-----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, NrZQz4vHR+jcCfBaB13HzBogC2SfLu6u2ICUNMaBvL8UDGQUaIwItUNdH+rBZB5L z2QFiggvSw31fwGJseHvdA== 0000950153-97-001309.txt : 19971219 0000950153-97-001309.hdr.sgml : 19971219 ACCESSION NUMBER: 0000950153-97-001309 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19971112 ITEM INFORMATION: FILED AS OF DATE: 19971218 SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: STARWOOD LODGING TRUST CENTRAL INDEX KEY: 0000048595 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 520901263 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-06828 FILM NUMBER: 97740325 BUSINESS ADDRESS: STREET 1: 2231 E CAMELBACK RD STREET 2: STE 410 CITY: PHOENIX STATE: AZ ZIP: 80516 BUSINESS PHONE: 6028523900 MAIL ADDRESS: STREET 1: 2231 E CAMELBACK RD STREET 2: STE 410 CITY: PHOENIX STATE: AZ ZIP: 85016 FORMER COMPANY: FORMER CONFORMED NAME: HOTEL INVESTORS TRUST /MD/ DATE OF NAME CHANGE: 19930506 FORMER COMPANY: FORMER CONFORMED NAME: HOTEL INVESTORS TRUST DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: HOTEL INVESTORS DATE OF NAME CHANGE: 19800720 FILER: COMPANY DATA: COMPANY CONFORMED NAME: STARWOOD LODGING CORP CENTRAL INDEX KEY: 0000316206 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 521193298 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-07959 FILM NUMBER: 97740326 BUSINESS ADDRESS: STREET 1: 2231 E CAMELBACK RD, 4TH FL STREET 2: SUITE 400 CITY: PHOENIX STATE: AZ ZIP: 85016 BUSINESS PHONE: 6028523900 MAIL ADDRESS: STREET 1: 2231 E CAMELBACK RD. 4TH FL STREET 2: SUITE 4O0 CITY: PHOENOX STATE: AZ ZIP: 85016 FORMER COMPANY: FORMER CONFORMED NAME: HOTEL INVESTORS CORP DATE OF NAME CHANGE: 19920703 8-K/A 1 FORM 8-K AMENDMENT #1 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED): NOVEMBER 12, 1997 COMMISSION FILE NUMBER: 1-6828 STARWOOD LODGING TRUST (Exact name of registrant as specified in its charter) MARYLAND (State or other jurisdiction of incorporation or organization) 52-0901263 (I.R.S. employer identification no.) 2231 EAST CAMELBACK ROAD., SUITE 410 PHOENIX, ARIZONA 85016 (Address of principal executive offices, including zip code) (602) 852-3900 (Registrant's telephone number, including area code) COMMISSION FILE NUMBER: 1-7959 STARWOOD LODGING CORPORATION (Exact name of registrant as specified in its charter) MARYLAND (State or other jurisdiction of incorporation or organization) 52-1193298 (I.R.S. employer identification no.) 2231 EAST CAMELBACK ROAD, SUITE 400 PHOENIX, ARIZONA 85016 (Address of principal executive offices, including zip code) (602) 852-3900 (Registrant's telephone number, including area code) ================================================================================ 2 ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) Pro Forma Financial Information. See Index to Financial Statements (page F-1). 3 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, each Registrant has duly caused this report to be signed on its behalf by the undersigned, thereto duly authorized.
STARWOOD LODGING TRUST STARWOOD LODGING CORPORATION By: By: ------------------ ------------------ Ronald C. Brown Alan M. Schnaid Senior Vice Vice President and President and Corporate Controller Chief Financial Principal Officer Accounting Officer
Date: December , 1997 4 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION INDEX TO PRO FORMA (UNAUDITED) FINANCIAL STATEMENTS STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION -- PRO FORMA FINANCIAL STATEMENTS AS ADJUSTED FOR THE ITT AND WESTIN TRANSACTIONS................................................................ F-3 Starwood Lodging Trust and Starwood Lodging Corporation Unaudited Combined Consolidated Pro Forma Balance Sheet as of September 30, 1997...................... F-4 Starwood Lodging Trust Unaudited Consolidated Pro Forma Balance Sheet as of September 30, 1997........................................................................... F-5 Starwood Lodging Corporation Unaudited Consolidated Pro Forma Balance Sheet as of September 30, 1997................................................................. F-6 Notes to the Unaudited Combined Consolidated and Separate Consolidated Pro Forma Balance Sheets as of September 30, 1997............................................ F-7 Starwood Lodging Trust and Starwood Lodging Corporation Unaudited Combined Consolidated Pro Forma Statements of Income for the nine months ended September 30, 1997............................................................................... F-10 Starwood Lodging Trust Unaudited Consolidated Pro Forma Statements of Income for the nine months ended September 30, 1997............................................... F-11 Starwood Lodging Corporation Unaudited Consolidated Pro Forma Statements of Income for the nine months ended September 30, 1997....................................... F-12 Starwood Lodging Trust and Starwood Lodging Corporation Unaudited Combined Consolidated Pro Forma Statements of Income for the year ended December 31, 1996... F-13 Starwood Lodging Trust Unaudited Consolidated Pro Forma Statements of Income for the year ended December 31, 1996....................................................... F-14 Starwood Lodging Corporation Unaudited Consolidated Pro Forma Statements of Income for the year ended December 31, 1996............................................... F-15 Notes to the Unaudited Combined Consolidated and Separate Consolidated Pro Forma Statements of Operations for the nine months ended September 30, 1997 and the year ended December 31, 1996............................................................ F-16 ITT CORPORATION PRO FORMA FINANCIAL STATEMENTS Unaudited Consolidated Pro Forma Balance Sheet as of September 30, 1997.............. F-18 Unaudited Consolidated Pro Forma Statement of Income for the nine months ended September 30, 1997................................................................. F-19 Unaudited Consolidated Pro Forma Statement of Income for the year ended December 31, 1996............................................................................... F-20 Notes to Unaudited Pro Forma Consolidated Financial Statements....................... F-21 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION -- PRO FORMA FINANCIAL STATEMENTS AS ADJUSTED FOR THE WESTIN TRANSACTION.............. F-22 Starwood Lodging Trust and Starwood Lodging Corporation Unaudited Combined Consolidated Pro Forma Balance Sheet as of September 30, 1997...................... F-23 Starwood Lodging Trust Unaudited Consolidated Pro Forma Balance Sheet as of September 30, 1997........................................................................... F-24 Starwood Lodging Corporation Unaudited Consolidated Pro Forma Balance Sheet as of September 30, 1997................................................................. F-25
