-----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, BNZgtBYyoAXYCYzKY/DX0Y+w116FOz5yrKE2NfGFV386fN7WB6ZWuxHssOF2FAmW Y2DsAsI9GDrhC3UTeONmbw== 0000914760-95-000119.txt : 19951106 0000914760-95-000119.hdr.sgml : 19951106 ACCESSION NUMBER: 0000914760-95-000119 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951103 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: 95587291 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 SEPTEMBER 30, 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 November 3, 1995, 5,935,165 shares of the Registrant's Common Stock were outstanding. AMERIHOST PROPERTIES, INC. FORM 10-Q FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 INDEX PART I: Financial Information Page Consolidated Balance Sheets as of September 30, 1995 and December 31, 1994 4 Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 1995 and 1994 6 Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 1995 and 1994 7 Notes to Consolidated Financial Statements 9 Management's Discussion and Analysis 14 Schedule of Earnings Before Interest/Rent, Taxes and Depreciation/Amortization for the Three and Nine Months Ended September 30, 1995 and 1994 19 PART II: Other Information Item 4 Submission of Matters to a Vote of Security Holders 20 Item 6 Exhibits and Reports on Form 8-K 20 Signatures 20 Part I: Financial Information Item 1: Financial Statements AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
September 30, December 31, 1995 1994 ASSETS Current assets: Cash and cash equivalents $ 1,754,253 $ 3,026,029 Accounts receivable (including $429,057 and $703,465 from related parties) 2,832,257 2,457,233 Notes receivable (including $1,414,060 and $1,687,178 from related parties) 1,606,790 1,834,908 Prepaid expenses and other current assets 383,147 370,471 Costs and estimated earnings in excess of billings on uncompleted contracts (including $2,008,561 and $1,315,707 from related parties) 2,700,767 2,005,274 Total current assets 9,277,214 9,693,915 Investments 2,472,601 2,995,234 Property and equipment: Land 4,079,860 2,240,952 Buildings 18,305,920 9,124,901 Furniture, fixtures and equipment 7,737,784 3,784,608 Construction in progress 2,803,139 2,253,456 Leasehold improvements 1,568,671 791,800 34,495,374 18,195,717 Less accumulated depreciation and amortization 4,406,734 1,729,611 30,088,640 16,466,106 Long-term notes receivable (including $1,092,960 and $1,272,612 from related parties) 2,536,571 2,737,882 Costs of management contracts acquired, net of accumulated amortization of $870,982 and $768,324 644,175 492,253 Other assets (including deferred taxes of $547,000 and $487,000), net of accumulated amortization of $993,822 and $769,669 2,786,366 2,018,192 5,967,112 5,248,327 $ 47,805,567 $ 34,403,582 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 2,847,623 $ 3,224,973 Bank line-of-credit 1,127,727 - Accrued payroll and related expenses 634,917 679,971 Accrued real estate and other taxes 671,016 362,409 Other accrued expenses and current liabilities 570,157 262,331 Current portion of long-term debt 925,148 566,808 Income taxes payable 819,203 415,197 Total current liabilities 7,595,791 5,511,689 Long-term debt, net of current portion 20,936,183 12,975,226 Deferred income 827,373 1,051,457 Commitments Minority interests 1,452,378 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 5,935,165 shares at September 30, 1995, and 5,570,013 shares at December 31, 1994 29,676 27,850 Additional paid-in capital 16,661,066 15,465,891 Retained earnings (deficit) 1,696,267 (428,289) 18,387,009 15,065,452 Less: Stock subscriptions receivable (436,875) (436,875) Notes receivable (956,292) (956,292) 16,993,842 13,672,285 $ 47,805,567 $ 34,403,582 See notes to consolidated financial statements.
