-----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, UJCs0p8TPy6TgTVnAmFzPbbLDfhAZhXiP1FihyaSsJW0u/XBNxanrymTjm1YWloP TFKnmg4B3lYr9EO/sXiaPQ== 0000914760-96-000101.txt : 19960619 0000914760-96-000101.hdr.sgml : 19960619 ACCESSION NUMBER: 0000914760-96-000101 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960513 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AMERIHOST PROPERTIES INC CENTRAL INDEX KEY: 0000778423 STANDARD INDUSTRIAL CLASSIFICATION: 7011 IRS NUMBER: 363312434 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-15291 FILM NUMBER: 96561004 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, 1996 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 10, 1996, 5,980,829 shares of the Registrant's Common Stock were outstanding. AMERIHOST PROPERTIES, INC. FORM 10-Q FOR THE THREE MONTHS ENDED MARCH 31, 1996 INDEX PART I: Financial Information Page Consolidated Balance Sheets as of March 31, 1996 and December 31, 1995 4 Consolidated Statements of Operations for the Three Months Ended March 31, 1996 and 1995 6 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 1996 and 1995 7 Notes to Consolidated Financial Statements 9 Management's Discussion and Analysis 11 Schedule of Earnings Before Interest/Rent, Taxes and Depreciation/Amortization for the Three Months Ended March 31, 1996 and 1995 16 PART II: Other Information Item 6 Exhibits and Reports on Form 8-K 17 Signatures 17 Part I: Financial Information Item 1: Financial Statements AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31, December 31, 1996 1995 ASSETS Current assets: Cash and cash equivalents $ 1,528,147 $ 1,371,278 Accounts receivable (including $1,655,321 and $802,164 from related parties) 4,579,842 3,270,094 Notes receivable (including $1,532,768 and $1,752,126 from related parties) 1,745,690 1,965,048 Prepaid expenses and other current assets 254,678 188,163 Refundable income taxes 377,412 230,530 Costs and estimated earnings in excess of billings on uncompleted contracts (including $3,353,848 and $3,574,939 from related parties) 3,475,662 3,900,879 Total current assets 11,961,431 10,925,992 Investments 2,268,214 2,388,999 Property and equipment: Land 4,247,909 4,236,309 Buildings 22,321,057 22,075,629 Furniture, fixtures and equipment 9,598,151 9,204,377 Construction in progress 1,299,346 662,159 Leasehold improvements 2,069,245 2,050,654 39,535,708 38,229,128 Less accumulated depreciation and amortization 6,022,254 5,404,102 33,513,454 32,825,026 Long-term notes receivable (including $1,617,756 and $1,450,616 from related parties) 3,014,448 2,863,580 Costs of management contracts acquired, net of accumulated amortization of $959,444 and $913,393 787,886 664,110 Other assets (including deferred taxes of $383,000), net of accumulated amortization of $1,585,282 and $1,451,715 2,697,057 2,785,595 6,499,391 6,313,285 $ 54,242,490 $ 52,453,302 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 3,584,270 $ 3,751,097 Bank line-of-credit 3,376,164 2,317,036 Accrued payroll and related expenses 606,102 688,648 Accrued real estate and other taxes 706,365 606,468 Other accrued expenses and current liabilities 754,940 666,352 Current portion of long-term debt 1,046,228 1,042,847 Total current liabilities 10,074,069 9,072,448 Long-term debt, net of current portion 25,455,514 23,971,481 Deferred income 676,751 686,388 Commitments Minority interests 973,435 1,456,226 Shareholders' equity: Preferred stock, no par value; authorized 100,000 shares; none issued - - Common stock, $.005 par value; authorized 15,000,000 shares; issued 5,975,374 shares at March 31, 1996, and 5,977,213 shares at December 31, 1995 29,877 29,886 Additional paid-in capital 16,915,333 16,920,237 Retained earnings 1,562,142 1,709,803 18,507,352 18,659,926 Less: Stock subscriptions receivable (436,875) (436,875) Notes receivable (1,007,756) (956,292) 17,062,721 17,266,759 $ 54,242,490 $ 52,453,302 See notes to consolidated financial statements.