F-1 5 Notes to the Unaudited Combined Consolidated and Separate Consolidated Pro Forma Balance Sheets as of September 30, 1997............................................ F-26 Starwood Lodging Trust and Starwood Lodging Corporation Unaudited Combined Consolidated Pro Forma Statement of Operations for the nine months ended September 30, 1997........................................................................... F-29 Starwood Lodging Trust Unaudited Consolidated Pro Forma Statement of Operations for the nine months ended September 30, 1997........................................... F-30 Starwood Lodging Corporation Unaudited Consolidated Pro Forma Statement of Operations for the nine months ended September 30, 1997....................................... F-31 Starwood Lodging Trust and Starwood Lodging Corporation Unaudited Combined Consolidated Pro Forma Statement of Operations for the year ended December 31, 1996............................................................................... F-32 Starwood Lodging Trust Unaudited Consolidated Pro Forma Statement of Operations for the year ended December 31, 1996................................................... F-33 Starwood Lodging Corporation Unaudited Consolidated Pro Forma Statement of Operations for the year ended December 31, 1996............................................... F-34 Notes to the Unaudited Combined Consolidated and Separate Consolidated Pro Forma Statements of Operations for the nine months ended September 30, 1997 and the year ended December 31, 1996............................................................ F-35
F-2 6 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION PRO FORMA COMBINED CONSOLIDATED AND SEPARATE CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1997 (UNAUDITED) The following unaudited pro forma combined consolidated and separate consolidated balance sheets are presented as if (i) the merger of Chess Acquisition Corp. ("Merger Sub"), a subsidiary of Starwood Lodging Corporation (the "Corporation"), with and into ITT Corporation ("ITT") (the "Merger") pursuant to the Agreement and Plan of Merger dated as of October 19, 1997 (the "Merger Agreement"), among ITT, the Corporation, Merger Sub and Starwood Lodging Trust (the "Trust" and, together with the Corporation, the "Company" or "Starwood Lodging"), as Starwood Lodging has proposed to amend the Merger Agreement, and assuming that ITT shareholders elect to receive 30% of the aggregate consideration in cash, and (ii) the acquisition by Starwood Lodging and certain of its affiliates of Westin Hotels & Resorts Worldwide, Inc. ("Westin Worldwide"), W&S Lauderdale Corp. ("Lauderdale"), W&S Seattle Corp. ("Seattle"), Westin St. John Hotel Company, Inc. ("St. John"), W&S Denver Corp. ("Denver") and W&S Atlanta Corp. ("Atlanta" and, together with Westin Worldwide, Lauderdale, Seattle, St. John and Denver, "Westin") pursuant to the Transaction Agreement dated as of September 8, 1997 (the "Transaction Agreement"), among the Trust, SLT Realty Limited Partnership ("Realty"), the Corporation, SLC Operating Limited Partnership ("Operating" and, together with Realty, the "Partnerships"), WHWE L.L.C., Woodstar Investor Partnership, Nomura Asset Capital Corporation, Juergen Bartels, Westin Worldwide, Lauderdale, Seattle, St. John, Denver, Atlanta and W&S Hotel L.L.C., had occurred as of September 30, 1997. The aggregate consideration for the Merger of approximately $10.4 billion consists of (i) the cash component of approximately $3.4 billion paid to existing ITT shareholders and (ii) the issuance of approximately 121.7 million paired shares of Starwood Lodging, with a value of $7.027 billion, to existing ITT shareholders (using the closing stock price of Starwood Lodging of $57.75 on October 27, 1997). The aggregate consideration for the acquisition of Westin of approximately $1.8 billion includes (i) 6,285,783 shares of newly created Class A Exchangeable Preferred Stock with an aggregate value of approximately $310.8 million (using the closing stock price of $49.4375 per paired share on September 8, 1997) (ii) 5,294,783 shares of newly created Class B Exchangeable Preferred Stock with an aggregate value of approximately $261.8 million (using the closing stock price of $49.4375 per paired share on September 8, 1997) (iii) 991,000 limited partnership units of the Partnerships with an aggregate value of approximately $49.0 million (using the closing stock price of $49.4375 per Paired Share on September 8, 1997), exchangeable on a one for one basis for Class B Exchangeable Preferred Stock or paired shares, (iv) the assumption of approximately $1.030 billion of debt and (v) the cash payment of approximately $178.0 million. The unaudited pro forma combined consolidated and separate consolidated balance sheets should be read in conjunction with the separate consolidated and combined consolidated historical financial statements of the Trust and the Notes thereto included in the Starwood Lodging Joint Annual Report on Form 10-K for the year ended December 31, 1996, the unaudited separate and combined financial statements and related notes of Starwood Lodging included in its Joint Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997, June 30, 1997 and September 30, 1997, and the historical financial statements of Westin and the Notes thereto included in the Starwood Lodging Joint Current Report on Form 8-K dated September 9, 1997, each of which are incorporated by reference in this Joint Current Report on Form 8-K. In management's opinion, all pro forma adjustments necessary to reflect the effects of the acquisition of ITT and Westin have been made. The unaudited pro forma combined consolidated and separate consolidated balance sheets are not necessarily indicative of what the actual financial position of the Company would have been as of September 30, 1997, nor do they purport to represent the future financial position of the Company. F-3 7 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION UNAUDITED COMBINED CONSOLIDATED PRO FORMA BALANCE SHEET AS OF SEPTEMBER 30, 1997 (IN MILLIONS)
PRO FORMA PRO FORMA STARWOOD PRO FORMA STARWOOD PRO FORMA LODGING ITT LODGING ADJUSTMENTS AND ITT --------- --------- ----------- --------- (A) (B) ASSETS Total current assets................. $ 1,302 $ 278 $ 3,368(D) $ 1,580 1,622(F) (3,368)(D) (1,622)(F) Plant, property and equipment, net... 4,667 3,198 7,865 Investments.......................... 328 78 406 Goodwill and other intangibles, net................................ 1,529 857 2,588(C) 4,974 Other assets......................... 1,256 194 1,450 ------- ------- ------- ------- $ 9,082 $ 4,605 $ 2,588 $16,275 ======= ======= ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Notes payable and current maturities of long-term debt.................. $ 232 $ 195 $ $ 427 Other current liabilities............ 1,240 108 1,348 Long-term debt....................... 3,362 1,950 3,368(D) 8,680 Deferred income taxes and other liabilities........................ 651 180 831 ------- ------- ------- ------- 5,485 2,433 3,368 11,286 ------- ------- ------- ------- Minority interest.................... 228 332 14(E) 574 Class B Exchangeable preferred pro forma shares, at redemption value.............................. 204 204 SHAREHOLDERS' EQUITY Trust shares of beneficial interest........................... 1 1 2 Class A Exchangeable preferred pro forma shares....................... Corporation common stock............. 2,916 1 (2,915)(G) 2 Additional paid-in capital........... 1,938 5,227(E),(G),(H),(I) 7,165 Cumulative translation adjustment.... (128) (128) Retained earnings/(Distributions in excess of earnings)................ 581 (304) (3,107)(H) (2,830) ------- ------- ------- ------- 3,369 1,636 (794) 4,211 ------- ------- ------- ------- $ 9,082 $ 4,605 $ 2,588 $16,275 ======= ======= ======= =======
See accompanying Notes to the Unaudited Combined Consolidated and Separate Consolidated Pro Forma Balance Sheet. F-4 8 STARWOOD LODGING TRUST UNAUDITED CONSOLIDATED PRO FORMA BALANCE SHEET AS OF SEPTEMBER 30, 1997 (IN MILLIONS)
