November 01, 2000
ITEM 9. REGULATION FD DISCLOSURE
On October 31, 2000 the Registrant released its earnings results for
the three months ended September 30, 2000 and issued the press release attached
hereto as Exhibit 99.1. The outline relating to a conference call held by the
Registrant on November 1, 2000 is attached hereto as Exhibit 99.2. The
Registrant also intends to issue a letter to its shareholders on November 3,
2000, the full text of which is attached hereto as Exhibit 99.3.
-2-
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERIHOST PROPERTIES, INC.
(Registrant)
Date: November 1, 2000 By: /s/ James B. Dale
---------------------------------
James B. Dale
Senior Vice President and
Chief Financial Officer
-3-
AMERIHOST PROPERTIES, INC. DBA ARLINGTON HOSPITALITY
ANNOUNCES THIRD QUARTER RESULTS
RECORD NET INCOME FOR THE QUARTER
ARLINGTON HEIGHTS, ILLINOIS, OCTOBER 31, 2000 - Amerihost Properties, Inc. DBA
Arlington Hospitality, Inc. (Nasdaq/NM: HOST) today announced its earnings
results for the three months ended September 30, 2000. Net income soared to a
record $4.6 million, or $0.87 per diluted share for the quarter, compared to
$1.5 million or $0.27 per diluted share for the same period last year. As
previously announced, the third quarter of 2000 includes a gain of $0.57 per
diluted share from the sale of the AmeriHost Inn and AmeriHost Inn & Suites
brand names and franchising rights to Cendant Corporation. Cash flow, defined as
net income plus depreciation and amortization, grew to $5.8 million or $1.10 per
diluted share in the third quarter of this year compared to $2.6 million or
$0.48 per diluted share during the same period of 1999. Cash flow, as defined,
serves as a supplemental measurement of performance in evaluating the Company's
strategy of developing and selling AmeriHost Inn hotels.
For the nine-month period ended September 30, 2000, net income was $4.9 million,
or $0.92 per diluted share, compared to net income of $574,537 or $0.08 per
diluted share for the nine months ended September 30, 1999. Operating income for
the nine-month period increased 21.3% to $5.4 million in 2000, from $4.4 million
in the nine-month period of 1999. Cash flow, defined as net income plus
depreciation and amortization, for the nine-month period increased to $8.2
million or $1.56 per diluted share in 2000, from $4.2 million or $0.70 per
diluted share for the same period in 1999.
Same Room RevPar for the third quarter of 2000 compared to the third quarter of
1999 for all AmeriHost Inn hotels was up 6.9%. This growth in Same Room RevPar
was the result of a small increase in Average Daily Rate to $58.88 and a 6.5%
increase in occupancy for the quarter, which resulted in a RevPar of $41.62.
Arlington Hospitality, Inc.
October 31, 2000
Page 1 of 5
Same Room RevPar for the first nine months of 2000 for all AmeriHost Inn hotels
was up 7.6%. This growth was the result of a 6.8 0ncrease in occupancy and a
slight increase in Average Daily Rate. These results are for all AmeriHost Inn
hotels open at least 13 full months as of September 30, 2000.
Arlington Chairman, President & CEO, Michael P. Holtz, commented, "The third
quarter of this year was significantly impacted by the improved operating
margins in the hotel operations segment and the initial impact of the sale of
the AmeriHost Inn brand name and franchising rights to Cendant Corporation.
However, this is just the beginning of the numerous financial incentives the
Company may realize as a result of this transaction. As we continue to develop
and build AmeriHost Inn hotels, Arlington Hospitality will continue to realize
more of the benefits from this transaction".
--------------------------------------------------------------------------------
ARLINGTON HOSPITALITY, INC.
PROPERTY OWNERSHIP AND ROOM MANAGEMENT
AS OF SEPTEMBER 30, 2000
Hotel Properties # of Rooms
AmeriHost Inn(R) Hotels
Consolidated hotels 60 3,812
Minority owned hotels 10 652
Franchised only hotels 10 611
Under Construction 2 128
-- -----
SUBTOTAL 82 5,203
Other Hotels
Consolidated hotels 7 936
Minority owned hotels 3 349
Managed only hotels 3 573
-- -----
SUBTOTAL 13 1,858
-- -----
GRAND TOTAL 95 7,061
AMERIHOST INN(R) HOTEL BRAND
SAME ROOM REVPAR PERFORMANCE
Three Months Ended Nine Months Ended
September 30, September 30,
2000 1999 2000 1999
AmeriHost Inn(R)
Average Daily Rate ($) $58.88 $58.60 $57.38 $57.06
Occupancy (%) 70.7 % 62.8 %
RevPAR ($) $41.62 $38.93 $36.03 $33.58
--------------------------------------------------------------------------------
Arlington Hospitality, Inc.
