<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended MARCH 31, 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 May 5, 1995, 5,796,499 shares of the Registrant's Common Stock were
outstanding.
AMERIHOST PROPERTIES, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 1995
INDEX
PART I: Financial Information Page
<PAGE>
Consolidated Balance Sheets as of March 31, 1995
and December 31, 1994
Consolidated Statements of Operations for the Three
Months Ended March 31, 1995 and 1994
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1995 and 1994
Notes to Consolidated Financial Statements
Management's Discussion and Analysis
Schedule of Earnings Before Interest/Rent, Taxes
and Depreciation/Amortization for the Three
Months Ended March 31, 1995
PART II: Other Information
Item 6 Exhibits and Reports on Form 8-K
Signatures
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
ASSETS (Unaudited)
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,598,949 $ 3,026,029
Accounts receivable (including
$817,420 and $703,465
from related parties) 2,742,199 2,457,233
Notes receivable (including
$1,326,932 and $1,687,178
from related parties) 1,474,662 1,834,908
Prepaid expenses and other current
assets 355,647 370,471
Costs and estimated earnings in excess
of billings on uncompleted contracts
(including $2,850,299 and
$1,315,707 from related parties) 3,857,807 2,005,274
Refundable income taxes 133,081 -
Total current assets 10,162,345 9,693,915
Investments 2,386,166 2,995,234
Property and equipment:
Land 2,785,290 2,240,952
Buildings 11,614,479 9,124,901
Furniture, fixtures and equipment 5,447,818 3,784,608
<PAGE>
Construction in progress 2,508,635 2,253,456
Leasehold improvements 1,424,853 791,800
23,781,075 18,195,717
Less accumulated depreciation and
amortization 3,166,294 1,729,611
20,614,781 16,466,106
Long-term notes receivable (including
$1,002,615 and $1,272,612 from related
parties) 2,461,847 2,737,882
Costs of management contracts acquired,
net of accumulated
amortization of $813,343 and $768,324 561,535 492,253
Other assets, net of accumulated amortization
of $1,107,706 and $769,669 2,610,278 2,018,192
5,633,660 5,248,327
$ 38,796,952 $34,403,582
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,203,511 $ 3,224,973
Accrued payroll and related expenses 731,783 679,971
Other accrued expenses and current
liabilities 905,806 624,740
Current portion of long-term debt 785,611 566,808
Income taxes payable - 415,197
Total current liabilities 7,626,711 5,511,689
Long-term debt, net of current portion 15,082,660 12,975,226
Deferred income 890,833 1,051,457
Commitments
Minority interest 1,270,027 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 5,756,874
shares at March 31, 1995, and
5,570,013 shares at December 31, 1994 28,784 27,850
Additional paid-in capital 16,002,925 15,465,891
Deficit (711,821) (428,289)
15,319,888 15,065,452
Less:
Stock subscriptions receivable (436,875) (436,875)
Notes receivable (956,292) (956,292)
13,926,721 13,672,285
<PAGE>
$ 38,796,952 $34,403,582
See notes to consolidated financial statements.
</TABLE>
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Revenue:
Hotel operations $ 4,114,725 $2,454,086
Development and construction 5,504,823 602,898
Management services 564,454 535,958
Employee leasing 2,973,359 3,240,328
13,157,361 6,833,270
Operating costs and expenses:
Hotel operations 3,457,530 2,205,834
Development and construction 5,164,129 768,374
Management services 456,823 517,602
Employee leasing 2,931,187 3,206,435
12,009,669 6,698,245
1,147,692 135,025
Depreciation and amortization 434,919 273,824
Leasehold rents - hotels 451,605 419,820
Corporate general and administrative 467,757 623,745
Operating loss (206,589) (1,182,364)
Other income (expense):
Interest expense (307,720) (149,442)
Interest income 91,536 91,008
Other income 20,159 (22,142)
Equity in net income and losses of
affiliates (183,528) (204,980)
Loss before minority interests and
income taxes (586,142) (1,467,920)
Minority interests in losses of consolidated
subsidiaries and partnerships 112,610 44,428
Loss before income tax benefit (473,532) (1,423,492)
Income tax benefit 190,000 569,000
Net loss $ (283,532) $ (854,492)
Net loss per share $ (0.05) $ (0.15)
<PAGE>
See notes to consolidated financial statements.
