to control operating costs. Going forward, the Company plans to continue to develop and construct hotels for both itself, which will contribute to the hotel operations segment, and unrelated third parties and entities in which the Company has a minority equity interest, which will contribute to the hotel development segment. RESULTS OF OPERATIONS Record revenues of $13.2 million for the three months ended March 31, 1995 increased 92.5% from revenues of $6.8 million for the three months ended March 31, 1994. This increase was due primarily to the Company's hotel operations and hotel development segments. Hotel operations revenue increased 67.7% to $4.1 million in the first quarter of 1995, as compared to $2.5 million in the first quarter of 1994. This increase was attributable to an increase in same room average daily rates and the addition of six Consolidated Hotels to the hotel operations segment since March 31, 1994. The Company held a minority ownership position in three of these six hotels prior to the first quarter of 1995 when additional ownership interests were acquired. The first quarter of 1995 included the operations of 18 Consolidated Hotels comprising 2,026 rooms compared to 12 Consolidated Hotels comprising 1,423 rooms in the first quarter of 1994 or an increase of 42.4% in total rooms. Excluding minority interests in the Consolidated Hotels, this translates to 1,698 and 1,313 equivalent owned rooms as of March 31, 1995 and 1994, respectively, or an increase of 29.3%. The average daily rates for the same room Consolidated Hotels increased $1.54 from $42.73 in the first quarter of 1994 to $44.27 in the first quarter of 1995. Revenues from the Company's hotel development segment increased $4.9 million from $602,898 in the first quarter of 1994 to $5.5 million in the first quarter of 1995. This increase is attributable to increased project development and hotel construction activity during the first quarter of 1995 compared to the first quarter of 1994. During the first quarter of 1995, the Company was constructing six hotels (excluding construction of Consolidated Hotels) and had several projects in various stages of pre-construction development. Two of the six hotels which were under construction during the 1995 first quarter were being constructed for unrelated third parties, and four were minority owned by the Company. During the first quarter of 1994, the Company began construction on one hotel for a third party, and was in the development phase of several projects. The increases in hotel operations and hotel development revenues were partially offset by a decrease in employee leasing revenues. Hotel management and employee leasing revenues are a direct function of the number of unrelated and minority owned properties managed by the Company. While the number of Consolidated Hotels increased from 12 to 18, hotels managed for third parties and minority owned entities decreased from 41 to 34 (three minority owned hotels became Consolidated Hotels in the first quarter of 1995 due to the Company acquiring additional ownership interests in these hotels). Management and employee leasing revenues from the Consolidated Hotels are eliminated in consolidation. Hotel management revenues increased 5.3% from $535,958 in the first quarter of 1994 to $564,454 in the first quarter of 1995 as the decrease in hotels managed for third parties was more than offset by higher management fee revenues on the remaining properties. Employee leasing revenue decreased 8.2% from $3.2 million to $3.0 million in the first quarter due to the decrease in hotels managed for third parties and minority owned entities. Operating costs and expenses increased 79.3% to $12.0 million (91.3% of total revenues) in the first quarter from $6.7 million (98.0% of total revenues) in the first quarter of 1994, which increase is directly related to the 92.5% increase in revenues. Operating costs and expenses for the hotel development segment increased from $768,374 in the first quarter of 1994 to $5.2 million in the first quarter of 1995, due to increased construction activity during 1995 compared to the 1994 first quarter. Operating costs and expenses in the hotel operations segment increased 56.7% from $2.5 million in the first quarter of 1994 to $3.5 million in the first quarter of 1995, resulting primarily from the addition of six Consolidated Hotels to this segment and is directly related to the 67.7% increase in segment revenue. Hotel management segment operating costs and expenses decreased 11.7% in the first quarter from $517,602 in 1994 to $456,823 in 1995 due to the decrease in hotels managed for third parties and minority owned entities, and an increase in pre-opening costs associated with new hotels and management contracts. Employee leasing operating costs and expenses decreased 8.6% from $3.2 million in the first quarter of 1994 to $2.9 million in 1995 also as a result of the decrease in hotels managed for third parties and minority owned entities. Depreciation and amortization expense increased 58.8% to $434,919 in the first quarter of 1995 from $273,824 in the first quarter of 1994. This increase was primarily attributable to the addition of six Consolidated Hotels to the hotel operations segment and the resulting depreciation and amortization therefrom. Leasehold rents - hotels increased 7.6% to $451,605 in the first quarter of 1995 from $419,820 