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, (UNAUDITED)
1996 1995 Revenue: Hotel operations: AmeriHost Inn hotels $ 1,306,138 $ - Other hotels 4,277,358 4,114,725 Development and construction 3,979,802 5,504,823 Management services 489,682 564,454 Employee leasing 2,591,588 2,973,359 12,644,568 13,157,361 Operating costs and expenses: Hotel operations: AmeriHost Inn hotels 885,766 - Other hotels 3,853,085 3,457,530 Development and construction 3,113,679 5,164,129 Management services 372,651 456,823 Employee leasing 2,525,909 2,931,187 10,751,090 12,009,669 1,893,478 1,147,692 Depreciation and amortization 802,815 434,919 Leasehold rents - hotels 446,130 451,605 Corporate general and administrative 484,652 467,757 Operating income (loss) 159,881 (206,589) Other income (expense): Interest expense (665,173) (307,720) Interest income 154,359 91,536 Other income 41,909 20,159 Equity in net income and losses of affiliates (144,638) (183,528) Loss before minority interests and income taxes (453,662) (586,142) Minority interests in (income) loss of consolidated subsidiaries and partnerships 204,001 112,610 Loss before income tax (249,661) (473,532) Income tax benefit 102,000 190,000 Net loss $ (147,661) $ (283,532) Net loss per share $ (0.02) $ (0.05) See notes to consolidated financial statements.
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOW FOR THE THREE MONTHS ENDED MARCH 31, (UNAUDITED)
1996 1995 Cash flows from operating activities: Cash received from customers $ 11,839,312 $ 11,304,689 Cash paid to suppliers and employees (11,868,154) (10,840,119) Interest received 59,039 72,469 Interest paid (639,973) (310,371) Income taxes paid (44,882) (358,278) Net cash used in operating activities (654,658) (131,610) Cash flows from investing activities: Distributions from affiliates 107,044 19,219 Purchase of property and equipment (1,327,158) (2,209,105) Purchase of investments (250,000) (5,000) Increase in notes receivables (1,121,233) (206,202) Collections on notes receivables 1,050,766 126,463 Preopening and management contract costs (169,827) (114,301) Sale of investments - 10,000 Net cash used in investing activities (1,710,408) (2,378,926) Cash flows from financing activities: Proceeds from issuance of long-term debt 1,699,638 1,224,263 Principal payments of long-term debt (223,572) (140,807) Proceeds from line of credit 1,559,128 - Payments on line of credit (500,000) - Distributions to minority interests (13,259) - Net cash provided from financing activities 2,521,935 1,083,456 Net increase (decrease) in cash 156,869 (1,427,080) Cash and cash equivalents, beginning of period 1,371,278 3,026,029 Cash and cash equivalents, end of period $ 1,528,147 $ 1,598,949 Reconciliation of net loss to net cash used in operating activities: Net loss $ (147,661)$ (283,532) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 802,815 434,919 Equity in net loss of affiliates before amortization of deferred income 152,867 198,428 Minority interests in net income (losses) of subsidiaries (204,001) (112,610) Amortization of deferred income (8,229) (14,900) Amortization of deferred interest (1,408) (2,143) Amortization of loan discount 11,348 11,348 Compensation paid through issuance of common stock - 364 Changes in assets and liabilities net of effects of acquisitions: Increase in accounts receivable (1,272,382) (20,298) Increase in interest receivable (93,912) (16,924) (Increase) decrease in prepaid expenses and other current assets (66,515) 24,784 Decrease (increase) in costs and estimated earnings in excess of billings 425,217 (1,852,533) Increase in refundable income taxes (146,882) (548,278) Increase in other assets (45,027) (129,723) (Decrease) increase in accounts payable (166,827) 2,019,490 Increase in accrued expenses and other current liabilities 92,087 173,997 Increase (decrease) in accrued interest 13,852 (13,999) Net cash used in operating activities $ (654,658) $ (131,610) See notes to consolidated financial statements.
