-----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, TQuQ4mLUcyI2yzXt+R+N6idywmoTkrNdhY9l7EJfAp6qrKtrTksz5lv0ZCz0T+ma m0Q/O0hHoz2HponNqj/y/Q== 0000950137-04-007787.txt : 20040917 0000950137-04-007787.hdr.sgml : 20040917 20040917103810 ACCESSION NUMBER: 0000950137-04-007787 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20040902 ITEM INFORMATION: Material Impairments ITEM INFORMATION: Other Events ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20040917 DATE AS OF CHANGE: 20040917 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ARLINGTON HOSPITALITY 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: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-15291 FILM NUMBER: 041035031 BUSINESS ADDRESS: STREET 1: 2355 SOUTH ARLINGTON HEIGHTS ROAD STREET 2: SUITE 400 CITY: ARLINGTON HEIGHTS STATE: IL ZIP: 60005 BUSINESS PHONE: 8472285400 MAIL ADDRESS: STREET 1: 2355 SOUTH ARLINGTON HEIGHTS ROAD STREET 2: SUITE 400 CITY: ARLINGTON HEIGHTS STATE: IL ZIP: 60005 FORMER COMPANY: FORMER CONFORMED NAME: AMERIHOST PROPERTIES INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: AMERICA POP INC DATE OF NAME CHANGE: 19871111 8-K 1 c88270e8vk.txt CURRENT REPORT UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ------------------- FORM 8-K ------------------- CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: September 2, 2004 (Date of earliest event reported) ------------------- ARLINGTON HOSPITALITY, INC. (Exact name of registrant as specified in its charter) ------------------- Delaware 0-15291 36-3312434 (State or other jurisdiction (Commission File No.) (IRS Employer of incorporation) Identification No.) 2355 South Arlington Heights Road Suite 400 Arlington Heights, Illinois 60005 (Address of Principal Executive Offices) (847) 228-5400 (Registrant's telephone number, including area code) NOT APPLICABLE (Former name or former address, if changed since last report) ------------------- Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below): [ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) [ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) [ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) [ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) ITEM 2.06 -- MATERIAL IMPAIRMENTS HOTEL DISPOSITION PLAN UPDATE During 2003, we determined that the sale of a significant number of our hotel properties would assist us in achieving our financial and growth objectives of maximizing cash flow streams from hotel development activity and our AmeriHost agreements with Cendant Corporation. After conducting a comprehensive assessment of each of our hotel properties in July 2003, we adopted a formal plan to sell 25 to 30 hotels over a two-year period. In addition, we determined that all of our owned non-AmeriHost Inn hotels would be sold as part of this plan, subject to market conditions. Upon successful completion of the sale of the properties in the plan, we expect to own or lease 30 to 35 AmeriHost Inn hotels, excluding any new hotels we develop. Since inception of the plan in July 2003, we have sold 17 hotels, including 11 hotels in 2004, through the date of this filing. Below is a summary of the sales made under the plan:
(in thousands) Net cash Number proceeds Mortgage Cendant of after mortgage debt Incentive hotels Payoff reduction Fees (1) ----------------------------------------------- Consolidated hotels: AmeriHost Inn hotels 8 $ 3,599 $14,885 $ 1,414 Other brand hotels 2 916 2,276 -- ------ ------- ------- ------- 10 4,515 17,161 1,414 ------ ------- ------- ------- Unconsolidated hotels: AmeriHost Inn hotels 0 -- -- -- Other brand hotels 1 611 -- -- ------ ------- ------- ------- 1 611 -- -- ------ ------- ------- ------- Total, year-to-date 2004 11 $ 5,126 $17,161 $ 1,414 ====== ======= ======= ======= Total, since the implementation of the strategic plan to sell hotels 16 $ 9,994 $25,876 $ 2,455 ====== ======= ======= =======
