<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 0-9032
SONESTA INTERNATIONAL HOTELS CORPORATION
(Exact name of registrant as specified in its charter)
NEW YORK 13-5648107
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
200 Clarendon Street, Boston, MA 02116
(Address of principal executive offices)
(Zip Code)
617-421-5400
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report)
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 ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Sections 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Number of Shares of Common Stock Outstanding
as of August 12, 1994 -- $.80 par value,
Class A -- 2,075,281
<PAGE>
FORM 10-Q
Part I - Item 1. Financial Information
<TABLE>
<CAPTION>
SONESTA INTERNATIONAL HOTELS CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, 1994 (Unaudited) and December 31, 1993
(in thousands)
June 30 December 31
1994 1993
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 4,575 $ 6,919
Accounts and notes receivable:
Trade, less allowance of $124,867
($99,996 at 12/31/93) for
doubtful accounts 5,846 4,438
Current portion of long-term receivables 164 123
Other 455 493
Total accounts and notes receivable 6,465 5,054
Inventories 563 697
Prepaid expenses 586 401
Total current assets 12,189 13,071
Long-term receivables and advances 15,347 16,284
Investment in hotel and casino, at equity 1,863 0
Property and equipment, at cost:
Land 2,202 2,336
Buildings 53,457 53,788
Furniture and equipment 18,918 17,512
Leasehold improvements 484 482
75,061 74,118
Less accumulated depreciation and
amortization 45,821 43,686
Net property and equipment 29,240 30,432
$ 58,639 $ 59,787
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
FORM 10-Q
<TABLE>
<CAPTION>
SONESTA INTERNATIONAL HOTELS CORPORATION
CONSOLIDATED BALANCE SHEETS
June 30, 1994 (Unaudited) and December 31, 1993
(in Thousands)
June 30 December 31
1994 1993
<S> <C> <C>
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ 192 $ --
Current portion of long-term debt and
capitalized lease obligations 1,153 1,465
Accounts payable 3,521 5,124
Federal, foreign and state income taxes 1,341 1,181
Current portion-deferred taxes 1,191 1,934
Accrued liabilities:
Salaries and wages 1,293 1,739
Rentals 1,456 1,832
Interest 124 88
Taxes, other than income taxes 48 33
Employee benefits 538 292
Other 1,091 969
Total accrued liabilities 4,550 4,953
Total current liabilities 11,948 14,657
Long-term debt 20,489 18,848
Capitalized lease obligations 230 278
Deferred federal and state income taxes 3,046 3,700
Other non-current liabilities 395 317
Redeemable preferred stock, $25 par value, at
redemption value 294 294
Commitments and contingencies
Common stockholders' equity:
Common stock:
Class A, $.80 par value:
Authorized--10,000,000 shares
Issued--3,051,088 shares at stated value 3,488 3,488
Retained earnings 26,812 26,268
Treasury shares--975,807 at cost (8,063) (8,063)
Total common stockholders' equity 22,260 21,693
$ 58,639 $ 59,787
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
FORM 10-Q
<TABLE>
<CAPTION>
SONESTA INTERNATIONAL HOTELS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands except for per share data)
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Revenues:
Rooms $ 8,593 $ 7,840 $15,890 $14,226
Food and beverage 3,714 3,286 6,705 5,756
Management, license and
service fees 1,245 1,119 2,383 2,315
Other 1,169 1,133 2,181 2,140
14,721 13,378 27,159 24,437
Costs and expenses:
Costs and operating expenses 5,702 5,465 11,027 10,370
Advertising and promotion 1,198 1,108 2,306 2,270
Administrative and general 2,097 1,778 4,207 3,743
Human Resources 264 243 512 469
Maintenance 1,023 960 2,053 1,981
Rentals 1,006 836 2,019 1,557
Property taxes 302 264 599 527
Depreciation and amortization 1,126 1,197 2,191 2,394
12,718 11,851 24,914 23,311
Operating income 2,003 1,527 2,245 1,126
Other income (deductions):
Interest expense (356) (295) (632) (592)
Interest income 62 231 123 500
Foreign exchange gain (loss) (12) 18 (16) 19
Equity in net loss of hotel and
casino (137) -- (137) --
Gain (loss) on sales of assets 3 -- (105) 3,002
(440) (46) (767) 2,929
Income before income taxes and
cumulative effect of accounting
change 1,563 1,481 1,478 4,055
Federal, foreign and state income
tax provision 658 555 616 1,481
Net income 905 926 862 2,574
Retained earnings at beginning
of period 26,221 25,851 26,267 24,206
Cash dividends on preferred
stock (3) (3) (6) (6)
Cash dividends on common stock (311) (313) (311) (313)
Retained earnings at end of
period 26,812 26,461 26,812 26,461
Earnings per share of common
stock:
Net income $ .44 $ .45 $ .42 $ 1.24
Weighted average number of
shares outstanding 2,075 2,083 2,075 2,083
<FN>
See accompanying notes to consolidated financial statements.
