SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[x] Annual Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of
1934 for the fiscal year ended
DECEMBER 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
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of Each Class on which registered
NONE NONE
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, par value $0.005 per share
(Title of class)
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 \ \
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of Registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K. \ X \
While it is difficult to determine the number of shares owned by non-
affiliates (within the meaning of the term under the applicable regulations
of the Securities and Exchange Commission), the registrant estimates that the
aggregate market value of the registrant's Common Stock held by non-
affiliates on March 15, 1996 (based upon an estimate that 86.4% of the shares
are so owned by non-affiliates and upon the closing prices for the Common
Stock of $7.13) was $36,810,216.
As of March 15, 1996, 5,975,374 shares of the Registrant's Common Stock were
outstanding.
The following documents are incorporated into this Form 10-K by reference:
None
PART I
ITEM 1. BUSINESS.
GENERAL
Amerihost Properties, Inc. was incorporated under the laws of the State of
Delaware on September 19, 1984. Amerihost Properties, Inc. and its
subsidiaries (collectively, where appropriate, "Amerihost," the "Company" or
"API") are primarily engaged in the development and ownership/operation of
mid-market hotels. The Company also provides hotel management and employee
leasing services for mid-market hotels. The Company's expertise includes the
development and construction of new hotels from inception to completion,
hotel renovation, hotel management and operation, and employee leasing. This
expertise is utilized in the development and operation of Consolidated Hotels
and provided to non-controlled entities (minority-owned entities) and
unaffiliated third parties on a fee-for-service or contract basis. For
purposes of this document, Consolidated Hotels includes all hotels in which
the Company has a controlling (typically, over 50%) ownership or leasehold
interest. The Company's principal office is located at 2400 East Devon
Avenue, Suite 280, Des Plaines, Illinois 60018.
Amerihost entered the hotel industry in 1987 primarily as a hotel developer
and manager. Through 1993, the Company acquired and renovated several
distressed hotel properties at below market prices through partnerships in
which the Company is a general partner, typically with a minority ownership
interest. These hotels were operated as part of a national or regional
franchise system, including Days Inn and Holiday Inn. In 1993, as the hotel
industry began to rebound from the oversupply of hotels built in the mid
1980's, the Company began focusing on balancing hotel ownership with hotel
development, allowing the Company to rely less on the one-time transactional
fees associated with hotel development and construction while generating
long-term revenues and potential profits from hotel operations. The Company
also ceased to aggressively pursue management contracts with unaffiliated
third parties, focusing on managing and operating hotels where the Company
has ownership. In addition, during 1994 and 1995, the number of existing
hotels which could be profitably acquired, renovated and operated declined
significantly. The increased hotel ownership in 1994 and 1995 was achieved
primarily through the development and construction of new hotels, whereby the
Company built hotels for its own account (majority or wholly-owned), or
maintained a minority ownership position through joint ventures.
The first AmeriHost Inn, the Company's signature brand, which opened in 1989,
was built by the Company through a joint venture, with the Company
maintaining a minority ownership interest. The AmeriHost Inns have achieved
occupancy and average daily rates which were significantly higher than those
realized by other hotels managed by the Company which were not AmeriHost
Inns, including those operated under a national franchise affiliation. The
favorable operating results experienced by the AmeriHost Inns prompted the
Company to focus on expanding this brand. During 1994, the Company began
construction on seven AmeriHost Inns, out of a total of 15 hotel construction
starts, while in 1995, 19 of the Company's 20 hotel construction starts were
AmeriHost Inns. With one exception, all of the AmeriHost Inns have been
newly constructed by the Company using the same prototype design. As of
December 31, 1995, 30 AmeriHost Inns were open or under construction. Except
for one hotel, the Company has an ownership interest, ranging from 15.0% to
100.0%, in all of the AmeriHost Inns. The Company plans to continue
developing the AmeriHost Inn brand as its primary product for its own account
and through joint ventures in an effort to maximize revenues and profits in
all business segments while building a critical mass of AmeriHost Inns.
The typical AmeriHost Inn hotel is located near an interstate highway, a
major traffic artery or airport, or other demand generator such as an
office/industrial park, university, casino, or shopping mall and contains
from 60 to 120 guest rooms. The Company has targeted secondary and tertiary
markets (with average room rates from $40 to $60 per night), usually in
smaller communities where there is minimal competition or where new hotels
have not been built for a number of years, as the principal location for the
development and construction of AmeriHost Inn hotels. The AmeriHost Inn is
positioned to attract both business and leisure travelers seeking quality
rooms at reasonable rates.
The AmeriHost Inn offers a variety of amenities and services typically not
found on a consistent basis in the markets in which the Company targets.
These amenities and services include 24-hour front desk and message service,
facsimile machines, personal computers, complimentary expanded continental
breakfast, 24-hour hot coffee, an indoor swimming pool, whirlpool suites,
sauna, and exercise room. The AmeriHost Inn prototype features indoor
corridors and electronic card-key locks for added comfort and security, and
an efficient layout designed to minimize operating costs. AmeriHost Inns do
not contain food and beverage facilities associated with full-service hotels.
Food service to hotel guests generally is provided by adjacent free-standing
restaurants, which are independently owned and operated by national or
regional restaurant operators. All of the AmeriHost Inns are managed by the
Company in accordance with strict operating guidelines with respect to the
amenities and services provided. The Company believes this high degree of
consistency is critical to guest satisfaction and repeat business as the
AmeriHost Inn brand is expanded. By focusing on hotel operations and
providing a wide variety of amenities on a consistent basis, Amerihost
believes it is able to operate profitable hotels while offering an excellent
value at an attractive price to its guests.
Hotels which are owned, operated and/or managed by the Company as part of a
national or regional franchise system, or independent of any brand
affiliation, are also located in secondary and tertiary markets, with nearby
demand generators similar to those of AmeriHost Inn hotels. These hotels
also generate average room rates in the $40 to $60 per night range, and
generally do not contain food and beverage facilities. In an effort to
enhance occupancy and average daily rate at these hotels, a variety of
amenities and services are provided similar to those provided by the
AmeriHost Inns.
For all AmeriHost Inns, same room revenues increased 13.7% in 1995 compared
to 1994, while same room revenue per available room ("RevPar") increased
$4.70, both attributable to an increase of $1.77 in average daily rate and a
9.9% increase in occupancy. For all hotels in which the Company has
ownership which are not AmeriHost Inn hotels, same room occupancy increased
4.7% and same room average daily rate increased $0.58 from 1994 to 1995,
resulting in a 4.7% increase in same room revenues.
As of December 31, 1995, the Company owned or managed 58 hotel properties in
13 states. The Company had ownership or leasehold interests, ranging from
5.0% to 100.0%, in 48 hotels at December 31, 1995 versus 43 at December 31,
1994, translating into a 27.8% increase in equivalent owned rooms. The
remaining 10 properties are managed for unaffiliated owners.
The following table summarizes the composition of owned and managed hotels,
excluding hotels under construction, at:
<TABLE>
<CAPTION>
December 31, 1995 December 31, 1994
Amerihost Amerihost
Total Equivalent Total Equivalent
Hotels Rooms Rooms(1) Hotels Rooms Rooms(1)
<S> <C> <C> <C> <C> <C> <C>
Consolidated Hotels 24 2,516 2,125 14 1,543 1,415
Minority-owned(2)
and managed 24 1,977 541 29 2,768 671
Managed only 10 1,284 - 10 1,296 -
58 5,777 2,666 53 5,607 2,086
(1) Represents the Company's proportionate interest in hotel rooms,
including leased hotels.
(2) Includes three hotels (426 rooms) at December 31, 1994, which are
leased by the operating entity and became Consolidated Hotels in
1995 pursuant to the acquisition of additional ownership
interests.
</TABLE>
During 1995, the Company began construction on 20 hotels, and completed
construction of twelve hotels, nine of which began construction in 1994,
leaving 17 hotels under construction at December 31, 1995. Of the 29 hotels
completed in 1995 or under construction at year end, the Company has an
ownership position in 26, including nine wholly-owned Consolidated Hotels.
The Company had a record year in 1995 for hotel construction starts,
surpassing the level achieved in 1994, when the Company began construction on
a total of 15 hotels. In addition, the Company acquired additional ownership
interests in hotels in which the Company already held a minority ownership
interest, of which five such acquisitions resulted in majority ownership
positions. Consistent with the Company's balanced strategy, the Company
plans to continue increasing hotel ownership through new construction for its
own account as well as for minority-owned entities, thereby generating
revenues and profits from the operation of Consolidated Hotels and from the
development of hotels for minority-owned and unrelated third parties.
The Company's revenues increased to a record $52.0 million in 1995 from $43.3
million in 1994, an increase of 19.9%. Revenues are generated by the
Company's two primary business segments, hotel operations and hotel
development, and also by the hotel management and employee leasing segments.
Hotel operations revenues increased 57.9% to $24.4 million in 1995 from $15.4
million in 1994, primarily due to a net increase of ten Consolidated Hotels
in 1995. Revenues from hotel development were $12.2 million in 1995,
increasing 1.7% from $12.0 million in 1994. Although the Company started
construction on more hotels in 1995 compared to 1994 for unaffiliated or
minority-owned entities, many of the 1995 starts began in the fourth quarter.
Consequently, the majority of revenues from these contracts will be realized
in 1996 when the projects are completed. Hotel management revenues increased
11.0% in 1995 compared to 1994 due primarily to an increase in same room
revenues and incentive management fees. Employee leasing revenues decreased
slightly as a result of fewer contracts with third parties and minority-owned
entities.
The Company reported record net income of $2.1 million in 1995, increasing
274.2% from $571,421 in 1994. Operating income increased to a record $4.3
million in 1995 from $1.5 million in 1994, while earnings before
interest/rents, taxes and depreciation/amortization increased to a record
$9.5 million in 1995 from $4.6 million in 1994.
INDUSTRY
The Company believes that the hotel industry is in a strong rebound. After a
difficult period caused by an oversupply of hotel rooms and a weak U.S.
economy in the late 1980's and early 1990's, the lodging industry continued
to show progress in 1994 and 1995. Industry-wide room demand increased 3.9%
in 1994 according to industry analyst Coopers & Lybrand, more than
quadrupling their estimated .9% increase in supply. Industry-wide room
demand is estimated to have increased 2.2% in 1995 according to Coopers &
Lybrand, while supply continued to lag behind, increasing by 1.0%. Coopers &
Lybrand also reported that industry-wide occupancy reached 64.9% in 1994, its
highest level since the early 1980's, improving to 65.7% in 1995, while
industry-wide average daily rate increased by 3.7% in 1994, the first time in
six years it surpassed the consumer price index, and 4.6% in 1995.
Coopers & Lybrand expects the positive trends to continue in 1996. They
expect industry-wide room demand to remain strong, averaging 2.5% annual
increases through 1998, while supply increases should continue to lag behind,
around 2.0% per year during this same period. Occupancy for the industry is
expected to surpass 66% in 1996 while average daily rates are expected to
increase 4.5% in 1996.
BUSINESS SEGMENTS
The Company's business is organized into four business segments: hotel
operations; hotel development; hotel management; and employee leasing. See
Note 13 to the Consolidated Financial Statements under Item 14 for financial
data regarding each of the Company's business segments.
HOTEL OPERATIONS
The hotel operations segment is comprised of the revenues and profits
generated from the operations of the Consolidated Hotels.
At December 31, 1995, the hotel operations segment contained 24 Consolidated
Hotels. An additional three wholly-owned hotels were also under construction
at year-end with projected opening dates through the second quarter of 1996.
These hotels will be included in the hotel operations segment after opening.
The Company constructed its first hotel in 1987, a 60 room Days Inn in
Sullivan, Indiana. The Company maintained a controlling ownership interest
in this hotel and has consolidated the operations of this hotel in its
financial statements since August 1987, when the hotel began operations.
Beginning in 1992, the Company has substantially increased its hotel
operations segment through the acquisition of controlling ownership and
leasehold interests in hotels, with 14 Consolidated Hotels at December 31,
1994. The Company continued to expand its hotel operations in 1995 through
the development and construction of Consolidated Hotels, as well as the
acquisition of majority ownership positions in hotels which had previously
been minority-owned. During 1995, the Company completed construction of six
Consolidated Hotels, while acquiring a majority ownership or leasehold
interest in five existing hotels which had previously been minority-owned.
In addition, one hotel lease was terminated by the Company pursuant to the
sale of the hotel by the lessor.
Presented below is a recap of all Consolidated Hotels included in the
Company's hotel operations segment, including hotels under construction at
December 31, 1995:
<TABLE>
<CAPTION>
Operations
Hotel Location API % began
<S> <C> <C> <C>
CONSTRUCTIONS:
Days Inn Sullivan Sullivan, Indiana 56.0% September 1987
Holiday Inn Express Wooster Wooster, Ohio 100.0% January 1994
Players Riverboat Hotel Metropolis, Illinois 54.9% February 1994
Holiday Inn Express Tuscola Tuscola, Illinois 68.75% August 1994
AmeriHost Inn Upper Sandusky Upper Sandusky, Ohio 100.0% December 1994
Holiday Inn Express LaGrange LaGrange, Georgia 100.0% March 1995
AmeriHost Inn Walker Walker, Michigan 100.0% July 1995
AmeriHost Inn Eagles Landing Eagles Landing, Georgia 100.0% August 1995
AmeriHost Inn Wooster Wooster, Ohio 100.0% October 1995
AmeriHost Inn Smyrna Smyrna, Georgia 100.0% December 1995
AmeriHost Inn Coopersville Coopersville, Michigan 100.0% December 1995
AmeriHost Inn Sycamore Sycamore, Illinois 100.0% May 1996 (1)
AmeriHost Inn Shippensburg Shippensburg, Pennsylvania 100.0% July 1996 (1)
AmeriHost Inn Waverly Waverly, Iowa 100.0% August 1996 (1)
ACQUISITIONS:
Days Inn Bowling Green (3) Bowling Green, Ohio 64.16% September 1990
Days Inn Findlay (3) Findlay, Ohio 56.67% May 1991
Days Inn Dayton South (3) Dayton, Ohio 61.5% January 1992
Days Inn Niles (2) Niles, Illinois 100.0% January 1992
Days Inn O'Hare South (2) Schiller Park, Illinois 100.0% January 1992
Days Inn Portage (2) Portage, Indiana 100.0% January 1992
Days Inn Shorewood (2) Shorewood, Illinois 100.0% January 1992
Days Inn New Philadelphia (3) New Philadelphia, Ohio 50.35% June 1992
Holiday Inn Milwaukee, N.W. Menomonee Falls, Wisconsin 100.0% July 1992
Holiday Inn Altoona (3) Altoona, Pennsylvania 62.78% August 1992
Holiday Inn White River White River Junction,
Junction Vermont 83.3% June 1993
Days Inn Elgin Elgin, Illinois 100.0% December 1993
Ramada Inn Lafayette Lafayette, Indiana 100.0% February 1994
(1) Estimated opening date; hotel under construction as of date of
this filing.
(2) The Company leases the hotel from a partnership in which the
Company owns a minority equity interest, ranging from 5.0% to
16.3%.
(3) The Company acquired a majority ownership position in 1995 which
had been minority-owned in previous years.
</TABLE>
All of the acquired hotels listed above were renovated by the Company and
repositioned in their respective marketplace after obtaining a national
franchise license. The revenues and expenses from the operation of the above
hotels are included in the Company's consolidated financial statements, or
will be included upon opening. Hotels under construction at December 31,
1995 are included in the Company's consolidated balance sheet as
construction-in-progress.
This segment achieved record revenues and operating income in 1995. Hotel
operations revenue increased 57.9% to $24.4 million in 1995 from $15.4
million in 1994, while operating income increased 36.8% to $3.4 million in
1995 from $2.5 in 1994. These results were due primarily to the net addition
of ten Consolidated Hotels, improving industry fundamentals, and a strong
management effort in establishing and marketing the newly constructed hotels.
For all hotels included in this segment, same room average daily rate
increased $1.19 from 1994 to 1995, resulting in a 2.4% increase in revenues.
The Company's hotel operations segment is subject to seasonal variations.
The Consolidated Hotels are located primarily in the Midwest and typically
experience lower revenues in the first and fourth quarters. The impact of
seasonality has become more pronounced with the addition of owned hotels in
the Midwest, however if the Company further increases its ownership in hotels
located in warmer climates, this impact may be diminished.
The Company is constantly analyzing market conditions to determine the
appropriate time to sell an owned property. Amerihost may realize profits
and cash flow from the disposition of owned hotels. Increases in value
created through the Company's development and management activities, as well
as any overall real estate appreciation are not reflected in the consolidated
financial statements until a property is sold.
HOTEL DEVELOPMENT
The hotel development segment is comprised of the revenues and profits
derived from new construction, acquisition/lease, and renovation activities
performed for third parties and entities in which the Company has a minority
interest. The hotel development segment includes the activities of Amerihost
Development, Inc. and Amerihost Renovations, Inc., wholly-owned subsidiaries
of Amerihost Properties, Inc.
New Construction
Amerihost offers "turn-key" development services for new construction
projects. The Company has the in-house expertise to complete a project from
beginning to end, including market research, site selection, architectural
services, the securing of financing, and construction management.
For new construction, the Company targets secondary and tertiary markets,
typically in smaller communities where there is little or no competition or
where new hotels have not been built for a number of years, as the principal
location for the development and construction of new hotels. The Company has
developed a number of prototypes to meet the needs of hotel operators. Each
of these prototypes is designed to be a 60 - 80 room limited service, mid-
market hotel which does not provide food or banquet services. Each prototype
is built to meet or exceed the standards required to qualify for a national
hotel franchise and may be easily modified up to 120 rooms.
