-----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, GJaos2rZgmfrPuw5a3ZkyOQD9n36QjpIb56dYSTfBKZwV2Tx7meZTrAsTSCzmodA KAVYZny4XFVofIzktR4O7g== 0000928385-98-001441.txt : 19980717 0000928385-98-001441.hdr.sgml : 19980717 ACCESSION NUMBER: 0000928385-98-001441 CONFORMED SUBMISSION TYPE: 11-K PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980716 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SUNBURST HOSPITALITY CORP CENTRAL INDEX KEY: 0001018146 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 521985619 STATE OF INCORPORATION: DE FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 11-K SEC ACT: SEC FILE NUMBER: 001-11915 FILM NUMBER: 98666979 BUSINESS ADDRESS: STREET 1: 10770 COLUMBIA PIKE CITY: SILVER SPRING STATE: MD ZIP: 20901 BUSINESS PHONE: 3019795000 MAIL ADDRESS: STREET 1: 10770 COLUMBIA PIKE CITY: SILVER SPRING STATE: MD ZIP: 20901 FORMER COMPANY: FORMER CONFORMED NAME: CHOICE HOTELS INTERNATIONAL INC DATE OF NAME CHANGE: 19970108 FORMER COMPANY: FORMER CONFORMED NAME: CHOICE HOTELS HOLDINGS INC DATE OF NAME CHANGE: 19960705 11-K 1 FORM 11-K FORM 11-K SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (X) ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED) For the fiscal year ended December 31, 1997 ------------------------------------------ OR ( ) TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED) For the transition period from _____________ to _______________ Commission File Number 1-13393 ------- A. Full title of the plan and address of the plan, if different from that of the issuer named below: SUNBURST HOSPITALITY CORPORATION RETIREMENT SAVINGS & INVESTMENT PLAN - -------------------------------------------------------------------------------- (formerly Choice Hotels International, Inc. Retirement Savings & Investment Plan B. Name of the issuer of the securities held pursuant to the plan and the address of its principle executive office: Sunburst Hospitality Corporation 10770 Columbia Pike, Silver Spring, Maryland 20901 Report of Independent Public Accountants ---------------------------------------- To the Administrator of the Sunburst Hospitality Corporation Retirement Savings and Investment Plan: We have audited the accompanying statement of net assets available for benefits of the Sunburst Hospitality Corporation Retirement, Savings and Investment Plan (the "Plan" -- see Note 1) as of December 31, 1997 and 1996, and the related statement of changes in net assets available for benefits with fund information for the year ended December 31, 1997. These financial statements and the schedules referred to below are the responsibility of the Plan's management. Our responsibility is to express an opinion on these financial statements and schedules 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 financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan as of December 31, 1997 and December 31, 1996, and the changes in net assets available for benefits for the year ended December 31, 1997, in conformity with generally accepted accounting principles. Our audits were performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental schedules of assets held for investment purposes and of reportable transactions are presented for purposes of additional analysis and are not a required part of the basic financial statements but are supplementary information required by the Department of Labor's Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. The fund information in the statement of changes in net assets available for benefits is presented for purposes of additional analysis rather than to present the changes in its net assets available for benefits of each fund. These supplemental schedules and fund information are the responsibility of the plan management. The supplemental schedules and fund information have been subjected to the auditing procedures applied in our audit of the basic financial statements and, in our opinion, are fairly stated, in all material respects, in relation to the basic financial statements taken as a whole. Washington, D.C. June 30, 1998 SUNBURST HOSPITALITY CORPORATION RETIREMENT, SAVINGS AND INVESTMENT PLAN INDEX Page ---- Statement of Net Assets Available for Benefits as of December 31, 1997 and 1996 1 Statement of