-----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, LjO2LR2NfFkCQmUnPv2pUW3c5Y5qjUqynxaA8Xizpj3Pk+eTOrLU7X/WQYaVdgyD VwqgSP3Y6dZ9jvLimBLFyA== 0000912057-97-030275.txt : 19970912 0000912057-97-030275.hdr.sgml : 19970912 ACCESSION NUMBER: 0000912057-97-030275 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970909 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19970909 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAPSTAR HOTEL CO CENTRAL INDEX KEY: 0001014764 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 521979383 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-12017 FILM NUMBER: 97677507 BUSINESS ADDRESS: STREET 1: 1010 WISCONSIN AE NW CITY: WASHINGTON STATE: DC ZIP: 20007 BUSINESS PHONE: 2029654455 MAIL ADDRESS: STREET 1: 1010 WISCONSIN AVE NW CITY: WASHINGTON STATE: DC ZIP: 20007 FORMER COMPANY: FORMER CONFORMED NAME: CAPSTAR HOTEL INVESTORS INC DATE OF NAME CHANGE: 19960517 8-K 1 FORM 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K CURRENT REPORT FILED PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): SEPTEMBER 9, 1997 CAPSTAR HOTEL COMPANY (Exact name of registrant as specified in its charter) DELAWARE 1-12017 52-1979383 (State or other jurisdiction (Commission File (IRS Employer of incorporation) Number) Identification Number)
1010 WISCONSIN AVENUE, N.W. SUITE 650 WASHINGTON, D.C. 20007 (Address of principal executive offices) Registrant's telephone number, including area code: (202) 965-4455 ITEM 5. Other Events For purposes of incorporating by reference into the Registration Statement of CapStar Hotel Company (the "Company") on Form S-3 (File No. 333-34253), the financial statements of the National Airport Hilton as of and for the periods ended June 30, 1997 and December 31, 1996 as required by Rule 3-05 of Regulation S-X are attached hereto as Exhibit 99.1. For purposes of incorporating by reference into the Company's Registration Statement on Form S-3 (File No. 333-34253), the unaudited pro forma condensed consolidated financial statements of the Company as of and for the six months ending June 30, 1997 and for the year ended December 31, 1996 as required by Article 11 of Regulation S-X are attached hereto as Exhibit 99.2. ITEM 7. Financial Statements, Pro Forma Financial Information and Exhibits (c) Exhibits Exhibit Number 99.1 Balance Sheets as of June 30, 1997 (unaudited) and December 31, 1996 and Statements of Operations, Owners' Deficit and Cash Flows for the six months ended June 30, 1997 (unaudited) and the year ended December 31, 1996 for the National Airport Hilton with accompanying notes and Independent Auditors' Report. 99.2 Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 1997 and Unaudited Pro Forma Condensed Consolidated Statements of Operations for the six months ended June 30, 1997 and for the year ended December 31, 1997 with accompanying notes. SIGNATURES 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 hereto duly authorized. Date: September 9, 1997 CAPSTAR HOTEL COMPANY By: /s/ JOHN EMERY ----------------- John Emery Chief Financial Officer EXHIBIT INDEX Exhibit Number 99.1 Balance Sheets as of June 30, 1997 (unaudited) and December 31, 1996 and Statements of Operations, Owners' Deficit and Cash Flows for the six months ended June 30, 1997 (unaudited) and the year ended December 31, 1996 for the National Airport Hilton with accompanying notes and Independent Auditors' Report. 99.2 Unaudited Pro Forma Condensed Consolidated Balance Sheet as of June 30, 1997 and Unaudited Pro Forma Condensed Consolidated Statements of Operations for the six months ended June 30, 1997 and for the year ended December 31, 1997 with accompanying notes. EX-99.1 2 EXHIBIT 99.1 INDEPENDENT AUDITORS' REPORT The Board of Directors CapStar Hotel Company: We have audited the accompanying balance sheet of the National Airport Hilton (the Hotel) as of December 31, 1996, and the related statements of operations, owners' deficit, and cash flows for the year then ended. These financial statements are the responsibility of the Hotel's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the National Airport Hilton as of December 31, 1996, and the results of its operations and its cash flows for the year then ended in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Washington, D.C. July 25, 1997 1 NATIONAL AIRPORT HILTON BALANCE SHEETS JUNE 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996
