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 SEPTEMBER 30, 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: (847) 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 November 11, 1996, 6,023,521 shares of the Registrant's Common Stock were
outstanding.
AMERIHOST PROPERTIES, INC.
FORM 10-Q
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996
INDEX
PART I: Financial Information Page
Consolidated Balance Sheets as of September 30, 1996
and December 31, 1995 4
Consolidated Statements of Income for the Three and Nine
Months Ended September 30, 1996 and 1995 6
Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 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 and Nine
Months Ended September 30, 1996 and 1995 17
PART II: Other Information
Item 4 - Submission to a Vote of Securities Holders 18
Item 6 - Exhibits and Reports on Form 8-K 19
Signatures 19
Part I: Financial Information
Item 1: Financial Statements
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,116,182 $ 1,371,278
Accounts receivable (including $2,625,448 and $802,164
from related parties) 5,697,638 3,270,094
Notes receivable (including $1,895,273 and $1,752,126
from related parties) 2,063,195 1,965,048
Prepaid expenses and other current assets 349,623 188,163
Refundable income taxes - 230,530
Costs and estimated earnings in excess of billings on
uncompleted contracts (including $3,928,847 and
$3,574,939 from related parties) 3,948,847 3,900,879
Total current assets 14,175,485 10,925,992
Investments 2,958,397 2,388,999
Property and equipment:
Land 5,481,311 4,236,309
Buildings 27,962,393 22,075,629
Furniture, fixtures and equipment 11,225,402 9,204,377
Construction in progress 1,290,588 662,159
Leasehold improvements 2,249,576 2,050,654
48,209,270 38,229,128
Less accumulated depreciation and amortization 7,697,241 5,404,102
40,512,029 32,825,026
Long-term notes receivable (including $1,787,755 and
$1,450,616 from related parties) 3,208,332 2,863,580
Costs of management contracts acquired, net of accumulated
amortization of $1,073,393 and $913,393 879,710 664,110
Other assets (including deferred taxes of $383,000), net of
accumulated amortization of $1,887,356 and $1,451,715 2,966,200 2,785,595
7,054,242 6,313,285
$ 64,700,153 $ 52,453,302
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 5,040,201 $ 3,751,097
Bank line-of-credit 2,242,909 2,317,036
Accrued payroll and related expenses 866,499 688,648
Accrued real estate and other taxes 816,447 606,468
Other accrued expenses and current liabilities 1,036,379 666,352
Current portion of long-term debt 1,139,918 1,042,847
Income taxes payable 412,391 -
Total current liabilities 11,554,744 9,072,448
Long-term debt, net of current portion 30,366,410 23,971,481
Deferred income 854,645 686,388
Commitments
Minority interests 1,223,638 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 6,023,521 shares at September 30, 1996, and
5,977,213 shares at December 31, 1995 30,118 29,886
Additional paid-in capital 17,094,874 16,920,237
Retained earnings 4,968,891 1,709,803
22,093,883 18,659,926
Less:
Stock subscriptions receivable (436,875) (436,875)
Notes receivable (956,292) (956,292)
20,700,716 17,266,759
$ 64,700,153 $ 52,453,302
See notes to consolidated financial statements.
