SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[x] Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended MARCH 31, 2000
----------------------
OR
[ ] Transition Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Commission File No. 0-15291
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.)
2355 S. ARLINGTON HEIGHTS ROAD, SUITE 400, ARLINGTON HEIGHTS, ILLINOIS 60005
- ---------------------------------------------------------------------- -----
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 228-5400
----------------
Indicate by check mark whether the Registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes x No
As of May 12, 2000, 4,973,573 shares of the Registrant's Common Stock were
outstanding.
<PAGE>
AMERIHOST PROPERTIES, INC.
FORM 10-Q
FOR THE THREE MONTHS ENDED MARCH 31, 2000
INDEX
PART I: Financial Information Page
----------------------------- ----
Consolidated Balance Sheets as of March 31, 2000
and December 31, 1999 4
Consolidated Statements of Operations for the Three Months
Ended March 31, 2000 and 1999 6
Consolidated Statements of Cash Flows for the Three Months
Ended March 31, 2000 and 1999 7
Notes to Consolidated Financial Statements 9
Management's Discussion and Analysis 13
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 18
Schedule of Earnings Before Interest/Rent, Taxes and
Depreciation/Amortization for the Three Months
Ended March 31, 2000 and 1999 19
PART II: Other Information
--------------------------
Item 6 - Exhibits and Reports on Form 8-K 20
Signatures 20
<PAGE>
Part I: Financial Information
Item 1: Financial Statements
<PAGE>
<TABLE>
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<CAPTION>
March 31, December 31,
2000 1999
--------------- --------------
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,957,724 $ 3,766,323
Accounts receivable (including $432,051 and $213,911
from related parties) 3,414,063 2,901,615
Notes receivable, current portion 568,485 568,485
Prepaid expenses and other current assets 343,039 971,836
Refundable income taxes 905,359 56,876
Costs and estimated earnings in excess of billings on
uncompleted contracts with related parties 1,104,126 834,820
--------------- --------------
Total current assets 9,292,796 9,099,955
--------------- --------------
Investments in and advances to unconsolidated
hotel joint ventures 6,312,179 7,332,806
--------------- --------------
Property and equipment:
Land 9,870,897 8,786,189
Buildings 60,529,451 56,670,991
Furniture, fixtures and equipment 19,510,232 17,758,161
Construction in progress 1,538,391 1,062,888
Leasehold improvements 2,046,517 1,990,822
Assets held for sale - 7,967,318
--------------- --------------
93,495,488 94,236,369
Less accumulated depreciation and amortization 16,163,109 15,466,013
--------------- --------------
77,332,379 78,770,356
--------------- --------------
Notes receivable, less current portion 669,411 692,662
Deferred income taxes 4,120,000 4,327,000
Other assets, net of accumulated amortization of
$805,998 and $1,871,416 2,820,352 2,885,388
--------------- --------------
7,609,763 7,905,050
$ 100,547,117 $ 103,108,167
=============== ==============
</TABLE>
(continued)
<PAGE>
<TABLE>
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
=================================================================================================================
<CAPTION>
March 31, December 31,
2000 1999
--------------- --------------
LIABILITIES AND SHAREHOLDERS' EQUITY
<S> <C> <C>
Current liabilities:
Accounts payable $ 2,663,434 $ 2,623,390
Bank line-of-credit 7,586,742 7,560,214
Accrued payroll and related expenses 381,820 777,725
Accrued real estate and other taxes 2,081,958 2,260,048
Other accrued expenses and current liabilities 1,379,280 1,127,504
Current portion of long-term debt 1,556,821 1,567,643
--------------- --------------
Total current liabilities 15,650,055 15,916,524
--------------- --------------
Long-term debt, net of current portion 57,669,985 58,781,609
--------------- --------------
Deferred income 13,732,835 14,001,231
--------------- --------------
Commitments
Minority interests 204,074 228,235
Shareholders' equity:
Preferred stock, no par value; authorized 100,000 shares;
none issued - -
Common stock, $.005 par value; authorized 25,000,000 shares; issued and
outstanding 4,973,548 shares at March 31, 2000
and 4,968,673 shares at December 31, 1999 24,868 24,843
Additional paid-in capital 13,063,724 13,050,069
Retained earnings 638,451 1,542,531
--------------- --------------
13,727,043 14,617,443
Less:
Stock subscriptions receivable (436,875) (436,875)
--------------- --------------
13,290,168 14,180,568
$ 100,547,117 $ 103,108,167
=============== ==============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
<CAPTION>
2000 1999
--------------------- -------------
<S> <C> <C>
Revenue:
Hotel operations:
AmeriHost Inn(R)hotels $ 10,411,503 $ 10,008,296
Other hotels 2,472,789 2,435,095
Development and construction 1,096,518 370,745
Management services 289,843 314,656
Employee leasing 1,428,871 1,590,155
Franchising 167,525 -
--------------- --------------
15,867,049 14,718,947
--------------- --------------
Operating costs and expenses:
Hotel operations:
AmeriHost Inn(R)hotels 8,183,697 8,123,201
Other hotels 2,363,946 2,379,939
Development and construction 914,731 403,551
Management services 219,803 284,821