</TABLE>
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDED MARCH 31,
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 11,304,689 $ 7,171,318
Cash paid to suppliers and employees (10,840,119) (8,265,962)
Interest received 72,469 25,798
Interest paid (310,371) (140,183)
Income taxes paid (358,278) (2,100)
Net cash used in operating activities (131,610) (1,211,129)
Cash flows from investing activities:
Distributions from affiliates 19,219 74,128
Purchase of property and equipment (2,209,105) (1,654,030)
Purchase of investments (5,000) (11,075)
Increase in notes receivables (206,202) (476,588)
Collections on notes receivables 126,463 28,637
Cost of management contracts acquired (114,301) -
Sale of investments 10,000 -
Increase in organization costs - (6,043)
Net cash used in investing activities (2,378,926) (2,044,971)
Cash flows from financing activities:
Proceeds from issuance of long-term
debt 1,224,263 1,935,242
Principal payments of long-term debt (140,807) (49,150)
Proceeds from line of credit - 200,000
Increase in minority interests - 445,000
Net cash provided from financing
activities 1,083,456 2,531,092
Net decrease in cash (1,427,080) (725,008)
Cash, beginning of period 3,026,029 1,885,335
Cash, end of period $ 1,598,949 $ 1,160,327
Reconciliation of net loss to net cash used in
operating activities:
Net loss $ (283,532) $ (854,492)
<PAGE>
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 434,919 273,824
Equity in net loss of affiliates before
amortization of deferred income 198,428 223,139
Minority interests in net losses of
subsidiaries (112,610) (44,428)
Amortization of deferred income (14,900) (18,159)
Amortization of deferred interest (2,143) (2,143)
Amortization of loan discount 11,348 11,348
Increase in deferred tax asset - (569,000)
Compensation paid through issuance of
common stock 364 -
Changes in assets and liabilities net of effects of acquisitions:
Increase in accounts receivable (20,298) (418,580)
Increase in interest receivable (16,924) (63,067)
Decrease (increase) in prepaid
expenses and other current assets 24,784 (55,950)
(Increase) decrease in costs and
estimated earnings in excess of
billings (1,852,533) 744,166
Increase in refundable income taxes (548,278) (2,100)
Increase in other assets (129,723) (268,887)
Increase (decrease) in accounts
payable 2,019,490 (1,369,625)
Increase in accrued expenses and other
current liabilities 173,997 1,192,701
Decrease in accrued interest (13,999) (2,089)
Increase in deferred income - 12,213
Net cash used in operating activities $ (131,610 $ (1,211,129)
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 March 31, 1995 and
December 31, 1994 and the results of its operations for the three month
periods ended March 31,1995 and 1994, and statements of cash flows for the
three months ended March 31, 1995 and 1994. The results of operations for
the three months ended March 31, 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
<PAGE>
1291 Limited Partnership (49.5%), Bowling Green, Ohio 590 Limited
Partnership (62.33%) and Findlay, Ohio 391 Limited Partnership (50.67%).
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:
<PAGE>
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."
NET LOSS PER SHARE:
Computations of net loss per share of common stock are computed by dividing
net loss by the weighted average number of shares of common stock and
<PAGE>
dilutive common stock equivalents outstanding. Common stock equivalents
include stock options and warrants. The weighted average number of shares
used in the computations were 5,756,353 and 5,651,335 for the three months
ended March 31, 1995 and 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 March 31, 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 at March
31, 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
<PAGE>
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 March 31,
1995.