PRO FORMA PRO FORMA PRO FORMA PRO FORMA TRUST ITT TRUST ADJUSTMENTS AND ITT --------- --------- ----------- --------- (A) (B) ASSETS Total current assets.................. $ $ 52 $ 1,622(F) $ 52 (1,622)(F) Plant, property and equipment, net.... 2,785 2,785 Investments........................... 72 72 Mortgage and other notes receivable from Corporation.................... 536 4,000(F) 4,536 Goodwill and other intangibles, net... 654 654 Other assets.......................... 165 165 ------- ------- ------- ------- $ $ 4,264 $ 4,000 $ 8,264 ======= ======= ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Notes payable and current maturities of long-term debt................... $ $ 194 $ $ 194 Other current liabilities............. 47 47 Long-term debt........................ 1,950 (1,622)(F) 328 ------- ------- ------- 2,191 (1,622) 569 ------- ------- ------- Minority interest..................... 315 229(E) 544 Class B Exchangeable preferred pro forma shares, at redemption value... 204 204 SHAREHOLDERS' EQUITY Trust shares of beneficial interest... 1 1 2 Class A Exchangeable preferred pro forma shares........................ -- -- Additional paid-in capital............ 1,773 5,392(E)(I) 7,165 Distributions in excess of earnings... (220) (220) ------- ------- ------- ------- 1,554 5,393 6,947 ------- ------- ------- ------- $ $ 4,264 $ 4,000 $ 8,264 ======= ======= ======= =======
See accompanying Notes to the Unaudited Combined Consolidated and Separate Consolidated Pro Forma Balance Sheet. F-5 9 STARWOOD LODGING CORPORATION UNAUDITED CONSOLIDATED PRO FORMA BALANCE SHEET AS OF SEPTEMBER 30, 1997 (IN MILLIONS)
PRO FORMA PRO FORMA PRO FORMA PRO FORMA CORPORATION ITT CORPORATION ADJUSTMENTS AND ITT --------- ----------- ----------- ----------- (A) (B) ASSETS Total current assets............................ $ 1,302 $ 226 $ 3,368(D) $ 1,528 1,622(F) (3,368)(D) (1,622)(F) Plant, property and equipment, net.............. 4,667 413 5,080 Investments..................................... 328 6 334 Goodwill and other intangibles, net............. 1,529 203 2,588(C) 4,320 Other assets.................................... 1,256 29 1,285 ------- ----- ------- ------- $ 9,082 $ 877 $ 2,588 $12,547 ======= ===== ======= ======= LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Notes payable and current maturities of long-term debt................................ $ 232 $ 1 $ $ 233 Other current liabilities....................... 1,240 61 1,301 Mortgage and other notes payable to Trust....... 536 4,000(F) 4,536 Long-term debt.................................. 3,362 3,368(D) 8,352 1,622(F) Deferred income taxes and other liabilities..... 651 180 831 ------- ----- ------- ------- 5,485 778 8,990 15,253 ------- ----- ------- ------- Minority interest............................... 228 17 (215)(E) 30 SHAREHOLDERS' EQUITY Corporation common stock........................ 2,916 1 (2,915)(G) 2 Additional paid-in capital...................... 165 (165)(E),(G),(H),(I) -- Cumulative translation adjustment............... (128) (128) Retained earnings/(Distributions in excess of earnings)..................................... 581 (84) (3,107)(H) (2,610) ------- ----- ------- ------- 3,369 82 (6,187) (2,736) ------- ----- ------- ------- $ 9,082 $ 877 $ 2,588 $12,547 ======= ===== ======= =======
See accompanying Notes to the Unaudited Combined Consolidated and Separate Consolidated Pro Forma Balance Sheet. F-6 10 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION NOTES TO THE UNAUDITED COMBINED CONSOLIDATED AND SEPARATE CONSOLIDATED PRO FORMA BALANCE SHEETS AS OF SEPTEMBER 30, 1997 NOTE 1. BASIS OF PRESENTATION The Trust and the Corporation have unilateral control of Realty and Operating, respectively, and, therefore, the historical financial statements of Realty and Operating are consolidated with those of the Trust and the Corporation, respectively. Unless the context otherwise requires, all references to the "Trust" and the "Corporation" include the Trust and the Corporation and those entities respectively owned or controlled by the Trust or the Corporation, including Realty and Operating, respectively. NOTE 2. ITT ACQUISITION On October 19, 1997, ITT agreed to the Merger with Merger Sub, a subsidiary of the Corporation. The terms of the Merger are set forth in the Merger Agreement. Pursuant to the Merger Agreement, each share of ITT's common stock, no par value ("ITT Common Stock"), together with the associated preferred share purchase right of ITT, will be converted into the right to receive shares of common stock, par value $0.01 per share, of the Corporation ("Corporation Shares") and shares of beneficial interest, par value $0.01 per share, of the Trust ("Trust Shares" and, when paired with the Corporation Shares, "Paired Shares") aggregating $67.00 per share in value, subject to certain collar provisions, and $15.00 in cash. As a result of the Merger, ITT will be wholly owned by the Corporation and the Trust. On November 7, 1997, Starwood Lodging announced that it had proposed to amend the Merger Agreement to increase the consideration to be paid in the Merger to $85 per share of ITT Common Stock, with ITT shareholders able to elect to receive up to 30% (but not less than 18%) of the aggregate consideration (calculated at $85 per share) in cash, with the remainder to be paid in Paired Shares (subject to such collar provisions). In addition, such consideration would be increased (in cash) by 7% per annum to the extent the Merger occurs after February 1, 1998. Accounting Treatment Starwood Lodging will account for the Merger as a purchase in accordance with Accounting Principles Board Opinion No. 16. Purchase accounting for a combination is similar to the accounting treatment used in the acquisition of any asset group. Although the Trust and the Corporation are issuing paired shares to ITT stockholders and will be the surviving reporting companies following the Merger, the Trust and the Corporation are considered the acquired companies for accounting purposes because the ITT stockholders will represent the majority shareholders of Starwood Lodging. The fair market value of the pro forma paired shares and Partnership units held by the Starwood Lodging shareholders and the Partnerships' unit holders, respectively (using the closing stock price of $57.75 on October 27, 1997), is used as the valuation basis for the combination. The assets and liabilities of Starwood Lodging are revalued to their respective fair market values at the combination date. The pro forma financial statements of Starwood Lodging reflect the combined operations from the date of the combination. Certain reclassifications have been made to the pro forma Starwood Lodging balance sheets to conform to the presentation of the ITT balance sheet. NOTE 3. PRO FORMA ADJUSTMENTS (A) Represents ITT's pro forma balance sheet as of September 30, 1997 reflecting the sale of shares of Alcatel Alsthom owned by ITT and the sale of ITT's 39.8% ownership interest in Madison Square Garden (see page F-18 through F-21). (B) Represents Starwood Lodging's pro forma combined consolidated and separate consolidated balance sheets as of September 30, 1997, as adjusted for the pending acquisition of Westin (see pages F-22 through F-27). (C) Represents the purchase consideration in excess of the fair market value of the combined pro forma net assets of Starwood