Employee leasing 1,396,980 1,520,093
Franchising 237,554 87,381
--------------- --------------
13,316,711 12,798,986
--------------- --------------
2,550,338 1,919,961
Depreciation and amortization 1,103,824 1,154,519
Leasehold rents - hotels 1,698,362 1,768,275
Corporate general and administrative 398,953 382,535
--------------- --------------
Operating loss (650,801) (1,385,368)
Other income (expense):
Interest expense (1,499,716) (1,553,587)
Interest income 231,757 233,803
Other income 100,861 15,795
Equity in net income and losses of affiliates 68,751 (165,215)
Gain on sale of assets 171,579 -
--------------- --------------
Loss before minority interests and income taxes (1,577,569) (2,854,572)
Minority interests in operations of consolidated
subsidiaries and partnerships 18,489 (38,419)
--------------- --------------
Loss before income tax (1,559,080) (2,892,991)
Income tax benefit 655,000 1,128,000
--------------- --------------
Net loss $ (904,080) $ (1,764,991)
================ ===============
Loss per share:
Basic $ (0.18) $ (0.29)
================ ===============
Diluted $ (0.18) $ (0.29)
================ ===============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
<CAPTION>
2000 1999
------------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $ 15,350,850 $ 15,633,372
Cash paid to suppliers and employees (15,495,191) (17,275,643)
Interest received 311,295 203,737
Interest paid (1,576,971) (1,587,677)
Income taxes received (paid) 13,517 (51,932)
--------------- --------------
Net cash used in operating activities (1,396,500) (3,078,143)
---------------- ---------------
Cash flows from investing activities:
Distributions, and collections on advances,
from affiliates 1,768,667 335,379
Purchase of property and equipment (1,743,365) (3,772,438)
Purchase of investments in, and advances
to, minority owned affiliates (683,895) (592,500)
Acquisitions of partnership interests,
net of cash acquired - 85,314
Collections on notes receivable 23,251 16,385
Proceeds from sale of assets 2,311,344 12,816,969
--------------- --------------
Net cash provided by investing activities 1,676,002 8,889,109
--------------- --------------
Cash flows from financing activities:
Proceeds from issuance of long-term debt 800,000 5,087,386
Principal payments on long-term debt (1,922,636) (9,018,277)
Net (repayments of) proceeds from line of credit 26,528 (1,961,213)
Decrease in minority interest (5,672) (5,672)
Common stock repurchases - (79,650)
Other 13,679 -
--------------- --------------
Net cash used in financing activities (1,088,101) (5,977,426)
--------------- --------------
Net decrease in cash (808,599) (166,460)
Cash and cash equivalents, beginning of year 3,766,323 4,493,834
--------------- --------------
Cash and cash equivalents, end of period $ 2,957,724 $ 4,327,374
=============== ==============
</TABLE>
(continued)
<PAGE>
<TABLE>
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
(UNAUDITED)
=============================================================================================================
<CAPTION>
2000 1999
---------------------- -------------
<S> <C> <C>
Reconciliation of net loss to net cash used in operating activities:
Net loss $ (904,080) $ (1,764,991)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization 1,103,824 1,154,519
Equity in net (income) loss of affiliates and
amortization of deferred income (68,751) 165,215
Minority interests in net income of subsidiaries (18,489) 38,419
Amortization of deferred interest and loan discount - 11,348
Amortization of deferred gain (380,070) (321,027)
Deferred income taxes 207,000 (844,000)
Gain on sale of fixed assets (171,579) -
Changes in assets and liabilities, net of effects of acquisition:
(Increase) decrease in accounts receivable (591,450) 623,581
Decrease (increase) in prepaid expenses and
other current assets 707,799 (77,501)
Increase in refundable income taxes (848,483) (335,932)
(Increase) decrease in costs and estimated earnings
in excess of billings (269,306) 304,552
Decrease (increase) in other assets 2,796 (343,346)
Increase (decrease) in accounts payable 40,045 (1,586,806)
Decrease in accrued payroll and other accrued
expenses and current liabilities (244,781) (27,233)
Decrease in accrued interest (78,663) (45,438)
Increase (decrease) in deferred income 117,688 (29,503)
--------------- --------------
Net cash used in operating activities $ (1,396,500) $ (3,078,143)
================ ===============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
AMERIHOST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2000
1. BASIS OF PREPARATION:
---------------------
The financial statements included herein have been prepared by the
Company, without audit. In the opinion of the Company, the accompanying
unaudited financial statements contain all adjustments, which consist only
of recurring adjustments necessary to present fairly the financial
position of Amerihost Properties, Inc. and subsidiaries as of March 31,
2000 and December 31, 1999 and the results of its operations and cash
flows for the three months ended March 31, 2000 and 1999. The results of
operations for the three months ended March 31, 2000 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 1999 Annual Report on Form 10-K. Certain
reclassifications have been made to the 1999 financial statements in order
to conform with the 2000 presentation.
