-----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, GhqvibQK9/ycqp/UryUokfN1xTuVuKZ5a9BnC6tpRPF/2FM+4D91y5RjhPnUbkaC fNqFi6Xyq3TZc1yhUqHwdw== 0001007076-96-000006.txt : 19960820 0001007076-96-000006.hdr.sgml : 19960820 ACCESSION NUMBER: 0001007076-96-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960614 FILED AS OF DATE: 19960726 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: 96599265 BUSINESS ADDRESS: STREET 1: 10400 FERNWOOD RD CITY: BETHESDA STATE: MD ZIP: 20817 BUSINESS PHONE: 3013809000 10-Q 1 HMC ACQUISITION PROPERTIES 2ND QTR 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 June 14, 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 - 3 June 14, 1996 and December 29, 1995 Condensed Consolidated Statements of Operations - 4 Twelve Weeks and Twenty-four Weeks Ended June 14, 1996 and June 16, 1995 Condensed Consolidated Statements of Cash Flows - 6 Twenty-four Weeks Ended June 14, 1996 and June 16, 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)
June 14, December 29, 1996 1995 ASSETS (unaudited) ----------- ----------- Property and equipment, net.................................................... $ 515,779 $ 455,602 Investment in affiliate........................................................ 20,000 -- Due from hotel managers........................................................ 9,373 8,994 Other assets................................................................... 11,222 16,592 Cash and cash equivalents...................................................... 23,997 107,119 ------- ------- $ 580,371 $ 588,307 ============= ============= LIABILITIES AND SHAREHOLDER'S EQUITY Debt ........................................................................ $ 350,000 $ 350,000 Deferred income taxes.......................................................... 12,982 9,718 Other liabilities.............................................................. 3,578 4,839 ------- ------- Total liabilities........................................................ 366,560 364,557 ------- ------- Shareholder's equity Common stock, 100 shares issued and outstanding, no par value.............. -- -- Additional paid-in capital................................................. 214,374 214,374 Retained earnings (deficit)................................................ (563) 9,376 ------- ------- Total shareholder's equity .............................................. 213,811 223,750 ------- ------- $ 580,371 $ 588,307 ============= =============
See Notes to Condensed Consolidated Financial Statements. - 3 - HMC ACQUISITION PROPERTIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Twelve Weeks Ended June 14, 1996 and June 16, 1995 (unaudited, in thousands)
1996 1995 ---- ---- REVENUES........................................................................$ 21,993 $ 15,167 --------- --------- OPERATING COSTS AND EXPENSES Depreciation and amortization of property and equipment....................... 4,447 3,614 Base and incentive management fees (including Marriott International management fees of $3,333 and $2,045 in 1996 and 1995, respectively)........ 3,653 2,387 Property taxes................................................................ 1,770 1,383 Ground rent, insurance and other.............................................. 923 857 ------- ------- Total operating costs and expenses.......................................... 10,793 8,241 ------- ------- OPERATING PROFIT BEFORE CORPORATE EXPENSES AND INTEREST............................................... 11,200 6,926 Corporate expenses.............................................................. (876) (616) Interest expense................................................................ (7,535) (3,484) Interest income................................................................. 461 197 ------- ------- INCOME BEFORE INCOME TAXES...................................................... 3,250 3,023 Provision for income taxes...................................................... (1,113) (1,323) ------- ------- NET INCOME......................................................................$ 2,137 $ 1,700 ========= =========
See Notes to Condensed Consolidated Financial Statements. - 4 - HMC ACQUISITION PROPERTIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS Twenty-four Weeks Ended June 14, 1996 and June 16, 1995 (unaudited, in thousands)
1996 1995 ---- ---- REVENUES........................................................................$ 44,452 $ 32,991 --------- --------- OPERATING COSTS AND EXPENSES Depreciation and amortization of property and equipment....................... 8,652 6,369 Base and incentive management fees (including Marriott International management fees of $6,393 and $4,435 in 1996 and 1995, respectively)........ 6,926 4,765 Property taxes................................................................ 3,645 2,793 Ground rent, insurance and other.............................................. 1,411 1,457 ------- ------- Total operating costs and expenses.......................................... 20,634 15,384 ------- ------- OPERATING PROFIT BEFORE CORPORATE EXPENSES AND INTEREST............................................... 23,818 17,607 Corporate expenses.............................................................. (2,022) (1,351) Interest expense................................................................ (15,066) (6,973) Interest income................................................................. 1,595 276 ------- ------- INCOME BEFORE INCOME TAXES...................................................... 8,325 9,559 Provision for income taxes...................................................... (3,264) (3,919) ------- ------- NET INCOME......................................................................$ 5,061 $ 5,640 ========= =========
See Notes to Condensed Consolidated Financial Statements. - 5 - HMC ACQUISITION PROPERTIES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS Twenty-four Weeks Ended June 14, 1996 and June 16, 1995 (unaudited, in thousands)