Lodging. The Merger will be accounted for as a reverse purchase (see note 2 above). As a result, the purchase consideration is based upon the fair market value of Starwood F-7 11 Lodging's pro forma paired shares outstanding (after giving effect to the Westin acquisition and assuming the conversion of the Partnership's units into paired shares and using the closing stock price of $57.75 on October 27, 1997). Since the majority of Starwood Lodging's pro forma assets were acquired within the last year, their cost basis is deemed to approximate fair market value. The amount attributable to goodwill will be analyzed following the consummation of the Merger to determine whether any amounts should be specifically allocated to properties or other assets. (D) Represents the additional debt of $3.368 billion to be incurred to finance (i) $3.012 billion representing the $25.50 per share cash portion of the purchase price of the shares to be acquired from ITT stockholders and (ii) $356 million in cash necessary to retire approximately 8.7 million ITT stock options. (E) Represents the adjustment to minority interest to reflect the approximate 6.6% pro forma minority interest of the Partnership units plus the minority interests of certain joint ventures. (F) Represents the consideration paid to the Trust by the Corporation for the Trust's interest in ITT, consisting of (i) a $4.0 billion collateralized note receivable issued by the Corporation and (ii) $1.622 billion in cash to be obtained by the Corporation through third party financing. The Trust intends to use the cash received from the Corporation to pay down its third party debt. (G) Represents a reclassification of ITT's common stock to additional paid-in capital to conform to Starwood Lodging's par value of $0.01 per share. (H) Represents the $3.012 billion distribution to existing ITT shareholders (see note (D) above), resulting in the elimination of additional paid-in capital and distributions in excess of retained earnings. (I) Represents the $7.027 billion value of the 121.7 million paired shares issued by Starwood Lodging (using the closing stock price of $57.75 on October 27, 1997) of which $5.621 billion represents the Trust's portion and $1.406 billion represents the Corporation's portion. F-8 12 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION PRO FORMA COMBINED CONSOLIDATED AND SEPARATE CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND THE YEAR ENDED DECEMBER 31, 1996 (UNAUDITED) The following unaudited combined consolidated and separate consolidated pro forma statements of operations for the nine months ended September 30, 1997 and the year ended December 31, 1996 give effect as of January 1, 1996 to the pending acquisitions of ITT (pursuant to the Merger Agreement as proposed to be amended by Starwood Lodging and assuming that ITT shareholders elect to receive 30% of the aggregate consideration in cash) and Westin. The pro forma information is based upon historical information and does not purport to present what actual results would have been had such transactions, in fact, occurred at January 1, 1996, or to project results for any future period. Historical Trust and Corporation results are for the nine months ended September 30, 1997 and the year ended December 31, 1996. The historical ITT results and Westin results are for the nine months ended September 30, 1997 and the year ended December 31, 1996. Historical Trust and Corporation results include the results of the properties acquired in 1996 (the Westin in Washington, D.C. -- acquired on January 4, a 58.2% interest in the Park Plaza in Boston, Massachusetts -- acquired on January 24, the Doubletree Guest Suites DFW Airport in Irving, Texas, the Doubletree Guest Suites in Ft. Lauderdale, Florida and the Westin Hotel in Tampa, Florida -- all three acquired on April 26, the Midland Hotel in Chicago, Illinois -- acquired on March 22, the Clarion Hotel -- San Francisco Airport in Milbrae, California -- acquired on April 25, the Westin at the Philadelphia International Airport in Philadelphia, Pennsylvania -- acquired on June 3, the Days Inn in Philadelphia, Pennsylvania -- acquired on July 1, a portfolio of 8 hotels owned by an institution consisting of the Ritz Carlton in Kansas City, Missouri, the Ritz Carlton in Philadelphia, Pennsylvania, the Westin Hotel in Waltham, Massachusetts, the Westin LAX in Los Angeles, California, the Westin Horton Plaza in San Diego, California, the Westin Hotel Concourse in Atlanta, Georgia, the Doubletree Grand at Mall of America in Bloomington, Minnesota and the Wyndham Hotel in Ft. Lauderdale, Florida -- all acquired on August 12, a portfolio of 9 hotels owned by Hotels of Distinction Ventures, Inc. consisting of the Hotel Park Tucson in Tucson, Arizona, the Embassy Suites in Palm Desert, California, the Marque in Atlanta, Georgia, the Arlington Park Hilton in Arlington Heights, Illinois, the Sheraton Needham in Needham, Massachusetts, the Sheraton Minneapolis Metrodome in Minneapolis, Minnesota, the Embassy Suites in St. Louis, Missouri, the Radisson Marque in Winston-Salem, North Carolina (this property was sold in April, 1997) and the Allentown Hilton in Allentown, Pennsylvania -- all acquired on August 16 except the Sheraton Minneapolis Metrodome which closed on September 5, the Marriott Forrestal Village in Princeton, New Jersey -- acquired on August 29, the Doral Court and Doral Tuscany both in New York, New York -- acquired on September 19, and a 93.5% interest in the Westwood Marquis Hotel & Gardens in Westwood, California -- acquired on December 31) and the properties acquired in 1997 (the Deerfield Beach Hilton in Deerfield Beach, Florida -- acquired on January 8, the Radisson Denver South in Denver, Colorado -- acquired on January 17, the Embassy Suites Hotel in Atlanta, Georgia, the BWI Airport Marriott in Baltimore, Maryland, the Charleston Hilton North in Charleston, South Carolina, the Crowne Plaza Edison in Edison, New Jersey, the Courtyard by Marriott Crystal City in Arlington, Virginia, the Novi Hilton in Novi, Michigan, the Omni Waterside Hotel in Norfolk, Virginia, the Park Ridge Hotel in King of Prussia, Pennsylvania, the Sheraton Hotel in Long Beach, California, and the Sonoma County Hilton in Santa Rosa, California -- all acquired on February 14, the Days Inn Lake Shore Drive in Chicago, Illinois -- acquired February 21, the Hermitage Suites Hotel in Nashville, Tennessee -- acquired on March 11, the Hotel De La Poste in New Orleans, Louisiana -- acquired on March 12, the San Diego Marriott Suites in San Diego, California -- acquired on April 3, the Tremont Hotel in Chicago, Illinois -- acquired on April 4, the Raphael Hotel in Chicago, Illinois -- acquired May 7, the Stamford Sheraton in Stamford, Connecticut -- acquired on June 9, the Radisson Plaza Hotel in Southfield, Michigan -- acquired on July 10, the Westin Regina Resort in Los Cabos, Mexico, the Westin Regina Resort in Cancun, Mexico, and the Westin Regina Resort in Puerto Vallarta, Mexico -- acquired on August 21, a portfolio of 15 hotels, owned by Flatley Co./Tara Hotels, located in the Northeastern United States -- acquired on September 11, the Crowne Plaza in New Orleans, Louisiana -- acquired on September 16, and One Washington Circle in Washington, D.C. -- acquired on September 30) from their respective dates of acquisition. F-9 13 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION UNAUDITED COMBINED CONSOLIDATED PRO FORMA STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA PRO FORMA STARWOOD PRO FORMA STARWOOD PRO FORMA LODGING ITT LODGING ADJUSTMENTS AND ITT --------- --------- ----------- --------- (A) (B) Revenues.......................................... $ 4,897 $ 925 $ $ 5,822 Costs and expenses: Salaries, benefits and other operating.......... 