<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15 (d)
of the Securities Exchange Act of 1934
For Quarter Ended.................................................March 31, 1999
Commission File Number...................................................0-17838
Hudson Hotels Corporation
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
New York 16-1312167
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State or other jurisdiction of I.R.S. Employer
in corporation or organization Identification No.
300 Bausch & Lomb Place, Rochester, New York 14604
- --------------------------------------------------------------------------------
(Address or principal executive offices) (Zip Code)
(716) 454-3400
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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 / /
APPLICABLE ONLY TO CORPORATE ISSUERS:
As of April 29, 1999 the Registrant had issued and outstanding 6,399,161 shares
of its $.001 par value common stock.
<PAGE>
HUDSON HOTELS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
OPERATING REVENUES:
Hotel operations $ 11,273,052 $ 11,596,718
Management fees 355,744 176,700
Royalties 286,901 196,365
Other 98 37,500
------------ ------------
Total operating revenues 11,915,795 12,007,283
OPERATING COSTS AND EXPENSES
Direct 6,971,760 7,608,142
Corporate 1,145,886 696,802
Depreciation and amortization 1,495,289 1,399,258
------------ ------------
Total operating costs and expenses 9,612,935 9,704,202
------------ ------------
Income from operations 2,302,860 2,303,081
OTHER INCOME (EXPENSE):
Interest income 56,332 53,745
Interest expense (3,162,531) (3,218,429)
------------ ------------
Total other expense (3,106,199) (3,164,684)
------------ ------------
Loss from continuing operations, before income taxes,
minority interest and equity on net losses of affiliates (803,339) (861,603)
PROVISION (BENEFIT) FROM INCOME TAXES 2,471 (348,512)
------------ ------------
Loss from continuing operations, before minority interest
and equity on net losses of affiliates (805,810) (513,091)
MINORITY INTEREST (21,544) (26,751)
EQUITY IN OPERATIONS OF AFFILIATES (6,539) (5,361)
------------ ------------
NET LOSS $ (833,893) $ (545,203)
============ ============
NET LOSS PER COMMON SHARE - BASIC AND DILUTED $ (.15) $ (.11)
============ ============
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
<PAGE>
HUDSON HOTELS CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1999 AND DECEMBER 31, 1998
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 1,025,925 $ 1,751,580
Cash - restricted 4,095,190 3,013,617
Accounts receivable - trade 1,148,594 931,212
Prepaid expenses and other 1,529,423 1,356,730
------------- -------------
TOTAL CURRENT ASSETS 7,799,132 7,053,139
INVESTMENTS IN PARTNERSHIP INTERESTS 1,772,456 1,781,218
LAND AND REAL ESTATE DEVELOPMENT 780,822 2,430,880
PROPERTY AND EQUIPMENT, NET 123,600,809 124,434,369
OTHER ASSETS 6,956,359 6,976,612
------------- -------------
TOTAL ASSETS $ 140,909,578 $ 142,676,218
============= =============
LIABILITIES AND SHAREHOLDERS' INVESTMENT
CURRENT LIABILITIES:
Lines of credit $ 400,000 $ 400,000
Current portion of long-term debt 2,748,961 6,017,698
Accounts payable - trade 819,190 1,112,851
Other accrued expenses 5,939,233 6,026,744
------------- -------------
TOTAL CURRENT LIABILITIES 9,907,384 13,557,293
LONG-TERM DEBT 128,789,543 128,039,543
DEFERRED REVENUE - LAND SALE 185,055 185,055
LIMITED PARTNERS' INTEREST IN
CONSOLIDATED PARTNERSHIP 1,059,573 1,060,581
SHAREHOLDERS' INVESTMENT:
Preferred stock 295 295
Common stock 6,410 5,743
Additional paid-in capital 21,872,593 19,873,260
Accumulated deficit (20,870,024) (20,004,301)
------------- -------------
1,009,274 (125,003)
Less: 10,000 shares of common stock in treasury,
at cost at March 31, 1999 and 1998 (41,251) (41,251)
------------- -------------
TOTAL SHAREHOLDERS' INVESTMENT 968,023 (166,254)
------------- -------------
TOTAL LIABILITIES AND SHAREHOLDERS' INVESTMENT $ 140,909,578 $ 142,676,218
============= =============
</TABLE>
The accompanying notes are an integral part of these
consolidated statements.
<PAGE>
HUDSON HOTELS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' INVESTMENT
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1999
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SERIES A ADDITIONAL ADDITIONAL
PREFERRED PAID-IN CAPITAL COMMON PAID-IN CAPITAL ACCUMULATED TREASURY
STOCK PREFERRED STOCK COMMON DEFICIT STOCK TOTAL
----- --------- ----- ------ ------- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE, DECEMBER 31, 1998 $295 $1,560,705 $5,743 $18,312,555 $(20,004,301) $(41,251) $ (166,254)
Net Loss -- -- -- -- (833,893) -- (833,893)
Issuance of stock -- -- 667 1,999,333 -- -- 2,000,000
Cash dividends paid on
preferred stock -- -- -- -- (31,830) -- (31,830)
---- ---------- ------ ----------- ------------ --------- ----------
BALANCE, MARCH 31, 1999 $295 $1,560,705 $6,410 $20,311,888 $(20,870,024) $ (41,251) $ 968,023
==== ========== ====== =========== ============ ========= ==========
Stock balances at December 31, 1998:
Common stock: 5,732,495 shares;
Preferred stock: 294,723 shares
Stock balances at March 31, 1999:
Common stock: 6,399,161 shares;
Preferred stock: 294,723 shares
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
HUDSON HOTELS CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTH PERIOD ENDED MARCH 31, 1999 AND 1998
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES: 1999 1998
----------- -----------
<S> <C> <C>
Net Loss $ (833,893) $ (545,203)
Adjustments to reconcile net loss to net
cash from operating activities:
Deferred tax provision -- (348,549)
Depreciation and amortization 1,495,289 1,399,258
Minority interest in operations 21,544 26,751
Non-cash consulting -- 1,687
Equity in operations 6,539 5,361
Capital distributions from unconsolidated
partnership interests 4,724 50,220
(Increase) decrease in assets -
Accounts receivable - trade (217,382) (28,959)
Prepaid expenses and other (338,749) (470,521)
Increase (decrease) in liabilities -
Accounts payable (293,661) (379,732)
Other accrued expenses (87,511) 316,255
----------- -----------
Net cash provided (used in) by operating activities (243,100) 26,568
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of land/real estate development -- (15,780)
Increase in restricted cash (1,081,573) (381,481)
Cash collected on sale of land 1,650,058 --
Change in affiliates accounts and notes receivable 166,056 (110,007)
Capital contribution to unconsolidated partnership (1,500) --
Purchase of equipment (500,569) (276,228)
Change in other assets (141,908) 4,600
Deposits -- (96,900)
Change in non-affiliate accounts receivable -- 256,479
----------- -----------