in 1994. The increase was due to the addition of two leased Consolidated Hotels to the hotel operations segment (the Company had held a minority ownership position in these hotels prior to the first quarter of 1995 when additional ownership interests were acquired), partially offset by a decrease in leasehold rents for five other Consolidated Hotels pursuant to a lease amendment which provided for reduced lease payments and extended the termination date to December 31, 1999. Corporate general and administrative expense decreased 25.0% from $623,745 in the first quarter of 1994 to $467,757 in the first quarter of 1995, and can be attributed to a decrease in consulting and professional fees and an increase in costs allocated to specific development projects. The Company's operating loss in the first quarter decreased $1.0 million, from a loss of $1.2 million in 1994 to a loss of $206,589 in 1995, or 82.5%. The operating loss from the hotel operations segment decreased 60.4% from a loss of $375,380 in the first quarter of 1994 to a loss of $148,566 in the first quarter of 1995, resulting primarily from an increase in same room revenues, the controlling of costs and higher energy costs in the first quarter of 1994 from severe weather conditions in the midwest which were not present in the 1995 first quarter. The hotel development segment generated operating income of $337,499 in the first quarter of 1995 compared to an operating loss of $168,532 in 1994, due primarily to the increase in construction and development activity for third parties and entities in which the Company has a minority ownership interest. The hotel management segment generated operating income of $55,466 in the first quarter of 1995 compared to an operating loss of $18,186 in 1994, due primarily to the achievement of operational efficiencies and an increase in pre-opening costs associated with new hotels and management contracts. Employee leasing operating income increased slightly during the first quarter, from $32,619 in 1994 to $40,597 in 1995. The Company uses a supplemental performance measure along with net income to report its operating results. Earnings before interest/rent, taxes and depreciation/amortization ("EBITDA") is not defined by generally accepted accounting principles, but the Company believes it provides relevant information about its operations and is necessary for an understanding of the Company's operations. For purposes of EBITDA, the Company considers leasehold rents for hotels to be financing costs similar to interest. EBITDA for the first quarter of 1995 was a record $720,712, as compared to a loss of $580,406 in the first quarter of 1994. The significant changes resulting in the increase in EBITDA from the first quarter of 1994 to 1995 are discussed above. An EBITDA schedule is included herein. Interest expense was $307,720 in the first quarter of 1995 as compared to $149,442 in the first quarter of 1994. This increase is primarily attributable to an increase in mortgage financing of the Company's Consolidated Hotels. The Company's share of equity in net loss of affiliates decreased from $204,980 in the first quarter of 1994 to $183,528 in the same quarter of 1995. This decrease in net loss is due to increases in occupancy and average daily rates at these hotels as well as the controlling of operating costs. Distributions from affiliates decreased to $19,219 in the first quarter of 1995 from $74,128 in 1994. In the first quarter of 1995, the Company recorded an income tax benefit of $190,000 due to the net loss, compared with a benefit of $569,000 in the first quarter of 1994. LIQUIDITY AND CAPITAL RESOURCES Over the years, the Company has financed its growth through a combination of cash provided from operations, long-term debt financing and public and private issuances of Common Stock. During the first quarter of each year, the Company typically experiences decreases in cash flow from operations. During the first quarter of 1995, the Company experienced a decrease in cash from operations of $131,610 compared to a decrease in cash from operations of $1.2 million in the first quarter of 1994, or an improvement of $1.1 million from 1994 to 1995. The decrease in cash flow from operations during the first quarter of 1995 was due primarily to the net loss of $283,532 and the seasonal fluctuations in occupancy and average daily rates which impact hotel operating results. The improvement in cash flow from the first quarter of 1994 to 1995 can be attributed to the increased hotel development activity and improvements in occupancy and average daily rates over the first quarter of 1994. The Company has four main sources of cash from operating activities: fees from development, construction and renovation projects; revenues from hotel operations; fees from management contracts; and fees from employee leasing. Fees from development, construction and renovation projects are typically received within 15 to 45 days from billing. During the first quarter of 1995, development, construction and renovation projects contributed $337,499 to the Company's operating income compared to an operating loss of $168,532 in the first quarter of 1994. Due to the procedures in place for processing its construction draws, the Company typically does not pay its contractors until the Company receives its draw. Cash from hotel operations is typically received at