3,567 556 4,123 Selling, general and administrative............. 600 59 659 Restructuring charge............................ 58 58 Depreciation and amortization................... 220 170 49(C) 439 ------- ----- ----- ------- 4,445 785 49 5,279 ------- ----- ----- ------- 452 140 (49) 543 Interest expense, net............................. (126) (80) (190)(D) (396) Miscellaneous income (expense), net............... (34) (34) Provision for income taxes........................ (129) (12) 204(F) 63 Minority interest................................. (23) (10) (2)(G) (35) ------- ----- ----- ------- Net income........................................ $ 140 $ 38 $ (37) $ 141 ======= ===== ===== ======= Earnings per share................................ $ 1.18 $ 0.74 ======= ======= Weighted average number of paired shares.......... 118 191 ======= =======
See accompanying Notes to the Unaudited Combined Consolidated and Separate Consolidated Pro Forma Statements of Operations. F-10 14 STARWOOD LODGING TRUST UNAUDITED CONSOLIDATED PRO FORMA STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA PRO FORMA PRO FORMA PRO FORMA TRUST ITT TRUST ADJUSTMENTS AND ITT --------- --------- ----------- --------- (A) (B) Revenues....................................... $ $ 259 $ 255(E) $ 514 Costs and expenses: Selling, general and administrative.......... 7 7 Depreciation and amortization................ 143 143 ----- ----- ----- ----- 150 150 ----- ----- ----- ----- 109 255 364 Interest expense, net.......................... (80) 91(D) 11 Minority interest.............................. (5) (19)(G) (24) ----- ----- ----- ----- Net income..................................... $ $ 24 $ 327 $ 351 ===== ===== ===== ===== Earnings per share............................. $ $1.84 ===== ===== Weighted average number of shares of beneficial interest..................................... 191 ===== =====
See accompanying Notes to the Unaudited Combined Consolidated and Separate Consolidated Pro Forma Statements of Operations. F-11 15 STARWOOD LODGING CORPORATION UNAUDITED CONSOLIDATED PRO FORMA STATEMENTS OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA PRO FORMA PRO FORMA PRO FORMA CORPORATION ITT CORPORATION ADJUSTMENTS AND ITT --------- ----------- ----------- --------- (A) (B) Revenues................................... $ 4,897 $ 893 $ $ 5,790 Costs and expenses: Salaries, benefits and other operating... 3,567 752 4,319 Selling, general and administrative...... 600 52 652 Restructuring charge..................... 58 58 Depreciation and amortization............ 220 27 49(C) 296 ------- ----- ----- ------- 4,445 831 49 5,325 ------- ----- ----- ------- 452 62 (49) 465 Interest expense, net...................... (126) (31) (536)(D)(E) (693) Miscellaneous income (expense), net........ (34) (34) Provision for income taxes................. (129) (12) 204(F) 63 Minority interest.......................... (23) (5) 17(G) (11) ------- ----- ----- ------- Net income (loss).......................... $ 140 $ 14 $(364) $ (210) ======= ===== ===== ======= Earnings (loss) per share.................. $ 1.18 $ (1.10) ======= ======= Weighted average number of shares of common stock.................................... 118 191 ======= =======
See accompanying Notes to the Unaudited Combined Consolidated and Separate Consolidated Pro Forma Statements of Operations. F-12 16 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION UNAUDITED COMBINED CONSOLIDATED PRO FORMA STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1996 (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA PRO FORMA STARWOOD PRO FORMA STARWOOD PRO FORMA LODGING ITT LODGING ADJUSTMENTS AND ITT --------- --------- ----------- --------- (A) (B) Revenues.......................................... $ 6,597 $ 776 $ $ 7,373 Costs and expenses: Salaries, benefits and other operating.......... 4,755 475 5,230 Selling, general and administrative............. 838 68 906 Depreciation and amortization................... 276 143 65(C) 484 ------- ----- ----- ------- 5,869 686 65 6,620 ------- ----- ----- ------- 728 90 (65) 753 Interest expense, net............................. (138) (76) (253)(D) (467) Provision for income taxes........................ (249) (10) 272(F) 13 Minority interest................................. (40) (2) (13)(G) (55) ------- ----- ----- ------- Net income........................................ $ 301 $ 2 $ (59) $ 244 ======= ===== ===== ======= Earnings per share................................ $ 2.55 $ 1.40 ======= ======= Weighted average number of paired shares.......... 118 174 ======= =======
See accompanying Notes to the Unaudited Combined Consolidated and Separate Consolidated Pro Forma Statements of Operations. F-13 17 STARWOOD LODGING TRUST UNAUDITED CONSOLIDATED PRO FORMA STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1996 (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA PRO FORMA PRO FORMA PRO FORMA TRUST ITT TRUST ADJUSTMENTS AND ITT --------- --------- ----------- --------- (A) (B) Revenues....................................... $ $ 185 $ 340(E) $ 525 Costs and expenses: Selling, general and administrative.......... 4 4 Depreciation and amortization................ 116 116 ----- ----- ----- ----- 120 120 ----- ----- ----- ----- 65 340 405 Interest expense, net.......................... (75) 122(D) 47 Minority interest.............................. (25)(G) (25) ----- ----- ----- ----- Net income..................................... $ $ (10) $ 437 $ 427 ===== ===== ===== ===== Earnings per share............................. $ $2.45 ===== ===== Weighted average number of shares of beneficial interest..................................... 174 ===== =====
See accompanying Notes to the Unaudited Combined Consolidated and Separate Consolidated Pro Forma Statements of Operations. F-14 18 STARWOOD LODGING CORPORATION UNAUDITED CONSOLIDATED PRO FORMA STATEMENTS OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1996 (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
PRO FORMA PRO FORMA PRO FORMA PRO FORMA CORPORATION ITT CORPORATION ADJUSTMENTS AND ITT ------------- --------------------- ----------- ----------- (A) (B) Revenues.......................... $ 6,597 $ 754 $ $ 7,351 Costs and expenses: Salaries, benefits and other operating.................... 4,755 601 5,356 Selling, general and administrative............... 838 64 902 Depreciation and amortization... 276 27 65(C) 368 ------- ----- ----- ------- 5,869 692 65 6,626 ------- ----- ----- ------- 728 62 (65) 725 Interest expense, net............. (138) (38) (714)(D)(E) (890) Provision for income taxes........ (249) (10) 272(F) 13 Minority interest................. (40) (2) 11(G) (31) ------- ----- ----- ------- Net income (loss)................. $ 301 $ 12 $(496) $ (183) ======= ===== ===== ======= Earnings (loss) per share......... $ 2.55 $ (1.05) ======= ======= Weighted average number of shares of common stock................. 118 174 ======= =======
