<PAGE>
FORM 10-Q
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, 1995
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 Section 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 ISSURERS:
Number of Shares of Common Stock Outstanding
as of August 11, 1995 -- $.80 par value,
Class A -- 2,071,281
<PAGE>
PART I - ITEM 1. FINANCIAL INFORMATION
SONESTA INTERNATIONAL HOTELS CORPORATION
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 (UNAUDITED) AND DECEMBER 31, 1994
<TABLE>
<CAPTION>
(in thousands)
-----------------------------
June 30 December 31
1995 1994
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 3,549 $ 3,669
Accounts and notes receivables:
Trade, less allowance of $91,000
($84,000 at December 31, 1994)
for doubtful accounts 4,347 4,997
Interest receivable 138 3
Current portion of long-term receivables 22 26
Other 415 893
----- -----
Total accounts and notes receivable 4,922 5,919
Refundable income taxes -- 959
Inventories 631 653
Prepaid expenses 776 358
--------- ---------
Total current assets 9,878 11,558
Long-term receivables and advances 13,753 14,477
Investments in hotels 5,981 5,648
Property and equipment, at cost:
Land 2,202 2,202
Buildings 30,866 30,866
Furniture and equipment 14,552 13,409
Leasehold improvements 483 483
--------- ---------
48,103 46,960
Less accumulated depreciation and
amortization 19,903 18,529
--------- ---------
Net property and equipment 28,200 28,431
--------- ---------
$57,812 $60,114
--------- ---------
--------- ---------
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
SONESTA INTERNATIONAL HOTELS CORPORATION
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1995 (UNAUDITED) AND DECEMBER 31, 1994
<TABLE>
<CAPTION>
(in thousands)
-----------------------------
June 30 December 31
1995 1994
----------- -----------
<S> <C> <C>
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable to banks $ -- $ 500
Current portion of long-term debt and
capitalized lease obligations 937 937
Accounts payable 3,039 5,440
Federal, foreign and state income taxes 684 290
Current portion-deferred taxes 315 623
Accrued liabilities:
Salaries and wages 1,066 1,662
Rentals 3,421 3,218
Interest 145 143
Taxes, other than income taxes 51 38
Employee benefits 851 1,134
Other 1,276 891
--------- ---------
Total accrued liabilities 6,810 7,086
--------- ---------
Total current liabilities 11,785 14,876
Long-term debt 19,688 20,089
Deferred federal and state income taxes 2,761 3,021
Non-current pension liabilities 784 135
Other non-current liabilities 130 179
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 26,979 26,095
Treasury shares--979,807 (975,807 at
December 31, 1994) at cost (8,097) (8,063)
---------- ----------
Total common stockholders' equity 22,370 21,520
---------- ----------
$57,812 $60,114
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
SONESTA INTERNATIONAL HOTELS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands except for per share data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
-------- --------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues:
Rooms $ 8,411 $ 8,593 $16,547 $15,890
Food and beverage 3,543 3,714 6,675 6,705
Management, license and service fees 1,335 1,245 2,565 2,383
Other 1,155 1,169 2,160 2,181
-------- -------- -------- --------
14,444 14,721 27,947 27,159
-------- -------- -------- --------
Costs and expenses:
Costs and operating expenses 5,823 5,702 11,260 11,027
Advertising and promotion 1,148 1,198 2,316 2,306
Administrative and general 2,270 2,097 4,539 4,207
Human resources 285 264 586 512
Maintenance 1,020 1,023 2,041 2,053
Rentals 1,286 1,006 3,484 2,019
Property taxes 306 302 610 599
Depreciation and amortization 831 1,126 1,659 2,191
-------- -------- -------- --------
12,969 12,718 26,495 24,914
-------- -------- -------- --------
Operating income 1,475 2,003 1,452 2,245
Other income (deductions):
Interest expense (458) (356) (905) (632)
Interest income 189 62 566 123
Foreign exchange gain (loss) -- (12) 13 (16)
Equity in net loss of hotel and
casino (273) (137) (245) (137)
Gain (loss) on sales of assets 5 3 550 (105)
Gain from casualty insurance 365 -- 365 --
-------- -------- -------- --------
(172) (440) 344 (767)
-------- -------- -------- --------
Income before income taxes 1,303 1,563 1,796 1,478
Federal, foreign and state income
tax provision 436 658 595 616
-------- -------- -------- --------
Net income 867 905 1,201 862
Retained earnings at beginning
of period 26,426 26,221 26,095 26,267
Cash dividends on preferred stock (3) (3) (6) (6)