1997 1996 -------------- ------------ (UNAUDITED) ASSETS Cash................................................................................ $ 254,174 224,725 Escrow accounts..................................................................... 225,957 349,869 Accounts receivable, net............................................................ 1,259,529 338,568 Inventory........................................................................... 328,142 366,078 Hotel property: Land.............................................................................. 1,900,000 1,900,000 Building and building improvements, net of accumulated depreciation of $6,485,917 as of June 30, 1997 and $6,231,741 as of December 31, 1996...................... 14,515,714 14,255,113 -------------- ------------ Total hotel property................................................................ 16,415,714 16,155,113 Deferred financing costs, net of accumulated amortization of $2,770,829 as of June 30, 1997 and $1,895,829 as of December 31, 1996.............................. 729,171 1,604,171 Deposits and other assets........................................................... 85,752 75,976 -------------- ------------ $ 19,298,439 19,114,500 -------------- ------------ -------------- ------------ LIABILITIES AND OWNERS' DEFICIT Accounts payable and accrued expenses: Accounts payable and other accrued expenses....................................... $ 1,972,325 1,216,663 Deferred interest payable (note 3)................................................ 3,500,000 3,500,000 -------------- ------------ Total accounts payable and accrued expenses......................................... 5,472,325 4,716,663 Notes payable (note 3).............................................................. 23,557,000 23,557,000 Advanced deposits................................................................... 72,201 67,574 -------------- ------------ Total liabilities................................................................... 29,101,526 28,341,237 Owners' deficit..................................................................... (9,803,087) (9,226,737) -------------- ------------ $ 19,298,439 19,114,500 -------------- ------------ -------------- ------------
See accompanying notes to financial statements. 2 NATIONAL AIRPORT HILTON STATEMENTS OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED) AND THE YEAR ENDED DECEMBER 31, 1996
1997 1996 --------- --------- (UNAUDITED) Hotel operating revenue: Room rental........................................................ $4,763,646 8,212,957 Food and beverage sales............................................ 1,360,668 2,663,449 Other operating departments........................................ 295,037 597,321 --------- --------- Total hotel operating revenue........................................ 6,419,351 11,473,727 --------- --------- Hotel operating expenses: Rooms.............................................................. 1,007,784 1,931,283 Food and beverage.................................................. 1,095,419 2,217,016 Other operating departments........................................ 176,750 406,475 Undistributed operating expenses: Administrative and general......................................... 751,680 1,449,597 Marketing.......................................................... 350,144 707,010 Utilities.......................................................... 265,520 568,197 Repairs and maintenance............................................ 316,728 440,317 Depreciation....................................................... 254,176 508,350 Management fee (note 4)............................................ 256,774 457,607 Franchise fee (note 5)............................................. 238,182 216,884 Insurance and taxes................................................ 236,756 567,306 Equipment leases................................................... 23,438 51,980 Interest expense (note 3).......................................... 2,084,838 4,124,837 Other.............................................................. 27,512 57,390 --------- --------- Total expenses....................................................... 7,085,701 13,704,249 --------- --------- Net loss............................................................. $(666,350)(2,230,522) --------- --------- --------- ---------