1. BASIS OF PREPARATION: The financial statements included herein have been prepared by the Company, without audit. In the opinion of the Company, the accompanying unaudited financial statements contain all adjustments, which consist only of recurring adjustments necessary to present fairly the financial position of Amerihost Properties, Inc. and subsidiaries as of March 31, 1996 and December 31, 1995 and the results of its operations and cash flows for the three months ended March 31, 1996 and 1995. The results of operations for the three months ended March 31, 1996, 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 1995 Annual Report on Form 10-K. 2. PRINCIPLES OF CONSOLIDATION: The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries, and partnerships in which the Company has a controlling ownership interest. There were no AmeriHost Inn hotels in operation during the first quarter of 1995 in which the Company had a controlling ownership interest. Significant intercompany accounts and transactions have been eliminated. 3. INCOME TAXES: Deferred income taxes are provided on the differences in the bases of the Company's assets and liabilities determined for tax and financial reporting purposes. The income tax benefit for the three months ended March 31, 1996 and 1995 were based on the Company's estimate of the effective tax rate expected to be applicable for the full year. The Company expects the effective tax rate to approximate the Federal and state statutory rates. 4. NET LOSS PER SHARE: Net loss per share is computed by dividing the net loss by the weighted average number of shares of common stock outstanding. The weighted average number of shares used in the computations were 5,976,293 and 5,663,443 for the three months ended March 31, 1996 and 1995, respectively. 5. SUPPLEMENTAL CASH FLOW DATA: The following represents the supplemental schedule of noncash investing and financing activities for the three months ended March 31, 1996 and 1995: Three Months Ended March 31, 1996 1995 Purchase of investments through issuance of common stock and decrease in notes and accrued interest receivable $ 143,929 $ 304,253 Reduction of accounts payable through issuance of common stock $ 233,351 During the first quarter of 1995, the Company acquired additional partnership interests in three hotels for 134,400 shares of the Company's common stock. In conjunction with the acquisitions, 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, 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 non-controlled entities in which the Company has a minority ownership interest on a fee-for-service or contract basis. The first quarter of 1996 resulted in record earnings before interest/rents, taxes and depreciation/amortization ("EBITDA"). The Company uses EBITDA as 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 increased nearly $1.0 million to $1.7 million in the first quarter of 1996 from $720,712 in the first quarter of 1995, or 131%. Revenues decreased to $12.6 million, or 3.9% from $13.2 million in the first quarter of 1995, due primarily to weather related delays in hotel construction activity. Net loss for the first quarter decreased to ($147,661) in 1996 from ($283,532) in 1995, while net loss per share narrowed from 5 cents to 2 cents. The Company reported an operating loss of ($206,589) in the 1995 first quarter, improving to operating income of $159,881 in the first quarter of 1996, or an increase in operating income of $366,470. The improvement in operating income and net loss was primarily attributable to hotel development. Although construction progress and revenues were impacted by the severe weather conditions, there was a significant increase in hotel development activity in the first quarter of 1996 compared to the first quarter of 1995 which produces a higher profit margin than construction activity. Excluding Consolidated Hotels, the Company was constructing 14 hotels in the first quarter of 1996 and completed the pre-construction development stage of several additional projects which have or are expected to break ground in the second quarter of 1996. The hotel operations segment incurred an operating loss of $303,039 during the first quarter of 1996 compared to an operating loss of $148,566 in the 1995 first quarter. Included in the hotel operations first quarter of 1996 operating loss was $202,121 in operating income from the AmeriHost Inn Consolidated Hotels. These AmeriHost Inn hotels were newly constructed by the Company and opened during the prior twelve months or converted to an AmeriHost Inn during the first quarter of 1996. In addition, many of the AmeriHost Inn hotels were still operating in their initial stabilization period. 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 an expanded 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 11.4% in the first quarter of 1996 compared to the first quarter of 1995, attributable to an increase of $2.33 in average daily rate and a 5.3% increase in occupancy. For all hotels in which the Company has an ownership interest, same room revenues decreased 1.7% in the first quarter of 1996 compared to the first quarter of 1995, as occupancy decreased 2.6% and average daily rate increased $1.00. Amerihost had an ownership interest in 49 hotels at March 31, 1996 versus 44 hotels at March 31, 1995 (excluding hotels under construction), increasing equivalent owned rooms by 18.6%. This increased ownership was achieved primarily through the development of AmeriHost Inn hotels for the Company's own account and for minority-owned