1996 1995 ---- ---- OPERATING ACTIVITIES Net income......................................................................$ 5,061 $ 5,640 Adjustments to reconcile to cash provided by operations: Depreciation and amortization................................................ 8,652 6,369 Income taxes................................................................. 3,264 3,919 Changes in operating accounts................................................ 245 (977) Other........................................................................ 350 221 ------- ------- Cash provided by operations............................................... 17,572 15,172 ------- ------- INVESTING ACTIVITIES Acquisitions.................................................................... (61,405) (14,742) Capital expenditures............................................................ (22,737) (10,443) Other........................................................................... (331) 1,150 ------- ------- Cash used in investing activities......................................... (84,473) (24,035) ------- ------- FINANCING ACTIVITIES Dividend to Parent.............................................................. (15,000) -- Proceeds from borrowings, net................................................... -- 14,800 Repayments of debt.............................................................. -- (5,000) Other........................................................................... (1,221) -- ------- ------ Cash provided by (used in) financing activities........................... (16,221) 9,800 ------- ------ INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS................................$ (83,122) $ 937 ========== =========
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 June 14, 1996, the results of operations for the twelve and twenty-four weeks ended June 14, 1996 and June 16, 1995 and cash flows for the twenty-four weeks ended June 14, 1996 and June 16, 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, real and personal property taxes, ground rent, insurance and management fees 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 Twenty-four Weeks Ended June 14, June 16, June 14, June 16, 1996 1995 1996 1995 ---- ---- ---- ---- (in thousands) Sales Rooms.............................. $ 40,250 $ 32,188 $ 82,726 $ 62,132 Food & Beverage.................... 19,952 17,481 39,619 31,875 Other.............................. 3,910 3,435 7,751 5,742 ------- ------- ------- ------- Total Hotel Sales................ 64,112 53,104 130,096 99,749 ------- ------- ------- ------- Department Costs Rooms.............................. 9,981 7,871 20,003 14,894 Food & Beverage.................... 15,140 13,497 30,350 24,590 Other.............................. 2,015 2,030 4,309 3,425 ------- ------- ------- ------- Total Department Costs........... 27,136 23,398 54,662 42,909 ------- ------- ------- ------- Department Profit.................... 36,976 29,706 75,434 56,840 Other Deductions..................... 14,983 14,539 30,982 23,849 ------- ------- ------- ------- House Profit..................... $ 21,993 $ 15,167 $ 44,452 $ 32,991 ========= ========= ========= =========
- 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 $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 re-opened in July 1996. During the first quarter of 1996, the Company acquired a minority interest in a joint venture with Host Marriott that holds a controlling interest in two hotels in Mexico City, Mexico for $20 million. The Company has 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. Combined summarized operating results of the Guarantor Subsidiaries are as follows:
Twelve Weeks Ended Twenty-four Weeks Ended June 14, June 16, June 14, June 16, 1996 1995 1996 1995 ---- ---- ---- ---- (in thousands) Revenues............................................. $ 3,881 $ 2,510 $ 6,807 $ 4,390 Operating profit before corporate expenses and interest....................................... 1,694 2,436 3,589 3,062 Net income........................................... 1,138 2,694 1,543 3,070
Combined summarized balance sheet information of the Guarantor Subsidiaries is as follows:
June 14, December 29, 1996 1995 ---- ---- (in thousands) Property and equipment, net...............................................$ 87,366 $ 63,044 Other assets.............................................................. 9,290 5,333 ------- ------- Total assets............................................................$ 96,656 $ 68,377 =========== =========== Debt......................................................................$ 49,175 $ 40,679 Other liabilities......................................................... 1,058 -- ------- ------- Total liabilities....................................................... 50,233 40,679 Equity.................................................................... 46,423 27,698 ------- ------- Total liabilities and equity............................................$ 96,656 $ 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 second quarter 1996 revenues of $22 million represented a $6.8 million, or 45%, increase from the second quarter of 1995. Year-to-date revenues increased $11.5 million, or 35% to $44.5 million. The Company's revenues were impacted by improved lodging results and the addition of three full-service hotel properties during 1995 and one full-service hotel property in 1996. (The Company acquired a controlling interest in the Pittsburgh Hyatt Regency in April 1996, however, the hotel was closed for renovation and conversion to the Marriott brand until July 1996 and as such had no effect on operations.) 