4. SUPPLEMENTAL CASH FLOW DATA:
The following represents the supplemental schedule of noncash investing and
financing activities for the three month periods ending March 31, 1995 and
1994:
Three Months Ended
March 31,
1995 1994
Purchase of investments through
issuance of common stock and
decrease in notes receivable $ 304,253 $ 150,000
Reduction of accounts payable
through issuance of common
stock $ 233,351
The Company acquired additional partnership interests in three hotels for
134,400 shares of the Company's common stock. In conjunction with the
acquisition, liabilities were assumed as follows:
Fair value of assets acquired $ 2,907,246
Issuance of common stock (454,094)
Liabilities assumed $ 2,453,152
Proforma financial information has not been given reflecting the
acquisitions since it is not considered material to the overall financial
statement presentation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company is primarily engaged in the development and ownership/operation of
mid-market hotels. 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 first quarter of 1995 resulted in record revenues of $13.2 million, an
increase of 92.5% from $6.8 million in the first quarter of 1994. The Company
typically experiences a net loss in the first quarter of each year due to the
seasonal fluctuations in hotel occupancy and average daily rates. The first
quarter net loss decreased to a net loss of $283,532 in 1995 from a net loss
of $854,492 in the first quarter of 1994. The Company's operating loss
decreased from a loss of $1.2 million in 1994 to a loss of $206,589 in 1995,
while earnings before interest/rents, taxes and depreciation/amortization
("EBITDA") increased to a record $720,712 in the first quarter of 1995 from a
loss of $580,406 in the first quarter of 1994.
<PAGE>
The improved performance was primarily attributable to hotel operations and
hotel development. Amerihost had an ownership interest in 44 hotels at March
31, 1995 versus 39 hotels at March 31, 1994, increasing equivalent owned rooms
by 16.7%. This increased ownership, as well as a 13.1% increase in same room
revenues during the first quarter of 1995 compared to the same quarter in 1994
for all hotels in which the Company has an ownership interest, had a
significant impact on the hotel operations segment's revenues and profit and
the Company's equity in income and loss of its minority owned hotel
investments. The 13.1% increase in same room revenues resulted primarily from
a 7.3% increase in occupancy and a $1.06 increase in average daily rate,
compared with the first quarter of 1994. The hotel operations segment
generated revenues of $4.1 million in the first quarter of 1995, compared to
$2.5 million in the 1994 first quarter. The operating loss in this segment
decreased 60.4% from a loss of $375,380 in the first quarter of 1994 to a loss
of $148,566 in the 1995 first quarter.
During the first quarter of 1995, the Company was constructing nine hotels,
one of which was completed in February 1995, and was in various stages of the
pre-construction development process for several additional hotels. The
Company has an ownership position in seven of these nine hotels, including
100% ownership of three. Seven of these nine 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 $13.2 million for the three months ended March 31, 1995
increased 92.5% from revenues of $6.8 million for the three months ended March
31, 1994. This increase was due primarily to the Company's hotel operations
and hotel development segments.
Hotel operations revenue increased 67.7% to $4.1 million in the first quarter
of 1995, as compared to $2.5 million in the first quarter of 1994. This
increase was attributable to an increase in same room average daily rates and
the addition of six Consolidated Hotels to the hotel operations segment since
March 31, 1994. The Company held a minority ownership position in three of
these six hotels prior to the first quarter of 1995 when additional ownership
interests were acquired. The first quarter of 1995 included the operations of
18 Consolidated Hotels comprising 2,026 rooms compared to 12 Consolidated
Hotels comprising 1,423 rooms in the first quarter of 1994 or an increase of
42.4% in total rooms. Excluding minority interests in the Consolidated
Hotels, this translates to 1,698 and 1,313 equivalent owned rooms as of March
31, 1995 and 1994, respectively, or an increase of 29.3%. The average daily
rates for the same room Consolidated Hotels increased $1.54 from $42.73 in the
first quarter of 1994 to $44.27 in the first quarter of 1995.
Revenues from the Company's hotel development segment increased $4.9 million
from $602,898 in the first quarter of 1994 to $5.5 million in the first
quarter of 1995. This increase is attributable to increased project
development and hotel construction activity during the first quarter of 1995
compared to the first quarter of 1994. During the first quarter of 1995, the
Company was constructing six hotels (excluding construction of Consolidated
Hotels) and had several projects in various stages of pre-construction
<PAGE>
development. Two of the six hotels which were under construction during the
1995 first quarter were being constructed for unrelated third parties, and
four were minority owned by the Company. During the first quarter of 1994,
the Company began construction on one hotel for a third party, and was in the
development phase of several projects.
