SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
For the quarterly period ended JUNE 30, 1996
OR
[ ] Transition Report Pursuant to Section 13 or
15(d) of the Securities Exchange Act of 1934
Commission File No. 2-90939C
AMERIHOST PROPERTIES, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 36-3312434
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2400 EAST DEVON AVE., SUITE 280, DES PLAINES, ILLINOIS 60018
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 298-4500
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes x No
As of July 29, 1996, 6,023,521 shares of the Registrant's Common Stock were
outstanding.
AMERIHOST PROPERTIES, INC.
FORM 10-Q
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996
INDEX
PART I: Financial Information Page
Consolidated Balance Sheets as of June 30, 1996
and December 31, 1995 4
Consolidated Statements of Operations for the Three and Six
Months Ended June 30, 1996 and 1995 6
Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 1996 and 1995 7
Notes to Consolidated Financial Statements 9
Management's Discussion and Analysis 11
Schedule of Earnings Before Interest/Rent, Taxes
and Depreciation/Amortization for the Three and Six
Months Ended June 30, 1996 and 1995 17
PART II: Other Information
Item 6 Exhibits and Reports on Form 8-K 18
Signatures 18
Part I: Financial Information
Item 1: Financial Statements
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,609,268 $ 1,371,278
Accounts receivable (including $1,146,030 and $802,164
from related parties) 3,448,601 3,270,094
Notes receivable (including $1,839,444 and $1,752,126
from related parties) 2,052,362 1,965,048
Prepaid expenses and other current assets 260,774 188,163
Refundable income taxes - 230,530
Costs and estimated earnings in excess of billings on
uncompleted contracts (including $8,137,130 and
$3,574,939 from related parties) 8,258,944 3,900,879
Total current assets 16,629,949 10,925,992
Investments 2,388,456 2,388,999
Property and equipment:
Land 4,445,693 4,236,309
Buildings 23,776,472 22,075,629
Furniture, fixtures and equipment 10,111,316 9,204,377
Construction in progress 1,560,119 662,159
Leasehold improvements 2,136,925 2,050,654
42,030,525 38,229,128
Less accumulated depreciation and amortization 6,697,538 5,404,102
35,332,987 32,825,026
Long-term notes receivable (including $2,149,082 and
$1,450,616 from related parties) 3,541,621 2,863,580
Costs of management contracts acquired, net of accumulated
amortization of $1,011,446 and $913,393 859,026 664,110
Other assets (including deferred taxes of $383,000), net of
accumulated amortization of $1,719,399 and $1,451,715 2,816,821 2,785,595
7,217,468 6,313,285
$ 61,568,860 $ 52,453,302
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 9,026,420 $ 3,751,097
Bank line-of-credit 1,731,803 2,317,036
Accrued payroll and related expenses 794,597 688,648
Accrued real estate and other taxes 846,377 606,468
Other accrued expenses and current liabilities 814,757 666,352
Current portion of long-term debt 1,129,544 1,042,847
Income taxes payable 307,491 -
Total current liabilities 14,650,989 9,072,448
Long-term debt, net of current portion 26,375,235 23,971,481
Deferred income 747,114 686,388
Commitments
Minority interests 1,121,970 1,456,226
Shareholders' equity:
Preferred stock, no par value; authorized 100,000 shares;
none issued - -
Common stock, $.005 par value; authorized 15,000,000 shares;
issued 6,023,521 shares at June 30, 1996, and
5,977,213 shares at December 31, 1995 30,118 29,886
Additional paid-in capital 17,094,877 16,920,237
Retained earnings 2,941,724 1,709,803
20,066,719 18,659,926
Less:
Stock subscriptions receivable (436,875) (436,875)
Notes receivable (956,292) (956,292)
18,673,552 17,266,759
$ 61,568,860 $ 52,453,302
See notes to consolidated financial statements.