(1) These fees are deferred for financial statement reporting purposes, and amortized as revenue over a 76-month period. On January 1, 2002, we adopted SFAS 144, "Statement of Financial Accounting Standard (SFAS) No. 144, Accounting for Long-Lived assets (SFAS 144)". SFAS 144 addresses financial accounting and reporting for the impairment or disposal of long-lived assets. We periodically review the carrying value of certain long-lived assets in relation to historical results, current business conditions and trends to identify potential situations in which the carrying value of 2 assets may not be recoverable. If such reviews indicate that the carrying value of such assets may not be recoverable, we would estimate the undiscounted sum of the expected cash flows of such assets to determine if such sum is less than the carrying value of such assets to ascertain if an impairment exists. If an impairment exists, we would determine the fair value by using quoted market prices, if available for such assets, or if quoted market prices are not available, we would discount the expected future cash flows of such assets. In connection with the plan for hotel disposition, and in accordance with SFAS No. 144, we recorded $5.9 million in pre-tax, non-cash impairment charges during 2003, related to 18 of the hotels targeted for sale, including approximately $909,000 which was included in "discontinued operations" in the company's consolidated financial statements. The non-cash impairment charges represent adjustments to reduce the carrying value of certain hotel assets to the estimated sales prices, net of estimated costs to sell. Through the first six months of 2004, we recorded an additional $1.4 million in pre-tax, non-cash impairment charges. Approximately $907,000 of the additional impairment charges in 2004 relate to one non-AmeriHost Inn hotel which is over 25 years old with exterior corridors and will require a significant amount of capital expenditures over the next few years. The operations of this hotel have declined significantly over the past several months, as a result of a change in brand affiliation and the addition of newer hotels in its local market. This decline has had a negative impact on the value of the hotel, resulting in the impairment charge. The remaining impairment charges recorded in 2004 relate primarily to the ongoing evaluation of market conditions and listing prices on all of our other properties. Based on our recent review of the market conditions relating to one of the hotels included in the plan for hotel disposition, we decided on September 2, 2004 to reduce the asking price for this hotel. In addition, we have received offers to purchase two other assets. One of these assets is a vacant land parcel and the other is an investment in a joint venture which owns and operates a non-AmeriHost Inn hotel. Although these two assets were not part of the hotel disposition plan adopted in 2003, we determined on September 2, 2004 that we would pursue these offers based on our assessment of the asset values, their potential, and related market conditions. The sale of these assets will result in a significant amount of positive cash flow to the company, however we anticipate recording approximately $378,000 in non-cash impairment charges related to these three assets during the third quarter of 2004, thereby reducing the carrying values of these assets to the anticipated net sale prices. We expect to review the carrying value of all our long-lived assets in accordance with SFAS 144 prior to the issuance of our report on Form 10-Q for the three and nine months ended September 30, 2004. When the plan for hotel disposition was adopted, we expected that the sale of the identified hotels would generate net cash of approximately $11.5 million to $14.7 million, after the repayment of the related mortgage debt secured by the individual properties. Our sale program is a dynamic process. Since the adoption of the plan, we have slightly changed the mix of hotels being offered for sale, identified and/or engaged three additional brokers, in addition to the national broker used thus far, to market and sell the hotels, and reevaluated the listing prices of certain hotels on an ongoing basis. Based on changes in specific hotel market conditions, certain hotel offering prices have changed, including some price reductions. Currently, exclusive of any cash generated from the two additional assets contemplated to be sold as discussed above, we anticipate that the plan for hotel disposition will now generate total net proceeds toward the lower end of the range as originally estimated, or approximately $11.9 million to $12.5 million. 