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 September 30, 1996
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 November 11, 1996 -- $.80 par value,
Class A -- 2,068,215
<PAGE>
FORM 10-Q
Part I - Item 1. Financial Information
SONESTA INTERNATIONAL HOTELS CORPORATION
CONSOLIDATED BALANCE SHEETS
September 30, 1996 (Unaudited) and December 31, 1995
(in thousands)
----------------------------
September 30 December 31
1996 1995
--------------- -----------
ASSETS
Current assets:
Cash and cash equivalents $ 2,554 $ 3,370
Accounts and notes receivables:
Trade, less allowance of $99,000
($98,000 at December 31, 1995)
for doubtful accounts 6,092 5,098
Interest receivable 140 145
Other 956 828
------- -------
Total accounts and notes receivable 7,188 6,071
Current portion of deferred taxes 252 400
Inventories 716 656
Prepaid expenses 1,321 496
------- -------
Total current assets 12,031 10,993
Long-term receivables and advances 12,441 13,544
Investments in hotels 563 6,341
Property and equipment, at cost:
Land 2,280 2,202
Buildings 39,765 39,611
Furniture and equipment 17,440 15,096
Leasehold improvements 933 700
Construction in progress 708 --
------- -------
61,126 57,609
Less accumulated depreciation and
amortization 22,287 19,247
------- -------
Net property and equipment 38,839 38,362
------- -------
$63,874 $69,240
======= =======
See accompanying notes to consolidated financial statements.
1
<PAGE>
FORM 10-Q
SONESTA INTERNATIONAL HOTELS CORPORATION
CONSOLIDATED BALANCE SHEETS
September 30, 1996 (Unaudited) and December 31, 1995
(in thousands)
-------------------------------
September 30 December 31
1996 1995
-------------- -----------
LIABILITIES AND COMMON STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable -- $ 562
Current portion of long-term debt and
capitalized lease obligations 647 1,211
Accounts payable 3,702 5,380
Federal, foreign and state income taxes 485 411
Accrued liabilities:
Salaries and wages 1,606 1,782
Rentals 3,352 5,270
Interest 161 173
Employee benefits 352 982
Other 1,668 1,056
-------- --------
Total accrued liabilities 7,139 9,263
-------- --------
Total current liabilities 11,973 16,827
Long-term debt 24,619 24,977
Capital lease obligations 65 105
Deferred federal and state income taxes 2,255 2,381
Other non-current liabilities 1,295 1,030
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 28,004 28,235
Treasury shares-- 982,273 (979,851 at
December 31, 1995), at cost (8,119) (8,097)
-------- --------
Total common stockholders' equity 23,373 23,626
-------- --------
$ 63,874 $ 69,240
======== ========
See accompanying notes to consolidated financial statements.
2
<PAGE>
FORM 10-Q
SONESTA INTERNATIONAL HOTELS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
(in thousands except for per share data)
Three Months Ended Nine Months Ended
September 30 September 30
------------- --------------
1996 1995 1996 1995
---- ---- ---- ----
Revenues:
Rooms $ 8,702 $ 7,822 $ 26,756 $ 24,369
Food and beverage 3,445 2,974 10,667 9,649
Management, license and
service fees 1,434 1,483 4,571 4,048
Other 1,265 1,138 3,788 3,298
-------- -------- -------- --------
14,846 13,417 45,782 41,364
-------- -------- -------- --------
Costs and expenses:
Costs and operating expenses 6,592 5,708 19,598 16,968
Advertising and promotion 1,422 1,156 4,178 3,472
Administrative and general 2,886 2,452 8,395 6,991
Human resources 404 288 1,109 874
Maintenance 1,139 1,042 3,500 3,083
Rentals 771 753 3,971 4,237
Property taxes 275 320 627 930
Depreciation and amortization 1,063 847 3,091 2,506
-------- -------- -------- --------
14,552 12,566 44,469 39,061
-------- -------- -------- --------
Operating income 294 851 1,313 2,303
Other income (deductions):
Interest expense (518) (438) (1,586) (1,343)
Interest income 316 192 900 758
Foreign exchange gain (loss) 2 (1) -- 12
Equity in net loss of hotels (338) (302) (89) (547)
Gain (loss) on sales of assets -- (2) 209 548
Gain from casualty insurance -- 155 -- 520
-------- -------- -------- --------
(538) (396) (566) (52)
-------- -------- -------- --------
Income (loss) before income taxes (244) 455 747 2,251
Federal, foreign and state income
tax provision (benefit) (230) 135 658 730
-------- -------- -------- --------
Net income (loss) (14) 320 89 1,521
Retained earnings at beginning
of period 28,022 26,979 28,235 26,095
Cash dividends on preferred stock (4) (4) (10) (10)
Cash dividends on common stock -- -- (310) (311)
-------- -------- -------- --------
Retained earnings at end of period $ 28,004 $ 27,295 $ 28,004 $ 27,295
======== ======== ======== ========
Earnings per share of common stock $ (.01) $ .15 $ .04 $ .73
======== ======== ======== ========
Weighted average number of shares
outstanding 2,070 2,075 2,070 2,075
See accompanying notes to consolidated financial statements.
