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 JUNE 30, 1995
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File No. 2-90939C
AMERIHOST PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3312434
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2400 EAST DEVON AVE., SUITE 280, DES PLAINES, ILLINOIS 60018
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (708) 298-4500
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
As of August 4, 1995, 5,937,414 shares of the Registrant's Common Stock were
outstanding.
AMERIHOST PROPERTIES, INC.
FORM 10-Q
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1995
INDEX
PART I: Financial Information Page
Consolidated Balance Sheets as of June 30, 1995
and December 31, 1994 4
Consolidated Statements of Operations for the Three
and Six Months Ended June 30, 1995 and 1994 6
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1995 and 1994 7
Notes to Consolidated Financial Statements 9
Management's Discussion and Analysis 14
Schedule of Earnings Before Interest/Rent, Taxes
and Depreciation/Amortization for the Three
and Six Months Ended June 30, 1995 and 1994 18
PART II: Other Information
Item 6 Exhibits and Reports on Form 8-K 19
Signatures 19
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,831,816 $ 3,026,029
Accounts receivable (including $470,297
and $703,465 from related parties) 3,135,535 2,457,233
Notes receivable (including $826,932
and $1,687,178 from related parties) 974,662 1,834,908
Prepaid expenses and other current assets 473,363 370,471
Costs and estimated earnings in excess of
billings on uncompleted contracts (including
$587,877 and $1,315,707 from related parties) 1,310,481 2,005,274
Total current assets 7,725,857 9,693,915
Investments 2,486,011 2,995,234
Property and equipment:
Land 3,607,463 2,240,952
Buildings 15,511,241 9,124,901
Furniture, fixtures and equipment 6,601,917 3,784,608
Construction in progress 2,942,163 2,253,456
Leasehold improvements 1,520,688 791,800
30,183,472 18,195,717
Less accumulated depreciation and amortization 3,940,335 1,729,611
26,243,137 16,466,106
Long-term notes receivable (including
$982,960 and $1,272,612 from related parties) 2,432,914 2,737,882
Costs of management contracts acquired,
net of accumulated amortization of
$867,078 and $768,324 606,516 492,253
Other assets (including deferred taxes of
$517,000 and $487,000), net of accumulated
amortization of $1,193,510 and $769,669 2,701,908 2,018,192
5,741,338 5,248,327
$ 42,196,343 $ 34,403,582
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,789,812 $ 3,224,973
Bank line-of-credit 744,147 -
Accrued payroll and related expenses 818,807 679,971
Accrued real estate and other taxes 566,016 362,409
Other accrued expenses and current
liabilities 462,410 262,331
Current portion of long-term debt 821,549 566,808
Income taxes payable 84,466 415,197
Total current liabilities 6,287,207 5,511,689
Long-term debt, net of current portion 18,231,191 12,975,226
Deferred income 843,394 1,051,457
Commitments
Minority interests 1,398,555 1,192,925
Shareholders' equity:
Preferred stock, no par value; authorized
100,000 shares; none issued
Common stock, $.005 par value; authorized
15,000,000 shares; issued 5,937,414 shares
at June 30, 1995, and 5,570,013 shares at
December 31, 1994 29,687 27,850
Additional paid-in capital 16,667,088 15,465,891
Retained earnings (deficit) 132,388 (428,289)
16,829,163 15,065,452
Less:
Stock subscriptions receivable (436,875) (436,875)
Notes receivable (956,292) (956,292)
15,435,996 13,672,285
$ 42,196,343 $ 34,403,582
See notes to consolidated financial statements.