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
Three Months Ended Nine Months Ended September 30, September 30, 1995 1994 1995 1994 Revenue: Hotel operations $ 7,962,043 $ 5,259,973 $ 18,181,769 $ 11,626,413 Development and construction 2,200,908 3,842,522 9,978,271 7,979,676 Management services 925,774 783,335 2,295,847 2,029,939 Employee leasing 3,437,391 3,417,273 9,514,220 10,156,703 14,526,116 13,303,103 39,970,107 31,792,731 Operating costs and expenses: Hotel operations 4,953,488 3,045,249 12,363,519 7,752,834 Development and construction 1,294,928 3,331,151 8,130,754 7,462,999 Management services 565,900 546,088 1,531,478 1,531,428 Employee leasing 3,371,864 3,355,615 9,352,484 10,028,313 10,186,180 10,278,103 31,378,235 26,775,574 4,339,936 3,025,000 8,591,872 5,017,157 Depreciation and amortization 556,659 358,889 1,469,585 896,688 Leasehold rents - hotels 511,868 454,497 1,507,414 1,315,101 Corporate general and administrative 545,869 526,665 1,538,915 1,620,608 Operating income 2,725,540 1,684,949 4,075,958 1,184,760 Other income (expense): Interest expense (474,712) (237,575) (1,144,439) (587,275) Interest income 160,859 70,961 412,762 239,600 Other income 4,368 4,989 23,850 30,365 Equity in net income and losses of affiliates 310,426 270,223 223,549 190,740 Income before minority interests and income taxes 2,726,481 1,793,547 3,591,680 1,058,190 Minority interests in (income) loss of consolidated subsidiaries and partnerships (170,603) (97,091) (148,124) (110,923) Income before income tax 2,555,878 1,696,456 3,443,556 947,267 Income tax expense 992,000 679,000 1,319,000 379,000 Net income $ 1,563,878 $ 1,017,456 $ 2,124,556 $ 568,267 Earnings per share $ 0.25 $ 0.18 $ 0.35 $ 0.10 See notes to consolidated financial statements.
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE NINE MONTHS ENDED SEPTEMBER 30, (UNAUDITED)
1995 1994 Cash flows from operating activities: Cash received from customers $ 39,234,882 $ 30,804,990 Cash paid to suppliers and employees (34,534,996) (29,884,023) Interest received 389,934 289,920 Interest paid (1,124,393) (555,320) Income taxes (paid) received (974,994) 183,861 Net cash provided by operating activities 2,990,433 839,428 Cash flows from investing activities: Distributions from affiliates 376,915 308,299 Purchase of property and equipment (9,564,901) (5,528,897) Purchase of investments (225,050) (371,102) Increase in notes receivables (1,080,286) (705,589) Collections on notes receivables 818,695 907,528 Preopening and management contract costs (254,580) (245,520) Sale of investments 55,000 - Leasehold interest acquisition costs (5,000) - Increase in organization costs (1,797) (12,824) Net cash used in investing activities (9,881,004) (5,648,105) Cash flows from financing activities: Proceeds from issuance of long-term debt 5,186,628 5,883,565 Principal payments of long-term debt (570,750) (251,840) Proceeds from line of credit 1,871,874 1,460,000 Payments on line of credit (744,147) (1,460,000) Distributions to minority interests (124,810) - Contributions from minority interests - 690,056 Net cash provided from financing activities 5,618,795 6,321,781 Net increase (decrease) in cash (1,271,776) 1,513,104 Cash and cash equivalents, beginning of period 3,026,029 1,885,335 Reconciliation of net income to net cash provided by operating activities: Net income $ 2,124,556 $ 568,267 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,469,585 896,688 Equity in net loss of affiliates before amortization of deferred income (147,272) (132,749) Minority interests in net (income) losses of subsidiaries 148,124 110,923 Amortization of deferred income (76,277) (57,991) Amortization of deferred interest (4,226) (6,429) Amortization of loan discount 34,045 34,044 Decrease in deferred tax asset (60,000) - Compensation paid through issuance of common stock 213,991 65,084 Changes in assets and liabilities net of effects of acquisitions: Increase in accounts receivable (82,167) (1,307,320) Increase in interest receivable (18,602) (32,688) Decrease (increase) in prepaid expenses and other current assets 45,220 (14,638) (Increase) decrease in costs and estimated earnings in excess of billings (695,493) 414,886 Decrease in refundable income taxes - 376,000 Increase in other assets (373,313) (469,793) Decrease in accounts payable (372,156) (695,753) Increase in accrued expenses and other current liabilities 394,411 895,829 Decrease in accrued interest (13,999) (2,089) Increase in accrued income taxes 404,006 186,861 Increase in deferred income - 10,296 Net cash provided by operating activities $ 2,990,433 $ 839,428 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 September 30, 1995 and December 31, 1994 and the results of its operations for the three and nine month periods ended September 30, 1995 and 1994, and statements of cash flows for the nine months ended September 30, 1995 and 1994. The results of operations for the three and nine months ended September 30, 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 the following partnerships with ownership as indicated: Sullivan Motel Associates, Ltd. (56.0%), 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 (60.0%), Bowling Green, Ohio 590 Limited Partnership (63.3%), Findlay, Ohio 391 Limited Partnership (51.3%), and Altoona, PA 892 Limited Partnership (62.8%). 