-----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, AVIjWoQy/CyRoxVhCwBV+gQ4c6XDtAn6pW0UpjtmUFr4QgjvpCeKcXoSQBDsH1+h 1OOFekPsIgbg9RRsGW9g5g== /in/edgar/work/20000810/0000912057-00-035933/0000912057-00-035933.txt : 20000921 0000912057-00-035933.hdr.sgml : 20000921 ACCESSION NUMBER: 0000912057-00-035933 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: SONESTA INTERNATIONAL HOTELS CORP CENTRAL INDEX KEY: 0000091741 STANDARD INDUSTRIAL CLASSIFICATION: [7011 ] IRS NUMBER: 135648107 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-09032 FILM NUMBER: 690720 BUSINESS ADDRESS: STREET 1: 200 CLARENDON ST CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 6174215400 MAIL ADDRESS: STREET 1: 200 CLARENDON ST CITY: BOSTON STATE: MA ZIP: 02116 FORMER COMPANY: FORMER CONFORMED NAME: HOTEL CORP OF AMERICA DATE OF NAME CHANGE: 19700622 FORMER COMPANY: FORMER CONFORMED NAME: CHILDS CO DATE OF NAME CHANGE: 19681121 10-Q 1 a10-q.txt FORM 10-Q FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly period ended June 30, 2000 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________________ to______________________ Commission file number 0-9032 SONESTA INTERNATIONAL HOTELS CORPORATION (Exact name of registrant as specified in its charter) NEW YORK 13-5648107 - ---------------------------------- -------------------------------- (State or other jurisdiction (I.R.S. Employer or incorporation or organization) Identification No.) 200 CLARENDON STREET, BOSTON, MA 02116 - ------------------------------------------------------------------------------- (Address of principal executive offices) (Zip Code) 617-421-5400 - ------------------------------------------------------------------------------- (Registrant's telephone number, including area code) - ------------------------------------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report 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 --- --- APPLICABLE ONLY TO CORPORATE ISSUERS: Number of Shares of Common Stock Outstanding As of August 7, 2000 -- $.80 par value, Class A - 3,705,230 INDEX SONESTA INTERNATIONAL HOTELS CORPORATION
PAGE Part I. Financial Information Item 1. Financial Statements (Unaudited) Consolidated balance sheets - June 30, 2000 and December 31, 1999 1 Consolidated statements of operations - Three month and six month periods ended June 30, 2000 and 1999 3 Consolidated statements of cash flows - Six month periods ended June 30, 2000 and 1999 4 Notes to consolidated financial statements - June 30, 2000 and 1999 6 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition--Three month and six month periods ended June 30, 2000 and 1999 11 Item 3. Quantitative and Qualitative Disclosure of Market Risk 16 Part II. Other Information Item 4. Submission of matters to a vote of security holders 17
PART I - ITEM 1. FINANCIAL INFORMATION SONESTA INTERNATIONAL HOTELS CORPORATION CONSOLIDATED BALANCE SHEETS JUNE 30, 2000 (UNAUDITED) AND DECEMBER 31, 1999
(IN THOUSANDS) JUNE 30 DECEMBER 31 2000 1999 ---- ---- ASSETS Current assets: Cash and cash equivalents $32,498 $ 7,876 Accounts and notes receivables: Trade, less allowance of $ 275 ($260 at December 31, 1999) for doubtful accounts 6,368 7,673 Other 1,332 2,083 -------- -------- Total accounts and notes receivable 7,700 9,756 Current portion of deferred taxes 480 459 Inventories 1,519 1,530 Prepaid expenses 1,954 1,092 -------- -------- Total current assets 44,151 20,713 Long-term receivables and advances 1,261 1,507 Property and equipment, at cost: Land and land improvements 9,939 9,894 Buildings 70,170 69,256 Furniture and equipment 34,877 30,785 Leasehold improvements 2,713 2,471 Projects in progress 797 1,051 -------- -------- 118,496 113,457 Less accumulated depreciation and amortization 33,350 29,255 -------- -------- Net property and equipment 85,146 84,202 Other long-term assets 1,832 1,096 -------- -------- $132,390 $107,518 ======== ========
See accompanying notes to consolidated financial statements. 1 SONESTA INTERNATIONAL HOTELS CORPORATION CONSOLIDATED BALANCE SHEETS JUNE 30, 2000 (UNAUDITED) AND DECEMBER 31, 1999
(IN THOUSANDS) JUNE 30 DECEMBER 31 2000 1999 ---- ---- LIABILITIES AND COMMON STOCKHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 1,327 $ 24,164 Accounts payable 4,231 6,897 Advance deposits 3,014 4,703 Federal, foreign and state income taxes 1,648 97 Accrued liabilities: Salaries and wages 2,168 2,917 Rentals 3,896 6,917 Interest 16 410 Employee benefits 270 207 Other 2,050 1,344 -------- --------- Total accrued liabilities 8,400 11,795 -------- --------- Total current liabilities 18,620 47,656 Long-term debt 76,285 26,165 Deferred federal and state income taxes 4,183 4,220 Other non-current liabilities 3,604 3,095 Redeemable preferred stock, $25 par value, at redemption value 294 294 Commitments and contingencies Common stockholders' equity: Common stock: Class A, $.80 par value: Authorized--10,000,000 shares Issued--6,102,176 shares at stated value 4,882 4,882 Retained earnings 36,510 33,114 Treasury shares--2,396,946 (2,386,946 at December 31, 1999) at cost (11,988) (11,908) -------- --------- Total common stockholders' equity 29,404 26,088 -------- --------- $132,390 $107,518 ======== =========
