November 3, 2000
Dear Shareholders:
This has truly been a great quarter for your Company. After months of
negotiation, we closed on the sale of the AmeriHost Inn name and franchising
rights to the world's largest franchiser, Cendant Corporation. As a result, the
profits generated for the third quarter and year to date 2000 are record
results. However, the initial cash and profits recorded in the third quarter are
just the beginning of the benefits your Company will realize as a result of our
deal with Cendant. There are basically four points that will financially impact
your Company.
1. An initial payment that was recorded this quarter of $5.1 million,
net of closing costs.
2. Preferred franchise agreements with Cendant on all our owned
AmeriHost Inn hotels.
3. Royalty sharing whereby our Company will receive a percentage of
royalty fees paid to Cendant for the AmeriHost Inn brand for the
next 25 years.
4. Incentive fees from Cendant as we develop and sell AmeriHost Inn
hotels that execute a franchise agreement with Cendant.
We are truly excited about the future of our Company and the AmeriHost Inn brand
with Cendant. To avoid confusion going forward as we develop the AmeriHost Inn
brand with Cendant, and as part of our agreement with Cendant, we have begun
doing business as Arlington Hospitality, Inc. Our symbol on Nasdaq: HOST will
remain the same. In addition, the names of our hotels will remain as AmeriHost
Inn hotels and operate under a franchise agreement with Cendant. Technically,
our name change will not be official until our next regularly scheduled
shareholder meeting, subject to shareholder approval.
Another significant event for Arlington Hospitality this quarter was the
appointment of KPMG LLP as our new auditors. After evaluating many accounting
firms, the Company's Audit Committee and Board of Directors decided to retain
the services of a world renowned accounting firm to not only provide audit and
tax services, but to guide and consult with senior management through the many
changes occurring in our industry.
One of our primary objectives this year was to bring the Company's debt to
equity ratio to 2:1 or better. Our debt to equity ratio is computed using total
long-term debt compared to total shareholders' equity plus deferred income.
Deferred income has been included since the Company has already received the
cash benefit and the accounting treatment is merely a deferral and amortization
of the profit. I am proud to say that our debt to equity ratio, as defined, now
stands at 1.85:1. Our objective is to better manage this ratio and other
financial ratios and to be stronger than industry averages.
The outlook for the future of Arlington Hospitality appears very strong. Our
objective to start construction on up to 15 new AmeriHost Inn & Suites hotels
through next year appears right on target. In addition, we are optimistic about
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the prospects of selling at least 15 hotels to Amerihost Inn franchisees through
the end of next year. Remember, our goal is to sell one AmeriHost Inn hotel for
each one that we build.
We are committed to increasing the shareholder value of Arlington Hospitality,
Inc. Our Board of Directors and management team are extremely focused in this
area. Our primary objective of increasing profitability is now being realized.
Our next step is to communicate our business plan more thoroughly to the Wall
Street community. I would like to thank you for your commitment to the Company
and look forward to future prosperity.
Sincerely,
Michael P. Holtz
Chairman of the Board
President and CEO