Net cash provided by (used in) investing activities 90,564 (619,317)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayment of mortgages (518,737) (270,439)
Distributions to limited partners (22,552) (27,000)
Proceeds from stock options exercised -- 7,500
Dividends paid (31,830) (31,830)
Borrowings on line of credit, net -- 587,463
----------- -----------
Net cash provided by/(used in)financing activities (573,119) 265,694
----------- -----------
NET DECREASE IN CASH AND
CASH EQUIVALENTS (725,655) (327,055)
CASH AND CASH EQUIVALENTS - beginning of period 1,751,580 670,736
----------- -----------
CASH AND CASH EQUIVALENTS - end of period $ 1,025,925 $ 343,681
=========== ===========
OTHER INFORMATION:
Cash paid during the period for:
Interest $ 3,159,157 $ 3,158,634
Income taxes $ 41,392 $ 14,372
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
<PAGE>
HUDSON HOTELS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1999
(UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated interim financial
statements reflect, in the opinion of management, all adjustments,
which are of a normal and recurring nature, necessary for a fair
presentation of the financial condition and results of operations and
cash flows for the periods presented. The preparation of financial
statements in accordance with generally accepted accounting principals
("GAAP") requires management to make estimates and assumptions. Such
estimates and assumptions affect the reported amounts of assets and
liabilities, as well as the disclosure of contingent assets and
liabilities at the date of the financial statements and the reported
amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates. The results of operations
for the interim periods are not necessarily indicative of the results
for the entire year.
The accounting policies followed by the Company are set forth in Note 2
to the Company's financial statements in the December 31, 1998 10-K.
Other footnote disclosures normally included in the financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted. It is suggested that these
consolidated financial statements be read in conjunction with the
financial statements and notes included in the Company's December 31,
1998 10-K.
2. THE COMPANY
Hudson Hotels Corporation (the "Company") was organized as Microtel
Franchise and Development Corporation to develop and franchise a
national chain of economy limited service lodging facilities
("Microtels"), using the service mark "MICROTEL". The Company was
incorporated in New York State on June 5, 1987.
The principal activity of the Company is as owner/manager of hotels.
The Company also manages hotels with financial interest (through
various partnerships) and manages hotels through third party management
contracts. The owned and managed hotels are located in twelve (12)
states, and are operated under various franchise agreements. The
Company operates in the industry segment of hotel operations and
management.
On October 5, 1995, the Company entered into an agreement with US
Franchise Systems, Inc. ("USFS") pursuant to which USFS purchased
worldwide franchising and administration for the Microtel hotel chain
(the "USFS Agreement"). Following this transaction, the Company ceased
its franchising activities. Although the agreement was entitled Joint
Venture Agreement, the transaction was structured as an outright sale
of the Company's franchising rights.
The Company, in return, received $4.0 million over a three (3) year
period, allocated as follows: $3,037,640 for the purchase of the
franchising assets; $700,000 for consulting services over three (3)
years; and $262,360 in interest related to deferred payments. Expenses
of $121,759 were netted against the purchase price. Of the total
consideration, $2.0 million was paid at closing, $1.0 million was paid
at the first anniversary and $500,000 at the second anniversary, and an
additional $500,000 was paid at the third anniversary. In addition to
the lump sum payments, the Company is entitled to receive royalty
payments from properties franchised by USFS at the rate of 1% of gross
room revenues from hotels 1-100; .75% of gross room revenues from
hotels 101-250 and .5% of gross room revenues for all hotels in excess
of 250.
Under this Agreement, the Company has the right to franchise and
construct an additional twenty-two
<PAGE>
(22) Microtel Inn properties and ten (10) "suites" properties and to
thus receive all royalties on a total of fifty (50) Microtels
(twenty-eight (28) existing hotels and twenty-two (22) new hotels to be
undertaken by the Company) and ten (10) suites.
As a result of the sale of its franchising system pursuant to the USFS
Agreement, the Company has focused its efforts on developing, building
and managing various hotel products, including Microtel Inns, which has
been the Company's strength since it acquired Hudson Hotels Corporation
in 1992. During 1996, 1997 and 1998, the Company embarked upon a
significant expansion and development program, which included several
acquisitions and the development of six (6) Microtel Inns through a
joint venture partnership.
3. LIQUIDITY
In December of 1998, and the first quarter of 1999, the Company sold
certain assets and took other actions as described in Item 1 "Recent
Developments" in the December 31, 1998 10-K to generate cash or avoid
cash payments which would allow sufficient liquidity to maintain
current operations during its seasonally slow operating season (the
fourth and first quarters). The Company's mezzanine loan agreement
required Hudson to use the proceeds of asset sales to pay down the
mezzanine debt; however, Hudson instead used these proceeds for working
capital. This violation of the mezzanine loan agreement gave the lender
the right to demand immediate repayment of the mezzanine loan. In April
1999, the Company entered into an agreement with this lender, which
waives these violations of the mezzanine loan agreement if the Company
fulfills certain conditions. One of these conditions is that the
Company is not to make any principal payments to subordinated creditors
of this lender, including Equity Inns, LP ("Equity Inns"), its $7.5
million convertible subordinated debenture or for the obligations of
Hudson Hotels Trust. Such requirement caused the Company to default in
its obligations to Equity Inns as of May 1, 1999; however, under the
subordination agreement with Equity Inns, that Company is currently
prevented from taking legal action to enforce the payment of its debt.
In May 1999 Equity Inns notified the Company that it has declared this
debt in default and has accelerated the debt and is seeking default
interest. Also, after default, Equity Inns can obtain 2,000,000 shares
of Hudson Hotels common stock, which is collateral for this debt.