3 Inclusive of the two additional assets contemplated to be sold, the plan for hotel disposition is expected to generate total net proceeds of approximately $14.0 million to $14.6 million. There can be no assurances, however, as to the timing, and terms of sale, or that any additional sales will be consummated. ITEM 8.01 - OTHER EVENTS. On September 17, 2004, Arlington Hospitality, Inc. (the "Company") issued a press release announcing August 2004 operating results and recent hotel development and sales activity. A copy of the Company's press release is attached to this current report on Form 8-K as Exhibit 99.1. ITEM 9.01 - FINANCIAL STATEMENTS AND EXHIBITS. EXHIBITS 99.1 Press Release of Arlington Hospitality, Inc., dated September 17, 2004, announcing August 2004 operating results and recent hotel development and sales activity. 4 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 hereunto duly authorized. DATE: September 17, 2004 Arlington Hospitality, Inc. (Registrant) By: /s/ Jerry H. Herman -------------------------------------- Jerry H. Herman Chief Executive Officer By: /s/ James B. Dale -------------------------------------- James B. Dale Senior Vice President and Chief Financial Officer 5 EX-99.1 2 c88270exv99w1.txt PRESS RELEASE EXHIBIT 99.1 6 [ARLINGTON HOSPITALITY, INC. LETTERHEAD] For Immediate Release CONTACT: MEDIA CONTACT: James B. Dale, Chief Financial Officer Jerry Daly or Carol McCune 847-228-5401 x 361 703-435-6293 jimdale@arlingtonhospitality.com jerry@dalygray.com ARLINGTON HOSPITALITY, INC. ANNOUNCES AUGUST 2004 RESULTS ALSO ANNOUNCES SALE OF FOUR HOTELS, CLOSING OF FINANCING FOR NEW HOTEL IN LANSING, MI ARLINGTON HEIGHTS, Ill., September 17, 2004--Arlington Hospitality, Inc. (Nasdaq/NM: HOST), a hotel development and management company, today announced August 2004 same-room operating results for the AmeriHost Inn hotels in which the company has an ownership interest, and the sale of four hotels. In addition, a joint venture in which the company is a partner announced the closing of the financing for the construction of a new 82-room AmeriHost Inn & Suites hotel in Lansing, Mich. AUGUST RESULTS Same-room revenue per available room (RevPAR) in August 2004 decreased 4.9 percent to $38.33, compared to August 2003. Occupancy decreased 4.8 percent to 63.5 percent, while average daily rate (ADR) decreased 0.2 percent to $60.34. The August 2004 same-room results include 48 AmeriHost Inn hotels, which have been opened for at least 13 months. The primary reason for the decrease in RevPAR was the timing of the Labor Day holiday weekend. In 2003, this holiday weekend was in August, and in 2004, this weekend was in September. - more - Arlington Hospitality Page 2
One Month Two Months Eight Months Twelve Months Ended Ended Ended Ended August 31 August 31 August 31 August 31 --------- --------- --------- --------- Occupancy -- 2004 63.5% 65.5% 57.7% 56.0% Occupancy -- 2003 66.7% 67.3% 57.2% 55.7% Increase (decrease) (4.8%) (2.7%) 0.9% 0.5% Average Daily Rate -- 2004 $60.34 $60.31 $57.59 $57.35 Average Daily Rate -- 2003 $60.45 $59.67 $57.07 $56.92 Increase (decrease) (0.2%) 1.1% 0.9% 0.8% RevPAR -- 2004 $38.33 $39.51 $33.22 $32.12 RevPAR -- 2003 $40.33 $40.17 $32.66 $31.68 Increase (decrease) (4.9%) (1.6%) 2.2% 1.7%
According to Smith Travel Research, preliminary results for August 2004 indicate that RevPAR for the midscale without food and beverage segment of the lodging industry was flat to an increase of 2 percent, compared to August 2003. Most of the company's hotels are concentrated in the Midwest, including Ohio, Michigan and Illinois, where the lodging industry is recovering at a much slower rate than the rest of the country, according to Smith Travel Research. SALES ACTIVITY The company sold two wholly owned AmeriHost Inn hotels in August 2004, and one wholly owned non-AmeriHost Inn hotel thus far in September 2004. The revenue and profit/loss from the sale of hotels, as well as the reduction of debt, will be reported in the company's financial statements during the quarter in which the sale transactions close. In addition, one leased AmeriHost Inn hotel was sold by the landlord during August 2004. The lease for this hotel was simultaneously terminated upon the closing of the sale. - more - Arlington Hospitality Page 3 Year to date, including these sales, the company has sold eight wholly owned AmeriHost Inn hotels, sold two wholly owned non-AmeriHost Inn hotels, facilitated the sale of one non-AmeriHost Inn hotel owned by a joint venture, and facilitated the sale of one leased AmeriHost Inn hotel on behalf of the landlord. The