2. PRINCIPLES OF CONSOLIDATION:
----------------------------
The consolidated financial statements include the accounts of the Company,
its wholly-owned subsidiaries, and entities in which the Company has a
majority ownership interest. Significant intercompany accounts and
transactions have been eliminated.
3. EARNINGS (LOSS) PER SHARE:
--------------------------
The Company calculates earnings per share in accordance with Financial
Accounting Standards Board ("FASB") Statement No. 128, "Earnings Per
Share" (FAS 128). Basic earnings per share ("EPS") is calculated by
dividing the income (loss) available to common shareholders by the
weighted average number of common shares outstanding for the period,
without consideration for common stock equivalents. The Company excluded
stock options which had an anti-dilution effect on the EPS computations.
Diluted EPS gives effect to all dilutive potential common shares
outstanding for the period. The following are the calculations of basic
and diluted earnings per share:
<TABLE>
Three Months Ended March 31,
-------------------------------
2000 1999
------------ ---------------
<S> <C> <C>
Net loss $ (904,080) $ (1,764,991)
Impact of convertible partnership interests (33,897) (34,215)
---------------- ----------------
$ (937,977) $ (1,799,206)
================ ================
Weighted average common shares outstanding 4,972,304 6,077,725
Dilutive effect of convertible partnership interests and
common stock equivalents 249,350 249,350
--------------- ---------------
Dilutive common shares outstanding 5,221,654 6,327,075
=============== ===============
Basic net loss per share $ (0.18) $ (0.29)
============== ===============
Diluted net loss per share $ (0.18) $ (0.29)
============== ===============
</TABLE>
<PAGE>
AMERIHOST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2000
4. 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 and relate principally to depreciation of property and
equipment and deferred income.
The income tax expense (benefit) for the three months ended March 31, 2000
and 1999 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.
5. HOTEL LEASES:
-------------
The Company leases 34 hotels as of March 31, 2000 (including 30
sale/leaseback hotels - Note 8), the operations of which are included in
the Company's consolidated financial statements. All of these leases are
triple net and provide for monthly base rent payments ranging from $14,000
to $26,667. The Company leases or subleases two of these hotels from
partnerships in which the Company owns equity interests of up to 16.33%.
These two leases also provide for additional rent payments ranging from
approximately $37,000 to $74,000 per annum, plus percentage rents equal to
10% of room revenues in excess of stipulated amounts. The leases and
sub-leases expire through March 23, 2009, except for the two leases from
partnerships in which the Company owns an equity interest which expired
December 31, 1999. The Company is continuing to operate these hotels under
the same terms as provided in the original lease.
The four leases, other than the sale/leaseback hotels, 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 with a
specified maximum, and the others are based on a fixed amount. At March
31, 2000, the aggregate purchase price for these leased hotels was
approximately $14,030,000.
6. LIMITED PARTNERSHIP GUARANTEED DISTRIBUTIONS:
---------------------------------------------
The Company is a general partner in three partnerships where the Company
has guaranteed minimum annual distributions to the limited partners in the
amount of 10% of their original capital contributions.
7. INVESTMENTS:
------------
Effective January 1, 1999, the Company acquired the remaining ownership
interest in one hotel joint venture. The following is a summary of this
acquisition:
Fair value of assets acquired $ 1,916,070
Cash paid, net of cash acquired (260,648)
--------------
Liabilities assumed $ 1,655,422
=============
<PAGE>
AMERIHOST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2000
8. SALE/LEASEBACK OF HOTELS:
-------------------------
On June 30, 1998, the Company completed the sale of 26 AmeriHost Inn(R)
hotels to a Real Estate Investment Trust ("REIT") for $62.2 million. The
company completed the sale of four additional AmeriHost Inn(R) hotels to
the same REIT during March 1999 for $10.8 million. Upon the sales to the
REIT, the Company entered into agreements to lease back the hotels for an
initial term of ten years, with two five year renewal options. The lease
payments are fixed at 10% of the sale price for the first three years.
Thereafter, the lease payments are subject to a CPI increase with a 2%
annual maximum. The Company has deferred the gain on the sale of these
hotels pursuant to sale/leaseback accounting. This deferral will be
recognized over the initial term of the lease as a reduction of leasehold
rent expense.
9. BUSINESS SEGMENTS:
------------------
The Company's business is primarily involved in five segments: (1) hotel
operations, consisting of the operations of all hotels in which the
Company has a 100% or majority 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, and (5) AmeriHost Inn(R) hotel franchising.
