-----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, Vhhh9PrcpXbMz1l2eaK2rQlUDKoxSHiceRGhqTlknjVUXUBQLShdMCT5ytnVyMTs 3kGJ+KzLKDWux22nrFNTWA== 0000912057-97-004658.txt : 19970222 0000912057-97-004658.hdr.sgml : 19970222 ACCESSION NUMBER: 0000912057-97-004658 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19961231 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970212 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/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-12017 FILM NUMBER: 97528133 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/A 1 8-KA UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A 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): DECEMBER 31, 1996 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 Identification of incorporation) Number) 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 The registrant hereby amends Items 7(a) and (b) of its Current Report on Form 8-K filed with the Commission on December 31, 1996 as set forth in the pages attached hereto to file the financial statements and pro forma condensed, consolidated balance sheet and statements of operations reflecting the acquisition by the registrant of five hotels from MBL Life Assurance Corporation. ITEM 2. ACQUISITION OF ASSETS The Company has previously filed a report on Form 8-K as of December 31, 1996 with respect to the requirements of Item 2. ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS (a) Financial statements of business acquired. INDEPENDENT AUDITORS' REPORT Board of Directors CapStar Hotel Company: We have audited the accompanying combined balance sheets of the Muben Hotels (the "Hotels") as of September 30, 1996, December 31, 1995 and 1994 and related combined statements of operations, owners' capital and cash flows for the nine months ended September 30, 1996 and the years ended December 31, 1995 and 1994. These combined financial statements are the responsibility of the Hotels' management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits 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 audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of the Muben Hotels as of September 30, 1996, December 31, 1995 and 1994, and the results of their combined operations and their combined cash flows for the nine months ended September 30, 1996 and the years ended December 31, 1995 and 1994, in conformity with generally accepted accounting principles. KPMG Peat Marwick, LLP Washington, D.C. January 10, 1997 MUBEN HOTELS Combined Balance Sheets September 30, 1996, December 31, 1995 and 1994 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ ASSETS 1996 1995 1994 - ------------------------------------------------------------------------------ Cash and cash equivalents $2,540,021 2,100,027 1,795,991 Accounts receivable 1,520,016 1,009,479 1,347,062 Inventory and other assets 1,000,652 1,004,098 1,100,562 - ------------------------------------------------------------------------------ Total current assets 5,060,689 4,113,604 4,243,615 - ------------------------------------------------------------------------------ Property and equipment: Land 14,454,496 14,454,496 14,454,496 Building 49,190,163 48,816,467 48,792,386 Furniture, fixtures and equipment 19,744,427 19,968,593 18,993,252 - ------------------------------------------------------------------------------ 83,389,086 83,239,556 82,240,134 Less - accumulated depreciation (35,118,050) (32,623,613) (29,307,378) - ------------------------------------------------------------------------------ Total net property and equipment 48,271,036 50,615,943 52,932,756 - ------------------------------------------------------------------------------ Total assets $53,331,725 54,729,547 57,176,371 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ LIABILITIES AND OWNERS' CAPITAL - ------------------------------------------------------------------------------ Accounts payable and accrued expenses $3,622,343 2,778,452 3,022,008 Advance deposits 114,175 41,927 45,436 Intercompany income taxes payable (note 4) 2,485,345 995,677 81,080 - ------------------------------------------------------------------------------ Total liabilities 6,221,863 3,816,056 3,148,524 Owners' capital 47,109,862 50,913,491 54,027,847 - ------------------------------------------------------------------------------ Total liabilities and owners' capital $53,331,725 54,729,547 57,176,371 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ See accompanying notes to combined financial statements. MUBEN HOTELS Combined Statements of Operations For the nine months ended September 30, 1996 and the years ended December 31, 1995 and 1994 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ 1996 1995 1994 - ------------------------------------------------------------------------------ Revenue: Rooms $18,337,641 21,925,991 21,147,009 Food and beverage 8,117,806 10,442,474 10,513,519 Other operating departments 1,265,677 1,613,934 1,591,255 - ------------------------------------------------------------------------------ 27,721,124 33,982,399 33,251,783 - ------------------------------------------------------------------------------ Operating costs and expenses: Rooms 4,513,632 5,751,406 5,673,951 Food and beverage 6,874,250 9,198,740 9,407,042 Other operating departments 669,595 904,143 933,992 Undistributed operating expenses: Administrative and general 2,505,580 3,342,110 3,314,554 Sales and marketing 1,811,948 2,320,060 2,343,494 Management fees (note 3) 628,182 1,065,175 1,051,710 Property operating costs 3,505,572 4,407,863 4,353,126 Property taxes, insurance and other 993,759 1,390,174 1,519,555 Depreciation and amortization 2,494,437 3,316,235 4,451,660 - ------------------------------------------------------------------------------ 23,996,955 31,695,906 33,049,084 - ------------------------------------------------------------------------------ Net income before income taxes 3,724,169 2,286,493 202,699 Income taxes (note 4) 1,489,668 914,597 81,080 - ------------------------------------------------------------------------------ Net income $2,234,501 1,371,896 121,619 - ------------------------------------------------------------------------------ See accompanying notes to combined financial statements. MUBEN HOTELS Combined Statements of Owners' Capital For the nine months ended September 30, 1996 and the years ended December 31, 1995 and 1994 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ Balance at December 31, 1993 $ 55,146,114 Contributions 1,485,114 Distributions (2,725,000) Net income 121,619 - ------------------------------------------------------------------------------ Balance at December 31, 1994 54,027,847 Contributions 215,327 Distributions (4,701,579) Net income 1,371,896 - ------------------------------------------------------------------------------ Balance at December 31, 1995 50,913,491 Contributions 173,601 Distributions (6,211,731) Net income 2,234,501 - ------------------------------------------------------------------------------ Balance at September 30, 1996 $ 47,109,862 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ See accompanying notes to combined financial statements. MUBEN HOTELS Combined Statements of Cash Flows For the nine months ended September 30, 1996 and the years ended December 31, 1995 and 1994 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ 1996 1995 1994 - ------------------------------------------------------------------------------ Cash flows from operating activities: Net income $2,234,501 1,371,896 121,619 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,494,437 3,316,235 4,451,660 Decrease (increase) in accounts receivable (510,537) 337,583 (77,086) Decrease in inventory and other assets 3,446 96,464 22,741 Decrease in notes receivable - - 100,000 Increase (decrease) in accounts payable and accrued expenses 843,891 (243,556) (312,119) Increase (decrease) in advance deposits 72,248 (3,509) (10,866) Increase in intercompany income taxes payable 1,489,668 914,597 81,080 - ------------------------------------------------------------------------------ TOTAL ADJUSTMENTS 4,393,153 4,417,814 4,255,410 - ------------------------------------------------------------------------------ Net cash provided by operating activities 6,627,654 5,789,710 4,377,029 - ------------------------------------------------------------------------------ Cash flows from investing activities - purchases of furniture and equipment (149,530) (999,422) (2,285,579) - ------------------------------------------------------------------------------ Cash flows from financing activities: Capital contributions 173,601 215,327 1,485,114 Capital distributions (6,211,731) (4,701,579) (2,725,000) - ------------------------------------------------------------------------------ Net cash used by financing activities (6,038,130) (4,486,252) (1,239,886) - ------------------------------------------------------------------------------ Net increase in cash and cash equivalents 439,994 304,036 851,564 Cash and cash equivalents at beginning of period 2,100,027 1,795,991 944,427 - ------------------------------------------------------------------------------ Cash and cash equivalents at end of period $2,540,021 2,100,027 1,795,991 - ------------------------------------------------------------------------------ - ------------------------------------------------------------------------------ See accompanying notes to combined financial statements. MUBEN HOTELS Notes to Combined Financial Statements September 30,1996, December 31,1995 and 1994 - ------------------------------------------------------------------------------- (1) ORGANIZATION The combined financial statements consist of five hotels which are part of MBL Life Assurance Corporation. This portfolio of hotels is known as the Muben Hotels (the "Hotels"). Two of the hotels are in California (Sacramento Hilton and Santa Barbara Inn); one is in Louisiana (Lafayette Hilton), one is in Colorado (Holiday Inn) and the other is in Washington, D.C. (Embassy Row). CapStar Hotel Company purchased the Hotels for approximately $68,400,000 on December 17, 1996. (2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF PRESENTATION The accounts of the Hotels are included in the financial records of the MBL Life Assurance Corporation. The