Cash dividends on common stock (311) (311) (311) (311)
-------- -------- -------- --------
Retained earnings at end of period $26,979 $26,812 $26,979 $26,812
-------- -------- -------- --------
-------- -------- -------- --------
Earnings per share of common stock $ .42 $ .44 $ .58 $ .42
-------- -------- -------- --------
-------- -------- -------- --------
Weighted average number of shares
outstanding 2,075 2,075 2,075 2,075
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
SONESTA INTERNATIONAL HOTELS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Increase (Decrease) in Cash
<TABLE>
<CAPTION>
(in thousands)
-----------------------------
Six Months Ended June 30
1995 1994
----------- -----------
<S> <C> <C>
Cash provided (used) by operating activities
Net income $ 1,201 $ 862
Items not (providing) requiring cash
Foreign exchange loss (gain) (13) 16
Pension expense 290 81
Depreciation and amortization 1,659 2,191
Deferred federal income taxes (568) (1,397)
Net (gain) loss on sales of assets (550) 105
Gain from casualty insurance (365) --
Provision for doubtful accounts 13 7
Equity in net loss of hotel and casino 245 137
Changes in assets and liabilities
Accounts and notes receivable 1,155 (1,397)
Refundable income taxes 959 --
Inventories 22 134
Prepaid expenses (418) (182)
Accounts payable (1,866) (1,651)
Federal, foreign and state income taxes 394 159
Accrued liabilities 80 (407)
----------- -----------
Cash provided (used) by operating
activities 2,238 (1,342)
Cash provided (used) by investing activities
Proceeds from sales of assets 27 335
Proceeds from casualty insurance 250 --
Expenditures for property and equipment (1,521) (1,439)
Investments in hotels (578) (2,000)
New loans and advances -- (548)
Payments received on long-term receivables
and advances 757 1,488
----------- -----------
Cash used by investing activities (1,065) (2,164)
Cash provided (used) by financing activities
Borrowing (repayment) under lines of credit (500) 192
Proceeds from issuance of long-term debt -- 2,000
Payments on long-term debt (401) (233)
Payments on capitalized lease obligations (48) (486)
Purchase of common stock (33) --
Cash dividends paid (318) (317)
----------- -----------
Cash provided (used) by financing
activities (1,300) 1,156
Gain from effect of exchange rate
changes on cash 7 6
----------- -----------
Net decrease in cash (120) (2,344)
Cash and cash equivalents at beginning of
period 3,669 6,919
----------- -----------
Cash and cash equivalents at end of period $ 3,549 $ 4,575
----------- -----------
----------- -----------
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited) (continued)
SUPPLEMENTAL SCHEDULE OF INTEREST AND INCOME TAXES PAID
Cash paid for interest in the 1995 six-month period and the 1994
six-month period was approximately $903,000 and $596,000, respectively.
Net cash refunded for income taxes in the 1995 six-month period was
$190,000. Cash paid for income taxes in the 1994 six-month period
was $1,853,000.
See accompanying notes to consolidated financial statements.
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 normally recurring items necessary to present fairly the
financial position of the Company at June 30, 1995 and December 31, 1994,
and the results of its operations for the three and six month periods ended
June 30, 1995 and 1994 and its cash flows for the three and six month periods
ended June 30, 1995 and 1994, and should be read in conjunction with the 1994
Annual Report.
The results of operations for these periods are not necessarily indicative of
the results for the full years.
In the first quarter of 1995, the Company recognized a pre-tax gain on sale
of assets of $535,000. This was a result of a settlement, for amounts less
than previously recorded, of liabilities related to the sale in 1991 of the
Company's Amsterdam Sonesta Hotel. In 1994, the Company settled a dispute
related to foreign taxes on the same transaction, which resulted in
refundable federal income taxes of $959,000. The Company received payment
for this in March 1995, together with interest.
In May 1994, the Company acquired a 22% equity interest in the Sonesta Beach
Hotel & Casino, Curacao. Included in the statement of operations for the six
month periods ended June 30, 1995 and 1994 is equity in net loss of $245,000
and $137,000 respectively, which represents the Company's share of the net
losses of the hotel. The losses are not indicative of the full year results,
due to the seasonal nature of the hotel's business.