</TABLE>
<PAGE>
FORM 10-Q
<TABLE>
<CAPTION>
SONESTA INTERNATIONAL HOTELS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Increase (Decrease) in Cash
(in thousands)
Six Months Ended June 30
1994 1993
<S> <C> <C>
Cash provided by operating activities
Net income $ 862 $ 2,574
Items not (providing) requiring cash
Foreign exchange loss (gain) 16 (19)
Pension expense (benefit) 81 (50)
Depreciation and amortization 2,191 2,394
Deferred federal income taxes (1,397) 695
Net loss (gain) on sales of assets 105 (3,002)
Provision for doubtful accounts 7 18
Equity in net loss of hotel and casino 137 --
Changes in assets and liabilities
Accounts and notes receivable (1,397) (1,795)
Inventories 134 98
Prepaid expenses (182) (250)
Accounts payable (1,651) (917)
Federal, foreign and state income taxes 159 7
Accrued liabilities (407) (1,567)
Cash used by operating activities (1,342) (1,814)
Cash provided (used) by investing
activities
Proceeds from sales of assets 335 10
Expenditures for property and equipment (1,439) (1,660)
New loans and advances (548) (1,278)
Investment in hotel and casino (2,000) --
Payments received on long-term
receivables and advances 1,488 1,051
Cash used by investing activities (2,164) (1,877)
Cash provided (used) by financing
activities
Borrowings under lines of credit 192 --
Proceeds from issuance of long term debt 2,000 --
Payments on long-term debt (233) (149)
Payments on capitalized lease obligations (486) (459)
Cash dividends paid (317) (6)
Cash provided (used) by financing
activities 1,156 (614)
Gain (loss) from effect of exchange rate
changes on cash 6 (13)
Net decrease in cash (2,344) (4,318)
Cash and cash equivalents at beginning
of period 6,919 11,194
Cash and cash equivalents at end of
period $ 4,575 $ 6,876
<FN>
Supplemental Schedule of non-cash investing activity.
In March 1993 the Company realized an additional net gain and
recorded a receivable of $3,000,000 from a sale of Aruban
assets (See Note 1-Operations).
(continued on next page)
<PAGE>
FORM 10-Q
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (continued)
Supplemental Schedule of Interest and Income Taxes Paid
Cash paid for interest in the 1994 six-month period and the
1993 six-month period was approximately $596,000 and $591,000,
respectively. Cash paid for income taxes in the 1994 and
1993 six-month periods was approximately $1,853,000 and
$779,000, respectively.
See accompanying notes to consolidated financial statements.
</TABLE>
SONESTA INTERNATIONAL HOTELS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Operations
The accompanying unaudited consolidated financial statements
include the accounts of the Company and all foreign and domestic
subsidiaries. In the opinion of management, these financial
statements reflect all adjustments consisting of normal
recurring items necessary to present fairly the financial
position of the Company at June 30, 1994 and December 31,
1993, and the results of operations for the six month periods
ended June 30, 1994 and 1993 and the statement of cash
flow for the six month periods ended June 30, 1994 and 1993,
and should be read in conjunction with the 1993 Annual Report.
The results of operations for these periods are not
necessarily indicative of the results for the full years.
The Sonesta Beach Hotel and Casino, in Curacao, which opened
in November of 1992, is operated by the Company under a
management agreement. Pursuant to the terms of the management
agreement, the Company in May 1994 invested $2,000,000 in the
hotel and casino for a 22% equity ownership. The Company uses
the equity method of accounting for this investment, under which
method the original investment is recorded at cost and is
adjusted by the Company's share of undistributed earnings or
losses of the hotel and casino. The Company entered into a
$2,000,000 loan agreement to finance this investment (See
Note 4).