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 subsidiary 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." EARNINGS PER SHARE: Computations of earnings per share of common stock are computed by dividing net income 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 6,307,471 and 6,060,496 for the three and nine months ended September 30, 1995, and 5,573,409 and 5,606,016 for the three and nine months ended September 30, 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 September 30, 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 as of September 30, 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 September 30, 1995. 4. SUPPLEMENTAL CASH FLOW DATA: The following represents the supplemental schedule of noncash investing and financing activities for the nine months ended September 30, 1995 and 1994: Nine Months Ended September 30, 1995 1994 Purchase of investments through issuance of common stock and decrease in notes receivable $ 749,659 $ 198,000 Reduction of accounts payable through issuance of common stock $ 233,351 Reduction in accounts receivable in exchange for note receivable $ 142,219 The Company acquired additional partnership interests in four hotels for 244,015 shares of the Company's common stock. In conjunction with the acquisitions, liabilities were assumed as follows: Fair value of assets acquired $ 6,070,768 Issuance of common stock (818,345) Liabilities assumed $ 5,252,423 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, with a focus on its own AmeriHost Inn brand. 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, hotel management and employee leasing 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 third quarter of 1995 resulted in record revenues, net income, operating income and earnings before interest/rents, taxes and depreciation/amortization ("EBITDA"). Revenues increased to $14.5 million, or 9.2% from $13.3 million in the third quarter of 1994. Net income for the third quarter increased to $1.6 million in 1995 from $1.0 million in 1994, while earnings per share increased from 18 cents to 25 cents. Operating income increased from $1.7 million in the third quarter of 1994 to $2.7 million in the 1995 third quarter, while EBITDA increased to $4.1 million in the third quarter of 1995 from $2.7 million in the third quarter of 1994, or an increase of $1.4 million. The improved performance was primarily attributable to hotel operations and hotel development. Amerihost had an ownership interest in 47 hotels at September 30, 1995 versus 40 hotels at September 30, 1994 (excluding hotels under construction), increasing equivalent owned rooms by 26.2%. These figures include an increase in Consolidated Hotels from 13 at September 30, 1994 to 20 at September 30, 1995. This increased ownership had a significant impact on the hotel operations segment's revenues and profit. Excluding Consolidated Hotels, the Company was constructing three hotels in the third quarter of 1995 and completed the pre-construction development stage of several additional projects which broke ground in the fourth quarter of 1995 or are expected to break ground by the end of 1995. The Company intends for the AmeriHost Inn brand to be used whenever feasible in expanding its hotel operations segment. In addition, the AmeriHost Inn prototype is the primary product being developed through the hotel development segment. The AmeriHost Inn brand features several amenities including an indoor pool area, whirlpool suites, an exercise room, and a full complimentary continental breakfast which assists the property in obtaining favorable occupancy and average daily rates, and an efficient layout designed to control operating costs. Same room revenues for all AmeriHost Inns increased approximately 8.3% in the third quarter of 1995 compared to the third quarter of 1994, attributable to an increase of $2.14 in average daily rate and a 4.3% increase in occupancy. For all hotels in which the Company has an ownership interest, same room revenues increased 2.7% in the third quarter of 1995 compared to the third quarter of 1994, as occupancy increased 1.0% and average daily rate increased $1.14. During the third quarter of 1995, the Company was constructing ten hotels, including Consolidated Hotels, three of which were completed during the quarter. The Company has an ownership position in eight of these ten hotels, including 100% ownership of seven. Eight of these ten hotels are AmeriHost Inns. Several additional hotels were also in various stages of the pre- construction development process. 