Changes in Net Assets Available for Benefits, with Fund Information, for the Year Ended December 31, 1997 2 Notes to Financial Statements as of December 31, 1997 3-7 Item 27(a) - Schedule of Assets Held for Investment Purposes as of December 31, 1997 8 Item 27(d) - Schedule of Reportable Transactions for the Year Ended December 31, 1997 9 Non-exempt Transactions for the Year Ended December 31, 1997 * Obligations in Default as of December 31, 1997 * Leases in Default as of December 31, 1997 * * Schedules omitted because there were no such transactions, obligations, or leases in default. SUNBURST HOSPITALITY CORPORATION RETIREMENT, SAVINGS AND INVESTMENT PLAN STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS AS OF DECEMBER 31, 1997 AND 1996
1997 1996 ----------- ------------ Assets: Participant Directed Investments held by Chase Manhattan Bank: Janus Fund $ 8,528,097 $ 6,247,943 Vanguard U.S. Treasury Money Market Fund 2,317,911 2,321,141 T. Rowe Price Stable Value Fund 1,254,665 1,029,507 Vanguard Wellington Balanced Fund 7,736,995 5,910,367 T. Rowe Price International Stock Fund 3,319,698 3,346,994 Choice Hotels International Common Stock Fund 1,853,235 -- Manor Care Common Stock Fund 664,051 666,900 Sunburst Hospitality Common Stock Fund 379,337 -- ----------- ----------- Total investments 26,053,989 19,522,852 ----------- ----------- Participant loans 770,405 685,123 Receivable from Manor Care Plan (see Note 6) 53,108 471,958 Contributions receivable: Employer, paid subsequent to year-end 1,006,310 893,090 Employee, paid subsequent to year-end 81,981 90,094 ----------- ----------- NET ASSETS AVAILABLE FOR BENEFITS $27,965,793 $21,663,117 =========== ===========
The accompanying notes are an integral part of this statement. -1- Sunburst Hospitality Corporation Retirement, Savings and Investment Plan Statement of Changes in Net Assets Available for Benefits, with Fund Information, for the Year Ended December 31, 1997
Participant Directed - ---------------------------------------------------------------------------------------------------------------------------- Vanguard Vanguard T. Rowe Price T. Rowe Price US Treasury Wellington Choice Hotels International Janus Stable Value Money Market Balanced Common Stock Fund Fund Fund Fund Fund Stock Fund -------------- ---------- ------------ ------------ ----------- ------------- Additions Contributions: Employer $ - $ - $ - $ - $ - $ 893,090 Employee 390,153 811,476 162,027 305,355 668,705 91,623 ---------- ---------- ---------- ---------- ----------- ----------- Total 390,153 811,476 162,027 305,355 668,705 984,713 Interest and dividends, including interest on participant loan transactions 174,986 1,410,218 63,671 112,281 648,682 1,284 Net (depreciation) appreciation in market value (93,046) 100,399 - - 763,449 563,109 Rollover contributions 9,870 9,571 6,028 3,900 8,433 11,081 Transfers in from Manor Care Plan 77,115 145,924 43,024 6,140 98,151 380,759 ---------- ---------- ---------- ---------- ----------- ----------- Total additions 559,078 2,477,588 274,750 427,676 2,187,420 1,940,946 ---------- ---------- ---------- ---------- ----------- ----------- Transfers between investment options, including principal portions of participant loan transactions (240,398) 17,883 83,358 (104,186) (84,719) (15,974) ---------- ---------- ---------- ---------- ----------- ----------- Deductions Benefit payments (345,976) (215,317) (132,950) (326,720) (276,073) (71,737) ---------- ---------- ---------- ---------- ----------- ----------- Net (decrease) increase (27,296) 2,280,154 225,158 (3,230) 1,826,628 1,853,235 Net asset available for benefits, beginning of year 3,346,994 6,247,943 1,029,507 2,321,141 5,910,367 - ---------- ---------- ---------- ---------- ----------- ----------- Net assets available for benefit, end of year $3,319,698 $8,528,097 $1,254,665 $2,317,911 $7,736,995 $1,853,235 ========== ========== ========== ========== ========== ===========