</TABLE>
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenue:
Hotel operations:
AmeriHost Inn hotels $ 2,876,756 $ 325,820 $ 6,370,553 $ 462,161
Other hotels 6,980,912 7,636,223 17,023,696 17,719,608
Development and construction 5,175,044 2,200,908 17,366,142 9,978,271
Management services 830,965 925,774 2,014,795 2,295,847
Employee leasing 3,445,429 3,437,391 8,996,227 9,514,220
19,309,106 14,526,116 51,771,413 39,970,107
Operating costs and expenses:
Hotel operations:
AmeriHost Inn hotels 1,452,075 235,108 3,514,603 298,282
Other hotels 4,424,247 4,718,380 12,093,802 12,065,237
Development and construction 4,370,118 1,294,928 14,681,704 8,130,754
Management services 547,773 565,900 1,416,808 1,531,478
Employee leasing 3,363,985 3,371,864 8,765,724 9,352,484
14,158,198 10,186,180 40,472,641 31,378,235
5,150,908 4,339,936 11,298,772 8,591,872
Depreciation and amortization 916,049 556,659 2,575,221 1,469,585
Leasehold rents - hotels 587,782 511,868 1,552,084 1,507,414
Corporate general and administrative 475,679 545,869 1,482,325 1,538,915
Operating income 3,171,398 2,725,540 5,689,142 4,075,958
Other income (expense):
Interest expense (701,417) (474,712) (1,985,714) (1,144,439)
Interest income 162,955 160,859 478,590 412,762
Other income 505 4,368 57,491 23,850
Gain on sale of land 129,833 - 534,089 -
Equity in net income and losses
of affiliates 838,850 310,426 875,240 223,549
Income before minority interests
and income taxes 3,602,124 2,726,481 5,648,838 3,591,680
Minority interests in (income) loss
of consolidated subsidiaries
and partnerships (167,957) (170,603) (125,750) (148,124)
Income before income tax 3,434,167 2,555,878 5,523,088 3,443,556
Income tax expense 1,407,000 992,000 2,264,000 1,319,000
Net income $ 2,027,167 $ 1,563,878 $ 3,259,088 $ 2,124,556
Earnings per share $ 0.30 $ 0.25 $ 0.48 $ 0.35
See notes to consolidated financial statements.
</TABLE>
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 49,820,329 $ 39,234,882
Cash paid to suppliers and employees (41,971,677) (34,534,996)
Interest received 230,395 389,934
Interest paid (1,935,589) (1,124,393)
Income taxes paid (1,621,079) (974,994)
Net cash provided by operating activities 4,522,379 2,990,433
Cash flows from investing activities:
Distributions from affiliates 431,876 376,915
Purchase of property and equipment (8,384,989) (9,564,901)
Purchase of investments (720,105) (225,050)
Increase in notes receivable (3,312,644) (1,080,286)
Collections on notes receivable 2,730,788 818,695
Pre-opening and management contract costs (375,600) (254,580)
Sale of investments - 55,000
Sale of land 755,356 -
Acquisition of leasehold interest (100,000) (5,000)
Increase in organization costs - (1,797)
Net cash used in investing activities (8,975,318) (9,881,004)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 6,439,569 5,186,628
Increase in deferred offering costs (144,625) -
Principal payments of long-term debt (1,133,133) (570,750)
Proceeds from issuance of common stock 202,966 -
Proceeds from line-of-credit 10,662,364 1,871,874
Payments on line-of-credit (10,736,491) (744,147)
Distributions to minority interests (92,807) (124,810)
Net cash provided from financing activities 5,197,843 5,618,795
Net increase (decrease) in cash 744,904 (1,271,776)
Cash and cash equivalents, beginning of period 1,371,278 3,026,029
Cash and cash equivalents, end of period $ 2,116,182 $ 1,754,253
Reconciliation of net income to net cash provided
by operating activities:
Net income $ 3,259,088 $ 2,124,556
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,575,221 1,469,585
Equity in net loss (income) of affiliates before
amortization of deferred income (811,697) (147,272)
Minority interests in net income of subsidiaries 125,750 148,124
Amortization of deferred income (63,543) (76,277)
Amortization of deferred interest (4,224) (4,226)
Amortization of loan discount 34,044 34,045
Increase in deferred income 256,948 -
Gain on sale of land (534,089) -
Increase in deferred tax asset - (60,000)
Compensation paid through issuance of common stock 29,676 213,991
Changes in assets and liabilities, net of effects of acquisitions:
Increase in accounts receivable (2,217,445) (82,167)
Increase in interest receivable (243,971) (18,602)
(Increase) decrease in prepaid expenses and other
current assets (161,300) 45,220
Increase in costs and estimated earnings in excess
of billings on uncompleted contracts (47,968) (695,493)
Increase in other assets (308,036) (373,313)
Decrease in refundable income taxes 230,530 -
Increase (decrease) in accounts payable 1,269,557 (372,156)
Increase in accrued expenses and other current liabilities 705,366 394,411
Increase in accrued income taxes 412,391 404,006
Increase (decrease) in accrued interest 16,081 (13,999)
Net cash provided by operating activities $ 4,522,379 $ 2,990,433
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 September 30, 1996 and December 31,
1995 and the results of its operations for the three and nine months ended
September 30, 1996 and 1995 and cash flows for the nine months ended
September 30, 1996 and 1995. The results of operations for the three and
nine months ended September 30, 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. Certain reclassifications have been made to the 1995 financial
statements in order to conform with the 1996 presentation.