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 $14.5 million for the three months ended September 30, 1995 increased 9.2% from revenues of $13.3 million for the three months ended September 30, 1994. This increase was due primarily to a significant increase in the Company's hotel operations segment as well as an increase in the hotel management segment, partially offset by a decrease in the hotel development segment. Hotel operations revenue increased 51.4% to $8.0 million in the third quarter of 1995, as compared to $5.3 million in the third quarter of 1994. This increase was primarily attributable to the addition of seven Consolidated Hotels to the hotel operations segment since September 30, 1994. The Company held a minority ownership position in four of these seven hotels prior to these hotels becoming Consolidated Hotels in 1995 when additional ownership interests were acquired. The third quarter of 1995 included the operations of 20 Consolidated Hotels comprising 2,231 rooms compared to 13 Consolidated Hotels comprising 1,482 rooms in the third quarter of 1994 or an increase of 50.5% in total rooms. Excluding minority interests in the Consolidated Hotels, this translates to 1,880 and 1,354 equivalent owned rooms as of September 30, 1995 and 1994, respectively, or an increase of 38.8%. Hotel management and employee leasing revenues are recognized from hotels which are owned by unrelated third parties and entities in which the Company holds a minority ownership interest. While the number of Consolidated Hotels increased from 13 to 20, the number of hotels managed for third parties and minority owned entities decreased from 38 hotels at September 30, 1994 to 37 hotels at September 30, 1995. The addition of six management contracts from October 1, 1994 to September 30, 1995 was offset by the loss of three management contracts with third parties and by the four minority owned hotels which became Consolidated Hotels in the first and second quarters of 1995 due to the Company acquiring additional ownership interests in these hotels. Management and employee leasing revenues from the Consolidated Hotels are not recognized by the Company. Hotel management revenues increased 18.2% from $783,335 in the third quarter of 1994 to $925,774 in the third quarter of 1995 as a result of an increase in same room revenues for managed hotels and incentive management fees received from certain managed hotels in the 1995 third quarter which were not present in the 1994 third quarter. Employee leasing revenue remained consistent at $3.4 million during the third quarters of 1994 and 1995. Excluding the construction of Consolidated Hotels, the Company was constructing three hotels in the third quarter of 1995, versus six hotels in the third quarter of 1994, and had several projects in various stages of pre- construction development. A greater number of projects under construction during the 1994 third quarter resulted in a decrease in revenues from the Company's hotel development segment, from $3.8 million in the third quarter of 1994 to $2.2 million in the third quarter of 1995. In addition, one of the three hotels under construction during the third quarter of 1995 was opened during the quarter, and another began construction later in the third quarter, resulting in the recognition of construction revenues for only part of the quarter for these two projects. Conversely, most of the hotels under construction in the third quarter of 1994 were under construction for the entire or a significant portion of the quarter with revenues recognized accordingly. Total operating costs and expenses decreased slightly to $10.2 million (70.1% of total revenues) in the third quarter of 1995 from $10.3 million (77.3% of total revenues) in the third quarter of 1994. Operating costs and expenses for the hotel development segment decreased from $3.3 million in the third quarter of 1994 to $1.3 million in the third quarter of 1995, due to the lower level of construction activity, as the Company had the majority of its projects in the pre-construction development stage in the third quarter of 1995 versus the third quarter of 1994. Pre-construction development activity has lower associated operating costs and expenses than construction activity. Operating costs and expenses in the hotel operations segment increased 62.7% from $3.0 million in the third quarter of 1994 to $5.0 million in the third quarter of 1995, resulting primarily from the addition of seven Consolidated Hotels to this segment and is directly related to the 51.4% increase in segment revenue. Hotel management segment operating costs and expenses increased 3.6% in the third quarter from $546,088 in 1994 to $565,900 in 1995 due to a decrease in pre-opening costs associated with new hotels and management contracts, partially offset by efficiencies achieved in the management of all hotels operated and/or managed, which increased from 51 hotels at September 30, 1994 to 57 hotels at September 30, 1995, or 11.8%. Employee leasing operating costs and expenses remained relatively unchanged in the third quarter at $3.4 million in both 1994 and 1995 and is consistent with the stable employee leasing revenues. Depreciation and amortization expense increased 55.1% to $556,659 in the third quarter of 1995 from $358,889 in the third quarter of 1994. This increase was primarily attributable to the addition of seven Consolidated Hotels to the hotel operations segment and the resulting depreciation and