</TABLE>
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenue:
Hotel operations:
AmeriHost Inn hotels $ 2,187,659 $ 136,341 $ 3,493,797 $ 136,341
Other hotels 5,765,426 5,968,660 10,042,784 10,083,385
Development and construction 8,211,296 2,272,540 12,191,098 7,777,364
Management services 694,148 805,619 1,183,830 1,370,073
Employee leasing 2,959,210 3,103,470 5,550,799 6,076,828
19,817,739 12,286,630 32,462,308 25,443,991
Operating costs and expenses:
Hotel operations:
AmeriHost Inn hotels 1,176,762 63,174 2,062,528 63,174
Other hotels 3,816,470 3,889,327 7,669,555 7,346,858
Development and construction 7,197,907 1,671,697 10,311,585 6,835,826
Management services 496,384 508,755 869,035 965,578
Employee leasing 2,875,830 3,049,433 5,401,739 5,980,619
15,563,353 9,182,386 26,314,442 21,192,055
4,254,386 3,104,244 6,147,866 4,251,936
Depreciation and amortization 856,357 478,007 1,659,172 912,926
Leasehold rents - hotels 518,172 543,941 964,302 995,546
Corporate general and administrative 521,994 525,289 1,006,646 993,047
Operating income 2,357,863 1,557,007 2,517,746 1,350,417
Other income (expense):
Interest expense (619,124) (362,007) (1,284,298) (669,726)
Interest income 161,276 160,367 315,635 251,903
Other income (expense) 15,077 (677) 56,986 19,482
Gain on sale of land 404,256 - 404,256 -
Equity in net income and losses
of affiliates 181,028 96,651 36,389 (86,877)
Income before minority interests
and income taxes 2,500,376 1,451,341 2,046,714 865,199
Minority interests in (income) loss
of consolidated subsidiaries
and partnerships (161,794) (90,131) 42,207 22,478
Income before income tax 2,338,582 1,361,210 2,088,921 887,677
Income tax expense 959,000 517,000 857,000 327,000
Net income $ 1,379,582 $ 844,210 $ 1,231,921 $ 560,677
Earnings per share $ 0.20$ 0.14 $ 0.18 $ 0.09
See notes to consolidated financial statements.
</TABLE>
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
<TABLE>
<CAPTION>
Six Months Ended June 30,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 28,223,649 $ 25,881,307
Cash paid to suppliers and employees (22,704,610) (23,323,406)
Interest received 93,950 145,148
Interest paid (1,246,185) (665,120)
Income taxes paid (318,979) (687,731)
Net cash provided by operating activities 4,047,825 1,350,198
Cash flows from investing activities:
Distributions from affiliates 259,800 204,162
Purchase of property and equipment (3,937,049) (5,252,999)
Purchase of investments (350,200) (225,050)
Increase in notes receivable (2,537,964) (351,550)
Collections on notes receivable 1,633,652 780,744
Pre-opening and management contract costs (292,968) (213,016)
Sale of investments - 10,000
Sale of land 524,377 -
Acquisition of leasehold interest (94,000) (5,000)
Increase in organization costs - (1,455)
Net cash used in investing activities (4,794,352) (5,054,164)
Cash flows from financing activities:
Proceeds from issuance of long-term debt 3,339,047 2,170,794
Increase in deferred offering costs (74,456) -
Principal payments of long-term debt (871,292) (352,158)
Proceeds from issuance of common stock 202,969 -
Proceeds from line-of-credit 5,045,931 744,147
Payments on line-of-credit (5,631,164) -
Distributions to minority interests (26,518) (53,030)
Net cash provided from financing activities 1,984,517 2,509,753
Net increase (decrease) in cash 1,237,990 (1,194,213)
Cash and cash equivalents, beginning of period 1,371,278 3,026,029
Cash and cash equivalents, end of period $ 2,609,268 $ 1,831,816
Reconciliation of net income to net cash provided
by operating activities:
Net income $ 1,231,921 $ 560,677
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,659,172 912,926
Equity in net loss (income) of affiliates before
amortization of deferred income (19,931) 147,073
Minority interests in net income of subsidiaries (42,207) (22,478)
Amortization of deferred income (16,458) (60,196)
Amortization of deferred interest (2,816) (4,286)
Amortization of loan discount 22,696 22,696
Increase in deferred income 80,000 -
Gain on sale of land (404,256) -
Increase in deferred tax asset - (30,000)
Compensation paid through issuance of common stock 29,676 213,991
Changes in assets and liabilities, net of effects of acquisitions:
Increase in accounts receivable (17,470) (301,578)
Increase in interest receivable (218,869) (102,469)
Increase in prepaid expenses and other
current assets (72,611) (44,998)
(Increase) decrease in costs and estimated earnings in
excess of billings on uncompleted contracts (4,358,065) 694,793
Increase in other assets (130,454) (232,843)
Decrease in refundable income taxes 230,530 -
Increase (decrease) in accounts payable 5,275,213 (429,967)
Increase in accrued expenses and other current liabilities 478,846 375,677
Increase (decrease) in accrued income taxes 307,491 (330,731)
Increase (decrease) in accrued interest 15,417 (18,089)
Net cash provided by operating activities $ 4,047,825 $ 1,350,198
See notes to consolidated financial statements.