3
<PAGE>
FORM 10-Q
SONESTA INTERNATIONAL HOTELS CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)
Increase (Decrease) in Cash
(in thousands)
-------------------------
Nine Months Ended Sept 30
1996 1995
-------- -------
Cash provided (used) by
operating activities
Net income $ 89 $ 1,521
Items not (providing) requiring cash
Foreign exchange gain -- (12)
Pension expense 561 429
Depreciation and amortization 3,091 2,506
Deferred federal income taxes 22 (282)
Deferred interest income (412) --
Net gain on sales of assets (209) (548)
Gain from casualty insurance -- (520)
Provision for doubtful accounts 28 20
Equity in net loss of hotels 89 547
Changes in assets and liabilities
Accounts and notes receivable (994) 843
Refundable income taxes -- 959
Inventories (60) 21
Prepaid expenses (825) (167)
Accounts payable (1,678) (1,661)
Federal, foreign and state
income taxes 74 (111)
Accrued liabilities (2,245) 852
------- -------
Cash provided (used)
by operating activities (2,469) 4,397
Cash provided (used) by investing
activities
Proceeds from sales of assets 57 27
Proceeds from casualty insurance -- 450
Expenditures for property and
equipment (3,580) (2,464)
Investments in hotels (103) (855)
Proceeds from sale of investment
in hotel 5,792 --
New loans and advances (137) (125)
Payments received on long-term
receivables and advances 1,551 956
------- -------
Cash provided (used) by
investing activities 3,580 (2,011)
Cash used by financing activities
Changes in notes payable (562) (500)
Payments on long-term debt (962) (601)
Payments on capitalized lease obligations (61) (74)
Purchase of common stock (22) (33)
Cash dividends paid (320) (321)
------- -------
Cash used by financing activities (1,927) (1,529)
Gain (loss) from effect of exchange
rate changes on cash -- 8
------- -------
Net increase (decrease) in cash (816) 865
------- -------
Cash and cash equivalents at beginning of period 3,370 3,669
------- -------
Cash and cash equivalents at end of period $ 2,554 $ 4,534
======= =======
4
<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 1996 nine-month period and the 1995
nine-month period was approximately $1,598,000 and $1,353,000,
respectively. Cash paid for income taxes in the 1996 and 1995
nine-month periods was approximately $562,000 and $164,000.
See accompanying notes to consolidated financial statements.
5
<PAGE>
FORM 10-Q
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 September 30, 1996 and December 31, 1995,
and the results of its operations for the three and nine-month periods ended
September 30, 1996 and 1995 and its cash flows for the nine month periods ended
September 30, 1996 and 1995, and should be read in conjunction with the 1995
Annual Report.
The results of operations for these periods are not necessarily indicative of
the results for the full years.
In December 1994 Company subsidiaries entered into a partnership through which
it acquired a 50% interest in a building in New York City, with the intent to
develop a hotel. In October 1995, the Company notified its partner of its
intention not to proceed with the development. The partnership sold its interest
in the building in July 1996, and the Company received a payment of $5,792,000,
which consisted of its cash investment in the partnership of $5,175,000, and
distribution of income of $617,000. This income is included in Equity in Net
Loss of Hotels in the consolidated statements of operations at September 30,
1996.
On November 28, 1995, a wholly-owned subsidiary of the Company purchased the
Casablanca Resort in Anguilla, British West Indies. The Seller restored all
damage done to the 100-room hotel property by Hurricane Luis in September 1995,
and the hotel reopened as Sonesta Beach Resort Anguilla in January 1996. The
Company has filed a claim for business interruption insurance proceeds as a
result of the hurricane as of March 1, 1996. No income regarding that claim is
included in the results of operations at September 30, 1996. Also, as part of
the transaction, the Company is entitled to a credit on the purchase price for
certain expenses related to the hotel property and operations. Included in
Accounts Receivable-Other is an amount of $400,000 at September 30, 1996, for
this credit. During the first quarter of 1996, the Company received an
assignment of certain expected insurance proceeds from the Seller to satisfy
this receivable. In the event such insurance proceeds prove insufficient to
satisfy this receivable, the Company has the right to deduct any remaining
amounts from a loan from the Seller which is due in November 1998 (see Note 4,
Long-Term Debt). The construction in progress of $708,000 consists of the
construction of new facilities and improvements to the Sonesta Beach Resort
Anguilla.