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. 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 expense for the three and nine months ended September 30, 1996
and 1995 was 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. EARNINGS PER SHARE:
Earnings per share of common stock is computed by dividing adjusted net
income by the weighted average number of shares of common stock and dilutive
common stock equivalents outstanding. The weighted average number of shares
used in the computations were 6,756,913 and 6,708,365 for the three and nine
months ended September 30, 1996, and 6,307,471 and 6,060,496 for the three
and nine months ended September 30, 1995, respectively.
5. SUPPLEMENTAL CASH FLOW DATA:
The following represents the supplemental schedule of noncash investing and
financing activities for the nine months ended September 30, 1996 and 1995:
Nine Months Ended
September 30,
1996 1995
Purchase of investments through issuance of
common stock and decrease in notes and accrued
interest receivable $143,929 $ 749,659
Reduction of accounts payable through
issuance of common stock $ 233,351
During the first nine months of 1995, the Company acquired additional
partnership interests in four hotels for 244,015 shares of the Company's
common stock. During the first nine months of 1996, the Company acquired
the remaining partnership interest in one hotel for $447,558. In
conjunction with the acquisitions, liabilities were assumed as follows:
1996 1995
Fair value of assets acquired $ 1,656,095 $ 6,070,768
Cash paid or issuance of common stock (447,558) (818,345)
Liabilities assumed $ 1,208,537 $ 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.
6. HOTEL LEASES:
The Company, through its subsidiaries and consolidated partnerships, has
leasehold interests ranging from 50.35% to 100% in nine hotels, the
operations of which are included in the Company's consolidated financial
statements. All of these leases provide for an option to purchase the
hotel. Some of the purchase prices are based upon a multiple of gross room
revenues for the preceding twelve months and the others are based upon a
fixed amount, typically with annual increases based upon the change in the
consumer price index. At September 30, 1996, the aggregate purchase price
for these nine hotels was approximately $25,800,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company is engaged in the development of AmeriHost Inn hotels, its
proprietary brand, and the ownership, operation and management of AmeriHost Inn
hotels and other mid-price hotels. As of September 30, 1996, there were 34
AmeriHost Inn hotels open, of which 12 were wholly-owned, one was majority
owned, 19 were minority-owned, and two were managed for unrelated third parties.
The Company intends to use primarily the AmeriHost Inn brand when expanding its
hotel operations segment. All of the hotels currently under construction will
be AmeriHost Inn hotels. As of September 30, 1996, 13 AmeriHost Inn hotels were
under construction, of which four will be wholly-owned with the remainder being
minority-owned. Same room revenues for all AmeriHost Inns increased
approximately 14.4% in the third quarter of 1996 compared to the third quarter
of 1995, attributable to an increase of $0.67 in average daily rate and a 13.1%
increase in occupancy.
Revenues from hotel operations consist of the revenues from all hotels in which
the Company has a 100% or controlling ownership or leasehold 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.
As a result of the Company's focus on increasing the number of Consolidated
Hotels, the Company expects that revenues from the hotel operations segment will
increase over time as a percentage of the Company's overall revenues.
Development and construction revenues consist of one-time fees for new
construction, acquisition and renovation activities performed by the Company for
minority-owned hotels and unrelated third parties. The Company also receives
management services revenues for management services provided to minority-owned
hotels and unrelated third parties. Employee leasing revenues consist of
revenues the Company receives for leasing its employees to minority-owned hotels
and unrelated third parties. All revenues attributable to development,
construction, management and employee leasing services with respect to
Consolidated Hotels have been eliminated in consolidation.