- ------------------------------------------------------------------------------------------------------------- Sunburst Hospitality Manor Care Non- Common Common Participant participant 1997 Stock Fund Stock Fund Loans Directed Other Total -------------- ---------- ------------ ------------ ----------- Additions Contributions: Employer $ - $ - $ - $ 113,220 $ 1,006,310 Employee - - - (8,113) 2,421,226 ---------- ---------- ---------- ---------- ----------- Total - - - 105,107 3,427,536 Interest and dividends, including interest on participant loan transactions - 2,146 - - 2,413,268 Net (depreciation) appreciation in market value 9,602 150,237 - - 1,493,750 Rollover contributions - - - - 48,883 Transfers in from Manor Care Plan - 11,326 23,579 (418,850) 367,168 ---------- ---------- ---------- ---------- ----------- Total additions 9,602 163,709 23,579 (313,743) 7,750,605 ---------- ---------- ---------- ---------- ----------- Transfers between investment options, including principal portions of participant loan transactions 369,735) (88,601) 62,902 - - ---------- ---------- ---------- ---------- ----------- Deductions Benefit payments - (77,957) (1,199) - (1,447,929) ---------- ---------- ---------- ---------- ----------- Net (decrease) increase 379,337 (2,849) 85,282 (313,743) 6,302,676 Net asset available for benefits, beginning of year - 666,900 685,123 1,455,142 21,663,117 ---------- ---------- ---------- ---------- ----------- Net assets available for benefit, end of year $ 379,337 $ 664,051 $ 770,405 $1,141,399 $27,965,793 ========== ========== ========== ========== ===========
The accompanying notes are an integral part of this statement. -2- SUNBURST HOSPITALITY CORPORATION RETIREMENT, SAVINGS AND INVESTMENT PLAN NOTES TO FINANCIAL STATEMENTS AS OF DECEMBER 31, 1997 1. NATURE OF THE ORGANIZATION AND DESCRIPTION OF THE PLAN The Sunburst Hospitality Corporation Retirement, Savings and Investment Plan (the "Plan") is a defined contribution, salary deferral plan available to the employees of Sunburst Hospitality Corporation ("Sunburst") and Choice Hotels International, Inc. ("Choice"). Sunburst is a leading national hotel company. The Company owns and operates approximately 75 hotels. Choice is one of the largest franchisers of hotels in the world. The Company franchises approximately 3,500 hotels operated under the following brand names: Quality Inn, Comfort Inn, Clarion, Sleep Inn, Rodeway Inn, EconoLodge, and Mainstay Suites. Sunburst was formerly a subsidiary of Manor Care, Inc. ("Manor Care"). On November 1, 1996, Manor Care separated its lodging business from its health care business by distributing to its shareholders all of the outstanding common stock of Sunburst, (the "Manor Care Distribution"). On October 15, 1997, Choice Hotels International, Inc. separated its franchising and European hotel business from its owned hotel business by distributing to its shareholders the common stock of Choice Hotels Franchising (the "Choice Distribution"). Subsequent to the Choice Distribution, Choice Hotels International, Inc. changed its name to Sunburst Hospitality Corporation and Choice Hotels Franchising changed its name to Choice Hotels International, Inc. In connection with the Choice Distribution, the name of the Choice Hotels International, Inc. Retirement, Savings and Investment Plan was changed to the Sunburst Hospitality Corporation Retirement, Savings and Investment Plan. In connection with the Manor Care Distribution, Manor Care retained sponsorship of the Manor Care Retirement, Savings and Investment Plan (the "Manor Care Plan") and the Company adopted the Sunburst Hospitality Corporation Retirement, Savings and Investment Plan. The following description of the Plan provides general information only. Participants should refer to the plan agreement for a more complete description of the Plan's provisions. -3- GENERAL The Plan, established on October 1, 1996, is a participant directed, defined contribution, salary deferral plan subject to the provisions of the Employee Retirement Income Security Act of 1974 ("ERISA"). ELIGIBILITY AND CONTRIBUTIONS All employees of Sunburst and Choice (collectively the "Companies") are eligible to participate in the Plan if they are: -- are at least 21 years of age -- have completed one year of service -- have worked at least 1,000 hours in the previous year Participants may elect to contribute up to 15% of their annual compensation to the Plan, subject to IRS limitations. The Companies match an employee's contributions, up to a total match of 6% of employee salary.