</TABLE>
1. BASIS OF PREPARATION:
The financial statements included herein have been prepared by the Company,
without audit. In the opinion of the Company, the accompanying unaudited
financial statements contain all adjustments, which consist only of
recurring adjustments necessary to present fairly the financial position of
Amerihost Properties, Inc. and subsidiaries as of June 30, 1996 and
December 31, 1995 and the results of its operations for the three and six
months ended June 30, 1996 and 1995 and cash flows for the six months ended
June 30, 1996 and 1995. The results of operations for the three and six
months ended June 30, 1996, are not necessarily indicative of the results
to be expected for the full year. It is suggested that the accompanying
financial statements be read in conjunction with the financial statements
and the notes thereto included in the Company's 1995 Annual Report on Form
10-K. Certain reclassifications have been made to the 1995 financial
statements in order to conform with the 1996 presentation.
2. PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiaries, and partnerships in which the Company has a
controlling ownership interest. Significant intercompany accounts and
transactions have been eliminated.
3. INCOME TAXES:
Deferred income taxes are provided on the differences in the bases of the
Company's assets and liabilities determined for tax and financial reporting
purposes.
The income tax expense for the three and six months ended June 30, 1996 and
1995 was based on the Company's estimate of the effective tax rate expected
to be applicable for the full year. The Company expects the effective tax
rate to approximate the Federal and state statutory rates.
4. EARNINGS PER SHARE:
Earnings per share of common stock is computed by dividing the net income
by the weighted average number of shares of common stock and dilutive
common stock equivalents outstanding. The weighted average number of
shares used in the computations were 6,764,415 and 6,695,726 for the three
and six months ended June 30, 1996, and 6,058,603 and 5,911,803 for the
three and six months ended June 30, 1995, respectively.
5. SUPPLEMENTAL CASH FLOW DATA:
The following represents the supplemental schedule of noncash investing and
financing activities for the six months ended June 30, 1996 and 1995:
Six Months Ended
June 30,
1996 1995
Purchase of investments through issuance of
common stock and decrease in notes and accrued
interest receivable $ 143,929 $ 755,692
Reduction of accounts payable through
issuance of common stock $ 233,351
During the first six months of 1995, the Company acquired additional
partnership interests in four hotels for 244,015 shares of the Company's
common stock. In conjunction with the acquisitions, liabilities were
assumed as follows:
Fair value of assets acquired $ 6,070,768
Issuance of common stock (818,345)
Liabilities assumed $ 5,252,423
Pro forma financial information has not been given reflecting the
acquisitions since it is not considered material to the overall financial
statement presentation.
6. HOTEL LEASES:
The Company, through its subsidiaries and consolidated partnerships, has
leasehold interests ranging from 50.35% to 100% in nine hotels, the
operations of which are included in the Company's consolidated financial
statements. All of these leases provide for an option to purchase the
hotel. Some of the purchase prices are based upon a multiple of gross
room revenues for the preceding twelve months and the others are based
upon a fixed amount, typically with annual increases based upon the change
in the consumer price index. At June 30, 1996, the aggregate purchase
price for these nine hotels was approximately $25,750,000.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
GENERAL
The Company is engaged in the development of AmeriHost Inn hotels, its
proprietary brand, and the ownership, operation and management of AmeriHost
Inn hotels and other mid-price hotels. As of June 30, 1996, there were 26
AmeriHost Inn hotels open, of which ten were wholly-owned, one was majority
owned, 13 were minority-owned, and two were managed for unrelated third
parties. The Company intends to use primarily the AmeriHost Inn brand when
expanding its hotel operations segment. All of the hotels currently under
construction will be AmeriHost Inn hotels. As of June 30, 1996, 13 AmeriHost
Inn hotels were under construction, of which three will be wholly-owned with
the remainder being minority-owned. Same room revenues for all AmeriHost
Inns increased approximately 8.1% in the second quarter of 1996 compared to
the second quarter of 1995, attributable to an increase of $3.37 in average
daily rate and a 1.4% increase in occupancy.