Additionally, upon default (which has already occurred), the holder of
a $2.0 million debt in Hudson Hotels Trust can convert his debt into a
total of 666,666 shares of Hudson common stock. Another Hudson Hotels
debt holder has already converted $2.0 million of Hudson Hotels Trust
debt into 666,666 shares of Hudson common stock. Additionally, the
Company at December 31, 1998 had certain portions of its mezzanine debt
that would begin to amortize in the fourth quarter of 1999. As a result
of the recent agreement with the holder of the mezzanine debt, the
amortization of this debt now begins in the second quarter of 2000,
which amortization the Company will not, at current operating levels,
be able to service. Therefore, the Company's viability is dependent
upon the restructuring of its debt obligations and strengthening its
equity base, and ultimately, a return of profitability.
The Company is currently in discussions with its lenders about its debt
obligations and activities to restructure its debt. There is negative
working capital of $2,108,252 at March 31, 1999 with a significant
amount of this negative working capital generated by significant
principal debt payments. These principal payments described herein are
expected to continue. Furthermore, the Company is severely restricted
in accessing the cash flows generated from revenues as they are trapped
for application against required escrows for debt, tax, insurance,
capital asset reserve, and beginning in the second quarter of 2000,
principal amortization of the Company's mezzanine debt.
There can be no assurances that the Company's restructuring efforts
will be successful, or that the Company's lenders will agree to a
course of action consistent with the Company's requirements in
restructuring the obligations. Even if such agreement is reached it may
require approval of additional debt holders, or possibly agreements of
other creditors and shareholders of the Company, none of which is
assured. Furthermore, there can be no assurance that restructuring of
the Company's debt can be successfully accomplished on terms acceptable
to the Company. Under current circumstances, the Company's ultimate
ability to remain viable depends upon the successful restructuring of
its debt obligations. If the Company is unsuccessful in these efforts,
it may be unable to make its future obligations associated with its
principal payments, as well as other obligations, making it necessary
to
<PAGE>
undertake such other actions including seeking court protection as may
be appropriate to preserve asset value.
4. SUMMARIZED FINANCIAL INFORMATION - INVESTMENTS IN PARTNERSHIP INTERESTS
The following is a summary of condensed financial information for the
unconsolidated partnerships that the Company does not control for the
three month period ended March 31, 1999 and 1998.
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
Property and equipment, net of
accumulated depreciation $ 56,947,033 $ 31,475,400
Current assets 4,214,282 2,690,808
Other assets 1,028,740 1,031,096
------------ ------------
TOTAL ASSETS 62,190,055 35,197,304
------------ ------------
Mortgage and notes payable - current 432,082 1,945,948
Other current liabilities 2,515,187 851,092
Mortgage and notes payable - noncurrent 43,593,787 25,218,161
------------ ------------
TOTAL LIABILITIES 46,541,056 28,015,201
------------ ------------
NET ASSETS $ 15,648,999 $ 7,182,103
============ ============
COMPANY'S SHARE $ 1,772,456 $ 1,725,767
============ ============
Net revenues $ 5,334,349 $ 3,002,060
Operating expenses 3,511,821 1,895,735
------------ ------------
Income (loss) from operations 1,822,528 1,106,325
Other income (expense), net (1,399,035) (1,149,689)
------------ ------------
NET (LOSS) $ 423,493 $ (43,364)
============ ============
COMPANY'S SHARE $ (6,539) $ (5,361)
============ ============
</TABLE>
5. LINE OF CREDIT
The Company has a line of credit note with a commercial bank, with an
interest rate of prime plus 1 1/2%, for a total of $400,000. Amount
borrowed is collateralized by undeveloped land in Tonawanda, New York.
6. LONG TERM DEBT
Future minimum repayments under long-term debt are as follows:
Remainder 1999 $ 2,748,961
2000 9,897,670
2001 13,713,286
2002 6,325,594
2003 and thereafter 98,852,993
7. COMMITMENTS AND CONTINGENCIES
The Company has various operating lease arrangements for automobiles and
office space. Total rent expense under operating leases amounted to
$120,817 and $44,753 for the periods ending March 31, 1999 and 1998,
respectively. Future minimum lease payments under operating leases are
approximately: 1999 remainder - $355,037; 2000 - $470,160; and 2001 -
$446,043.
<PAGE>
The Company is required to remit monthly royalty fees from 2% to 4% of
gross room revenue, plus additional monies for marketing assessments and
reservation fees to its franchisors based on franchise agreements which
extend from ten to sixteen years. Some of these agreements specify
restrictions on transferability of franchise and liquidated damages upon
termination of franchise agreement due to the franchisee's default.
Total fees were approximately $433,000 and $445,000 for the three months
ended March 31, 1999 and 1998, respectively.
The Company assumed a ground lease for the land on which a hotel was
acquired by the Company in 1996 in Statesville, NC. The initial term of
this lease commenced in February 1984 and expires April 30, 2005. The
Company renewed the lease at its option, for three additional ten year
periods ending April 30, 2035. The annual rental during the final ten
years of the initial term and each extension is the greater of $22,000
plus one-half percent of gross room rentals from the Statesville hotel
during the 1991 lease year of the lease term of four percent of gross
room rentals from the Statesville hotel during each lease year. The
Company has a right of first refusal to buy the land subject to the
ground lease from the lessor during the lease term subject to the first
refusal rights of Roses Department Stores, Inc., or its successors. Rent
expense on the ground lease was $5,500 for the three month period ended
March 31, 1999 and 1998.
The future minimum ground lease rental payments, assuming no gross room
rentals during the initial lease term and no increases in the consumer
price index, are as follows for the years ended December 31:
Remainder 1999 $ 16,500
2000 22,000
2001 22,000
2002 22,000
2003 22,000
Thereafter 704,000
----------
$ 808,500
==========
8. INCOME TAXES
Income taxes are provided in accordance with Statement of Financial
Accounting Standard No. 109, "Accounting for Income Taxes", which
requires an asset and liability approach to financial accounting and
reporting for income taxes. The Statement requires that deferred income
taxes be provided to reflect the impact of "temporary differences"
between the amount of assets and liabilities for financial reporting
purposes and such amounts as measured by current tax laws and
regulations. A valuation allowance is established, when necessary, to
reduce deferred tax assets to the amount expected to be realized.
The deferred tax consequences of temporary differences in reporting
items for financial statement and income tax purposes are recognized,
if appropriate. Realization of the future tax benefits related to the
deferred tax assets is dependent on many factors, including the
Company's ability to generate taxable income within the net operating
loss carryforward period and its history of taxable earnings.
Management has considered these factors in reaching its conclusion as
to the valuation allowance for financial reporting purposes.