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 the
three months ended March 31, 2000 and 1999, for each business segment,
which is the information utilized by the Company's decision makers in
managing the business:
Revenues 2000 1999
-------- ---------------- --------------
Hotel operations $ 12,884,292 $ 12,443,391
Hotel development 1,096,518 370,745
Hotel management 289,843 314,656
Employee leasing 1,428,871 1,590,155
Hotel franchising 167,525 -
------------- -------------
$ 15,867,049 $ 14,718,947
============= =============
Operating costs and expenses
Hotel operations $ 10,547,643 $ 10,503,140
Hotel development 914,731 403,551
Hotel management 219,803 284,821
Employee leasing 1,396,980 1,520,093
Hotel franchising 237,554 87,381
------------- -------------
$ 13,316,711 $ 12,798,986
============= =============
<PAGE>
AMERIHOST PROPERTIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2000
9. BUSINESS SEGMENTS (CONTINUED):
------------------------------
Operating loss 2000 1999
-------------- -------------- --------------
Hotel operations $ (443,900) $ (955,263)
Hotel development 177,030 (39,345)
Hotel management 58,201 18,795
Employee leasing 31,312 69,162
Hotel franchising (71,496) (87,381)
Corporate (401,948) (391,336)
-------------- --------------
$ (650,801) $ (1,385,368)
============== ==============
Identifiable assets
-------------------
Hotel operations $ 91,288,124 $ 94,606,864
Hotel development 1,813,014 1,272,184
Hotel management 246,834 674,489
Employee leasing 481,529 494,806
Hotel franchising 68,517 164,485
Corporate 6,649,099 5,895,339
------------- -------------
$ 100,547,117 $ 103,108,167
============= =============
Capital expenditures
--------------------
Hotel operations $ 1,592,157 $ 3,740,065
Hotel development 5,018 -
Hotel management 21,261 24,329
Employee leasing - -
Hotel franchising 18,732 -
Corporate 106,197 8,044
------------- -------------
$ 1,743,365 $ 3,772,438
============= =============
Depreciation/Amortization
-------------------------
Hotel operations $ 1,082,186 $ 1,127,238
Hotel development 4,757 6,539
Hotel management 11,840 11,040
Employee leasing 579 900
Hotel franchising 1,467 -
Corporate 2,995 8,802
------------- -------------
$ 1,103,824 $ 1,154,519
============= =============
<PAGE>
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(R) hotels, its
proprietary brand, and the ownership, operation and management of AmeriHost
Inn(R) hotels and other mid-price hotels. As of March 31, 2000, there were 77
AmeriHost Inn(R) hotels open, of which 60 were wholly-owned or leased, one was
majority-owned, 11 were minority-owned, and five were owned and operated by
franchisees. A total of six AmeriHost Inn(R) hotels were opened during the past
fifteen months. The Company intends to use the AmeriHost Inn(R) brand when
expanding its hotel operations segment. As of March 31, 2000, one wholly-owned
AmeriHost Inn(R) hotel and four minority-owned AmeriHost Inn(R) hotels were
under construction. Same room revenues for all AmeriHost Inn(R) hotels
(including minority owned and franchised) increased approximately 7.6% during
the first quarter of 2000, compared to the first quarter of 1999, attributable
to an increase of $0.95 in average daily rate, and a 4.6% increase in occupancy.
These results relate to the 73 AmeriHost Inn(R) hotels that were operating for
at least thirteen full months during the three months ended March 31, 2000.
Revenues from hotel operations consist of the revenues from all hotels in which
the Company has a 100% or majority 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 method.
Development and construction revenues consist of one-time fees for new
construction and renovation activities performed by the Company for
minority-owned hotels and unrelated third parties. The Company also receives
revenue from management and employee leasing services provided to minority-owned
hotels and unrelated third parties.
Revenues from Consolidated AmeriHost Inn(R) hotels increased 4.0% to $10.4
million during the first quarter of 2000, from revenues of $10.0 million during
the first quarter of 1999, due primarily to a strong increase in same room
revenues, offset by the sale of hotels to franchisees. Revenues from the hotel
management and employee leasing segments decreased by 9.8% in total during the
first quarter of 2000, due primarily to the sale of hotels under management
contracts. Revenues from Consolidated non-AmeriHost Inn(R) hotels increased 1.6%
during the first quarter of 2000, compared to 1999, as a result of the
renovation of one Consolidated non-AmeriHost Inn(R) hotel and the increased
occupancy therefrom, offset by the sale of two non-AmeriHost Inn(R) hotels.
Total revenues increased 7.8% to $15.9 million during the first quarter of 2000,
from $14.7 million during the first quarter of 1999. The Company recorded a net
loss of $904,080 for the first quarter of 2000, or ($0.18) per diluted share,
compared to a net loss of $1.8 million, or ($0.29) per diluted share in 1999.