</TABLE>
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenue:
Hotel operations $ 6,105,001 $ 3,912,354 $ 10,219,726 $ 6,366,440
Development and construction 2,272,540 3,534,256 7,777,364 4,137,154
Management services 805,619 710,647 1,370,073 1,246,604
Employee leasing 3,103,470 3,499,101 6,076,828 6,739,430
12,286,630 11,656,358 25,443,991 18,489,628
Operating costs and expenses:
Hotel operations 3,952,501 2,501,751 7,410,032 4,707,585
Development and construction 1,671,697 3,363,474 6,835,826 4,131,852
Management services 508,755 467,738 965,578 985,340
Employee leasing 3,049,433 3,466,262 5,980,619 6,672,697
9,182,386 9,799,225 21,192,055 16,497,474
3,104,244 1,857,133 4,251,936 1,992,154
Depreciation and amortization 478,007 263,975 912,926 537,799
Leasehold rents - hotels 543,941 440,783 995,546 860,604
Corporate general and
administrative 525,289 447,809 993,047 1,093,940
Operating income (loss) 1,557,007 704,566 1,350,417 (500,189)
Other income (expense):
Interest expense (362,007) (200,258) (669,726) (349,700)
Interest income 160,367 77,631 251,903 168,106
Other income (expense) (677) 25,126 19,482 25,909
Equity in net income and losses
of affiliates 96,651 125,498 (86,877) (79,483)
Income (loss) before minority
interests and income taxes 1,451,341 732,563 865,199 (735,357)
Minority interests in (income) loss
of consolidated subsidiaries and
partnerships (90,131) (58,260) 22,478 (13,832)
Income (loss) before income tax 1,361,210 674,303 887,677 (749,189)
Income tax expense (benefit) 517,000 269,000 327,000 (300,000)
Net income (loss) $ 844,210 $ 405,303 $ 560,677 $ (449,189)
Earnings (loss) per share $ 0.14 $ 0.07 $ 0.09 $ (0.08)
See notes to consolidated financial statements.
</TABLE>
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 25,881,307 $ 16,477,999
Cash paid to suppliers and employees (23,323,406) (16,698,003)
Interest received 145,148 224,627
Interest paid (665,120) (351,789)
Income taxes paid (687,731) 221,305
Net cash provided by (used in) operating
activities 1,350,198 (125,861)
Cash flows from investing activities:
Distributions from affiliates 204,162 182,842
Purchase of property and equipment (5,252,999) (3,740,707)
Purchase of investments (225,050) (383,961)
Increase in notes receivables (351,550) (666,589)
Collections on notes receivables 780,744 774,711
Cost of management contracts acquired (213,016) -
Sale of investments 10,000 25,000
Leasehold interest acquisition costs (5,000) -
Increase in organization costs (1,455) (12,978)
Net cash used in investing activities (5,054,164) (3,821,682)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 2,170,794 2,741,251
Principal payments of long-term debt (352,158) (151,724)
Proceeds from line of credit 744,147 950,000
Payments on line of credit - (780,000)
Distributions to minority interests (53,030) -
Contributions from minority interests - 690,056
Net cash provided from financing activities 2,509,753 3,449,583
Net decrease in cash (1,194,213) (497,960)
Cash and cash equivalents, beginning of
period 3,026,029 1,885,335
Cash and cash equivalents, end of period $ 1,831,816 $ 1,387,375
Reconciliation of net income (loss) to net
cash provided by (used in) operating
activities:
Net income (loss) $ 560,677 $ (449,189)
Adjustments to reconcile net income (loss)
to net cash provided by (used in)
operating activities:
Depreciation and amortization 912,926 537,824
Equity in net loss of affiliates before
amortization of deferred income 147,073 123,080
Minority interests in net (income)
losses of subsidiaries (22,478) 13,832
Amortization of deferred income (60,196) (38,098)
Amortization of deferred interest (4,286) (4,286)
Amortization of loan discount 22,696 22,696
Gain on sale of investment - (25,000)
Increase in deferred tax asset (30,000) (300,000)
Compensation paid through issuance of
common stock 213,991 60,236
Changes in assets and liabilities net of
effects of acquisitions:
Increase in accounts receivable (301,578) (2,134,473)
(Increase) decrease in interest
receivable (102,469) 56,521
Increase in prepaid expenses and other
current assets (44,998) (24,969)
Decrease in costs and estimated earnings
in excess of billings 694,793 710,048
Decrease in refundable income taxes - 221,305
Increase in other assets (232,843) (431,602)
(Decrease) increase in accounts payable (429,967) 212,990
Increase in accrued expenses and other
current liabilities 375,677 1,312,717
Decrease in accrued interest (18,089) (2,089)
Decrease in accrued income taxes (330,731) -
Increase in deferred income - 12,596
Net cash provided by (used in) operating
activities $ 1,350,198 $ (125,861)
See notes to consolidated financial statements.
