-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EPFl178fM3JSY4dJfgNqctW137TuYYuZA+jv9Y82S3bNVtzCzGgJoh+B9HOKWFWt D4FM8c/rn/ePSx652npM5Q== 0000905038-96-000004.txt : 19961204 0000905038-96-000004.hdr.sgml : 19961204 ACCESSION NUMBER: 0000905038-96-000004 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960906 FILED AS OF DATE: 19961017 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HMC ACQUISITION PROPERTIES INC /DE CENTRAL INDEX KEY: 0001007076 STANDARD INDUSTRIAL CLASSIFICATION: 7011 IRS NUMBER: 521888825 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-00768 FILM NUMBER: 96644549 BUSINESS ADDRESS: STREET 1: 10400 FERNWOOD RD CITY: BETHESDA STATE: MD ZIP: 20817 BUSINESS PHONE: 3013809000 MAIL ADDRESS: STREET 1: 10400 FERNWOOD RD CITY: BETHESDA STATE: MD ZIP: 20817 10-Q 1 HMC ACQUISITION PROPERTIES, INC. 3RD QTR RPT SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended September 6, 1996 Commission File No. 333-00768 HMC ACQUISITION PROPERTIES, INC. 10400 Fernwood Road Bethesda, Maryland 20817 (301) 380-9000 Delaware 52-1888825 (State of Incorporation) (I.R.S. Employer Identification Number) 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, and (2) has been subject to such filing requirements for the past 90 days. Yes X No HMC ACQUISITION PROPERTIES INC. AND SUBSIDIARIES INDEX
Page No. PART I. FINANCIAL INFORMATION (Unaudited): Condensed Consolidated Balance Sheets - 3 September 6, 1996 and December 29, 1995 Condensed Consolidated Statements of Operations - 4 Twelve Weeks and Thirty-six Weeks Ended September 6, 1996 and September 8, 1995 Condensed Consolidated Statements of Cash Flows - 6 Thirty-six Weeks Ended September 6, 1996 and September 8, 1995 Notes to Condensed Consolidated Financial Statements 7 Management's Discussion and Analysis of Results of 9 Operations and Financial Condition PART II. OTHER INFORMATION AND SIGNATURE 12
- 2 - HMC ACQUISITION PROPERTIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
September 6, December 29, 1996 1995 ------------ ------------ ASSETS (unaudited) Property and equipment, net.................................................... $ 518,673 $ 455,602 Due from hotel managers........................................................ 10,440 8,994 Other assets................................................................... 14,608 16,592 Cash and cash equivalents...................................................... 47,518 107,119 ------------- ------------- $ 591,239 $ 588,307 ============= ============= LIABILITIES AND SHAREHOLDER'S EQUITY Debt ........................................................................ $ 350,000 $ 350,000 Deferred income taxes.......................................................... 14,861 9,718 Other liabilities.............................................................. 10,303 4,839 ------------- ------------ Total liabilities........................................................ 375,164 364,557 ------------- ------------ Shareholder's equity Common stock, 100 shares issued and outstanding, no par value.............. -- -- Additional paid-in capital................................................. 214,374 214,374 Retained earnings.......................................................... 1,701 9,376 ------------- ------------ Total shareholder's equity .............................................. 216,075 223,750 ------------- ------------- $ 591,239 $ 588,307 ============= =============
See Notes to Condensed Consolidated Financial Statements. - 3 - HMC ACQUISITION PROPERTIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Twelve Weeks Ended September 6, 1996 and September 8, 1995 (unaudited, in thousands)
1996 1995 --------- --------- REVENUES................................................................ $ 23,453 $ 14,526 --------- --------- OPERATING COSTS AND EXPENSES Depreciation and amortization......................................... 5,146 3,167 Base and incentive management fees (including Marriott International management fees of $1,813 and $1,620 in 1996 and 1995, respectively)....................................................... 2,329 2,047 Property taxes........................................................ 1,891 1,405 Ground rent, insurance and other...................................... 1,893 360 --------- --------- Total operating costs and expenses.................................. 11,259 6,979 --------- --------- OPERATING PROFIT BEFORE CORPORATE EXPENSES AND INTEREST....................................... 12,194 7,547 Corporate expenses...................................................... (1,017) (676) Interest expense........................................................ (7,534) (3,523) Interest income......................................................... 500 181 --------- --------- INCOME BEFORE INCOME TAXES.............................................. 4,143 3,529 Provision for income taxes.............................................. (1,879) (1,447) --------- --------- NET INCOME.............................................................. $ 2,264 $ 2,082 ========= =========