See accompanying notes to consolidated financial statements. 2 SONESTA INTERNATIONAL HOTELS CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (in thousands except for per share data)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 2000 1999 2000 1999 ---- ---- ---- ---- Revenues: Rooms $17,067 $15,774 $34,914 $33,002 Food and beverage 7,497 7,286 14,407 13,535 Management, license and service fees 1,303 1,212 2,521 2,314 Parking, telephone and other 2,813 2,107 5,080 4,158 ----- ----- ----- ----- 28,680 26,379 56,922 53,009 ------ ------ ------ ------ Costs and expenses: Costs and operating expenses 11,346 10,799 22,532 20,977 Advertising and promotion 2,187 1,955 4,230 3,938 Administrative and general 4,017 4,198 8,122 8,100 Human resources 522 473 1,040 975 Maintenance 1,747 1,685 3,576 3,370 Rentals 1,839 2,107 4,379 4,494 Property taxes 624 546 1,249 1,088 Depreciation and amortization 2,043 1,799 4,099 3,561 ----- ----- ----- ----- 24,325 23,562 49,227 46,503 ------ ------ ------ ------ Operating income 4,355 2,817 7,695 6,506 Other income (deductions): Interest expense (1,342) (1,135) (2,476) (2,350) Interest income 262 225 393 377 Foreign exchange loss (1) (3) (6) (7) Gain on sales of assets 6 1 10 5 Gain on casualty 450 -- 950 -- Other -- 3,875 -- 3,875 ------ ------ ------ ------ (625) 2,963 (1,129) 1,900 Income before income taxes 3,730 5,780 6,566 8,406 Federal, foreign and state income tax provision 1,454 2,123 2,519 3,087 ----- ----- ----- ----- Income before extraordinary loss on refinancing of debt 2,276 3,657 4,047 5,319 Extraordinary loss on refinancing of debt (net of tax) (274) -- (274) -- ----- ----- ----- ----- Net income 2,002 3,657 3,773 5,319 Retained earnings at beginning of period 34,882 30,530 33,114 28,871 Cash dividends on preferred stock (3) (3) (6) (6) Cash dividends on common stock (371) (310) (371) (310) ------- ------- ------- ------- Retained earnings at end of period $36,510 $33,874 $36,510 $33,874 ======= ======= ======= ======= Basic and diluted earnings per share of common stock $ 0.54 $ 0.88 $ 1.01 $ 1.28 ====== ======= ====== ====== Weighted average number of shares outstanding 3,707 4,136 3,711 4,136 ===== ===== ===== =====
See accompanying notes to consolidated financial statements. 3 SONESTA INTERNATIONAL HOTELS CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) Increase (Decrease) in Cash
(IN THOUSANDS) SIX MONTHS ENDED JUNE 30 2000 1999 ---- ---- Cash provided (used) by operating activities Net income $ 3,773 $ 5,319 Items not (providing) requiring cash Pension expense 543 582 Depreciation and amortization of property and equipment 4,099 3,561 Other amortization (320) (342) Deferred federal and state income tax provision (benefit) (58) 557 Gain on sales of assets (10) (5) Gain on casualty (950) -- Extraordinary loss on debt refinancing 431 -- Changes in assets and liabilities Accounts and notes receivable 2,287 880 Inventories 11 6 Prepaid expenses (834) (225) Accounts payable (2,666) (2,108) Advance deposits (1,689) (274) Federal, foreign and state income taxes 1,551 882 Accrued liabilities (3,411) (2,113) -------- -------- Cash provided by operating activities 2,757 6,720 Cash provided (used) by investing activities Proceeds from sales of assets 27 5 Proceeds from casualty insurance 500 -- Expenditures for property and equipment (5,060) (4,520) Payments received on long-term receivables and advances 352 565 -------- -------- Cash used by investing activities (4,181) (3,950) Cash provided (used) by financing activities Scheduled payments on long-term debt (551) (3,406) Proceeds from issuance of long-term debt 72,000 -- Cost of financing (1,379) -- Payments on refinancing of long-term debt (43,566) -- Cash dividends paid (378) (316) Purchase of treasury stock (80) -- -------- -------- Cash provided (used) by financing activities 26,046 (3,722) -------- -------- Net increase (decrease) in cash 24,622 (952) Cash and cash equivalents at beginning of period 7,876 9,470 -------- -------- Cash and cash equivalents at end of period $32,498 $8,518 ======== ========