The construction contracts entered into between the Company and the ownership
entity of the property have generally been one of two types. The first type
of contract provides for the Company to receive cost plus developers' and
construction overhead fees. Under this type of contract, the Company's costs
are fully recoverable. The second type of contract provides for the Company
to receive a fixed fee. Under this type of contract, the Company attempts to
limit its risk by providing for allowances for certain site costs to be
performed by third parties, such as excavation, sewage, sanitation costs and
tap fees, as these costs can vary from project to project. Any costs in
excess of the allowed amounts are borne directly by the ownership entity.
Under both types of contracts, the Company typically performs the actual
construction of the hotel through the use of a general contractor hired by
the Company for a fixed fee. Since the Company builds its own prototypes,
its in-house drafting and design personnel make any required changes or
modifications to hotel blueprints through the use of its computer assisted
drafting ("CAD") equipment, which minimizes architects' fees.
Through the years, the Company has developed relationships with suppliers of
the furniture, fixtures and equipment used in its prototype hotels. Because
of its experience and relationships with these suppliers, the Company has
been able to appropriately budget for these items over the years. The
Company believes that its relationships with these suppliers are good and
that the loss of any particular supplier will not have a material adverse
effect on the Company.
Excluding Consolidated Hotels, during 1995, the Company completed six hotels
which began construction in 1994, and began construction on 14 hotels, all of
which were under construction at December 31, 1995. During 1994, the Company
began construction on 10 hotels, four of which were completed in 1994,
leaving six hotels under construction at December 31, 1994 which were
completed in 1995. The hotel development and construction activity performed
for minority-owned entities and third unaffiliated parties is summarized as
follows:
<TABLE>
<CAPTION>
Number of Start Completion
Property Rooms Date Date
<S> <C> <C> <C>
1995 STARTS:
Wildhorse Hotel, Pendleton, OR 100 6/95 Est. 3/96
AmeriHost Inn, Hammond, IN (1) 86 9/95 Est. 3/96
AmeriHost Inn, New Martinsville,
WV (1) 61 10/95 Est. 4/96
AmeriHost Inn, Batesville, MS (1) 61 10/95 Est. 4/96
AmeriHost Inn, Ashland, OH (1) 62 10/95 Est. 6/96
AmeriHost Inn, Harvard, IL (1) 61 11/95 Est. 5/96
AmeriHost Inn, Jeffersonville, OH (1) 61 11/95 Est. 6/96
AmeriHost Inn, Grand Blanc, MI (1) 61 11/95 Est. 6/96
AmeriHost Inn, Kenton, OH (1) 61 12/95 Est. 7/96
AmeriHost Inn, Zanesville, OH (1) 61 12/95 Est. 6/96
AmeriHost Inn, Murray, KY (1) 61 12/95 Est. 7/96
AmeriHost Inn, Jacksonville, IL (1) 61 12/95 Est. 6/96
AmeriHost Inn, Allen, TX (1) 61 12/95 Est. 7/96
AmeriHost Inn, Green Bay, WI (1) 61 12/95 Est. 7/96
1994 STARTS:
Menominee Casino-Bingo Hotel, Keshena, WI 100 2/949/94
Days Inn Pass Christian, MS 60 3/94 8/94
AmeriHost Inn Jeffersonville, OH(1) 61 4/94 10/94
Days Inn Mansfield, OH (1) 61 6/94 11/94
Days Inn York, AL 52 8/94 8/95
Days Inn Vicksburg, MS (1) 89 9/94 5/95
AmeriHost Inn Muncie, IN 61 10/94 4/95
AmeriHost Inn Macomb, IL (1) 61 10/94 5/95
AmeriHost Inn Athens, OH
(addition)(1) 41 12/94 5/95
AmeriHost Inn Parkersburg, WV (1) 61 12/94 6/95
1993 STARTS:
Construction of Consolidated Hotels only; no starts for unaffiliated or
minority-owned entities
(1) Minority-owned hotels
</TABLE>
The Company's hotel development segment generated revenues of $12.2 million
in 1995 compared to $12.0 million in 1994. This 1.7% increase was due to
increased development activity performed for third parties and entities in
which the Company has a minority interest. In addition to the hotels
currently under construction, the Company has several projects in various
stages of development.
Acquisitions, Leases and Renovations
In prior years, the Company had been successful in acquiring hotels through
partnerships in which the Company is a general partner, renovating the
properties and repositioning them in their respective marketplace. The
revenues and profits from these acquisitions and renovations performed for
unaffiliated third parties or minority-owned partnerships were included in
the Company's hotel development segment.
The Company has also acquired fee simple title or leasehold interests in
certain hotels in which it has a 100% or majority ownership interest. Since
the Company has a controlling or 100% leasehold interest in these hotels, all
development and renovation revenues and profits have been eliminated in
consolidation. The operations of these hotels are included in the Company's
hotel operations segment.
The Company periodically performs renovations on the hotels it manages. The
revenues and profits from renovations performed for unaffiliated and
minority-owned hotels are included in the Company's hotel development
segment.
In 1995, the Company experienced a decrease in hotel acquisition activity
while focusing primarily on new construction. The shift from acquisition to
new construction was primarily the result of two factors. First, the Company
believes that the number of existing hotels which can be profitably acquired
and renovated has declined significantly after most were sold at depressed
prices during a difficult period in the industry. The Company intends to
acquire additional properties only if the terms are considered favorable.
Second, the availability of financing for new construction has increased as
the industry showed significant improvements in occupancy and average daily
rate. Both of these factors are the result of improved industry
fundamentals. Industry-wide hotel room demand was estimated to have
increased 2.2% in 1995, more than doubling the estimated 1.0% increase in
room supply.
The construction industry can be seasonal, depending upon the geographic
location of the construction projects. As of December 31, 1995, the Company
has new construction projects primarily in the Midwest and Southeast.
Construction activity in the Midwest can be slower in the first and fourth
quarters. However, the Company makes a concerted effort to schedule its
construction activity to minimize the effect of this seasonality. Other
types of revenue recognized in the hotel development segment are not as
seasonal. Renovations performed by the Company are typically cosmetic in
nature and usually pertain to hotel interiors. Other fees recognized from
the acquisition of hotels and the sale of leasehold interests are not
seasonal in nature, as these types of transactions can occur at any time
during the year.
HOTEL MANAGEMENT
The hotel management segment is comprised of the revenues and profits
generated from management services performed for third parties and entities
in which the Company has a minority interest. This segment includes the
activity of Amerihost Management, Inc., a wholly-owned subsidiary of
Amerihost Properties, Inc.
The Company provides complete operational and financial management services.
The Company has developed centralized systems and procedures which allow it
to manage the hotels effectively and efficiently. Management and financial
services include sales, marketing, quality control, training, purchasing, and
accounting. As of December 31, 1995, the Company provided management
services to 58 hotels. The Company's revenues from hotel management
activities were over $3.0 million in 1995, compared to $2.7 million in 1994.
Under most of its management contracts, the Company is responsible for all
operational and financial management. However, under some management
contracts, its joint venture partners (discussed below) are responsible for
the day-to-day operational management, while the Company provides full
financial management, operational consulting and assistance.
The Company has designed a financial management system whereby all accounting
information is processed in the Company's centralized accounting office at
its headquarters in Des Plaines, Illinois. The system includes cash
management, accounts payable and generation of monthly financial statements.
The Company provides each managed property with standardized forms and
procedures so that financial reporting for all managed hotels is uniform.
The Company's financial management computer system enhances the quality and
timing of internal financial reports used by the Company, its partners, third
party owners, and financial institutions.
The Company's operational management activities are overseen by two Vice
Presidents of Operations who supervise regional and area managers, who in
turn oversee general managers at each property. These managers are
responsible for maintaining smooth day-to-day operations at all hotels. In
addition to these managers, the Company has in-house marketing personnel who
assist and direct the general managers and on-site personnel in marketing the
property. The Company also has a team of auditors who examine each hotel at
least three times per year. These audits include tests of financial items
such as cash and receivables, as well as operational and information systems
and security matters. The audit team is also responsible for conducting the
various general manager and staff training seminars.
The Company is currently managing or co-managing with its joint venture
partners all properties in which it has a minority equity interest, as well
as managing a number of properties for third party owners for fees equal to a
percentage of total gross revenues. The terms of most of the Company's
management contracts typically range from one to ten years, with optional
renewal periods of equal length.
During 1993 and continuing through 1994 and 1995, the Company began to focus
on increasing hotel ownership, primarily through the construction of hotels
where the Company has either a minority interest or controlling interest
(Consolidated Hotels). Managing Consolidated Hotels does not contribute to
the hotel management segment, however the Company does recognize fees from
the management of hotels in which it has a minority interest. During 1995,
the Company built and opened three minority-owned hotels, one hotel for an
unrelated third party, and had 13 minority-owned projects under construction
at December 31, 1995. The Company intends to grow this segment primarily
through the construction of minority-owned hotels. While the Company does
not intend to actively pursue management contracts with third parties, it
does intend to continue managing properties for third parties under its
current management contracts and may manage additional hotels for third
parties if the terms are favorable. The Company expects the hotel management
segment to grow as the number of minority-owned hotels increases, which is
consistent with the Company's balanced strategy.
The following is a list of hotel properties under the Company's management at
December 31, 1995 by state:
<TABLE>
<CAPTION>
Name Rooms Location
<S> <C> <C>
Florida
Hampton Inn Ft. Myers (1) 123 Ft. Myers, Florida
Georgia
AmeriHost Inn Eagles Landing (1) 61 Eagles Landing, Georgia
AmeriHost Inn Smyrna (1) 61 Smyrna, Georgia
Days Inn Northwest 107 Atlanta, Georgia
Days Inn Peachtree 142 Atlanta, Georgia
Days Inn Dalton 152 Dalton, Georgia
Days Inn Jekyll Island 162 Jekyll Island, Georgia
Holiday Inn Express LaGrange (1) 59 LaGrange, Georgia
Jekyll Estates Motel 37 Jekyll Island, Georgia
781
Illinois
AmeriHost Inn Macomb (1) 61 Macomb, Illinois
Days Inn Elgin (1) 96 Elgin, Illinois
Days Inn O'Hare West (1) 120 Elk Grove, Illinois
Days Inn Melrose Park (1) 123 Melrose Park, Illinois
Days Inn Niles (1) 153 Niles, Illinois
Days Inn O'Hare South (1) 145 Schiller Park, Illinois
Days Inn Shorewood (1) 182 Shorewood, Illinois
Holiday Inn Express Tuscola (1) 59 Tuscola, Illinois
Palwaukee Motor Inn 138 Wheeling, Illinois
Players Riverboat Casino
Hotel (1) 120 Metropolis, Illinois
1,197
Indiana
AmeriHost Inn Muncie 61 Muncie, Indiana
AmeriHost Inn Plainfield (1)(2) 61 Plainfield, Indiana
Days Inn Cloverdale (1)(2) 60 Cloverdale, Indiana
Days Inn Crawfordsville (1)(2) 60 Crawfordsville, Indiana
Days Inn Plainfield (1)(2) 64 Plainfield, Indiana
Days Inn Portage (1) 120 Portage, Indiana
Days Inn Sullivan (1) 60 Sullivan, Indiana
Ramada Inn Lafayette (1) 145 Lafayette, Indiana
631
Louisiana
Days Inn Kenner 324 Kenner, Louisiana
Michigan
AmeriHost Inn Walker (1) 61 Walker, Michigan
AmeriHost Inn Coopersville (1) 61 Coopersville, Michigan
122
Mississippi
Days Inn Vicksburg (1)(2) 89 Vicksburg, Mississippi
Name Rooms Location
Ohio
AmeriHost Inn Athens (1)(2) 102 Athens, Ohio
AmeriHost Inn Jeffersonville (1)(2) 61Jeffersonville, Ohio
AmeriHost Inn Lancaster (1)(2) 61 Lancaster, Ohio
AmeriHost Inn Logan (1)(2) 61 Logan, Ohio
AmeriHost Inn Upper Sandusky (1) 61 Upper Sandusky, Ohio
AmeriHost Inn Wooster (1) 61 Wooster, Ohio
Days Inn Athens (1)(2) 60 Athens, Ohio
Days Inn Bowling Green (1) 100 Bowling Green, Ohio
Days Inn Dayton South (1) 209 West Carrollton, Ohio
Days Inn Findlay (1) 115 Findlay, Ohio
Days Inn Kent (1)(2) 67 Brimfield, Ohio
Days Inn Mansfield (1) 61 Mansfield, Ohio
Days Inn Marysville (1)(2) 79 Marysville, Ohio
Days Inn New Philadelphia (1)(2)102 New Philadelphia, Ohio
Days Inn Oxford 61 Oxford, Ohio
Days Inn Zanesville (1)(2) 60 Zanesville, Ohio
Holiday Inn Middletown (1) 120 Middletown, Ohio
Holiday Inn Express Wooster (1) 58 Wooster, Ohio
1,499
Pennsylvania
Holiday Inn Altoona (1) 143 Altoona, Pennsylvania
Holiday Inn Oil City (1) 106 Oil City, Pennsylvania
249
Texas
Ramada Inn Euless (1) 150 Euless, Texas
Vermont
Holiday Inn White River
Junction (1)(2) 140 White River
Junction, Vermont
West Virginia
AmeriHost Inn Parkersburg (1)(2) 79 Parkersburg, West
Virginia
Wisconsin
Days Inn Kenosha (1) 96 Kenosha, Wisconsin
Days Inn Mosinee (1) 53 Mosinee, Wisconsin
Holiday Inn Milwaukee NW (1) 144 Menomonee Falls,
Wisconsin
Menominee Casino-Bingo Hotel 100 Keshena, Wisconsin
393
Total 5,777
(1) Indicates properties in which the Company owns a direct or
indirect equity or leasehold interest.
(2) Indicates properties which are co-managed with partners.
</TABLE>
In addition to the above referenced management contracts, the Company has a
financial services contract with a 150 room Best Western hotel near O'Hare
Airport that is partially owned by an officer of the Company. Under this
contract, the Company processes payables and prepares monthly financial
statements for a fixed monthly fee.
Because the hotel industry is seasonal, the revenues generated by the hotels
managed by the Company will increase or decrease depending upon the time of
year. Since the Company's management fees are based upon a percentage of the
hotels' total gross revenues, the Company is susceptible to these seasonal
variations. Given the location of the properties the Company manages, the
revenues are typically lower in the first and fourth quarters of each year.
The impact of the seasonal variation may diminish if the Company expands
further into warmer climates.
EMPLOYEE LEASING
The employee leasing segment is comprised of employee leasing activities
whereby the Company leases its employees to unaffiliated hotels and hotels in
which the Company has a minority interest. The Company employs all the
personnel working at the hotels and leases them to the hotels pursuant to
written agreements. The Company has entered into employee leasing agreements
with all the hotels it manages. Similar to the management contracts, the
employee leasing agreements typically contain terms of one to ten years, with
optional renewal periods of equal length. The Company generally receives
fees from each hotel in an amount equal to the gross payroll, including all
related taxes and benefits plus a percentage of the gross payroll. The
employee leasing segment consists of the activities of Amerihost Staffing,
Inc., a wholly-owned subsidiary of Amerihost Properties, Inc.
During 1995, the Company's employee leasing segment generated approximately
$12.4 million in gross revenues for the Company. While the ratio of
operating income to revenues is not as significant as the Company's other
business segments, employee leasing did contribute approximately $216,000 to
the Company's operating income in 1995. This business segment provides the
Company with greater control and security over the payroll, while allowing
the hotels to benefit from significant economies of scale on all personnel
related costs.
JOINT VENTURES
During 1995, the Company continued to develop new properties through joint
venture arrangements. These joint ventures are arrangements formalized in
agreements whereby the Company and other investors agree to jointly undertake
the development, construction, acquisition or renovation of a hotel property.
Each party has specific responsibilities for which it receives certain fees.
Most joint ventures are formed for a particular project or projects, but the
Company has entered into one joint venture arrangement for the future
development and management of hotel properties which have not been
identified. As of December 31, 1995, the Company had completed 26 projects
with joint venture partners.
COMPETITION
There is significant competition in the mid-market hotel industry. There are
numerous hotel chains that operate on a national or regional basis, as well
as other hotels, motor inns and other independent lodging establishments
throughout the United States. Competition is primarily in the areas of
price, location, quality and services. Many of the Company's competitors
have recognized trade names, greater resources and longer operating histories
than the Company. However, the Company believes that its management is
sufficiently experienced, and the markets which the Company targets for
development typically contain minimal competition, enabling the Company to
compete successfully.
There are a number of companies which develop, construct and renovate hotels.
Some of these companies perform these services only for their own account,
while others actively pursue contracts for these services with third party
owners. The Company believes that it can develop, construct and renovate
hotels at costs which are competitive. The Company also believes that its
ability to offer additional services, such as hotel management, provides some
competitive advantages.
There are many hotel management companies which provide management services
to hotels similar to the services provided by the Company. While the
quantity of competition may be high, the Company believes that the quality of
its services, including its information and management systems and employee
leasing operations, will enable the Company to compete successfully. The
Company believes that its focus on secondary and tertiary markets also
lessens competition for the types of services provided by the Company.
FRANCHISE LICENSING
The majority of hotels operated and managed by the Company are part of a
national or regional franchise system, such as Days Inns and Holiday Inns.
Franchises in certain locations are important in maintaining occupancy
levels, which is accomplished through the franchise's national reservation
systems as well as through brand name recognition. The importance of
national franchises is amplified for highway locations. The typical term of
a franchise agreement is twenty years for newly developed and constructed
hotels and ten years for the conversion of an existing hotel. The Company
believes that the loss of any one of its franchise agreements would not have
a material adverse effect on the Company.
