to Satisfy the Provisions of the Canadian Securities
Commission and Cure Default of the Financial
Statement Reporting Requirements
|TORONTO, Nov. 26, 2004 - AFM Hospitality Corporation (TSX:AFM) today
announced that it has released its consolidated financial statements along
with its Management Discussion and Analysis for 2003. All financial statements
are available on SEDAR.
Previously, AFM announced that it did not file its annual statements by the appropriate deadlines; and, as a result, the relevant securities commissions imposed Issuer Cease Trade Orders. With the release of 2003 financial statements and its interim statements for 2004, AFM Hospitality intends to satisfy the provisions of the securities commissions and cure its default of the financial statement reporting requirement. With the change of CFO's during 2004 and the departure of an interim CFO, AFM's management and its board of directors, believed that it was prudent to invest additional time to review AFM's books, records, and related disclosures in accordance with company guidelines and the new disclosure standards as AFM completed several complex transactions during 2003. While reporting a sizeable loss for 2003, AFM is pleased that it has received a clean opinion letter from its outside auditors and it has not been necessary to report any restatement of any periods prior to 2003. Additionally, AFM expects to report a significant turn around for 2004 compared to 2003.
AFM has reported in its annual MDA that the significant world events had a large negative impact on many of AFM's customers during the prior 36 months.
The well-publicized impacts on the hospitality and travel industries included: the overall long-term effects of the September 11, 2001 disaster; the ensuing terrorism fears; the Iraq War and travelers' concerns relating to Severe Acute Respiratory Syndrome (SARS). AFM's 2003 fee income declined from 2002 to 2003 as its customers' room rates and occupancies suffered from the global turmoil affecting travelers in both Canada and the United States. Despite these factors, AFM realized growth in franchise and management contracts in large part due to the acquisition of the Trigild International management and receivership business in the United States and an increase in asset management assignments throughout 2003. This growth helped offset the reduction in fees from the individual franchisees and management contracts.
AFM reports in its MDA that its operating results were impacted in 2003 for various reasons, including:
In March, 2004, AFM completed new financing through two US subsidiaries, Northwest Lodging International (USA) Inc. and AFM Asset Management Services Inc totaling $1,372,325 (USD $1,050,000) from a pool of private lenders. In order to secure the financing, the lenders have required that AFM's CEO and another director/shareholder provide personal guarantees and collateral outside AFM. Neither director/shareholder is receiving any compensation or remuneration for providing the guarantees and collateral.
In March 2004, AFM announced that it had entered into an agreement to acquire the assets of Boutique Hotels & Resorts International ("Boutique"). The transaction was completed on November 15, 2004. Boutique is a membership alliance, which provides independent hotel and resort properties with a distinctive upscale international brand identity, a state of the art reservations system, innovative marketing, worldwide sales and other services that are usually available through large international hotel chains only. Under the terms of the purchase, in exchange for all the assets of Boutique Hotels & Resorts International(R) and the related intellectual property from First Capital Hospitality Financial Group, the sellers have received cash, notes and other consideration of approximately CDN $2.5 million as well as the right to an earn-out participation in the success of the related business over the next seven years.
Concurrent with this acquisition AFM closed on a financing package with a private Canadian and American lending group to provide USD $450,000 of acquisition financing, working capital, and capital to cover related transaction costs. The financing provides for terms with a twenty four month maturity, deferred interest and the right to participate in operating profits of the acquired business for the first twenty four months.
According to Lawrence P. Horwitz, AFM Chairman and CEO, "We are pleased with restructuring actions we implemented in 2003, the focus on our core strengths and businesses as seen in the very positive results to date in 2004, and with the continued commitment of our customers, our employees, our vendors, and our Board to the continued growth of AFM in 2004."
About AFM Hospitality Corporation
This Press Release contains certain forward-looking statements and information from AFM Hospitality Corporation relating, but not limited to, the company's operations, anticipated financial performance, business prospects and strategies.
AFM Hospitality Corporation
135 Queens Plate Drive, Suite 410
Toronto, Ontario, M9W 6V1
Phone: (416) 361-1010
|Also See:||Tracy L. Kundey Rejoins Northwest Lodging International as Chief Operating Officer, Part of the Reorganization of AFM's Management Division / February 2004|
|AFM Hospitality Names Scott Dickson as Chief Financial Officer, Adds Two New Directors / October 2003|