See accompanying notes to consolidated financial statements. 4 CONSOLIDATED STATEMENTS OF CASH FLOW (UNAUDITED) (CONTINUED) SUPPLEMENTAL SCHEDULE OF INTEREST AND INCOME TAXES PAID Cash paid for interest in the 2000 six-month period and the 1999 six-month period was approximately $2,870,000 and $2,401,000 respectively. Cash paid for income taxes in the 2000 six-month period and the 1999 six-month period was approximately $868,000 and $1,648,000, respectively. See accompanying notes to consolidated financial statements. 5 SONESTA INTERNATIONAL HOTELS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BASIS OF PRESENTATION AND OPERATIONS The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six month period ended June 30, 2000 are not necessarily indicative of the results that may be expected for the year ended December 31, 2000. The balance sheet at December 31, 1999 has been derived from the audited financial statements at that date but does not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 1999. Sonesta Beach Resort Anguilla reopened on February 10, 2000, after a brief closure due to damage sustained by hurricane Lenny, which struck the island in November 1999. Under its insurance agreements, the hotel will receive loss of income proceeds for the period of the closure, as well as for a six month period following the reopening date. The loss of revenues during the first six months of 2000 compared to the same period in 1999 was approximately $1,103,000. Included in gain from casualty is income of $950,000 from the receipt of advances against the business interruption claim. On June 2, 2000 the Company refinanced the mortgage loans on its hotels in Key Biscayne, Florida and Cambridge, Massachusetts. The net proceeds from this refinancing were $27,055,000, and the Company intends to use these proceeds for improvements to the Key Biscayne property, and to fund its expansion plans. At December 31, 1999, the mortgage loan on the Key Biscayne property was classified as a current liability pending receipt of a formal loan commitment. 2. LONG-TERM RECEIVABLES AND ADVANCES
(IN THOUSANDS) ------------------------------------------- JUNE 30, DECEMBER 31, 2000 1999 -------------- ----------------- Sharm El Sheikh (a) $859 $936 Cairo, Egypt, net of discount (b) 240 315 Other 684 866 -------------- ----------------- Total long-term receivables 1,783 2,117 Less: current portion 522 610 -------------- ----------------- Net long-term receivables $1,261 $1,507 ============== =================
6 SONESTA INTERNATIONAL HOTELS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (a) This loan, in the original amount of $1,000,000, was made in 1996 and 1997 to the owner of Sonesta Beach Resort, Sharm El Sheikh. The loan agreement was amended in 1999. The loan bears interest at the prime rate (9 1/2% at June 30, 2000) and will be repaid in 60 monthly installments from January 2000. (b) The remaining balance of this loan, made in February 1997 to the owner of the Sonesta Hotel Cairo, will be repaid in 2000. There is no interest due during the term of the loan. 3. BORROWING ARRANGEMENTS The Company has a $2,000,000 line of credit which expires on September 30, 2000. This line of credit bears interest at the prime rate (9 1/2% at June 30, 2000). The terms of the line require a certain minimum net worth, a minimum amount of unrestricted cash or available credit lines during part of each calendar year, and approval for additional borrowings by the Company. No amounts were outstanding under this line at June 30, 2000. A subsidiary of the Company has a $5,000,000 line of credit which will expire December 31, 2000. The terms of the loan require certain minimum levels of earnings and net worth, limit cash dividends and purchases of the Company's stock, and specify a maximum defined debt to net worth ratio. The loan is secured by the Company's leasehold interest in the Royal Sonesta Hotel New Orleans, and by a Company guaranty. The interest rate is prime (9 1/2% at June 30, 2000) less one-eighth percent, and the commitment fee on the unused portion of the line is .65% per annum. No amounts were outstanding under this line at June 30, 2000. 4. LONG-TERM DEBT
(IN THOUSANDS) JUNE 30, DECEMBER 31, 2000 1999 Charterhouse of Cambridge Trust and Sonesta of Massachusetts Inc.: First mortgage note (a) $41,000 $21,414 Sonesta Beach Resort Limited Partnership: First mortgage note (b) 31,000 23,049 Sonesta Hotels of Anguilla, Ltd: First mortgage note (c) 5,168 5,440 Other 444 426 ------- ------- 77,612 50,329 Less current portion of long-term debt 1,327 24,164 ------- ------- Total long-term debt $76,285 $26,165 ======= =======