In 1993, the Company committed to loan up to approximately
$5,600,000 to the owner of the Sonesta Beach Resort in Key
Biscayne, Florida, which the Company operates under a long-term
management agreement (See Note 2 -- Long Term Receivables).
In addition, and included in accounts receivable, the Company
advanced $1,235,000 for furniture, fixtures and equipment
purchases for the hotel, which the Company expects to get paid
in 1994 out of future available insurance proceeds.
During the first quarter of 1993, the Company had a pre-tax
<PAGE>
FORM 10-Q
SONESTA INTERNATIONAL HOTELS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
$3,000,000 gain on sale, which resulted from the recognition of
previously deferred income following the sale in 1992 of its
Aruban assets.
The Sonesta Resort, Sharm el Sheikh, Egypt opened in May,
1994. The Company has loaned $800,000 to the owner of the
Resort (See Note 2 -- Long Term Receivables). The Company
operates the hotel under a long-term management agreement,
under which it will receive management and incentive fees.
2. Long-Term Receivables and Advances
<TABLE>
<CAPTION>
(in Thousands)
June 30 December 31
1994 1993
<S> <C> <C>
From sales of assets:
The Sonesta Beach Hotel, Key Biscayne,
Florida (a):
Second mortgage receivable, 14-1/2%
interest (of which 11% is payable
quarterly and 3-1/2% deferred until
maturity) due 12/31/97 $ 5,000 $ 5,000
Deferred interest receivable 2,306 2,306
$6,500,000 fourth mortgage receivable,
10% simple interest due 12/31/04,
net of $5,500,000 reserve 1,000 1,000
The Crystal Casino, Aruba (b) 742 1,926
Sharm El Sheikh (c) 800 600
Sonesta Beach Hotel, Key Biscayne (d) 2,547 2,684
Sonesta Beach Hotel, Key Biscayne (e) 2,696 2,501
Other 420 390
Total long-term receivables $15,511 $16,407
Less: current portion 164 123
Net long-term receivables $15,347 $16,284
<FN>
(a) The Company's mortgage notes receivable are
subordinate to a first mortgage of $24,142,000.
The maturity date of the first mortgage loan is
October 1, 2000. Based on the Company's analysis
of the present situation in the hotel industry and
generally depressed hotel real estate values, it has
stopped, effective July 1, 1992, recording as income
the deferred portion of interest on the second mortgage,
and, effective January 1, 1994, the current portion of
interest on the second mortgage. Payment received for
second mortgage interest has been applied to the
principal balance of the Company's loan to the hotel's
owner described in (d).
<PAGE>
FORM 10-Q
SONESTA INTERNATIONAL HOTELS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(b) As a result of the sale by the Company in January
1992 of its interest in the Crystal Casino Aruba,
the Company has recorded a receivable in the original
amount of $5,110,000. This receivable earns interest at
prime. Principal and interest is payable monthly based
on a percentage of the Crystal Casino win in excess of
$10,000,000 per annum. The $10,000,000 is subject to
increase based on capital improvements made by the casino
owner. As of June 30, 1994, $4,368,000 of principal
payments have been received, reducing the balance to
$742,000.
(c) A subsidiary of the Company has loaned $800,000 to
the owner of the Sonesta Beach Resort, Sharm El Sheikh
which opened in May,1994. This receivable earns interest
at an annual rate of ten percent. Principal and interest
is payable in 18 monthly installments out of hotel cash
flow following the opening of the hotel.
(d) A subsidiary of the Company has loaned $2,684,000 to
the hotel's owner, to enable the owner to meet its
obligations, including those incurred to reconstruct and
reopen the hotel in 1993 (see also Note 1 -- Operations).
Of this loan, $550,000 accrues interest at a rate of 14
1/2%, while the balance accrues interest at the prime rate.
Principal and interest are payable, beginning in 1994,
out of hotel cash flow after payment of first and second
mortgage interest and a payment to owner equal to 3/4
of 1% of revenues of the hotel. Of this loan, an amount
of $550,000 and interest thereon is secured by the Company's
second mortgage, while the remaining amount is secured by a
third mortgage on the hotel property. For financial
reporting purposes, the Company has applied $137,000 of
interest received on its second mortgage to reduce the
balance of this loan.