See Notes to Condensed Consolidated Financial Statements. - 4 - HMC ACQUISITION PROPERTIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Thirty-six Weeks Ended September 6, 1996 and September 8, 1995 (unaudited, in thousands)
1996 1995 --------- --------- REVENUES.................................................................. $ 67,905 $ 47,517 --------- --------- OPERATING COSTS AND EXPENSES Depreciation and amortization........................................... 13,798 9,536 Base and incentive management fees (including Marriott International management fees of $8,206 and $6,055 in 1996 and 1995, respectively)......................................................... 9,255 6,812 Property taxes.......................................................... 5,536 4,198 Ground rent, insurance and other........................................ 3,304 1,817 --------- --------- Total operating costs and expenses.................................... 31,893 22,363 --------- --------- OPERATING PROFIT BEFORE CORPORATE EXPENSES AND INTEREST......................................... 36,012 25,154 Corporate expenses........................................................ (3,039) (2,027) Interest expense.......................................................... (22,600) (10,496) Interest income........................................................... 2,095 457 --------- --------- INCOME BEFORE INCOME TAXES................................................ 12,468 13,088 Provision for income taxes................................................ (5,143) (5,366) --------- --------- NET INCOME................................................................ $ 7,325 $ 7,722 ========= =========
See Notes to Condensed Consolidated Financial Statements. - 5 - HMC ACQUISITION PROPERTIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Thirty-six Weeks Ended September 6, 1996 and September 8, 1995 (unaudited, in thousands)
1996 1995 ---------- --------- OPERATING ACTIVITIES Net income.......................................................... $ 7,325 $ 7,722 Adjustments to reconcile to cash provided by operations: Depreciation and amortization.................................... 13,798 9,965 Income taxes..................................................... 5,143 5,287 Changes in operating accounts.................................... (191) 2,666 Other............................................................ 532 -- ---------- --------- Cash provided by operations...................................... 26,607 25,640 ---------- --------- INVESTING ACTIVITIES Acquisitions..................................................... (61,405) (58,864) Dispositions..................................................... 20,000 -- Capital expenditures............................................. (27,724) (15,588) Other............................................................ (779) (396) ---------- --------- Cash used in investing activities................................ (69,908) (74,848) ---------- --------- FINANCING ACTIVITIES Dividend to Host Marriott Corporation............................ (15,000) -- Proceeds from borrowings, net.................................... -- 58,598 Repayments of debt............................................... -- (16,000) Other............................................................ (1,300) -- ---------- --------- Cash provided by (used in) financing activities.................. (16,300) 42,598 ---------- --------- DECREASE IN CASH AND CASH EQUIVALENTS............................... $ (59,601) $ (6,610) ========== =========
See Notes to Condensed Consolidated Financial Statements. - 6 - HMC ACQUISITION PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. The accompanying consolidated financial statements of HMC Acquisition Properties, Inc. and subsidiaries (the "Company"), a wholly-owned indirect subsidiary of Host Marriott Corporation ("Host Marriott"), have been prepared by the Company without audit. Certain information and footnote disclosures normally included in financial statements presented in accordance with generally accepted accounting principles have been condensed or omitted. The Company believes the disclosures made are adequate to make the information presented not misleading. However, the condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto for the fiscal year ended December 29, 1995. In the opinion of the Company, the accompanying unaudited condensed consolidated financial statements reflect all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position of the Company as of September 6, 1996 and December 29, 1995, the results of operations for the twelve and thirty-six weeks ended September 6, 1996 and September 8, 1995 and the cash flows for the thirty-six weeks ended September 6, 1996 and September 8, 1995. Interim results are not necessarily indicative of fiscal year performance because of the impact of seasonal and short-term variations. 2. Revenues represent house profit from the Company's hotel properties. House profit reflects the net revenues flowing to the Company as property owner and represents hotel operating results less property-level expenses excluding depreciation and amortization, property taxes, ground rent, insurance, management fees and certain other costs which are classified as operating costs and expenses. House profit generated by the Company's hotels for 1996 and 1995 consists of:
Twelve Weeks Ended Thirty-six Weeks Ended September 6, September 8, September 6, September 8, 1996 1995 1996 1995 ------------ ------------ ------------ ------------ (in thousands) Sales Rooms.............................. $ 44,645 $ 30,369 $ 127,371 $ 92,501 Food & Beverage.................... 19,229 14,274 58,848 46,149 Other.............................. 4,277 3,076 12,028 8,818 --------- --------- --------- --------- Total Hotel Sales............... 68,151 47,719 198,247 147,468 --------- --------- --------- --------- Department Costs Rooms.............................. 10,974 7,766 30,977 22,660 Food & Beverage.................... 15,468 11,675 45,818 36,265 Other.............................. 2,339 1,722 6,648 5,147 --------- --------- --------- --------- Total Department Costs.......... 28,781 21,163 83,443 64,072 --------- --------- --------- --------- Department Profit.................... 39,370 26,556 114,804 83,396 Other Deductions..................... 15,917 12,030 46,899 35,879 --------- --------- --------- --------- House Profit.................... $ 23,453 $ 14,526 $ 67,905 $ 47,517 ========= ========= ========= =========
- 7 - HMC ACQUISITION PROPERTIES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 3. In the first quarter of 1996, the Company acquired the 374-room Toronto Delta Meadowvale hotel for approximately $25 million. In the second quarter of 1996, the Company acquired, for approximately $17 million, a 95% interest in a venture that acquired the 400-room Pittsburgh Hyatt Regency. The property was renovated, converted to the Marriott brand, and re-opened in July 1996. During the first quarter of 1996, the Company acquired for $20 million a minority interest in a joint venture with Host Marriott that holds a controlling interest in two hotels in Mexico City, Mexico. The Company subsequently sold its interest to Host Marriott for $20 million in the third quarter of 1996. 4. During the second quarter of 1996, a $15 million dividend was paid to Host Marriott, as permitted under the senior notes indenture. 5. All direct and indirect subsidiaries of the Company guarantee the senior notes. The separate financial statements of each guaranteeing subsidiary (each, a "Guarantor Subsidiary") are not presented because the Company's management has concluded that such financial statements are not material to investors. The guarantee of each Guarantor Subsidiary is full and unconditional and joint and several and each Guarantor Subsidiary is a wholly-owned subsidiary of the Company. Operating results presented for the period ended September 8, 1995 are for comparative purposes only as the senior notes were issued in December 1995. Combined summarized operating results of the Guarantor Subsidiaries are as follows:
Twelve Weeks Ended Thirty-six Weeks Ended September 6, September 8, September 6, September 8, 1996 1995 1996 1995 ------------------------- ------------------------- (in thousands) Revenues............................................. $ 4,507 $ 2,620 $ 11,314 $ 7,010 Operating profit before corporate expenses and interest....................................... 3,489 1,873 7,078 4,935 Net income........................................... 1,041 148 2,584 3,218
Combined summarized balance sheet information of the Guarantor Subsidiaries is as follows:
September 6, December 29, 1996 1995 ------------ ------------ (in thousands) Property and equipment, net....................................... $ 87,506 $ 63,044 Other assets...................................................... 13,074 5,333 ----------- ----------- Total assets.................................................... $ 100,580 $ 68,377 =========== =========== Debt.............................................................. $ 43,879 $ 40,679 Other liabilities................................................. 4,542 -- ----------- ----------- Total liabilities............................................... 48,421 40,679 Equity............................................................ 52,159 27,698 ----------- ----------- Total liabilities and equity.................................... $ 100,580 $ 68,377 =========== ===========