October 31, 2000
Page 2 of 5
ARLINGTON HOSPITALITY, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(UNAUDITED)
=====================================================================================================================
ASSETS
September 30, December 31,
2000 1999
----------------------- ------------------------
Current assets:
Cash and cash equivalents $ 2,773,806 $ 3,766,323
Accounts receivable 3,889,228 2,901,615
Notes receivable 518,485 568,485
Prepaid expenses and other current assets 907,461 971,836
Refundable income taxes - 56,876
Costs and estimated earnings in excess
of billings on uncompleted contracts 1,034,626 834,820
----------------------- ------------------------
Total current assets 9,123,606 9,099,955
Investments in and advances to affiliates 6,838,524 7,332,806
Property and equipment, net 78,175,513 78,770,356
Long-term notes receivable 714,188 692,662
Other assets, net 6,238,817 7,212,388
----------------------- ------------------------
$ 101,090,648 $ 103,108,167
======================= ========================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,816,283 $ 2,623,390
Bank line-of-credit - 7,560,214
Accrued expenses and other current liabilities 3,855,177 4,165,277
Income taxes payable 2,502,297 -
Current portion of long-term debt 1,435,120 1,567,643
----------------------- ------------------------
Total current liabilities 11,608,877 15,916,524
Long-term debt, net of current portion 57,425,947 58,781,609
Deferred income 12,665,665 14,001,231
Minority interests 238,667 228,235
Shareholders' equity 19,151,492 14,180,568
----------------------- ------------------------
$ 101,090,648 $ 103,108,167
======================= ========================
Arlington Hospitality, Inc.
October 31, 2000
Page 3 of 5
ARLINGTON HOSPITALITY, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
=================================================================================================================
Three Months Ended September 30, Nine Months Ended September 30,
------------------------------- --------------------------------
2000 1999 2000 1999
------------- ------------- -------------- --------------
Revenue:
Hotel operations:
AmeriHost Inn(R)hotels $14,533,022 $14,681,959 $38,291,146 $37,879,605
Other hotels 3,769,565 3,912,792 9,523,865 10,011,222
Development and construction 3,610,293 5,287,436 7,697,058 5,847,468
Management services 320,996 287,128 934,234 942,202
Employee leasing 1,434,228 1,532,218 4,506,679 4,749,234
Franchising 199,422 92,066 586,276 171,066
------------- ------------- -------------- --------------
23,867,526 25,793,599 61,539,258 59,600,797
------------- ------------- -------------- --------------
Operating costs and expenses:
Hotel operations:
AmeriHost Inn hotels 9,090,650 9,175,390 26,117,093 25,924,588
Other hotels 2,630,603 2,851,594 7,462,832 7,931,951
Development and construction 3,591,327 4,493,261 7,365,708 5,064,816
Management services 208,447 206,080 616,705 717,255
Employee leasing 1,423,474 1,501,205 4,451,061 4,635,138
Franchising 82,859 295,420 480,854 488,036
------------- ------------- -------------- --------------
17,027,360 18,522,950 46,494,253 44,761,784
------------- ------------- -------------- --------------
6,840,166 7,270,649 15,045,005 14,839,013
Depreciation and amortization 1,177,305 1,115,039 3,303,976 3,658,440
Leasehold rents - hotels 1,644,293 1,840,290 5,059,334 5,552,409
Corporate general and administrative 484,428 404,259 1,287,597 1,181,454
------------- ------------- -------------- --------------
Operating income 3,534,140 3,911,061 5,394,098 4,446,710
Other income (expense):
Interest expense (1,410,867) (1,630,309) (4,353,453) (4,801,889)
Interest income 153,666 167,711 587,406 783,704
Other income 160,173 36,046 272,130 542,013
Gain on sale of property 5,506,883 283,187 6,518,719 283,187
Equity in net income and losses
of affiliates (54,410) (45,735) (42,799) (6,019)
------------- ------------- -------------- --------------
Income before minority
interests and income taxes 7,889,585 2,721,961 8,376,101 1,247,706
Minority interests in income of consolidated
subsidiaries and partnerships (88,667) (152,142) (90,485) (242,169)
------------- ------------- -------------- --------------
Income before income taxes 7,800,918 2,569,819 8,285,616 1,005,537
Income tax expense (3,159,000) (1,028,000) (3,342,000) (431,000)
Net Income $ 4,641,918 $ 1,541,819 $ 4,943,616 $ 574,537
============== ============== =============== ===============
Income per common share - diluted $ 0.87 $ 0.27 $ 0.92 $ 0.08
============== =============== =============== ===============
Weighted average shares outstanding -
diluted basis 5,295,676 5,507,679 5,274,032 6,011,270
============= ============= ============== ==============
Arlington Hospitality, Inc.