In 1999, the Company began to franchise the AmeriHost Inn(R) brand name.
Currently, the Company is qualified to sell AmeriHost Inn(R) franchises in all
states, Canada and Mexico. To date, the Company has entered into 18 AmeriHost
Inn(R) franchise agreements. However, the Company does not anticipate the
franchising activity to have a significant impact on the operations of the
Company in 2000, and there can be no assurance that the Company will be
successful in selling AmeriHost Inn(R) franchises in the future. The results for
the first three months of 2000 were consistent with the Company's primary
objective of increasing the number of franchised AmeriHost Inn(R) hotels,
including the sale of two AmeriHost Inn(R) hotels owned by the Company to
franchisees.
The Company uses EBITDAR as a supplemental performance measure, along with net
income, to report its operating results. EBITDAR is defined as net income before
extraordinary items, adjusted to eliminate the impact of (i) interest expense;
(ii) interest and other income; (iii) leasehold rents for hotels, which the
Company considers to be financing costs similar to interest; (iv) income tax
expense (benefit), (v) depreciation and amortization; and (vi) gains or losses
from property transactions. EBITDAR should not be considered as an alternative
to operating income (as determined in accordance with Generally Accepted
Accounting Principles, "GAAP") as an indicator of the Company's operating
performance or to cash flows from operating activities (as determined in
accordance with GAAP) as a measure of liquidity. EBITDAR, as defined by the
Company, is included herein due to numerous requests by investors and analysts.
Management believes that investors and analysts find it to be a useful tool for
measuring the Company's ability to service debt. EBITDAR increased 67.8% to $2.2
million during the three months ended March 31, 2000, from $1.3 million during
the three months ended March 31, 1999. An EBITDAR schedule is included herein.
<PAGE>
Amerihost had an ownership interest in 82 hotels at March 31, 2000 versus 89
hotels at March 31, 1999 (excluding hotels under construction). The increased
ownership from the development of AmeriHost Inn(R) hotels for the Company's own
account and for minority-owned entities was offset by the sale of AmeriHost
Inn(R) hotels to franchisees and non-AmeriHost Inn(R) hotels to unrelated third
parties. These figures include a net decrease of five Consolidated hotels, from
73 at March 31, 1999 to 68 at March 31, 2000.
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2000 COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 1999
Revenues increased 7.8% to $15.9 million during the three months ended March 31,
2000, from $14.7 million during the three months ended March 31, 1999. Revenues
increased from Consolidated AmeriHost Inn(R) hotels, non-AmeriHost Inn(R)
hotels, hotel development, and hotel franchising, partially offset by decreases
from the hotel management and employee leasing segments.
Hotel operations revenue increased 3.5% to $12.9 million during the three months
ended March 31, 2000, from $12.4 million during the three months ended March 31,
1999. Revenues from Consolidated AmeriHost Inn(R) hotels increased 4.0% to $10.4
million during the three months ended March 31, 2000, from $10.0 million during
the three months ended March 31, 1999. These increases were attributable
primarily to the addition of four newly constructed Consolidated AmeriHost
Inn(R) hotels during the first quarter of 1999, partially offset by the sale of
three Consolidated AmeriHost Inn(R) hotels to franchisees during the remainder
of 1999 and the first quarter of 2000. In addition, same room revenues for the
Consolidated AmeriHost Inn(R) hotels increased 6.6%. Revenue from Consolidated
other brand hotels increased 1.6% during the three month period, due to a same
room revenue increase of 17.3% which is attributable to the complete renovation
of one hotel which significantly increased its occupancy, partially offset by
the sale of two non-AmeriHost Inn(R) hotels during the second half of 1999. The
hotel operations segment included the operations of 68 Consolidated hotels
(including 61 AmeriHost Inn(R) hotels) comprising 4,807 rooms at March 31, 2000,
compared to 73 Consolidated hotels (including 64 AmeriHost Inn(R) hotels)
comprising 5,160 rooms at March 31, 1999. After considering the Company's
ownership interest in the majority-owned Consolidated hotels, this translates to
4,564 and 4,891 equivalent owned rooms as of March 31, 2000 and 1999,
respectively, or a decrease of 6.7%. Recently, the Company has experienced an
increase in competition in certain markets, primarily from newly constructed
hotels. As a result, there is increased downward pressure on occupancy levels
and average daily rates. The Company believes that as the number of AmeriHost
Inn(R) hotels increases, the greater the benefits will be at all locations from
marketplace recognition and repeat business. In addition, the Company typically
builds new hotels in growing markets where it anticipates a certain level of
additional hotel development.