EMPLOYEES
As of December 31, 1995, the Company and its subsidiaries had approximately
1,800 full and part-time employees:
Hotel Management:
Operations 19
Accounting and finance 17
Property general managers 58
Hotel Development: 35
Hotel Operations: 562
Corporate:
General and administrative 9
Officers 4
Employee Leasing:
General and administrative 4
Operations(1) 1,130
1,838
(1) Does not include 622 employees who are employed by ASI and leased
to other subsidiaries of the Company. These employees are
reflected in the table under hotel management and hotel
operations.
The Company believes that its relationship with its employees is good.
ITEM 2. PROPERTIES.
The Company's corporate offices and the offices of its wholly-owned
subsidiaries are located in approximately 17,085 square feet of space at 2400
East Devon Avenue, Suite 280, Des Plaines, Illinois 60018. These offices are
occupied under a lease that expires on December 31, 2000.
At December 31, 1995, the Company had a controlling ownership or leasehold
interest in 24 operating hotels and three hotels under construction, located
in nine states. The land, building, furniture, fixtures and equipment and
construction in progress for these hotels is reflected in the Company's
Consolidated Balance Sheet at December 31, 1995. These assets were
substantially pledged to secure the related long-term mortgage debt. See
Item 1 and Note 7 to the Consolidated Financial Statements under Item 14.
In addition to the foregoing, the Company has an equity interest in
partnerships which own and/or lease property. See Note 4 to Consolidated
Financial Statements under Item 14.
ITEM 3. LEGAL PROCEEDINGS
The Company is subject to claims and suits in the ordinary course of
business. In management's opinion, currently pending legal proceedings and
claims against the Company will not, individually or in the aggregate, have a
material adverse effect on the Company's financial condition, results of
operations or liquidity.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders of the Company during
the fourth quarter of the fiscal year ended December 31, 1995.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER
MATTERS.
The Company's Common Stock is traded on the Nasdaq National Market under the
symbol HOST. As of March 15, 1996, there were 1,576 holders of record of the
Company's Common Stock. The following table shows the range of reported high
and low closing prices per share.
<TABLE>
<CAPTION>
High($) Low($)
<S> <C> <C>
FISCAL 1994
First quarter 6.75 4.88
Second quarter 5.25 3.75
Third quarter 4.88 3.50
Fourth quarter 5.50 3.50
FISCAL 1995
First quarter 4.88 3.56
Second quarter 5.75 4.31
Third quarter 7.50 5.63
Fourth quarter 7.25 6.13
FISCAL 1996
First quarter (through March 15, 1996) 8.00 6.25
</TABLE>
The Company has not declared or paid any cash dividends on its Common Stock.
The Company currently intends to retain any earnings for use in its business
and therefore does not anticipate paying any cash dividends in the
foreseeable future. Any future determination to pay cash dividends will be
made by the Board of Directors in light of the Company's earnings, financial
position, capital requirements and such other factors as the Board of
Directors deems relevant. In addition, pursuant to the terms of the
Company's 7% Subordinated Notes (the "7% Notes"), no dividends may be paid on
any capital stock of the Company until the 7% Notes have been paid in full.
(See Notes 8 and 10 to Consolidated Financial Statements under Item 14.)
ITEM 6. SELECTED FINANCIAL DATA.
The selected consolidated financial data presented below have been derived
from the Company's consolidated financial statements. The consolidated
financial statements for all years presented have been audited by the
Company's independent auditors, whose report on such consolidated financial
statements for the three years ended December 31, 1995, 1994 and 1993 is
included herein under Item 14. The information set forth below should be
read in conjunction with the consolidated financial statements and notes
thereto under Item 14 and "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
<TABLE>
<CAPTION>
(in thousands, except per share data)
Fiscal Year Ended December 31,
1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenue $51,962 $43,347 $34,274 $29,411 $6,524
Operating costs and expenses 41,317 37,076 30,389 25,445 4,851
Depreciation and amortization expense 2,268 1,141 928 421 191
Leasehold rents - hotels 1,976 1,661 1,652 1,149 -
Corporate general and administrative 2,111 2,013 1,783 1,399 1,043
Operating income (loss) 4,290 1,456 (478) 997 439
Interest expense, net 1,195 427 596 220 200
Net income (loss) $2,138 $ 571 $ (761) $ 511 $ 280
Earnings (loss) per share $ 0.35 $ 0.10 $ (0.15) $ 0.22 $ 0.17
Weighted average shares
outstanding(1) 6,125 5,624 5,038 2,347 1,685
BALANCE SHEET DATA:
Total assets $52,453 $34,404 $24,174 $13,837 $6,098
Long-term debt, including current
portion 25,014 13,542 6,408 6,012 2,223
Working capital 1,854 4,182 5,048 3,329 938
Shareholders' equity 17,267 13,672 12,781 3,856 1,708
OTHER DATA:
EBITDA (2) $ 9,467 $ 4,609 $ 2,598 $ 2,713 $ 738
Cash flow from operating activities 1,918 2,215 693 1,267 (54)
Cash flow from investing activities (13,506) (8,764) (10,737) (4,065) (1,542)
Cash flow from financing activities 9,933 7,690 10,651 3,735 624
Net income plus depreciation/
amortization (3) 4,406 1,712 652 932 471
Capital expenditures 12,539 7,872 8,292 296 132
(1) During the first quarter of 1993, the Company issued an
additional 1,718,915 shares of Common Stock in connection with
the conversion and redemption of the Company's 12% Notes, the
cashless exercise of warrants and the exercise of warrants to
purchase Common Stock by Diversified. During the second quarter
of 1993, the Company issued an additional 1,550,000 shares of
Common Stock in connection with the public offering completed in
May 1993.
(2) Earnings before interest/rent, taxes and
depreciation/amortization ("EBITDA"), is not defined by generally
accepted accounting principles, however the Company believes it
provides relevant information about its operations and is
necessary for an understanding of the Company's operations, given
it significant investment in real estate. EBITDA for 1993 does
not include a non-cash debt acceleration charge of $485,411
relating to the prepayment of subordinated debt.
(3) Net income plus depreciation/amortization is not defined by
generally accepted accounting principles, however the Company
believes it provides relevant information about its operations
and is necessary for an understanding of the Company's
operations. Net income plus depreciation/amortization for 1993
does not include a non-cash debt acceleration charge of $485,411
relating to the prepayment of subordinated debt.
</TABLE>
ITEM 7. 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 year ended December 31, 1995 resulted in record revenues, net income,
operating income and earnings before interest/rents, taxes and
depreciation/amortization ("EBITDA"). Revenues increased to $52.0 million,
or 19.9% from $43.3 million in 1994. Net income increased to $2.1 million in
1995 from $571,421 in 1994, while earnings per share increased from 10 cents
to 35 cents. Operating income increased from $1.5 million in 1994 to $4.3
million in 1995. The Company uses 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 - hotels to be financing costs similar to
interest. EBITDA increased to $9.5 million in 1995 from $4.6 million in
1994, or an increase of $4.9 million.
The improved performance was primarily attributable to hotel operations and
hotel development. 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. All of the hotels which began
construction in 1995 were AmeriHost Inns except for one hotel developed for
an unrelated third party. As of December 31, 1995, 14 AmeriHost Inns were
open, 16 were under construction, and several additional were in the pre-
construction development phase. The AmeriHost Inn brand features several
amenities including an indoor pool area, whirlpool suites, an exercise room,
and an expanded continental breakfast which assist the property in obtaining
favorable occupancy and average daily rates, and an efficient layout designed
to control operating costs. For all AmeriHost Inns, same room revenues
increased 13.7% in 1995 compared to 1994 as RevPar increased $4.70, both
attributable to an increase of $1.77 in average daily rate and a 9.9%
increase in occupancy. For all other hotels in which the Company has an
ownership interest which are not AmeriHost Inns, same room revenues increased
4.7% in 1995 compared to 1994, as occupancy increased 4.7% and average daily
rate increased $0.58.
The Company continued constructing hotels for both its own account
(Consolidated Hotels) as well as for unaffiliated and minority-owned
entities. The Company began construction on six Consolidated Hotels (all
AmeriHost Inns) and another 14 hotels (13 of which are AmeriHost Inns) for
unaffiliated parties and minority-owned entities in 1995, and was in the
development stage of several additional projects at the end of 1995 which are
expected to break ground in 1996. Constructing Consolidated Hotels
contributes to the hotel operations segment when the hotels are opened.
Developing and constructing hotels for unrelated third parties and entities
in which the Company has a minority equity interest contributes to the hotel
development segment and provides capital necessary to develop hotels for the
Company's own account.
Amerihost had an ownership interest in 48 hotels at December 31, 1995 versus
43 hotels at December 31, 1994 (excluding hotels under construction),
increasing equivalent owned rooms by 27.8% from 2,086 at December 31, 1994 to
2,666 at December 31, 1995. These figures include an increase in
Consolidated Hotels from 14 at December 31, 1994 to 24 at December 31, 1995.
This increased ownership was achieved primarily through the development of
hotels for the Company's own account and for minority-owned entities.
RESULTS OF OPERATIONS
The following table sets forth the percentages of revenues of the Company
represented by components of net income for 1995, 1994 and 1993.
<TABLE>
<CAPTION>
Percentage of Total Revenue
Year Ended December 31,
1995 1994 1993
<S> <C> <C> <C>
Revenue 100.0% 100.0% 100.0%
Operating costs and expenses 79.5 85.5 88.7
20.5 14.5 11.3
Depreciation and amortization 4.4 2.6 2.7
Leasehold rents - hotels 3.8 3.8 4.8
Corporate general and administrative 4.0 4.7 5.2
Operating income (loss) 8.3 3.4 ( 1.4)
Interest expense ( 3.4) ( 2.0) ( 1.7)
Interest and other income 1.2 1.1 1.5
Equity in income (loss) of affiliates .7 - .1
Debt acceleration charge ( 1.4)
Income (loss) before minority interest 6.8 2.5 ( 2.9)
Minority interests in net income of subsidiaries
and consolidated partnerships ( .1) ( .3) ( .1)
Income (loss) before taxes 6.7 2.2 ( 3.0)
Income tax expense (benefit) 2.6 .9 ( .8)
Net income (loss) 4.1% 1.3% ( 2.2)%
</TABLE>
1995 compared to 1994
Record revenues of $52.0 million in 1995 increased 19.9% from revenues of
$43.3 million in 1994. This increase was due primarily to a significant
increase in revenues from hotel operations.
Hotel operations revenue increased 57.9% to $24.4 million in 1995, compared
to $15.4 million in 1994. This increase was attributable to the net addition
of ten Consolidated Hotels to the hotel operations segment during 1995, and a
2.4% increase in same room revenue realized by the Consolidated Hotels. The
Company held a minority ownership position in five of these ten hotels prior
to these hotels becoming Consolidated Hotels in 1995 when additional
ownership interests were acquired. The hotel operations segment included 24
Consolidated Hotels comprising 2,516 rooms and the end of 1995, compared to
14 Consolidated Hotels comprising 1,543 rooms at the end of 1994, or an
increase of 63.1% in total rooms. Same room occupancy for all Consolidated
Hotels increased 2.8% in 1995, while same room average daily rate increased
$1.19, or 2.5%.
Hotel development activity is summarized as follows:
<TABLE>
<CAPTION>
1995 1994 1993
Unaffiliated Consoli- Unaffiliated Consoli- Unaffiliated Consoli-
& Minority- dated & Minority dated & Minority- dated
Owned(1) Hotels(2) Owned(1) Hotels(2) Owned(1) Hotels(2)
<S> <C> <C> <C> <C> <C> <C>
Under construction at
beginning of year 6 3 0 2 2 0
Starts 14 6 10 5 0 2
Completions 6 6 4 4 2 0
Under construction at
end of year 14 3 6 3 0 2
(1) hotels developed/constructed for unaffiliated third parties and
entities in which the Company holds a minority ownership interest
(2) hotels developed/constructed for the Company's own account and for
entities in which the Company holds a controlling ownership interest
</TABLE>
The Company does not recognize revenues from the development and construction
of Consolidated Hotels. Excluding the Consolidated Hotels, the Company had
20 hotels under construction during 1995, versus 10 hotels in 1994 for
unaffiliated parties and entities in which the Company holds a minority
ownership interest. In addition, the Company had several projects in various
stages of pre-construction development at the end of 1994 and 1995. Hotel
development revenue increased 1.7% in 1995 from $12.0 million in 1994 to
$12.2 million in 1995. Although the number of hotels under construction was
significantly greater in 1995, total segment revenues did not increase
accordingly since 12 of the 14 hotels which began construction in 1995 were
not started until the fourth quarter, resulting in the recognition of only a
minor portion of the total contracted revenues on these projects.
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. While the number of Consolidated Hotels
increased from 14 to 24, the number of hotels managed for third parties and
minority owned entities decreased from 39 hotels at the end of 1994 to 34
hotels at the end of 1995. The addition of four management contracts in 1995
was offset by the loss of one management contract with a unaffiliated third
party, three management contracts with minority-owned entities as a result of
a hotel/investment sale or temporary closing during renovation, and the five
minority-owned hotels which became Consolidated Hotels in 1995 due to the
Company acquiring additional ownership interests in these hotels. The
Company does not recognize management and employee leasing revenues from
Consolidated Hotels. Hotel management revenues increased 11.0% from $2.7
million in 1994 to $3.0 million in 1995. The decrease resulting from the
changes noted above, were more than offset by an increase in same room
revenue for managed hotels and incentive management fees received in 1995
which were not present in 1994 from certain managed hotels. Employee leasing
revenues, which are based on actual employee costs, decreased 6.2% from $13.2
million in 1994 to $12.4 million in 1995 as a result of the decrease in
employee leasing contracts with minority-owned entities and an unaffiliated
third party as noted above.
Operating costs and expenses increased 11.4% to $41.3 million (79.5% of total
revenues) in 1995 from $37.1 million (85.5% of total revenues) in 1994.
Operating costs and expenses in the hotel operations segment increased 63.2%
from $10.5 million in 1994 to $17.1 million in 1995, resulting primarily from
the net addition of ten Consolidated Hotels to this segment and is directly
related to the 57.9% increase in segment revenue. Operating costs and
expenses in the hotel development segment decreased from $11.3 million in
1994 to $10.1 million in 1995, due to the lower level of construction costs
recognized in 1995 relative to 1994, as the Company had started construction
on a significant number of hotels in the fourth quarter of 1995 which had not
yet incurred significant construction costs in 1995. Hotel management
segment operating costs and expenses decreased 12.5% to $2.0 million in 1995
from $2.3 million in 1994, primarily due to the write-off of a contract
termination fee note receivable in 1994. Employee leasing operating costs
and expenses decreased 6.8% from $13.0 million in 1994 to $12.1 million in
1995. This decrease is attributable to the decrease in segment revenue as
well as operational efficiencies.
Depreciation and amortization expense increased 98.8% to $2.3 million in 1995
compared to $1.1 million in 1994. This increase was primarily attributable
to the addition of ten Consolidated Hotels to the hotel operations segment
and the resulting depreciation and amortization therefrom.
Leasehold rents - hotels increased 19.0% to $2.0 million in 1995 from $1.7
million in 1994. This increase was due to the addition of three leased
Consolidated Hotels to the hotel operations segment (the Company had held a
minority ownership position in these hotels prior to 1995 when additional
ownership interests were acquired), partially offset by the termination of a
lease agreement for one hotel.
Corporate general and administrative expenses increased 4.9% from $2.0
million in 1994 to $2.1 million in 1995, and can be attributed to the
Company's overall growth.
The Company had $4.3 million in operating income in 1995 increasing 194.7%
from $1.5 million in 1994, or an increase of $2.8 million. Operating income
from the hotel operations segment increased 36.8% from $2.5 million in 1994
to $3.4 million in 1995, resulting primarily from an increase in Consolidated
Hotels from 14 at December 31, 1994 to 24 at December 31, 1995. Operating
income from the hotel operations segment as a percentage of segment revenue
decreased during 1995 compared to 1994 due to a greater number of newly
constructed Consolidated Hotels operating during their initial stabilization
period, when revenues are generally lower. The hotel development segment
operating income increased 194.2% from $711,032 in 1994 to $2.1 million in
1995 as operating income as a percentage of segment revenues also increased
due to a higher level of pre-construction development activity realized in
1995 which has lower revenues and a higher gross margin than construction
activity. Hotel management segment operating income increased from $250,118
in 1994 to $831,007 in 1995, due primarily to the increase in same room
revenues for managed hotels, incentive management fees received in 1995, and
the write-off of a contract termination fee note receivable in 1994.
Employee leasing operating income increased from $149,305 in 1994 to $216,075
in 1995, or $66,770, due primarily from operational efficiencies.
EBITDA increased $4.9 million to a record $9.5 million in 1995 compared to
$4.6 million in 1994, or an increase of 105.4%. The significant changes
resulting in the increase in EBITDA from 1994 to 1995 are discussed above.
Interest expense increased to $1.8 million in 1995 versus $854,880 in 1994,
primarily attributable to an increase in Consolidated Hotels with mortgage
financing.
The Company's share of equity in the operating results of affiliates
increased to $387,439 in 1995 from $31,511 in 1994. This increase was due
primarily to a 10.2% increase in same room revenues for all minority owned
hotels and the gain on the sale of one hotel, which translated into a 392%
increase in net income for these hotels. Distributions from affiliates
increased 32.2% to $505,410 in 1995 from $382,229 in 1994.
The Company recorded income tax expense of $1.3 million in 1995 compared to
income tax expense of $381,000 in 1994, which increase is directly
attributable to the increase in pre-tax income.