At March 31, 1999, the Company has net operating loss carryforwards for
income tax purposes of approximately $9,600,000 that may be used to
offset future taxable income. These loss carryforwards will begin to
expire in 2003.
9. SHAREHOLDERS INVESTMENT
In 1998, the Company announced its plans to "paper clip" with Hudson
Hotels Trust ("Hudson Trust"), a newly formed entity that planned an
initial public offering ("IPO"), led by a group of seven (7)
underwriters to raise funds to acquire a group of twenty-nine (29)
hotel properties, which would then be leased to the Company. Prior to
the IPO, Hudson Trust borrowed a total of $4.0 million from two
<PAGE>
third party sources (in the form of two $2.0 million notes). As part of
the loan agreement, the Company pledged 1,333,332 shares of its stock
as security for the repayment of the loans from the third parties.
These funds were used to put deposits on the hotels to be acquired by
Hudson Trust and for other expenses related to the IPO. Due to
difficult capital market conditions, Hudson Trust was not able to
complete its IPO. In March 1999 one of the holders of these notes
agreed to convert one of the $2.0 million notes into 666,666 shares of
Hudson common stock. Hudson Trust did not repay the remaining loan when
it came due April 30, 1999.
10. SUPPLEMENTAL INFORMATION OF NON-CASH FINANCING ACTIVITIES
In March 1999 a $2.0 million note was converted to 666,666 shares of
Hudson Hotels Corp. Common Stock. See Note 9 for further details.
11. BUSINESS SEGMENTS
As described in Note 2, the Company operates in two segments: (1) hotel
owner/operator; and (2) hotel management services and other. Revenues,
identifiable assets and capital expenditures of each segment are those
that are directly identified with those operations.
The Company evaluates the performance of its segments based primarily
on earnings before interest, taxes and depreciation and amortization
("EBITDA") generated by the operations of its Owned Hotels. Interest
expense is primarily related to debt incurred by the Company through
its corporate obligations and collateralized mortgage obligations on
its hotel properties. The Company's taxes are included in the
consolidated Federal income tax return of the Company and are allocated
based upon the relative contribution to the Company's consolidated
taxable income/losses and changes in temporary differences.
The following table presents revenues and other financial information
by business segment for the three months ended March 31, 1999 and 1998
(in thousands):
<TABLE>
<CAPTION>
1999 HOTEL OPERATIONS MANAGEMENT & OTHER ELIMINATION (A) CONSOLIDATED
---- ---------------- ------------------ --------------- ------------
<S> <C> <C> <C> <C>
Revenues $ 11,273 $ 1,204 $ (561) $ 11,916
EBITDA $ 3,740 $ 58 -- $ 3,798
Depreciation and amortization $ 1,404 $ 91 -- $ 1,495
Interest expense $ 2,862 $ 301 -- $ 3,163
Capital expenditures $ 449 $ 52 -- $ 501
Total assets $ 127,069 $ 61,437 $ (47,596) $ 140,910
1998 HOTEL OPERATIONS MANAGEMENT & OTHER ELIMINATION (A) CONSOLIDATED
---- ---------------- ------------------ --------------- ------------
Revenues $ 11,599 $ 988 $ (580) $ 12,007
EBITDA $ 3,411 $ 291 -- $ 3,702
Depreciation and amortization $ 1,347 $ 52 -- $ 1,399
Interest expense $ 2,910 $ 308 -- $ 3,218
Capital expenditures $ 258 $ 18 -- $ 276
Total assets $ 132,193 $ 73,485 $ (53,874) $ 151,804
</TABLE>
(A) Eliminations represent inter-company management fees and inter-company
receivables/payables and investments in subsidiaries
<PAGE>
The following presents the segments' performance measure to the
Company's consolidated loss before taxes, minority interest, and equity
in operations of partnerships:
<TABLE>
<CAPTION>
1999 1998
------- -------
<S> <C> <C>
EBITDA
Hotel operations $ 3,740 $ 3,411
Management and other 58 291
Interest (3,163) (3,218)
Depreciation and amortization (1,495) (1,399)
Other 57 53
------- -------
Loss before income taxes, minority interest,
and equity in operations of partnerships $ (803) $ (862)
======= =======
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following Management's Discussion and Analysis should be read in conjunction
with the entire Form 10-Q. Particular attention should be directed to the
Consolidated Financial Statements found at Item 8 and Management's Discussion
and Analysis of Financial Condition and Results of Operations found at Item 7.
As a result of the sale of (i) the Cricket Inn Virginia Beach in May 1998, and
(ii) the Company's leasehold interest in the Canandaigua Inn on the Lake in
December 1998, a significant portion of the current results are not directly
comparable to prior year results, specifically hotel operations and direct
costs.
RESULTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1999, COMPARED TO THE THREE MONTHS ENDED MARCH 31,
1998:
Total operating revenues decreased $91,488, or 1% to $11,915,795 for 1999,
reflecting changes in revenue categories, as discussed below.
HOTEL OPERATIONS were $11,273,052 for the three months ended March 31, 1999, a
decrease of $323,666, or 3%, from $11,596,718 for the three months ended March
31, 1998. Hotel operations consisted of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31, 1999 MARCH 31, 1998
-------------- --------------
<S> <C> <C>
Hotel room revenue $ 9,773,221 $10,005,204
Beach club revenue 391,078 377,409
Food and beverage revenue 707,887 749,728
Other 400,866 464,377
----------- -----------
Total $11,273,052 $11,596,718
=========== ===========
</TABLE>
Hotel room revenues were $9,773,221 for the three month period ended March 31,
1999 a decrease of $231,983, or 2%, from $10,005,204 for the three month period
ended March 31, 1998. The net decrease is the result of the sale of the Cricket
Inn Virginia Beach in May 1998 which had $102,437 in room revenue in the first
quarter of 1998 and the sale of the Company's leasehold interest in the
Canandaigua Inn on the Lake in December 1998 which had $299,181 in room revenue
in the first quarter of 1998 offset in part by overall increases in room revenue
at the Company's other hotels. The Company currently manages the Canandaigua Inn
on the Lake pursuant to a Management Agreement. The results of these two hotels
were included in hotel room revenues in 1998 but are not included in 1999. These
decreases were offset by improved operating results for the three months ended
March 31, 1999 compared to the three months ended March 31, 1998. Occupancy and
average daily room rates for the Company owned hotels were 62.6% and $59.97,
respectively, for the three months ended March 31, 1999 and 60.2% and $58.14,
respectively, for the three months ended March 31, 1998.