Hotel development revenue increased 195.8% to $1.1 million during the three
months ended March 31, 2000, from $370,745 during the three months ended March
31, 1999. Hotel development revenues are directly related to the number of
hotels being developed and constructed for minority-owned entities or unrelated
third parties. The Company was constructing four hotels for minority-owned
entities during the first quarter of 2000, compared to one hotel during the
three months ended March 31, 1999. The Company also had several additional
projects in various stages of pre-construction development during both three
month periods.
Hotel management revenue decreased 7.9% to $289,843 during the three months
ended March 31, 2000, from $314,656 during the three months ended March 31,
1999. The number of hotels managed for third parties and minority-owned entities
decreased from 20 hotels, representing 1,817 rooms, at March 31, 1999 to 17
hotels, representing 1,635 rooms, at March 31, 2000. The decrease was the result
of the termination of two management contracts (121 rooms) with minority-owned
entities as a result of the sale of the hotels (one non-AmeriHost Inn(R) hotel
and one AmeriHost Inn(R) hotel which was sold to a franchisee), and the
termination of one management contract for a hotel with an unrelated third party
(61 rooms).
Employee leasing revenue decreased 10.1% to $1.4 million during the three months
ended March 31, 2000, from $1.6 million during the three months ended March 31,
1999, due primarily to the reduction in hotels managed for
<PAGE>
minority-owned entities and unrelated third parties as described above, and the
associated decrease in payroll costs which is the basis for the employee leasing
revenue.
Total operating costs and expenses increased 4.0% to $13.3 million during the
three months ended March 31, 2000, from $12.8 million during the three months
ended March 31, 1999, or 83.9% and 87.0% of total revenues during the three
months ended March 31, 2000 and 1999, respectively. Operating costs and expenses
in the hotel operations segment remained constant at $10.5 million during the
three months ended March 31, 2000 and 1999. A decrease in operating costs
associated with the fewer number of hotels included in this segment (68 hotels
and March 31, 2000 versus 73 hotels at March 31, 1999), as well as a significant
amount of pre-opening start-up expenses incurred during the first quarter of
1999 which were not present in the first quarter of 2000, was offset by the
inflationary increases in operating expenses and the greater number of
stabilized hotels. Consequently, hotel operational efficiency improved as total
operating costs and expenses as a percentage of segment revenue decreased to
81.9% during the three months ended March 31, 2000, from 84.4% during the three
months ended March 31, 1999. Operating costs and expenses as a percentage of
revenues from the Consolidated AmeriHost Inn(R) hotels decreased to 78.6% during
the three months ended March 31, 2000, from 81.2% during the three months ended
March 31, 1999.
Operating costs and expenses for the hotel development segment increased 126.7%
to $914,731 during the three months ended March 31, 2000, from $403,551 during
the three months ended March 31, 1999, consistent with the 195.8% increase in
hotel development revenues for the three months ended March 31, 2000. Operating
costs and expenses in the hotel development segment as a percentage of segment
revenue decreased during the three months ended March 31, 2000 due primarily to
the overall increase in the level of hotel development and construction activity
performed for minority-owned entities, as well as the relatively higher level of
pre-construction development activity performed in 2000 compared to 1999.
Construction activity has significantly higher operating costs compared to the
pre-construction development activity. Hotel management segment operating costs
and expenses decreased 22.8% to $219,803 during the three months ended March 31,
2000, from $284,821 during the three months ended March 31, 1999. This decrease
was due to the decrease in the number of hotels managed for minority-owned
hotels and unaffiliated third parties. Employee leasing operating costs and
expenses decreased 8.1% to $1.4 million during the three months ended March 31,
2000, from $1.5 million during the three months ended March 31, 1999, which is
consistent with the 10.1% decrease in segment revenue for the three months ended
March 31, 2000.
Depreciation and amortization expense decreased 4.4% to $1.1 million during the
three months ended March 31, 2000, from $1.2 million during the three months
ended March 31, 1999. The decrease was primarily attributable to the decrease in
Consolidated hotels and the completion of the sale and leaseback of four hotels
in March 1999. The Company does not recognize any depreciation on the assets
sold in the sale/leaseback transaction.
Leasehold rents - hotels decreased 4.0% to $1.7 million during the three months
ended March 31, 2000, from $1.8 million during the three months ended March 31,
1999. This decrease was due primarily to the sale of two larger non-AmeriHost
Inn(R) hotels during the second half of 1999, partially offset by the sale and
leaseback of four AmeriHost Inn(R) hotels in March 1999.
Corporate general and administrative expense increased 4.3% to $398,953 during
the three months ended March 31, 2000, from $382,535 during the three months
ended March 31, 1999, which can be attributed primarily to the overall growth of
the Company.