1994 Compared with 1993
Revenues increased 26.5% in 1994 to $43.3 million from $34.3 million in 1993.
This increase was attributable to the Company's hotel operations and hotel
development segments.
Hotel operations revenue increased 69.7% to $15.4 million in 1994 compared to
$9.1 million in 1993. This increase was attributable to a significant
increase in average daily rates and the addition of five Consolidated Hotels
to this segment. Hotel operations included fourteen Consolidated Hotels
comprising 1,543 rooms at the end of 1994 versus nine Consolidated Hotels
comprising 1,100 rooms at the end of 1993, or an increase of 40.3% in total
rooms. Same room average daily rates for Consolidated Hotels increased $5.37
to $44.16 in 1994 from $38.79 in 1993.
Hotel development revenue increased 72.7% to $12.0 million in 1994 compared
to $7.0 million in 1993. This increase was attributable to a significant
level of hotel development and construction activity during 1994. The
Company began construction on 15 hotels in 1994 while completing construction
on eight hotels, including two hotels which began construction in 1993. Ten
of these construction starts were pursuant to contracts with unaffiliated
third parties (four) and entities in which the Company has a minority
ownership interest (six) whereby the Company recognized revenues from their
development and construction. The remaining five construction starts were
for Consolidated Hotels. In 1993, the Company completed construction on two
minority-owned hotels which began construction in 1992, started construction
on two Consolidated Hotels which were completed in 1994, and substantially
completed the pre-construction development phase of four projects for
unaffiliated and minority-owned entities which were also completed in 1994.
The increases in hotel operations and hotel development revenues were
partially offset by decreases in hotel management and employee leasing
revenues. The revenue generated from these segments is directly related to
the number of properties managed for unaffiliated hotel owners and entities
in which the Company has a minority interest. Although the number of
minority-owned and managed hotels increased from 26 at the end of 1993 to 29
at the end of 1994, the number of properties managed for unaffiliated third
parties decreased from 14 to 10 during this same period, more than offsetting
the increase in minority-owned hotels. As a result, management fee revenues,
which are based on the managed hotel's revenue, decreased 4.8% in 1994 to
$2.7 million, compared to $2.8 million in 1993. Employee leasing revenues,
which are based on actual employee costs, decreased 14.3% from $15.4 million
in 1993 to $13.2 million in 1994 due to the decrease in properties managed
for unaffiliated third parties and contract revisions for properties located
in one state which resulted in a more favorable tax treatment.
Operating costs and expenses increased 22.0% in 1994 to $37.1 million in 1994
from $30.4 million in 1993, and is directly related to the 26.5% increase in
total revenues. Operating costs and expenses for the hotel operations
segment increased to $10.5 million in 1994 from $6.8 million in 1993, or
54.3%, primarily attributable to the addition of five Consolidated Hotels in
1994. Hotel development operating costs and expenses increased 85.1% from
$6.1 million in 1993 to $11.3 million in 1994 due to the significant level of
new construction activity. Hotel management segment operating costs and
expenses remained consistent at $2.3 million in both 1994 and 1993 as the
total number of properties managed remained relatively constant. Employee
leasing segment operating costs and expenses decreased 14.4% from $15.2
million in 1993 to $13.0 million in 1994 as a result of contract revisions
for properties located in one state. Total operating costs and expenses for
the Company as a percentage of total revenues decreased from 88.7% in 1993 to
85.5% in 1994.
Depreciation and amortization increased 23.0% to $1.1 million in 1994 from
$927,527 in 1993, primarily attributable to the addition of five Consolidated
Hotels offset by a decrease in the amortization of management contracts
acquired. Depreciation and amortization in the hotel operations segment
increased from $308,384 in 1993 to $854,743 in 1994, an increase of 177.2%,
resulting from the additional Consolidated Hotels. Depreciation and
amortization decreased by 64.1% in the hotel management segment in 1994 from
$480,855 in 1993 to $172,753 in 1994 due to the amortization in 1993 of the
remaining acquisition costs associated with the termination of the Grand
American Hotel Management, Inc. management contracts.
Leasehold rents - hotels remained stable at $1.7 million in 1994 and 1993.
Leasehold rents - hotels was increased by the acquisition of a 100% leasehold
interest in a hotel during the first quarter of 1994. This increase was
offset by a decrease in leasehold rents for five hotels pursuant to a lease
amendment which provided for reduced lease payments and extended the
termination date to December 31, 1999.
Corporate general and administrative expense increased from $1.8 million in
1993 to $2.0 million in 1994, or 12.9%. This increase was primarily
attributable to the overall growth of the Company as evidenced by the 26.5%
increase in total revenue.
The Company had $1.5 million in operating income in 1994 compared to an
operating loss of $477,636 in 1993, or an increase of $1.9 million.
Operating income from the hotel operations segment increased nearly seven-
fold from $352,309 in 1993 to $2.5 million in 1994, resulting primarily from
the addition of five Consolidated Hotels as well as a significant increase in
same room revenues for the existing Consolidated Hotels. Operating income in
the hotel management segment increased from $72,229 in 1993 to $250,118 in
1994, due primarily to the decrease in amortization of management contract
acquisition costs. Hotel development operating income decreased from
$851,903 in 1993 to $711,032 in 1994. Hotel development activity reached
significant levels in 1994, however a significant portion of this development
was for Consolidated Hotels whereby revenues and profits are not recognized
by the Company. In addition, 1994 consisted of a larger volume of
construction activity which has a lower gross profit margin than pre-
construction development activity. In 1993, the Company completed a
significant portion of the pre-construction development phase on four
projects built in 1994 for unaffiliated third parties and entities in which
the Company has a minority ownership interest. Operating income in the
employee leasing segment was approximately $150,000 in 1994 and 1993.
EBITDA for 1994 was $4.6 million compared to $2.6 million in 1993. EBITDA
for 1993 does not include a non-cash debt acceleration charge of $485,411
related to the prepayment of subordinated notes. The significant changes
resulting in the increase in EBITDA from 1993 to 1994 are discussed above.
Interest expense was $854,880 in 1994 compared to $589,945 in 1993. This
increase is primarily attributable to an increase in mortgage financing of
newly constructed Consolidated Hotels. This increase was partially offset by
a decrease in interest expense relating to the 7% Subordinated Notes.
The Company's share of equity in net income of affiliates increased to
$31,511 in 1994 from $29,836 in 1993. Excluding a non-operational
distribution resulting from the refinancing of one property in 1993,
distributions from affiliates decreased slightly to $382,229 in 1994 from
$417,486 in 1993.
The Company recorded income tax expense of $381,000 in 1994 compared to an
income tax benefit of $295,600 in 1993.
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 1995, the Company experienced an
increase in cash from operations of $1.9 million, compared to an increase of
$2.2 million in 1994, and $693,334 in 1993. The decrease in cash flow from
operations during 1995 can be attributed to the significant level of hotel
construction activity in 1994. Although a greater number of hotels began
construction in 1995, a significant number of projects were started during
the fourth quarter, and the majority portion of the construction fees will
not be received until 1996 when the hotels are completed. This decrease was
partially offset by an increase in hotel ownership and operation activity and
improvements in occupancy and average daily rates over 1994. In addition to
the positive cash flow from operations of $1.9 million, the Company received
$7.8 million through the financing of Consolidated Hotel projects, net of
principal repayments, and net proceeds of $2.3 million from the Company's
line-of-credit. These increases to cash were more than offset by the use of
$13.5 million in cash for investing activities during 1995, primarily for the
construction of Consolidated Hotel properties. As a result, cash decreased
$1.7 million during 1995.
The Company has four main sources of cash from operating activities:
revenues from hotel operations; fees from development, construction and
renovation projects; fees from management contracts; and fees from employee
leasing. Cash from hotel operations is typically received at the time the
guest checks out of the hotel. A portion of the Company's hotel operations
revenues is generated through other businesses and contracts and are usually
paid within 30 to 45 days from billing. Hotel operations experienced
operating income of $3.4 million during 1995 compared to $2.5 million during
1994. 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 1995,
development, construction and renovation projects contributed $2.1 million to
the Company's operating income compared to $711,032 in 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 $831,007 to
the Company's operating income in 1995 compared to $250,118 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
$216,075 and $149,305 in operating income during 1995 and 1994, respectively.
During 1995, the Company used $13.5 million in investing activities compared
to $8.8 million during 1994. 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 minority equity interests
in hotels; and loans to affiliated and non-affiliated hotels for the purpose
of construction, renovation and working capital. In 1995, the Company used
$12.5 million to purchase property and equipment for Consolidated Hotels,
used $332,800 for the purchase of minority equity interests in hotels, and
used $946,857 for loans to affiliates, net of loan collections. In 1994, the
Company used $7.9 million to purchase property and equipment for Consolidated
Hotels, used $349,015 for the purchase of minority equity interests in
hotels, and used $607,225 for loans to affiliates, net of loan collections.
In addition, the Company received distributions from investments in hotels of
$505,410 in 1995 compared to $382,229 in 1994. The Company enters into
agreements with contractors for the construction of Consolidated Hotels,
including hotels under construction at December 31, 1995, after both the
construction and long-term mortgage financing is in place. A significant
portion of the notes receivable from affiliates is for construction advances
which will be collected as the construction of the hotels progresses and the
equity and debt financing becomes available to the affiliate through the draw
process. 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 $9.9 million in 1995 compared to
$7.7 million in 1994. In 1995, the primary factors were proceeds of $7.8
million from the mortgage financing of Consolidated Hotels, net of principal
repayments, and $2.3 million in net proceeds from the Company's operating
line-of-credit. In 1994, the contributing factor was proceeds of $7.1
million from the mortgage financing of Consolidated Hotels, net of principal
repayments. The Company's line-of-credit was increased effective May 1, 1995
to $3,500,000 and expires on May 1, 1996. The Company's operating line-of-
credit had a balance of $2.3 million at December 31, 1995. In December of
1995, the same bank providing the operating line-of-credit approved a $7.5
million line-of-credit to be used for construction financing on projects
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 December 31, 1995. On February 1, 1996,
the Company secured an additional $1.5 million line-of-credit from the same
bank under terms and conditions similar to its existing operating line-of-
credit.
The Company expects cash from operations to be sufficient to pay all
operating expenses and debt service 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 if 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 Statement requires that companies adopt
this standard for fiscal years beginning after December 15, 1995. The
Company adopted this standard on January 1, 1996. Management believes that
the impact of SFAS No. 121 on the 1996 financial statements will not be
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.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements filed as a part of this Form 10-K are
included under "Exhibits, Financial Statements and Reports on Form 8-K" under
Item 14.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
There have been no disagreements on accounting and financial disclosure
matters which are required to be described by Item 304 of Regulation S-K.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The Company's executive officers and directors are:
Name Age Position
H. Andrew Torchia 52 Chairman of the Board and Director
Michael P. Holtz 39 President, Chief Executive Officer
and Director
Richard A. D'Onofrio 52 Executive Vice President and
Director
Russell J. Cerqua 39 Senior Vice President of Finance,
Secretary, Treasurer, Chief
Financial Officer and Director
Reno J. Bernardo 64 Director
Robert L. Barney 59 Director
H. Andrew Torchia, a co-founder of the Company, has been a Director of the
Company since its inception in 1984. Mr. Torchia was President and Chief
Executive Officer of the Company from 1985 until 1989, when he became
Chairman of the Board of the Company. As Chairman, Mr. Torchia's primary
areas of responsibility include business development, corporate finance and
strategic and financial planning. Mr. Torchia is also the President and 51%
stockholder of Urban 2000 Corp. ("Urban"), a hotel development consulting
firm and franchise broker, which was initially the 100% parent of the Company
and is currently a principal stockholder. See "Principal Stockholders" under
Item 12. Mr. Torchia is also the Secretary of AHMCO Corporation ("AHMCO"), a
hotel management company in which Mr. Torchia owns a 50% interest which
manages only one property, the Best Western at O'Hare. Mr. Torchia has had
27 years of experience in hotel development, operations and franchising as
head of regional development for Best Western International, and as a head of
independent franchise sales organizations for Quality Inns International and
Days Inns.
Michael P. Holtz has been a Director of the Company since August 1985. From
1985 to 1988, Mr. Holtz served as the Company's Treasurer and Secretary. In
1986, Mr. Holtz was promoted to Chief Operating Officer of the Company with
direct responsibility for the Company's day to day operations. In 1988, Mr.
Holtz was elected President and Chief Executive Officer of the Company. Mr.
Holtz is responsible for development and implementation of all Company
operations including hotel development, finance and management. Mr. Holtz
has over 20 years experience in hotels operations, management and
renovations. Mr. Holtz earned a Masters Degree in Business Administration
and a Bachelor of Science degree from Wright State University in Dayton,
Ohio.
Richard A. D'Onofrio, a co-founder of the Company, has been a Director of the
Company since its inception in 1984. From 1985 to 1989, Mr. D'Onofrio served
as Vice President of the Company. In 1989, Mr. D'Onofrio was promoted to
Executive Vice President. His principal areas of responsibility include
corporate finance, corporate marketing, investments, and the Company's
relationships with the financial community. Mr. D'Onofrio has been involved
in various capacities within the hotel and related industries, including the
conceptualization and development of franchised restaurants. In addition,
Mr. D'Onofrio owned and operated the Quality Inn in Youngstown, Ohio, through
1987. Mr. D'Onofrio acquired 49% of Urban 2000 Corp. ("Urban") during 1994,
a hotel development consulting firm and franchise broker, which was initially
the 100% parent of the Company and is currently a principal stockholder. See
"Principal Stockholders" under Item 12.
Russell J. Cerqua has been the Senior Vice President of Finance of the
Company since 1987, and Treasurer and a Director of the Company since 1988.
In 1989, in addition to his other responsibilities, Mr. Cerqua was elected
Secretary of the Company. His primary responsibilities include internal and
financial reporting, corporate and property financing, development of
financial management systems, hotel accounting for managed properties and
financial analysis. Prior to joining the Company, Mr. Cerqua was an audit
manager with Laventhol & Horwath, the Company's former independent certified
public accountants, and was responsible for the Company's annual audits.
Mr. Cerqua was involved in public accounting for over 9 years, with
experience in auditing, financial reporting and taxation. Mr. Cerqua is a
Certified Public Accountant, and a member of the American Institute of
Certified Public Accountants and the Illinois CPA Society.
Reno J. Bernardo served as the Senior Vice President of Construction of the
Company from 1987 through March 1994, when he went on disability. In 1989,
Mr. Bernardo became a Director of the Company and continues to serve in this
capacity. His primary responsibilities included managing construction of new
properties and directing renovation projects. From 1985 to 1986, Mr.
Bernardo was Vice President of Construction with Devcon Corporation, a hotel
construction company. From 1982 to 1985, Mr. Bernardo was Project
Superintendent with J.R. Trueman and Associates, a hotel construction
company, and a subsidiary of Red Roof Inns. His responsibilities included
supervision of the development and construction of several Red Roof Inns.
Robert L. Barney is currently the sole shareholder, President and Chief
Executive Officer of Rolling Meadows Golf Club & Estates in Columbus, Ohio.
Mr. Barney was a director of Wendy's International, Inc. ("Wendy's"), a
restaurant company, when it was founded in 1969. In July 1971, Mr. Barney
was appointed President and Chief Operating Officer and in February 1980
became the Chief Executive Officer in which capacity he served until February
1989. Mr. Barney also served as Chairman of the Board of Wendy's from
September 1982 until retiring in May 1990, and continued to consult Wendy's
until May 1992. Prior to his affiliation with Wendy's, Mr. Barney held
positions with Kentucky Fried Chicken and Arthur Treacher's Fish & Chips
while owning several franchises for these two restaurant chains. Since
December 1991, Mr. Barney has served as a director of Quantum Restaurant
Group, Inc., owner of four restaurant chain concepts including Mortons Steak
House. Mr. Barney has been a Director of the Company since July 1995.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth certain information concerning the annual and
long-term compensation for services as officers to the Company for the fiscal
years ended December 31, 1995, 1994 and 1993, of those persons who were, at
December 31, 1995 (i) the chief executive officer, and (ii) the other two
most highly compensated executive officers of the Company (the "Named
Officers"). See "Compensation of Directors" under Item 11.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Long-Term
Annual Compensation Compensation
Name and Principal Stock Stock
Position Year Salary Cash Bonus Bonus Options(1)
<S> <C> <C> <C> <C> <C>
Michael P. Holtz 1995 $ 322,115 $ 0 $ 196,927 360,000
President and Chief 1994 244,913 75,000 75,000 60,000
Executive Officer 1993 117,741 177,759 0 0
Russell J. Cerqua 1995 $ 149,423 $ 0 $ 56,690 153,333
Senior Vice President 1994 132,692 15,000 15,000 30,000
Finance, Secretary, 1993 75,000 43,900 0 0
Treasurer and Chief
Financial Officer
Richard A. D'Onofrio 1995 $ 137,500 $ 27,500 $ 0 120,000
Executive Vice President 1994 162,528 0 0 30,000
1993 99,010 15,000 0 0
(1) Options for the purchase of 60,000, 30,000, and 30,000 shares of Common
Stock granted to Messrs. Holtz, Cerqua and D'Onofrio vested as of October
5, 1994. Options for the purchase of 260,000, 120,000, and 120,000
shares of Common Stock granted to Messrs. Holtz, Cerqua and D'Onofrio,
respectively, vest as follows: 135,000 as of January 1, 1995, 165,000 as
of January 1, 1996, and 200,000 as of January 1, 1997. Options for the
purchase of 100,000 and 33,333 shares of Common Stock granted to Messrs.
Holtz and Cerqua, respectively, vested as of December 1, 1995.