</TABLE>
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PREPARATION:
The financial statements included herein have been prepared by the Company,
without audit. In the opinion of the Company, the accompanying unaudited
financial statements contain all adjustments, which consist only of recurring
adjustments necessary to present fairly the financial position of Amerihost
Properties, Inc. and subsidiaries as of June 30, 1995 and December 31, 1994
and the results of its operations for the three and six month periods ended
June 30, 1995 and 1994, and statements of cash flows for the six months ended
June 30, 1995 and 1994. The results of operations for the three and six
months ended June 30, 1995, are not necessarily indicative of the results to
be expected for the full year. It is suggested that the accompanying
financial statements be read in conjunction with the financial statements and
the notes thereto included in the Company's 1994 Annual Report on Form 10-K.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiaries, and ownership interests in the following
partnerships: Sullivan Motel Associates, Ltd. (45.7%), White River Junction,
VT 393 Limited Partnership (83.3%), Metropolis, IL 1292 Limited Partnership
(54.9%), Tuscola, Illinois 593 Limited Partnership (68.75%), Dayton, Ohio
1291 Limited Partnership (60.0%), Bowling Green, Ohio 590 Limited Partnership
(63.3%), Findlay, Ohio 391 Limited Partnership (51.3%), and Altoona, PA 892
Limited Partnership (62.8%). Significant intercompany accounts and
transactions have been eliminated.
CONSTRUCTION ACCOUNTING:
Development fee revenue from construction/renovation projects is recognized
over the period beginning with the execution of contracts and ending with the
commencement of construction/renovation.
Construction fee revenue from construction/renovation projects is recognized
on the percentage-of-completion method, generally based on the ratio of costs
incurred to estimated total contract costs. Revenue from contract change
orders is recognized to the extent costs incurred are recoverable. Profit
recognition begins when construction reaches a progress level sufficient to
estimate the probable outcome. Provision is made for anticipated future
losses in full, at the time they are identified.
CONCENTRATION OF CREDIT RISK:
Financial instruments which potentially subject the Company to concentrations
of credit risk consist principally of temporary cash investments, accounts
receivable and notes receivable. The Company invests in temporary cash
balances in financial instruments of highly rated financial institutions
generally with maturities of less than three months. A substantial portion
of accounts receivable are from hotels located in the midwestern United
States, where collateral is generally not required, and from hotel operators
for the development and construction of hotels pursuant to written contracts.
Notes receivable are primarily from hotel operating entities generally
located in the midwestern and southern United States, and two of the
Company's officers.
CASH EQUIVALENTS:
The Company considers all investments with a maturity of three months or less
to be cash equivalents.
INVESTMENTS:
Investments in affiliates are accounted for using the equity method, under
which method the original investment is increased (decreased) by the
Company's share of affiliates' earnings (losses), and is reduced by dividends
or distributions when received. Other investments are recorded at cost.
PROPERTY AND EQUIPMENT:
Property and equipment are stated at cost. Depreciation is being provided
for assets placed in service by use of the straight-line and accelerated
methods over their estimated useful lives. Leasehold improvements are being
amortized by use of the straight-line method over the term of the lease.
For each classification of property and equipment, depreciable periods are as
follows:
Building 31.5-39 years
Furniture, fixture and equipment 5-7 years
Leasehold improvements 3-10 years
COST OF MANAGEMENT CONTRACTS ACQUIRED:
The costs of management contracts acquired includes amounts paid to acquire
management contracts and pre-opening costs incurred in connection with new
management contracts. These amounts are being amortized by use of the
straight-line method over periods ranging from two to five years.
OTHER ASSETS:
Costs in excess of net assets of subsidiary
Costs in excess of net assets of various consolidated partnerships are
amortized on a straight-line basis over a period of 31.5 years.
Organization costs
Organization costs are being amortized by use of the straight-line method
over a period of five years.
Investment in leases
Investment in leases represents the amounts paid for the acquisition of
leasehold interests for certain hotels. These costs are being amortized by
use of the straight-line method over the lives of the leases.
Deferred subordinated note costs
Deferred subordinated note costs represents the costs incurred in obtaining
the 7% subordinated notes. These costs are being amortized by use of the
straight-line method over the life of the debt.
Franchise fees
Franchise fees represent the initial franchise fees paid to franchisors for
certain hotels and are being amortized by use of the straight-line method
over the term of the franchise license, ranging from 10 to 20 years.
DEFERRED INCOME:
Deferred income represents that portion of fees earned from entities in which
the Company holds an ownership interest which is equal to the Company's
proportional ownership interest in the entity. The balance of the fees are
recorded in income as earned. The deferred income is being amortized over
the life of the operating assets owned by the affiliated entity.