The third quarter and first nine months of 1996 resulted in record revenues, net
income, and EBITDA (as defined below). Revenues increased 32.9% and 29.5% to
$19.3 million and $51.8 million during the three and nine months ended September
30, 1996, respectively, from $14.5 million and $40.0 million during the three
and nine months ended September 30, 1995, due primarily to expanded hotel
operations and significant hotel development and construction activity. Net
income for the third quarter increased 29.6% to $2.0 million, or $0.30 per share
in 1996, from $1.6 million, or $0.25 per share in 1995. Net income for the
first nine months increased 53.4% to $3.3 million, or $0.48 per share in 1996,
from $2.1 million, or $0.35 per share in 1995. The Company sold two parcels of
excess land adjacent to Consolidated Hotels in 1996, including one parcel which
was sold in the third quarter. The gains from the sale of these parcels, net of
minority interests and income taxes, increased earnings per share by $0.01 and
$0.04 for the three and nine months ended September 30, 1996, respectively.
Operating income increased 16.4% and 39.6% to $3.2 million and $5.7 million
during the three and nine months ended September 30, 1996, respectively, from
$2.7 million and $4.1 million during the three and nine months ended
September 30, 1995.
The Company uses EBITDA as a supplemental performance measure along with net
income to report its operating results. EBITDA is defined as net income,
adjusted to eliminate the impact of (i) interest expense; (ii) leasehold rents
for hotels, which the Company considers to be financing costs similar to
interest; (iii) income tax expense (benefit), (iv) depreciation; and (v)
amortization of intangibles. EBITDA should not be considered as an alternative
to net income or cash flows from operating activities as a measure of liquidity.
EBITDA for the third quarter of 1996 was $5.5 million, of which $4.9 million or
89.0% was generated by hotel operations and management, with the remainder
generated from hotel development. This represents a 34.4% increase over the
1995 third quarter total EBITDA of $4.1 million. For the nine months ended
September 30, 1996, EBITDA was $11.2 million, of which $9.1 million or 81.5% was
generated by hotel operations and management, with the remainder generated from
hotel development. This represents a 48.1% increase over the 1995 total nine
month EBITDA of $7.6 million. An EBITDA schedule is included herein.
Amerihost had an ownership interest in 60 hotels at September 30, 1996 versus 47
hotels at September 30, 1995 (excluding hotels under construction). 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 20 at September 30, 1995
to 28 at September 30, 1996.
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996
COMPARED TO THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995
Revenues increased 32.9% and 29.5% to $19.3 million and $51.8 million during the
three and nine months ended September 30, 1996, respectively, from revenues of
$14.5 million and $40.0 million during the three and nine months ended
September 30, 1995. These increases were due primarily to significant increases
in the Company's hotel development and hotel operations segments.
Hotel operations revenue increased 23.8% and 28.7% to $9.9 million and $23.4
million during the three and nine months ended September 30, 1996, respectively,
as compared to $8.0 million and $18.2 million during the three and nine months
ended September 30, 1995. This increase was primarily attributable to the
addition of eight Consolidated Hotels to the hotel operations segment from
October 1, 1995 through September 30, 1996. The Company held a minority
ownership position in two of these eight hotels prior to them becoming
Consolidated Hotels when additional ownership interests were acquired. The
hotel operations segment included the operations of 28 Consolidated Hotels
comprising 2,743 rooms at September 30, 1996, compared to 20 Consolidated Hotels
comprising 2,231 rooms at September 30, 1995 or an increase of 22.9% in total
rooms. After considering the Company's ownership interest in the majority-owned
Consolidated Hotels, this translates to 2,370 and 1,880 equivalent owned rooms
as of September 30, 1996 and 1995, respectively, or an increase of 26.1%.
Hotel development revenue increased 135% and 74.0% to $5.2 million and $17.4
million during the three and nine months ended September 30, 1996, respectively,
from $2.2 million and $10.0 million during the three and nine months ended
September 30, 1995. These increases were due primarily to the significant
increase in hotel construction activity performed for entities in which the
Company holds a minority ownership interest. The Company was constructing 15
and 21 hotels for minority-owned entities or unrelated third parties during the
third quarter and first nine months of 1996, compared to three and eight hotels
during the three and nine months ended September 30, 1995, respectively. The
Company also had several additional projects in various stages of pre-
construction development during both nine month periods.
