SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended MARCH 31, 1996
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File No. 2-90939C
AMERIHOST PROPERTIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 36-3312434
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2400 EAST DEVON AVE., SUITE 280, DES PLAINES, ILLINOIS 60018
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (708) 298-4500
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No
As of May 10, 1996, 5,980,829 shares of the Registrant's Common Stock were
outstanding.
AMERIHOST PROPERTIES, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 1996
INDEX
PART I: Financial Information Page
Consolidated Balance Sheets as of March 31, 1996
and December 31, 1995 4
Consolidated Statements of Operations for the Three
Months Ended March 31, 1996 and 1995 6
Consolidated Statements of Cash Flows for the
Three Months Ended March 31, 1996 and 1995 7
Notes to Consolidated Financial Statements 9
Management's Discussion and Analysis 11
Schedule of Earnings Before Interest/Rent, Taxes
and Depreciation/Amortization for the Three
Months Ended March 31, 1996 and 1995 16
PART II: Other Information
Item 6 Exhibits and Reports on Form 8-K 17
Signatures 17
Part I: Financial Information
Item 1: Financial Statements
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,528,147 $ 1,371,278
Accounts receivable (including $1,655,321
and $802,164 from related parties) 4,579,842 3,270,094
Notes receivable (including $1,532,768
and $1,752,126 from related parties) 1,745,690 1,965,048
Prepaid expenses and other current assets 254,678 188,163
Refundable income taxes 377,412 230,530
Costs and estimated earnings in excess
of billings on uncompleted contracts
(including $3,353,848 and $3,574,939
from related parties) 3,475,662 3,900,879
Total current assets 11,961,431 10,925,992
Investments 2,268,214 2,388,999
Property and equipment:
Land 4,247,909 4,236,309
Buildings 22,321,057 22,075,629
Furniture, fixtures and equipment 9,598,151 9,204,377
Construction in progress 1,299,346 662,159
Leasehold improvements 2,069,245 2,050,654
39,535,708 38,229,128
Less accumulated depreciation and
amortization 6,022,254 5,404,102
33,513,454 32,825,026
Long-term notes receivable (including
$1,617,756 and $1,450,616 from related
parties) 3,014,448 2,863,580
Costs of management contracts acquired,
net of accumulated amortization of
$959,444 and $913,393 787,886 664,110
Other assets (including deferred taxes of
$383,000), net of accumulated amortization
of $1,585,282 and $1,451,715 2,697,057 2,785,595
6,499,391 6,313,285
$ 54,242,490 $ 52,453,302
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,584,270 $ 3,751,097
Bank line-of-credit 3,376,164 2,317,036
Accrued payroll and related expenses 606,102 688,648
Accrued real estate and other taxes 706,365 606,468
Other accrued expenses and current
liabilities 754,940 666,352
Current portion of long-term debt 1,046,228 1,042,847
Total current liabilities 10,074,069 9,072,448
Long-term debt, net of current portion 25,455,514 23,971,481
Deferred income 676,751 686,388
Commitments
Minority interests 973,435 1,456,226
Shareholders' equity:
Preferred stock, no par value; authorized
100,000 shares; none issued - -
Common stock, $.005 par value; authorized
15,000,000 shares; issued 5,975,374
shares at March 31, 1996, and
5,977,213 shares at December 31, 1995 29,877 29,886
Additional paid-in capital 16,915,333 16,920,237
Retained earnings 1,562,142 1,709,803
18,507,352 18,659,926
Less:
Stock subscriptions receivable (436,875) (436,875)
Notes receivable (1,007,756) (956,292)
17,062,721 17,266,759
$ 54,242,490 $ 52,453,302
See notes to consolidated financial statements.