The increases in hotel operations and hotel development revenues were
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, hotels managed for third parties
and minority owned entities decreased from 41 to 34 (three minority owned
hotels became Consolidated Hotels in the first quarter 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. Hotel management revenues increased 5.3% from $535,958 in the
first quarter of 1994 to $564,454 in the first quarter of 1995 as the decrease
in hotels managed for third parties was more than offset by higher management
fee revenues on the remaining properties. Employee leasing revenue decreased
8.2% from $3.2 million to $3.0 million in the first quarter due to the
decrease in hotels managed for third parties and minority owned entities.
Operating costs and expenses increased 79.3% to $12.0 million (91.3% of total
revenues) in the first quarter from $6.7 million (98.0% of total revenues) in
the first quarter of 1994, which increase is directly related to the 92.5%
increase in revenues. Operating costs and expenses for the hotel development
segment increased from $768,374 in the first quarter of 1994 to $5.2 million
in the first quarter of 1995, due to increased construction activity during
1995 compared to the 1994 first quarter. Operating costs and expenses in the
hotel operations segment increased 56.7% from $2.5 million in the first
quarter of 1994 to $3.5 million in the first quarter of 1995, resulting
primarily from the addition of six Consolidated Hotels to this segment and is
directly related to the 67.7% increase in segment revenue. Hotel management
segment operating costs and expenses decreased 11.7% in the first quarter from
$517,602 in 1994 to $456,823 in 1995 due to the decrease in hotels managed for
third parties and minority owned entities, and an increase in pre-opening
costs associated with new hotels and management contracts. Employee leasing
operating costs and expenses decreased 8.6% from $3.2 million in the first
quarter of 1994 to $2.9 million in 1995 also as a result of the decrease in
hotels managed for third parties and minority owned entities.
Depreciation and amortization expense increased 58.8% to $434,919 in the first
quarter of 1995 from $273,824 in the first 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 7.6% to $451,605 in the first quarter of
1995 from $419,820 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 the first quarter
of 1995 when additional ownership interests were acquired), partially offset
by a decrease in leasehold rents for five 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 decreased 25.0% from $623,745 in
the first quarter of 1994 to $467,757 in the first quarter of 1995, and can be
attributed to a decrease in consulting and professional fees and an increase
in costs allocated to specific development projects.
<PAGE>
The Company's operating loss in the first quarter decreased $1.0 million, from
a loss of $1.2 million in 1994 to a loss of $206,589 in 1995, or 82.5%. The
operating loss from the hotel operations segment decreased 60.4% from a loss
of $375,380 in the first quarter of 1994 to a loss of $148,566 in the first
quarter of 1995, resulting primarily from an increase in same room revenues,
the controlling of costs and higher energy costs in the first quarter of 1994
from severe weather conditions in the midwest which were not present in the
1995 first quarter. The hotel development segment generated operating income
of $337,499 in the first quarter of 1995 compared to an operating loss of
$168,532 in 1994, due primarily to the increase in construction and
development activity for third parties and entities in which the Company has a
minority ownership interest. The hotel management segment generated operating
income of $55,466 in the first quarter of 1995 compared to an operating loss
of $18,186 in 1994, due primarily to the achievement of operational
efficiencies and an increase in pre-opening costs associated with new hotels
and management contracts. Employee leasing operating income increased
slightly during the first quarter, from $32,619 in 1994 to $40,597 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
first quarter of 1995 was a record $720,712, as compared to a loss of $580,406
in the first quarter of 1994. The significant changes resulting in the
increase in EBITDA from the first quarter of 1994 to 1995 are discussed
above. An EBITDA schedule is included herein.
Interest expense was $307,720 in the first quarter of 1995 as compared to
$149,442 in the first 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 loss of affiliates decreased from
$204,980 in the first quarter of 1994 to $183,528 in the same quarter of 1995.
This decrease in net loss is due to increases in occupancy and average daily
rates at these hotels as well as the controlling of operating costs.
Distributions from affiliates decreased to $19,219 in the first quarter of
1995 from $74,128 in 1994.
In the first quarter of 1995, the Company recorded an income tax benefit of
$190,000 due to the net loss, compared with a benefit of $569,000 in the first
quarter of 1994.