The Company's operating loss decreased 53.0% to ($650,801) during the three
months ended March 31, 2000, from ($1.4) million during the three months ended
March 31, 1999. The following discussion of operating income (loss) by segment
is exclusive of any corporate general and administrative expense. Operating loss
from Consolidated AmeriHost Inn(R) hotels decreased 79.7% to ($74,168) during
the three months ended March 31, 2000, from ($365,537) during the three months
ended March 31, 1999. This decrease in operating loss was due to the increase in
same room revenues as well as a significant number of Consolidated AmeriHost
Inn(R) hotels operating closer to full stabilization in the first quarter of
2000 as compared to the first quarter of 1999. Operating income from the hotel
development segment increased to operating income of $177,030 during the three
months ended March 31,
<PAGE>
2000, from an operating loss of ($39,345) during the three months ended March
31, 1999. The fluctuation in hotel development operating income was due to the
timing of hotels developed and constructed for third parties and minority-owned
entities during the first quarter of 2000, compared with the first quarter of
1999, and the overall increase in the number of hotels developed and constructed
for minority-owned entities. The hotel management segment operating income
increased 209.7% to $58,200 during the three months ended March 31, 2000, from
$18,795 during the three months ended March 31, 1999. This increase was due
primarily to operational efficiencies. Employee leasing operating income
decreased 54.7% to $31,312 during the three months ended March 31, 2000, from
$69,162 during the three months ended March 31, 1999, due to the decrease in
employee leasing agreements with minority-owned entities and unrelated third
parties.
Interest expense decreased 3.5% to $1.5 million during the three months ended
March 31, 2000, from $1.6 million during the three months ended March 31, 1999.
The decrease was attributable to the decrease in Consolidated hotels with
mortgage financing, including the sale and leaseback of four hotels in the first
quarter of 1999, whereby the Company did not recognize any interest expense on
the sold hotels after the sale date.
The Company's share of equity in income (loss) of affiliates increased to
$68,751 during the three months ended March 31, 2000, from ($165,215) during the
three months ended March 31, 1999. The fluctuation in equity of affiliates
during the three months ended March 31, 2000, compared to the three months ended
March 31, 1999, was primarily due to the sale of a minority owned hotel at a
significant gain during the first quarter of 2000. Distributions from affiliates
were $262,232 during the three months ended March 31, 2000, compared to $37,229
during the three months ended March 31, 1999.
LIQUIDITY AND CAPITAL RESOURCES
The Company has five main sources of cash from operating activities: (i)
revenues from hotel operations; (ii) fees from development, construction and
renovation projects, including proceeds from the sale of assets held for sale;
(iii) fees from management contracts; (iv) fees from employee leasing services;
and (v) fees from franchise agreements. Cash from hotel operations is typically
received at the time the guest checks out of the hotel. Approximately 10% of the
Company's hotel operations revenues is generated through other businesses and
contracts and is 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 typically are received by the Company within five working days from the
end of each month. Cash from the Company's employee leasing segment typically is
received 24 to 48 hours prior to the pay date. Franchise fees are typically
received within ten days from the end of each month.
During the first three months of 2000, the Company used cash for operations of
$1.4 million, compared to using $3.1 million during the first three months of
1999, or a decrease in cash used by operations of $1.7 million. The increase in
cash flow from operations during the first three months of 2000, when compared
to 1999, can be attributed to the increasing number of hotels operating closer
to stabilization in 2000 and the increase in same room revenues. In addition,
during the first quarter of 2000, the Company had significantly less development
and construction activity on hotels which were being built for the Company's own
account.
The Company invests cash in four 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) the making of loans
to affiliated and non-affiliated hotels for the purpose of construction,
renovation and working capital; and (iv) the purchase of property and equipment
held for sale. During the first three months of 2000, the Company received $1.7
million from investing activities compared to $8.9 million during the first
three months of 1999. During the first three months of 2000, the Company
received $2.3 million from the sale of one hotel, used $1.7 million to purchase
property and equipment for Consolidated AmeriHost Inn(R) hotels, and received
$1.1 million in distributions and collections on advances from affiliates, net
of investments in and advances to affiliates. During the first three months of
1999, the Company received $12.8 million from the sale of five hotels, used $3.8
million to purchase property and equipment for Consolidated AmeriHost Inn(R)
hotels, and used $257,121 for investments in and advances to affiliates, net of
distributions and collections.
<PAGE>
Cash used in financing activities was $1.1 million during the first three months
of 2000 compared to $6.0 million during the first three months of 1999. In 2000,
the primary factors were principal repayments of $1.9 million, including the
repayment of a mortgage in connection with the sale of a hotel, offset by
$800,000 in proceeds from the mortgage financing of Consolidated hotels. In
1999, the contributing factors were principal repayments of $9.0 million,
including the repayment of mortgages in connection with the sale of hotels,
offset by $5.1 million in proceeds from the mortgage financing of Consolidated
hotels, and net repayments of $2.0 million on the Company's operating
line-of-credit.