7 SONESTA INTERNATIONAL HOTELS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) (a) The mortgage loan on the Royal Sonesta Hotel Boston (Cambridge) was refinanced in June 2000. The new loan is secured by a first mortgage on the Royal Sonesta Hotel Boston (Cambridge) property. This property is included in fixed assets at a net book value of $25,864,000 at June 30, 2000. The interest rate on this new loan is 8.6% for the term of the loan, and amortization of the principal balance is based on a 25 year schedule. Monthly payments will be $332,911. The mortgage loan matures in July 2010, and prepayment of this loan will be subject to early payment penalties, based on prevailing interest rates at the time of prepayment. (b) The mortgage loan on the Sonesta Beach Resort Key Biscayne was refinanced in June 2000. The new loan is secured by a first mortgage on the Sonesta Beach Resort Key Biscayne property. This property is included in fixed assets at a net book value of $38,193,000 at June 30, 2000. The interest rate on this new loan is 8.6% for the term of the loan, and amortization of the principal balance is based on a 25 year schedule. Monthly payments will be $251,713. The mortgage loan matures in July 2010, and prepayment of this loan will be subject to early payment penalties, based on prevailing interest rates at the time of prepayment. (c) The loan is secured by a first mortgage on the Sonesta Beach Resort Anguilla property, and an assignment to the lender of the hotel's furniture, fixtures and equipment. The property is included in fixed assets at a book value of $12,585,000 at June 30, 2000. In addition, an amount of $1,900,000 is secured by a Company guaranty. The loan requires minimum principal payments of $272,000 and $544,000 during the remaining six months of 2000 and 2001, respectively. In addition, principal payments are required equal to 25% of the hotel's annual excess cash flow, as defined. The balance of $4,352,000 is due on the scheduled maturity date of December 31, 2001. The interest rate on the loan is LIBOR plus 2.25%. The interest rate at June 30, 2000 was 8.875%. 5. HOTEL COSTS AND OPERATING EXPENSES Hotel costs and operating expenses in the accompanying Consolidated Statements of Operations are summarized below:
(IN THOUSANDS) -------------------------------------------------------------------------- Three Months Ended June 30 Six Months Ended June 30 2000 1999 2000 1999 ---- ---- ---- ---- Direct departmental costs Rooms $ 3,878 $ 3,715 $ 7,767 $ 7,245 Food and beverage 5,496 5,423 10,878 10,357 Heat, light and power 793 750 1,562 1,477 Other 1,179 911 2,325 1,898 ----- --- ----- ----- $11,346 $10,799 $22,532 $20,977 ======= ======= ======= =======
Direct departmental costs include payroll expenses and related payroll burden, the cost of food and beverage consumed and other departmental costs. 8 SONESTA INTERNATIONAL HOTELS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED) 6. FEDERAL, FOREIGN AND STATE INCOME TAX The provision for income taxes in the accompanying Consolidated Statements of Operations is summarized below:
(IN THOUSANDS) Six Months Ended June 30 2000 1999 ---- ---- Deferred federal income tax provision (benefit) $ (58) $ 557 Current federal income tax provision 1,912 2,292 Current foreign income tax provision 232 18 Current state income tax provision 433 220 ------- ------- $ 2,519 $ 3,087 ======= =======
7. SEGMENT INFORMATION Segment information for the Company's two reportable segments, Owned & Leased Hotels and Management Activities for the three month and six month periods ending June 30, 2000 and 1999 follows:
Three month period ended June 30, 2000 (IN THOUSANDS) ---------------------------------------------------- OWNED & LEASED MANAGEMENT HOTELS ACTIVITIES CONSOLIDATED ---------- -------------- ---------------- Revenues $27,122 $ 1,558 $28,680 Operating income before depreciation and amortization expense 6,164 234 6,398 Depreciation and amortization (1,928) (115) (2,043) Interest income (expense), net (1,219) 139 (1,080) Other income (deductions) 456 (1) 455 ---------- -------------- ---------------- Segment pre-tax profit 3,473 257 3,730 Segment assets 114,018 18,372 132,390 Segment capital additions 2,222 187 2,409
Six month period ended June 30, 2000 (IN THOUSANDS) ---------------------------------------------------- OWNED & LEASED MANAGEMENT HOTELS ACTIVITIES CONSOLIDATED ---------- -------------- ---------------- Revenues $54,139 $ 2,783 $56,922 Operating income before depreciation and amortization expense 11,520 274 11,794 Depreciation and amortization (3,869) (230) (4,099) Interest income (expense), net (2,340) 257 (2,083) Other income (deductions) 956 (2) 954 ---------- -------------- ---------------- Segment pre-tax profit 6,267 299 6,566 Segment assets 114,018 18,372 132,390 Segment capital additions 4,773 287 5,060