October 31, 2000
Page 4 of 5
Statements about future results made in this release may constitute
forward-looking statements within the meaning of the Private Securities
Litigation Reform Act of 1995. These statements are based on current
expectations and the current economic environment. These statements are not
guarantees of future performance. They involve a number of risks and
uncertainties that are difficult to predict. Actual results could differ
materially from those expressed or implied in the forward-looking statements.
Important assumptions and other important factors that could cause results to
differ materially from those in the forward-looking statements are specified in
the Form 10-K for the year ended December 31, 1999 for the Company.
Arlington Hospitality, Inc. is a hotel development and management company that
owns, builds and manages mid-priced hotels. Currently, Arlington manages 84
properties (with an ownership position in 81 of these hotels) in 18 states,
including 71 AmeriHost Inn hotels, for a total of 6,382 rooms. An additional two
AmeriHost Inn hotels are currently under construction. Arlington Hospitality,
Inc. (formerly Amerihost Properties, Inc.) founded the AmeriHost Inn hotel brand
in 1989, and in September 2000, sold the brand and its franchising rights to
Cendant Corporation.
Additional information about the Company can be found at its web site:
"www.arlingtonhospitality.com."
MEDIA CONTACT: INVESTOR CONTACTS:
Rebecca Hayne James Dale - CFO
Alexander and Walsh 847-228-5400, Ext. 361
847-604-9800
Arlington Hospitality, Inc.
October 31, 2000
Page 5 of 5
2000 THIRD QUARTER CONFERENCE CALL WITH SHAREHOLDERS
MIKE
----
o WELCOMES EVERYONE AND INTRODUCES THE COMPANY OFFICIALS ON THE CALL
o Jim Dale - Chief Financial Officer
o Mike Holtz - President and CEO
o Certain statements made during this conference call can be construed as
forward-looking statements within the meaning of Section 27A of the
Securities and Exchange Act of 1934, as amended. These statements are
subject to risks and uncertainties that could cause actual results to
differ materially from those set forth in this presentation.
o First of all, let me take a moment to comment on our new name,
Arlington Hospitality, Inc. As most of you have seen from our recent
press release, we are now doing business as Arlington Hospitality,
Inc., and all subsidiaries that had the name Amerihost in their name
have also changed. Technically, the Amerihost Properties, Inc. name
will exist until the next regularly scheduled shareholders' meeting.
For all intents and purposes, we are now Arlington Hospitality, Inc.
Our symbol on Nasdaq will remain as HOST. Now let's talk about the
important news for the quarter.
o Jim Dale, our Chief Financial Officer, will review the financial
results for the quarter, and I will talk about the operations and
direction of the Company. We will then open the discussion to any
questions you might have.
JIM
---
o REVIEW OF THE PRESS RELEASE
FOR THE QUARTER ENDED September 30, 2000.
o Net income increased to $0.87 per diluted share during this year's
third quarter compared to $0.27 per diluted share during the same
quarter last year.
o As previously announced, the Cendant transaction accounted for
about $0.57 per share of the net income for the quarter. Mike will
discuss this transaction further.
o Without the Cendant transaction, Net Income increased to $0.30 per
diluted share from $0.27 per diluted share last year during the
third quarter.
o Even though hotel operations revenues were slightly down as the
result of selling hotels, operating income for this segment was
actually up as margins improved from 19.7 0n 1999 to 20.8% this
year.
1
o Total Company revenues for the quarter decreased 7.5% to $23.9
million in 2000 from $25.8 million in 1999 with the majority of
the decrease coming from the Hotel Development segment.
o Revenues and Operating Income in the Hotel Development segment
were down in the third quarter of 2000 versus last year's third
quarter as the Company had only three joint venture deals under
construction during the current quarter. During last year's third
quarter, we sold two hotels which had been open less than twelve
months resulting in approximately $5.2 million in revenue and
nearly $1.0 million in operating profit for the Development
segment. Remember, our accounting policy is that if we sell a
hotel within 12 months from the opening date, then we will book
the revenues and profits in the Development segment; otherwise, we
will record only the net profit in the "Gain on Sale" line, below
Operating Income.
o Cash flow, defined as Net Income plus Depreciation and
Amortization, increased to $1.10 per share in the third quarter
2000 from $0.48 per share in the third quarter of 1999.