Also included in deferred income is the unamortized portion of loan points
collected from a loan made to an unaffiliated party in connection with the
acquisition of management contracts. These are being amortized into interest
income over the life of the loan.
INCOME TAXES:
Deferred income taxes are provided on the differences in the bases of the
Company's assets and liabilities determined for tax and financial reporting
purposes. Deferred income taxes have been calculated under the liability
method as prescribed by Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes."
EARNINGS (LOSS) PER SHARE:
Computations of earnings (loss) per share of common stock are computed by
dividing net income (loss) by the weighted average number of shares of common
stock and dilutive common stock equivalents outstanding. Common stock
equivalents include stock options and warrants. The weighted average number
of shares used in the computations were 6,058,603 and 5,911,803 for the three
and six months ended June 30, 1995, and 5,567,634 and 5,614,587 for the three
and six months ended June 30, 1994, respectively.
RECLASSIFICATIONS:
Certain reclassifications have been made to the 1994 financial statements in
order to conform with the 1995 presentation.
2. SHAREHOLDERS' EQUITY:
REVERSE STOCK SPLIT:
During 1989, the Company effected a 1-for-50 reverse stock split. Each
holder of the Company's Common Stock was entitled to receive one new share
for every 50 shares held as of the close of business on August 22, 1989. Any
fractional shares resulting from the reverse split were acquired by the
Company and retired. Through June 30, 1995, 19.06 of aggregate fractional
shares were acquired by the Company at $4.63 per share and retired.
AUTHORIZED SHARES:
The Company's corporate charter authorizes 15,000,000 shares of Common Stock
and 100,000 shares of Preferred Stock without par value. The Preferred Stock
may be issued in series and the Board of Directors shall determine the voting
powers, designations, preferences and relative participating, optional or
other special rights and the qualifications, limitations or restrictions
thereof.
DIVIDEND RESTRICTIONS:
Pursuant to the terms of the Company's subordinated notes (Note 3), no
dividends may be paid on any capital stock of the Company until such notes
have been paid in full.
REGISTRATION OF COMMON STOCK:
Pursuant to agreements with certain shareholders who executed agreements not
to sell in connection with a public offering of 1,550,000 shares of the
Company's Common Stock in May 1993, the Company filed a shelf registration
statement on Form S-3 with the Securities and Exchange Commission. This
filing registered a total of 1,359,084 shares and became effective on
December 28, 1993.
3. SUBORDINATED DEBENTURES:
On October 9, 1992, the Company completed the private placement of $4,500,000
7% Subordinated Notes. The notes are unsecured, and subordinated in right of
payment to all senior indebtedness, which includes all indebtedness
outstanding on October 9, 1992. The Notes are due October 9, 1999, with
interest payable quarterly at the rate of 7% per annum. The proceeds to the
Company, net of commissions, legal and accounting fees and other costs of the
offering were $4,030,346. During 1993, in accordance with certain provisions
on the Notes, the Company prepaid 50% of the principal amount, resulting in a
principal balance of $2,250,000 as of June 30, 1995.
For each $1,000 principal amount loaned to the Company, the noteholder also
received common stock purchase warrants, representing the right to purchase
375 shares of the Company's Common Stock at an exercise price of $4.00 per
share for a period of five years from the date of issuance of the warrants.
Warrants to purchase a total of 46,875 shares are outstanding at June 30,
1995.
4. SUPPLEMENTAL CASH FLOW DATA:
The following represents the supplemental schedule of noncash investing and
financing activities for the six months ended June 30, 1995 and 1994:
Six Months Ended
June 30,
1995 1994
Purchase of investments through issuance
of common stock and decrease in notes
receivable $ 755,692 $ 198,000
Reduction of accounts payable through
issuance of common stock $ 233,351
The Company acquired additional partnership interests in four hotels for
244,015 shares of the Company's common stock. In conjunction with the
acquisitions, liabilities were assumed as follows:
Fair value of assets acquired $ 6,070,768
Issuance of common stock (818,345)
Liabilities assumed $ 5,252,423
Proforma financial information has not been given reflecting the acquisitions
since it is not considered material to the overall financial statement
presentation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company is primarily engaged in the development and ownership/operation of
mid-market hotels. The consolidated financial statements include the operations
of all hotels in which the Company has a 100% or controlling ownership interest
("Consolidated Hotels"). Investments in other entities in which the Company has
a minority ownership interest are accounted for using the equity or cost method.