The operating results and balance sheet information include the pushed-down effect of that portion of the Company's senior notes allocated to the Guarantor Subsidiaries. - 8 - HMC ACQUISITION PROPERTIES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION RESULTS OF OPERATIONS REVENUES. Revenues represent house profit from the Company's hotel properties. The Company's third quarter 1996 revenues of $23.5 million represented a $8.9 million, or 61%, increase from the third quarter of 1995. Year-to-date revenues increased $20.4 million, or 43%, to $67.9 million. The Company's revenues were impacted by improved lodging results and the addition of three full-service hotel properties during 1995 and two full-service hotel properties in 1996. The Company's hotels reported strong growth in revenue per available room ("REVPAR") for comparable hotels. REVPAR is a commonly used indicator of market performance for hotels which represents the combination of the average daily room rate charged and the average daily occupancy achieved. REVPAR does not include food and beverage or other ancillary revenues generated by the property. Improved results were driven by strong increases in REVPAR of 17% and 13% for comparable units for the quarter and year-to-date, respectively. On a comparable basis, average room rates increased 11% and 9% for the 1996 third quarter and year-to-date, while average occupancy increased three percentage points for both the quarter and year-to-date reflecting the impact of the five properties converted to the Marriott brand. Management believes REVPAR will continue to grow in the near future through steady increases in average room rates, combined with less significant increases in occupancy rates. However, there can be no assurance that REVPAR will continue to grow in the future. The comparable REVPAR growth contributed to a 28% increase in comparable hotel revenues for the quarter and a 19% increase year-to-date. OPERATING COSTS AND EXPENSES. Operating costs and expenses consist of depreciation and amortization, management fees, property taxes, ground rent, insurance and certain other costs. The Company's operating costs and expenses for the third quarter of 1996 increased $4.3 million to $11.3 million and year-to-date operating costs and expenses increased $9.5 million to $31.9 million. As a percentage of revenues, operating costs and expenses represented 48% of revenues for both the third quarter of 1996 and 1995, respectively. Operating costs and expenses represented 47% of revenues for both year-to-date 1996 and 1995, respectively. OPERATING PROFIT. As a result of the changes in revenues and operating costs and expenses discussed above, the Company's operating profit increased $4.6 million to $12.2 million, or 52% of revenues, in the third quarter of 1996 from $7.5 million, or 52% of revenues, in the third quarter of 1995. Year-to- date operating profit rose $10.9 million to $36 million, or 53% of revenues, in 1996 from $25.2 million, or 53% of revenues, in 1995. Several hotels, including the San Francisco Airport Marriott, the Westfields Conference Resort and the Dallas Quorum Marriott, posted significant improvements in operating profit. Three properties which were renovated and converted to the Marriott brand in 1995, the Denver Marriott Tech Center, Vail Marriott Mountain Resort and the Williamsburg Marriott, have also shown significant improvement over prior year results. These gains have been partially offset by the performance of the South Bend Marriott which experienced lower operating profit due to increased competition. CORPORATE EXPENSES. Corporate expenses increased $0.3 million to $1 million in the third quarter of 1996 and increased $1 million to $3 million year-to-date primarily due to higher average assets for the Company during 1996, which resulted in an increase in the allocation of corporate expenses to the - 9 - HMC ACQUISITION PROPERTIES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Company by Host Marriott. As a percentage of revenues, corporate expenses were 4% of revenues for the 1996 third quarter and year-to-date, respectively, compared to 5% of revenues for the 1995 third quarter and 4% year-to-date. INTEREST EXPENSE. Interest expense increased $4 million to $7.5 million in the 1996 third quarter and $12.1 million to $22.6 million year-to-date primarily due to the increase in the overall level of debt, as well as a higher average interest rate, as a result of the December 1995 debt offering. INTEREST INCOME. Interest income increased $0.3 million to $0.5 million for the 1996 third quarter and increased $1.6 million to $2.1 million year-to-date, primarily due to the impact of available proceeds from the December 1995 debt offering. NET INCOME. The Company's net income for the third quarter of 1996 increased $0.2 million to $2.3 million, or 10% of revenues. Year-to-date net income decreased $0.4 million to $7.3 million, or 11% of revenues, principally