See accompanying notes to financial statements. 3 NATIONAL AIRPORT HILTON STATEMENTS OF OWNERS' DEFICIT FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED) AND THE YEAR ENDED DECEMBER 31, 1996 Balance, December 31, 1995..................................................... $(7,135,778) Capital contribution......................................................... 139,563 Net loss..................................................................... (2,230,522) ----------- Balance, December 31, 1996..................................................... (9,226,737) ----------- Capital contribution......................................................... 90,000 Net loss..................................................................... (666,350) ----------- Balance, June 30, 1997......................................................... $(9,803,087) ----------- -----------
See accompanying notes to financial statements. 4 NATIONAL AIRPORT HILTON STATEMENTS OF CASH FLOWS FOR THE SIX MONTHS ENDED JUNE 30, 1997 (UNAUDITED) AND THE YEAR ENDED DECEMBER 31, 1996
1997 1996 ----------- ----------- (UNAUDITED) Cash flows from operating activities: Net loss............................................................................. $ (666,350) (2,230,522) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation expense............................................................... 254,176 508,350 Amortization of deferred financing costs........................................... 875,000 1,749,996 (Increase) decrease in accounts receivable......................................... (920,961) 248,464 Decrease (increase) in inventory................................................... 37,936 (334,418) Decrease (increase) in escrow accounts............................................. 123,912 (202,577) Increase in deposits and other assets.............................................. (9,776) (45,232) Increase (decrease) in accounts payable and accrued expenses....................... 755,662 (492,296) Increase in advanced deposits...................................................... 4,627 17,671 ----------- ----------- Net cash provided by (used in) operating activities.................................... 454,226 (780,564) ----------- ----------- Cash flows from investing activities--purchases of furniture and equipment............. (514,777) (1,843,860) ----------- ----------- Cash flows from financing activities--capital contributions............................ 90,000 139,563 ----------- ----------- Net increase (decrease) in cash........................................................ 29,449 (2,484,861) Cash at beginning of period............................................................ 224,725 2,709,586 ----------- ----------- Cash at end of period.................................................................. $ 254,174 224,725 ----------- ----------- ----------- ----------- Supplemental disclosure of cash flow information: Interest paid.......................................................................... $ 1,015,934 2,206,706 ----------- ----------- ----------- -----------
See accompanying notes to financial statements. 5 NATIONAL AIRPORT HILTON NOTES TO FINANCIAL STATEMENTS JUNE 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996 (1) ORGANIZATION The National Airport Hilton (the "Hotel") is located near National Airport in Arlington, Virginia. The Hotel has been operated under a franchise agreement with Hilton Inns, Inc. since 1995. The Hotel has 386 rooms, an indoor pool and fitness center, a lobby gift shop, and 24 hour security and room service. In addition, the Hotel has 17,000 square feet of convention and ballroom space. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The accounts of the Hotel for the periods presented are included in the financial records of the partnership that owned the Hotel. The accompanying financial statements include the accounts of the Hotel only, as if they were a separate legal entity, and have been prepared using the accrual basis of accounting. ESCROW ACCOUNTS Escrow accounts represent amounts paid into a property tax and insurance escrow account. HOTEL PROPERTY Building, building improvements and land are stated at cost. Depreciation is computed on the building and building improvements using the straight-line method over their estimated useful lives of 40 years. Management periodically evaluates potential permanent impairment of the net carrying value of the Hotel. If the net carrying value of the Hotel exceeds its fair value, the excess is charged to operations. No impairment losses were recorded in 1997 or 1996. DEFERRED FINANCING COSTS Deferred financing costs are being amortized on a basis which approximates the interest method, over the two year term of the related loan. INVENTORY Inventory primarily consists of food and beverage, linens, silverware, and glassware and is stated at cost using the first-in, first-out method of inventory valuation. REVENUES Revenue is earned primarily through the operations of the Hotel and is recognized when earned. INCOME TAXES The Hotel is owned by a partnership, and therefore, any income taxes are reported by the individual partners. USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and judgments that affect the reported amounts of assets and 6 NATIONAL AIRPORT HILTON NOTES TO FINANCIAL STATEMENTS--(CONTINUED) (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) liabilities and disclosures of contingencies at the date of the financial statements and revenues and expenses recognized during the reporting period. Actual results could differ from those estimates. (3) NOTES PAYABLE Notes Payable consisted of the following at June 30, 1997 and December 31, 1996:
JUNE 30, DECEMBER 1997 31, 1996 ----------- ----------- (UNAUDITED) LEHMAN BROTHERS HOLDINGS INC. Mortgage note payable to Lehman Brothers Holdings Inc. secured by a mortgage, deed of trust and assignment of leases and rents on the Hotel. Interest payable monthly at LIBOR plus 450 basis points (10.22% at June 30, 1997 and 10.19% at December 31, 1996). Balance is due November 21, 1997, however may be extended for one year with interest at LIBOR plus 550 basis points and an extension fee of two percent of the outstanding principal balance.............................. $ 22,057,000 22,057,000 HILTON INNS, INC. Loan payable to Hilton Inns, Inc., secured by a pledge and security agreement of (i) 95 percent of the partnership interests of the Hotel's owner and (ii) a security interest in the Hotel. Interest payable semi-annually at twelve percent with the balance due November 21, 1998........................................... 1,500,000 1,500,000 ------------- ------------- $ 23,557,000 23,557,000 ------------- ------------- ------------- -------------
The mortgage note payable to Lehman Brothers Holdings, Inc. requires the Hotel to pay additional interest of $3,500,000. In accordance with the terms of the note, the additional interest is considered fully earned at inception of the note, and is payable on the maturity date or upon its earlier repayment. These deferred interest costs are being amortized into interest expense over the twenty-four month term of the note. (4) COMMITMENTS HOTEL MANAGEMENT AGREEMENT On November 5, 1995, the Hotel entered a 5-year management agreement with US Hotel Associates, the owner of the Hotel, for management of the Hotel. The management agreement provides for payment of a management fee of 4% of Gross Income, as defined in the agreement, payable monthly. Total management fees under this agreement were $256,774 (unaudited) for the six months ended June 30, 1997 and $457,607 for the year ended December 31, 1996. (5) LICENSE AGREEMENT On November 21, 1995, the Hotel entered into an agreement with Hilton Inns, Inc. for a license and franchise to operate the Hotel under the Hilton name. The agreement provides for payment of a monthly fee of 2.5 percent (5 percent effective January 1997) of gross room sales. In addition, the agreement 7 NATIONAL AIRPORT HILTON NOTES TO FINANCIAL STATEMENTS--(CONTINUED) (5) LICENSE AGREEMENT (CONTINUED) requires the payment of a monthly advertising fee of 1 percent of gross room sales. The agreement terminates on November 30, 2005. (6) SUBSEQUENT EVENTS On July 1, 1997, the Hotel was purchased by CapStar Hotel Company (CapStar) for approximately $36.5 million and will thereafter be owned and managed by CapStar. 