The Company also provides hotel development and management services to unrelated
third parties and entities in which the Company has a minority ownership
interest on a fee-for-service or contract basis.
The second quarter of 1995 resulted in record revenues of $12.3 million, an
increase of 5.4% from $11.7 million in the second quarter of 1994. The second
quarter net income increased to $844,210 in 1995 from $405,303 in 1994.
Operating income increased from $704,566 in the second quarter of 1994 to $1.6
million in the 1995 second quarter, while earnings before interest/rents, taxes
and depreciation/amortization ("EBITDA") increased to a record $2.7 million in
the second quarter of 1995 from $1.6 million in the second quarter of 1994, or
an increase of $1.2 million.
The improved performance was primarily attributable to hotel operations and
hotel development. Amerihost had an ownership interest in 46 hotels at June 30,
1995 versus 39 hotels at June 30, 1994, increasing equivalent owned rooms by
22.7%. These figures include an increase in Consolidated Hotels from 12 at June
30, 1994 to 18 at June 30, 1995. This increased ownership, as well as an 8.7%
increase in same room revenue during the second quarter of 1995 compared to the
same quarter in 1994 for all Consolidated Hotels, had a significant impact on
the hotel operations segment's revenues and profit. The 8.7% increase in same
room revenue resulted primarily from a 6.5% increase in occupancy and a $0.46
increase in average daily rate, compared with the second quarter of 1994. The
hotel operations segment generated revenues of $6.1 million in the second
quarter of 1995, compared to $3.9 million in the 1994 second quarter. Operating
income in this segment increased 57.8% from $773,756 in the second quarter of
1994 to $1.2 million in the 1995 second quarter.
During the second quarter of 1995, the Company was constructing ten hotels, five
of which were completed during the quarter. Several additional hotels were also
in various stages of the pre-construction development process. The Company has
an ownership position in seven of these ten hotels, including 100% ownership of
three. Seven of these ten hotels are the Company's own brand, AmeriHost Inn.
AmeriHost Inns offer certain amenities including an indoor pool area, whirlpool
suites, an exercise room, and a free continental breakfast which assists the
property in obtaining favorable occupancy and average daily rates, and an
efficient layout designed to control operating costs. Going forward, the
Company plans to continue to develop and construct hotels for both itself, which
will contribute to the hotel operations segment, and unrelated third parties and
entities in which the Company has a minority equity interest, which will
contribute to the hotel development segment.
RESULTS OF OPERATIONS
Record revenues of $12.3 million for the three months ended June 30, 1995
increased 5.4% from revenues of $11.7 million for the three months ended June
30, 1994. This increase was due primarily to a significant increase in the
Company's hotel operations segment, partially offset by a decrease in the hotel
development segment, and to a lesser extent, a decrease in the employee leasing
segment.
Hotel operations revenue increased 56.0% to $6.1 million in the second quarter
of 1995, as compared to $3.9 million in the second quarter of 1994. This
increase was attributable to increases in same room occupancy and average daily
rates and the addition of six Consolidated Hotels to the hotel operations
segment since June 30, 1994. The Company held a minority ownership position in
four of these six hotels prior to these hotels becoming Consolidated Hotels in
1995 when additional ownership interests were acquired. The second quarter of
1995 included the operations of 18 Consolidated Hotels comprising 2,109 rooms
compared to 12 Consolidated Hotels comprising 1,423 rooms in the second quarter
of 1994 or an increase of 48.2% in total rooms. Excluding minority interests in
the Consolidated Hotels, this translates to 1,751 and 1,313 equivalent owned
rooms as of June 30, 1995 and 1994, respectively, or an increase of 33.4%. The
average daily rates for the same room Consolidated Hotels increased $0.46 from
$47.86 in the second quarter of 1994 to $48.32 in the second quarter of 1995,
while occupancy increased 6.5%.
Excluding the construction of Consolidated Hotels, the Company was constructing
seven hotels in the second quarter of 1995, versus four hotels in the second
quarter of 1994, and had several projects in various stages of pre-construction
development. Although more projects were under construction during the 1995
second quarter, revenues from the Company's hotel development segment decreased
from $3.5 million in the second quarter of 1994 to $2.3 million in the second
quarter of 1995. Five of the seven hotels under construction during the second
quarter of 1995 were opened during the quarter resulting in the recognition of
the remaining revenues for only part of the quarter. Conversely, the four
projects in the second quarter of 1994 were under construction for the entire or
majority portion of the quarter with revenues recognized accordingly.