9 SONESTA INTERNATIONAL HOTELS CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Three month period ended June 30, 1999 (IN THOUSANDS) ---------------------------------------------------- OWNED & LEASED MANAGEMENT HOTELS ACTIVITIES CONSOLIDATED ---------- -------------- ---------------- Revenues $25,153 $ 1,226 $26,379 Operating income before depreciation and amortization expense 4,991 (375) 4,616 Depreciation and amortization (1,694) (105) (1,799) Interest income (expense), net (1,075) 165 (910) Other income -- 3,873 3,873 ---------- -------------- ---------------- Segment pre-tax profit 2,222 3,558 5,780 Segment assets 91,337 14,034 105,371 Segment capital additions 2,410 50 2,460
Six month period ended June 30, 1999 (IN THOUSANDS) ---------------------------------------------------- OWNED & LEASED MANAGEMENT HOTELS ACTIVITIES CONSOLIDATED ---------- -------------- ---------------- Revenues $50,668 $2,341 $53,009 Operating income before depreciation and amortization expense 10,727 (660) 10,067 Depreciation and amortization (3,351) (210) (3,561) Interest income (expense), net (2,212) 239 (1,973) Other income -- 3,873 3,873 ---------- -------------- ---------------- Segment pre-tax profit 5,164 3,242 8,406 Segment assets 91,337 14,034 105,371 Segment capital additions 4,359 161 4,520
8. EARNINGS PER SHARE As the Company has no dilutive securities, there is no difference between basic and diluted earnings per share of common stock. The following table sets forth the computation of basic earnings per share of common stock:
THREE MONTHS ENDED JUNE 30 SIX MONTHS ENDED JUNE 30 2000 1999 2000 1999 ---- ---- ---- ---- Numerator: Net income $ 2,002 $ 3,657 $ 3,773 $ 5,319 Preferred stock dividends (3) (3) (7) (7) ------- ------- ------- ------- Numerator for earnings per share $ 1,999 $ 3,654 $ 3,766 $ 5,312 ======= ======= ======= ======= Denominator: Weighted average number of Shares outstanding 3,707 4,136 3,711 4,136 ======= ======= ======= ======= Earnings per share of common stock $ 0.54 $ 0.88 $ 1.01 $ 1.28 ======= ======= ======= =======
10 PART I - ITEM 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS FIRST SIX MONTHS 2000 COMPARED TO 1999 - -------------------------------------- REVENUES - --------
TOTAL REVENUES (IN THOUSANDS) ---------------------------------------------------- NO. OF ROOMS 2000 1999 ----- ---- ---- Sonesta Beach Resort Anguilla, BWI 100 $ 2,048 $ 3,151 Sonesta Beach Resort Key Biscayne 300 17,106 16,061 Royal Sonesta Hotel Boston (Cambridge) 400 15,049 12,957 Royal Sonesta Hotel New Orleans 500 19,936 18,499 Management and service fees and other revenues 2,783 2,341 -------- --------- Total revenues $ 56,922 $ 53,009 ======== =========
Total revenues for the first six months of 2000 were $56,922,000 compared to $53,009,000 in 1999, an increase of approximately $3,913,000. Revenues during the first six months of 2000 at Sonesta Beach Resort Anguilla were $1,103,000 less than during the same period in 1999. The Anguilla resort was closed due to damage sustained by hurricane Lenny from November 17, 1999 until February 10, 2000. The Company has insurance for the loss of income during the period of closure, as well as for the reduction in revenues for a six month period following reopening. The Company recorded a gain on casualty of $950,000 against its insurance claim during the six month period ending June 30, 2000. Sonesta Beach Resort Key Biscayne increased revenues by 7% in the first six months of the year compared to last year, mainly due to revenues from the hotel's retail shops, which have been operated by the Company since late 1999. Revenues at the Royal Sonesta Hotel Boston (Cambridge) increased by 16% during the first six months of 2000 compared to the same period in 1999. Room revenue per available room (REVPAR) increased by 19%, due to both higher occupancies and an increase in average rate achieved. This increase in room revenues was caused by higher demand from both the group and convention as well as the transient market segments. Revenues during the six month period ending June 30, 2000 at the Company's Royal Sonesta Hotel New Orleans increased by $1,437,000 compared to 1999. This was due to a 10% increase in the hotel's REVPAR. Revenues from management activities increased from $2,341,000 during the six month period ended June 30, 1999 to $2,783,000 during the six month period ended June 30, 2000. This was caused primarily by increases in fee income from the Company's managed operations in Egypt, in particular from the Sonesta St. George Hotel in Luxor and the Sonesta Nile River cruise ships, and from the collection of previously unrecorded fees and other expenses from a hotel which the Company used to manage in Orlando, Florida. 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS (CONTINUED) OPERATING INCOME