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 12% for comparable units for both the quarter and year-to-date. On a comparable basis, average room rates increased 7% for the 1996 second 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 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. The REVPAR growth contributed to a 10% increase in comparable hotel revenues for the quarter and a 13% increase year-to-date. OPERATING COSTS AND EXPENSES. Operating costs and expenses consist of depreciation, amortization, management fees, real and personal property taxes, ground and equipment rent, insurance and certain other costs. The Company's operating costs and expenses for the second quarter of 1996 increased $2.6 million to $10.8 million and year-to-date operating costs and expenses increased $5.3 million to $20.6 million. As a percentage of revenues, operating costs and expenses represented 49% of revenues and 54% of revenues in the second quarter of 1996 and 1995, respectively, reflecting the significant increase in REVPAR, partially offset by the an overall increase in depreciation expense, incentive management fees and the impact of the renovation of the Denver Marriott Tech Center. Operating costs and expenses represented 46% and 47% of revenues for the 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 $4.3 million to $11.2 million, or 51% of revenues, in the second quarter of 1996 from $6.9 million, or 46% of revenues, in the second quarter of 1995. Year- to-date operating profit rose $6.2 million to $23.8 million, or 54% of revenues, in 1996 from $17.6 million, or 53% of revenues, in 1995. Several hotels, including the San Francisco Airport Marriott, the Denver Marriott Tech Center, the Westfields Conference Resort, 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 due to the Super Bowl being held in Florida in 1995 and the Portland Marriott reported an overall decrease in operating profit due to room renovations during 1996. - 9 - HMC ACQUISITION PROPERTIES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION CORPORATE EXPENSES. Corporate expenses increased $.3 million to $.9 million in the second quarter of 1996 and $.7 million to $2 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 Company by Host Marriott. As a percentage of revenues, corporate expenses remained unchanged at 4% of revenues in the second quarter of 1996 and 5% of revenues for year-to-date 1996, compared to 4% for 1995. INTEREST EXPENSE. Interest expense increased $4.1 million to $7.5 million in the 1996 second quarter and $8.1 million to $15.1 million year-to-date primarily due to the increase in the level of debt and the interest rate as a result of the December 1995 debt offering. INTEREST INCOME. Interest income increased $.3 million to $.5 million for the 1996 second quarter and $1.3 million to $1.6 million year-to-date, primarily due to the impact of proceeds from the December 1995 debt offering that have been and will continue to be invested in the acquisition of full-service properties. NET INCOME. The Company's net income for the second quarter of 1996 increased $.4 million to $2.1 million, or 10% of revenues. Year-to-date net income decreased $.6 million to $5.1 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 $83 million in the first half of 1996. This decrease is primarily due to the use of funds to fund capital expenditures and acquire two full-service properties and a minority equity interest in a joint venture controlling two hotels in Mexico City. Cash flow provided by operations increased $2.4 million to approximately $18 million for 1996 primarily due to improved hotel operating results. Cash used in investing activities increased $60 million to $84 million for the first half of 1996, reflecting capital expenditures of $23 million for the renovation of certain properties and renewals and replacements on other properties, expenditures of $61 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 sold its interest in the joint venture to Host Marriott during the third quarter of 1996 for $20 million. 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 $18 million, a 95% interest in the venture that acquired the 400-room Pittsburgh Hyatt Regency. The property was closed and converted to the Marriott brand, prior to reopening in July 1996. EBITDA The Company's consolidated earnings before interest expense, taxes, depreciation, amortization and other non-cash items ("EBITDA"), increased $7.1 million, or 77%, to $16.3 million in the 1996 second quarter and $11.3 million, or 51%, to $33.4 million year-to-date. The increase in EBITDA is due to the increase in comparable hotel EBITDA of 19% for the 1996 second quarter and 17% year-to-date, and the addition of three full-service hotels in 1995 and one full-service hotel in 1996. The Company believes that EBITDA is a meaningful measure of the Company's operating performance due to the significance of the - 10 - Company's long-lived assets (and the related depreciation thereon) and because EBITDA can be used to measure the Company's ability to meet debt service requirements and is used in the senior note indenture as part of the tests determining the Company's ability to incur debt and to make certain restricted payments. EBITDA information should not be considered as an alternative to net income, operating profit, cash from operations, or any other operating or liquidity performance measure prescribed by generally accepted accounting principles. The following is a reconciliation of EBITDA to net income:
Twelve Weeks Ended Twenty-four Weeks Ended June 14, June 16, June 14, June 16, 1996 1995 1996 1995 ---- ---- ---- ---- (in thousands) EBITDA ..............................................$ 16,286 $ 9,192 $ 33,380 $ 22,068 Interest expense........................................ (7,535) (3,484) (15,066) (6,973) Depreciation and amortization........................... (4,447) (3,614) (8,652) (6,369) Income taxes............................................ (1,113) (1,323) (3,264) (3,919) Other non-cash charges, net............................. (1,054) 929 (1,337) 833 ------- ------- -------- ------- Net income..............................................$ 2,137 $ 1,700 $ 5,061 $ 5,640 ========== ========== ========== ===========
- 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. July 26, 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. 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 $ 6-mos Jan-3-1997 Dec-30-1995 Jun-14-1996 1 23,997 0 9,373 0 0 0 541,113 25,334 580,371 0 350,000 0 0 0 (564) 580,371 (564) 44,452 0 20,634 2,022 0 15,066 8,325 3,264 5,061 0 0 0 5,061 0 0
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