-----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, R7ScXmxpl8pTZWFvQ/r/ZqF3RV5Am+Bcc9+SnBVzyZT6ny/zhXadCIa7wksBuLzf C1XKmZks+pb7nk/38IbN/Q== 0001007076-96-000005.txt : 19960802 0001007076-96-000005.hdr.sgml : 19960802 ACCESSION NUMBER: 0001007076-96-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960322 FILED AS OF DATE: 19960513 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HMC ACQUISITION PROPERTIES INC /DE CENTRAL INDEX KEY: 0001007076 STANDARD INDUSTRIAL CLASSIFICATION: 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: 96561096 BUSINESS ADDRESS: STREET 1: 10400 FERNWOOD RD CITY: BETHESDA STATE: MD ZIP: 20817 BUSINESS PHONE: 3013809000 10-Q 1 FIRST QUARTER 10-Q 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 March 22, 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 No N/A X HMC ACQUISITION PROPERTIES INC. AND SUBSIDIARIES INDEX Page No. PART I. FINANCIAL INFORMATION (Unaudited): Condensed Consolidated Balance Sheets - 2 March 22, 1996 and December 29, 1995 Condensed Consolidated Statements of Operations - 3 Twelve Weeks Ended March 22, 1996 and March 24, 1995 Condensed Consolidated Statements of Cash Flows - 4 Twelve Weeks Ended March 22, 1996 and March 24, 1995 Notes to Condensed Consolidated Financial Statements 5 Management's Discussion and Analysis of Results of 7 Operations and Financial Condition PART II. OTHER INFORMATION AND SIGNATURE 10 - 2 - HMC ACQUISITION PROPERTIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands, except share data)
March 22, December 29, 1996 1995 ---- ---- (unaudited) ASSETS Property and equipment, net............. $ 490,800 $ 455,602 Investment in affiliate................. 20,000 -- Due from hotel managers................. 11,949 8,994 Other assets............................ 13,095 16,592 Cash and cash equivalents............... 65,058 107,119 ------------- ------------- $ 600,902 $ 588,307 ============= ============= LIABILITIES AND SHAREHOLDER'S EQUITY Debt.................................... $ 350,000 $ 350,000 Deferred income taxes................... 11,869 9,718 Other liabilities....................... 12,360 4,839 ------------- ------------- Total liabilities............... 374,229 364,557 ------------- ------------- Shareholder's equity Common stock, 100 shares issued ........ -- -- and outstanding, no par value Additional paid-in capital.............. 214,374 214,374 Retained earnings....................... 12,299 9,376 ------------- ------------- Total shareholder's equity ......... 226,673 223,750 ------------- ------------- $ 600,902 $ 588,307 ============= =============
See Notes to Condensed Consolidated Financial Statements. - 3 - HMC ACQUISITION PROPERTIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Twelve Weeks Ended March 22, 1996 and March 24, 1995 (unaudited, in thousands)
1996 1995 ---- ---- REVENUES.............................................. $ 22,459 $ 17,824 --------- --------- OPERATING COSTS AND EXPENSES Depreciation and amortization ...................... 4,205 2,755 of property and equipment Base and incentive management fees (including Marriott International management fees of $3,058 and $2,038 in 1996 and 1995, respectively)........ 3,273 2,378 Property taxes...................................... 1,875 1,410 Ground rent, insurance and other.................... 489 600 --------- --------- Total operating costs and expenses................ 9,842 7,143 --------- --------- OPERATING PROFIT BEFORE CORPORATE EXPENSES AND INTEREST..................... 12,617 10,681 Corporate expenses.................................... (1,146) (735) Interest expense...................................... (7,531) (3,489) Interest income....................................... 1,134 79 ---------- --------- INCOME BEFORE INCOME TAXES............................ 5,074 6,536 Provision for income taxes............................ (2,151) (2,596) --------- --------- NET INCOME............................................ $ 2,923 $ 3,940 ========= =========
See Notes to Condensed Consolidated Financial Statements. - 4 - HMC ACQUISITION PROPERTIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Twelve Weeks Ended March 22, 1996 and March 24, 1995 (unaudited, in thousands)
1996 1995 --------- --------- OPERATING ACTIVITIES Net income............................................ $ 2,923 $ 3,940 Adjustments to reconcile to cash provided by operations: Depreciation and amortization...................... 4,205 2,755 Income taxes....................................... 2,151 2,596 Other.............................................. 168 143 Changes in operating accounts...................... 4,698 (3,599) ---------- --------- Cash provided by operations..................... 14,145 5,835 ---------- --------- INVESTING ACTIVITIES Acquisitions.......................................... (44,561) (14,742) Capital expenditures.................................. (9,583) (6,736) Other................................................. (1,456) 682 ---------- --------- Cash used in investing activities............... (55,600) (20,796) ---------- --------- FINANCING ACTIVITIES Proceeds from borrowings, net......................... -- 14,800 Repayments of debt.................................... -- (5,000) Other................................................. (606) -- ---------- --------- Cash provided by (used in) financing activities (606) 9,800 ---------- --------- DECREASE IN CASH AND CASH EQUIVALENTS................. $ (42,061) $ (5,161) ========== ==========