</TABLE>
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Revenue:
Hotel operations:
AmeriHost Inn hotels $ 1,306,138 $ -
Other hotels 4,277,358 4,114,725
Development and construction 3,979,802 5,504,823
Management services 489,682 564,454
Employee leasing 2,591,588 2,973,359
12,644,568 13,157,361
Operating costs and expenses:
Hotel operations:
AmeriHost Inn hotels 885,766 -
Other hotels 3,853,085 3,457,530
Development and construction 3,113,679 5,164,129
Management services 372,651 456,823
Employee leasing 2,525,909 2,931,187
10,751,090 12,009,669
1,893,478 1,147,692
Depreciation and amortization 802,815 434,919
Leasehold rents - hotels 446,130 451,605
Corporate general and administrative 484,652 467,757
Operating income (loss) 159,881 (206,589)
Other income (expense):
Interest expense (665,173) (307,720)
Interest income 154,359 91,536
Other income 41,909 20,159
Equity in net income and losses
of affiliates (144,638) (183,528)
Loss before minority interests and
income taxes (453,662) (586,142)
Minority interests in (income) loss
of consolidated
subsidiaries and partnerships 204,001 112,610
Loss before income tax (249,661) (473,532)
Income tax benefit 102,000 190,000
Net loss $ (147,661) $ (283,532)
Net loss per share $ (0.02) $ (0.05)
See notes to consolidated financial statements.
</TABLE>
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 11,839,312 $ 11,304,689
Cash paid to suppliers and employees (11,868,154) (10,840,119)
Interest received 59,039 72,469
Interest paid (639,973) (310,371)
Income taxes paid (44,882) (358,278)
Net cash used in operating activities (654,658) (131,610)
Cash flows from investing activities:
Distributions from affiliates 107,044 19,219
Purchase of property and equipment (1,327,158) (2,209,105)
Purchase of investments (250,000) (5,000)
Increase in notes receivables (1,121,233) (206,202)
Collections on notes receivables 1,050,766 126,463
Preopening and management contract costs (169,827) (114,301)
Sale of investments - 10,000
Net cash used in investing activities (1,710,408) (2,378,926)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 1,699,638 1,224,263
Principal payments of long-term debt (223,572) (140,807)
Proceeds from line of credit 1,559,128 -
Payments on line of credit (500,000) -
Distributions to minority interests (13,259) -
Net cash provided from financing
activities 2,521,935 1,083,456
Net increase (decrease) in cash 156,869 (1,427,080)
Cash and cash equivalents, beginning
of period 1,371,278 3,026,029
Cash and cash equivalents, end
of period $ 1,528,147 $ 1,598,949
Reconciliation of net loss to net cash used in
operating activities:
Net loss $ (147,661)$ (283,532)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization 802,815 434,919
Equity in net loss of affiliates before
amortization of deferred income 152,867 198,428
Minority interests in net income
(losses) of subsidiaries (204,001) (112,610)
Amortization of deferred income (8,229) (14,900)
Amortization of deferred interest (1,408) (2,143)
Amortization of loan discount 11,348 11,348
Compensation paid through issuance of
common stock - 364
Changes in assets and liabilities net of effects of acquisitions:
Increase in accounts receivable (1,272,382) (20,298)
Increase in interest receivable (93,912) (16,924)
(Increase) decrease in prepaid expenses
and other current assets (66,515) 24,784
Decrease (increase) in costs and estimated
earnings in excess of billings 425,217 (1,852,533)
Increase in refundable income taxes (146,882) (548,278)
Increase in other assets (45,027) (129,723)
(Decrease) increase in accounts
payable (166,827) 2,019,490
Increase in accrued expenses and other
current liabilities 92,087 173,997
Increase (decrease) in accrued interest 13,852 (13,999)
Net cash used in operating activities $ (654,658) $ (131,610)
See notes to consolidated financial statements.
</TABLE>
1. BASIS OF PREPARATION:
The financial statements included herein have been prepared by the Company,
without audit. In the opinion of the Company, the accompanying unaudited
financial statements contain all adjustments, which consist only of recurring
adjustments necessary to present fairly the financial position of Amerihost
Properties, Inc. and subsidiaries as of March 31, 1996 and December 31, 1995
and the results of its operations and cash flows for the three months ended
March 31, 1996 and 1995. The results of operations for the three months
ended March 31, 1996, are not necessarily indicative of the results to be
expected for the full year. It is suggested that the accompanying financial
statements be read in conjunction with the financial statements and the notes
thereto included in the Company's 1995 Annual Report on Form 10-K.
2. PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiaries, and partnerships in which the Company has a
controlling ownership interest. There were no AmeriHost Inn hotels in
operation during the first quarter of 1995 in which the Company had a
controlling ownership interest. Significant intercompany accounts and
transactions have been eliminated.
3. INCOME TAXES:
Deferred income taxes are provided on the differences in the bases of the
Company's assets and liabilities determined for tax and financial reporting
purposes.