entities. These figures include an increase in Consolidated Hotels from 18 at March 31, 1995 to 24 at March 31, 1996. The Company plans to continue developing and constructing hotels for both itself (Consolidated Hotels), which will contribute to the hotel operations segment, as well as for 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 Revenues of $12.6 million for the three months ended March 31, 1996 decreased 3.9% from revenues of $13.2 million for the three months ended March 31, 1995. This decrease was due primarily to a significant decrease in the Company's hotel development segment as well as a smaller decrease in the hotel management segment, partially offset by an increase in the hotel operations segment. Hotel operations revenue increased 35.7% to $5.6 million in the first quarter of 1996, as compared to $4.1 million in the first quarter of 1995. This increase was primarily attributable to the net addition of six Consolidated Hotels to the hotel operations segment since March 31, 1995. The Company held a minority ownership position in two of these six hotels prior to these hotels becoming Consolidated Hotels in the second and fourth quarters of 1995 when additional ownership interests were acquired. The first quarter of 1996 included the operations of 24 Consolidated Hotels comprising 2,516 rooms compared to 18 Consolidated Hotels comprising 2,026 rooms in the first quarter of 1995 or an increase of 24.2% in total rooms. After considering the Company's ownership interest in these Consolidated Hotels, this translates to 2,143 and 1,698 equivalent owned rooms as of March 31, 1996 and 1995, respectively, or an increase of 26.2%. 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. The number of hotels managed for third parties and minority owned entities increased from 34 hotels at March 31, 1995 to 36 hotels at March 31, 1996. The addition of six management contracts from April 1, 1995 to March 31, 1996 was offset by the loss of two management contracts with minority owned entities as a result of a hotel sale or temporary closing during renovation, and the two minority owned hotels which became Consolidated Hotels in the second and fourth 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 decreased 13.3% from $564,454 in the first quarter of 1995 to $489,682 in the first quarter of 1996. The total management fee revenues generated in the first quarter of 1996 from the six management contracts added since April 1, 1995 were lower than the management fee revenues generated in the first quarter of 1995 from the four minority-owned hotels which were lost as discussed above. In addition, same room revenues decreased for all managed hotels. Employee leasing revenue decreased 12.8% to $2.6 million during the first quarter of 1996 from $3.0 million in the 1995 first quarter as the six hotels added from April 1, 1995 through March 31, 1996 generally incurred lower payroll costs than the four hotels which were eliminated from the employee leasing segment as discussed above. Excluding Consolidated Hotels, the Company had 14 hotels under construction during the first quarter of 1996, versus six hotels in the first quarter of 1995, in addition to having several projects in various stages of pre- construction development during both quarters. Although a greater number of projects were under construction during the first quarter of 1996 versus the first quarter of 1995, the Company experienced a decrease in revenues in the hotel development segment, from $5.5 million in 1995 to $4.0 million in 1996. This decrease was due primarily to two factors. First, the Company was constructing three hotels during the first quarter of 1996 as a construction manager whereby the Company only recognizes construction manager fees instead of the greater revenues which are associated with construction contracts where the Company functions as a general contractor. The Company may continue to develop hotels as a construction manager in the future. There were no construction manager projects in the first quarter of 1995. Second, the first quarter of 1996 was hampered by severe weather conditions, especially in the midwest where the majority of the Company's construction projects were located. Consequently, the Company was able to make greater progress on a fewer number of projects in the first quarter of 1995, compared to the first quarter of 1996. Total operating costs and expenses decreased 10.5% to $10.8 million (85.0% of total revenues) in the first quarter of 1996 from $12.0 million (91.3% of total revenues) in the first quarter of 1995. Operating costs and expenses for the hotel development segment decreased from $5.2 million in the first quarter of 1995 to $3.1 million in the first quarter of 1996, consistent with the decrease in hotel development revenues. Although the Company had several projects in the early stages of construction in the first quarter of 1996, progress was slowed by severe weather conditions. Operating costs and expenses in the hotel operations segment increased 37.1% from $3.5 million in the first quarter of 1995 to $4.7 million in the first quarter of 1996, resulting primarily from the net addition of six Consolidated Hotels to this segment and is directly related to the 35.7% increase in segment revenue. Operating costs and expenses from hotels other than AmeriHost Inn hotels increased from 84.0% of hotel revenues in the first quarter of 1995 to 90.1% of hotel revenues in the first quarter of 1996 due primarily to the conversion of three hotels to AmeriHost Inn hotels