The Beach Club revenue, which totaled $391,078 for the three month period ended
March 31, 1999 and relates to the operation of the beach club at the Seagate
Hotel and Beach Club, increased $13,669, or 4%, from $377,409 for the three
months ended March 31, 1998. The increase is specifically attributable to
increase in initiation fees being charged to new members.
Food and beverage revenue was $707,887 for the three months ended March 31, 1999
compared to $749,728 for the three months ended March 31, 1998, a decrease of
$41,841 or 6%. The net decrease is primarily a result of the sale of the
Company's leasehold interest in the Canandaigua Inn on the Lake in December
1998, which had food and beverage operations. This was offset by increased food
and beverage volume at the Seagate Hotel and Beach Club and assuming the food
and beverage operations of the Brookwood Inn in Pittsford on May 1, 1998 which
was leased in prior years to a third party.
Other hotel revenue decreased $63,511 or 14% to $400,866 for the three months
ended March 31, 1999 from $464, 377 for the three months ended March 31, 1998.
The decrease is primarily the result of the sale of the Cricket Inn Virginia
Beach in May 1998 and the sale of the Company's leasehold interest in the
Canandaigua Inn
<PAGE>
on the Lake in December 1998 whose results are not included in 1999 but were
included in 1998.
ROYALTIES for the three month period ended March 31, 1999 have increased
$90,536, or 46% to $286,901 from $196,365 for the three month period ended March
31, 1998. The increase is attributable to one hundred thirty-five (135)
franchised Microtel Inns in operation, as opposed to sixty-two (62) during the
same three month period in 1998. The Company receives all royalties on
twenty-eight (28) of the one hundred thirty-five (135) franchised Microtel Inns
and on the remaining one hundred seven (107) franchises established by US
Franchise Systems, Inc., the Company receives royalty payments from USFS based
on the following schedule: 1% of gross room revenues for motels 0-100; .75% of
gross room revenues for hotels 101-250; and .5% of gross room revenues for
hotels 251 and beyond.
Pursuant to the USFS Agreement, the Company has retained the right to franchise,
construct and collect franchise placement fees on an additional twenty-two (22)
Microtel Inn properties (for a total of 50 properties) and ten (10) "suite"
properties and retain all royalties on these fifty (50) Microtel Inns
(twenty-eight (28) existing and twenty (20) new properties to be undertaken by
the Company) and ten (10) new suites properties. The Company will also receive
royalty payments in the future from US Franchise Systems, Inc., for franchises
they open based on the schedule discussed in the preceding paragraph, along with
consulting payments over the next year.
MANAGEMENT FEES for the three month period ended March 31, 1999 increased
$179,044, or 101% to $355,744, compared to management fees of $176,700 for the
same three-month period ended March 31, 1998. The increase is primarily the
result of increased gross revenues at hotels managed by the Company as
management fees are generally based on a percentage of gross revenue and the
addition of four (4) management contracts when compared to the period ended
March 31, 1999. The schedule of owned and managed hotels is summarized below:
<TABLE>
<CAPTION>
MARCH 31, 1999 MARCH 31, 1998
-------------- --------------
<S> <C> <C>
Owned 25 26
Managed with financial interest 12 10
Other managed 6 5
-- --
43 41
== ==
</TABLE>
Management fees of approximately $562,000 were generated by the twenty-five (25)
owned hotels for the three month period ended March 31, 1999, which were
eliminated for consolidation purposes.
OTHER REVENUE for the three month period ended March 31, 1999 decreased $37,402,
or 99% to $98 from $37,500 for the three month period ended March 31, 1998. This
is primarily a result of consulting fees accrued from USFS of $37,500, which
were non-recurring after September 1998.
The Company plans to continue its revenue growth by maintaining the following
strategies: (i) enhance operating performance of its existing hotels owned or
under management (ii) develop and build Microtel Inns, if financing is
obtainable, and (iii) opportunistic acquisition of existing hotels. However,
given the Company's highly leveraged financial condition, it is at a substantial
disadvantage in acquiring or developing additional hotel properties.
GROSS OPERATING MARGIN for hotel operations (consisting of total hotel revenues,
less direct expenses; departmental expenses, undistributed expenses, property
occupancy costs and insurance costs) for the three months ended March 31, 1999
was 38%, compared to 34% for the three months ended March 31, 1998. The increase
in gross operating margin is a result of undertaking operational steps to more
effectively and efficiently manage the properties purchased in 1997 and 1996.
CORPORATE EXPENSE represents general and administrative costs and expenses
associated with the corporate office. Corporate costs and expenses increased
$449,084, or 64%, to $1,145,886 for the three months ended March 31, 1999 from
$696,802 for the three months ended March 31, 1998. The increase is primarily a
result of the following: (1) a $55,000 increase in professional fees incurred
for the three month period ended March 31, 1999, compared to the three month
period ended March 31, 1998, (2) a $230,000 increase in payroll and related
expenses as a result of the addition of employees, and (3) a $71,000 increase in
rent expense associated with
<PAGE>
leasing new office space.
DEPRECIATION AND AMORTIZATION for the three month period ended March 31, 1999
increased $96,031, or 7% to $1,495,289 from $1,399,258 for the three month
period ended March 31, 1998. The increase is a result of capital improvements in
1997 and 1998, which increased depreciation expense. Capital improvements
include converting a Cricket Inn Charlotte to a Red Roof Inn and wall
replacement at the Seagate Hotel and Beach Club.
OTHER INCOME (EXPENSE) for the three months ended March 31, 1999 decreased
$58,485, or 2%, to $3,106,199 from $3,164,684 for the three months ended March
31, 1998. This decrease is a result of amortization of long-term debt resulting
in paying less interest expense on reduced principal balances and lower interest
rates in effect on variable rate debt in the period ended March 31, 1999. Of the
$3,162,531 in total interest expense 60% relates to the mortgages held on the
hotels acquired or consolidated by the Company in 1996 and 1997. The remaining
amount represents interest on the Company's outstanding convertible debentures,
mezzanine financing, notes payable relating to purchase of hotels, notes payable
to Hudson Hotels Trust, Tonawanda bond issue and line of credit.
EQUITY IN OPERATIONS OF AFFILIATES represents the loss incurred from the
Company's equity investment in various hotels. The loss for the three months
ended March 31, 1999 increased $1,178 to $6,539, or 22%, from $5,361 for the
three months March 31, 1998.