Hotel management revenue decreased 10.2% and 12.2% to $830,965 and $2.0 million
during the three and nine months ended September 30, 1996, respectively, from
$925,774 and $2.3 million during the three and nine months ended September 30,
1995. The number of hotels managed for third parties and minority-owned
entities increased from 37 hotels, representing 3,693 rooms, at September 30,
1995 to 43 hotels, representing 3,833 rooms, at September 30, 1996. The
addition of management contracts for 12 newly constructed hotels (790 rooms) was
partially offset by the termination of six management contracts (650 rooms) with
minority-owned entities as a result of hotel sales or closing for renovation, or
in two of the six cases, minority-owned hotels which became Consolidated Hotels
due to the Company acquiring additional ownership interests in these hotels.
Six of the 12 new management contracts were added throughout the third quarter
of 1996, resulting in the recognition of management fee revenues for only a
portion of the quarter. In addition, hotels which opened during the second and
third quarters of 1996 were operating during their initial stabilization period
when revenues are typically lower. The management contracts terminated, all of
which were for hotels other than the AmeriHost Inn brand, were for larger hotels
compared to the 12 hotels added during the twelve months ended September 30,
1996. Consequently, the decrease in management fee revenue from the terminated
management contracts was greater than the revenues added from the 12 newly
constructed hotels during the three and twelve month period. The Company does
not recognize management fees from Consolidated Hotels.
Employee leasing revenue remained stable at $3.4 million during the three months
ended September 30, 1996 and 1995, while decreasing 5.4% to $9.0 million during
the nine months ended September 30, 1996 from $9.5 million during the nine
months ended September 30, 1995, as the timing of the twelve hotels added and
the six management contracts terminated from October 1, 1995 through September
30, 1996 as discussed above, resulted in similar total payroll costs for the
third quarter of 1996 compared to the third quarter of 1995 and lower payroll
costs during the nine months ended September 30, 1996 compared to the same 1995
period.
Total operating costs and expenses increased 39.0% and 29.0% to $14.2 million
(73.3% of total revenues) and $40.5 million (78.2% of total revenue) during the
three and nine months ended September 30, 1996, respectively, from $10.2 million
(70.1% of total revenues) and $31.4 million (78.5% of total revenues) during the
three and nine months ended September 30, 1995. Operating costs and expenses in
the hotel operations segment increased 18.6% and 26.2% to $5.9 million and $15.6
million during the three and nine months ended September 30, 1996, respectively,
from $5.0 million and $12.4 million during the three and nine months ended
September 30, 1995, resulting primarily from the addition of eight Consolidated
Hotels to this segment and are directly related to the 23.8% and 28.7% increase
in segment revenue during the three and nine months ended September 30, 1996.
Hotel operations segment operating costs and expenses as a percentage of segment
revenue decreased to 59.6% and 66.7% during the three and nine months ended
September 30, 1996, respectively, from 62.2% and 68.0% during the three and nine
months ended September 30, 1995, due primarily to improvements in operating
efficiency and the increase in newly constructed AmeriHost Inn hotels, whose
operating costs are typically lower than the older, acquired hotels. Operating
costs and expenses from hotels other than AmeriHost Inn hotels increased to
63.4% and 71.0% of hotel revenues during the three and nine months ended
September 30, 1996 from 61.8% and 68.1% of hotel revenues during the three and
nine months ended September 30, 1995, due primarily to the conversion of four
Consolidated Hotels to AmeriHost Inn hotels and higher expenses associated with
the severe weather conditions in the first quarter of 1996.
Operating costs and expenses for the hotel development segment increased 237%
and 80.6% to $4.4 million and $14.7 million during the three and nine months
ended September 30, 1996, respectively, from $1.3 million and $8.1 million
during the three and nine months ended September 30, 1995, consistent with the
increase in hotel development revenues. Operating costs and expenses in the
hotel development segment as a percentage of segment revenue increased to 84.4%
and 84.5% during the three and nine months ended September 30, 1996,
respectively, from 58.8% and 81.5% during the three and nine months ended
September 30, 1995. The third quarter and first nine months of 1996 contained a
significant level of construction activity which has higher operating costs than
pre-construction development activity. The third quarter and first nine months
of 1995 contained a relatively higher portion of pre-construction development
activity which has lower associated operating costs. Hotel management segment
operating costs and expenses decreased 3.2% and 7.5% to $547,773 and $1.4
million during the three and nine months ended September 30, 1996, respectively,
from $565,900 and $1.5 million during the three and nine months ended September
30, 1995 due to an increase in capitalized 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 0.2% and 6.3% to $3.4 million and $8.8 million during the
three and nine months ended September 30, 1996, respectively, from $3.4 million
and $9.4 million during the three and nine months ended September 30, 1995, and
are consistent with the stable segment revenue during the third quarter of 1996
compared to 1995 and 5.4% decrease in segment revenue during the nine month
periods.