In the first quarter of 1996, the Company adopted Statement No. 121, Accounting
for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of. The Statement requires impairment losses to be recorded on long-lived assets
used in operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets are less than
the assets' carrying amounts. Statement 121 also addresses the accounting for
long-lived assets that are expected to be disposed of. The adoption of Statement
121 had no effect on the Company's consolidated balance sheet at September
30,1996, and the result of operations for the three and nine month periods ended
September 30, 1996.
6
<PAGE>
FORM 10-Q
SONESTA INTERNATIONAL HOTELS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
2. Long-Term Receivables and Advances
(in thousands)
---------------------------
September 30, December 31,
1996 1995
------------- -----------
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 (a) $ 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
Loans to owner (b) 3,869 4,472
Sharm el Sheikh (c) 10 370
Other 280 408
------- -------
Total long-term receivables $12,465 $13,556
Less: current portion 24 12
------- -------
Net long-term receivables $12,441 $13,544
======= =======
(a) The Company's mortgage notes receivable are subordinate to a first
mortgage of $22,431,000 at September 30, 1996. The maturity date of the
first mortgage loan is October 1, 2000. The Company has not recorded as
income the deferred portion of interest on the second mortgage since
July 1, 1992.
(b) Under five separate agreements, a subsidiary of the Company loaned
$5,475,000 to the hotel's owner during 1993 and 1994. These loans earn
interest at rates ranging from the prime rate to 14 1/2%. Of these
loans, an amount of $2,684,000, and interest thereon is secured by
second and third mortgages on the hotel property. Principal and
interest are payable out of hotel cash flow remaining after payment of
first and second mortgage interest, and a payment to the hotel's owner
equal to 3/4 of 1% of revenues of the hotel.
(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 are payable in 18 monthly installments out of hotel cash
flow following the opening of the hotel. During 1995 and 1996 the
company received payments of $790,000, reducing the principal balance
to $10,000 at September 30, 1996.
7
<PAGE>
FORM 10-Q
SONESTA INTERNATIONAL HOTELS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
In connection with its Key Biscayne notes receivable, the Company recorded
interest income of $825,000 during the nine month period ending September 30,
1996. During the same period, cash payments received were $1,428,000.
3. Borrowing Arrangements
The Company has a $2,000,000 line of credit which expires on September 30, 1997.
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 September 30, 1996.
A subsidiary of the Company has a $5,000,000 line of credit which will expire
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, and by a Company guaranty. The interest rate 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 September 30, 1996.
A foreign subsidiary has an operating line of credit of $500,000, which is
guaranteed by the Company. The interest rate is at the prime rate plus one
percentage point. This line of credit is subject to periodic review by the bank.
No amount was outstanding under this line at September 30, 1996.
4. Long-Term Debt
(in thousands)
-------------------------------
September 30, December 31,
1996 1995
------------- ------------
Charterhouse of Cambridge Trust:
First mortgage notes (a) $17,335 $17,936
Sonesta Hotels of Anguilla, Ltd:
First mortgage notes (b) 4,690 4,990
Note from Seller (c) 1,000 1,000
Sonesta Curacao Hotel Corporation, N.V.:
Bank term loan (d) 2,000 2,000
Other 188 188
------- -------
25,213 26,114
Less: current portion 594 1,137
------- -------
Total long-term debt $24,619 $24,977
======= =======
8
<PAGE>
FORM 10-Q
SONESTA INTERNATIONAL HOTELS CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(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 $18,400,000
at September 30,1996. 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 requires monthly principal payments of $66,777, and
the remaining balance is due at maturity in April 1997. Interest on the
loan is two percentage points over the LIBOR rate. The interest rate at
September 30, 1996 was 7-7/16%. In September 1996 the Company received a
commitment for a 7-year, fixed rate mortgage loan in the amount of
$22,880,000. The Company expects to close on this loan in November 1996,
and repay the existing note.