See accompanying Notes to the Unaudited Combined Consolidated and Separate Consolidated Pro Forma Statements of Operations. F-15 19 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION NOTES TO THE UNAUDITED COMBINED CONSOLIDATED AND SEPARATE CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND THE YEAR ENDED DECEMBER 31, 1996 NOTE 1. BASIS OF PRESENTATION The Trust and the Corporation have unilateral control of Realty and Operating, respectively, and, therefore, the historical financial statements of Realty and Operating are consolidated with those of the Trust and the Corporation, respectively. Unless the context otherwise requires, all references to the "Trust" and the "Corporation" include the Trust and the Corporation and those entities respectively owned or controlled by the Trust or the Corporation, including Realty and Operating. NOTE 2. ITT ACQUISITION On October 19, 1997, ITT agreed to the Merger with Merger Sub, a subsidiary of the Corporation. The terms of the Merger are set forth in the Merger Agreement. Pursuant to the Merger Agreement, each share of ITT Common Stock, together with the associated preferred share purchase right of ITT, will be converted into the right to receive Paired Shares aggregating $67.00 per share in value, subject to certain collar provisions, and $15.00 in cash. As a result of the Merger, ITT will be wholly owned by the Corporation and the Trust. On November 7, 1997, Starwood Lodging announced that it had proposed to amend the Merger Agreement to increase the consideration to be paid in the Merger to $85 per share of ITT Common Stock, with ITT shareholders able to elect to receive up to 30% (but not less than 18%) of the aggregate consideration (calculated at $85 per share) in cash, with the remainder to be paid in Paired Shares (subject to such collar provisions). In addition, such consideration would be increased (in cash) by 7% per annum to the extent the Merger occurs after February 1, 1998. Accounting Treatment Starwood Lodging will account for the Merger as a purchase in accordance with Accounting Principles Board Opinion No. 16. Purchase accounting for a combination is similar to the accounting treatment used in the acquisition of any asset group. Although the Trust and the Corporation are issuing paired shares to ITT stockholders and will be the surviving reporting companies following the Merger, the Trust and the Corporation are considered the acquired companies for accounting purposes because the ITT stockholders will represent the majority shareholders of Starwood Lodging. The fair market value of the pro forma paired shares and Partnership units held by the Starwood Lodging shareholders and the Partnerships' unit holders, respectively (using the closing stock price of $57.75 on October 27, 1997), is used as the valuation basis for the combination. The assets and liabilities of Starwood Lodging are revalued to their respective fair market values at the combination date. The pro forma financial statements of the Starwood Lodging reflect the combined operations from date of combination. Certain reclassifications have been made to Starwood Lodging's pro forma statements of operations to conform to the presentation of the ITT statements of income. NOTE 3. PRO FORMA ADJUSTMENTS (A) Represents ITT's pro forma statements of income for the nine months ended September 30, 1997 and the year ended December 31, 1996 reflecting the sale of shares of Alcatel Alsthom owned by ITT and the sale of ITT's 39.8% ownership interest in Madison Square Garden (see pages F-18 through F-21). (B) Represents Starwood Lodging's combined consolidated and separate consolidated pro forma statements of operations for the nine months ended September 30, 1997 and the year ended December 31, 1996, as adjusted for the pending acquisition of Westin (see pages F-28 through F-39). (C) Represents the amortization expense related to the goodwill recorded as a result of the purchase consideration exceeding the fair market of the combined net assets of Starwood Lodging. (See note (C) on page F-7). F-16 20 (D) Represents interest expense, using an average interest rate of 7.5%, on the additional debt incurred to finance (i) the $3.012 billion representing the $25.50 per share cash portion of the purchase price of the shares to be acquired from ITT stockholders, (ii) the $356 million representing the cash necessary to retire approximately 8.7 million ITT stock options and (iii) the $1.622 billion in cash to be obtained by the Corporation through third party financing and to be paid to the Trust as partial consideration for the Trust's interest in ITT. The Trust intends to use the cash received from the Corporation to pay down its third party debt. (E) Represents interest expense, using an average interest rate of 8.5%, on the $4.0 billion collateralized notes receivable, issued by the Corporation to the Trust, as partial consideration for the Trust's interest in ITT. (F) Represents the tax effect of the additional interest expense described in notes (D) and (E) above. (G) Represents the adjustment to the minority interest to reflect the weighted average pro forma minority interest of the Partnership units and the minority interests of certain joint ventures. F-17 21 ITT CORPORATION UNAUDITED CONSOLIDATED PRO FORMA BALANCE SHEET AS OF SEPTEMBER 30, 1997 (IN MILLIONS)
SALE OF HISTORICAL WBIS+ PRO FORMA ---------- ----- --------- (A) Total current assets.......................................... $1,302 $ $ 1,302 Plant, property and equipment................................. 4,667 4,667 Investments................................................... 433 (105) 328 Goodwill, net................................................. 1,529 1,529 Other assets.................................................. 1,256 1,256 ------ ----- ------ $9,187 $(105) $ 9,082 ====== ===== ====== Notes payable and current maturities of long-term debt........ $ 232 $ $ 232 Other current liabilities..................................... 1,240 1,240 Long-term debt................................................ 3,467 (105) 3,362 Deferred income taxes and other liabilities................... 651 651 Minority interest............................................. 228 228 Common stock.................................................. 2,916 2,916 Cumulative translation adjustment............................. (128) (128) Retained earnings............................................. 581 581 ------ ----- ------ $9,187 $(105) $ 9,082 ====== ===== ======
See accompanying Notes to the Unaudited Pro Forma Consolidated Financial Statements. F-18 22 ITT CORPORATION UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
SALE OF SALE OF SALE OF HISTORICAL ALCATEL MSG WBIS+ PRO FORMA ---------- ------- ------- ------- --------- (A) (A) (A) Revenues............................................. $4,897 $ $ $ $ 4,897 Costs and expenses: Salaries, benefits and other operating............. 3,567 3,567 Selling, general and administrative................ 600 600 Restructuring charge............................... 58 58 Depreciation and amortization...................... 220 220 ------ ------ ------ --- ------- 4,445 4,445 ------ ------ ------ --- ------- 452 452 Interest expense, net................................ (161) 13 17 5 (126) Gain on sale of Alcatel Alsthom shares............... 183 (183) Gain on sale of investment in Madison Square Garden............................................. 200 (200) Miscellaneous income (expense), net.................. (35) (4) 5 (34) Provision for income taxes........................... (276) 72 75 (129) Minority equity...................................... (23) (23) ------ ------ ------ --- ------- Net income........................................... $ 340 $ (98) $ (112) $10 $ 140 ====== ====== ====== === ======= Earnings per share................................... $ 2.88 $ 1.18 ====== ======= Weighted average number of shares.................... 118 118 ====== =======