Depreciation and amortization expense increased 64.6% and 75.2% to $916,049 and
$2.6 million during the three and nine months ended September 30, 1996,
respectively, from $556,659 and $1.5 million during the three and nine months
ended September 30, 1995. This increase was primarily attributable to the
addition of eight Consolidated Hotels to the hotel operations segment and the
resulting depreciation and amortization therefrom.
Leasehold rents - hotels increased 14.8% and 3.0% to $587,782 and $1.6 million
during the three and nine months ended September 30, 1996, respectively, from
$511,868 and $1.5 million during the three and nine months ended September 30,
1995. The increase during the third quarter of 1996 compared to the third
quarter of 1995 was due primarily to 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 interests which resulted in a majority ownership position).
The smaller increase during the nine months ended September 30, 1996 compared to
the same period in 1995 was also due primarily to the addition of the one leased
Consolidated Hotel in the fourth quarter of 1995, partially offset by the
termination of another leased Consolidated Hotel in the second quarter of 1995
as a result of the sale of the hotel.
Corporate general and administrative expense decreased 12.9% and 3.7% to
$475,679 and $1.5 million during the three and nine months ended September 30,
1996 and 1995, respectively, from $545,869 and $1.5 million during the three and
nine months ended September 30, 1996 and 1995. The decreases were due primarily
to operational efficiencies and the allocation of costs associated with
increased hotel development activity.
The Company's operating income increased $445,858 and $1.6 million, or 16.4% and
39.6%, to $3.2 million and $5.7 million during the three and nine months ended
September 30, 1996, respectively, from $2.7 million and $4.1 million during the
three and nine months ended September 30, 1995. Operating income from the hotel
operations segment increased to $2.6 million and $4.0 million during the three
and nine months ended September 30, 1996 from $2.0 million and $3.1 million
during the three and nine months ended September 30, 1995, resulting primarily
from the addition of eight Consolidated Hotels from October 1, 1995 to September
30, 1996. Operating income from the hotel development segment decreased to
$787,799 during the third quarter of 1996 compared to $902,934 during the third
quarter of 1995. Although more hotels were under construction during the third
quarter of 1996, the Company recognized a greater portion of pre-construction
development fees in the third quarter of 1995 which have significantly lower
associated operating costs. Operating income from hotel development increased
43.2%, to $2.6 million during the nine months ended September 30, 1996 from $1.8
million during the nine months ended September 30, 1995, due to the increased
level of hotel development and construction activity. The hotel management
segment generated operating income of $211,644 and $409,187 during the three and
nine months ended September 30, 1996 compared to $348,823 and $640,270 during
the three and nine months ended September 30, 1995. These decreases were due
primarily to the termination of six hotel management contracts with minority-
owned entities and unrelated third parties during the twelve month period ended
September 30, 1996 as well as the elimination of management fees from
Consolidated Hotels. Employee leasing operating income increased slightly
during the third quarter, to $79,869 in 1996 from $63,952 in 1995. During the
nine month period, employee leasing operating income increased to $225,779 in
1996 from $157,012 in 1995.
Interest expense was $701,417 and $2.0 million during the three and nine months
ended September 30, 1996, respectively, as compared to $474,712 and $1.1 million
during the three and nine months ended September 30, 1995. These increases are
primarily attributable to the increase in mortgage financing for newly
constructed Consolidated Hotels.