The increase in hotel operations revenue was partially offset by a decrease in
employee leasing revenues. Hotel management and employee leasing revenues are a
direct function of the number of unrelated and minority owned properties managed
by the Company. While the number of Consolidated Hotels increased from 12 to
18, the Company managed 37 hotels for third parties and minority owned entities
at both June 30, 1994 and 1995. The addition of seven management contracts from
July 1, 1994 to June 30, 1995 was offset by the loss of three management
contracts with third parties and the four minority owned hotels which became
Consolidated Hotels in the first and second quarters of 1995 due to the Company
acquiring additional ownership interests in these hotels. Management and
employee leasing revenues from the Consolidated Hotels are eliminated in
consolidation. Three hotel management contracts were terminated towards the end
of the 1994 second quarter, after management and employee leasing fees were
recognized for the majority of the quarter. In addition, three management and
employee leasing contracts with minority owned hotels did not commence until
later in the 1995 second quarter. As a result, employee leasing revenue
decreased 11.3% from $3.5 million to $3.1 million in the second quarter. Hotel
management revenues increased 13.4% from $710,647 in the second quarter of 1994
to $805,619 in the second quarter of 1995 as the timing of the commencement and
termination of management contracts was more than offset by higher management
fee revenues on the remaining properties.
Operating costs and expenses decreased 6.3% to $9.2 million (74.7% of total
revenues) in the second quarter from $9.8 million (84.1% of total revenues) in
the second quarter of 1994. Operating costs and expenses for the hotel
development segment decreased from $3.4 million in the second quarter of 1994 to
$1.7 million in the second quarter of 1995, and are directly related to the
decrease in construction revenue during 1995 compared to the 1994 second
quarter, as explained above. Operating costs and expenses in the hotel
operations segment increased 58.0% from $2.5 million in the second quarter of
1994 to $4.0 million in the second quarter of 1995, resulting primarily from the
addition of six Consolidated Hotels to this segment and is directly related to
the 56.0% increase in segment revenue. Hotel management segment operating costs
and expenses increased 8.8% in the second quarter from $467,738 in 1994 to
$508,755 in 1995 due to the changes in hotels managed for third parties and
minority owned entities, and a decrease in pre-opening costs associated with new
hotels and management contracts. Employee leasing operating costs and expenses
decreased 12.0% from $3.5 million in the second quarter of 1994 to $3.0 million
in 1995 and is directly related to the 11.3% decrease in employee leasing
revenues.
Depreciation and amortization expense increased 81.1% to $478,007 in the second
quarter of 1995 from $263,975 in the second quarter of 1994. This increase was
primarily attributable to the addition of six Consolidated Hotels to the hotel
operations segment and the resulting depreciation and amortization therefrom.
Leasehold rents - hotels increased 23.4% to $543,941 in the second quarter of
1995 from $440,783 in 1994. The increase was due to the addition of two leased
Consolidated Hotels to the hotel operations segment (the Company had held a
minority ownership position in these hotels prior to 1995 when additional
ownership interests were acquired), partially offset by a decrease in leasehold
rents for four other Consolidated Hotels pursuant to a lease amendment which
provided for reduced lease payments and extended the termination date to
December 31, 1999.
Corporate general and administrative expense increased 17.3% from $447,808 in
the second quarter of 1994 to $525,289 in the second quarter of 1995, and can be
attributed to an increase in public relations expenses and a decrease in costs
allocated to specific development projects.
The Company's operating income in the second quarter increased $852,441, from
$704,566 in 1994 to $1.6 million in 1995, or 121.0%. Operating income from the
hotel operations segment increased 57.8% from $773,756 in the second quarter of
1994 to $1.2 million in the second quarter of 1995, resulting primarily from an
increase in Consolidated Hotels from 12 to 18, an increase in same room
revenues, and the controlling of costs. The hotel development segment generated
operating income of $597,799 in the second quarter of 1995 compared to $167,975
in 1994, despite higher revenues in the second quarter of 1994. This increase
is due to a larger volume of construction activity during the second quarter of
1994 which has higher revenue and a lower gross profit margin than pre-
construction development activity. The second quarter of 1995 contained a
larger portion of pre-construction development activity. The hotel management
segment generated operating income of $235,981 in the second quarter of 1995
compared to $206,367 in 1994, due primarily to the achievement of operational
efficiencies, offset by a decrease in the allocation of pre-opening costs
associated with new hotels and management contracts. Employee leasing operating
income increased during the second quarter, from $31,565 in 1994 to $52,463 in
1995.