The income tax benefit for the three months ended March 31, 1996 and 1995
were based on the Company's estimate of the effective tax rate expected to be
applicable for the full year. The Company expects the effective tax rate to
approximate the Federal and state statutory rates.
4. NET LOSS PER SHARE:
Net loss per share is computed by dividing the net loss by the weighted
average number of shares of common stock outstanding. The weighted average
number of shares used in the computations were 5,976,293 and 5,663,443 for
the three months ended March 31, 1996 and 1995, respectively.
5. SUPPLEMENTAL CASH FLOW DATA:
The following represents the supplemental schedule of noncash investing and
financing activities for the three months ended March 31, 1996 and 1995:
Three Months Ended
March 31,
1996 1995
Purchase of investments through issuance of
common stock and decrease in notes and accrued
interest receivable $ 143,929 $ 304,253
Reduction of accounts payable through
issuance of common stock $ 233,351
During the first quarter of 1995, the Company acquired additional
partnership interests in three hotels for 134,400 shares of the Company's
common stock. In conjunction with the acquisitions, liabilities were
assumed as follows:
Fair value of assets acquired $ 2,907,246
Issuance of common stock (454,094)
Liabilities assumed $ 2,453,152
Proforma financial information has not been given reflecting the
acquisitions since it is not considered material to the overall financial
statement presentation.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL
The Company is primarily engaged in the development and ownership/operation of
mid-market hotels, with a focus on its own AmeriHost Inn brand. The
consolidated financial statements include the operations of all hotels in which
the Company has a 100% or controlling ownership interest ("Consolidated
Hotels"). Investments in other entities in which the Company has a minority
ownership interest are accounted for using the equity or cost method. The
Company also provides hotel development, hotel management and employee leasing
services to unrelated third parties and non-controlled entities in which the
Company has a minority ownership interest on a fee-for-service or contract
basis.
The first quarter of 1996 resulted in record earnings before interest/rents,
taxes and depreciation/amortization ("EBITDA"). The Company uses EBITDA as a
supplemental performance measure along with net income to report its operating
results. EBITDA is not defined by generally accepted accounting principles, but
the Company believes it provides relevant information about its operations and
is necessary for an understanding of the Company's operations. For purposes of
EBITDA, the Company considers leasehold rents for hotels to be financing costs
similar to interest. EBITDA increased nearly $1.0 million to $1.7 million in the
first quarter of 1996 from $720,712 in the first quarter of 1995, or 131%.
Revenues decreased to $12.6 million, or 3.9% from $13.2 million in the first
quarter of 1995, due primarily to weather related delays in hotel construction
activity. Net loss for the first quarter decreased to ($147,661) in 1996 from
($283,532) in 1995, while net loss per share narrowed from 5 cents to 2 cents.
The Company reported an operating loss of ($206,589) in the 1995 first quarter,
improving to operating income of $159,881 in the first quarter of 1996, or an
increase in operating income of $366,470.
The improvement in operating income and net loss was primarily attributable to
hotel development. Although construction progress and revenues were impacted by
the severe weather conditions, there was a significant increase in hotel
development activity in the first quarter of 1996 compared to the first quarter
of 1995 which produces a higher profit margin than construction activity.
Excluding Consolidated Hotels, the Company was constructing 14 hotels in the
first quarter of 1996 and completed the pre-construction development stage of
several additional projects which have or are expected to break ground in the
second quarter of 1996. The hotel operations segment incurred an operating loss
of $303,039 during the first quarter of 1996 compared to an operating loss of
$148,566 in the 1995 first quarter. Included in the hotel operations first
quarter of 1996 operating loss was $202,121 in operating income from the
AmeriHost Inn Consolidated Hotels. These AmeriHost Inn hotels were newly
constructed by the Company and opened during the prior twelve months or
converted to an AmeriHost Inn during the first quarter of 1996. In addition,
many of the AmeriHost Inn hotels were still operating in their initial
stabilization period.
The Company intends for the AmeriHost Inn brand to be used whenever feasible in
expanding its hotel operations segment. In addition, the AmeriHost Inn
prototype is the primary product being developed through the hotel development
segment. The AmeriHost Inn brand features several amenities including an indoor
pool area, whirlpool suites, an exercise room, and an expanded complimentary
continental breakfast which assists the property in obtaining favorable
occupancy and average daily rates, and an efficient layout designed to control
operating costs. Same room revenues for all AmeriHost Inns increased
approximately 11.4% in the first quarter of 1996 compared to the first quarter
of 1995, attributable to an increase of $2.33 in average daily rate and a 5.3%
increase in occupancy. For all hotels in which the Company has an ownership
interest, same room revenues decreased 1.7% in the first quarter of 1996
compared to the first quarter of 1995, as occupancy decreased 2.6% and average
daily rate increased $1.00.