At March 31, 2000, the Company had $7.6 million outstanding under its operating
line-of-credit. The operating line-of-credit (i) has a limit of $8.5 million
(ii) is collateralized by a security interest in certain of the Company's
assets, including its interest in various joint ventures; (iii) 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 (iv) matures May 15, 2000. The lender has
indicated the line-of-credit will be extended for an additional one year period.
The Company expects cash from operations to be sufficient to pay all operating
and interest expenses in 2000.
YEAR 2000
The following disclosure is a Year 2000 readiness disclosure statement pursuant
to the Year 2000 Readiness Disclosure Act.
In order to minimize or eliminate the effect of the Year 2000 risk on our
business systems and applications, we identified, evaluated, implemented and
tested changes to our computer systems, applications and software necessary to
achieve Year 2000 compliance. Our computer systems and equipment successfully
transitioned to the Year 2000 with no significant issues. Costs incurred to
achieve Year 2000 compliance were not material. We continue to keep our Year
2000 project management in place to monitor latent problems that could surface
at key dates or events in the future. We do not anticipate any significant
problems related to these events.
SEASONALITY
The lodging industry, in general, is seasonal by 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, as well as general business and leisure travel
trends. This seasonality can be expected to continue to cause quarterly
fluctuations in the Company's revenues, and is expected to have a greater impact
as the number of Consolidated hotels increases. Quarterly earnings may also be
adversely affected by events beyond the Company's control, such as extreme
weather conditions, economic factors and other general 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.
<PAGE>
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(R) 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 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
- -------
The Company's exposure to market risk for changes in interest rates relates
primarily to the Company's long-term debt obligations. The Company has some cash
flow exposure on its long-term debt obligations to changes in market interest
rates. The Company primarily enters into long-term debt obligations in
connection with the development and financing of hotels. The Company maintains a
mix of fixed and floating debt to mitigate its exposure to interest rate
fluctuations.
The Company's management believes that fluctuations in interest rates in the
near term would not materially affect the Company's consolidated operating
results, financial position or cash flows as the Company has limited risks
related to interest rate fluctuations.
<PAGE>
<TABLE>
AMERIHOST PROPERTIES, INC. AND SUBSIDIARIES
SCHEDULE OF EARNINGS BEFORE INTEREST/RENT,
TAXES AND DEPRECIATION/AMORTIZATION
(UNAUDITED)
<CAPTION>
Three Months Ended
March 31,
----------------
2000 1999
------------- -----
<S> <C> <C>
Revenue $ 15,867,049 $ 14,718,947
Operating costs and expenses 13,316,711 12,798,986
--------------- --------------
2,550,338 1,919,961
Corporate general and administrative (398,953) (382,535)
Equity in net income and losses
of affiliates 68,751 (165,215)
--------------- --------------
Earnings before minority interests 2,220,136 1,372,211
Minority interests in earnings of
consolidated subsidiaries and
partnerships 18,489 (38,419)
--------------- --------------
Earnings before interest/rent, taxes
and depreciation/amortization $ 2,238,625 $ 1,333,792
=============== ==============
</TABLE>
<PAGE>
PART II: Other Information
<PAGE>
Item 6. Exhibits and Reports on Form 8-K:
- -------
(a) Exhibits:
Exhibit No.
-----------
27.0 Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during this
period covered by this report.
Signatures
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERIHOST PROPERTIES, INC.
--------------------------
Registrant
Date: May 11, 2000
By: /s/ James B. Dale
----------------------
James B. Dale
Treasurer/Senior Vice President, Finance
By: /s/ Michael E. Kirk
------------------------
Michael E. Kirk
Corporate Controller
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-2000 DEC-31-1999
<PERIOD-END> MAR-31-2000 MAR-31-1999
<CASH> 2,957,724 4,327,374
<SECURITIES> 0 0
<RECEIVABLES> 5,086,674 2,953,095
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 9,292,796 9,827,775
<PP&E> 93,495,488 99,480,621
<DEPRECIATION> 16,163,109 14,552,162
<TOTAL-ASSETS> 100,547,117 109,711,582
<CURRENT-LIABILITIES> 15,650,055 13,934,136
<BONDS> 0 0
0 0
0 0
<COMMON> 24,868 30,332
<OTHER-SE> 13,265,300 16,440,835
<TOTAL-LIABILITY-AND-EQUITY> 100,547,117 109,711,582
<SALES> 15,867,049 14,718,947
<TOTAL-REVENUES> 15,867,049 14,718,947
<CGS> 13,316,711 12,798,986
<TOTAL-COSTS> 13,316,711 12,798,986
<OTHER-EXPENSES> 3,201,139 3,305,329
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,499,716 1,553,587
<INCOME-PRETAX> (1,559,080) (2,892,991)
<INCOME-TAX> (655,000) (1,128,000)
<INCOME-CONTINUING> (904,080) (1,764,991)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (904,080) (1,764,991)
<EPS-BASIC> (0.18) (0.29)
<EPS-DILUTED> (0.18) (0.29)
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