The Company's share of equity in income (loss) of affiliates increased 170% and
292% to $838,850 and $875,240 during the three and nine months ended September
30, 1996, respectively, from $310,426 and $223,549 during the three and nine
months ended September 30, 1995. The increases in equity in operations of
affiliates are primarily due to the sale of two hotels in 1996 and the
acquisition of additional ownership interests in two additional hotels causing
them to become Consolidated Hotels, both of which had been accounted for by the
equity method. Distributions from affiliates were $172,076 in the third quarter
of 1996 compared to $172,753 in the third quarter of 1995. Distributions from
affiliates increased to $431,876 during the nine months ended September 30,
1996, compared to $376,915 during the same period in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company has four main sources of cash from operating activities: (i)
revenues from hotel operations; (ii) fees from development, construction and
renovation projects; (iii) fees from management contracts; and (iv) fees from
employee leasing services. 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. 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 from the equity or lending source. Management fee revenues
are typically received by the Company within five working days from the end of
each month. Cash from the Company's employee leasing segment is typically
received 24 to 48 hours prior to the pay date.
During the first nine months of 1996, the Company received cash from operations
of $4.5 million, compared to $3.0 million in the first nine months of 1995, or
an increase in cash provided by operations of $1.5 million. The increase in
cash flow from operations during the first nine months of 1996, when compared to
1995, can be attributed to the significant level of hotel ownership and
operation activity as the number of Consolidated Hotels increased from 20 hotels
at September 30, 1995 to 28 hotels and September 30, 1996. In addition, a
significant number of projects were under construction during the first nine
months of 1996 compared to the same period in 1995, including several which
began construction in the fourth quarter of 1995 and completed in 1996,
resulting in a significant amount of construction fees received during the first
nine months of 1996.
The Company invests cash in three principal areas: (i) the purchase of property
and equipment through the construction and renovation of Consolidated Hotels;
(ii) the purchase of equity interests in hotels; and (iii) loans to affiliated
and non-affiliated hotels for the purpose of construction, renovation and
working capital. During the first nine months of 1996, the Company used $9.0
million in investing activities compared to $9.9 million in the first nine
months of 1995. During the first nine months of 1996, the Company used $8.4
million to purchase property and equipment for Consolidated Hotels, used
$720,105 for the purchase of equity interests in hotels, used $581,856 for
loans, net of loan collections, and received $755,356 from the sale of assets.
During the first nine months of 1995, the Company used cash primarily for the
purchase of $9.6 million in property and equipment for Consolidated Hotels, used
$225,050 for the purchase of minority equity interests in hotels, and used
$261,591 for loans, net of repayments from minority-owned hotels. In addition,
the Company received distributions from investments in minority-owned hotels of
$431,876 in the first nine months of 1996, compared to $376,915 in the first
nine months of 1995.
Cash received from financing activities was $5.2 million during the first nine
months of 1996 compared to $5.6 million during the first nine months of 1995.
In 1996, the primary factors were net proceeds of $5.3 million from the mortgage
financing of Consolidated Hotels, net of principal repayments, and $74,127 in
net reductions to the Company's operating line-of-credit. In 1995, the
contributing factors were proceeds of $4.6 million from the mortgage financing
of Consolidated Hotels, net of principal repayments, and net proceeds of $1.1
million from the Company's operating line-of-credit.
At September 30, 1996, the Company had $2.2 million outstanding under its
operating line-of-credit. The Company's line-of-credit was renewed and
increased effective May 1, 1996 to $5,000,000. The operating line-of-credit (i)
is collateralized by a security interest in certain of the Company's assets,
including its interest in various joint ventures; (ii) bears interest at an
annual rate equal to the lending bank's base rate plus 1/2% (with a minimum
interest rate of 7.5%); and (iii) matures May 1, 1997. The same bank providing
the operating line-of-credit also provides 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 balance outstanding on the
construction line-of-credit at September 30, 1996. At September 30, 1996, the
Company also had outstanding $2.25 million of its 7% Subordinated Notes which
are unsecured obligations due October 9, 1999 and which pay interest quarterly.
Pursuant to the terms of the 7% Subordinated Notes, no dividends may be paid on
any capital stock of the Company until the 7% Subordinated Notes have been paid
in full. At the Company's sole discretion, the 7% Subordinated Notes may be
prepaid at any time without prepayment penalty.
The Company expects cash from operations to be sufficient to pay all operating
and interest expenses in 1996.