Amerihost had an ownership interest in 49 hotels at March 31, 1996 versus 44
hotels at March 31, 1995 (excluding hotels under construction), increasing
equivalent owned rooms by 18.6%. This increased ownership was achieved
primarily through the development of AmeriHost Inn hotels for the Company's own
account and for minority-owned entities. These figures include an increase in
Consolidated Hotels from 18 at March 31, 1995 to 24 at March 31, 1996.
The Company plans to continue developing and constructing hotels for both itself
(Consolidated Hotels), which will contribute to the hotel operations segment, as
well as for unrelated third parties and entities in which the Company has a
minority equity interest, which will contribute to the hotel development
segment.
RESULTS OF OPERATIONS
Revenues of $12.6 million for the three months ended March 31, 1996 decreased
3.9% from revenues of $13.2 million for the three months ended March 31, 1995.
This decrease was due primarily to a significant decrease in the Company's hotel
development segment as well as a smaller decrease in the hotel management
segment, partially offset by an increase in the hotel operations segment.
Hotel operations revenue increased 35.7% to $5.6 million in the first quarter of
1996, as compared to $4.1 million in the first quarter of 1995. This increase
was primarily attributable to the net addition of six Consolidated Hotels to the
hotel operations segment since March 31, 1995. The Company held a minority
ownership position in two of these six hotels prior to these hotels becoming
Consolidated Hotels in the second and fourth quarters of 1995 when additional
ownership interests were acquired. The first quarter of 1996 included the
operations of 24 Consolidated Hotels comprising 2,516 rooms compared to 18
Consolidated Hotels comprising 2,026 rooms in the first quarter of 1995 or an
increase of 24.2% in total rooms. After considering the Company's ownership
interest in these Consolidated Hotels, this translates to 2,143 and 1,698
equivalent owned rooms as of March 31, 1996 and 1995, respectively, or an
increase of 26.2%.
Hotel management and employee leasing revenues are recognized from hotels which
are owned by unrelated third parties and entities in which the Company holds a
minority ownership interest. The number of hotels managed for third parties and
minority owned entities increased from 34 hotels at March 31, 1995 to 36 hotels
at March 31, 1996. The addition of six management contracts from April 1, 1995
to March 31, 1996 was offset by the loss of two management contracts with
minority owned entities as a result of a hotel sale or temporary closing during
renovation, and the two minority owned hotels which became Consolidated Hotels
in the second and fourth quarters of 1995 due to the Company acquiring
additional ownership interests in these hotels. Management and employee leasing
revenues from the Consolidated Hotels are not recognized by the Company. Hotel
management revenues decreased 13.3% from $564,454 in the first quarter of 1995
to $489,682 in the first quarter of 1996. The total management fee revenues
generated in the first quarter of 1996 from the six management contracts added
since April 1, 1995 were lower than the management fee revenues generated in the
first quarter of 1995 from the four minority-owned hotels which were lost as
discussed above. In addition, same room revenues decreased for all managed
hotels. Employee leasing revenue decreased 12.8% to $2.6 million during the
first quarter of 1996 from $3.0 million in the 1995 first quarter as the six
hotels added from April 1, 1995 through March 31, 1996 generally incurred lower
payroll costs than the four hotels which were eliminated from the employee
leasing segment as discussed above.
Excluding Consolidated Hotels, the Company had 14 hotels under construction
during the first quarter of 1996, versus six hotels in the first quarter of
1995, in addition to having several projects in various stages of pre-
construction development during both quarters. Although a greater number of
projects were under construction during the first quarter of 1996 versus the
first quarter of 1995, the Company experienced a decrease in revenues in the
hotel development segment, from $5.5 million in 1995 to $4.0 million in 1996.
This decrease was due primarily to two factors. First, the Company was
constructing three hotels during the first quarter of 1996 as a construction
manager whereby the Company only recognizes construction manager fees instead of
the greater revenues which are associated with construction contracts where the
Company functions as a general contractor. The Company may continue to develop
hotels as a construction manager in the future. There were no construction
manager projects in the first quarter of 1995. Second, the first quarter of
1996 was hampered by severe weather conditions, especially in the midwest where
the majority of the Company's construction projects were located. Consequently,
the Company was able to make greater progress on a fewer number of projects in
the first quarter of 1995, compared to the first quarter of 1996.