Revenues from hotel operations consist of the revenues from all hotels in
which the Company has a 100% or controlling ownership or leasehold interest
("Consolidated Hotels"). Investments in other entities in which the Company
has a minority ownership interest are accounted for using the equity or cost
method. As a result of the Company's focus on increasing the number of
Consolidated Hotels, the Company expects that revenues from the hotel
operations segment will increase over time as a percentage of the Company's
overall revenues. Development and construction revenues consist of one-time
fees for new construction, acquisition and renovation activities performed
by the Company for minority-owned hotels and unrelated third parties. The
Company also receives management services revenues for management services
provided to minority-owned hotels and unrelated third parties. Employee
leasing revenues consist of revenues the Company receives for leasing its
employees to minority-owned hotels and unrelated third parties. All revenues
attributable to development, construction, management and employee leasing
services with respect to Consolidated Hotels have been eliminated in
consolidation.
The second quarter and first six months of 1996 resulted in record revenues,
net income, and EBITDA (as defined below). Revenues increased 61.3% and
27.6% to $19.8 million and $32.5 million during the three and six months
ended June 30, 1996, respectively, from $12.3 million and $25.4 million
during the three and six months ended June 30, 1995, due primarily to
expanded hotel operations and significant hotel development and construction
activity. Net income for the second quarter increased 63.4% to $1.4 million,
or $0.20 per share in 1996, from $844,210, or $0.14 per share in 1995. Net
income for the first six months increased 119.7% to $1.2 million, or $0.18
per share in 1996, from $560,677, or $0.09 per share in 1995. Excluding the
second quarter gain on the sale of excess land adjacent to a Consolidated
Hotel in the amount of $180,076, net of minority interest and income taxes,
the Company reported earnings per share of $0.18 and $0.16 during the three
and six months ended June 30, 1996. Operating income increased 51.4% and
86.4% to $2.4 million and $2.5 million during the three and six months ended
June 30, 1996, respectively, from $1.6 million and $1.4 million during the
three and six months ended June 30, 1995. The Company uses EBITDA as a
supplemental performance measure along with net income to report its
operating results. EBITDA is defined as net income, adjusted to eliminate
the impact of (i) interest expense; (ii) leasehold rents for hotels, which
the Company considers to be financing costs similar to interest; (iii) income
tax expense (benefit), (iv) depreciation; and (v) amortization of
intangibles. EBITDA should not be considered as an alternative to net income
or cash flows from operating activities as a measure of liquidity. EBITDA
increased 46.7% and 64.2% to $4.0 million and $5.7 million during the three
and six months ended June 30, 1996, respectively, from $2.7 million and $3.5
million during the three and six months ended June 30, 1995. An EBITDA
schedule is included herein.
Amerihost had an ownership interest in 53 hotels at June 30, 1996 versus 46
hotels at June 30, 1995 (excluding hotels under construction). This
increased ownership was achieved primarily through the development of
AmeriHost Inn hotels for the Company's own account and for minority-owned
entities. These figures include an increase in Consolidated Hotels from 18
at June 30, 1995 to 25 at June 30, 1996.
RESULTS OF OPERATIONS FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1996
COMPARED TO THE THREE AND SIX MONTHS ENDED JUNE 30, 1995
Revenues increased 61.3% and 27.6% to $19.8 million and $32.5 million during
the three and six months ended June 30, 1996, respectively, from revenues of
$12.3 million and $25.4 million during the three and six months ended June
30, 1995. These increases were due primarily to significant increases in the
Company's hotel development and hotel operations segments.
Hotel operations revenue increased 30.3% and 32.5% to $8.0 million and $13.5
million during the three and six months ended June 30, 1996, respectively, as
compared to $6.1 million and $10.2 million during the three and six months
ended June 30, 1995. This increase was primarily attributable to the
addition of seven Consolidated Hotels to the hotel operations segment from
July 1, 1995 through June 30, 1996. The Company held a minority ownership
position in one of these seven hotels prior to it becoming a Consolidated
Hotel in the fourth quarter of 1995 when additional ownership interests were
acquired. The hotel operations segment included the operations of 25
Consolidated Hotels comprising 2,570 rooms at June 30, 1996, compared to 18
Consolidated Hotels comprising 2,109 rooms at June 30, 1995 or an increase of
21.9% in total rooms. After considering the Company's ownership interest in
the majority-owned Consolidated Hotels, this translates to 2,197 and 1,751
equivalent owned rooms as of June 30, 1996 and 1995, respectively, or an
increase of 25.5%.