INCOME TAXES - The provision for income tax of $2,471 includes minimum state
taxes. The Company did not record a deferred tax benefit as realization of
the future tax benefits related to the deferred taxes is dependent on many
factors, including the Company's ability to generate taxable income within the
net operating loss carryforward period. The benefit for income tax of $348,512
for the three month period ended March 31, 1998 represents federal and state tax
income tax benefit from the recognition of deferred tax assets and liabilities
on loss from continuing operations before income taxes of $831,422.
NET LOSS - As a result of the above factors, the net loss increased $288,690, or
53%, from the three month period ended March 31, 1998 to a net loss of $833,893
for the three month period ended March 31, 1999. The resulting net loss per
common share - basic of $0.15 for the three month period ended March 31, 1999,
compared to a net loss per common share - basic of $0.11 for the three month
period ended March 31, 1998.
CAPITAL RESOURCES AND LIQUIDITY
At March 31, 1999, the Company had a $400,000 working capital demand line note
with a commercial bank, which bears interest at a rate of prime plus 1 1/2%.
Amounts borrowed are collateralized by unencumbered land. At March 31, 1999,
$400,000 was borrowed under the terms of this line.
At March 31, 1999, the Company had $1,025,925 of cash and cash equivalents
compared with $1,751,580 at December 31, 1998.
The Company is required to maintain certain levels of escrowed cash in order to
comply with the terms of its debt agreements. All cash is trapped for
application against required escrows for debt, taxes, insurance and capital
asset reserves. A substantial portion of the escrowed cash funds is released
several times monthly for application against current liabilities. The balances
held in escrow on March 31, 1999 and 1998 were $4,095,190 and $3,845,409,
respectively.
Net cash flows used in operating activities was $243,100 for the three months
ended March 31, 1999 compared to cash flows provided by operating activities of
$26,568 for the three months ended March 31, 1998. The net decrease is primarily
the result of the increases in accounts receivables associated with room sales,
royalties and management fees.
Net cash flows provided by investing activities was $90,564 for the three months
ended March 31, 1999 compared to net cash flows used in investing activities of
$619,317 for the three months ended March 31, 1998. Net cash flow provided by
investing activities for the three months ended March 31, 1999 reflects cash
received for the sale of land, changes in restricted cash, collection of
deposits and other assets less the purchase of equipment and the amounts placed
into escrow as required by the loan agreements. Net cash used in investing
activities for the three months ended March 31, 1998, reflects amounts placed
into escrow as required by the loan
<PAGE>
agreements, capital improvements to the Twenty-Five (25) hotels acquired in
1996 and 1997 and cash received from non-affiliates and the deposits submitted
for the acquisition of three (3) hotels.
Net cash flows used in financing activities was $573,119 for the three months
ended March 31, 1999 compared to net cash flows provided by financing activities
of $265,694 for the three months ended March 31, 1998. Net cash flows used in
financing activities for the three months ended March 31, 1999 reflects the
repayment of mortgages, preferred stock dividends and distributions to limited
partners. Net cash flows provided by financing activities for the three months
ended March 31, 1998 reflects cash proceeds from the exercise of options and
proceeds from our line of credit. This was offset by financing costs, repayment
of mortgages and preferred dividends.
EBITDA increased by $95,810, or 3%, to $3,798,149 for the three months ended
March 31, 1999, compared to $3,702,339 for the three months ended March 31,
1998. EBITDA is defined as total operating revenues less direct, corporate and
indirect operating costs. The Company believes this definition of EBITDA
provides a meaningful measure of its ability to service debt. The increase is a
result of undertaking operational steps to more effectively and efficiently
manage the properties purchased in 1996 and 1997.
LIQUIDITY in December of 1998, and the first quarter of 1999, the Company sold
certain assets and took other actions as described in Item 1 "Recent
Developments" in the December 31, 1998 10-K to generate cash or avoid cash
payments which would allow sufficient liquidity to maintain current operations
during its seasonally slow operating season (the fourth and first quarters). The
Company's mezzanine loan agreement required Hudson to use the proceeds of asset
sales to pay down the debt; however, Hudson instead used these proceeds for
working capital. This violation of the mezzanine loan agreement gave the lender
the right to demand immediate repayment of the mezzanine loan. In April 1999,
the Company entered into an agreement with this lender, which waives these
violations of the mezzanine loan agreement if the Company fulfills certain
conditions. One of these conditions is that the Company is not to make any
principal payments to subordinated creditors of this lender, including Equity
Inns, LP ("Equity Inns"), for its 10% subordinated note or on the $7.5 million
convertible subordinated debenture or for the obligations of Hudson Hotels
Trust. Such requirements caused the Company to default in its obligations to
Equity Inns as of May 1, 1999. However, under the subordination agreement with
Equity Inns, that company is currently prevented from taking legal action to
enforce the payment of its debt. In May 1999 Equity Inns notified Hudson that it
has declared this debt in default and has accelerated the debt and is seeking
default interest. Also, after default, Equity Inns can obtain 2,000,000 shares
of Hudson Hotels common stock, which is collateral for this debt.
Additionally, upon default (which has already occurred), the holder of a $2.0
million debt in Hudson Hotels Trust can convert his debt into a total of 666,666
shares of Hudson common stock. Another Hudson Hotels Trust debt holder has
already converted $2.0 million of Hudson Hotels Trust debt into 666,666 shares
of Hudson common stock. Additionally, the Company at December 31, 1998 had
certain portions of its mezzanine debt that would begin to amortize in the
fourth quarter of 1999. As a result of this recent agreement with the holder of
the mezzanine debt, the amortization of this debt now begins in the second
quarter of 2000, which amortization the Company will not, at current operating
levels, be able to service. Therefore, the Company's viability is dependent upon
the restructuring of its debt obligations and strengthening its equity base, and
ultimately, a return of profitability.
The Company is currently in discussions with its lenders about its debt
obligations and activities to restructure its debt. There is negative working
capital of $2,108,252 at March 31, 1999 with a significant amount of this
negative working capital generated by significant principal debt payments. These
principal payments described herein are expected to continue. Furthermore, the
Company is severely restricted in accessing the cash flows generated from
revenues as they are trapped for application against required escrows for debt,
tax, insurance, capital asset reserve, and now beginning in the second quarter
of 2000, principal amortization of the Company's mezzanine debt.