8 EX-99.2 3 EXHIBIT 99.2 Exhibit 99.2 UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS The Unaudited Pro Forma Condensed Consolidated Balance Sheet of the Company as of June 30, 1997 is presented assuming: (i) all of the 41 hotels owned by the Company on September 8, 1997 (the "Owned Hotels") and the two hotels under purchase contract on September 8, 1997 (the "Additional Acquisitions") were owned on June 30, 1997 and (ii) the $150 million senior subordinated notes (the "Notes") offering was completed and the Company's $450 million senior secured credit facility (the "Credit Facility") and the $100 million non-recourse debt facility (the "Non-Recourse Facility") were entered into on June 30, 1997. The Unaudited Pro Forma Condensed Consolidated Statements of Operations of the Company for the six months ended June 30, 1997 and for the year ended December 31, 1996 are presented assuming: (i) all of the Owned Hotels and the Additional Acquisitions were owned at the beginning of the periods presented and (ii) the initial public offering of 9,250,000 shares of common stock, the secondary offering of 5,750,000 shares of common stock, and the Notes offering (collectively, the "Offerings"), the Credit Facility and the Non-Recourse Facility were completed at the beginning of the periods presented. The National Airport Hilton was acquired subsequent to June 30, 1997, and is separately disclosed because the acquisition of this hotel constituted an acquisition of a "significant amount of assets" as such phrase is defined in Item 2 of Form 8-K and Sections 210.11-01(b), 210.11-01(d) and 210.3-05(b) (2)(ii) of Regulation S-X. In management's opinion, all material adjustments necessary to reflect the transactions are presented in the pro forma adjustments columns, which are further described in the notes to the Unaudited Pro Forma Condensed Consolidated Financial Statements. The Unaudited Pro Forma Condensed Consolidated Financial Statements are not necessarily indicative of what the Company's financial position or results of operations actually would have been if all the Owned Hotels and the Additional Acquisitions were, in fact, owned on such dates presented and if the Offerings, the Credit Facility and the Non-Recourse Facility were completed on such dates. Additionally, the pro forma information does not purport to project the Company's financial position or results of operations at any future date or for any future period. The Unaudited Pro Forma Condensed Consolidated Financial Statements should be read in conjunction with the historical consolidated financial statements and related notes thereto of the Company. CapStar Hotel Company Unaudited Pro Forma Condensed Consolidated Balance Sheet June 30, 1997
Pro Forma Adjustments ----------------------------------------------------- Owned Hotels, Credit Facility, Non-Recourse Facility and National Additional Historical (A) Notes (B) Airport Hilton (C) Acquisitions(D) Pro Forma ------------- ------------ ----------------- --------------- --------- Assets Cash $ 11,489 $ (5,562) $ 15 $ -- $ 5,942 Property and equipment, net: Land 81,683 32,916 5,529 5,811 125,939 Building and improvements 404,798 141,654 27,644 29,054 603,150 Furniture, fixtures and equipment 44,556 16,359 3,686 3,874 68,475 Construction-in-progress 5,314 5 -- -- 5,319 ------------- ---------- ----------- ---------- -------- Total property and equipment, net 536,351 190,934 36,859 38,739 802,883 Deposits and other assets 60,233 345 25 -- 60,603 ------------- ---------- ----------- ---------- -------- Total assets $ 608,073 $ 185,717 $ 36,899 $ 38,739 $869,428 ------------- ---------- ----------- ---------- -------- ------------- ---------- ----------- ---------- -------- Liabilities, Minority Interest and Stockholders' Equity Other liabilities $ 35,333 $ 2,904 $ 262 $ -- $ 38,499 Long-term debt: Senior secured credit facility 168,500 (168,500) -- -- -- Credit Facility -- 198,563 36,637 38,739 273,939 Non-Recourse Facility -- 52,750 -- -- 52,750 Notes -- 150,000 -- -- 150,000 Other obligations 66,495 (50,000) -- -- 16,495 ------------- ---------- ----------- ---------- -------- Total liabilities 270,328 185,717 36,899 38,739 531,683 Minority interest 22,270 -- -- -- 22,270 Stockholders' equity 315,475 -- -- -- 315,475 ------------- ---------- ----------- ---------- -------- Total liabilities, minority interest and stockholders' equity $ 608,073 $ 185,717 $ 36,899 $ 38,739 $869,428 ------------- ---------- ----------- ---------- -------- ------------- ---------- ----------- ---------- --------