See accompanying Notes to the Unaudited Pro Forma Consolidated Financial Statements. F-19 23 ITT CORPORATION UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 1996 (IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
SALE SALE OF SALE OF OF HISTORICAL ALCATEL MSG WBIS+ PRO FORMA ---------- -------- ------- ----- --------- (A) (A) (A) Revenues.................................... $6,597 $ $ $ $ 6,597 Costs and expenses: Salaries, benefits and other operating.... 4,755 4,755 Selling, general and administrative....... 838 838 Depreciation and amortization............. 276 276 ------ ---- ---- --- ------ 5,869 5,869 ------ ---- ---- --- ------ 728 728 Interest expense, net....................... (230) 50 38 4 (138) Miscellaneous income (expense), net......... 1 (7) 6 Provision for income taxes.................. (210) (22) (13) (4) (249) Minority equity............................. (40) (40) ------ ---- ---- --- ------ Net Income.................................. $ 249 $ 28 $ 18 $ 6 $ 301 ====== ==== ==== === ====== Earnings per share.......................... $ 2.11 $ 2.55 ====== ====== Weighted average number of shares........... 118 118 ====== ======
See accompanying Notes to the Unaudited Pro Forma Consolidated Financial Statements. F-20 24 ITT CORPORATION NOTES TO THE UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS AS OF AND FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND FOR THE YEAR ENDED DECEMBER 31, 1996 The unaudited pro forma consolidated financial statements may not be indicative of the results that would have occurred if the transactions discussed above had actually occurred on the dates indicated or which may be obtained in the future. The unaudited pro forma consolidated financial statements should be read in conjunction with the historical consolidated financial statements and accompanying notes to such financial statements of ITT, which are incorporated by reference herein to ITT's Annual Report on Form 10-K for the Year Ended December 31, 1996 and ITT's Quarterly Report on Form 10-Q for the Quarter Ended September 30, 1997 for which Starwood Lodging accepts no responsibility. Set forth below is a discussion of the adjustments that are given effect in the unaudited pro forma consolidated financial statements. BALANCE SHEET The accompanying unaudited consolidated pro forma balance sheet assumes that the following adjustments occurred as of September 30, 1997. (A) Pro forma effect is given to the sale of ITT's interest in WBIS+ at its book value of $105 million. On May 12, 1997, ITT and Dow Jones & Company, Inc. reached a definitive agreement to sell WBIS+, Channel 31 in New York City, to Paxson Communications Corporation ("Paxson") for a purchase price of $257.5 million. STATEMENTS OF INCOME The accompanying unaudited consolidated pro forma statements of income assume the following adjustments: (A) Pro forma effect is given to the asset dispositions indicated in the unaudited consolidated pro forma statements of income as if such transactions had occurred at the beginning of the respective periods presented. Those dispositions include the sale of ITT's interest in WBIS+, the sale of ITT's 7.5 million share stake in Alcatel Alsthom and the sale of ITT's 39.8% ownership interest in Madison Square Garden. The sale of the Alcatel Alsthom shares generated proceeds of approximately $830 million and a pre-tax gain of $183 million. The sale of the ownership interest in Madison Square Garden generated proceeds of $500 million and a pre-tax gain of $200 million. F-21 25 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION PRO FORMA COMBINED CONSOLIDATED AND SEPARATE CONSOLIDATED BALANCE SHEETS SEPTEMBER 30, 1997 (UNAUDITED) The following unaudited pro forma combined consolidated and separate consolidated balance sheets are presented as if the acquisition of Westin had occurred as of September 30, 1997. The unaudited pro forma combined consolidated and separate consolidated balance sheets should be read in conjunction with the separate consolidated and combined consolidated historical financial statements of the Trust and the Corporation and the notes thereto included in Starwood Lodging's Joint Annual Report on Form 10-K for the year ended December 31, 1996, the unaudited separate and combined financial statements and related notes of Starwood Lodging included in its Joint Quarterly Reports on Form 10-Q for the quarters ended March 31, 1997, June 30, 1997 and September 30, 1997, and the historical financial statements of Westin and the Notes thereto included in the Starwood Lodging Joint Current Report on Form 8-K dated September 9, 1997, each of which are incorporated by reference in this Joint Current Report on Form 8-K. In management's opinion, all pro forma adjustments necessary to reflect the effects of the acquisition of Westin have been made. The unaudited pro forma combined consolidated and separate consolidated balance sheets are not necessarily indicative of what the actual financial position of Starwood Lodging would have been as of September 30, 1997, nor do they purport to represent the future financial position of Starwood Lodging. F-22 26 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION UNAUDITED COMBINED CONSOLIDATED PRO FORMA BALANCE SHEET SEPTEMBER 30, 1997 (IN THOUSANDS)
HISTORICAL STARWOOD PRO FORMA LODGING WESTIN PRO FORMA STARWOOD LODGING COMBINED ACQUISITION ADJUSTMENTS COMBINED --------- ----------- ----------- ---------------- (A) (B) ASSETS Hotel assets held for sale, net....................... $ 32,215 $ $ $ 32,215 Hotel assets, net..................................... 2,323,657 874,618 3,198,275 ---------- ---------- -------- ---------- 2,355,872 874,618 3,230,490 Mortgage notes receivable, net........................ 79,465 79,465 Investments........................................... 1,691 75,850 77,541 ---------- ---------- -------- ---------- Total real estate investments..................... 2,437,028 950,468 3,387,496 Cash and cash equivalents............................. 28,527 178,000 28,527 (178,000) Accounts, interest and rent receivable................ 71,709 71,709 Notes receivable, net................................. 2,701 14,076 16,777 Inventories, prepaid expenses and other assets........ 55,633 865,056 180,000(E) 1,100,689 ---------- ---------- -------- ---------- $2,595,598 $ 1,829,600 $ 180,000 $4,605,198 ========== ========== ======== ========== LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Collateralized notes payable and revolving lines of credit.............................................. $1,217,861 $ 1,030,093 $(500,000)(C) $1,925,954 178,000 Mortgage and other notes payable...................... 218,558 218,558 Accounts payable and other liabilities................ 79,768 180,000(E) 259,768 Distributions payable................................. 28,447 28,447 ---------- ---------- -------- ---------- 1,544,634 1,208,093 (320,000) 2,432,727 ---------- ---------- -------- ---------- Commitments and contingencies......................... MINORITY INTEREST..................................... 258,926 48,993 24,768(C) 332,687 Class B exchangeable preferred pro forma shares; $.01 par value; authorized 10,000,000; outstanding 5,294,783, at redemption value...................... 203,849 203,849 SHAREHOLDERS' EQUITY Trust shares of beneficial interest, $.01 par value; authorized 100,000,000 shares; outstanding 45,725,852, 56,425,852 pro forma...... 457 107(C) 564 $.01 par value; authorized 10,000,000 Class A Exchangeable preferred pro forma shares; outstanding 6,285,783............................. 63 63 Corporation common stock, $.01 par value; authorized 100,000,000 shares; outstanding 45,725,852, 56,425,852 pro forma...... 457 107(C) 564 Additional paid-in capital............................ 1,094,849 368,602 475,018(C) 1,938,469 Accumulated deficit................................... (303,725) (303,725) ---------- ---------- -------- ---------- 792,038 368,665 475,232 1,635,935 ---------- ---------- -------- ---------- $2,595,598 $ 1,829,600 $ 180,000 $4,605,198 ========== ========== ======== ==========