(b) The loan is secured by a first mortgage on the Sonesta Beach Resort
Anguilla property, and an assignment to the Lender of the hotel's
furniture, fixtures and equipment. The property is included in fixed
assets at a net book value of $9,500,000 at September 30, 1996. In
addition, an amount of $1,000,000 is secured by a Company guaranty. The
loan requires minimum principal payments of $300,000 in 1996, $425,000 in
1997 and $550,000 in each of the years 1998 and 1999. In addition,
principal payments are required equal to 25% of the hotel's annual excess
cash flow, as defined. The balance is due on March 1, 2000. The interest
rate on the loan is LIBOR plus 2 1/4 percentage points. The interest rate
at September 30, 1996 was 7-11/16%.
(c) This loan from the Seller of the Sonesta Beach Resort Anguilla is for a
three year period ending November 28, 1998. The interest rate is 8% per
annum. No principal payments are due during the term of the loan. The
Company has the right to offset certain receivables from the Seller from
this loan (see Note 1 -- Operations).
(d) This loan matures on June 30, 1998. No principal payments are required
during the term. The interest rate was 9.75% at September 30, 1996, 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.
9
<PAGE>
FORM 10-Q
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:
(in thousands)
-------------------------------------------
Three Months Ended Nine Months Ended
September 30 September 30
------------------ -----------------
1996 1995 1996 1995
------- ------- ------- -------
Direct departmental costs
Rooms $ 2,354 $ 2,060 $ 6,753 $ 6,036
Food and beverage 2,938 2,494 8,962 7,738
Other 705 681 2,165 1,901
------- ------- ------- -------
5,997 5,235 17,880 15,675
Heat, light and power 595 473 1,718 1,293
------- ------- ------- -------
$ 6,592 $ 5,708 $19,598 $16,968
======= ======= ======= =======
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:
(in thousands)
------------------------------
Nine Months Ended September 30
1996 1995
------- -------
Deferred United States income tax (benefit) $ 22 $ (282)
Current United States income tax (benefit) 330 (354)
Current foreign income tax 119 1,217
Current state income tax 187 149
------- -------
$ 658 $ 730
======= =======
10
<PAGE>
FORM 10-Q
Part I - Item 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
FIRST NINE MONTHS 1996 COMPARED TO 1995
REVENUES
Total revenues for the nine month period ended September 30, 1996 were
$45,782,000 compared to $41,364,000 in 1995, an increase of approximately
$4,418,000.
The Company's Boston (Cambridge) hotel had increased revenues in the nine month
period ended September 30, 1996 of approximately $1,454,000, primarily because
of an 8% increase in average room rates and increased food and beverage
revenues. The Company's New Orleans hotel had an increase in revenues of
$818,000 in the first nine months of 1996 compared to 1995 primarily due to a
slight increase in average room rate and occupancy. The Company's Sonesta Beach
Resort Anguilla, which opened January 18, 1996, had revenues of $1,603,000
during the nine month period ending September 30, 1996. The remaining revenue
increase of $543,000 was primarily from increases in management and service fee
income, in particular from the Company's managed hotels in New Orleans, Sharm El
Sheikh, Egypt, and Bermuda.
OPERATING INCOME
Operating income for the nine month period ended September 30, 1996 was
$1,313,000 compared to operating income of $2,303,000 in 1995, a decrease of
approximately $990,000.
The Company's Anguilla Resort had an operating loss of $2,207,000 from the
opening on January 18, 1996 until September 30, 1996, caused primarily by
disappointing revenues as a result of the negative effects that Hurricane Luis
had on the hotel business in Anguilla. The Company has filed a business
interruption claim, but has not recorded any income at September 30, 1996. The
Boston (Cambridge) hotel had an increase in operating income of $946,000,
primarily because of increased revenues of $1,454,000. The Boston (Cambridge)
hotel's operating income also benefitted from a refund for prior years real
estate taxes, after expenses, of approximately $180,000. The New Orleans hotel's
operating income increased by $243,000 during the nine month period ending
September 30, 1996. Operating loss from management activities and other sources
decreased by $28,000, because of increased revenues of $543,000, which exceeded
the increase in expenses of $515,000 related to these activities.
OTHER INCOME (DEDUCTIONS)
Interest expense during the first nine months of 1996 increased by $243,000,
primarily due to interest on the additional indebtedness related to the Sonesta
Beach Resort Anguilla, which the Company purchased in November 1995.
Interest income during the first nine months of 1996 increased by $142,000
compared to 1995. Interest income on the Company's Key Biscayne receivables
increased by $412,000 in 1996. The 1995 period included interest received on a
federal income tax refund, and higher interest income on the Company's cash
balances, reducing the increase to $142,000.