</TABLE>
BONUS PLANS
In April of each year, the Company issues restricted Common Stock to its
employees as an incentive for their continued employment. The Company's
management determines those employees who are entitled to receive such Common
Stock bonus. During 1995, the Company issued 6,775 shares of Common Stock,
none of which were issued to the Named Officers reflected above.
OPTIONS
The options described in the following tables have been granted other than
pursuant to the Incentive Stock Plan or Non-Qualified Plan. There were no
options exercised by the Named Officers in 1995.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
Potential Realizable Value at
Assumed Annual Rates of
Stock Price Appreciation
Individual Grants for Option Term
% of Total
Options
Granted to Exercise or
Options Employees in Base Price Expiration
Name Granted Fiscal Year ($/Sh) Date 5% ($) 10% ($)
<S> <C> <C> <C> <C>
Michael P. Holtz 260,000 27.99% $3.56 Jan. 2007 666,657 1,748,790
100,000 10.77% $6.50 Dec. 2005 388,420 1,003,511
360,000 38.76% 1,055,077 2,752,301
Russell J. Cerqua 120,000 12.92% $3.56 Jan. 2007 310,198 815,308
33,333 3.59% $6.50 Dec. 2005 129,472 334,500
153,333 16.51% 439,670 1,149,808
Richard A. D'Onofrio 120,000 12.92% $3.56 Jan. 2007 268,852 681,325
</TABLE>
OPTION EXERCISES AND YEAR-END VALUE TABLE
<TABLE>
<CAPTION>
Number of Unexercised Options Held at Value of Unexercised in-the-Money
December 31, 1995 Options at December 31, 1995 (1)
Name Exercisable Unexercisable Exercisable Unexercisable
<S> <C> <C> <C> <C>
Michael P. Holtz 332,000 198,000 $501,313 $500,438
Richard A. D'Onofrio 190,688 103,000 379,789 245,125
Russell J. Cerqua 132,833 94,875 219,125 243,094
Reno J. Bernardo 39,500 4,875 74,750 1,219
_______________
(1) Fiscal year ended December 31, 1995. The closing sale price of the
Company's Common Stock on such date on the Nasdaq National Market was
$6.25.
</TABLE>
COMPENSATION OF DIRECTORS
Each Director of the Company receives an annual retainer fee of $9,000 ($750
per month). Each Director of the Company also receives $250 for each Board
of Directors meeting attended in person, $150 for each Board of Directors
meeting conducted by telephone and $150 for each committee meeting. In
addition, each Director is reimbursed for all out-of-pocket expenses related
to attendance at Board meetings.
Mr. Torchia, a Director of the Company, also receives indirect compensation
through a consulting agreement between the Company and Urban which commenced
in January 1991. Under the terms of the consulting agreement, Urban receives
a monthly consulting fee of $20,000 for the provision of business development
services to the Company. The Company also paid Urban $236,138 in additional
fees in 1995, for transactions brought to the Company. In addition, Urban
received $82,400 in transactional fees in 1995, directly from partnerships in
which the Company is a general partner. See "Certain Relationships and
Related Transactions" under Item 13.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth certain information regarding beneficial
ownership of the Company's Common Stock as of March 15, 1996, by (i) each
person who is known by the Company to own beneficially more than 5% of the
Company's Common Stock, (ii) each of the Company's Directors, (iii) each of
the Named Officers and (iv) all Directors and executive officers as a group.
<TABLE>
<CAPTION>
Shares Beneficially Owned
As of March 15, 1996
Name Number Percent
<S> <C> <C>
Michael P. Holtz 711,498 (1) 11.1
Wellington Management Company 568,300 (2) 9.5
Massachusetts Financial Services Company 516,500 (3) 8.6
H. Andrew Torchia (6) 434,680 (1)(4) 7.0
Richard A. D'Onofrio 425,727 (1)(5) 6.9
Russell J. Cerqua 245,805 (1) 4.0
Reno J. Bernardo 86,766 (1) 1.4
Robert L. Barney 0 .0
ALL DIRECTORS AND EXECUTIVE
OFFICERS AS A GROUP (6 PERSONS) 1,904,476 26.9
(1) Includes shares subject to options exercisable presently or
within 60 days as follows: Mr. Holtz, 417,000 shares, Mr.
Torchia, 232,063 shares, Mr. D'Onofrio, 230,688 shares, Mr.
Cerqua, 172,833 shares, Mr. Bernardo, 39,500 shares.
(2) Wellington Management Company ("WMC"), in its capacity as
investment advisor, may be deemed beneficial owner of 568,300
shares of the Company which are owned by numerous investment
counselling clients. Of the shares shown above, WMC has shared
voting power for 314,000 shares and shared investment power for
568,300 shares.
(3) Massachusetts Financial Services Company ("MFS"), in its capacity
as investment manager, may be deemed beneficial owner of 516,500
shares of the Company which are also beneficially owned by MFS
Series Trust II - MFS Emerging Growth Stock Fund, shares of which
are owned by numerous investors. MFS has sole voting and
investment power for the 516,500 shares.
(4) Includes 191,674 shares owned by Urban 2000 Corp. and 1,543
shares owned by Niles 1290 Corp., a wholly-owned subsidiary of
Urban 2000 Corp. Mr. Torchia is the President and 51%
stockholder of Urban 2000 Corp.
(5) Includes 184,158 shares owned by Urban 2000 Corp. and 1,482
shares owned by Niles 1290 Corp., a wholly-owned subsidiary of
Urban 2000 Corp. Mr. D'Onofrio is a 49% stockholder in Urban
2000 Corp.
(6) The address of this stockholder is c/o Amerihost Properties,
Inc., 2400 East Devon, Suite 280, Des Plaines, Illinois.
</TABLE>
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Urban 2000 Corp. ("Urban") is a principal shareholder of the Company and is
owned 51% by H. Andrew Torchia, the Chairman of the Board and a Director of
the Company, and 49% by Richard D'Onofrio, the Executive Vice President and a
Director of the Company. Urban, a licensed franchise broker, through
December 1993, was working with HFS, Inc. under a franchise brokerage
agreement, whereby Urban received commissions for the sale of franchises,
including sales to the Company and its affiliates. Urban and Torchia were
also entitled to referral fees for sales of HFS, Inc. system franchises to
unaffiliated third parties under certain circumstances. The Company's
affiliates previously have purchased HFS, Inc. system franchises through
Urban; however, such purchases have never been a significant expense to the
Company. The prices for such franchise license agreements were at least as
favorable as the prices the Company would have paid to a comparable
franchising company. The Company's relationship with Urban has provided the
Company with access to leads for hotel development projects. Many of the
Company's development projects, acquisitions, management contracts and
relationships with investors, developers and third party owners have been
established through Urban's contacts.
Urban and Mr. Torchia provide business development and consulting service to
the Company under a consulting agreement with Urban which commenced in
January 1991. Under the terms of this agreement, Urban receives a monthly
consulting fee of $20,000 plus the use of the Company's telephone system. No
additional amounts are paid to Urban for reimbursement of expenses. As part
of this arrangement, Mr. Torchia no longer receives compensation for the
services he provides to the Company in his capacity as an Officer of the
Company. Consistent with standard industry practices, the Company pays Urban
additional fees for transactions brought to the Company. During 1995, Urban
received $236,138 in additional fees from the Company and received $82,400 in
other transactional fees directly from partnerships in which the Company is a
general partner.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS AND REPORTS ON FORM 8-K.
Financial Statements:
The following consolidated financial statements are filed as part of this
Report on Form 10-K for the fiscal year ended December 31, 1995.
(a)(1) Financial Statements:
Report of Independent Certified Public Accountants . . . . . . . . F-1
Consolidated Balance Sheets at December 31, 1995
and 1994 . . . . . . . . . . . . . . . . . . F-2
Consolidated Statements of Operations for the years
ended December 31, 1995, 1994 and 1993 . . . . . F-4
Consolidated Statements of Shareholders' Equity
for the years ended December 31, 1995, 1994 and 1993 . . . . . F-5
Consolidated Statements of Cash Flows for the years
ended December 31, 1995, 1994 and 1993 . . . . . F-6
Notes to Consolidated Financial Statements . . . . F-8
(a)(3) Exhibits:
The following exhibits were included in the Registrant's Report on Form 10-K
filed on March 26, 1993, and are incorporated by reference herein:
Exhibit No. Description
3.1 Amended and Restated Certificate of Incorporation of
Amerihost Properties, Inc.
3.2 By-laws of Amerihost Properties, Inc.
4.2 Specimen Common Stock Purchase Warrant for Employees
4.3 Specimen 7% Subordinated Note
4.4 Specimen Common Stock Purchase Warrant for 7% Subordinated
Noteholders
4.5 Form of Registration Rights Agreement for 7% Subordinated
Noteholders
10.1 Non-Qualified Stock Option Plan
10.2 Incentive Stock Option Plan
The following exhibits were included in the Registrant's Report on Form 10-K
filed on March 25, 1994, and are incorporated by reference herein:
Exhibit No. Description
10.4 Urban 2000 Corp. Consulting Agreement
The following exhibits are included in this Report on Form 10-K dated March
19, 1996:
Exhibit No. Description
21.1 Subsidiaries of the Registrant
23.1 Consent of BDO Seidman, LLP
27.0 Financial Statement Schedule
Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter ended December 31,
1995.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /s/ Michael P. Holtz
Michael P. Holtz
Chief Executive Officer
By: /s/ Russell J. Cerqua
Russell J. Cerqua
Chief Financial Officer
By: /s/ James B. Dale
James B. Dale
Corporate Controller
March 19, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
/s/ H. Andrew Torchia /s/ Michael P. Holtz
H. Andrew Torchia, Director Michael P. Holtz, Director
March 19, 1996 March 19, 1996
/s/ Russell J. Cerqua /s/ Richard A. D'Onofrio
Russell J. Cerqua, Director Richard A. D'Onofrio,Director
March 19, 1996 March 19, 1996
/s/ Reno J. Bernardo /s/ Robert L. Barney
Reno J. Bernardo, Director Robert L. Barney, Director
March 19, 1996 March 19, 1996
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To The Board of Directors of
Amerihost Properties, Inc.
We have audited the accompanying consolidated balance sheets of Amerihost
Properties, Inc. and subsidiaries as of December 31, 1995 and 1994 and the
related consolidated statements of operations, shareholders' equity, and cash
flows for each of the three years in the period ended December 31, 1995.
These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Amerihost Properties, Inc. and subsidiaries at December 31, 1995 and 1994,
and the results of their operations and their cash flows, for each of the
three years in the period ended December 31, 1995, in conformity with
generally accepted accounting principles.
BDO Seidman, LLP
Chicago, Illinois
February 29, 1996
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1995 1994
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,371,278 $ 3,026,029
Accounts receivable (including $802,164
and $703,465 from related parties)
(Note 12) 3,270,094 2,457,233
Notes receivable (including $1,752,126
and $1,687,178 from related parties) (Note 3) 1,965,048 1,834,908
Prepaid expenses and other current assets 188,163 370,471
Refundable income taxes 230,530 -
Costs and estimated earnings in excess of
billings on uncompleted contracts
(including $3,574,939 and $1,315,707
from related parties) (Notes 4 and 12) 3,900,879 2,005,274
Total current assets 10,925,992 9,693,915
Investments (Notes 5 and 7) 2,388,999 2,995,234
Property and equipment (Notes 8, 9 and 15):
Land 4,236,309 2,240,952
Buildings 22,075,629 9,124,901
Furniture, fixtures and equipment 9,204,377 3,784,608
Construction in progress 662,159 2,253,456
Leasehold improvements 2,050,654 791,800
38,229,128 18,195,717
Less accumulated depreciation and amortization 5,404,102 1,729,611
32,825,026 16,466,106
Long-term notes receivable (including
$1,450,616 and $1,272,612 from related
parties) (Note 3) 2,863,580 2,737,882
Costs of management contracts acquired, net of
accumulated amortization of $913,393 and
$768,324 (Note 2) 664,110 492,253
Other assets (including deferred taxes of $383,000
and $487,000), net of accumulated amortization
of $1,451,715 and $769,669 (Notes 6 and 11) 2,785,595 2,018,192
6,313,285 5,248,327
$ 52,453,302 $ 34,403,582
</TABLE>
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December 31, December 31,
1995 1994
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $ 3,751,097 $ 3,224,973
Bank line-of-credit (Note 7) 2,317,036 -
Accrued payroll and related expenses 688,648 679,971
Accrued real estate and other taxes 606,468 362,409
Other accrued expenses and current liabilities 666,352 262,331
Current portion of long-term debt (Note 8) 1,042,847 566,808
Income taxes payable - 415,197
Total current liabilities 9,072,448 5,511,689
Long-term debt, net of current portion
(Notes 8 and 10) 23,971,481 12,975,226
Deferred income 686,388 1,051,457
Commitments (Notes 9, 14 and 15)
Minority interests 1,456,226 1,192,925
Shareholders' equity (Notes 9, 12, 14 and 16):
Preferred stock, no par value; authorized 100,000 shares;
none issued - -
Common stock, $.005 par value; authorized 15,000,000 shares;
issued 5,977,213 shares at December 31, 1995, and
5,570,013 shares at December 31, 1994 29,886 27,850
Additional paid-in capital 16,920,237 15,465,891
Retained earnings (deficit) 1,709,803 (428,289)
18,659,926 15,065,452
Less:
Stock subscriptions receivable (Note 3) (436,875) (436,875)
Notes receivable (Note 2) (956,292) (956,292)
17,266,759 13,672,285
$ 52,453,302 $ 34,403,582
</TABLE>
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Revenue:
Hotel operations $ 24,359,999 $ 15,428,022 $ 9,091,778
Development and construction 12,238,128 12,036,918 6,970,709
Management services 3,010,935 2,711,637 2,849,673
Employee leasing 12,353,355 13,169,942 15,361,940
51,962,417 43,346,519 34,274,100
Operating costs and expenses:
Hotel operations 17,065,041 10,457,154 6,779,306
Development and construction 10,117,782 11,315,973 6,112,327
Management services 2,003,310 2,288,765 2,296,589
Employee leasing 12,131,262 13,014,542 15,201,158
41,317,395 37,076,434 30,389,380
10,645,022 6,270,085 3,884,720
Depreciation and amortization 2,268,181 1,140,801 927,527
Leasehold rents - hotels 1,976,154 1,660,903 1,651,778
Corporate general and administrative 2,110,939 2,012,710 1,783,051
Operating income (loss) 4,289,748 1,455,671 (477,636)
Other income (expense):
Interest expense (1,755,745) (854,880) (589,945)
Interest income 560,724 428,353 479,405
Other income 44,099 37,836 24,518
Equity in net income and losses of affiliates 387,439 31,511 29,836
Debt acceleration charge - - (485,411)
Income (loss) before minority interests
and income taxes 3,526,265 1,098,491 (1,019,233)
Minority interests in operations of
consolidated subsidiaries and partnerships (59,173) (146,070) (37,660)
Income (loss) before income tax 3,467,092 952,421 (1,056,893)
Income tax expense (benefit) 1,329,000 381,000 (295,600)
Net income (loss) $ 2,138,092 $ 571,421 $ (761,293)
Net income (loss) per share $ 0.35 $ 0.10 $ (0.15)
</TABLE>
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993
<TABLE>
<CAPTION>
Stock
subscrip-
Common stock Additional tions Total
paid-in and notes shareholders'
Shares Amount capital Deficit receivable equity
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1993 2,193,646 $ 10,968 $ 4,083,430 $ (238,417) $ 0 $ 3,855,981
Authorized shares issued upon note conversion 278,125 1,391 1,039,429 1,040,820
Authorized shares issued upon warrant exercise
(Notes 9 and 14) 1,440,790 7,204 430,296 (436,875) 625
Authorized shares issued in public offering (Note 9) 1,550,000 7,750 9,564,794 9,572,544
Authorized shares issued for compensation and investment 13,143 66 62,010 62,076
Reclassification of note receivable (Note 2) (990,000) (990,000)
Net loss for the year ended December 31, 1993 (761,293) (761,293)
BALANCE AT DECEMBER 31, 1993 5,475,704 27,379 15,179,959 (999,710) (1,426,875) 12,780,753
Authorized shares issued for compensation and investment 94,309 471 285,932 286,403
Sale of note and receivables to officers (Note 2) 990,000 990,000
Collateralized notes receivable from officers (Note 2) (956,292) (956,292)
Net income for the year ended December 31, 1994 571,421 571,421
BALANCE AT DECEMBER 31, 1994 5,570,013 27,850 15,465,891 (428,289) (1,393,167) 13,672,285
Authorized shares issued for compensation and investment 407,200 2,036 1,454,346 1,456,382
Net income for the year ended December 31, 1995 2,138,092 2,138,092
BALANCE AT DECEMBER 31, 1995 5,977,213 $ 29,886 $16,920,237 $ 1,709,803 $(1,393,167) $17,266,759
</TABLE>
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 49,673,144 $ 42,775,919 $ 34,422,093
Cash paid to suppliers and employees (44,715,078) (40,282,468) (32,953,736)
Interest received 491,749 313,128 386,833
Interest paid (1,660,803) (803,054) (623,684)
Income taxes refunded (paid) (1,870,727) 211,197 (538,172)
Net cash provided by operating activities 1,918,285 2,214,722 693,334
Cash flows from investing activities:
Distributions from affiliates 505,410 382,229 548,882
Purchase of property and equipment (12,539,148) (7,872,269) (8,291,502)
Purchase of investments (332,800) (349,015) (1,005,600)
Increase in notes receivables (2,332,472) (1,568,266) (2,794,345)
Collections on notes receivables 1,385,615 961,041 927,174
Preopening and management contract costs (316,926) (279,000) (55,000)
Sale of investments 55,000 25,000 25,000
Other 69,124 (63,938) (91,889)
Net cash used in investing activities (13,506,197) (8,764,218) (10,737,280)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 8,478,903 7,444,998 3,447,587
Principal payments of long-term debt (724,709) (388,844) (2,405,865)
Proceeds from line of credit 4,461,182 1,290,000 1,275,000
Repayment on line of credit (2,144,146) (1,290,000) (1,275,000)
(Decrease) increase in minority interest (138,069) 634,036 327,125
Proceeds from issuance of common stock - - 9,614,577
Increase in deferred offering costs - - (82,738)
Principal payments of notes payable - - (250,000)
Net cash provided from financing activities 9,933,161 7,690,190 10,650,686
Net (decrease) increase in cash (1,654,751) 1,140,694 606,740
Cash and cash equivalents, beginning of year 3,026,029 1,885,335 1,278,595
Cash and cash equivalents, end of year $ 1,371,278 $ 3,026,029 $ 1,885,335
</TABLE>
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Reconciliation of net income (loss) to net
cash provided by operating activities:
Net income (loss) $ 2,138,092 $ 571,421 $ (761,293)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation 1,787,080 796,702 315,317
Amortization 481,101 344,099 612,210
Debt acceleration charge - - 485,411
Decrease (increase) in deferred taxes, net of
valuation allowance 104,000 (199,000) (108,000)
Equity in net (income) loss of affiliates before
amortization of deferred income (214,884) 47,322 40,372
Minority interests in net income of subsidiaries 59,173 146,070 37,660
Amortization of deferred income (172,555) (78,833) (70,208)
Amortization of deferred interest (5,633) (8,571) (15,000)
Amortization of loan discount 45,393 45,393 73,602
Compensation paid through issuance of common stock 212,843 98,832 26,655
Loss (gain) on sale of investments and equipment 18,585 (24,572) (24,490)
Partnership interests received in lieu of cash - - (100,000)
Write-off of note receivable - 190,000 -
Changes in assets and liabilities, net of effects
of acquisitions:
(Increase) decrease in accounts receivable (519,695) 72,554 263,432
Decrease (increase) in prepaid expenses and
other current assets 251,305 (197,373) (160,935)
(Increase) decrease in refundable income taxes (230,530) 376,000 (376,000)
Increase in costs and estimated earnings in
excess of billings (1,895,605) (907,658) (237,748)
Increase in other assets (547,318) (467,661) (293,281)
Increase in accounts payable 471,881 278,059 897,038
(Decrease) increase in income taxes payable (415,197) 415,197 (349,800)
Increase in accrued payroll and other accrued
expenses and current liabilities 300,700 565,292 400,997
Increase (decrease) in accrued interest 49,549 6,433 (107,342)
Increase in deferred income - 145,016 144,737
Net cash provided by operating activities $ 1,918,285 $ 2,214,722 $ 693,334
</TABLE>
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Organization:
Chicagoland Concessions, Inc. (the "Company") was incorporated under
the laws of Delaware on September 19, 1984, to operate concession
stands in the Chicago metropolitan area. On September 19, 1985, the
Company changed its name to America Pop, Inc.