(e) Under three separate agreements, a subsidiary of the
Company has agreed to loan funds to the owner of the hotel
to finance improvements to the hotel property and certain
furniture, fixtures and equipment. The Company has
committed approximately $2,900,000, of which $2,771,000
was advanced at June 30, 1994. These loans earn interest
at rates ranging from prime plus two percentage points to
10%. Of this loan, an amount of approximately $1,372,000
plus interest thereon is payable, beginning in 1994, out of
the hotel's annual reserve for capital additions and
replacements which under the management agreement is up to
four percent of gross revenues. The remaining principal
plus interest is payable, beginning in 1994, out of hotel
cash flow after payment of first and second mortgage
interest, and a payment to owner equal to 3/4 of 1% of
revenues of the hotel. As of June 30, 1994, principal
payments of $75,000 have been received.
</TABLE>
<PAGE>
FORM 10-Q
SONESTA INTERNATIONAL HOTELS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
3. Borrowing Arrangements
The Company has a $1,000,000 line of credit which expires on
March 31, 1995. The balance outstanding under this line at March
31, 1994, was $192,000.
A subsidiary of the Company has a $3,500,000 line of credit
which bears interest at 3/4% above prime, and will expire December
31, 1994. The Company is required to pay a commitment fee of
one-half percent per annum on the amount available but unused
under the facility. The terms of the loan require certain minimum
levels of earnings and net worth, limit cash dividends and purchases
of the Company's stock and specify a maximum defined debt to net
worth ratio. The loan is secured by the Company's leasehold interest
in the Royal Sonesta Hotel, New Orleans. No amount was outstanding
under this line at June 30, 1994.
4. Long-Term Debt
<TABLE>
<CAPTION>
(in thousands)
June 30 December 31
1994 1993
<S> <C> <C>
Charterhouse of Cambridge Trust:
First mortgage notes (a) $19,138 $19,371
Sonesta Curacao Hotel Corporation, N.V.:
Bank term loan (b) 2,000 0
Other 188 188
Total long term debt 21,326 19,559
Less current portion 837 711
Net long-term debt $20,489 $18,848
<FN>
(a) The loan is secured by a first mortgage and first lien
security interest on the Royal Sonesta Hotel, Cambridge property.
In addition, the stock of Sonesta of Massachusetts, Inc. and the
shares of Charterhouse of Cambridge Trust have been pledged as
security for the mortgage loan along with an unconditional
assignment of the lease. The loan was extended for an
additional five years as of April, 1992. The loan requires
monthly principal payments of $24,834 until April, 1994 and $66,777
for the remaining three years as of May, 1994. Interest on the
loan was at 5% until April 16, 1994, and is two percentage points
over the LIBOR rate for the remaining three years of the extension
term. The interest rate at June 30, 1994 was 6.4375%.
(b) This loan is for a three year period ending April 30, 1997.
No principal payments are required during the term. The interest
<PAGE>
FORM 10-Q
SONESTA INTERNATIONAL HOTELS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
rate is 9% until November 1994 and subject to review by the
bank thereafter. This loan may be prepaid on 60 days notice.
The loan is secured by a Company guaranty, and by an assignment
of the right to receive fees under the management agreement for
the Sonesta Beach Hotel and Casino, Curacao.
</TABLE>
5. Hotel Costs and Operating Expenses
Hotel costs and operating expenses in the accompanying
Consolidated Statement of Operations are summarized below:
<TABLE>
<CAPTION>
(in thousands)
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Direct Departmental Costs
Rooms $1,949 $1,898 $ 3,773 $ 3,574
Food and Beverage 2,662 2,510 5,053 4,693
Other 657 600 1,298 1,224
5,268 5,008 10,124 9,491
Heat, light and power 434 457 903 879
$5,702 $5,465 $11,027 $10,370
<FN>
Direct departmental costs include payroll expense and related
payroll burden, the cost of food and beverage consumed and other
departmental costs.
</TABLE>
6. Federal, Foreign and State Income Tax
The provision (benefit) for income taxes in the accompanying
Consolidated Statement of Operations is summarized below:
<TABLE>
<CAPTION>
(in thousands)
Six Months Ended
June 30 June 30
1994 1993
<S> <C> <C>
Deferred United States income
tax (credit) $(1,397) $ 695
Current United States income tax 1,856 637
Current foreign income tax 21 53
Current state income tax 136 96
$ 616 $1,481
</TABLE>
<PAGE>
FORM 10-Q
Part I - Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
FIRST SIX MONTHS OF 1994 COMPARED TO 1993
REVENUES
Total revenues for the first six month period ended June 30, 1994
were $27,159,000 compared to $24,437,000 in 1993, an increase of
approximately $2,720,000.