OPERATING INCOME (in thousands) -------------------------------- 2000 1999 ---- ---- Sonesta Beach Resort Anguilla, BWI $ (1,139) $ 34 Sonesta Beach Resort Key Biscayne 3,474 4,008 Royal Sonesta Hotel Boston (Cambridge) 3,117 1,800 Royal Sonesta Hotel New Orleans 2,199 1,534 --------- -------- Operating income from hotels after management and service fees 7,651 7,376 Management activities and other 44 (870) --------- -------- Operating income $ 7,695 $ 6,506 ========= ========
Operating income for the six-month period ending June 30, 2000 was $7,695,000, compared to operating income of $6,506,000 in 1999, an increase of approximately $1,189,000. Operating income at the Sonesta Beach Resort Anguilla decreased by $1,173,000 during the first six months of 2000 compared to the same period in 1999. This was the result of a $1,103,000 decrease in revenues, due to the closure of the resort from damage sustained by hurricane Lenny from November 17, 1999 through February 10, 2000. The Company has insurance for this loss of profits, and has already recorded casualty income of $950,000 in the six month period ended June 30, 2000. Operating income at Sonesta Beach Resort Key Biscayne for the six month period ended June 30, 2000 decreased by $534,000 compared to the same period in 1999. The resort's revenues rose $1,045,000 during the first six months of 2000, mainly due to income from the hotel's retail shops, which the Company started operating in late 1999. Expenses rose $1,579,000 compared to 1999, mainly due to increases in cost and operating expenses related to the retail shops, increases in administrative and general expenses, and a $400,000 increase in depreciation expense, which is a result of the refurbishments the Company has undertaken since the resort was acquired in July 1998. Royal Sonesta Boston (Cambridge) had operating income of $3,117,000 during the first six months of 2000, compared to operating income of $1,800,000 during the first six months of 1999. Revenues rose $2,092,000 compared to last year, and this increase was partly offset by increases in expenses of $775,000, primarily in cost and operating, as well as depreciation expense. Royal Sonesta Hotel New Orleans increased operating income from $1,534,000 in the first six months of 1999 to $2,199,000 in the first six months of 2000, due to a $1,437,000 increase in revenues, partially offset by increased expenses of $772,000. This increase in expenses was primarily in cost and operating expenses and real estate taxes. Operating income from management activities, which is computed after management and service fees from the company's owned and leased hotels, was $44,000 during the first six months of 2000, compared to a loss of $870,000 in the same period last year. This was mainly due to increased income from the Company's managed operations in Egypt, which reported higher fee income and lower management expenses, following a restructuring of the Company's Middle East office in mid 1999. 12 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS (CONTINUED) OTHER INCOME (DEDUCTIONS) Included in the first six months of 2000 is a gain on casualty of $950,000, resulting from a business interruption claim after Hurricane Lenny struck the island of Anguilla in November 1999. Sonesta Beach Resort Anguilla reopened on February 10, 2000, but has a claim for lost income for the period of the closure, as well as a six month period following the reopening. Included in Other Income in 1999 is a termination fee of approximately $1,875,000 which the Company received in connection with the June 1, 1999 cancellation of the management agreement under which the Company operated the Sonesta Beach Resort & Casino, Curacao. Also included in Other income in 1999 is a supplemental fee of $2,000,000 from Sonesta Beach Resort Bermuda, which the Company continues to operate under a management agreement. SECOND QUARTER 2000 COMPARED TO 1999 REVENUES
TOTAL REVENUES (in thousands) --------------------------------------------- NO. OF ROOMS 2000 1999 ----- ---- ---- Sonesta Beach Resort Anguilla, BWI 100 $ 1,125 $ 1,172 Sonesta Beach Resort Key Biscayne 300 7,635 6,700 Royal Sonesta Hotel Boston (Cambridge) 400 9,100 8,289 Royal Sonesta Hotel New Orleans 500 9,262 8,992 Management and service fees and other revenues 1,558 1,226 -------- -------- Total revenues $ 28,680 $ 26,379 ======== ========