Total operating costs and expenses decreased 10.5% to $10.8 million (85.0% of
total revenues) in the first quarter of 1996 from $12.0 million (91.3% of total
revenues) in the first quarter of 1995. Operating costs and expenses for the
hotel development segment decreased from $5.2 million in the first quarter of
1995 to $3.1 million in the first quarter of 1996, consistent with the decrease
in hotel development revenues. Although the Company had several projects in the
early stages of construction in the first quarter of 1996, progress was slowed
by severe weather conditions. Operating costs and expenses in the hotel
operations segment increased 37.1% from $3.5 million in the first quarter of
1995 to $4.7 million in the first quarter of 1996, resulting primarily from the
net addition of six Consolidated Hotels to this segment and is directly related
to the 35.7% increase in segment revenue. Operating costs and expenses from
hotels other than AmeriHost Inn hotels increased from 84.0% of hotel revenues in
the first quarter of 1995 to 90.1% of hotel revenues in the first quarter of
1996 due primarily to the conversion of three hotels to AmeriHost Inn hotels and
higher expenses associated with the severe weather conditions. Hotel management
segment operating costs and expenses decreased 18.4% in the first quarter from
$456,823 in 1995 to $372,651 in 1996 due to an increase in pre-opening costs
associated with new hotels and management contracts, and efficiencies achieved
in the management of all hotels operated and/or managed. Employee leasing
operating costs and expenses decreased 13.8% in the first quarter to $2.5
million in 1996 from $2.9 million in 1995, and is consistent with the 12.8%
decrease in segment revenue.
Depreciation and amortization expense increased 84.6% to $802,815 in the first
quarter of 1996 from $434,919 in the first quarter of 1995. This increase was
primarily attributable to the net addition of six Consolidated Hotels to the
hotel operations segment and the resulting depreciation and amortization
therefrom.
Leasehold rents - hotels decreased 1.2% to $446,130 in the first quarter of 1996
from $451,605 in 1995. The decrease was due to the termination of one leased
Consolidated Hotel in the second quarter of 1995 as a result of the sale of the
hotel, offset by the addition of one leased Consolidated Hotel to the hotel
operations segment in the fourth quarter of 1995 (the Company had held a
minority ownership position in this hotel prior to acquiring additional
ownership interest which resulted in a majority ownership position).
Corporate general and administrative expense increased 3.6% from $467,757 in the
first quarter of 1995 to $484,652 in the first quarter of 1996, and can be
attributed to the Company's overall growth.
The Company's operating income increased $366,470, from an operating loss of
$206,589 in the first quarter of 1995 to operating income of $159,881 in the
first quarter of 1996. Operating loss from the hotel operations segment
increased from a loss of $148,566 in the first quarter of 1995 to a loss of
$303,039 in the first quarter of 1996, resulting primarily from a 1.9% decrease
in same room revenues from Consolidated Hotels and a greater number of newly
constructed Consolidated Hotels operating in the first quarter of 1996 during
their initial stabilization period. The hotel development segment generated
operating income of $848,996 in the first quarter of 1996 compared to $337,499
in 1995, despite lower revenues in the first quarter of 1996. This increase is
due to a greater number of projects under construction during the 1996 first
quarter and a larger volume of pre-construction development activity during the
first quarter of 1996 which has lower revenue and a higher gross profit margin
than construction activity. The first quarter of 1995 contained a larger
portion of construction activity. The hotel management segment generated
operating income of $61,379 in the first quarter of 1996 compared to $55,466 in
1995, due primarily to the achievement of operational efficiencies and an
increase in the allocation of pre-opening costs associated with new hotels and
management contracts. Employee leasing operating income increased slightly
during the first quarter, from $40,597 in 1995 to $64,105 in 1996.
EBITDA for the first quarter of 1996 was a record $1.7 million as compared to
$720,712 in the first quarter of 1995. The significant changes resulting in the
increase in EBITDA from the first quarter of 1995 to 1996 are discussed above.
An EBITDA schedule is included herein.