YEAR TO DATE RESULTS:
o Net Income increased $4.4 million during the first nine months of
2000 to a profit of $4.9 million in 2000 from a profit of $575,000
in 1999.
o Total Revenues increased 3.3 0n 2000 to $61.5 million in 2000
from $59.6 million in 1999.
o Hotel Operations revenues were down slightly, again as the result
of the sale of hotels, but Operating Income for this segment was
up over $1.01 million as the result of stronger Operating Income
margins.
o Margins in Operating Income for the Hotel Operations segment
increased on a year-to-date basis to 12.5 0n 2000 from 10.3% last
year.
o Cash Flow (Net Income plus Depreciation and Amortization)
increased to $8.2 million in 2000 from $4.2 million in 1999.
o We made significant progress improving our debt to equity ratio,
from 2.41 as of December 31, 1999 to 1.85 as of September 30,
2000. For this calculation, we are using long-term debt plus the
line-of-credit versus total shareholders' equity plus deferred
income, which has already been realized by the Company from a cash
standpoint.
Overall, we are very happy with the record net income for the quarter as well as
year to date, and the financial strength of the Company.
2
MIKE
----
o Thank you for your participation in today's call. As most of you are
well aware, the third quarter of the year is historically the best for
the Company, and this year is no exception. The two major differences
this year are the very nice increase in Operating Income Margins in the
Hotel Operations segment of the Company and of course, the impact of
the transaction with Cendant. We'll talk about the Cendant deal in a
moment. First of all, let me review the recurring numbers from the
various segments of the Company.
HOTEL OPERATIONS:
-----------------
Same Room Revenues for the third quarter for the AmeriHost Inn hotel brand
increased 6.90ver the same period a year ago. This is the result of an
increase in occupancy of 6.5% to 71% and an increase of $0.28 in ADR to $58.88
for the quarter. This resulted in a RevPar of $41.62 for the third quarter of
this year. For the past 21 months, the AmeriHost Inn hotel brand has been a
leader in our segment of the hotel industry, the mid-priced without food and
beverage, in RevPar increases. We are working very hard to continue this trend.
The quarter went as follows with regard to Same Room Revenues:
o July Up 5.5%
o August Up 6.8%
o Sept. Up 8.8%
For the nine months ended September 30, 2000, Same Room Revenues for the
AmeriHost Inn hotel brand are up 7.6%. This includes an occupancy increase of
6.8% and an Average Daily Rate increase of $0.32 for a RevPar increase of $2.45.
Our major competitive advantage has been and will continue to be CONSISTENCY.
All of our hotels have the exact same amenity package and offer the same great
service at every location. In addition, every AmeriHost Inn hotel is rated
three-diamond with AAA.
As we outlined for you in past conference calls, our focus is to expand our
hotel development and operations segments and become more of a "fee based"
Company. To that end, let me take a moment to update you on our progress in each
of the following strategies:
(1) BRAND EXPANSION STRATEGY:
o We should start construction on around eight new AmeriHost Inn
hotels during 2000. As of today, your Company has opened four
hotels so far this year, has two under construction, and expects
to break ground on an additional two hotels by the end of the
year.
3
o Today, we have 71 AmeriHost Inn hotels open excluding ten
third-party franchised hotels with Cendant.
o Our strategy here is to enhance our development of new AmeriHost
Inn hotels and build about 12 to 15 AmeriHost Inn & Suites hotels
per year.
(2) OWNERSHIP STRATEGY:
o So far this year, we have sold seven AmeriHost Inn hotels. This
consists of three joint venture AmeriHost Inn hotels and four
consolidated AmeriHost Inn hotels. In addition, we currently have
three other AmeriHost Inn hotels under contract for sale. All of
these are consolidated and owned 100% by your Company. None of
these are less than 12 months old.
o We also have two non-AmeriHost Inn hotels under contract to sell.
o Here is a quick recap of our hotel ownership: 9/30/00 9/30/99
------- -------
Consolidated AmeriHost Inn hotels..................60 62
Joint Venture AmeriHost Inn hotels.................10 12
Consolidated other hotels.......................... 7 8
Managed Only and JV non-AmeriHost Inn hotels....... 6 6
-- --
TOTAL HOTELS.......................................83 88
(3) HOTEL OPERATIONS STRATEGY:
o OBJECTIVE: To increase same room revenues by 7 to 90ver the next
12 months.
o STRATEGIES:
(a) Focus our marketing efforts on our regional sales blitzes of
primary and secondary feeder markets. This has proven to be
very successful for the Company, and we will continue to
expand this even further.