LIQUIDITY AND CAPITAL RESOURCES
Over the years, the Company has financed its growth through a combination of
cash provided from operations, long-term debt financing and public and private
issuances of Common Stock. During the first quarter of each year, the Company
typically experiences decreases in cash flow from operations. During the
first quarter of 1995, the Company experienced a decrease in cash from
operations of $131,610 compared to a decrease in cash from operations of $1.2
million in the first quarter of 1994, or an improvement of $1.1 million from
1994 to 1995. The decrease in cash flow from operations during the first
quarter of 1995 was due primarily to the net loss of $283,532 and the seasonal
fluctuations in occupancy and average daily rates which impact hotel operating
results. The improvement in cash flow from the first quarter of 1994 to 1995
<PAGE>
can be attributed to the increased hotel development activity and improvements
in occupancy and average daily rates over the first quarter of 1994.
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 first quarter of 1995,
development, construction and renovation projects contributed $337,499 to the
Company's operating income compared to an operating loss of $168,532 in the
first 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 an operating loss of $148,566 during the first quarter
of 1995 compared to an operating loss of $375,380 during the first 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 $55,466 to the Company's operating income in the first quarter of
1995 compared to an operating loss of $18,186 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 $40,597 and $32,619
in operating income during the first quarter of 1995 and 1994, respectively.
During the first quarter of 1995, the Company used $2.4 million in investing
activities compared to $2.0 million during the first 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 first quarter of 1994, the Company used cash
primarily for the purchase of $1.7 million in property and equipment for
Consolidated Hotels and $447,951 in loans to affiliates, net of loan
repayments. In the first quarter of 1995, the Company used $2.2 million to
purchase property and equipment for Consolidated Hotels and $79,739 in loans
to affiliates, net of loan repayments.
The Company enters into agreements with contractors for the construction of
Consolidated Hotels, including hotels under construction at March 31, 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 $1.1 million in the first quarter
of 1995 compared to $2.5 million in the 1994 first quarter. In 1994, the
contributing factors were proceeds of $1.9 million from the mortgage financing
of Consolidated Hotels, $445,000 in equity contributions from minority owners,
and $200,000 in proceeds from the Company's line-of-credit. In 1995, the
primary factor was proceeds of $1.2 million from the mortgage financing of
hotels. There was no outstanding balance on the line-of-credit at March 31,
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
<PAGE>
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
FOR THE THREE MONTHS ENDED MARCH 31,
(Unaudited)
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Revenue $ 13,157,361 $ 6,833,270
Operating costs and expenses 12,009,669 6,698,245
1,147,692 135,025
Corporate general and administrative (467,757) (623,745)
Interest income 91,536 91,008
Other income (expense) 20,159 (22,142)
Equity in net income and losses of
affiliates (183,528) (204,980)
Earnings before minority interests 608,102 (624,834)
Minority interests in earnings of consolidated
subsidiaries and partnerships 112,610 44,428
Earnings before interest/rent, taxes and
depreciation/amortization $ 720,712 $ (580,406)
</TABLE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings:
See Notes to Consolidated Financial Statements.
<PAGE>
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: May 9, 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 first quarter summary financial information extracted
from Amerihost Properties, Inc.'s 1995 first quarter Form 10-Q and is qualified
in its entirety by reference to such Form 10-Q filing.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> MAR-31-1995
<CASH> 1,598,949
<SECURITIES> 0
<RECEIVABLES> 8,074,668
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,162,345
<PP&E> 23,781,075
<DEPRECIATION> 3,166,294
<TOTAL-ASSETS> 38,796,952
<CURRENT-LIABILITIES> 7,626,711
<BONDS> 0
<COMMON> 28,784
0
0
<OTHER-SE> 13,897,937
<TOTAL-LIABILITY-AND-EQUITY> 38,796,952
<SALES> 13,157,361
<TOTAL-REVENUES> 13,157,361
<CGS> 12,009,669
<TOTAL-COSTS> 12,009,669
<OTHER-EXPENSES> 1,354,281
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 307,720
<INCOME-PRETAX> (473,532)
<INCOME-TAX> 190,000
<INCOME-CONTINUING> (283,532)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (283,532)
<EPS-PRIMARY> (.05)
<EPS-DILUTED> (.05)
</TABLE>