11
<PAGE>
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
Equity in net loss of hotels includes income of $617,000 in the second quarter
of 1996 related to its investment in a hotel project in New York City (see Note
1 -- Operations). Also included is a loss of $706,000 representing the Company's
share of the losses from Sonesta Beach Hotel & Casino Curacao, in which the
Company has a 22% equity interest. This share of the 1996 losses reduced the
Company's $2,000,000 investment it made in 1994 to zero at September 30, 1996.
The 1995 period includes a pre-tax gain of approximately $535,000 related to the
sale of the Amsterdam Sonesta Hotel in 1991.
The gain from casualty insurance in 1995 was a result of a flood claim in May
1995 at the Company's Royal Sonesta Hotel New Orleans.
THIRD QUARTER 1996 COMPARED TO 1995
REVENUES
Total revenues for the third quarter 1996 were $14,846,000 compared to
$13,417,000 in 1995, an increase of approximately $1,429,000.
The Company's Boston (Cambridge) hotel had increased revenues in the 1996
quarter of approximately $575,000, primarily because of a 6% increase in average
room rates. The Company's New Orleans hotel experienced an increase in revenues
of approximately $614,000 in the third quarter of 1996 compared to the same
period in 1995, which was primarily due to a 4% increase in occupancy levels and
a 3% increase in average room rates. The Company's Sonesta Beach Resort
Anguilla, which opened on January 18, 1996, had revenues in the third quarter of
$291,000. The remaining revenue decrease of $51,000 was primarily from decreases
in management and service fee income.
OPERATING INCOME
Operating income for the three month period ended September 30, 1996 was
$294,000, compared to operating income of $851,000 in the same period in 1995, a
decrease of approximately $557,000.
The Company's Sonesta Beach Resort Anguilla had an operating loss of $965,000
during the third quarter of 1996, primarily because of disappointing revenues
during the quarter as a result of the slow summer season, and the lingering
effect that Hurricane Luis has on the business levels in the island of Anguilla.
The Boston (Cambridge) hotel had an increase in operating income of $309,000
compared to 1995. This was due to increased revenues of $575,000, partially
offset by increased expenses, primarily cost and operating, of $266,000. The New
Orleans hotel increased operating income during the third quarter by $167,000,
due to increased revenues of $614,000 and increased operating expenses of
$447,000. The operating loss from management and other sources increased by
$68,000, because of decreased income of $51,000 and increased expenses of
$17,000.
12
<PAGE>
FORM 10-Q
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION (CONTINUED)
OTHER INCOME (DEDUCTIONS)
Interest expense increased by $80,000 during the third quarter of 1996 compared
to 1995, primarily due to interest on the additional indebtedness related to the
Sonesta Beach Resort Anguilla, which the Company purchased in November 1995.
Interest income increased by $124,000 during the three-month period ended
September 30, 1996, compared to the same period the year before, primarily due
to increased interest income on the Company's Key Biscayne receivables in 1996.
The gain from casualty insurance of $155,000 in the 1995 third quarter was a
result of a flood claim at the Company's Royal Sonesta Hotel New Orleans.
LIQUIDITY AND CAPITAL RESOURCES
As mentioned in Note 4, Long-Term Debt, the Company has a commitment for a new
mortgage loan in the amount of $22,880,000, on which it expects to close in
November 1996.
Sonesta Hotels of Anguilla Limited, the owner of Sonesta Beach Resort Anguilla,
has received a commitment from the Lender to increase the mortage loan by up to
$1,700,000. The proceeds will be used to finance certain improvements to the
Resort. The terms are substantially based on the terms of the existing loan, as
described above in Note 4 (b) Long-Term Debt.
The Company believes that its present cash balances, and the expected cash flow
generated during the remainder of the calendar year 1996, will be adequate to
meet all of its obligations.
FEDERAL, FOREIGN AND STATE INCOME TAXES
The provision for income taxes is higher than the statutory rate due to certain
losses in 1996 from the Company's Sonesta Beach Resort Anguilla, B.W.I., which
are not deductible for U. S. income taxes.
PART II - Other Information
Item Numbers 1, 2, 3, 4, 5 and 6
Not applicable during the quarter ended September 30, 1996.
13
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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: _____________________________________
Boy van Riel
Vice President and Treasurer
(Authorized to sign on behalf of the Registrant as
Principal Financial Officer)
DATE: November 14, 1996
14
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0
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