the time the guest checks out of the hotel. A portion of the Company's hotel operations revenues is generated through other businesses and contracts and are usually paid within 30 to 45 days from billing. Hotel operations experienced an operating loss of $148,566 during the first quarter of 1995 compared to an operating loss of $375,380 during the first quarter of 1994. Management fee revenues are typically received by the Company within five working days from the end of each month. The hotel management segment contributed $55,466 to the Company's operating income in the first quarter of 1995 compared to an operating loss of $18,186 in 1994. Cash from the Company's employee leasing segment is typically received 24 to 48 hours prior to the pay date. The employee leasing segment contributed $40,597 and $32,619 in operating income during the first quarter of 1995 and 1994, respectively. During the first quarter of 1995, the Company used $2.4 million in investing activities compared to $2.0 million during the first quarter of 1994. The Company invests cash in three principal areas: the purchase of minority equity interests in hotels; the purchase of property and equipment through the construction and renovation of Consolidated Hotels; and loans to affiliated and non-affiliated hotels for the purpose of construction, renovation and working capital. In the first quarter of 1994, the Company used cash primarily for the purchase of $1.7 million in property and equipment for Consolidated Hotels and $447,951 in loans to affiliates, net of loan repayments. In the first quarter of 1995, the Company used $2.2 million to purchase property and equipment for Consolidated Hotels and $79,739 in loans to affiliates, net of loan repayments. The Company enters into agreements with contractors for the construction of Consolidated Hotels, including hotels under construction at March 31, 1995, after both the construction and long-term mortgage financing is in place. Typically, investments in hotels generate positive cash flow after a stabilization period ranging from 90 to 180 days depending upon the geographic location of the hotel and time of year the hotel is opened. As an equity holder, additional cash proceeds can be realized by the Company upon the sale of the properties. Cash received from financing activities was $1.1 million in the first quarter of 1995 compared to $2.5 million in the 1994 first quarter. In 1994, the contributing factors were proceeds of $1.9 million from the mortgage financing of Consolidated Hotels, $445,000 in equity contributions from minority owners, and $200,000 in proceeds from the Company's line-of-credit. In 1995, the primary factor was proceeds of $1.2 million from the mortgage financing of hotels. There was no outstanding balance on the line-of-credit at March 31, 1995. The Company's line-of-credit was increased effective May 1, 1995 to $3,500,000 and expires on May 1, 1996. The Company expects cash from operations to be sufficient to pay all operating and interest expenses in 1995. SEASONALITY Revenues from all of the Company's business segments are heavily dependent on hotel occupancy, which results in significant seasonal variations in the Company's revenues, with lower revenues usually in the first and fourth quarters of each year. The impact of seasonality may be diminished as the Company expands into warmer climates. INFLATION Management does not believe that inflation has had, or is expected to have, any significant adverse impact on the Company's financial condition or results of operations for the periods presented. AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES SCHEDULE OF EARNINGS BEFORE INTEREST/RENT, TAXES AND DEPRECIATION/AMORTIZATION FOR THE THREE MONTHS ENDED MARCH 31, (Unaudited)
1995 1994 Revenue $ 13,157,361 $ 6,833,270 Operating costs and expenses 12,009,669 6,698,245 1,147,692 135,025 Corporate general and administrative (467,757) (623,745) Interest income 91,536 91,008 Other income (expense) 20,159 (22,142) Equity in net income and losses of affiliates (183,528) (204,980) Earnings before minority interests 608,102 (624,834) Minority interests in earnings of consolidated subsidiaries and partnerships 112,610 44,428 Earnings before interest/rent, taxes and depreciation/amortization $ 720,712 $ (580,406)
PART II - OTHER INFORMATION Item 1. Legal Proceedings: See Notes to Consolidated Financial Statements. Item 6. Exhibits and Reports on Form 8-K: (a) Exhibits: Exhibit xxvii - Financial Statement Schedule (b) Reports on Form 8-K: There were no reports on Form 8-K filed during this period covered by this report. Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Amerihost Properties, Inc. Registrant Date: May 9, 1995 By: /s/ Russell J. Cerqua Russell J. Cerqua Treasurer/Senior Vice President, Finance By: /s/ James B. Dale James B. Dale Corporate Controller EX-27 2
5 This schedule contains first quarter summary financial information extracted from Amerihost Properties, Inc.'s 1995 first quarter Form 10-Q and is qualified in its entirety by reference to such Form 10-Q filing. 3-MOS DEC-31-1995 MAR-31-1995 1,598,949 0 8,074,668 0 0 10,162,345 23,781,075 3,166,294 38,796,952 7,626,711 0 28,784 0 0 13,897,937 38,796,952 13,157,361 13,157,361 12,009,669 12,009,669 1,354,281 0 307,720 (473,532) 190,000 (283,532) 0 0 0 (283,532) (.05) (.05)
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