5
<PAGE>
SONESTA INTERNATIONAL HOTELS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In April 1995, the Company opened the Chateau Sonesta Hotel in New Orleans,
Louisiana. This 243-room full-service hotel is located in the French
Quarter. The Company operates this hotel under a long-term management
agreement, and will receive management and marketing fees based on revenues,
and incentive fees based on cash flow. The Company guarantees debt service
payments of approximately $1,500,000 per year on the hotel's first mortgage
of $12,600,000 for a period of 5 years following the opening of the hotel.
Advances made under this guaranty, if required, would be secured by a
mortgage.
In October 1994, the Company exercised the first of three ten-year options to
extend the lease under which it operates the Royal Sonesta Hotel in New
Orleans. As of the renewal date, no fixed rent is payable, but percentage
rent, based on net income, increased.
In May 1995, heavy rains in New Orleans caused damage to the Royal Sonesta
Hotel, which is operated by the Company under a long-term lease. The hotel
is covered under its insurance program for both property damage and loss of
profits due to business interruption. The Company and the insurer have
estimated the damages to the furniture, fixtures and equipment to be
approximately $450,000. These assets were substantially depreciated and
accordingly the Company recorded an estimated pre-tax gain of $365,000 at
June 30, 1995. No recovery for lost profits has been recorded at June 30,
1995.
2. LONG-TERM RECEIVABLES AND ADVANCES
<TABLE>
<CAPTION>
(in thousands)
-----------------------------
June 30 December 31
1995 1994
----------- -----------
<S> <C> <C>
The Sonesta Beach Resort,
Key Biscayne, Florida:
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 (a) 1,000 1,000
Loan to owner (b) 2,134 2,272
Loan to owner (c) 2,402 2,791
Sharm el Sheikh (d) 610 800
Other 323 334
----------- -----------
Total long-term receivables $13,775 $14,503
Less: current portion 22 26
----------- -----------
Net long-term receivables $13,753 $14,477
----------- -----------
----------- -----------
</TABLE>
6
<PAGE>
SONESTA INTERNATIONAL HOTELS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(a) The Company's mortgage notes receivable are subordinate to a first
mortgage of $23,338,000 at June 30, 1995. 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.
(b) In 1993, a subsidiary of the Company loaned $2,684,000 to the hotel's
owner. 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 out of hotel cash flow remaining after payment of
first and second mortgage interest and a payment to the owner equal to
3/4 of 1% of the 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. Payments received of $550,000 for 1994 interest on the Company's
second mortgage (see 2 (a) above) have been used to reduce the principal
balance to $2,134,000 at June 30, 1995.
(c) In 1993, a subsidiary of the Company made loans totalling $2,791,000 to
the owner of the hotel. These loans earn interest at rates ranging from
10% to prime plus two percentage points. Principal and interest is
payable out of hotel cash flow available after payment of first and second
mortgage interest. Payments of $389,000 during 1995 have reduced the
principal balance to $2,402,000 at June 30, 1995.
(d) 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. Payments of $190,000 during 1995 have
reduced the principal balance to $610,000 at June 30, 1995.
3. BORROWING ARRANGEMENTS
The Company has a $2,000,000 line of credit which expires on September 30,
1995. This line of credit bears interest at the prime rate. The terms of
the line require a certain minimum net worth, a minimum amount of
unrestricted cash or available credit lines during part of each calendar
year, and approval for additional borrowings by the Company. No amount was
outstanding under this line at June 30, 1995.
7
<PAGE>
SONESTA INTERNATIONAL HOTELS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
A subsidiary of the Company has a $5,000,000 line of credit which will expire
on December 31, 1997. 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. The interest rate as of January 1, 1995 is prime less
one-eighth percent, and the commitment fee on the unused portion of the line
is .65% per annum. No amount was outstanding under this line at June 30,
1995.
4. LONG-TERM DEBT
<TABLE>
<CAPTION>
(in thousands)
-----------------------------
June 30 December 31
1995 1994
----------- -----------
<S> <C> <C>
Charterhouse of Cambridge Trust:
First mortgage notes (a) $18,337 $18,738
Sonesta Curacao Hotel Corporation, N.V.:
Bank term loan (b) 2,000 2,000
Other 188 188
----------- -----------
20,525 20,926
Less current portion of long-term debt 837 837
----------- -----------
Total long-term debt $19,688 $20,089
----------- -----------
----------- -----------
</TABLE>
(a) The loan is secured by a first mortgage and first lien security interest
on the Royal Sonesta Hotel Boston (Cambridge) property. This property is
included in fixed assets at a net book value of approximately $19,300,000
at June 30, 1995. 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 $66,777. Interest
on the loan was 5% until April 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, 1995 was 8.0625%.