The Company uses a supplemental performance measure along with net income to
report its operating results. Earnings before interest/rent, taxes and
depreciation/amortization ("EBITDA") is not defined by generally accepted
accounting principles, but the Company believes it provides relevant information
about its operations and is necessary for an understanding of the Company's
operations. For purposes of EBITDA, the Company considers leasehold rents for
hotels to be financing costs similar to interest. EBITDA for the second quarter
of 1995 was a record $2.7 million as compared to $1.6 million in the second
quarter of 1994. The significant changes resulting in the increase in EBITDA
from the second quarter of 1994 to 1995 are discussed above. An EBITDA schedule
is included herein.
Interest expense was $362,007 in the second quarter of 1995 as compared to
$200,258 in the second quarter of 1994. This increase is primarily attributable
to an increase in mortgage financing of the Company's Consolidated Hotels.
The Company's share of equity in net income of affiliates decreased from
$125,498 in the second quarter of 1994 to $96,651 in the same quarter of 1995.
This decrease in equity in income of affiliates is due to the four hotels
becoming Consolidated Hotels, which were previously accounted for by the equity
method, pursuant to the acquisition of additional ownership interests. This
decrease was partially offset by increases in occupancy and average daily rates
at these hotels. Distributions from affiliates increased to $184,943 in the
second quarter of 1995 from $108,714 in 1994.
In the second quarter of 1995, the Company recorded an income tax expense of
$517,000 compared to $269,000 in the second quarter of 1994, which increase is
directly attributable to the increase in net income.
LIQUIDITY AND CAPITAL RESOURCES
Over the years, the Company has financed its growth through a combination of
cash provided from operations, long-term debt financing and public and private
issuances of Common Stock. During the second quarter of 1995, the Company
experienced an increase in cash from operations of $1.5 million, compared to an
increase of $1.1 million in the second quarter of 1994, or an improvement of
$396,539 from 1994 to 1995. The increase in cash flow from operations during
the second quarter of 1994 to 1995 can be attributed to the increased hotel
ownership and operation activity and improvements in occupancy and average daily
rates over the second quarter of 1994, which contributed to the increase in net
income from $405,303 in the second quarter of 1994 to $844,210 in the second
quarter of 1995. In addition to the positive cash flow from operations of $1.4
million during the first six months of 1995, the Company received $2.5 million
through the financing of hotel projects during the same period. These increases
to cash were more than offset by the use of $5.1 million in cash for investing
activities during the first six months of 1995, primarily for the construction
of hotel properties. As a result, cash decreased $1.2 million during the six
months ended June 30, 1995.
The Company has four main sources of cash from operating activities: fees from
development, construction and renovation projects; revenues from hotel
operations; fees from management contracts; and fees from employee leasing.
Fees from development, construction and renovation projects are typically
received within 15 to 45 days from billing. During the second quarter of 1995,
development, construction and renovation projects contributed $597,799 to the
Company's operating income compared to $167,975 in the second quarter of 1994.
Due to the procedures in place for processing its construction draws, the
Company typically does not pay its contractors until the Company receives its
draw. Cash from hotel operations is typically received at the time the guest
checks out of the hotel. A portion of the Company's hotel operations revenues
is generated through other businesses and contracts and are usually paid within
30 to 45 days from billing. Hotel operations experienced operating income of
$1.2 million during the second quarter of 1995 compared to $773,756 during the
second quarter of 1994. Management fee revenues are typically received by the
Company within five working days from the end of each month. The hotel
management segment contributed $235,981 to the Company's operating income in the
second quarter of 1995 compared to $206,367 in 1994. Cash from the Company's
employee leasing segment is typically received 24 to 48 hours prior to the pay
date. The employee leasing segment contributed $52,463 and $31,565 in operating
income during the second quarter of 1995 and 1994, respectively.