Interest expense was $665,173 in the first quarter of 1996 as compared to
$307,720 in the first quarter of 1995. This increase is primarily attributable
to the increase in Consolidated Hotels with mortgage financing.
The Company's share of equity in income (loss) of affiliates improved $38,890 to
($144,638) in the first quarter of 1996 from ($183,528) in the same quarter of
1995. This improvement in equity in operations of affiliates is primarily due
to the two hotels which had been accounted for by the equity method in the first
quarter 1995, and became Consolidated Hotels during the second and fourth
quarters of 1995 pursuant to the acquisition of additional ownership interests,
and the sale of one hotel which had been accounted for by the equity method.
These changes were partially offset by a decrease in same room revenues for all
minority owned hotels. Distributions from affiliates increased to $107,044 in
the first quarter of 1996 from $19,219 in 1995.
In the first quarter of 1996, the Company recorded an income tax benefit of
$102,000 compared to $190,000 in the first quarter of 1995, which decrease is
directly attributable to the decrease in net loss.
LIQUIDITY AND CAPITAL RESOURCES
Over the years, the Company has financed its growth through a combination of
cash provided from operations, long-term debt financing and public and private
issuances of Common Stock. During the first quarter of 1996, the Company used
cash for operations of $654,658, compared to $131,610 in the first quarter of
1995, or an increase in cash used for operations of $523,048 from 1995 to 1996.
The Company also used $1.7 million in cash for investing activities during the
first quarter of 1996, primarily for the construction of Consolidated Hotel
properties. These uses of cash were offset by the receipt of $1.5 million
through the mortgage financing of Consolidated Hotel projects, net of principal
repayments, and net proceeds of $1.1 million from the Company's line-of-credit.
As a result, cash increased $156,869 during the three months ended March 31,
1996.
The Company has four main sources of cash from operating activities: fees from
development, construction and renovation projects; revenues from hotel
operations; fees from management contracts; and fees from employee leasing.
Fees from development, construction and renovation projects are typically
received within 15 to 45 days from billing. Due to the procedures in place for
processing its construction draws, the Company typically does not pay its
contractors until the Company receives its draw. During the first quarter of
1996, development, construction and renovation projects contributed $848,996 to
the Company's operating income compared to $337,499 in the first quarter of
1995. Cash from hotel operations is typically received at the time the guest
checks out of the hotel. A portion of the Company's hotel operations revenues
is generated through other businesses and contracts and are usually paid within
30 to 45 days from billing. Hotel operations experienced an operating loss of
$303,039 during the first quarter of 1996 compared to an operating loss of
$148,566 during the first quarter of 1995. Management fee revenues are
typically received by the Company within five working days from the end of each
month. The hotel management segment contributed $61,379 to the Company's
operating income in the first quarter of 1996 compared to $55,466 in 1995. Cash
from the Company's employee leasing segment is typically received 24 to 48 hours
prior to the pay date. The employee leasing segment contributed $64,105 and
$40,597 in operating income during the first quarter of 1996 and 1995,
respectively.
During the first quarter of 1996, the Company used $1.7 million in investing
activities compared to $2.4 million during the first quarter of 1995. The
Company invests cash in three principal areas: the purchase of property and
equipment through the construction and renovation of Consolidated Hotels; the
purchase of equity interests in hotels; and loans to affiliated and non-
affiliated hotels for the purpose of construction, renovation and working
capital. In the first quarter of 1995, the Company used cash primarily for the
purchase of $2.2 million in property and equipment for Consolidated Hotels. In
the first quarter of 1996, the Company used $1.3 million to purchase property
and equipment for Consolidated Hotels, used $250,000 for the purchase of an
equity interest, and used $70,467 for loans to affiliates, net of loan
collections. The Company enters into agreements with contractors for the
construction of Consolidated Hotels, including hotels under construction at
March 31, 1996, after both the construction and long-term mortgage financing is
in place. Typically, investments in hotels generate positive cash flow after a
stabilization period ranging from 90 to 180 days depending upon the geographic
location of the hotel and time of year the hotel is opened. As an equity
holder, additional cash proceeds can be realized by the Company upon the sale of
the properties.