There can be no assurances that the Company's restructuring efforts will be
successful, or that the Company's lenders will agree to a course of action
consistent with the Company's requirements in restructuring the obligations.
Even if such agreement is reached it may require approval of additional debt
holders, or possibly agreements of other creditors and shareholders of the
Company, none of which is assured. Furthermore, there can be no assurance that
restructuring of the Company's debt can be successfully accomplished on terms
acceptable to the Company. Under current circumstances, the Company's ultimate
ability to remain viable
<PAGE>
depends upon the successful restructuring of its debt obligations. If the
Company is unsuccessful in these efforts, it may be unable to make its future
obligations associated with its principal payments, as well as other
obligations, making it necessary to undertake such other actions including
seeking court protection as may be appropriate to preserve asset value.
YEAR 2000 COMPLIANCE
Many computer systems were designed using only two digits to designate years.
These systems may not be able to distinguish the year 2000 from the year 1900.
Like other organizations, the Company could be adversely affected if the
computer systems used by it or its service providers do not properly address
this problem prior to January 1, 2000. Currently, the Company does not
anticipate that the transition to the year 2000 will have any material impact on
its performance. The Company's plan to respond to the Year 2000 problem consists
of three phases that address the state of readiness, Year 2000 costs, risks and
contingency plans.
Phase I includes a plan to respond to the Year 2000 problem, which includes the
following areas (the "Focus Areas"): (i) telephone and call accounting systems;
(ii) credit card readers; (iii) sprinkler systems and fire suppression system;
(iv) security systems; (v) card entry systems; (vi) elevator systems; (vii)
computer systems and vendor contracts (hardware); (viii) fax machines and
laundry equipment; (ix) HVAC (heating and air conditioning systems) and utility
companies; (x) food, beverage, equipment, supplies and other ordering systems;
and (xi) computer software systems, including franchisor and non-franchisor
reservation systems. The Company has created a task force and procedures to
survey, test and report results for management's review. The Company believes
that the estimated cost to remediate its Year 2000 problems is approximately
$1,000,000.
The Company is currently proceeding with Phase II of its assessment of the Year
2000 problem. Phase II involves initiating a survey and checklist to each hotel
manager for completion and return to management. The survey was developed by the
Company after a review of franchisor and other Year 2000 compliance information
to include (i) the current vendor list with a column for a listing of current
product usage and (ii) a vendor address log and telephone number listing. Each
hotel checklist included the front desk, business center, housekeeping/back
office, beverage and guestrooms. Phase II also involves the testing of the
Company's computer systems. The Company is in the process of conducting testing
on the systems identified in Phase I and has yet to encounter any Year 2000
compliance issue which cannot be corrected before January 1, 2000.
Phase III of the Company's assessment of the Year 2000 problem includes the
results of testing, action plans, reporting of results and contingency plans to
remediate any Year 2000 problems. The risks and contingency plans include a
"reasonably likely worst case Year 2000 scenario." The Company believes that the
consequences of a worst case scenario rest almost exclusively with outside
vendors. The contingency plan, which the Company is currently initiating, is to
replace non-compliant vendors with new compliant vendors. A thorough review of
all vendors will continue to be an ongoing Year 2000 strategy for the Company.
However, the Company's contingency plan has back-up support to address each of
the focus areas.
The franchisors of many of the hotels have provided compliance guides to assist
in the Company's response to the Year 2000 problem. Promus Hotel Corporation,
Holiday Hospitality/Bass Hotels & Resorts, Marriott International, Inc., and
Choice Hotels International, Inc. have completed third party vendor checks,
reviewed computer systems and provided for reference a preferred compliant
vendor list. A checklist for Year 2000 issues, a work plan and a sample vendor
letter was provided to help the Company complete its assessment of the Year 2000
problem.
The Company is in the process of mailing a questionnaire to third party vendors
to assess third party risks. The results of this risk assessment were completed
April 30, 1999. In addition, the Company has sought assurances from the Lessee
and other service providers that they are taking all necessary steps to ensure
that their computer systems will accurately reflect the year 2000, and the
Company will continue to monitor the situation. There can be no assurance that
the systems of such third parties will be Year 2000 compliant or that any third
party's failure to have Year 2000 compliant systems would not have a material
adverse effect on the Company's systems and operations.
<PAGE>
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
Certain matters discussed in this Management's Discussion and Analysis of
Financial Condition and Results of Operations and Capital Resources and
Liquidity are "forward-looking statements" intended to qualify for the safe
harbors from liability established by the Private Securities Litigation Reform
Act of 1996. These forward-looking statements can generally be identified as
such because the context of the statement will include words such as the company
"believes", "anticipates", "expects", or words of similar meaning. Similarly,
statements that describe the Company's future plans, objectives or goals are
also forward-looking statements. Such forward-looking statements are subject to
certain risks, assumptions and uncertainties which are described in close
proximity to such statements and which could cause actual results to differ
materially from those currently anticipated. Shareholders, potential investors
and other readers are urged to consider these risks, assumptions and
uncertainties carefully in evaluating the forward-looking statements are
cautioned not to place undue reliance on such forward-looking statements. The
forward-looking statements made herein are only made as of the date of this Form
10-Q and the Company undertakes no obligation to publicly update such
forward-looking statements to reflect subsequent events or circumstances.