(A) Reflects the historical unaudited condensed consolidated balance sheet of the Company as of June 30, 1997. (B) Reflects the Company's cost basis and financing for 8 of the Owned Hotels acquired subsequent to June 30, 1997. Also included are the effects of the Company's Credit Facility, Non-Recourse Facility and Notes offering which were consummated after June 30, 1997. Deposits and other assets reflect the deferral of financing fees related to the new financing activities net of the write-off associated with refinanced facilities, and the use of purchase deposits. (C) Reflects the Company's cost basis and financing for the National Airport Hilton. (D) Reflects the Company's cost basis and financing for the Additional Acquisitions. CapStar Hotel Company Unaudited Pro Forma Condensed Consolidated Statement of Operations Six Months Ended June 30, 1997
Pro Forma Adjustments ------------------------------------------------ Owned Hotels, Offerings, Credit Facility, Non-Recourse National Facility Airport Additional Historical(A) and Notes(B) Hilton(B) Acquisitions(B) Pro Forma ------------- ------------ -------------- ------------- --------- Revenue from hotel operations: Rooms $ 79,254 $ 36,676 $ 4,764 $ 4,859 $ 125,553 Food and beverage 34,676 12,141 1,361 2,215 50,393 Other hotel revenue 5,664 2,931 295 251 9,141 Office rental and other revenues -- 2,844 -- -- 2,844 Hotel management, accounting and other 2,225 (98) -- -- 2,127 ------------- ----------- -------------- ------------ --------- Total revenue 121,819 54,494 6,420 7,325 190,058 Hotel operating expense by department: Rooms 18,954 9,849 1,008 1,233 31,044 Food and beverage 27,338 9,889 1,095 1,629 39,951 Other operating departments 3,008 1,680 177 153 5,018 Office rental and other expenses -- 1,184 -- -- 1,184 Undistributed operating expenses: Administrative and general 19,839 5,422 1,102 783 27,146 Property operating costs 13,960 10,997 820 1,065 26,842 Property taxes, insurance and other 5,064 3,472 288 289 9,113 Depreciation and amortization 8,220 4,359 609 640 13,828 ------------- ----------- -------------- ------------ --------- 96,383 46,852 5,099 5,792 154,126 Interest expense, net 8,440 8,642 476 1,059 18,617 Total expenses 104,823 55,494 5,575 6,851 172,743 ------------- ----------- -------------- ------------ --------- Income (loss) before minority interest and income taxes 16,996 (1,000) 845 474 17,315 Minority interest (620) (693) -- -- (1,313) ------------- ----------- -------------- ------------ --------- Income (loss) before income taxes 16,376 (1,693) 845 474 16,002 Income tax provision 6,288 (650) 325 182 6,145 ------------- ----------- -------------- ------------ --------- Net income (loss) (C) $ 10,088 $ (1,043) $ 520 $ 292 $ 9,857 ------------- ----------- -------------- ------------ --------- ------------- ----------- -------------- ------------ --------- Earnings per share (D) $ 0.62 $ 0.53 ------------- --------- ------------- ---------
(A) Reflects the historical unaudited condensed consolidated statement of operations of the Company for the six months ended June 30, 1997. (B) Reflects the pre-acquisition operations of the Owned Hotels (including separate disclosure for the National Airport Hilton) and Additional Acquisitions to provide six months of hotel operations. The pre-acquisition operations were obtained from the hotel pre-acquisition financial statements. Also reflects adjustments to (i) eliminate management fee revenues for the Owned Hotels for services that were provided by the Company, (ii) reflect federal and state income taxes (assuming a 38.4% combined effective rate), (iii) reflect pro forma depreciation and amortization expense on the Company's cost basis as if the hotels had been acquired as of the beginning of the period, (iv) reflect net amortization expense associated with financing activities and (v) record interest based on the terms of the Company's credit facilities. (C) Subsequent to June 30, 1997, the Company incurred expenses associated with the write-off of deferred financing costs related to the refinanced credit facilities. These extraordinary costs are charged to operations as incurred and have not been included in the Unaudited Pro Forma Condensed Consolidated Statement of Operations. (D) In computing historical and pro forma earnings per share, weighted average shares of common stock and common stock equivalents of 16,356,343 and 19,547,910, respectively, were used and net income has been adjusted for certain minority interests. CapStar Hotel Company Unaudited Pro Forma Condensed Consolidated Statement of Operations Year Ended December 31, 1996