Cash received from financing activities was $2.5 million in the first quarter of
1996 compared to $1.1 million in the 1995 first quarter. In 1995, the
contributing factor was proceeds of $1.1 million from the mortgage financing of
Consolidated Hotels, net of principal repayments. In 1996, the primary factors
were proceeds of $1.5 million from the mortgage financing of Consolidated
Hotels, net of principal repayments, and $1.1 million in net proceeds from the
Company's operating line-of-credit. The Company's operating line-of-credit had
a balance of $3,376,164 at March 31, 1996. The Company's line-of-credit was
increased effective May 1, 1996 to $5,000,000 and expires on May 1, 1997. The
same bank providing the operating line-of-credit has also provided a $7.5
million line-of-credit to be used for construction financing on hotel projects,
of which $5.0 million must be used on contracts which have firm commitments for
permanent mortgage financing when the construction is completed. There was no
outstanding balance on the construction line-of-credit as of March 31, 1996.
The Company expects cash from operations to be sufficient to pay all operating
and interest expenses in 1996.
SEASONALITY
Revenues from all of the Company's business segments are heavily dependent on
hotel occupancy, which results in significant seasonal variations in the
Company's revenues, with lower revenues usually in the first and fourth
quarters of each year. The impact of seasonality may be diminished as the
Company expands further into warmer climates.
INFLATION
Management does not believe that inflation has had, or is expected to have, any
significant adverse impact on the Company's financial condition or results of
operations for the periods presented.
IMPACT OF NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This Statement
establishes accounting standards for the impairment of long-lived assets,
certain identifiable intangibles, and goodwill related to those assets to be
held and used and for long-lived assets and certain identifiable intangibles to
be disposed of. The Company adopted this standard on January 1, 1996, the
impact of which was not material.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
All statements contained herein that are not historical facts, including but not
limited to, statements regarding the Company's plans for future development and
operation of AmeriHost Inn hotels are based on current expectations. These
statements are forward looking in nature and involve a number of risks and
uncertainties. Actual results may differ materially. Among the factors that
could cause actual results to differ materially are the following: the
availability of sufficient capital to finance the Company's business plan on
terms satisfactory to the Company; competitive factors, such as the introduction
of new hotels or renovation of existing hotels in the same markets; changes in
travel patterns which could affect demand for the Company's hotels; changes in
development and operating costs, including labor, construction, land, equipment,
and capital costs; general business and economic conditions; and other risk
factors described from time to time in the Company's reports filed with the
Securities and Exchange Commission. The Company wishes to caution readers not
to place undue reliance on any such forward looking statements, which statements
are made pursuant to the Private Securities Litigation Reform Act of 1995, and
as such, speak only as of the date made.
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
SCHEDULE OF EARNINGS BEFORE INTEREST/RENT,
TAXES AND DEPRECIATION/AMORTIZATION
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Revenue $ 12,644,568 $ 13,157,361
Operating costs and expenses 10,751,090 12,009,669
1,893,478 1,147,692
Corporate general and administrative (484,652) (467,757)
Interest income 154,359 91,536
Other income 41,909 20,159
Equity in net income and losses
of affiliates (144,638) (183,528)
Earnings before minority interests 1,460,456 608,102
Minority interests in (income) loss of consolidated
subsidiaries and partnerships 204,001 112,610
Earnings before interest/rent, taxes
and depreciation/amortization $ 1,664,457 $ 720,712
</TABLE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
Exhibit 27 - Financial Statement Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during this period
covered by this report.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Amerihost Properties, Inc.
Registrant
Date: May 10, 1996
By: /s/ Russell J. Cerqua
Russell J. Cerqua
Treasurer/Senior Vice President, Finance
By: /s/ James B. Dale
James B. Dale
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 1,528,147
<SECURITIES> 0
<RECEIVABLES> 9,801,194
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 11,961,431
<PP&E> 39,535,708
<DEPRECIATION> 6,022,254
<TOTAL-ASSETS> 54,242,490
<CURRENT-LIABILITIES> 10,074,069
<BONDS> 0
29,877
0
<COMMON> 0
<OTHER-SE> 17,032,844
<TOTAL-LIABILITY-AND-EQUITY> 54,242,490
<SALES> 12,644,568
<TOTAL-REVENUES> 12,644,568
<CGS> 10,751,090
<TOTAL-COSTS> 10,751,090
<OTHER-EXPENSES> 1,733,597
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 665,173
<INCOME-PRETAX> (249,661)
<INCOME-TAX> (102,000)
<INCOME-CONTINUING> (147,661)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (147,661)
<EPS-PRIMARY> (0.02)
<EPS-DILUTED> (0.02)
</TABLE>