due to the change in interest expense discussed above, partially offset by improved lodging results. LIQUIDITY AND CAPITAL RESOURCES The Company reported a decrease in cash and cash equivalents of $60 million in the thirty-six weeks ended September 6, 1996. This decrease is primarily due to the use of funds to fund capital expenditures and acquire two full-service properties. Cash flow provided by operations increased $1 million to $27 million for 1996 primarily due to improved hotel operating results. Cash used in investing activities increased $46 million to $70 million in the thirty-six weeks ended September 6, 1996, reflecting capital expenditures of $28 million for the renovation of certain properties and renewals and replacements on other properties, in addition to expenditures of approximately $62 million for the acquisition of two full-service hotels and a minority equity interest in a joint venture controlling two hotels in Mexico City, Mexico. The Company subsequently sold its interest in the joint venture to Host Marriott during the third quarter of 1996 for $20 million. Cash used in financing activities was $16 million for the thirty-six weeks ended September 6, 1996 principally due to a $15 million dividend to Host Marriott. In the first quarter of 1996, the Company acquired the 374-room Toronto Delta Meadowvale Hotel for $25 million. In the second quarter of 1996, the Company acquired, for approximately $17 million, a 95% interest in the venture that acquired the 400-room Pittsburgh Hyatt Regency. The property was renovated, converted to the Marriott brand and re-opened in July 1996. EBITDA The Company's consolidated Earnings Before Interest Expense, Taxes, Depreciation, Amortization and other non-cash items ("EBITDA"), increased $6.5 million, or 60%, to $17.1 million in the 1996 third quarter and $17.8 million, or 54%, to $50.5 million year-to-date. The increase in EBITDA is due to the increase in comparable hotel EBITDA of 34% for the 1996 third quarter and 23% year-to-date, and the addition of three full-service hotels in 1995 and two full-service hotels in 1996. The Company believes that EBITDA is a meaningful measure of the Company's operating performance due to the significance of the Company's long-lived assets (and the related depreciation thereon) and because EBITDA can be - 10 - used to measure the Company's ability to meet debt service requirements and is used in the senior note indenture as part of the tests determining the Company's ability to incur debt and to make certain restricted payments. EBITDA information should not be considered as an alternative to net income, operating profit, cash from operations, or any other operating or liquidity performance measure prescribed by generally accepted accounting principles. The following is a reconciliation of EBITDA to net income:
Twelve Weeks Ended Thirty-six Weeks Ended September 6, September 8, September 6, September 8, 1996 1995 1996 1995 ------------ ------------ ------------ ------------ (in thousands) EBITDA ...................................... $ 17,148 $ 10,696 $ 50,528 $ 32,764 Interest expense................................ (7,534) (3,523) (22,600) (10,496) Depreciation and amortization................... (5,146) (3,167) (13,798) (9,536) Income taxes.................................... (1,879) (1,447) (5,143) (5,366) Other non-cash charges, net..................... (325) (477) (1,662) 356 --------- ----------- ---------- ---------- Net income...................................... $ 2,264 $ 2,082 $ 7,325 $ 7,722 ========= =========== ========== ==========
- 11 - PART II. OTHER INFORMATION Item 1. Legal Proceedings The Company is from time to time the subject of, or involved in, judicial proceedings. Management believes that any liability or loss resulting from such matters will not have a material adverse effect on the financial position or results of operations of the Company. Item 4. Submission of Matters to a Vote of Security Holders None. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8-K a. Exhibits: None. b. Reports on Form 8-K: None. - 12 - 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. HMC ACQUISITION PROPERTIES, INC. October 17, 1996 /s/ DONALD D. OLINGER - - ---------------- ----------------------------------- Date Donald D. Olinger Vice President and Corporate Controller - 13 - EX-27 2 FDS --
5 This schedule contains summary financial information extracted from HMC Acquisition Properties, Inc.'s Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Operations and is qualified in its entirety by reference to such financial statements. 0001007076 HMC Acquisition Properties, Inc. 1,000 $ 9-mos Jan-3-1997 Dec-30-1995 Sep-6-1996 1 47,518 0 10,440 0 0 0 548,536 29,863 591,239 0 350,000 0 0 0 216,075 591,239 0 67,905 0 31,893 3,039 0 22,600 12,468 5,143 7,325 0 0 0 7,325 0 0
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