amortization therefrom. Leasehold rents - hotels increased 12.6% to $511,868 in the third quarter of 1995 from $454,497 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 1995 when additional ownership interests were acquired), partially offset by a decrease in leasehold rents for four 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 increased 3.7% from $526,665 in the third quarter of 1994 to $545,869 in the third quarter of 1995, and can be attributed to the Company's overall growth. The Company's operating income in the third quarter increased $1.0 million, from $1.7 million in 1994 to a record $2.7 million in 1995, or 61.8%. Operating income from the hotel operations segment increased 34.0% from $1.5 million in the third quarter of 1994 to $2.0 million in the third quarter of 1995, resulting primarily from an increase in Consolidated Hotels from 13 to 20. Operating income from the hotel operations segment as a percentage of segment revenue decreased during the third quarter of 1995 compared to the third quarter of 1994, due to a greater number of newly constructed Consolidated Hotels operating during their initial stabilization period, when revenues are generally lower, during the third quarter of 1995. The hotel development segment generated operating income of $902,934 in the third quarter of 1995 compared to $508,690 in 1994, despite higher revenues in the third quarter of 1994. This increase is due to a larger volume of construction activity during the third quarter of 1994 which has higher revenue and a lower gross profit margin than pre-construction development activity. The third quarter of 1995 contained a larger portion of pre- construction development activity. The hotel management segment generated operating income of $348,823 in the third quarter of 1995 compared to $187,405 in 1994, due primarily to the achievement of operational efficiencies, offset by a decrease in the allocation of pre-opening costs associated with new hotels and management contracts. Employee leasing operating income increased slightly during the third quarter, from $60,383 in 1994 to $63,952 in 1995. The Company uses a supplemental performance measure along with net income to report its operating results. 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 third quarter of 1995 was a record $4.1 million as compared to $2.7 million in the third quarter of 1994. The significant changes resulting in the increase in EBITDA from the third quarter of 1994 to 1995 are discussed above. An EBITDA schedule is included herein. Interest expense was $474,712 in the third quarter of 1995 as compared to $237,575 in the third quarter of 1994. This increase is primarily attributable to the increase in Consolidated Hotels with mortgage financing. The Company's share of equity in net income of affiliates increased from $270,223 in the third quarter of 1994 to $310,426 in the same quarter of 1995. This increase in equity in income of affiliates is due to a 6.6% increase in same room revenues for all minority owned hotels, which translated into a 13.4% increase in net income for these hotels. This increase was partially offset by four hotels which had been accounted for by the equity method in 1994, and became Consolidated Hotels during the first and second quarters of 1995 pursuant to the acquisition of additional ownership interests. Distributions from affiliates increased to $172,753 in the third quarter of 1995 from $125,457 in 1994. In the third quarter of 1995, the Company recorded an income tax expense of $992,000 compared to $679,000 in the third quarter of 1994, which increase is directly attributable to the increase in net income. 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 third quarter of 1995, the Company experienced an increase in cash from operations of $1.6 million, compared to an increase of $853,689 in the third quarter of 1994, or an improvement of $786,546 from 1994 to 1995. The increase in cash flow from operations during the third quarter of 1994 to 1995 can be attributed to the increased hotel ownership and operation activity and improvements in occupancy and average daily rates over the third quarter of 1994, which contributed to the increase in net income from $1.0 million in the third quarter of 1994 to $1.6 million in the third quarter of 1995. During the first nine months of 1995, the Company reported positive cash flow from operations of $3.0 million and received $4.6 million through the financing of Consolidated Hotel projects, net of principal repayments, and net proceeds of $1.1 million from the Company's line-of-credit. These increases to cash were more than offset by the use of $9.9 million in cash for investing activities during the first nine months of 1995, primarily for the construction of Consolidated Hotel properties. As a result, cash decreased $1.3 million during the nine months ended September 30, 1995. 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. 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. During the third quarter of 1995, development, construction and renovation projects contributed $902,934 to the Company's operating income compared to $508,690 in the third quarter of 1994. 