Hotel development revenue increased 261% and 56.8% to $8.2 million and $12.2
million during the three and six months ended June 30, 1996, respectively,
from $2.3 million and $7.8 million during the three and six months ended June
30, 1995. These increases were due primarily to the significant increase in
hotel development activity performed for entities in which the Company holds
a minority ownership interest. The Company was constructing 14 and 16 hotels
during the second quarter and first six months of 1996, compared to seven
hotels during the three and six months ended June 30, 1995, including five
which were opened during the 1995 second quarter resulting in the recognition
of revenues for only a portion of the quarter. In addition, the Company was
able to make significant progress on certain projects which were hampered by
severe weather conditions in the first quarter of 1996. The Company also had
several projects in various stages of pre-construction development during
both six month periods.
Hotel management revenue decreased 13.8% and 13.6% to $694,148 and $1.2
million during the three and six months ended June 30, 1996, respectively,
from $805,619 and $1.4 million during the three and six months ended June 30,
1995. While the number of hotels managed for third parties and minority-
owned entities increased from 37 hotels at June 30, 1995 to 39 hotels at June
30, 1996, the total number of rooms managed decreased by 73. The addition of
six management contracts (426 rooms) from July 1, 1995 to June 30, 1996 was
offset by the termination of three management contracts (397 rooms) with
minority-owned entities as a result of a hotel sale or temporary closing
during renovation, and the one minority-owned hotel (102 rooms) which became
a Consolidated Hotel in the fourth quarter of 1995 due to the Company
acquiring additional ownership interests in this hotel. The Company does not
recognize management fees from Consolidated Hotels. The total management fee
revenues generated during the three and six months ended June 30, 1996 from
the six management contracts added since July 1, 1995 were lower than the
management fee revenues generated during the three and six months ended June
30, 1995 from the four minority-owned hotels terminated as discussed above.
In addition, same room revenues decreased for all hotels managed for third
parties.
Employee leasing revenue decreased 4.7% and 8.7% to $3.0 million and $5.6
million during the three and six months ended June 30, 1996, respectively,
from $3.1 million and $6.1 million during the three and six months ended June
30, 1995, as the six hotels added from July 1, 1995 through June 30, 1996
representing 426 rooms, incurred lower payroll costs than the four hotels
representing 499 rooms which were terminated as discussed above.
Total operating costs and expenses increased 69.5% and 24.2% to $15.6 million
(78.5% of total revenues) and $26.3 million (81.1% of total revenue) during
the three and six months ended June 30, 1996, respectively, from $9.2 million
(74.7% of total revenues) and $21.2 million (83.3% of total revenues) during
the three and six months ended June 30, 1995. Operating costs and expenses
in the hotel operations segment increased 26.3% and 31.3% to $5.0 million and
$9.7 million during the three and six months ended June 30, 1996,
respectively, from $4.0 million and $7.4 million during the three and six
months ended June 30, 1995, resulting primarily from the addition of seven
Consolidated Hotels to this segment and are directly related to the 30.3% and
32.5% increase in segment revenue during the three and six months ended June
30, 1996. Hotel operations segment operating costs and expenses as a
percentage of segment revenue decreased to 62.8% and 71.9% during the three
and six months ended June 30, 1996, respectively, from 64.7% and 72.5% during
the three and six months ended June 30, 1995, due primarily to improvements
in operating efficiency and the increase in newly constructed AmeriHost Inn
hotels, whose operating costs are typically lower than the older, acquired
hotels. Operating costs and expenses from hotels other than AmeriHost Inn
hotels increased to 66.2% and 76.4% of hotel revenues during the three and
six months ended June 30, 1996 from 65.2% and 72.9% of hotel revenues during
the three and six months ended June 30, 1995, due primarily to the conversion
of three Consolidated Hotels to AmeriHost Inn hotels and higher expenses
associated with the severe weather conditions in the first quarter of 1996.