See Notes to Condensed Consolidated Financial Statements. - 5 - 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 March 22, 1996, the results of operations and cash flows for the twelve weeks ended March 22, 1996 and March 24, 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 and base and incentive management fees which are classified as operating costs and expenses. House profit generated by the Company's hotels for the first quarter of 1996 and 1995 consists of:
Twelve Weeks Ended March 22, March 24, 1996 1995 ---- ---- (in thousands) Sales Rooms................................. $ 42,476 $ 29,944 Food & Beverage....................... 19,667 14,394 Other................................. 3,841 2,307 --------- --------- Total Hotel Sales.................. 65,984 46,645 --------- --------- Department Costs Rooms................................. 10,022 7,023 Food & Beverage....................... 15,210 11,093 Other................................. 2,294 1,395 --------- --------- Total Department Costs............. 27,526 19,511 --------- --------- Department Profit....................... 38,458 27,134 Other Deductions........................ 15,999 9,310 --------- --------- House Profit....................... $ 22,459 $ 17,824 ========= =========
- 6 - 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. The Company also acquired a minority equity interest in a joint venture with Host Marriott that holds a controlling interest in two hotels in Mexico City, Mexico totalling 914 rooms for $20 million. One of the hotels (314 rooms) is under construction and will open in the third quarter of 1996. In the second quarter of 1996, the Company acquired, for $18 million,a 95% interest in a venture that acquired the 400-room Pittsburgh Hyatt Regency. The property is currently closed and is being converted to the Marriott brand. The property is scheduled to re-open in July 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. Combined summarized operating results of the Guarantor Subsidiaries are as follows (in thousands):
Twelve Weeks Ended March 22, March 24, 1996 1995 ---- ---- Revenues........................................ $ 2,926 $ 1,880 Operating profit before corporate expenses and interest.................................. 1,895 626 Net income...................................... 405 376
Combined summarized balance sheet information of the Guarantor Subsidiaries is as follows (in thousands):
March 22, December 29, 1996 1995 ---- ---- Property and equipment, net..................... $ 87,299 $ 63,044 Other assets.................................... 9,916 5,333 ----------- ----------- Total assets.................................. $ 97,215 $ 68,377 =========== =========== Debt............................................ $ 56,623 $ 40,679 Other liabilities............................... 1,489 -- ----------- ----------- Total liabilities............................. 58,112 40,679 Equity.......................................... 39,103 27,698 ----------- ----------- Total liabilities and equity.................. $ 97,215 $ 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. - 7 - 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. Revenues increased $4.6 million, or 26%, to $22.5 million for the first quarter of 1996. The Company's revenues were impacted by improved lodging results and the addition of three full-service hotel properties during 1995 and one 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 14% for comparable units for the quarter. On a comparable basis, average room rates increased 7% for the 1996 first quarter, while average occupancy increased more than four percentage points reflecting the impact of the properties converted to the Marriott brand during 1995. Management believes REVPAR will continue to grow in the near future through steady increases in average room rates, combined with minor changes in occupancy rates. However, there can be no assurance that REVPAR will continue to grow in the future. Revenues for the quarter were negatively impacted by the renovation of the Denver Marriott Tech Center. The renovation should be completed in the second quarter of 1996. OPERATING COSTS AND EXPENSES. Operating costs and expenses consist of depreciation amortization, base and incentive management fees, property taxes, ground and equipment rent, insurance and certain other costs. The Company's operating costs and expenses for the first quarter of 1996 increased $2.7 million to $9.8 million. As a percentage of revenues, operating costs and expenses represented 44% of revenues in the first quarter of 1996 and 40% of revenues in the first quarter of 1995 reflecting an overall increase in