Arlington Third Quarter Results

Arlington Hospitality, Inc. (Nasdaq/NM:
HOST) today announced its earnings results for the third quarter ended September 30, 2002. Net income
for the quarter was $745,687, or $0.14 per diluted share, compared to net income of $1.9 million, or $0.35
per diluted share in 2001. Net income for the third quarter of 2002 reflects an accrual of $383,000 for
severance benefits to be paid to the outgoing CEO, subject to certain conditions. Revenues decreased
18.5%, to $18.4 million in the third quarter of 2002, from $22.6 million in 2001.
For the nine months ended September 30, 2002, net income was $222,003, compared to net income of
$1.4 million during the nine months ended September 30, 2001. Revenues for the first nine months
decreased 3.4%, to $57.0 million during 2002, from $59.0 million during 2001.
Same room Revenue Per Available Room (“RevPAR”) for the three and nine months ended September
30, 2002 for all AmeriHost Inn hotels owned by the Company increased 5.6% and 5.4%, respectively. In
comparison, RevPAR for the overall U.S. hotel industry increased by 0.5% during the three months ended
September 30, 2002 and decreased 4.8% during the nine months ended September 30, 2002, according to
Smith Travel Research. Michael P. Holtz, President and Chief Executive Officer commented, “The
Company’s AmeriHost Inn hotels continue to outperform the overall lodging industry with regard to same
room revenues. Increased demand from leisure travelers and favorable pricing for corporate business
helped fuel the 9.4% increase in same room occupancy achieved during the quarter. This increase was
partially offset by a decrease of $2.05 in average daily rate. Our focus is to maximize revenues through
an aggressive marketing and room rate management plan. Our hotel operations segment continues to
show strong signs of improvement over 2001 as the gross operating profit for the same room AmeriHost
Inn hotels increased by approximately $1.6 million, or 14.7%, during the first nine months of 2002,
compared to 2001.”
During the third quarter of 2002, the Company did not sell, open or acquire any AmeriHost Inn hotels for
its own account. However, during the third quarter, a joint venture in which the Company is a partner
sold one AmeriHost Inn hotel located in San Marcos, Texas, and another joint venture opened one
AmeriHost Inn hotel built by the Company located in Maumee, Ohio.
During the twelve months ended September 2002, in addition to the above-mentioned joint venture
activity during the third quarter of 2002, the Company sold four Company-owned AmeriHost Inn hotels,
opened three newly constructed AmeriHost Inn hotels for its own operation, and acquired the remaining
ownership interest from its joint venture partners in one AmeriHost Inn hotel. In addition, during the last
twelve months, the Company built an AmeriHost Inn for an operator who was referred to the Company by
Cendant Corporation, the franchisor of the AmeriHost Inn brand.
Holtz continued, “New hotel development for third parties and the sale of hotels continues at a slower
pace as a result of the difficulty of hotel developers and buyers obtaining suitable financing. However,
we have begun to experience increased activity with regard to the sale of hotels. We are confident that as
the financing market returns to the hotel industry, this segment will again contribute strong earnings and
cash flow for the Company.” Subsequent to September 30, 2002, another joint venture in which the
Company is a partner sold an AmeriHost Inn hotel located in Delaware, Ohio.
The Company currently has three AmeriHost Inn & Suites hotels under construction. These hotels are
located in Redding, California; DeWitt, Michigan; and Willows, California. In addition, the Company is
currently building an AmeriHost Inn hotel for a minority-owned joint venture located in Columbus, Ohio.
The Company intends to continue developing and constructing AmeriHost Inn hotels for itself as well as
third parties for the foreseeable future. Currently, the Company owns and operates 64 AmeriHost Inn
hotels, in addition to the hotels under construction and development.
The Company has entered into a series of severance agreements with its outgoing CEO, Michael P. Holtz,
which have been filed by the Company as exhibits to a Form 8-K filing Current Report with the Securities
and Exchange Commission made on November 8, 2002. The settlement agreement provides for a
severance payment of $325,000 plus fringe benefits for a period of one year in full satisfaction of the
obligations under his employment agreement. As of September 30, 2002, the Company has accrued
$383,000 for these severance benefits, which has been included in corporate general and administrative
expense in the Company’s financial statements. This settlement is contingent upon the successful closing
on the sale of two hotels to Mr. Holtz for a total purchase price of approximately $5.2 million. In
addition, the Company will be entitled to a five-year contingent purchase price participation in the
appreciation of the hotels above certain specified amounts. The Company expects to record pretax
income from the sale of these hotels of approximately $550,000 upon closing. The closing is expected to
be in December 2002, and a condition to the transaction is that it must close no later than February 15,
2003. There can be no assurance that these hotel sales transactions, and the severance agreement, will be
Arlington Hospitality, Inc. is a hotel management and development company that builds and manages
mid-priced hotels. As of September 30, 2002, Arlington Hospitality, Inc. owns or manages 76 properties
in 17 states, including 65 AmeriHost Inn hotels, for a total of 5,629 rooms, with four additional
AmeriHost Inn & Suites hotels under construction. Each hotel offers an amenity package not often found
in other mid-priced hotels. For additional information on the Company, please visit our web site at