Operating costs and expenses for the hotel development segment increased 331%
and 50.9% to $7.2 million and $10.3 million during the three and six months
ended June 30, 1996, respectively, from $1.7 million and $6.8 million during
the three and six months ended June 30, 1995, consistent with the increase in
hotel development revenues. Operating costs and expenses in the hotel
development segment as a percentage of segment revenue increased to 87.7%
during the three months ended June 30, 1996 from 73.6% during the three
months ended June 30, 1995. The second quarter of 1996 contained a
significant level of construction activity which has higher operating costs
than pre-construction development activity. The second quarter of 1995
contained a relatively higher portion of pre-construction development
activity which has lower associated operating costs. Operating costs and
expenses in the hotel development segment as a percentage of segment revenue
decreased to 84.6% from 87.9% during the six months ended June 30, 1996, due
primarily to the timing of the pre-construction development activity as well
as the construction activity. Hotel management segment operating costs and
expenses decreased 2.4% and 10.0% to $496,384 and $869,035 during the three
and six months ended June 30, 1996, respectively, from $508,755 and $1.0
million during the three and six months ended June 30, 1995 due to an
increase in capitalized pre-opening costs associated with new hotels and
management contracts, and efficiencies achieved in the management of all
hotels operated and/or managed. Employee leasing operating costs and
expenses decreased 5.7% and 9.7% to $2.9 million and $5.4 million during the
three and six months ended June 30, 1996, respectively, from $3.0 million and
$6.0 million during the three and six months ended June 30, 1995, and is
consistent with the 4.7% and 8.7% decrease in segment revenue during the
three and six month periods.
Depreciation and amortization expense increased 79.2% and 81.7% to $856,357
and $1.7 million during the three and six months ended June 30, 1996,
respectively, from $478,007 and $912,926 during the three and six months
ended June 30, 1995. This increase was primarily attributable to the
addition of seven Consolidated Hotels to the hotel operations segment and the
resulting depreciation and amortization therefrom.
Leasehold rents - hotels decreased 4.7% and 3.1% to $518,172 and $964,302
during the three and six months ended June 30, 1996, respectively, from
$543,941 and $1.0 million during the three and six months ended June 30,
1995. The decrease was due to the termination of one leased Consolidated
Hotel in the second quarter of 1995 as a result of the sale of the hotel,
partially offset by the addition of one leased Consolidated Hotel to the
hotel operations segment in the fourth quarter of 1995 (the Company had held
a minority ownership position in this hotel prior to acquiring additional
ownership interests which resulted in a majority ownership position).
Corporate general and administrative expense remained relatively stable,
decreasing 0.6% to $521,994 in the second quarter of 1996 from $525,289 in
the second quarter of 1995. During the six month period, corporate general
and administrative expense increased slightly by 1.4% to $1,006,646 in the
1996 period from $993,047 in the 1995 period.
The Company's operating income increased $800,856 and $1.2 million, or 51.4%
and 86.4%, to $2.4 million and $2.5 million during the three and six months
ended June 30, 1996, respectively, from $1.6 million and $1.3 million during
the three and six months ended June 30, 1995. Operating income from the
hotel operations segment increased to $1.7 million and $1.4 million during
the three and six months ended June 30, 1996 from $1.2 million and $1.1
million during the three and six months ended June 30, 1995, resulting
primarily from the addition of seven Consolidated Hotels from July 1, 1995 to
June 30, 1996. Operating income from the hotel development segment increased
to $1.0 million and $1.8 million during the three and six months ended June
30, 1996 compared to $597,799 and $935,298 during the three and six months
ended June 30, 1995, due to the significant level of hotel development and
construction activity. The hotel management segment generated operating
income of $136,163 and $197,542 during the three and six months ended June
30, 1996 compared to $235,981 and $291,447 during the three and six months
ended June 30, 1995. These decreases were due primarily to the net reduction
in total rooms managed for minority-owned entities and unrelated third
parties as well as the elimination of management fees from Consolidated
Hotels. Employee leasing operating income increased slightly during the
second quarter, to $81,805 in 1996 from $52,463 in 1995. During the six
month period, employee leasing operating income increased to $145,910 in 1996
from $93,060 in 1995.
Interest expense was $619,124 and $1.3 million during the three and six
months ended June 30, 1996, respectively, as compared to $362,007 and
$669,726 during the three and six months ended June 30, 1995. These
increases are primarily attributable to the increase in mortgage financing
for Consolidated Hotels.
The Company's share of equity in income (loss) of affiliates increased 87.3%
to $181,028 in the second quarter of 1996 from $96,651 in the same quarter of
1995. Equity in income (loss) of affiliates increased to $36,389 during the
six months ended June 30, 1996 compared to ($86,877) during the same period
in 1995. These improvements in equity in operations of affiliates are
primarily due to the sale of one hotel in the second quarter of 1996 and the
acquisition of additional ownership interests in another hotel causing it to
become a Consolidated Hotel, both of which had been accounted for by the
equity method. Distributions from affiliates decreased slightly to $152,756
in the second quarter of 1996 from $184,943 in the second quarter of 1995.