(b) We continue to improve our web site. We have recently added a
"virtual reality" tour of our hotels to our web site. The
response has been great. It's obvious that even though a
small portion of our reservations are generated through the
Internet, this is one of the fastest growing areas for us in
terms of growth in volume. We will continue to improve our
4
focus in this area. Internet reservation volume has increased
229 0uring the first nine months of this year.
(c) Continue to work to improve results through our reservation
center. We are up 68% this year in Net Room Nights booked
through our toll-free reservation system. GDS bookings,
including those booked over the Internet, are the main reason
for the large increase in reservation volume. Systems such as
Sabre, Apollo and Worldspan are actually matching the
reservation volume of our toll-free number. This is expected
to continue to grow as the use of the Internet expands with
the travelling population.
(d) Focus on improving our operations margins. We have made
significant progress in this area as seen on our operations
numbers for the quarter and the year. With revenues down
slightly, our Operating Income in this segment increased by
over $1.0 million for the first 9 months of this year. This
is good, but we still have a long way to go in this area. We
continue to be negatively impacted by the shortage of labor
for our hotels this year. This shortage of labor has forced
us to increase hourly wages and incur a higher payroll
expense as a result of increased overtime. Trends indicate
that this problem decreases as our hotels become more
established in their respective markets and we develop a
solid "base" of core associates for that hotel. We continue
to work on new and creative methods to overcome our staffing
shortages and minimize the effect this has on our operations.
(4) RECAP OF THE STATE OF THE HOTEL INDUSTRY
Statistics from "Smith Travel Research" as printed in Lodging Outlook.
o OCCUPANCY 9 MONTHS
--------- --------
o Overall hotel industry...................... Up .08%
o Mid-priced without F&B...................... Down 0.3%
o AmeriHost Inn hotels........................ Up 7.6%
o AVERAGE DAILY RATE
------------------
o Overall hotel industry...................... Up 4.8%
o Mid-priced without F&B...................... Up 4.6%
o AmeriHost Inn hotels........................ Up 1.0%
5
o RevPar NUMBERS
--------------
o Overall hotel industry...................... Up 5.5%
o Mid-priced without F & B.................... Up 4.3%
o AmeriHost Inn hotels........................ Up 7.6%
o Overall hotel industry.................Supply Up 3.1%
Demand Up 3.9%
o Mid-priced without F&B.................Supply Up 10.6%
Demand Up 10.2%
THE CENDANT TRANSACTION
-----------------------
On September 30, 2000 we closed the Cendant deal. I truly believe that this
could be one of the most important deals in the Company's history. Let me tell
you why:
First of all, we just couldn't hit the ball in the franchise segment. We all
know and agree that in order for the brand to succeed, we must have faster
growth. What better way to make that happen than to team up with the world's
largest franchiser, Cendant. When we first started to talk about doing something
together, several things were very important from our perspective:
o First and foremost, that we get paid a fair price for our brand
o Second, that we have an incentive to continue to grow the brand
o Third, that we structure the deal in such a way that your Company
receives a long-term, on-going source of revenues and profits from
the deal
I am confident that we have attained each of these and probably more. Here's
where your Company has made or will make its profits:
1. An initial payment that was recorded this quarter of $5.1 million,
pre-tax net of closing costs.
2. Preferred franchise agreements on all our owned AmeriHost Inn
hotels.
3. Royalty sharing whereby our Company will receive a percentage of
royalty fees paid to Cendant for the AmeriHost Inn brand for the
next 25 years.
4. Incentive fees from Cendant as we develop and sell AmeriHost Inn
hotels that execute a franchise agreement with Cendant.
In our filing with our third quarter 10-Q is a copy of all these documents.
However, certain confidential information has been deleted from these documents.
I am certain that you can understand the reasons for this.
6
(5) CONCLUSION
We continue to show strong results from our hotel segment with regard
to RevPar growth. Even as the industry has slowed, we continue to
recognize viable new markets for new development. While we have closed
our franchise segment in the Company, we have a tremendous potential
with Cendant to build the brand.