SEASONALITY
The lodging industry, in general, is seasonal in nature. The Company's hotel
revenues are generally greater in the second and third calendar quarters than in
the first and fourth quarters due to weather conditions in the markets in which
the Company's hotels are located and general business and leisure travel trends.
This seasonality can be expected to continue to cause quarterly fluctuations in
the Company's revenues. Quarterly earnings may also be adversely affected by
events beyond the Company's control such as extreme weather conditions, economic
factors and other factors affecting travel. In addition, hotel construction is
seasonal, depending upon the geographic location of the construction projects.
Construction activity in the Midwest may be slower in the first and fourth
calendar quarters due to weather conditions.
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 hotels under construction and the
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
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenue $ 19,309,106 $ 14,526,116 $ 51,771,413 $ 39,970,107
Operating costs and expenses 14,158,198 10,186,180 40,472,641 31,378,235
5,150,908 4,339,936 11,298,772 8,591,872
Corporate general and administrative (475,679) (545,869) (1,482,325) (1,538,915)
Interest income 162,955 160,859 478,590 412,762
Other income (expense) 505 4,368 57,491 23,850
Equity in net income and losses
of affiliates 838,850 310,426 875,240 223,549
Earnings before minority interests 5,677,539 4,269,720 11,227,768 7,713,118
Minority interests in earnings of
consolidated subsidiaries and
partnerships, excluding minority
interest in gain on sale of land (167,957) (170,603) (26,707) (148,124)
Earnings before interest/rent, taxes
and depreciation/amortization $ 5,509,582 $ 4,099,117 $ 11,201,061 $ 7,564,994
</TABLE>
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Securities Holders
The annual shareholders' meeting was held August 29, 1996. Five
matters were voted as follows:
Matter 1: Election of directors
Director For Against Abstain
H. Andrew Torchia 4,142,082 3,280 17,945
Michael P. Holtz 4,073,732 71,630 17,945
Richard A. D'Onofrio 4,142,082 3,280 17,945
Russell J. Cerqua 4,141,082 4,280 17,945
Reno J. Bernardo 4,063,432 81,930 17,945
Salomon J. Dayan 4,126,372 18,990 17,945
Matter 2: Amendment of the Company's Certificate of Incorporation
For Against Abstain
Increase in number of shares
of Common Stock authorized 3,514,441 637,718 11,148
Matter 3: Approval of the Amerihost Properties, Inc. 1996 Omnibus
Incentive Stock Plan
<TABLE>
<CAPTION>
Broker
For Against Abstain Non Votes
<S> <C> <C> <C> <C>
Approval of Plan 2,029,960 926,217 18,235 1,188,895
</TABLE>
Matter 4: Approval of the Amerihost Properties, Inc. 1996 Stock
Option Plan for Nonemployee Directors
<TABLE>
<CAPTION> Broker
For Against Abstain Non Votes
<S> <C> <C> <C> <C>
Approval of Plan 2,661,963 296,840 15,609 1,188,895
</TABLE>
Matter 5: Ratification of Auditors
For Against Abstain
Retention of BDO Seidman, LLP 4,153,994 3,210 6,103
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: November 12, 1996
By: /s/ Russell J. Cerqua
Russell J. Cerqua
Treasurer/Executive Vice President, Finance
By: /s/ James B. Dale
James B. Dale
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Amerihost
Properties, Inc.'s Form 10-Q and is qualified in its entirety by reference to
such Form 10-Q filing.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 2,116,182
<SECURITIES> 0
<RECEIVABLES> 11,709,680
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 14,175,485
<PP&E> 48,209,270
<DEPRECIATION> 7,697,241
<TOTAL-ASSETS> 64,700,153
<CURRENT-LIABILITIES> 11,554,744
<BONDS> 0
0
0
<COMMON> 30,118
<OTHER-SE> 20,670,598
<TOTAL-LIABILITY-AND-EQUITY> 64,700,153
<SALES> 51,771,413
<TOTAL-REVENUES> 51,771,413
<CGS> 40,472,641
<TOTAL-COSTS> 40,472,641
<OTHER-EXPENSES> 5,609,630
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,985,714
<INCOME-PRETAX> 5,523,088
<INCOME-TAX> 2,264,000
<INCOME-CONTINUING> 3,259,088
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,259,088
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.48
</TABLE>