depreciation expense, incentive management fees and the impact of the renovation of the Denver Marriott Tech Center. OPERATING PROFIT. As a result of the changes in revenues and operating costs and expenses discussed above, the Company's operating profit increased $1.9 million, or 18%, to $12.6 million in the first quarter of 1996 from $10.7 million in the first quarter of 1995. Several hotels, including the San Francisco Airport Marriott, the Vail Marriott Mountain Resort, which was renovated in early 1995, and the Dallas Quorum Marriott posted significant improvements in operating profit. The Fort Lauderdale Marina Marriott reported an overall decrease in operating profit from particularly strong 1995 results due to the Super Bowl being held in nearby Miami in 1995. CORPORATE EXPENSES. Corporate expenses increased approximately $.4 million to $1.1 million in the first quarter of 1996 primarily due to higher average assets for the Company for the first quarter of 1996, which resulted in an increase in the allocation of corporate expenses to the Company by Host Marriott. As a percentage of revenues, corporate expenses increased from 4.1% of revenues in the first quarter of 1995 to 5.1% of revenues in the first quarter of 1996. INTEREST EXPENSE. Interest expense increased $4 million to $7.5 million in the 1996 first quarter due to the increase in the level of debt and the interest rate as a result of the December 1995 debt offering. - 8 - HMC ACQUISITION PROPERTIES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION NET INCOME. The Company's net income for the first quarter of 1996 decreased $1 million to $2.9 million, principally due to the change in interest expense discussed above. LIQUIDITY AND CAPITAL RESOURCES - - ------------------------------- The Company reported a decrease in cash and cash equivalents of $42 million in the first quarter of 1996. This decrease is primarily due to the use of funds to fund capital expenditures and acquire one full-service property and a minority equity interest in a joint venture controlling two hotels in Mexico City. Cash flow provided by operations increased $8.3 million to $14.1 million for 1996 primarily due to improved hotel operating results. Cash used in investing activities increased $34.8 million to $55.6 million for the first quarter of 1996, reflecting capital expenditures of $9.6 million for the renovation of certain properties and renewals and replacements on other properties, expenditures of $25 million for the acquisition of one full-service hotel and $20 million for the acquisition of a minority equity interest in a joint venture controlling two hotels in Mexico. In the first quarter of 1996, the Company acquired the 374-room Toronto Delta Meadowvale Hotel for $25 million. The Company also acquired a minority equity interest in a venture with Host Marriott that holds a controlling interest in two hotels in Mexico City, Mexico totaling 914 rooms for $20 million. In the second quarter of 1996, the Company acquired, for $18 million, a 95% interest in the venture that acquired the 400-room Pittsburgh Hyatt Regency. The property is currently closed and is being converted to the Marriott brand. The property is scheduled to re-open in July 1996. EBITDA - - ------ The Company's consolidated earnings before interest expense, taxes, depreciation, amortization and other non-cash items ("EBITDA"), increased $4.1 million, or 32%, to $17.1 million in the 1996 first quarter. The increase in EBITDA is due to the increase in comparable hotel EBITDA of 16%, including the impact of the converted properties, and the addition of three full-service hotels in 1995 and one full-service hotel 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 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. - 9 - The following is a reconciliation of EBITDA to net income:
Twelve Weeks Ended March 22, March 24, 1996 1995 ---- ---- (in thousands) EBITDA.......................................... $ 17,094 $ 12,876 Interest expense................................ (7,531) (3,489) Depreciation and amortization................... (4,205) (2,753) Income taxes.................................... (2,151) (2,596) Other non-cash charges, net..................... (284) (98) --------- --------- Net income...................................... $ 2,923 $ 3,940 ========= =========
- 10 - 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 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. - 11 - 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. May 13, 1996 /s/ DONALD D. OLINGER Date Donald D. Olinger Vice President and Corporate Controller - 12 - EX-27 2 ART. 5 FDS FOR 1ST QUARTER 10-Q
5 This schedule contains summary financial information extracted from the first quarter 10-Q and is qualified in its entirety by reference to such 10-Q. 0001007076 HMC Acquisition Properties, Inc 1000 3-mos JAN-3-1997 DEC-30-1995 MAR-22-1996 65,058 0 11,949 0 0 0 490,800 21,465 600,902 0 350,000 0 0 1 0 600,902 0 22,459 0 9,842 1,146 0 7,531 5,074 2,151 2,923 0 0 0 2,923 0 0
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