(b) This loan is for a three year period ending April 30, 1997. No principal
payments are required during the term. The interest rate was 9.75% at
June 30, 1995, and is subject to periodic review by the bank. 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 & Casino, Curacao.
8
<PAGE>
SONESTA INTERNATIONAL HOTELS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5. HOTEL COSTS AND OPERATING EXPENSES
Hotel costs and operating expenses in the accompanying Consolidated
Statements of Operations are summarized below:
<TABLE>
<CAPTION>
(in thousands)
---------------------------------------
Three Months Ended Six Months Ended
June 30 June 30
-------- --------
1995 1994 1995 1994
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Direct Departmental Costs
Rooms $2,042 $1,949 $3,976 $3,773
Food and Beverage 2,712 2,662 5,244 5,053
Other 633 657 1,220 1,298
-------- -------- -------- --------
5,387 5,268 10,440 10,124
Heat, light and power 436 434 820 903
-------- -------- -------- --------
$5,823 $5,702 $11,260 $11,027
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
Direct departmental costs include payroll expenses and related payroll
burden, the cost of food and beverage consumed and other departmental costs.
6. FEDERAL, FOREIGN AND STATE INCOME TAX
The provision for income taxes in the accompanying Consolidated Statements of
Operations is summarized below:
<TABLE>
<CAPTION>
(in thousands)
-----------------------------
Six Months Ended June 30
1995 1994
----------- -----------
<S> <C> <C>
Deferred United States income
tax credit $ (568) $ (1,397)
Current United States income tax (benefit) (150) 1,856
Current foreign income tax 1,207 21
Current state income tax 106 136
----------- -----------
$ 595 $ 616
----------- -----------
----------- -----------
</TABLE>
9
<PAGE>
PART I - ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
FIRST SIX MONTHS 1995 COMPARED TO 1994
REVENUES
Total revenues for the first six months ended June 30, 1995 were $27,947,000
compared to $27,159,000 in 1994, an increase of approximately $785,000.
The Company's Boston (Cambridge) hotel had increased revenues in 1995 of
approximately $490,000 due principally to a 5.2% increase in average room
rate, a 1.6% increase in occupancy levels, and increased food and beverage
revenues. The Company's New Orleans hotel had an increase in revenues of
approximately $65,000 due principally to a 3.8% increase in average room rate
partially offset by decreased food and beverage and other revenues. The New
Orleans hotel's revenues were also adversely affected as a result of flooding
which occurred in May, 1995 (see Note 1--Operations). The remaining revenue
increase of $230,000 results principally from increases in management and
service fee income.
OPERATING INCOME
Operating income for the six-month period ended June 30, 1995 was $1,452,000
compared to $2,245,000 in 1994, a decrease of approximately $795,000. The
Company's Boston (Cambridge) hotel operations showed a $345,000 increase in
income compared to the 1994 period, due to increased revenues of $490,000,
partially offset by increased operating expenses of $145,000. The New
Orleans hotel showed a $1,375,000 decrease in operating income, due to an
increase of $1,560,000 in percentage rent expense in the 1995 period,
partially offset by increased revenues and a net decrease in other operating
expenses (see Note 1--Operations). Operating income from other sources
increased by $235,000.
OTHER INCOME (DEDUCTIONS)
The 1995 period includes a pre-tax gain of approximately $535,000 related to
the sale of its Amsterdam Sonesta Hotel in 1991 (see Note 1--Operations).
The 1995 period includes a pre-tax gain of $365,000 related to a property
insurance claim as a result of flood damage at the Company's New Orleans
hotel in May (see Note 1--Operations).
The 1995 and 1994 periods include pre-tax losses of $245,000 and $137,000,
respectively, representing the Company's share of net losses of the Curacao
hotel (see Note 1--Operations).
Interest expense increased by $273,000 compared to 1994 due to an increase in
the interest rate of the Company's mortgage on the Boston (Cambridge) hotel,
and the additional borrowing of a $2,000,000 bank term loan in May 1994 (see
Note 4--Long-Term Debt).