Distributions from affiliates increased to $259,800 during the six months
ended June 30, 1996, compared to $204,162 during the same period in 1995.
LIQUIDITY AND CAPITAL RESOURCES
The Company has four main sources of cash from operating activities: (i)
revenues from hotel operations; (ii) fees from development, construction and
renovation projects; (iii) fees from management contracts; and (iv) fees from
employee leasing services. Cash from hotel operations is typically received
at the time the guest checks out of the hotel. A portion of the Company's
hotel operations revenues is generated through other businesses and contracts
and are usually paid within 30 to 45 days from billing. Fees from
development, construction and renovation projects are typically received
within 15 to 45 days from billing. Due to the procedures in place for
processing its construction draws, the Company typically does not pay its
contractors until the Company receives its draw from the equity or lending
source. Management fee revenues are typically received by the Company within
five working days from the end of each month. Cash from the Company's
employee leasing segment is typically received 24 to 48 hours prior to the
pay date.
During the first six months of 1996, the Company received cash from
operations of $4.0 million, compared to $1.4 million in the first six months
of 1995, or an increase in cash provided by operations of $2.6 million. The
increase in cash flow from operations during the first six months of 1996,
when compared to 1995, can be attributed to the significant level of hotel
construction activity in 1996 and expanded hotel operations. A significant
number of projects were started in the fourth quarter of 1995, resulting in a
significant amount of construction fees received in the first six months of
1996 when the majority of the construction activity on these hotels was
performed. Increased hotel ownership and operation activity also contributed
to the increase in cash flow from operations.
The Company invests cash in three principal areas: (i) the purchase of
property and equipment through the construction and renovation of
Consolidated Hotels; (ii) the purchase of equity interests in hotels; and
(iii) loans to affiliated and non-affiliated hotels for the purpose of
construction, renovation and working capital. During the first six months of
1996, the Company used $4.8 million in investing activities compared to $5.1
million in the first six months of 1995. During the first six months of
1996, the Company used $3.9 million to purchase property and equipment for
Consolidated Hotels, used $350,200 for the purchase of equity interests, and
used $904,312 for loans, net of loan collections. During the first six
months of 1995, the Company used cash primarily for the purchase of $5.3
million in property and equipment for Consolidated Hotels, used $225,050 for
the purchase of minority equity interests in hotels, and received $429,194 in
net repayments of notes receivable from minority-owned hotels. In addition,
the Company received distributions from investments in minority-owned hotels
of $259,800 in the first six months of 1996, compared to $204,162 in the
first six months of 1995.
Cash received from financing activities was $2.0 million during the first six
months of 1996 compared to $2.5 million during the first six months of 1995.
In 1996, the primary factors were net proceeds of $2.5 million from the
mortgage financing of Consolidated Hotels, net of principal repayments, and
$585,233 in net reductions to the Company's operating line-of-credit. In
1995, the contributing factors were proceeds of $1.8 million from the
mortgage financing of Consolidated Hotels, net of principal repayments, and
net proceeds of $744,147 from the Company's operating line-of-credit.
At June 30, 1996, the Company had $1.7 million outstanding under its
operating line-of-credit. The Company's line-of-credit was renewed and
increased effective May 1, 1996 to $5,000,000. The operating line-of-credit
(i) is collateralized by a security interest in certain of the Company's
assets, including its interest in various joint ventures; (ii) bears interest
at an annual rate equal to the lending bank's base rate plus 1/2% (with a
minimum interest rate of 7.5%); and (iii) matures May 1, 1997. The same bank
providing the operating line-of-credit has agreed to provide a $7.5 million
line-of-credit to be used for construction financing on hotel projects, of
which $5.0 million must be used on contracts which have firm commitments for
permanent mortgage financing when the construction is completed. At June 30,
1996, the Company also had outstanding $2.25 million of its 7% Subordinated
Notes which are unsecured obligations due October 9, 1999 and which pay
interest quarterly. Pursuant to the terms of the 7% Subordinated Notes, no
dividends may be paid on any capital stock of the Company until the 7%
Subordinated Notes have been paid in full. At the Company's sole discretion,
the 7% Subordinated Notes may be prepaid at any time without prepayment
penalty.
The Company expects cash from operations to be sufficient to pay all
operating and interest expenses in 1996.