The Company's New Orleans Hotel had an increase in revenues of
approximately $1,890,000 due principally to a 5.9% increase in
average room rate, a 6.5% increase in occupancy levels, and
increased food and beverage revenues. The Company's Boston
(Cambridge) Hotel had increased revenues in 1994 of approximately
$820,000 due principally to a 6.5% increase in average room rate
and increased food and beverage revenues. The remaining
revenue increase of $10,000 results from an increase in manage-
ment and service fee income partially offset by a decrease in
other revenues.
OPERATING INCOME
Operating income for the six-month period ended June 30, 1994 was
$2,245,000 compared to operating income of $1,126,000 in 1993, an
increase of approximately $1,120,000. The Company's New Orleans
Hotel showed a $970,000 increase in operating income and the
Boston (Cambridge) Hotel operations showed a $240,000 increase in
operating income compared to the 1993 period. The remaining net
decrease of $90,000 is primarily a result of increases in manage-
ment costs and expenses and partially offset by increases in fee
income.
OTHER INCOME (DEDUCTIONS)
The 1993 period includes a pre-tax gain of $3,000,000 from the
sale of Aruban assets (See Note 1--Operations).
The 1994 period includes $137,000 equity in net loss of hotel and
casino representing the Company's 22% share in the net loss of
the Sonesta Beach Hotel and Casino in Curacao (See Note 1--
Operations).
Interest expense increased by $40,000 compared to 1993, due to an
increase in the interest rate of the Company's remaining mortgage
and the additional borrowing of a $2,000,000 bank term loan (See
Note 4).
<PAGE>
FORM 10-Q
Interest income decreased by $377,000 in the 1994 period. The
1993 period includes interest of $275,000 from the Company's
second mortgage receivable in Key Biscayne. The Company decided
to stop recording as income this interest effective January 1,
1994 (See Note 2--Long Term Receivables and Advances). The
remaining decrease in interest income of $102,000 is principally
due to lower short-term investment interest income from the
Company's decreased cash balances and decreased principal balance
on the Aruba casino note (See Note 2-Long Term Receivables and
Advances).
SECOND QUARTER 1994 COMPARED TO 1993
REVENUES
Total revenues for the second quarter ended June 30, 1994 were
$14,721,000 compared to $13,378,000 in 1993 an increase of
approximately $1,340,000. The Company's Boston (Cambridge) hotel
increased revenues in 1994 by approximately $650,000 due princi-
pally to a 6.1% increase in average room rate, a 2.1% increase in
occupancy levels, and increased food and beverage revenues. The
New Orleans hotel had an increase in revenues of approximately
$630,000 due principally to a 7.1% increase in occupancy levels,
a 1.6% increase in average room rate, and increased food and
beverage revenues. The remaining revenue increase of $60,000
results primarily from increases in management and service fee
income partially offset by a decrease in other revenues.
OPERATING INCOME
Operating income for the three-month period ended June 30, 1994
was $2,003,000 compared to operating income of $1,527,000 in
1993, an increase of approximately $475,000. The Company's New
Orleans hotel operations showed a $350,000 increase in operating
income, while the Boston (Cambridge) hotel showed a $310,000
increase in operating income in the 1994 period compared to the
1993 period. The remaining net decrease of $185,000 is primarily
a result of increases in management costs and expenses partially
offset by increases in fee income.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1994 the Company has a positive working capital
balance of approximately $240,000.
A subsidiary of the Company has commitments to loan additional
funds of approximately $130,000 to Sonesta Beach Resort, Key
Biscayne (See Note 2--Long Term Receivables and Advances).
<PAGE>
FORM 10-Q
The Company believes that its available credit lines and the
expected cash flow generated during the remainder of the calendar
year 1994, will be more than adequate to meet all of its obliga-
tions, including the commitments above.
<PAGE> FORM 10-Q
PART II - Other Information
Item Numbers 1, 2, 3, 4, 5, and 6
Not applicable during the quarter ended June 30, 1994.
<PAGE>
FORM 10-Q
SIGNATURE
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.
SONESTA INTERNATIONAL HOTELS CORPORATION
By: /s/ Boy van Riel
-------------------
Boy van Riel
Vice President and Treasurer
(Authorized to sign on behalf of the
Registrant as Principal Financial Officer)
DATE: August 12, 1994