and higher expenses associated with the severe weather conditions. Hotel management segment operating costs and expenses decreased 18.4% in the first quarter from $456,823 in 1995 to $372,651 in 1996 due to an increase in pre-opening costs associated with new hotels and management contracts, and efficiencies achieved in the management of all hotels operated and/or managed. Employee leasing operating costs and expenses decreased 13.8% in the first quarter to $2.5 million in 1996 from $2.9 million in 1995, and is consistent with the 12.8% decrease in segment revenue. Depreciation and amortization expense increased 84.6% to $802,815 in the first quarter of 1996 from $434,919 in the first quarter of 1995. This increase was primarily attributable to the net addition of six Consolidated Hotels to the hotel operations segment and the resulting depreciation and amortization therefrom. Leasehold rents - hotels decreased 1.2% to $446,130 in the first quarter of 1996 from $451,605 in 1995. The decrease was due to the termination of one leased Consolidated Hotel in the second quarter of 1995 as a result of the sale of the hotel, offset by the addition of one leased Consolidated Hotel to the hotel operations segment in the fourth quarter of 1995 (the Company had held a minority ownership position in this hotel prior to acquiring additional ownership interest which resulted in a majority ownership position). Corporate general and administrative expense increased 3.6% from $467,757 in the first quarter of 1995 to $484,652 in the first quarter of 1996, and can be attributed to the Company's overall growth. The Company's operating income increased $366,470, from an operating loss of $206,589 in the first quarter of 1995 to operating income of $159,881 in the first quarter of 1996. Operating loss from the hotel operations segment increased from a loss of $148,566 in the first quarter of 1995 to a loss of $303,039 in the first quarter of 1996, resulting primarily from a 1.9% decrease in same room revenues from Consolidated Hotels and a greater number of newly constructed Consolidated Hotels operating in the first quarter of 1996 during their initial stabilization period. The hotel development segment generated operating income of $848,996 in the first quarter of 1996 compared to $337,499 in 1995, despite lower revenues in the first quarter of 1996. This increase is due to a greater number of projects under construction during the 1996 first quarter and a larger volume of pre-construction development activity during the first quarter of 1996 which has lower revenue and a higher gross profit margin than construction activity. The first quarter of 1995 contained a larger portion of construction activity. The hotel management segment generated operating income of $61,379 in the first quarter of 1996 compared to $55,466 in 1995, due primarily to the achievement of operational efficiencies and an increase in the allocation of pre-opening costs associated with new hotels and management contracts. Employee leasing operating income increased slightly during the first quarter, from $40,597 in 1995 to $64,105 in 1996. EBITDA for the first quarter of 1996 was a record $1.7 million as compared to $720,712 in the first quarter of 1995. The significant changes resulting in the increase in EBITDA from the first quarter of 1995 to 1996 are discussed above. An EBITDA schedule is included herein. Interest expense was $665,173 in the first quarter of 1996 as compared to $307,720 in the first quarter of 1995. This increase is primarily attributable to the increase in Consolidated Hotels with mortgage financing. The Company's share of equity in income (loss) of affiliates improved $38,890 to ($144,638) in the first quarter of 1996 from ($183,528) in the same quarter of 1995. This improvement in equity in operations of affiliates is primarily due to the two hotels which had been accounted for by the equity method in the first quarter 1995, and became Consolidated Hotels during the second and fourth quarters of 1995 pursuant to the acquisition of additional ownership interests, and the sale of one hotel which had been accounted for by the equity method. These changes were partially offset by a decrease in same room revenues for all minority owned hotels. Distributions from affiliates increased to $107,044 in the first quarter of 1996 from $19,219 in 1995. In the first quarter of 1996, the Company recorded an income tax benefit of $102,000 compared to $190,000 in the first quarter of 1995, which decrease is directly attributable to the decrease in net loss. 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 1996, the Company used cash for operations of $654,658, compared to $131,610 in the first quarter of 1995, or an increase in cash used for operations of $523,048 from 1995 to 1996. The Company also used $1.7 million in cash for investing activities during the first quarter of 1996, primarily for the construction of Consolidated Hotel properties. These uses of cash were offset by the receipt of $1.5 million through the mortgage financing of Consolidated Hotel projects, net of principal repayments, and net proceeds of $1.1 million from the Company's line-of-credit. As a result, cash increased $156,869 during the three months ended March 31, 1996. 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 first quarter of 1996, development, construction and renovation projects contributed $848,996 to the Company's operating income compared to $337,499 in the first quarter of 1995. 