accompanying combined financial statements include the accounts of the Hotels only, as if they were a separate legal entity, and have been prepared using the accrual basis of accounting. CASH AND CASH EQUIVALENTS The Hotels consider all highly liquid instruments with an original maturity date of three months or less to be cash equivalents. INVENTORIES Inventories, consisting primarily of china, tableware, linens and food and beverage items, are stated at cost, using the first-in, first-out ("FIFO") method of inventory valuation. PROPERTY AND EQUIPMENT Property and equipment are reflected in the balance sheets at their fair value at the time of contribution. Depreciation is computed on the buildings and building improvements using the straight-line method over their useful lives of 18 to 39 years. Furniture, fixtures and equipment are depreciated using the straight-line method over five years. MUBEN HOTELS Notes to Combined Financial Statements - ------------------------------------------------------------------------------- (2) CONTINUED BAD DEBT EXPENSE Bad debt expense is accounted for using the allowance method. Management reviews the aging of accounts receivable and other current information on debtors to establish an allowance for doubtful accounts. Write-offs occur when management deems a receivable uncollectible. REVENUE Revenue is earned primarily through the operations of the Hotel and recognized when earned. INCOME TAXES The accounts of the Hotels are included in the financial records of the MBL Life Assurance Corporation and therefore the Hotels were not subject to income taxes on a separate basis. For purposes of these financial statements, the Hotels have calculated their tax provision on the separate return basis to approximate tax expense as if they were a separate legal entity. USE OF ESTIMATES Management has made a number of estimates and assumptions to prepare these combined financial statements in conformity with generally accepted accounting principles. Actual results could differ from those estimates. (3) RELATED-PARTY TRANSACTIONS All of the Hotels, except for Embassy Row, are managed by CapStar Hotel Company. The hotels managed by CapStar Hotel Company paid base management fees based on gross revenue plus incentive management fees if the hotels' operating results exceeded levels specified in the management contract. These four hotels incurred management fees of $563,455 in 1996; $926,737 in 1995; $929,013 in 1994; and $1,008,719 in 1993. CapStar Hotel Company began managing Embassy Row on September 25, 1996. MUBEN HOTELS Notes to Combined Financial Statements - ------------------------------------------------------------------------------- (4) INCOME TAXES The Hotels' income tax expense is comprised of the following: 1996 1995 1994 ________________________________________ Federal $1,151,118 706,741 62,653 State and local 338,550 207,856 18,427 ________________________________________ $1,489,668 914,597 81,080 ________________________________________ The "expected" tax expense, based on the U.S. federal statutory rate of 34% for each of the periods above, differs from the actual tax expense, calculated at an effective rate of 40%, due to state and local taxes, net of federal tax benefit. The Hotels' deferred tax assets and liabilities are insignificant to these financial statements and are therefore not presented. - ------------------------------------------------------------------------------- (b) Pro Forma Financial Information. CAPSTAR HOTEL COMPANY PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION On December 17, 1996, CapStar Hotel Company (the "Company") acquired five hotels with 1,121 rooms, known as the MUBEN hotels, from MBL Life Assurance Corporation. The aggregate purchase price for the MUBEN hotels was $69.4 million, and was paid through external borrowings. The unaudited pro forma Condensed Consolidated Balance Sheet is presented as if the aforementioned transaction had been consummated on September 30, 1996. The unaudited pro forma Consolidated Statements of Operations are presented as if the aforementioned transaction had been consummated at the beginning of the respective periods. In management's opinion, all adjustments necessary to reflect the effects of the aforementioned transaction have been made. The unaudited pro forma Condensed Consolidated Balance Sheet and Statements of Operations are not necessarily indicative of what the Company's actual financial position or operating results would have been had such events occurred as of an earlier date, nor does it purport to represent the future financial position or operating results of the Company. CAPSTAR HOTEL COMPANY PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET At September 30, 1996 (Unaudited) (In thousands) MUBEN HOTELS PRO FORMA AFTER PRO FORMA ACQUISITION OF HISTORICAL(A) ADJUSTMENTS(B) MUBEN HOTELS ------------- ----------------- ----------------- Assets Restricted and unrestricted cash 10,161 (3,500) 6,661 Property and equipment, net 215,824 68,939 284,763 Other Assets 21,120 506 21,626 -------- ------- ------- TOTAL ASSETS 247,105 65,945 313,050 -------- ------- ------- -------- ------- ------- Liabilities, Minority Interest and Equity Notes payable 73,225 65,198 138,423 Other liabilities 13,663 747 14,410 -------- ------- ------- Total Liabilities 86,888 65,945 152,833 Minority interest 625 -- 625 Equity 159,592 -- 159,592 -------- ------- ------- Total liabilities, minority interest and equity 247,105 65,945 313,050 -------- ------- ------- -------- ------- ------- Notes: (A) Reflects the Company's historical consolidated balance sheet as of September 30, 1996. (B) Reflects the pro forma adjustments related to the MUBEN hotels: (1) total acquisition costs of $69,445; (2) use of the Company's purchase deposit of $3,500; (3) external borrowings of $65,198; and (4) the assumption of other liabilities of $747. CAPSTAR HOTEL COMPANY PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS For the nine months ended September 30, 1996 (Unaudited) (In thousands, except per share amounts)
PRO FORMA AFTER MUBEN HOTELS ACQUISITION OF PRO FORMA MUBEN HISTORICAL(A) ADJUSTMENTS(B) HOTELS Rooms 48,960 18,338 67,298 Food and beverage 20,525 8,118 28,643 Management fees and other 7,643 703 8,346 ------- -------- --------- Total Revenue 77,128 27,159 104,287 Hotel operating expenses by department: Rooms 12,232 4,514 16,746 Food and beverage 16,620 6,874 23,494 Other operating departments 1,798 670 2,468 Undistributed operating expenses: Administrative and general 14,897 4,318 19,215 Property operating costs 8,920 3,506 12,426 Property taxes, insurance and other 3,225 994 4,219 Depreciation and amortization 5,955 1,459 7,414 ------- -------- --------- Total operating expenses 63,647 22,335 85,982 Interest expense, net 10,428 4,463 14,891 ------- -------- --------- Total expenses 74,075 26,798 100,873 ------- -------- --------- Income before minority interest and income taxes 3,053 361 3,414 Minority interest (20) - (20) ------- -------- --------- Income before income taxes 3,073 361 3,434 Income tax provision 1,092 281 1,373 ------- -------- --------- Net income 1,981 80 2,061 ------- -------- --------- ------- -------- --------- Earnings per share (C) $0.13 $0.16 ------- --------- ------- ---------
For the year ended December 31, 1995 (Unaudited) (In thousand, except per share amounts)
PRO FORMA AFTER MUBEN HOTELS ACQUISITION OF PRO FORMA MUBEN HISTORICAL(A) ADJUSTMENTS(B) HOTELS Rooms 14,456 21,926 36,382 Food and beverage 5,900 10,442 16,342 Management fees and other 6,007 687 6,694 -------- -------- --------- Total Revenue 26,363 33,055 59,418 Hotel operating expenses by department: Rooms 4,190 5,751 9,941 Food and beverage 4,924 9,199 14,123 Other operating departments 513 904 1,417 Undistributed operating expenses: Administrative and general 8,078 5,662 13,740 Property operating costs 2,624 4,408 7,032 Property taxes, insurance and other 1,311 1,390 2,701 Depreciation and amortization 2,098 1,945 4,043 -------- -------- --------- Total operating expenses 23,738 29,259 52,997 Interest expense, net 2,413 6,203 8,616 -------- -------- --------- Total expenses 26,151 35,462 61,613 -------- -------- --------- Income (loss) before minority interest and income taxes 212 (2,407) (2,195) Minority interest (17) - (17) -------- -------- --------- Income (loss) before income taxes 229 (2,407) (2,178) Income tax benefit - (871) (871) -------- -------- --------- Net income(loss) 229 (1,536) (1,307) -------- -------- --------- -------- -------- --------- Earnings per share(C) $(0.10) --------- ---------
CAPSTAR HOTEL COMPANY NOTES TO CONSOLIDATED STATEMENTS OF OPERATIONS For the Nine Months Ended September 30, 1996 and the Year Ended December 31, 1995 (Unaudited) (In thousands, except share amounts) Adjustments: (A) Reflects the Company's historical consolidated statements of operations for the nine months ended September 30, 1996 and the year ended December 31, 1995. (B) Pro forma adjustments for the purchase of the MUBEN hotels reflect the historical operating activity of the properties acquired except that: (1) interest expense reflects the expense the Company expects to incur on the funds borrowed to acquire the properties ($4,463 of interest expense for the nine months ended September 30, 1996 and $6,203 for the year ended December 31, 1995); (2) depreciation expense is based on the new accounting basis for the properties acquired; (3) management fee income earned by the Company for managing four of the five hotels has been eliminated ($563 in 1996 and $926 in 1995); and (4) income tax expense has been adjusted for (1), (2), and (3) above and to include taxes on historical income. (C) Calculated using weighted average number of shares of 12,754,321. Historical earnings per share is calculated on earnings since August 20, 1996, the date of the initial public offering. (c) Exhibits. There are no exhibits required to be filed with this amendment to the report on Form 8-K. 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 hereunto duly authorized. Date: February 12, 1997 CAPSTAR HOTEL COMPANY (Registrant) By: /s/ William M. Karnes ------------------------- William M. Karnes Senior Executive Vice President -----END PRIVACY-ENHANCED MESSAGE-----