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 operating income of $2.0 million during the third quarter of 1995 compared to $1.5 million during the third 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 $348,823 to the Company's operating income in the third quarter of 1995 compared to $187,405 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 $63,952 and $60,383 in operating income during the third quarter of 1995 and 1994, respectively. During the third quarter of 1995, the Company used $4.8 million in investing activities compared to $1.7 million during the third quarter of 1994. The Company invests cash in three principal areas: the purchase of property and equipment through the construction and renovation of Consolidated Hotels; the purchase of minority equity interests in hotels; and loans to affiliated and non-affiliated hotels for the purpose of construction, renovation and working capital. In the third quarter of 1994, the Company used cash primarily for the purchase of $1.8 million in property and equipment for Consolidated Hotels. In the third quarter of 1995, the Company used $4.3 million to purchase property and equipment for Consolidated Hotels, and used $690,785 in loans to affiliates, net of loan collections. The Company enters into agreements with contractors for the construction of Consolidated Hotels, including hotels under construction at September 30, 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 $3.1 million in the third quarter of 1995 compared to $2.9 million in the 1994 third quarter. In 1994, the contributing factor was proceeds of $3.1 million from the mortgage financing of Consolidated Hotels. In 1995, the primary factors were proceeds of $3.0 from the mortgage financing of Consolidated Hotels and $383,580 in net proceeds from the Company's operating line-of-credit. The Company's operating line-of-credit had a balance of $1,127,727 at September 30, 1995. During 1995, the Company utilized its operating line-of-credit as well as operating cash flow to finance the construction of the wholly-owned AmeriHost Inn in Walker, Michigan, in order to eliminate the construction draw process on the mortgage which it has secured with the same bank. A portion of the mortgage was used to purchase the land for the hotel. It is expected that the balance of mortgage proceeds of approximately $1,325,000 will be drawn from the bank and used to reduce the line-of-credit prior to December 31, 1995. The Company's line-of-credit was increased effective May 1, 1995 to $3,500,000 and expires on May 1, 1996. In addition, in September of 1995, the Company secured a $7.5 million construction line-of-credit with the same bank as the Company's operating line-of-credit, none of which was used as of September 30, 1995. 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 (UNAUDITED)
Three Months Ended Nine Months Ended September 30, September 30, 1995 1994 1995 1994 Revenue $ 14,526,116 $ 13,303,103 $ 39,970,107 $ 31,792,731 Operating costs and expenses 10,186,180 10,278,103 31,378,235 26,775,574 4,339,936 3,025,000 8,591,872 5,017,157 Corporate general and administrative (545,869) (526,665) (1,538,915) (1,620,608) Interest income 160,859 70,961 412,762 239,600 Other income 4,368 4,989 23,850 30,365 Equity in net income and losses of affiliates 310,426 270,223 223,549 190,740 Earnings before minority interests 4,269,720 2,844,508 7,713,118 3,857,254 Minority interests in earnings of consolidated subsidiaries and partnerships (170,603) (97,091) (148,124) (110,923) Earnings before interest/rent, taxes and depreciation/ amortization $ 4,099,117 $ 2,747,417 $ 7,564,994 $ 3,746,331
PART II - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders. The annual shareohlders' meeting was held on July 6, 1995. Two matters were voted as follows: Matter 1: Election of directors Director For Against Abstain H. Andrew Torchia 4,228,555 3,761 11,855 Michael P. Holtz 4,212,955 19,361 11,855 Richard A. D'Onofrio 4,228,155 4,161 11,855 Russell J. Cerqua 4,227,305 5,011 11,855 Reno J. Bernardo 4,226,705 5,611 11,855 Robert L. Barney 4,228,245 4,071 11,855 Matter 2: Ratification of Auditors For Against Abstain Retention of BDO Seidman 4,230,845 8,181 5,145 Item 6. Exhibits and Reports on Form 8-K: (a) Exhibits: Exhibit 27 - Financial Statement Schedule (b) Reports on Form 8-K: There were no reports on Form 8-K filed during this period covered by this report. Signatures Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Amerihost Properties, Inc. Registrant Date: November 3, 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 summary financial information extracted from Amerihost Properties, Inc.'s Form 10-Q and is qualified in its entirety by reference to such Form 10-Q filing. 9-MOS DEC-31-1995 SEP-30-1995 1,754,253 0 7,139,814 0 0 9,277,214 34,495,374 4,406,734 47,805,567 7,595,791 0 29,676 0 0 16,964,166 47,805,567 14,526,116 14,526,116 10,186,180 10,186,180 1,614,396 0 474,71278 2,555,878 992,000 1,563,878 0 0 0 1,563,878 .25 .25
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