In December, 1986, the Company ceased its operations of all concession
stand facilities and during 1987, repositioned itself into hotel/motel
development, construction and ownership/operation. In order to more
appropriately reflect the nature of the Company's business, on August
21, 1987, the Company changed its name to Amerihost Properties, Inc.
("API").
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.
Construction accounting:
Development fee revenue from construction/renovation projects is
recognized using the percentage-of-completion method 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.
Construction period interest in the amount of $119,749 and $37,222 was
capitalized in 1995 and 1994, respectively, and included in property
and equipment.
Cash equivalents:
The Company considers all investments with a maturity of three months
or less to be cash equivalents.
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 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<PAGE>
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.
Fair value of financial instruments:
The carrying values reflected in the consolidated balance sheet at
December 31, 1995 reasonably approximate the fair values for cash and
cash equivalents, accounts and contracts receivable and payable, and
variable rate long-term debt. The majority of the notes receivable are
collateralized by shares of the Company's common stock, investments in
hotels, a second mortgage on a hotel property, and personal guarantees.
Construction/renovation and working capital notes are repaid to the
Company within a relatively short period after their origination. The
notes receivable bear interest at rates approximating the current
market rates and the carrying value approximates their fair value. The
Company estimates that the fair value of its fixed rate long-term debt
at December 31, 1995 approximates the carrying value considering the
property specific nature of the notes and in certain cases, the
subordinated nature of the debt. In making such assessments, the
Company considered the current rate at which the Company could borrow
funds with similar remaining maturities and discounted cash flow
analysis as appropriate.
Investments:
Investments are accounted for using the equity method, under which
method the original investment is increased (decreased) by the
Company's share of 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, fixtures and equipment 5-7 years
Leasehold improvements 3-10 years
Costs of management contracts acquired:
The costs of management contracts acquired includes amounts paid to
acquire management contracts and pre-opening costs incurred in
connection with new management contracts. These amounts are being
amortized by use of the straight-line method over periods ranging from
two to five years.
Other assets:
Cost in excess of net assets of subsidiaries:
Cost in excess of net assets of subsidiaries 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 terms of the
leases.
Deferred subordinated note costs:
Deferred subordinated note costs represent the costs incurred in
issuing 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 licenses, 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. (Note
2)
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.
Earnings (loss) per share:
Computations of earnings per share of common stock are computed by
dividing net income by the weighted average number of shares of common
stock and dilutive common stock equivalents. Net loss per share is
computed by dividing the net loss by the weighted average number of
shares of common stock. Common stock equivalents include stock options
and warrants. The weighted average number of shares used in the
computations were equal to 6,124,750, 5,624,478 and 5,037,918 for the
years ended December 31, 1995, 1994 and 1993, respectively.
Advertising:
The costs of advertising, promotion and marketing programs are charged
to operations in the year incurred. These costs were approximately
$462,000, $218,000, and $167,000 for the years ended December 31, 1995,
1994 and 1993, respectively.
Estimates:
The accompanying consolidated financial statements include estimated
amounts and disclosures based on management's assumptions about future
events. Actual results may differ from those estimates.
Reclassifications:
Certain reclassifications have been made to the 1993 and 1994 financial
statements in order to conform to the 1995 presentation.
2. MANAGEMENT CONTRACTS:
Diversified
On November 9, 1991, the Company entered into agreements with
Diversified Innkeepers, Inc., its shareholders and various affiliates
("Diversified") to acquire management contracts for eleven properties
in the Southeastern United States for cash and stock in the total
amount of $548,772, which is being amortized over the term of the
management contracts which have been renewed through September 30,
2000. In addition, the Company issued warrants to acquire 125,000
shares of the Company's Common Stock, and agreed to loan Diversified a
total of $1,500,000 (Note 3).
Grand
On May 21, 1992, the Company entered into agreements with Grand
American Hotel Management, Inc. ("Grand"), its shareholders and certain
other entities owned by the shareholders of Grand to acquire seven
management contracts for cash and stock in the amount of $401,676. In
addition, the Company issued warrants to acquire 210,050 shares of the
Company's Common Stock, which were subsequently exercised, and agreed
to loan the shareholders of Grand a total of $800,000 (the "Original
Note") with interest at the rate of 10% per annum. The note was
collateralized by 165,784 shares of the Company's Common Stock.
During 1993, the Company and Grand agreed to terminate the Company's
management of the seven properties. In connection with the termination
agreement, the terms of the Original Note were revised as of June 1,
1993 providing for an additional $190,000 note (the "Termination Note")
due to the Company for a management contract termination fee, a reduced
interest rate on the Original Note, and monthly principal payments on
both notes through April 1995 with a final payment of $736,000 on May
31, 1995. The Company did not receive any payments for principal or
interest in 1994. The Termination Note was written off in 1994.
In November 1994, the Company notified Grand of its intention to take
the 165,784 shares of common stock in lieu of the $800,000 note and
$156,292 in related receivables. Prior to taking possession of the
stock, in December 1994, two of the Company's officers executed notes
in the amount of $956,292 to the Company for the purchase of the
Original Note and related receivables, and the 165,784 shares of the
Company's stock held as collateral on the Original Note. The officer
notes provide for annual payments of interest only at 8% per annum,
with the principal balance due December 31, 1997 and are collateralized
by a total of 273,369 shares of the Company's Common Stock. The
officers have the option to pay interest and principal with shares of
the Company's Common Stock, whereby the number of shares offered must
have a fair market value at time of payment equal to the amount then
due. These notes receivable have been classified as a reduction of
shareholders' equity on the accompanying balance sheets.
3. NOTES RECEIVABLE:
Related parties:
On June 20, 1990, the Company loaned $150,000 to the Hammond, Indiana
490 Partnership, which leases and operates the Ramada Inn Hammond. The
note is due on demand and provides for interest at the rate of 10% per
annum. The balance of this note was $122,493 at December 31, 1995 and
1994. During 1995, the Hammond, Indiana 490 Partnership contributed
its leasehold interests and other assets to a newly formed LLC in
exchange for a 35.0% interest. The LLC has since closed the Ramada
Inn, razed a portion of the building and begun renovation of the 86
remaining rooms. This new hotel is scheduled to open in March 1996 as
an AmeriHost Inn. In March 1996, the Company exchanged the note
receivable for an additional 49% ownership interest in the Hammond,
Indiana 490 Partnership.
During 1993 the Company loaned $723,843, with interest at the rate of
10% per annum, to Euless, TX 1192 General Partnership to be used for
the acquisition, renovation and operation of the Ramada Inn Euless,
Texas. The loan and interest are to be paid from priority
distributions from the partnership. Additional amounts of $120,348 and
$318,769 were loaned during 1995 and 1994, respectively.
During 1994 the Company loaned $525,000, with interest at a rate of
10%, to Macomb, IL 994 Limited Partnership to be used for the
development and construction of the Amerihost Inn Macomb, Illinois.
The entire loan and accrued interest were repaid during 1995 using the
proceeds from the syndication of the limited partnership interests.
The Company has advanced a total of $1,832,788 and $1,220,184 at
December 31, 1995 and 1994, respectively, to other partnerships in
which the Company has a minority ownership interest for working capital
and construction purposes. The advances bear interest rates ranging
from 10% to prime plus 3% and are due on demand. The Company expects
the partnerships to repay these advances through cash flow generated
from hotel operations and mortgage financings.
Other:
As part of the purchase of management contracts from Diversified
Innkeepers, Inc. in November, 1991, the Company entered into a
financing agreement whereby the Company provided financing to the
shareholders of Diversified in the total amount of $1,500,000,
collateralized by 125,000 shares of the Company's common stock, a
limited partnership interest in a hotel, a second mortgage on another
hotel property, and a personal guarantee by the shareholders. The loan
provided for interest only payments to be made at the rate of 12% per
annum for a period of two years ending January 1995. Beginning
February 6, 1995, the note provided for monthly payments of principal
and interest in accordance with a fifteen-year amortization schedule,
with all remaining principal and accrued interest due on December 31,
1999. In October, 1995, the note was modified to reduce the interest
rate to 10% per annum and extend the term to the earlier of the
termination of the related management contracts or September 30, 2000.
The monthly payments of principal and interest were also modified to
$16,250 per month. The balance of the note at December 31, 1995 was
$1,467,886. The Company received a $60,000 financing fee which is
being amortized into interest income over the life of the loan.
In connection with the Diversified transaction, the Company also issued
125,000 stock options which were exercised in January 1993, in
consideration for a secured promissory note in the amount of $436,875<PAGE>
with interest at 6.5% per annum. The total principal balance is due
April 30, 1997, unless the stock is sold, and is collateralized by
limited partnership interests. This note receivable has been
classified as a reduction of shareholders' equity on the accompanying
balance sheets.
During 1993 and 1994 the Company loaned $100,000 and $13,000 to a co-
partner in ten partnerships. The loans provide for interest rates
ranging from prime to prime plus 2% per annum and are due on demand.
The $100,000 loan is secured by the co-partner's shares of partnership
interests in two hotels.
4. COSTS AND ESTIMATED EARNINGS IN EXCESS OF BILLINGS ON UNCOMPLETED
CONTRACTS:
Information regarding contracts-in-progress is as follows at December
31, 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Costs incurred on uncompleted contracts $ 3,637,650 $ 3,392,795
Estimated earnings 2,360,089 1,020,607
5,997,739 4,413,402
Less billings to date 2,096,860 2,408,128
Costs and estimated earnings in excess of
billings on uncompleted contracts $ 3,900,879 $ 2,005,274
</TABLE>
5. INVESTMENTS:
Investments at December 31, 1995 and 1994, are comprised of the
following, including the name of the investee, the nature of the
investment and the property owned by the investee:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Accounted for at cost:
Richmond Investors, Inc. (a) $ - $ 450
15% of outstanding shares of common stock
2% general partner in the Richmond 688
Limited Partnership
Ashland Motel Associates (b) - 135,000
11% limited partner
Days Inn Ashland, Ohio
Venture South Hospitalities One
Pass Christian LLC (b) - 10,000
1% limited partner
Days Inn Pass Christian, Mississippi
Accounted for using the equity method:
Athens Motel Associates Limited
Partnership 46,454 47,925
12.5% general partner
Days Inn Athens, Ohio
Cloverdale, Indiana 588-1 Partnership 24,572 5,435
25% general partner
Days Inn Cloverdale, Indiana
Crawfordsville, Indiana 888-2
Partnership (37,921) (23,506)
25% general partner
Days Inn Crawfordsville, Indiana
Richmond 688 Limited Partnership (a) - 105,134
14.7% limited partner
Days Inn Richmond, Illinois
Bravanni Enterprises, Inc. & Melrose
Park Trust (2,229) 12,841
25% interest
Days Inn Melrose Park, Illinois
Schiller Park 1288 Limited Partnership (11,094) 3,840
5% general partner
Days Inn O'Hare South, Schiller Park, Illinois
Athens Motel Associates Limited
Partnership II 140,451 120,834
20% general partner
AmeriHost Inn Athens, Ohio
Kent 2-89 Partnership (27,101) (26,317)
10% general partner
Days Inn Brimfield, Ohio
Shorewood 689 Limited Partnership 187,764 192,368
10% general partner
Days Inn Shorewood, Illinois
Marysville, Ohio 589-3 Partnership (96,672) (106,268)
25% general partner
Days Inn Marysville, Ohio
Plainfield, Indiana 989-4 Partnership 92,774 88,828
25% general partner
Days Inn Plainfield, Indiana
Hammond, Indiana 490 Partnership 113,012 (96,186)
1% general partner
Ramada Inn Hammond, Indiana
Bowling Green, Ohio 590 Limited
Partnership (c) - 196,021
39.17% limited & 25% general partner
Days Inn Bowling Green, Ohio
Niles, Illinois 1290 Hotel Partnership 57,980 63,873
16.33% general partner
Days Inn Niles, Illinois
Host Venture Group 16,250 16,500
25% general partner
Joint venture with The R.R.A. Group of Ohio
Findlay, Ohio 391 Limited Partnership (c) - 114,401
15% general & 41.67% limited partner
Days Inn Findlay, Ohio<PAGE>
Portage 691 Limited Partnership 36,187 40,755
10% general partner
Days Inn Portage, Indiana
Zanesville, Ohio 1190 Limited Partnership (2,619) (561)
10% general partner
Days Inn Zanesville, Ohio
Dayton, Ohio 1291 Limited Partnership (c) - 9,008
15% general & 46.5% limited partner
Days Inn Dayton, Ohio
New Philadelphia, Ohio 592 Ltd
Partnership (c) - 299,579
24.65% general & 25.7% limited partner
Days Inn New Philadelphia, Ohio
Middletown, Ohio 592 Limited Partnership (55,094) 6,832
25% general & 8.59% limited partner
Oakbrook Inn Middletown, Ohio
Lancaster, Ohio 1191 Limited Partnership 189,725 134,705
15% general & 10% limited partner
AmeriHost Inn Lancaster, Ohio
Plainfield II Indiana 192-5 Partnership 38,409 50,040
25% ownership
AmeriHost Inn Plainfield, Indiana
Altoona, Pennsylvania 792 Limited
Partnership (c) - 22,831
20% general & 42.78% limited partner
Holiday Inn Altoona, Pennsylvania
Ft. Myers, Florida 992 Limited
Partnership 109,896 132,189
20% general partner
Hampton Inn Ft. Myers, Florida
Oil City, PA 1192 Limited Partnership (75,662) (69,502)
25% general & 3.05% limited partner
Holiday Inn Oil City, Pennsylvania
Mosinee Airport Inn 52,964 41,189
16.7% general partner
Days Inn Mosinee, Wisconsin
Logan, Ohio 692 Limited Partnership 87,489 86,437
15% general & 7.94% limited partner
AmeriHost Inn Logan, Ohio
Elk Grove, Illinois 1292 General
Partnership 171,882 246,480
50% general partner
Days Inn Elk Grove, Illinois
Kenosha, Wisconsin 193 General
Partnership 555,948 536,246
50% general partner
Days Inn Kenosha, Wisconsin
Ann Arbor, Michigan 193 Limited
Partnership 163,813 98,014
25% general & 14.17% limited partner
Days Inn Ann Arbor, Michigan
Euless, Texas 1192 General
Partnership 174,018 221,714
25% general partner
Ramada Inn Euless, Texas
Mansfield, Ohio 993 General Partnership 151,745 162,400
40% general partner
Days Inn Mansfield, Ohio
Washington C.H., Ohio 194 Limited
Partnership 154,821 102,580
15% general & 6.9% limited partner
AmeriHost Inn Jeffersonville, Ohio
Vicksburg, MS 694-711 Partnership 17,224 13,125
50% general partner
Days Inn Rainbow Park, Mississippi
Began operations May 1995
Macomb, IL 994 Limited Partnership (6,079) -
25% general partner
AmeriHost Inn Macomb, Illinois
Began operations May 1995
Parkersburg, WVA 894 Limited Partnership (798) -
15% general partner
AmeriHost Inn Parkersburg, West Virginia
Began operations June 1995
New Martinsville, WVA 695 Limited
Partnership 75,000 -
20% general & 6.31% limited partner
AmeriHost Inn New Martinsville, West Virginia
Kenton, OH 1095 Limited Partnership 45,890 -
20% general & 6.25% limited partner
AmeriHost Inn Kenton, Ohio
$ 2,388,999 $ 2,995,234
(a) The hotel was sold during 1995 and the partnership was terminated.