Total revenues for the six month period ended June 30, 2000 were $28,680,000 compared to $26,379,000 in 1999, an increase of approximately $2,301,000. Second quarter revenues at the Sonesta Beach Resort Anguilla were $47,000 less than during the second quarter of 1999, due to lower occupancies in the 2000 quarter which resulted from the closure of the resort due to damage sustained by Hurricane Lenny from November 17, 1999 until February 10, 2000. The hotel's insurance policy covers loss of profits for a six month period following reopening, as well as during the period of closure. Revenues of Sonesta Beach Resort Key Biscayne during the second quarter of 2000 rose $935,000 compared to the second quarter of 1999, due to a 10% increase in the resort's REVPAR (from increased occupancy as well as average rate), and income from the hotel's retail outlets, which the Company started operating in late 1999. Royal Sonesta Hotel Boston (Cambridge) increased revenues by 10% compared to last year's second quarter, due to a 10% increase in average rate, and a slight increase in occupancy. Revenues during the second quarter of 2000 at the Royal Sonesta Hotel New Orleans increased by $270,000 to $9,262,000 compared to 1999, due to a 7% increase in average room rate achieved. Revenues from management activities increased from $1,226,000 during the second quarter of 1999 to $1,558,000 in the second quarter of 2000, because of increased fee income from the Company's managed operations in Egypt and from the collection of previously unrecorded fees and expenses from a hotel in Orlando, Florida, which the Company operated before under a management agreement. 13 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS (CONTINUED) OPERATING INCOME
OPERATING INCOME (in thousands) ------------------------- 2000 1999 ---- ---- Sonesta Beach Resort Anguilla, BWI $ (409) $ (330) Sonesta Beach Resort Key Biscayne 896 784 Royal Sonesta Hotel Boston (Cambridge) 2,771 2,120 Royal Sonesta Hotel New Orleans 978 723 ------- ------- Operating income from hotels after management and service fees 4,236 3,297 Management activities and other 119 (480) ------- ------- Operating income $ 4,355 $ 2,817 ======= =======
Operating income for the second quarter of 2000 was $4,355,000, compared to operating income of $2,817,000 in 1999, an increase of approximately $1,538,000. Operating loss at the Sonesta Beach Resort Anguilla increased from $330,000 during the second quarter of 1999 to $409,000 during the second quarter of 2000, due to a reduction in revenues of $47,000 in the 2000 quarter compared to 1999. Business levels during the second quarter of 2000 were less than anticipated due to the lingering effects of the closure of the hotel from November 17, 1999 to February 10, 2000 due to damage sustained to the resort by hurricane Lenny. This loss of income is covered by insurance. Second quarter 2000 operating income at Sonesta Beach Resort Key Biscayne increased by $112,000 compared to 1999. Increased revenues of $935,000 during the second quarter were partially offset by increased cost and operating expenses related to the hotels' retail outlets, which the Company started operating in late 1999, and by increased administrative and general and depreciation expenses. Royal Sonesta Hotel Boston (Cambridge) increased operating income by $651,000 in the second quarter of 2000 compared to 1999, as revenues increased by $811,000, and expenses rose by only $160,000, or a modest 2 1/2%. Operating income at Royal Sonesta Hotel New Orleans in the 2000 second quarter increased by $255,000 compared to 1999, due to a $270,000 increase in revenues. In the second quarter of 2000 the Company had operating income of $119,000 from management activities, compared to a loss of $480,000 during the 1999 second quarter. This was mainly due to the collection of previously unrecorded fees and the recovery of expenses from a hotel in Orlando, Florida which the Company used to operate under a management agreement. Also, the Company incurred costs related to a restructuring of the management of its Egyptian operations during the second quarter of 1999. OTHER INCOME (DEDUCTIONS) Included in the second quarter of 2000 is a gain from casualty of $450,000 resulting from a business interruption claim for Sonesta Beach Resort Anguilla, which was closed from November 17, 1999 to February 10, 2000, from damage sustained by hurricane Lenny. Included in Other income in 1999 is a termination fee of approximately $1,875,000 which the Company received in connection with the June 1, 1999 cancellation of the management agreement under which the Company operated the Sonesta Beach Resort & Casino, Curacao. Also included in Other income in 1999 is a supplemental fee of $2,000,000 from Sonesta Beach Resort Bermuda, which the Company continues to operate under a management agreement. 