10
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITIONS AND RESULTS OF OPERATIONS (continued)
Interest income increased by $443,000 in the 1995 period. The 1995 period
includes $275,000 from the Company's second mortgage receivable in Key
Biscayne. The Company decided to resume recording this interest as income
effective January 1, 1995, as a result of improved cash flow from the hotel,
compared to 1994. The remaining increase in interest income of $168,000 is
principally due to interest the Company received on its $959,000 federal
income tax refund (see Note 1--Operations).
SECOND QUARTER 1995 COMPARED TO 1994
REVENUES
Total revenues for the second quarter ended June 30, 1995 were $14,444,000
compared to $14,721,000 in 1994, a decrease of approximately $275,000.
The Company's Boston (Cambridge) hotel had increased revenues in 1995 of
approximately $150,000 due principally to a 5.9% increase in average room
rate partially offset by decreased food and beverage revenues. The Company's
New Orleans hotel had a decrease in revenues of approximately $590,000 due
principally to a 10.0% decrease in occupancy levels and decreased food and
beverage revenues, partially offset by a 3.3% increase in average rate. The
New Orleans hotel's second quarter 1995 revenues were also adversely affected
as a result of flooding which occurred in May, 1995 (see Note 1--Operations).
The remaining revenue increase of $165,000 results principally from
increases in management and service fee and other income.
OPERATING INCOME
Operating income for the three-month period ended June 30, 1995 was
$1,475,000 compared to operating income of $2,003,000 in 1994, a decrease of
approximately $530,000. The Company's Boston (Cambridge) hotel operations
showed a $145,000 increase in operating income compared to the 1994 period,
due principally to increased revenues. The New Orleans hotel showed a
$810,000 decrease in operating income, due principally to a $590,000 decrease
in revenue and an increase of $335,000 in percentage rent expense in the 1995
period, partially offset by a net decrease in other operating expenses (see
Note 1--Operations). Operating income from other sources increased by
$135,000.
OTHER INCOME (DEDUCTION)
The 1995 period includes a pre-tax gain of approximately $365,000 related to
a property insurance claim as a result of damage sustained due to the
flooding of the Company's New Orleans hotel in May (see Note 1--Operations).
Interest expense increased by $102,000 compared to 1994 due to an increase in
the interest rate of the Company's mortgage on the Boston (Cambridge) hotel,
and the additional borrowing of a $2,000,000 bank term loan in May 1994 (see
Note 4--Long-Term Debt).
11
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS (continued)
Interest income increased by $127,000 in the 1995 period. The 1995 period
includes $138,000 from the Company's second mortgage receivable in Key
Biscayne. The Company decided to resume recording this interest as income
effective January 1, 1995, as a result of improved cash flow from the hotel,
compared to 1994. The remaining decrease in interest income of $11,000 is
principally due to decreased interest income on a note resulting from the
sale of Company assets in Aruba which was paid in full during 1994.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1995 the Company has a negative working capital balance of
approximately $1,900,000, due principally to the accrual of percentage rent
due under the lease for the Royal Sonesta Hotel in New Orleans, which is not
payable until March of 1996.
The Company believes that its present cash balances plus its available
borrowing capacity and the expected cash flow generated during the remainder
of the calendar year 1995 will be adequate to meet all of it obligations.
PART II - OTHER INFORMATION
ITEM NUMBERS 1, 2, 3, 4, 5 AND 6
Not applicable during the quarter ended June 30, 1995.
12
<PAGE>
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 11, 1995
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 3,549
<SECURITIES> 0
<RECEIVABLES> 4,438
<ALLOWANCES> 91
<INVENTORY> 631
<CURRENT-ASSETS> 9,878
<PP&E> 48,103
<DEPRECIATION> 19,903
<TOTAL-ASSETS> 57,812
<CURRENT-LIABILITIES> 11,785
<BONDS> 19,688
<COMMON> 3,488
0
294
<OTHER-SE> 18,882
<TOTAL-LIABILITY-AND-EQUITY> 57,812
<SALES> 6,675
<TOTAL-REVENUES> 27,947
<CGS> 1,596
<TOTAL-COSTS> 11,260
<OTHER-EXPENSES> 15,235
<LOSS-PROVISION> 13
<INTEREST-EXPENSE> 905
<INCOME-PRETAX> 1,796
<INCOME-TAX> 595
<INCOME-CONTINUING> 1,201
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,201
<EPS-PRIMARY> .58
<EPS-DILUTED> .58
</TABLE>