(b) These investments were sold in 1995 at book value.
(c) In 1995, the Company acquired additional interest in these
partnerships, which resulted in the Company owning a majority interest
in the partnerships. These investment account balances have been
eliminated in consolidation.
</TABLE>
During 1995, The Company acquired additional partnership interests in
five hotels for a total of 278,081 shares of the Company's common
stock. In conjunction with the acquisitions, liabilities were assumed
as follows:
Fair value of assets acquired $6,952,183
Issuance of common stock (932,306)
Liabilities assumed 6,019,877
The following represents tax basis unaudited condensed financial
information for all of the Company's investments in affiliated
companies accounted for under the equity method at December 31, 1995,
1994 and 1993.
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Current assets $ 3,135,884 $ 4,020,792 $ 2,617,457
Noncurrent assets 55,760,025 55,480,430 45,603,946
Current liabilities 5,137,164 5,295,653 4,149,309
Noncurrent liabilities 39,676,033 42,329,384 37,260,939
Equity 14,082,712 11,876,185 6,811,155
Gross revenue 31,128,888 30,386,457 25,703,226
Gross operating profit 12,137,897 10,655,515 8,484,395
Depreciation and amortization 3,591,929 3,446,013 3,528,056
Net income (loss) 2,337,969 (412,375) (700,806)
</TABLE>
6. OTHER ASSETS:
Other assets, net of accumulated amortization, at December 31, 1995
and 1994 are comprised of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred loan costs $ 434,342 $ 267,740
Franchise fees and other assets 1,257,975 840,679
Investment in leases 710,278 422,773
Deferred taxes (Note 11) 383,000 487,000
Total $ 2,785,595 $ 2,018,192
</TABLE>
7. NOTES PAYABLE:
The Company has a $3,500,000 bank operating line-of-credit that
expires May 1, 1996. Interest is payable at the bank's base
lending rate (8.5% at December 31, 1995) plus three-quarters of one
percent with a floor of 7.5%. This line is collateralized by a
security interest in the Company's assets, including its
interests in various partnerships. In December 1995, the bank
providing the operating line-of-credit approved a $7.5 million
line-of-credit to be used for construction financing on projects
which have firm commitments for permanent mortgage financing when
the construction is completed. Interest is payable at the bank's
base lending rate plus one percent. There was no outstanding
balance on the construction line-of-credit as of December 31,
1995. An additional $1,500,000 bank line-of-credit was obtained
on February 1, 1996 under the same terms and conditions as the
operating line-of-credit with the exception of the interest rate
which is 1% over the bank's base lending rate.
8. LONG-TERM DEBT:
<TABLE>
<CAPTION>
Long-term debt consists of:
1995 1994
<S> <C> <C>
7% Subordinated Notes ($2,250,000 face amount) due
October 1999, with an effective interest rate of 9%
payable quarterly, net of unamortized discount of $170,223
(Note 10) $ 2,079,777 $ 2,034,384
Mortgage payable - Sullivan State Bank, variable monthly
payments with interest at 1.5% over prime (10.5% at
December 31, 1995) adjusted quarterly to maturity in
March 2007, collateralized by a first mortgage on the Days
Inn Sullivan, Indiana and a guarantee by the Company 842,448 886,357<PAGE>
Mortgage Payable - Green Mountain Bank, monthly
payments of $22,733 with interest at the lowest New York
Bank Prime Rate plus two points (10.75% at December
31, 1995), with a balloon payment due August 26, 1998
collateralized by a first mortgage on the Holiday Inn White
River Junction and guarantees by the general partners 2,155,328 2,194,451
Mortgage Payable - First of America Bank, monthly
payments of $10,150 with interest at a rate of 8.5% with a
balloon payment due December 30, 1998, collateralized by a
first mortgage on the Days Inn Elgin, Illinois and a
guarantee by the Company 918,631 721,184
Mortgage Payable - Tuscola National Bank, monthly
payments of $15,523 with interest initially at 8.0% to be
adjusted every three years beginning March 1997 to two
points above Continental Bank's prime lending rate, with a
balloon payment due February 17, 2009, collateralized by
a first mortgage on the Holiday Inn Express Tuscola,
Illinois and a guarantee by the Company $ 1,431,240 $ 1,500,000
Mortgage Payable - First of America Bank, monthly
payments of $14,438 with interest at a rate of 9.0%, with
a balloon payment due July 1, 1999, collateralized by a
first mortgage on the Holiday Inn Express Wooster, Ohio,
a guarantee by the Company and cross-collateralized with
the AmeriHost Inn Wooster, Ohio 1,322,926 1,372,976
Mortgage Payable - First National Bank of Metropolis and
Downstate National Bank, monthly payments totalling
$21,053 with interest at 8.25% per annum, adjusting in
July 1996 to the Southwest Bank of St. Louis' prime rate
plus 2 1/4%, with balloon payments due July 2, 1998,
collateralized by a first mortgage on the Players Riverboat
Hotel and a guarantee by the Company 2,032,531 2,112,294
Mortgage Payable - First National Bank of Metropolis and
Downstate National Bank, monthly payments totalling
$5,971 with interest at Southwest Bank of St. Louis' prime
rate plus 2 1/4% (10.0% at December 31, 1995)
adjusted annually, with balloon payments due July 2,
1998, collateralized by a first mortgage on the Players
Riverboat Hotel and a guarantee by the Company 311,303 355,206
Mortgage Payable - The First Citizens National Bank,
monthly payments of $13,697 with interest initially at
7.25% to be adjusted every five years beginning May 1,
1999 to two points over the weekly average yield on US
Treasury Securities, with a balloon payment due
November 1, 2009, collateralized by a first mortgage on
the AmeriHost Inn Upper Sandusky, Ohio and a guarantee
by the Company 1,423,041 1,334,206
Note Payable - General Innkeeping Acceptance
Corporation, monthly principal payments of $5,833 plus
interest at the Citibank, N.A. (New York) Prime Rate plus
300 basis points (11.75% at December 31, 1995), due the
earlier of the end of the lease term (scheduled to terminate
September 30, 1997, but subject to renewal - Note 15) or
December 1, 1998, collateralized by a security agreement
on the furniture, fixtures and equipment of the Holiday Inn
Milwaukee, NW and a guarantee by the Company $ 204,167 $ 274,166
Mortgage Payable - First Federal Savings Bank of
LaGrange, monthly payments of $12,926 with interest
initially at a rate of 8.5% through February 15, 1998,
adjusting to a rate of two percent above the prime rate
with monthly payments adjusted based on a maturity date
of August 15, 2014, collateralized by a first mortgage on
the Holiday Inn Express LaGrange, Georgia and a
guarantee by the Company 1,446,945 427,212
Mortgage Payable - First of America Bank, monthly
payments of $15,438 with interest at a rate of 9.25% with
a balloon payment due June 2000, collateralized by a first
mortgage on the AmeriHost Inn Walker, Michigan and a
guarantee by the Company 1,410,819 192,103
Mortgage Payable - Southern Crescent Bank, monthly
payments of $15,271 with interest at the highest Wall
Street Journal Prime Rate plus two points (10.5% at
December 31, 1995) with a balloon payment due
November 15, 1999, collateralized by a first mortgage on
the AmeriHost Inn Eagles Landing, Georgia and a
guarantee by the Company 1,597,645 -
Mortgage Payable - First of America Bank, monthly
payments of $17,439 with interest at a rate of 10.0%, with
a balloon payment due November 15, 2000, collateralized
by a first mortgage on the AmeriHost Inn Wooster, Ohio,
a guarantee by the Company and cross-collateralized with
the Holiday Inn Express Wooster, Ohio 1,541,167 -
Mortgage Payable - Dollar Bank, monthly principal
payments of $3,275 plus interest at a rate equal to the
weekly average yield on U.S. Treasury Securities adjusted
to a constant maturity of one year plus 325 basis points
adjusted annually (8.72% at December 31, 1995) with a
floor of 7.0% and a ceiling of 12.0%, with a balloon
payment due August 31, 2002, collateralized by a first
mortgage on the Holiday Inn Altoona, Pennsylvania 2,415,854 -
Mortgage Payable - MidAm National Bank, monthly
payments of $14,088, with interest at a rate based on the
moving monthly average of auction rates for six-month
U.S. Treasury Bills, adjusted annually (9.68% at
December 31, 1995) with a final payment of all principal
and interest due September 10, 2005, collateralized by a
first mortgage on the Days Inn Bowling Green, Ohio 1,037,361 -
Construction Loan Payable - MidAm National Bank,
monthly payments of interest only, with interest at the
Wall Street Journal Prime Rate plus 1% (9.5%
at December 31, 1995) with the principal balance due July 7,
1996, collateralized by a first mortgage on the Days Inn
Bowling Green, Ohio and a guarantee by the Company 396,642 -
Construction Loan Payable - Empire Financial Services,
Inc., monthly payments of interest only at an annual rate
of 10.5% during construction until March 15, 1996, at
which time monthly payments of principal and interest
commence based upon a 15-year amortization, with
interest at the Wall Street Journal Prime Rate plus 1.5%,
with annual adjustments to the interest rate and monthly
payment, with a balloon payment due March 1, 2001,
collateralized by a first mortgage on the AmeriHost Inn<PAGE>
Smyrna, Georgia and a guarantee by the Company 1,240,196 -
Construction Loan Payable - Kent City State Bank,
monthly payments of interest only at an annual rate of
10.5% during construction until May 8, 1996, at which
time monthly payments of principal and interest commence
in the amount of $15,725, with interest at 10.5% per
annum, with a balloon payment due May 8, 2001,
collateralized by a first mortgage on the AmeriHost Inn
Coopersville, Michigan and a guarantee by the Company 693,707 -
Other notes and capitalized leases 512,600 137,495
25,014,328 13,542,034
Less current portion 1,042,847 566,808
$ 23,971,481 $ 12,975,226
</TABLE>
The aggregate maturities of long-term debt, excluding construction
loans payable in the amount of $2,330,545 at December 31, 1995, are
approximately as follows:
<TABLE>
<CAPTION>
Year Ending December 31, Amount
<S> <C>
1996 $ 1,043,000
1997 942,000
1998 5,649,000
1999 6,548,000
2000 2,845,000
Thereafter 5,657,000
$ 22,684,000
</TABLE>
9. 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.
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 10),
no dividends may be paid on any capital stock of the Company until
such notes have been paid in full.
Limited partnership conversion:
The Company is a general partner in three partnerships where the
limited partners have the right at certain times and under
certain conditions to convert their limited partnership interests
into 243,750 shares of the Company's common stock.
Public offering:
In May 1993 the company completed a public offering of 1,550,000
shares of the Company's Common Stock at an offering price of
$7.125 per share led by the underwriting of Rodman & Renshaw,
Inc. The proceeds less underwriting discounts and all other
costs amounted to $9,572,544. A portion of the proceeds were
used to pay the required prepayment of the 7% subordinated notes
(Note 10) and repay the outstanding balance of the Company's line
of credit.
Warrant net exercise:
In 1993, the Company offered to all of its holders of warrants to
purchase its shares of Common Stock, a right to exercise their
warrants on a cash-free basis (the "Cashless Exercise"). Under the
terms of the Cashless Exercise, the holder of the warrant would
receive shares of the Company's Common Stock in an amount equal
to a percentage of the number of warrants they held without payment
of any cash to the Company. The percentage was computed by dividing
the spread (defined as the difference between the "ask" price for
the Company's Common Stock on January 14, 1993 (the "market
price") and the exercise price of the warrant held by the
investor) by the market price. The number of shares subject to
the warrant was multiplied by this percentage. The result was
the number of shares to be issued to each warrantholder.
The holders of warrants to purchase 1,973,800 shares of the
Company's Common Stock exercised this right and the Company
issued 1,315,790 shares of its Common Stock in exchange for the
warrants. (See Note 14 for further discussion of Stock Options
and Warrants).
10. SUBORDINATED DEBENTURES:
In 1992, the Company issued $4,500,000 of unsecured 7% subordinated
notes due October 9, 1999, with interest payable quarterly. In
connection with a public offering of the Company's common stock
completed in 1993, the Company was required to make prepayments
of 50% of the outstanding principal balance plus accrued interest
thereon. As a result, the Company incurred a debt acceleration
charge of $485,411 in 1993, representing a pro-rata portion of
the unamortized note discount and other deferred note issuance
costs.
For each $1,000 principal amount loaned to the Company, the
noteholder also received 375 common stock purchase warrants,
representing the right to purchase 375 shares of the Company's
Common Stock at an exercise price of $4.00 per share for a period
of five years from the date of issuance of the warrants.
Warrants to purchase a total of 1,687,500 shares were issued, of
which 46,875 are outstanding at December 31, 1995.
11. TAXES ON INCOME:
The provision for (benefit from) income taxes in the consolidated
statements of operations is as follows:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Current $ 1,225,000 $ 580,000 $ (187,600)
Deferred 220,000 (155,000) (246,000)
Valuation allowance (decrease)
increase (116,000) (44,000) 138,000
Total taxes (benefit) on
income (loss) $ 1,329,000 $ 381,000 $ (295,600)
</TABLE>
Temporary differences between the financial statement carrying
amounts and tax bases of assets and liabilities that give rise
to a net deferred tax asset relate to the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Deferred income, recognized
currently for tax purposes $ 264,000 $ 420,000
Property, primarily due to majority
owned partnerships consolidated for
financial reporting purposes but not
tax purposes 654,000 519,000
Accumulated depreciation differences (407,000) (208,000)
Valuation allowance (128,000) (244,000)
$ 383,000 $ 487,000
</TABLE>
Deferred income tax assets of $511,000 and $731,000, less a
valuation allowance of $128,000 and $244,000, are included in
other assets in the accompanying consolidated balance sheets at
December 31, 1995 and 1994, respectively.
The following reconciles income tax expense (benefit) at the federal
statutory tax rate with the effective rate:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Income taxes (benefit) at
the federal statutory rate 34.0% 34.0% (34.0%)
State taxes (benefits),
net of federal taxes (benefit) 7.6% 10.6% (6.8%)
Increase (decrease) in valuation allowance (3.3%) (4.6%) 13.1%
Effective tax rate 38.3% 40.0% (27.7%)
</TABLE>
12. RELATED PARTY TRANSACTIONS:
The following table summarizes related party revenue from various
unconsolidated partnerships in which the company has an ownership
interest:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Development/acquisition revenue $ 9,316,810 $ 6,126,781 $ 2,623,431
Renovation revenue 83,925 519,626 3,782,626
Hotel management revenue 1,825,202 1,782,033 1,342,243
Employee leasing revenue 5,979,522 6,708,462 6,833,535
</TABLE>
In January 1991, the Company entered into an agreement with Urban
2000 Corp. ("Urban"), a company owned by the Chairman and another
Officer/Director of the Company. This agreement provides for the
payment to Urban of $20,000 per month for business development
consulting services. No additional amounts are paid to Urban for
reimbursement of expenses. Consistent with its standard industry
practice, the Company will pay additional fees for transactions
brought to the Company by Urban.
Urban received $236,138, $289,915, and $352,082 from the Company in
1995, 1994 and 1993, respectively, and also received $82,400 and
$28,200 in 1995 and 1994, respectively in other transactional
fees directly from partnerships in which the Company is a general
partner. The Chairman is not compensated by the Company in his
capacity as an officer.
13. BUSINESS SEGMENTS:
The Company's business is primarily involved in four segments:
(1) hotel operations, consisting of the operations of all hotels
in which the Company has a controlling ownership or leasehold
interest, (2) hotel development, consisting of development,
construction and renovation activities, (3) hotel management,
consisting of hotel management activities and (4) employee
leasing, consisting of the leasing of employees to various
hotels.