Our strategy of building and selling will become more pronounced in the
months to come. Our internal goals call for us to start construction of
a new AmeriHost Inn hotel for each one that we sell. We appear to be
right on course to accomplish just that this year. We expect to sell
between 8 to 10 AmeriHost Inns this year and our development plans call
for the start of between 8 to 10 new hotels this year. If we can
continue this strategy of building and selling on somewhat of an
equalized basis, this will prove to be a very effective way to grow the
brand and increase our value in the franchise segment from our deal
with Cendant.
We are also going about the task of selling hotels differently. Most of
our leads now come from the Internet, so much so, that we have now set
up our own web site: "hotelsforsaleonline.com." By utilizing the
Internet, we should be able to sell more hotels without the use of a
broker. This may save anywhere between 2% to 30f the sales price or
about $75,000 per hotel sold.
As we continue with our strategy of building and selling, we should
accomplish two very important objectives:
1. Build the AmeriHost Inn hotel brand
2. Increase Net Income and EPS for the Company
While we do believe that Net Income and EPS will continue to grow
accordingly under this strategy, Revenues and EBITDA will be in a
continual state of flux as the hotels are sold and then replaced with
new hotels. I must stress that we are not liquidating our portfolio,
but merely utilizing our expertise in the development segment to grow
the brand and bring increased value to the Company.
I would like to thank you for your time and attention today and would
now like to open the lines for any questions.
November 3, 2000
Dear Shareholders:
This has truly been a great quarter for your Company. After months of
negotiation, we closed on the sale of the AmeriHost Inn name and franchising
rights to the world's largest franchiser, Cendant Corporation. As a result, the
profits generated for the third quarter and year to date 2000 are record
results. However, the initial cash and profits recorded in the third quarter are
just the beginning of the benefits your Company will realize as a result of our
deal with Cendant. There are basically four points that will financially impact
your Company.
1. An initial payment that was recorded this quarter of $5.1 million,
net of closing costs.
2. Preferred franchise agreements with Cendant on all our owned
AmeriHost Inn hotels.
3. Royalty sharing whereby our Company will receive a percentage of
royalty fees paid to Cendant for the AmeriHost Inn brand for the
next 25 years.
4. Incentive fees from Cendant as we develop and sell AmeriHost Inn
hotels that execute a franchise agreement with Cendant.
We are truly excited about the future of our Company and the AmeriHost Inn brand
with Cendant. To avoid confusion going forward as we develop the AmeriHost Inn
brand with Cendant, and as part of our agreement with Cendant, we have begun
doing business as Arlington Hospitality, Inc. Our symbol on Nasdaq: HOST will
remain the same. In addition, the names of our hotels will remain as AmeriHost
Inn hotels and operate under a franchise agreement with Cendant. Technically,
our name change will not be official until our next regularly scheduled
shareholder meeting, subject to shareholder approval.
Another significant event for Arlington Hospitality this quarter was the
appointment of KPMG LLP as our new auditors. After evaluating many accounting
firms, the Company's Audit Committee and Board of Directors decided to retain
the services of a world renowned accounting firm to not only provide audit and
tax services, but to guide and consult with senior management through the many
changes occurring in our industry.
One of our primary objectives this year was to bring the Company's debt to
equity ratio to 2:1 or better. Our debt to equity ratio is computed using total
long-term debt compared to total shareholders' equity plus deferred income.
Deferred income has been included since the Company has already received the
cash benefit and the accounting treatment is merely a deferral and amortization
of the profit. I am proud to say that our debt to equity ratio, as defined, now
stands at 1.85:1. Our objective is to better manage this ratio and other
financial ratios and to be stronger than industry averages.
The outlook for the future of Arlington Hospitality appears very strong. Our
objective to start construction on up to 15 new AmeriHost Inn & Suites hotels
through next year appears right on target. In addition, we are optimistic about
the prospects of selling at least 15 hotels to Amerihost Inn franchisees through
the end of next year. Remember, our goal is to sell one AmeriHost Inn hotel for
each one that we build.
We are committed to increasing the shareholder value of Arlington Hospitality,
Inc. Our Board of Directors and management team are extremely focused in this
area. Our primary objective of increasing profitability is now being realized.
Our next step is to communicate our business plan more thoroughly to the Wall
Street community. I would like to thank you for your commitment to the Company
and look forward to future prosperity.
Sincerely,
Michael P. Holtz
Chairman of the Board
President and CEO