company recently has added two assets to its strategic plan for hotel disposition, including an investment in a non-AmeriHost Inn hotel joint venture and a vacant land parcel, and has received offers to purchase these assets. If consummated, the company anticipates generating net cash proceeds from the sale of these two assets. However, the company anticipates recognizing non-cash impairment charges of approximately $294,000 during the third quarter of 2004 related to these two potential sales. Today, the company will file a report on Form 8-K with the Securities & Exchange Commission, providing an update as to the status of the company's plan for hotel disposition, including more details on these two contemplated transactions and the related non-cash impairment charges. The company currently has five hotels under contract for sale, which are expected to be consummated within the next six months. When the company has hotels under contract for sale, even with nonrefundable cash deposits in certain cases, certain conditions to closing remain, and there can be no assurance that these sales will be consummated as anticipated. HOTEL DEVELOPMENT ACTIVITY Arlington Hospitality also provides turnkey hotel development services for new construction hotel projects, including AmeriHost Inn hotels. A joint venture in which the company has an ownership interest, has contracted the company to develop and build an - more - Arlington Hospitality Page 4 AmeriHost Inn & Suites hotel in Lansing, Mich. Recently, the joint venture closed on the debt and equity financing for this project, and the company anticipates commencing construction on this hotel within the next two to three weeks. The Lansing, Mich. market is representative of the type of larger market on which the company intends to focus its new hotel development efforts, compared to its historical AmeriHost Inn development projects. This hotel will contain 82 rooms, which is approximately 35 percent larger than most of the company's existing AmeriHost Inn hotels, and will also contain more public space, including a breakfast room, a business center, and an expanded meeting room. This new prototype is representative of the type of hotel the company intends to develop in the larger markets. The company has several other projects in the pre-construction development stage. The sales and development activities set forth above do not represent guidance on, or forecasts of, the results of the company's entire consolidated operations, which are reported on a quarterly basis. For more information regarding Arlington's hotels for sale and development opportunities either on a joint venture or turnkey basis, contact Stephen Miller, Senior Vice President -- Real Estate and Business Development via email at stevem@arlingtonhospitality.com, or by telephone at (847) 228-5401, ext. 312. ABOUT ARLINGTON HOSPITALITY Arlington Hospitality, Inc. is a hotel development and management company that builds, operates and sells mid-market hotels. Arlington is the nation's largest owner and franchisee of AmeriHost Inn hotels, a 105-property mid-market, limited-service hotel brand owned and presently franchised in 20 states and Canada by Cendant Corporation (NYSE: CD). Currently, - more - Arlington Hospitality Page 5 Arlington Hospitality, Inc. owns or manages 53 properties in 15 states, including 49 AmeriHost Inn hotels, for a total of 3,836 rooms, with additional AmeriHost Inn & Suites hotels under development. This press release may contain forward-looking statements. Forward-looking statements are statements that are not historical, including statements regarding management's intentions, beliefs, expectations, representations, plans or predictions of the future, and are typically identified by words such as "believe," "expect," "anticipate," "intend," "estimate," "may," "will," "should," and "could." There are numerous risks and uncertainties that could cause actual results to differ materially from those set forth in the forward-looking statements. For a discussion of these factors, see the Company's report on Form 10-K for the year ended December 31, 2003, report on Form 10-Q for the three months ended March 31, 2004, and report on Form 10-Q for the three and six months ended June 30, 2004, under the section headed "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Risk Factors." -----END PRIVACY-ENHANCED MESSAGE-----