During the second quarter of 1995, the Company used $2.7 million in investing
activities compared to $1.8 million during the second quarter of 1994. The
Company invests cash in three principal areas: the purchase of minority equity
interests in hotels; the purchase of property and equipment through the
construction and renovation of Consolidated Hotels; and loans to affiliated and
non-affiliated hotels for the purpose of construction, renovation and working
capital. In the second quarter of 1994, the Company used cash primarily for the
purchase of $1.5 million in property and equipment for Consolidated Hotels and
$378,961 for the purchase of investments. In the second quarter of 1995, the
Company used $3.0 million to purchase property and equipment for Consolidated
Hotels, received $508,933 in loan repayments from affiliates, net of loans made,
and used $225,050 for the purchase of investments. The Company enters into
agreements with contractors for the construction of Consolidated Hotels,
including hotels under construction at June 30, 1995, after both the
construction and long-term mortgage financing is in place. Typically,
investments in hotels generate positive cash flow after a stabilization period
ranging from 90 to 180 days depending upon the geographic location of the hotel
and time of year the hotel is opened. As an equity holder, additional cash
proceeds can be realized by the Company upon the sale of the properties.
Cash received from financing activities was $1.4 million in the second quarter
of 1995 compared to $918,491 in the 1994 second quarter. In 1994, the
contributing factors were proceeds of $806,009 from the mortgage financing of
Consolidated Hotels, and $245,056 in equity contributions from minority owners.
In 1995, the primary factors were proceeds of $946,531 from the mortgage
financing of hotels and $744,147 in proceeds from the Company's line-of-credit.
The $744,147 was outstanding on the line-of-credit at June 30, 1995. The
Company's line-of-credit was increased effective May 1, 1995 to $3,500,000 and
expires on May 1, 1996.
The Company expects cash from operations to be sufficient to pay all operating
and interest expenses in 1995.
SEASONALITY
Revenues from all of the Company's business segments are heavily dependent on
hotel occupancy, which results in significant seasonal variations in the
Company's revenues, with lower revenues usually in the first and fourth
quarters of each year. The impact of seasonality may be diminished as the
Company expands into warmer climates.
INFLATION
Management does not believe that inflation has had, or is expected to have, any
significant adverse impact on the Company's financial condition or results of
operations for the periods presented.
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
SCHEDULE OF EARNINGS BEFORE INTEREST/RENT,
TAXES AND DEPRECIATION/AMORTIZATION
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenue $ 12,286,630 $ 11,656,358 $ 25,443,991 $ 18,489,628
Operating costs and expenses 9,182,386 9,799,225 21,192,055 16,497,474
3,104,244 1,857,133 4,251,936 1,992,154
Corporate general and
administrative (525,289) (447,809) (993,047) (1,093,940)
Interest income 160,367 77,631 251,903 168,106
Other income (expense) (677) 25,126 19,482 25,909
Equity in net income and losses
of affiliates 96,651 125,498 (86,877) (79,483)
Earnings before minority
interests 2,835,296 1,637,579 3,443,397 1,012,746
Minority interests in earnings of
consolidated subsidiaries and
partnerships (90,131) (58,260) 22,478 (13,832)
Earnings before interest/rent,
taxes and
depreciation/amortization $ 2,745,165 $ 1,579,319 $ 3,465,875 $ 998,914
</TABLE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
Exhibit xxvii - Financial Statement Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during this period
covered by this report.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Amerihost Properties, Inc.
Registrant
Date: August 4, 1995
By: /s/ Russell J. Cerqua
Russell J. Cerqua
Treasurer/Senior Vice President,
Finance
By: /s/ James B. Dale
James B. Dale
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains second quarter summary financial information extracted
from Amerihost Properties, Inc.'s 1995 second quarter Form 10-Q and is qualified
in its entirety by reference to such From 10-Q filing.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 1,831,816
<SECURITIES> 0
<RECEIVABLES> 5,420,678
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 7,725,857
<PP&E> 30,183,472
<DEPRECIATION> 3,940,335
<TOTAL-ASSETS> 42,196,343
<CURRENT-LIABILITIES> 6,287,207
<BONDS> 0
<COMMON> 29,687
0
0
<OTHER-SE> 15,406,309
<TOTAL-LIABILITY-AND-EQUITY> 42,196,343
<SALES> 12,286,630
<TOTAL-REVENUES> 12,286,630
<CGS> 9,182,386
<TOTAL-COSTS> 9,182,386
<OTHER-EXPENSES> 1,547,237
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 362,007
<INCOME-PRETAX> 1,361,210
<INCOME-TAX> (517,000)
<INCOME-CONTINUING> 844,210
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 844,210
<EPS-PRIMARY> .14
<EPS-DILUTED> .14
</TABLE>