Results of operations of the Company's business segments are
reported in the consolidated statements of operations. The
following represents revenues, operating costs and expenses,
operating income, identifiable assets, capital expenditures and
depreciation and amortization for each business segment:
<TABLE>
<CAPTION>
Revenues 1995 1994 1993
<S> <C> <C> <C>
Hotel operations $ 24,359,999 $ 15,428,022 $ 9,091,778
Hotel development 12,238,128 12,036,918 6,970,709
Hotel management 3,010,935 2,711,637 2,849,673
Employee leasing 12,353,355 13,169,942 15,361,940
$ 51,962,417 $ 43,346,519 $34,274,100
</TABLE>
<TABLE>
<CAPTION>
Operating costs and expenses 1995 1994 1993
<S> <C> <C> <C>
Hotel operations $ 17,065,041 $ 10,457,154 $ 6,779,306
Hotel development 10,117,782 11,315,973 6,112,327
Hotel management 2,003,310 2,288,765 2,296,589
Employee leasing 12,131,262 13,014,542 15,201,158
$ 41,317,395 $ 37,076,434 $ 30,389,380
Operating income
Hotel operations $ 3,359,383 $ 2,455,221 $ 352,309
Hotel development 2,091,480 711,032 851,903
Hotel management 831,007 250,118 72,229
Employee leasing 216,075 149,305 156,190
Corporate (2,208,197) (2,110,005) (1,910,267)
$ 4,289,748 $ 1,455,671 $ (477,636)
Identifiable assets
Hotel operations $ 41,835,019 $ 25,056,800 $ 15,648,994
Hotel development 5,447,715 2,583,355 2,614,337
Hotel management 1,163,671 1,082,978 946,787
Employee leasing 825,468 690,265 658,435
Corporate 3,181,429 4,990,184 4,305,555
$ 52,453,302 $ 34,403,582 $ 24,174,108
Capital expenditures
Hotel operations $ 12,065,286 $ 7,804,040 $ 8,136,484
Hotel development 377,296 4,572 21,531
Hotel management 29,634 29,582 46,554
Employee leasing 1,602 6,461 879
Corporate 65,330 27,614 86,954
$ 12,539,148 $ 7,872,269 $ 8,292,402
Depreciation/Amortization
Hotel operations $ 1,959,421 $ 854,743 $ 308,384
Hotel development 28,866 9,915 6,479
Hotel management 176,618 172,753 480,855
Employee leasing 6,018 6,095 4,593
Corporate 97,258 97,295 127,216
$ 2,268,181 $ 1,140,801 $ 927,527
</TABLE>
14. STOCK OPTIONS AND WARRANTS:
On January 2, 1992, the Board of Directors authorized the issuance
200,000 stock options to certain employees of the Company. These
options are exercisable by the employees at any time during the five
years ending January 2, 1997, at an option price of $3.00 per share.
The shares issued upon exercise of the options are Rule 144 restricted
common stock.
On June 1, 1992, the Board of Directors authorized the issuance of
103,125 stock options to Urban and a former director in connection with
loans made to the Company. These options are exercisable at any time
prior to October 9, 1999 at an option price of $4.375 per share. The
shares issued upon exercise of the options are Rule 144 restricted
common stock.
On February 12, 1992, in connection with a financial advisory agreement
executed in 1992 with a former director, the Board of Directors
authorized the issuance of 75,000 stock options at an option price of
$3.521 per share exercisable at any time prior to February 12, 1997.
The option holder has the right to require the Company to file a
registration statement with the Securities and Exchange Commission to
register the underlying shares, up to a maximum of four times during
the seven year period commencing August 15, 1992. Any such
registration must be for a minimum of 10,000 shares.
On December 16, 1992, the Board of Directors authorized the issuance of
268,750 stock options to certain employees of the Company. The options
are exercisable at any time through September 16, 1997. These options
vest and are exercisable by the employees in accordance with the
following schedule:
<TABLE>
<CAPTION>
Date Vested Number of Options Exercise Price
<S> <C> <C>
December 16, 1992 53,750 $ 5.00
September 16, 1993 53,750 6.00
September 16, 1994 53,750 6.00
September 16, 1995 53,750 6.00
September 16, 1996 53,750 6.00
</TABLE>
On March 22, 1993, the Board of Directors authorized the issuance of
40,419 stock options to certain shareholders who executed agreements
not to sell their shares of common stock in connection with the public
offering completed by the Company in May 1993 (Note 9). These options
are exercisable by the holder at any time during the five years ending
March 22, 1998, at an exercise price of $6.875.
On October 5, 1994, the Board of Directors authorized the issuance of
150,000 stock options to certain employees of the Company. These
options are exercisable by the employees at any time during the ten
years ending October 5, 2004, at an option price of $4.125 per share.
The shares issued upon exercise of the options are Rule 144 restricted
common stock.
On October 5, 1994, the Board of Directors authorized the issuance of
33,500 stock options to certain employees of the Company. These
options are exercisable by the employees at any time during the five
years ending October 5, 1999, at an option price of $4.75 per share.
The shares issued upon exercise of the options are Rule 144 restricted
common stock.<PAGE>
On January 1, 1995, the Board of Directors authorized the issuance of
620,000 stock options to officers of the Company. The options are
exercisable at any time over a ten year period beginning on the vesting
date, expiring January 1, 2005 through January 1, 2007. The shares
issued upon exercise of the options are Rule 144 restricted common
stock. These options vest and are exercisable by the employees in
accordance with the following schedule:
<TABLE>
<CAPTION>
Date Vested Number of Options Exercise Price
<S> <C> <C>
January 1, 1995 165,000 $ 3.5625
January 1, 1996 205,000 3.5625
January 1, 1997 250,000 3.5625
</TABLE>
On January 1, 1995, the Board of Directors authorized the issuance of
20,000 stock options to a co-partner in seven of the Company's hotel
investments. These options are exercisable by the holder at any time
during the three years ended January 1, 1998, at an option price of
$7.125 per share. The shares issued upon exercise of the options are
Rule 144 restricted common stock.
On January 6, 1995, the Board of Directors authorized the issuance of
10,000 stock options to a co-partner in four of the Company's hotel
investments. These options are exercisable by the holder at any time
during the four years ended January 6, 2000, at an option price of
$3.56 per share. The shares issued upon exercise of the options are
Rule 144 restricted common stock.
On September 27, 1995, the Board of Directors authorized the issuance
of 145,500 stock options to certain employees of the Company. The
options are exercisable at any time through September 27, 2005. The
shares issued upon exercise of the options are Rule 144 restricted
common stock. These options vest and are exercisable by the employee
in accordance with the following schedule:
<TABLE>
<CAPTION>
Date Vested Number of Options Exercise Price
<S> <C> <C>
September 27, 1995 48,500 $ 6.375
September 27, 1996 48,500 6.375
September 27, 1997 48,500 6.375
</TABLE>
On December 1, 1995, the Board of Directors authorized the issuance of
133,333 stock options to certain employees of the Company. These
options are exercisable by the holder at any time during the ten years
ended December 31, 2005, at an option price of $6.50 per share. The
shares issued upon exercise of the options are Rule 144 restricted
common stock.
The following table summarizes the shares granted, exercised and
options outstanding:
<TABLE>
<CAPTION>
Shares Exercise Price
<S> <C> <C>
Options outstanding January 1, 1993 2,792,550 $ 3.00-6.00
Options granted 40,419 6.875
Options exercised (2,098,800) 3.00-4.65
Options outstanding December 31, 1993 734,169 3.00-6.875
Options granted 183,500 4.125-4.75
Options outstanding December 31, 1994 917,669 3.00-6.875
Options granted 928,833 3.56-7.125
Options outstanding December 31, 1995 1,846,502 $ 3.00-7.125
At December 31, 1995, 605,750 of the options were not vested.
</TABLE>
In July 1990, the Company adopted an Incentive Option Plan and a Non-
Qualified Stock Option Plan. A total of 125,000 shares of Common Stock
have been reserved for issuance under each of the plans. No options
have been granted under either plan as of December 31, 1995.
15. COMMITMENTS, CONTINGENCIES AND OTHER MATTERS:
Key-person life insurance:
The Company maintains term life insurance on three key officers of the
Company. Each policy provides for a death benefit of $1,000,000 for
which the Company is the beneficiary. The Company paid annual premiums
of $14,314 for the policy periods ending April 24, 1994, 1995 and 1996.
Office lease:
The Company entered into an operating lease for its existing office
facilities which commenced in October 1994 and expires December 2000.
The Company may cancel the lease effective December 1, 1998 with a 180-
day notice and payment of a $67,230 cancellation penalty. Rent
expense, including real estate taxes, insurance and repair costs
associated with the operating lease was approximately $180,700,
$145,000 and $111,800 in 1995, 1994 and 1993, respectively. Total
future minimum rent due under the operating lease is approximately as
follows:
Year ending December 31, Amount
1996 182,000
1997 188,000
1998 190,000
$ 560,000
Hotel leases:
On December 1, 1992, the Company renewed agreements to lease or
sub-lease five hotels which it had been managing in Schiller Park,
Shorewood, Niles and Richmond, Illinois and Portage, Indiana. The
Company leases or sub-leases the hotels from five partnerships which
currently own the hotels or lease the hotels from unrelated third
parties. The Company owns an equity interest in these partnerships,
ranging from 5% to 16.33%. The leases and sub-leases are triple net
leases which were scheduled to expire December 31, 1996. During 1994,
the leases were amended providing for reduced rent payments and
extending the terms through December 31, 1999. <PAGE>
In July 1992, the Company entered into a lease agreement for a Holiday
Inn in Menomonee Falls, Wisconsin. The lease is a triple net lease
expiring September 30, 1997. The rent payments are based upon
percentages of gross room revenues ranging from 15% to 20%, with a
monthly minimum of $14,583.
The Company entered into an agreement to lease a hotel in Lafayette,
Indiana, effective February 1, 1994. The lease expires on December 31,
1998. Monthly lease payments are 15% of gross guest room revenues,
with a monthly minimum of $10,000 beginning January 1, 1995.
In connection with the purchase of limited partnership interests in
certain hotels during 1995, the Company obtained a majority ownership
position in three hotels which held leasehold interests as follows:
The Days Inn Findlay operates under a triple net lease calling for
payments of $7,500 per month expiring March 31, 1996. The Company
exercised its five year renewal option, extending the termination
date to March 31, 2001. The lease provides for monthly payments of
$8,500 for the first three years of the renewal term, increasing to
$10,000 for the final two years, plus additional rent payments of 5%
of annual guest room revenues in excess of $750,000.
On January 1, 1995, the Days Inn Dayton amended its triple net lease
providing for an additional term of ten years expiring December 31,
2004. The lease provides for monthly payments ranging from $17,000
to $23,000 through December 31, 1998. Beginning in 1999, monthly
payments are the greater of $23,000 or 15% of room revenue. The
Company has agreed to guarantee the hotel's performance under the
lease up to $50,000.
The Days Inn New Philadelphia operates under a triple net lease
expiring June 3, 1997 which provides for minimum monthly payments of
$6,000, plus additional rent of 12.5% of annual gross room revenue
in excess of $550,000.
Minimum rent payments under hotel leases are as follows:
Year ending December 31, Amount
1996 $ 1,786,000
1997 1,739,000
1998 1,596,000
1999 1,490,000
2000 396,000
$ 7,007,000
Guarantees:
The Company has provided approximately $9.9 million in guarantees on
mortgage loan obligations and operating leases for nineteen of its
affiliated partnerships. Other partners have also guaranteed portions
of the same obligations. The partners of two of the partnerships have
entered into cross indemnity agreements whereby each partner has agreed
to indemnify the others for any payments made by any partner in
relation to these guarantees in excess of their ownership interest.
On February 4, 1993, the Company began management of a 383 room hotel
in Daytona Beach, Florida. As part of the management contract, the
Company was to receive 10% of all cash distributions from the hotel and
the Company guaranteed a $500,000 note payable to Hospitality Franchise
Systems, Inc. In July 1993, the Company ceased managing this property
and, in 1995 the Company received a final termination settlement of<PAGE>
$27,000. The balance of the note which continues to be guaranteed by
the Company is approximately $154,000.
The Company is secondarily liable for the obligations and liabilities
of the limited partnerships in which it holds general partnership
interests as described in Note 5.
Construction in progress:
At December 31, 1995, the Company had approximately $13.1 million
remaining to pay contractors for the completion of fourteen hotels, a
portion of which is included in accounts payable. These commitments
will be funded through construction and long-term mortgage financing
currently in place.
Employment agreements:
The Company entered into three year employment agreements with the
executive officers effective January 1, 1995, one of which includes an
automatic three year renewal option. The agreements provide for base
salaries totaling $679,000 in 1996 and $751,700 in 1997, plus shares of
the Company's common stock based on the attainment of certain financial
performance criteria totaling 40,000 shares in 1996 and 52,500 shares
in 1997, if all the objectives are met. The employment agreements
provide for severance pay should the officer be terminated without
cause.
Legal matters:
The Company and certain of its subsidiaries are defendants in various
litigation matters arising in the ordinary course of business. In the
opinion of management, the ultimate resolution of all such litigation
matters is not likely to have a material effect on the Company's
financial condition, results of operation or liquidity.
16. SUPPLEMENTAL CASH FLOW DATA:
The following represents the supplemental schedule of noncash investing
and financing activities for the years ended December 31, 1995, 1994
and 1993:
<TABLE>
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
Purchase of investments and
other assets through issuance
of common stock; issuance of
notes payable; and reduction of
notes receivable $1,010,188 $ 369,571 $ 443,753
Exchange of limited partnership
interests and note receivable $ 90,000
Reduction of accounts and
note payable through issuance
of common stock and warrants $ 233,351 $1,050,000
Increase of stock subscription
receivable through issuance of
common stock $ 436,875
</TABLE>
17. SELECTED FOURTH QUARTER FINANCIAL DATA (UNAUDITED):
A summary of selected fourth quarter information for 1995 and 1994 is
as follows:
<TABLE>
<CAPTION>
Quarter Ended December 31,
(in thousands except per share amounts)
1995 1994
<S> <C> <C>
Net sales $ 11,992 $ 11,554
Operating income 214 270
Net income 14 3
Net income per common share $ - $ -
</TABLE>
Exhibit 21.1
AMERIHOST PROPERTIES, INC.
LISTING OF SUBSIDIARIES
State of
Incorporation Ownership
Entity or Organization Percentage
Amerihost Development, Inc. Illinois 100.00%
Amerihost International, Inc. Delaware 100.00%
Amerihost Lodging Group, Inc. Delaware 100.00%
Amerihost Management, Inc. Illinois 100.00%
Amerihost Renovations, Inc. Illinois 100.00%
Amerihost Staffing, Inc. Illinois 100.00%
AP Equities of Arkansas, Inc. Arkansas 100.00%
AP Equities of Florida, Inc. Florida 100.00%
AP Equities of Indiana, Inc. Indiana 100.00%
AP Equities of Ohio, Inc. Ohio 100.00%
AP Hotels of Georgia, Inc. Georgia 100.00%
AP Hotels of Illinois, Inc. Illinois 100.00%
AP Hotels of Kansas, Inc. Kansas 100.00%
AP Hotels of Michigan, Inc. Delaware 100.00%
AP Hotels of Mississippi, Inc. Mississippi 100.00%
AP Hotels of Ohio, Inc. Delaware 100.00%
AP Hotels of Pennsylvania, Inc. Pennsylvania 100.00%
AP Hotels of Texas, Inc. Delaware 100.00%
AP Hotels of Vermont, Inc. Vermont 100.00%
AP Hotels of Vermont, Inc. Delaware 100.00%
AP Hotels of West Virginia, Inc. West Virginia 100.00%
AP Lodging of Ohio, Inc. Ohio 100.00%
AP Properties of Ohio, Inc. Ohio 100.00%
API of Indiana, Inc. Indiana 100.00%
API of Wisconsin, Inc. Wisconsin 100.00%
Hammond Investors, Inc. Indiana 100.00%
Niles Illinois Hotel Corporation Illinois 100.00%
Schiller Park Investors, Inc. Illinois 100.00%
Shorewood Hotel Investments, Inc. Illinois 100.00%
Shorewood Investors, Inc. Illinois 100.00%
AP Hotels of West Virginia, Inc. West Virginia 100.00%
AmeriHost Inns of Illinois, Inc. Illinois 100.00%
AmeriHost Inns of Ohio, Inc. Ohio 100.00%
AP Hotels of Wisconsin, Inc. Wisconsin 100.00%
AP Hotels of Iowa, Inc. Iowa 100.00%
AP Hotels of Kentucky, Inc. Kentucky 100.00%
API/Crawfordsville, Inc. Indiana 100.00%
API/Cloverdale, Inc. Indiana 100.00%
API/Marysville, Inc. Ohio 100.00%
API/Plainfield, Inc. Indiana 100.00%
Sullivan Motel Associates, Ltd. Indiana 56.00%
White River Junction, VT 393
Limited Partnership Vermont 83.30%
Metropolis, IL 1292 Limited
Partnership Illinois 54.90%
Tuscola, Illinois 593 Limited
Partnership Illinois 68.75%
Bowling Green, Ohio 590 Limited
Partnership Ohio 64.16%
Findlay, Ohio 391 Limited
Partnership Ohio 56.67%
Dayton, Ohio 1291 Limited
Partnership Ohio 61.50%
Altoona, PA 792 Limited
Partnership Pennsylvania 62.78%
New Philadelphia, Ohio
1092 Limited Partnership Ohio 50.35%
Exhibit 23.1
CONSENT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS
Amerihost Properties, Inc.
Des Plaines, Illinois
We hereby consent to the incorporation by reference in the Company's previously
filed Registration Statement (file no. 33-72742) of our report dated February
29, 1996 relating to the consolidated financial statements of Amerihost
Properties, Inc. appearing in the Company's Annual Report on Form 10-K for the
year ended December 31, 1995.
BDO Seidman, LLP
Chicago, Illinois
March 18, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,371,278
<SECURITIES> 0
<RECEIVABLES> 9,136,021
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 10,925,992
<PP&E> 38,229,128
<DEPRECIATION> 5,404,102
<TOTAL-ASSETS> 25,453,302
<CURRENT-LIABILITIES> 9,072,448
<BONDS> 0
29,886
0
<COMMON> 0
<OTHER-SE> 17,236,873
<TOTAL-LIABILITY-AND-EQUITY> 52,453,302
<SALES> 51,962,417
<TOTAL-REVENUES> 51,962,417
<CGS> 41,317,395
<TOTAL-COSTS> 41,317,395
<OTHER-EXPENSES> 6,355,274
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,755,745
<INCOME-PRETAX> 3,467,092
<INCOME-TAX> 1,329,000
<INCOME-CONTINUING> 2,138,092
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,138,092
<EPS-PRIMARY> 0.35
<EPS-DILUTED> 0.35
</TABLE>