14 MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITIONS (CONTINUED) Interest expense increased by $207,000 during the second quarter of 2000 due to the additional expense incurred following the refinancing in June 2000 of mortgage loans on both the Royal Sonesta Hotel Boston (Cambridge) and Sonesta Beach Resort Key Biscayne. Interest income increased in the second quarter of 2000 due to income received on the short term investment of the refinancing proceeds. The Company recorded an extraordinary loss of $274,000 (net of federal and state taxes) in June 2000, which represents the write-off of unamortized loan costs and the payment of a prepayment penalty, in connection with the refinancing of its Cambridge and Key Biscayne hotel's mortgage loans. FEDERAL, FOREIGN AND STATE INCOME TAXES The provision for income taxes during the first six months of 2000 was higher than the statutory rate due to state taxes provided on the Company's income from its operations in Louisiana, Florida and Massachusetts. LIQUIDITY AND CAPITAL RESOURCES The Company had cash and cash equivalents of approximately $32,498,000 at June 30, 2000. The Company also has $7,000,000 available under two lines of credit, and no amounts were outstanding under these lines at June 30, 2000. In June 2000, the Company refinanced the mortgage loans on its hotels in Cambridge, Massachusetts and Key Biscayne, Florida. The net proceeds from this refinancing were $27,055,000, and the Company intends to use these proceeds for improvements to the Key Biscayne property, and to fund its expansion plans. The Company believes that its present cash balances, plus available borrowing capacity and the expected cash flow generated during the remainder of the calendar year 2000, will be more than adequate to meet all of its obligations. 15 PART I - ITEM 3 QUANTITATIVE AND QUALITATIVE DISCLOSURE OF MARKET RISK The Company is exposed to market risk from changes in interest rates and foreign exchange rates. The Company uses fixed rate debt and debt with variable interest rates to finance the ownership of its properties. The table that follows summarizes the Company's debt obligations outstanding at June 30, 2000, and includes the principal payments due on the mortgage loans on the Company's Key Biscayne and Cambridge hotels, which were refinanced on June 2, 2000: Short and Long Term Debt at June 30, 2000 (in thousands):
2000 2001 2002 2003 2004 THEREAFTER TOTAL ---- ---- ---- ---- ---- ---------- ----- Principal Amount Due $1,064 $5,784 $967 $1,054 $1,148 $67,595 $77,612 Average Interest Rate 8.61% 8.61% 8.60% 8.60% 8.60% 8.60%
16 PART II - ITEM 4 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The Annual Meeting of Shareholders of Sonesta International Hotels Corporation was held on May 30, 2000. All nominees for directors were elected. The results of the votes with regard to the appointment of the Company's independent auditors as well as the election of common stock and preferred stock directors are as follows:
VOTES CAST MANAGEMENT PROPOSAL FOR AGAINST ABSTAIN - ------------------- --------------------------------------------------- Approval of the appointment of independent auditors for 2000 3,246,296 36,262 6,602
ELECTION OF COMMON STOCK DIRECTORS - ---------------------------------- DIRECTOR VOTES RECEIVED VOTES WITHHELD - -------- -------------- -------------- George S. Abrams 3,225,944 63,216 Vernon R. Alden 3,202,788 86,372 Joseph L. Bower 3,225,944 63,216 Peter J. Sonnabend 3,225,936 63,224 Roger P. Sonnabend 3,225,936 63,224 Stephanie Sonnabend 3,225,936 63,224 Jean C. Tempel 3,224,776 64,384
ELECTION OF PREFERRED STOCK DIRECTORS - ------------------------------------- DIRECTOR VOTES RECEIVED VOTES WITHHELD - -------- -------------- -------------- Paul Sonnabend 8,122 200 Stephen Sonnabend 8,122 200
17 PART II - OTHER INFORMATION ITEM NUMBERS 1, 2, 3, 5 AND 6 Not applicable during the quarter ended June 30, 2000 18 SIGNATURE 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. SONESTA INTERNATIONAL HOTELS CORPORATION By: ________________________________________ Boy van Riel Vice President and Treasurer (Authorized to sign on behalf of the Registrant as Principal Financial Officer) Date: August 9, 2000 19 EX-27 2 ex-27.txt EXHIBIT 27
5 0000091741 SONESTA INTERNATIONAL HOTELS CORPORATION 1000 6-MOS DEC-31-2000 JAN-01-2000 JUN-30-2000 32,498 0 6,643 275 1,519 44,151 118,496 33,350 132,390 18,620 76,285 0 294 4,882 24,522 132,390 14,407 56,922 3,374 22,532 26,695 0 2,476 6,566 2,519 4,047 0 274 0 3,773 $1.01 $1.01
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