Length of Service Percentage Match -------------------------------- -------------------------------- 1-5 years 25% 6-9 years 75% 10 years or more 100%
The Companies have the right to apply amounts forfeited by employees to reduce employer contributions. In 1997, forfeitures of $12,788 were used to reduce the employer contribution and allocated to the plan funds in conjunction with the Companies matching contributions. BENEFITS AND VESTING Participants are immediately vested in all participant contributions and earnings on such contributions. Participants vest in the Company Contributions 20% per year beginning at the end of their third year, resulting in full vesting at the end of their seventh year. Participants who leave the Company with a balance of less than $3,500 are required to roll the money over into another 401(k) or IRA account, or receive a direct payment after withholding of applicable federal and state tax provisions. If the participant's balance is greater than $3,500, the participant may retain their investment in the Plan for as long as IRS regulations allow. -4- INVESTMENTS Participants may direct the investment of their contributions into their choice of mutual funds, common collective trusts, or the common stock of Choice or Sunburst. Participants, who previously had investments in Manor Care common stock through the Manor Care Plan have been allowed to retain the Manor Care stock, but not to make additional investments. These funds are as follows: -- Vanguard U.S. Treasury Money Market Fund -- T. Rowe Price Stable Value Fund -- Vanguard Wellington Balanced Fund -- T. Rowe Price International Stock Fund -- Janus Fund Additionally, the Company contribution is made in Company stock. Investments are reported at quoted market values. All income earned is allocated monthly. LOANS Participant loans are made available to all participants who have a vested account balance. The minimum loan amount is $750 and the maximum loan amount is the lesser of $50,000 or 50% of a participant's vested account balance. Additionally, interest rates are equal to 1% above the Prime Rate on the date the loan is issued and there is a $35 loan-processing fee per loan. Participants may not have more than one loan outstanding at any time. USE OF ESTIMATES The preparation of these financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING The financial statements are presented on the accrual basis of accounting in accordance with generally accepted accounting principles. TRUSTEE FEES Investment management fees are netted against investment earnings in each fund. Trustee fees and all administrative expenses of the Plan are currently paid by the Companies. The Companies currently have no intention to seek reimbursement from the Plan for prior or future expenses paid by the Companies. -5- 3. FEDERAL INCOME TAX STATUS The Plan has not yet received a determination letter from the Internal Revenue Service. However, management believes that the Plan, as designed is in compliance with the applicable requirements of Section 401(a) of the Internal Revenue Code. Management believes that the Plan is operating as intended and, as such, continues to comply with these requirements. 4. PLAN TERMINATION Although it has not expressed any intent to do so, the Company has the right under the Plan to discontinue its contributions at any time and to terminate the Plan subject to the provisions of ERISA. 5. RELATED PARTY TRANSACTIONS Certain Plan investments are shares of mutual funds and common collective trusts managed by Chase Manhattan. Chase Manhattan is the Trustee and, therefore, these transactions qualify as party-in-interest. 6. NON-PARTICIPANT DIRECTED OTHER Non-participant Directed Other balances included in the financial statements represent receivables from the Company for contributions which have not yet been remitted to the trustee. Additionally, certain Plan investments had not yet been transferred from the Manor Care Plan as of December 31, 1996. These balances are also included as Non-participant Directed Other balances. All amounts were received by the Plan subsequent to year-end. 7. MULTI-EMPLOYER STATUS As discussed in Note 1, subsequent to the Choice Distribution, the Plan changed its name to the Sunburst Hospitality Corporation Retirement, Savings, and Investment Plan and the Plan became available to the employees of both Choice and Sunburst. The administrative expenses are shared by the Companies. 8. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500 The following is a reconciliation of net assets available for Plan benefits per the financial statements to the Form 5500 for the year ended December 31, 1997: Net assets available for Plan benefits per financial statements $27,965,791 ----------- Amounts allocated to withdrawing participants (428,158) ----------- Net assets available for Plan benefits per the Form 5500 $27,537,633 ===========