<PAGE>
PART II - OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
On October 26, 1990, a complaint was filed in Palm Beach County Circuit Court,
Florida, by Seagate Beach Quarters, Inc., a Florida corporation (Bearing Case
#90-12358-AB), seeking an unspecified amount of damages plus interest and costs,
against Rochester Community Savings Bank, ("RCSB"), a New York based bank, Shore
Holdings, Inc. ("SHORE"), a subsidiary of RCSB and naming Hudson as a
co-defendant. On December 6, 1990, Delray Beach Hotel Properties Limited, a
Florida limited partnership controlled by Hudson Hotels, purchased the Seagate
Hotel and Beach Club from RCSB's subsidiary, SHORE. The purchase contract
included an indemnification of Hudson Hotels against any action resulting from
previously negotiated contracts between RCSB's subsidiaries and third parties;
however, this indemnity specifically excludes indemnity for punitive damages
which may be assessed again the Company. Case #90-12358-AB contained allegations
that RCSB's subsidiary, SHORE, defaulted in its obligations under a Contract for
Purchase and Sale, dated August 16, 1990, and failed to go forward with the
transaction due to alleged tortuous negotiations between RCSB and Hudson. On
March 17, 1994, the Court granted Summary Judgment in favor of RCSB and Hudson
Hotels which judgment was appealed by Seagate. The Fourth District Court of
Appeal in Florida affirmed the summary judgment on RCSB and reversed the summary
judgment granted in favor of Hudson, remanding the action to Circuit Court for
further consideration. On August 15, 1994, Seagate proceeded to trial against
SHORE in case #90-12358-AB. During the course of the trial, Seagate took a
voluntary dismissal of their action against SHORE. On September 8,1994, Seagate
refiled its lawsuit against SHORE and joined Delray Beach Hotel Properties
Limited, through its general partner, Delray Beach Hotel Corp. (bearing Case
#94-6961-AF). The new case against SHORE was brought essentially on the same
facts as stated above. The claim against Delray Beach Hotel Properties Limited
was identical to the conspiracy and tortuous interference with a business
relationship claim currently existing against Hudson Hotels. On January 27,
1995, the Court issued an Order dismissing the Amended Complaint as to Delray
Beach Hotel Properties Limited. The Circuit Court has consolidated the case
against Hudson Hotels (Case #90-12358-AB) and the case against SHORE (Case
#94-6961-AF) and it is anticipated those suits will go to trial in the summer of
1999.
On December 4, 1998 and February 5, 1999 the Company was served with claims
before the State of South Carolina Human Affairs Division arising out of an
incident that occurred at the Greenville, SC Hampton Inn on November 7, 1997. A
security guard employed by Security Master, Inc. (the contract provider of
security services at the Hampton Inn) allegedly confronted a group of black
students with a starter pistol, and directed racially biased comments to the
student during that confrontation. The Company has provided requested
information to the Human Affairs division regarding the incident, and has agreed
to take part in a proposed mediation to resolve the matter. The complainants
have not requested any specific damages or other relief.
On April 13, 1999, the Company and its subsidiary, Canandaigua Hotel Corp., were
each served with a summons and complaint by Cheryl K. Lee, as administratrix of
the Estate of Eugene R. Guthrie, deceased, alleging negligence relating to the
design and maintenance of the handicapped access ramp at the Inn on the lake,
which negligence allegedly caused injuries resulting in the death of the
decedent. L,R,M&M, LLC, the owner of the Inn on the Lake, is also a defendant.
The action has been commenced in New York Supreme Court, Monroe County, and
demands damages in the amount of $2,000,000 plus costs and disbursements. This
action has been turned over to the Company's insurance company for defense; the
Company believes that it has adequate insurance to cover any potential loss.
After taking into consideration legal counsel's evaluation of all such actions,
management is of the opinion that the outcome of each such proceeding or claim
which is pending, or known to be threatened (as described above), will not have
a material adverse effect on the Company's financial statements.
<PAGE>
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.
HUDSON HOTELS CORPORATION
-------------------------
(Registrant)
Date: 5/14/99 /s/ John M. Sabin
--------------------------------
John M. Sabin, Executive Vice President
and Chief Financial Officer
Date: 5/14/99 /s/ Taras M. Kolcio
--------------------------------
Taras M. Kolcio, Vice President
and Chief Accounting Officer
<PAGE>
ITEM 2. CHANGE IN SECURITIES - None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - None
ITEM 5. OTHER INFORMATION - None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits
EXHIBIT NO. DESCRIPTION
11 Statement re: computation of per share earnings
27 Financial Data Schedule
B. Form 8-K: The following report was filed on Form 8-K - None
<PAGE>
Exhibit 11
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
THREE MONTHS
-----------------------------
3/31/99 3/31/98
----------- -----------
BASIC
<S> <C> <C>
Net earnings applicable to common stock:
Loss $ (833,893) $ (545,203)
Deduct preferred stock dividends paid (31,830) (31,830)
----------- -----------
Net loss applicable to common stock $ (865,723) $ (577,033)
=========== ===========
Weighted average number of common shares outstanding 5,784,347 5,156,238
=========== ===========
LOSS PER SHARE - BASIC $ (0.15) $ (0.11)
=========== ===========
DILUTED
Net earnings applicable to common stock on a diluted basis:
Net earnings applicable to common stock per above $ (865,723) $ (577,033)
Add net interest expense related to -- --
convertible debentures
Add dividends on convertible preferred stock -- --
----------- -----------
Net earnings applicable to common stock on a
diluted basis $ (865,723) $ (577,033)
=========== ===========
Total shares diluted:
Shares used in calculating basic earnings
per share 5,784,347 5,156,238
Additional shares assuming conversion of
options and warrants -- --
Additional shares to be issued under full
conversion of convertible debentures -- --
Additional shares to be issued under full
conversion of preferred stock -- --
----------- -----------
Total shares for diluted 5,784,347 5,156,238
=========== ===========
EARNINGS PER SHARE - DILUTED $ (.15) $ (.11)
=========== ===========
</TABLE>
The exercise of outstanding stock options, convertible subordinated debenture
and convertible preferred stock were not included in some of the calculations of
diluted earnings per share, as their effect would be antidilutive.
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Sheet, Consolidated Statement of Operations, Consolidated
Statements in Shareholders' Investment, Consolidated Statements of Cash Flows
and Notes to Consolidated Statements, and is qualified in its entirety by
reference to such financial statements and notes to Consolidated Statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 5,121,115
<SECURITIES> 0<F1>
<RECEIVABLES> 1,148,594
<ALLOWANCES> 0
<INVENTORY> 367,704
<CURRENT-ASSETS> 7,799,132
<PP&E> 134,254,071
<DEPRECIATION> 10,653,262
<TOTAL-ASSETS> 140,909,578
<CURRENT-LIABILITIES> 9,907,384
<BONDS> 131,538,504
0
295
<COMMON> 6,410
<OTHER-SE> 961,318
<TOTAL-LIABILITY-AND-EQUITY> 140,909,578
<SALES> 11,915,795
<TOTAL-REVENUES> 11,915,795
<CGS> 8,117,646
<TOTAL-COSTS> 8,117,646
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,162,531
<INCOME-PRETAX> (803,339)
<INCOME-TAX> 2,471
<INCOME-CONTINUING> (805,810)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (833,893)
<EPS-PRIMARY> (.15)
<EPS-DILUTED> (.15)
<FN>
<F1>Note: If information required by the applicable schedule is not included in the
underlying financial data because it is either immaterial or inapplicable, the
value "0" (zero) will be responded to that item.
</FN>
</TABLE>