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 $303,039 during the first quarter of 1996 compared to an operating loss of $148,566 during the first quarter of 1995. Management fee revenues are typically received by the Company within five working days from the end of each month. The hotel management segment contributed $61,379 to the Company's operating income in the first quarter of 1996 compared to $55,466 in 1995. 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 $64,105 and $40,597 in operating income during the first quarter of 1996 and 1995, respectively. During the first quarter of 1996, the Company used $1.7 million in investing activities compared to $2.4 million during the first quarter of 1995. 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 equity interests in hotels; and loans to affiliated and non- affiliated hotels for the purpose of construction, renovation and working capital. In the first quarter of 1995, the Company used cash primarily for the purchase of $2.2 million in property and equipment for Consolidated Hotels. In the first quarter of 1996, the Company used $1.3 million to purchase property and equipment for Consolidated Hotels, used $250,000 for the purchase of an equity interest, and used $70,467 for 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 March 31, 1996, 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 $2.5 million in the first quarter of 1996 compared to $1.1 million in the 1995 first quarter. In 1995, the contributing factor was proceeds of $1.1 million from the mortgage financing of Consolidated Hotels, net of principal repayments. In 1996, the primary factors were proceeds of $1.5 million from the mortgage financing of Consolidated Hotels, net of principal repayments, and $1.1 million in net proceeds from the Company's operating line-of-credit. The Company's operating line-of-credit had a balance of $3,376,164 at March 31, 1996. The Company's line-of-credit was increased effective May 1, 1996 to $5,000,000 and expires on May 1, 1997. The same bank providing the operating line-of-credit has also provided a $7.5 million line-of-credit to be used for construction financing on hotel projects, of which $5.0 million must be used on contracts which have firm commitments for permanent mortgage financing when the construction is completed. There was no outstanding balance on the construction line-of-credit as of March 31, 1996. The Company expects cash from operations to be sufficient to pay all operating and interest expenses in 1996. 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 further 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. IMPACT OF NEW ACCOUNTING STANDARDS In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This Statement establishes accounting standards for the impairment of long-lived assets, certain identifiable intangibles, and goodwill related to those assets to be held and used and for long-lived assets and certain identifiable intangibles to be disposed of. The Company adopted this standard on January 1, 1996, the impact of which was not material. PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 All statements contained herein that are not historical facts, including but not limited to, statements regarding the Company's plans for future development and operation of AmeriHost Inn hotels are based on current expectations. These statements are forward looking in nature and involve a number of risks and uncertainties. Actual results may differ materially. Among the factors that could cause actual results to differ materially are the following: the availability of sufficient capital to finance the Company's business plan on terms satisfactory to the Company; competitive factors, such as the introduction of new hotels or renovation of existing hotels in the same markets; changes in travel patterns which could affect demand for the Company's hotels; changes in development and operating costs, including labor, construction, land, equipment, and capital costs; general business and economic conditions; and other risk factors described from time to time in the Company's reports filed with the Securities and Exchange Commission. The Company wishes to caution readers not to place undue reliance on any such forward looking statements, which statements are made pursuant to the Private Securities Litigation Reform Act of 1995, and as such, speak only as of the date made. AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES SCHEDULE OF EARNINGS BEFORE INTEREST/RENT, TAXES AND DEPRECIATION/AMORTIZATION FOR THE THREE MONTHS ENDED MARCH 31, (UNAUDITED)
1996 1995 Revenue $ 12,644,568 $ 13,157,361 Operating costs and expenses 10,751,090 12,009,669 1,893,478 1,147,692 Corporate general and administrative (484,652) (467,757) Interest income 154,359 91,536 Other income 41,909 20,159 Equity in net income and losses of affiliates (144,638) (183,528) Earnings before minority interests 1,460,456 608,102 Minority interests in (income) loss of consolidated subsidiaries and partnerships 204,001 112,610 Earnings before interest/rent, taxes and depreciation/amortization $ 1,664,457 $ 720,712
PART II - OTHER INFORMATION 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: May 10, 1996 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 3-MOS DEC-31-1996 MAR-31-1996 1,528,147 0 9,801,194 0 0 11,961,431 39,535,708 6,022,254 54,242,490 10,074,069 0 29,877 0 0 17,032,844 54,242,490 12,644,568 12,644,568 10,751,090 10,751,090 1,733,597 0 665,173 (249,661) (102,000) (147,661) 0 0 0 (147,661) (0.02) (0.02)
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