SEASONALITY
The lodging industry, in general, is seasonal in nature. The Company's hotel
revenues are generally greater in the second and third calendar quarters than
in the first and fourth quarters due to weather conditions in the markets in
which the Company's hotels are located and general business and leisure
travel trends. This seasonality can be expected to continue to cause
quarterly fluctuations in the Company's revenues. Quarterly earnings may
also be adversely affected by events beyond the Company's control such as
extreme weather conditions, economic factors and other factors affecting
travel. In addition, hotel construction is seasonal, depending upon the
geographic location of the construction projects. Construction activity in
the Midwest may be slower in the first and fourth calendar quarters due to
weather conditions.
INFLATION
Management does not believe that inflation has had, or is expected to have,
any significant adverse impact on the Company's financial condition or
results of operations for the periods presented.
IMPACT OF NEW ACCOUNTING STANDARDS
In March 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment
of Long-Lived Assets and for Long-Lived Assets to be Disposed Of." This
Statement establishes accounting standards for the impairment of long-lived
assets, certain identifiable intangibles, and goodwill related to those
assets to be held and used and for long-lived assets and certain identifiable
intangibles to be disposed of. The Company adopted this standard on January
1, 1996, the impact of which was not material.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
All statements contained herein that are not historical facts, including but
not limited to, statements regarding the Company's hotels under construction
and the operation of AmeriHost Inn hotels are based on current expectations.
These statements are forward looking in nature and involve a number of risks
and uncertainties. Actual results may differ materially. Among the factors
that could cause actual results to differ materially are the following: the
availability of sufficient capital to finance the Company's business plan on
terms satisfactory to the Company; competitive factors, such as the
introduction of new hotels or renovation of existing hotels in the same
markets; changes in travel patterns which could affect demand for the
Company's hotels; changes in development and operating costs, including
labor, construction, land, equipment, and capital costs; general business and
economic conditions; and other risk factors described from time to time in
the Company's reports filed with the Securities and Exchange Commission. The
Company wishes to caution readers not to place undue reliance on any such
forward looking statements, which statements are made pursuant to the Private
Securities Litigation Reform Act of 1995, and as such, speak only as of the
date made.
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
SCHEDULE OF EARNINGS BEFORE INTEREST/RENT,
TAXES AND DEPRECIATION/AMORTIZATION
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Revenue $ 19,817,739 $ 12,286,630 $ 32,462,308 $ 25,443,991
Operating costs and expenses 15,563,353 9,182,386 26,314,442 21,192,055
4,254,386 3,104,244 6,147,866 4,251,936
Corporate general and administrative (521,994) (525,289) (1,006,646) (993,047)
Interest income 161,276 160,367 315,635 251,903
Other income (expense) 15,077 (677) 56,986 19,482
Equity in net income and losses
of affiliates 181,028 96,651 36,389 (86,877)
Earnings before minority interests 4,089,773 2,835,296 5,550,230 3,443,397
Minority interests in earnings of
consolidated subsidiaries and
partnerships, excluding minority
interest in gain on sale of land (62,751) (90,131) 141,250 22,478
Earnings before interest/rent, taxes
and depreciation/amortization $ 4,027,022 $ 2,745,165 $ 5,691,480 $ 3,465,875
</TABLE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K:
(a) Exhibits:
Exhibit 27 - Financial Statement Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during this period
covered by this report.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERIHOST PROPERTIES, INC.
Registrant
Date: July 29, 1996
By: /s/ Russell J. Cerqua
Russell J. Cerqua
Treasurer/Senior Vice President, Finance
By: /s/ James B. Dale
James B. Dale
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Amerihost
Properties, Inc.'s Form 10-Q and is qualified in its entirety by reference to
such Form 10-Q filing.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 2,609,268
<SECURITIES> 0
<RECEIVABLES> 13,759,907
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 16,629,949
<PP&E> 42,030,525
<DEPRECIATION> 6,697,538
<TOTAL-ASSETS> 61,568,860
<CURRENT-LIABILITIES> 14,650,989
<BONDS> 0
0
0
<COMMON> 30,118
<OTHER-SE> 18,643,434
<TOTAL-LIABILITY-AND-EQUITY> 61,568,860
<SALES> 19,817,739
<TOTAL-REVENUES> 19,817,739
<CGS> 15,563,353
<TOTAL-COSTS> 15,563,353
<OTHER-EXPENSES> 1,896,523
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 619,124
<INCOME-PRETAX> 2,338,582
<INCOME-TAX> 959,000
<INCOME-CONTINUING> 1,379,582
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,379,582
<EPS-PRIMARY> 0.20
<EPS-DILUTED> 0.20
</TABLE>