-6- The following is a reconciliation of benefits paid to participants per the financial statements to the Form 5500 for the year ended December 31, 1997: Benefits paid to participants per the financial statements $1,447,929 ---------- Add: Amounts allocated to withdrawing participants at December 31, 1997 428,158 ---------- Less: Amounts allocated to withdrawing participants at December 31, 1996 (122,390) ---------- Benefits paid to participants per the Form 5500 $1,752,498 ----------
Amounts allocated to withdrawing participants are recorded on the Form 5500 for benefit claims that have occurred but have not been paid as of December 31. -7- SUNBURST HOSPITALITY CORPORATION RETIREMENT, SAVINGS AND INVESTMENT PLAN ITEM 27(A) - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AS OF DECEMBER 31, 1997
IDENTITY OF ISSUE DESCRIPTION OF INVESTMENT COST CURRENT VALUE - ------------------------------------------- ------------------------- -------------- ----------------- Janus Fund Mutual Fund $ 7,537,727 $ 8,528,097 Vanguard U. S. Treasury Money Market Fund Mutual Fund 2,317,911 2,317,911 T. Rowe Price Stable Value Fund Common/Collective Trust 1,254,665 1,254,665 Vanguard Wellington Balanced Fund Mutual Fund 5,904,228 7,736,995 T. Rowe Price International Stock Fund Mutual Fund 2,872,835 3,319,698 Choice Hotels International Common Stock Fund* Common Stock 1,291,372 1,853,235 Manor Care Common Stock Fund* Common Stock 287,296 664,051 Sunburst Hospitality Common Stock Fund* Common Stock 225,368 379,337 -------------- ----------------- 21,691,403 26,053,989 Participant loans 9.25 9.5% interest rate 770,403 770,403 -------------- ----------------- Total assets held for investment purposes $22,461,806 $26,824,392 ============== =================
* Represents party-in-interest to the Plan -8- SUNBURST HOSPITALITY CORPORATION RETIREMENT, SAVINGS AND INVESTMENT PLAN Item 27(d) - Schedule of Reportable Transactions For the Year Ended December 31, 1997
CURRENT EXPENSE VALUE OF IDENTITY DESCRIPTION INCURRED COST ASSET ON NET OF OF PURCHASE SELLING LEASE WITH OF TRANSACTION GAIN/ PARTY ASSET PRICE PRICE RENTAL TRANSACTION ASSET DATE (LOSS) - ----------------------------- ------------ ---------- --------- ------ ----------- ---------- ----------- --------- Vanguard U.S. Treasury Money Market Fund Mutual Fund $ 4,585,652 $ -- $ -- $ -- $ 4,585,652 $ 4,585,652 $ -- Vanguard U.S. Treasury Money Market Fund Mutual Fund (4,532,187) -- $ -- $ -- (4,532,187) (4,532,187) Choice Hotels Common Stock Common Stock 1,580,204 1,580,204 1,580,204 Choice Hotels Common Stock Common Stock (99,875) (78,412) (99,875) 21,436 Janus Fund Mutual Fund 2,411,527 2,411,527 2,411,527 Janus Fund Mutual Fund (241,568) (184,500) (241,568) 57,068 T. Rowe Price International Stock Fund Mutual Fund 567,142 567,142 567,142 T. Rowe Price International Stock Fund Mutual Fund (516,019) (407,850) (516,019) 108,169 Vanguard Wellington Fund Mutual Fund 1,446,428 1,446,428 1,446,428 Vanguard Wellington Fund Mutual Fund (385,181) (289,265) (385,181) 95,916
* These transactions qualify as party-in-interest transactions as described in Note 5. Retirement and Savings Plan Statement of Changes in Net Assets Available for Benefits -9- EXHIBITS. 23 - Consent of Independent Public Accountants. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the trustee (or other persons who administer the employee benefit plan) has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized. Dated: July 15, 1998 SUNBURST HOSPITALITY CORPORATION RETIREMENT SAVINGS & INVESTMENT PLAN By: CHASE MANHATTAN BANK, as trustee By: /s/ Catherine Kidder Platt ---------------------------------- Asst. Vice President ---------------------------------- EX-23 2 EXHIBIT 23 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS As independent public accountants, we hereby consent to the incorporation of our report, included in this Form 11-K, into the Company's previously filed Registration Statement File No. 333-17577. ARTHUR ANDERSEN LLP Washington, D.C., July 15, 1998 -----END PRIVACY-ENHANCED MESSAGE-----