Pro Forma Adjustments ------------------------------------------------ Owned Hotels, Offerings, Credit Facility, Non-Recourse National Facility Airport Additional Historical(A) and Notes(B) Hilton(B) Acquisitions(B) Pro Forma ------------- ----------- -------------- --------------- --------- Revenue from hotel operations Rooms $ 68,498 $ 147,042 $ 8,213 $ 8,756 $ 232,509 Food and beverage 30,968 53,921 2,663 4,771 92,323 Other hotel revenue 5,981 12,744 597 494 19,816 Office rental and other revenues -- 5,668 -- -- 5,668 Hotel management, accounting and other 4,345 (1,487) -- -- 2,858 ------------- ----------- -------------- ------------ -------- Total revenue 109,792 217,888 11,473 14,021 353,174 Hotel operating expenses by department: Rooms 17,509 35,990 1,931 2,209 57,639 Food and beverage 24,589 42,805 2,217 3,801 73,412 Other operating departments 2,513 8,091 406 328 11,338 Office rental and other expenses -- 2,683 -- -- 2,683 Undistributed operating expenses: Administrative and general 20,448 31,752 1,450 658 54,308 Property operating costs 12,586 33,131 1,932 2,232 49,881 Property taxes, insurance and other 4,565 12,639 677 574 18,455 Depreciation and amortization 8,248 17,213 1,218 1,280 27,959 -------------- ---------- -------------- ----------- --------- Total operating expenses 90,458 184,304 9,831 11,082 295,675 Interest expense, net 12,346 21,924 951 2,096 37,317 Total expenses 102,804 206,228 10,782 13,178 332,992 --------------- ----------- -------------- ----------- -------- Income before minority interest and income taxes 6,988 11,660 691 843 20,182 Minority interest 39 (1,112) -- -- (1,073) --------------- ----------- -------------- ----------- -------- Income before income taxes 7,027 10,548 691 843 19,109 Income tax provision 2,674 4,356 276 338 7,644 --------------- ----------- --------------- ----------- -------- Net income from continuing operations (C) $ 4,353 $ 6,192 $ 415 $ 505 $ 11,465 --------------- ----------- --------------- ----------- -------- --------------- ----------- --------------- ----------- -------- Earnings per share (D) $ 0.31 $ 0.61 --------------- -------- --------------- --------
(A) Reflects the historical condensed consolidated statement of operations of the Company for the year ended December 31, 1997. (B) Reflects the pre-acquisition operations of the Owned Hotels (including separate disclosures for the National Airport Hilton) and Additional Acquisitions to provide a full year of hotel operations. The pre-acquisition operations were obtained from the hotel pre-acquisition financial statements. Also reflects adjustments to (i) eliminate management fee revenues for the Owned Hotels for services that were provided by the Company, (ii) reflect federal and state income taxes (assuming a 40% combined effective rate), (iii) reflect estimated incremental general and administrative expenses associated with public ownership, (iv) reflect pro forma depreciation and amortization expense on the Company's cost basis as if the hotels had been acquired as of the beginning of the period, (v) reflect net amortization expense associated with financing activities and (vi) record interest based on the terms of the Company's credit facilities. (C) Subsequent to June 30, 1997, the Company incurred expenses associated with the write-off of deferred financing costs related to the refinanced credit facilities. These extraordinary costs are charged to operations as incurred and have not been included in the Unaudited Pro Forma Condensed Consolidated Statement of Operations. (D) Historical earnings per share have been calculated using actual income for the period from the initial public offering on August 20, 1996 through December 31, 1996. The weighted average number of common shares and common share equivalents used in the calculation was 12,754,321. In computing pro forma earnings per share, weighted average shares of common stock and common stock equivalents of 19,313,844 were used and net income has been adjusted for certain minority interests. -----END PRIVACY-ENHANCED MESSAGE-----