See accompanying Notes to the Unaudited Combined Consolidated and Separate Consolidated Pro Forma Balance Sheet. F-23 27 STARWOOD LODGING TRUST UNAUDITED CONSOLIDATED PRO FORMA BALANCE SHEET SEPTEMBER 30, 1997 (IN THOUSANDS)
HISTORICAL WESTIN PRO FORMA PRO FORMA TRUST ACQUISITION ADJUSTMENTS TRUST ---------- ----------- ----------- ---------- (A) (B) ASSETS Hotel assets held for sale, net...................... $ 9,925 $ $ $ 9,925 Hotel assets, net.................................... 2,091,246 694,118 2,785,364 ---------- ---------- ---------- --------- 2,101,171 694,118 2,795,289 Mortgage notes receivable, net....................... 79,465 79,465 Mortgage notes receivable Corporation................ 209,642 209,642 Investments.......................................... 1,451 69,850 71,301 ---------- ---------- ---------- --------- Total real estate investments...................... 2,391,729 763,968 3,155,697 Cash and cash equivalents............................ 3,169 178,000 25,000(D) 3,169 (178,000) (25,000)(D) Rent and interest receivable......................... 13,823 13,823 Notes receivable, net................................ 2,080 14,076 16,156 Notes receivable Corporation......................... 57,712 294,184 (25,000)(D) 326,896 Prepaid expenses and other assets.................... 22,693 726,295 748,988 ---------- ---------- ---------- ---------- $2,491,206 $ 1,798,523 $ (25,000) $4,264,729 ========== ========== ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Collateralized notes payable and revolving lines of credit............................................. $1,217,861 $ 1,030,093 $(475,000)(C) $1,925,954 178,000 (25,000)(D) Mortgage and other notes payable..................... 217,606 217,606 Accounts payable and other liabilities............... 19,233 19,233 Distributions payable................................ 28,348 28,348 ---------- ---------- ---------- ---------- 1,483,048 1,208,093 (500,000) 2,191,141 ---------- ---------- ---------- ---------- Commitments and contingencies........................ MINORITY INTEREST.................................... 247,804 46,543 21,629(C) 315,976 Class B exchangeable preferred pro forma shares; $.01 par value; authorized 10,000,000; outstanding 5,294,783, at redemption value..................... 203,849 203,849 SHAREHOLDERS' EQUITY Trust shares of beneficial interest, $.01 par value; authorized 100,000,000 shares; outstanding 45,725,852, 56,425,852 pro forma..... 457 107(C) 564 $.01 par value; authorized 10,000,000 Class A Exchangeable preferred pro forma shares; outstanding 6,285,783............................ 63 63 Additional paid-in capital........................... 979,885 339,975 453,264(C) 1,773,124 Accumulated deficit.................................. (219,988) (219,988) ---------- ---------- ---------- --------- 760,354 340,038 453,371 1,553,763 ---------- ---------- ---------- ---------- $2,491,206 $ 1,798,523 $ (25,000) $4,264,729 ========== ========== ========== ==========
See accompanying Notes to the Unaudited Combined Consolidated and Separate Consolidated Pro Forma Balance Sheet. F-24 28 STARWOOD LODGING CORPORATION UNAUDITED CONSOLIDATED PRO FORMA BALANCE SHEET SEPTEMBER 30, 1997 (IN THOUSANDS)
HISTORICAL WESTIN PRO FORMA PRO FORMA CORPORATION ACQUISITION ADJUSTMENTS CORPORATION ----------- ----------- ----------- ----------- (A) (B) ASSETS Hotel assets held for sale, net............... $ 22,290 $ $ $ 22,290 Hotel assets, net............................. 232,411 180,500 412,911 -------- -------- -------- -------- 254,701 180,500 435,201 Investments................................... 240 6,000 6,240 -------- -------- -------- -------- Total real estate investments............ 254,941 186,500 441,441 Cash and cash equivalents..................... 25,358 25,000(C),(D) 25,358 (25,000)(D) Accounts and interest receivable.............. 57,886 57,886 Notes receivable, net......................... 621 621 Inventories, prepaid expenses and other assets...................................... 32,940 138,761 180,000(E) 351,701 -------- -------- -------- -------- $ 371,746 $ 325,261 $ 180,000 $ 877,007 ======== ======== ======== ======== LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Mortgage and other notes payable.............. $ 952 $ $ $ 952 Mortgage notes payable Trust.................. 209,642 209,642 Notes payable Trust........................... 57,712 294,184 (25,000)(D) 326,896 Accounts payable and other liabilities........ 60,535 180,000(E) 240,535 Distributions payable......................... 99 99 -------- -------- -------- -------- 328,940 294,184 155,000 778,124 -------- -------- -------- -------- Commitments and contingencies................. MINORITY INTEREST............................. 11,122 2,450 3,139(C),(D) 16,711 SHAREHOLDERS' EQUITY Corporation common stock, $.01 par value; authorized 100,000,000 shares; outstanding 45,725,852, 56,425,852 pro forma..................... 457 107(C),(D) 564 Additional paid-in capital.................... 114,964 28,627 21,754(C),(D) 165,345 Accumulated deficit........................... (83,737) (83,737) -------- -------- -------- -------- 31,684 28,627 21,861 82,172 -------- -------- -------- -------- $ 371,746 $ 325,261 $ 180,000 $ 877,007 ======== ======== ======== ========
See accompanying Notes to the Unaudited Combined Consolidated and Separate Consolidated Pro Forma Balance Sheet. F-25 29 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION NOTES TO THE UNAUDITED COMBINED CONSOLIDATED AND SEPARATE CONSOLIDATED PRO FORMA BALANCE SHEETS AS OF SEPTEMBER 30, 1997 NOTE 1. BASIS OF PRESENTATION (A) The Trust and the Corporation have unilateral control of Realty and Operating, respectively, and, therefore, the historical financial statements of Realty and Operating are consolidated with those of the Trust and the Corporation. Unless the context otherwise requires all references to the "Trust" and the "Corporation" include the Trust and the Corporation and those entities respectively owned or controlled by the Trust or the Corporation, including Realty and Operating, respectively. NOTE 2. WESTIN ACQUISITION (B) On September 9, 1997, the Company announced the execution of a definitive agreement to acquire Westin for approximately $1.83 billion (using the closing price of $49.4375 per paired share on September 8, 1997). As part of the acquisition, Westin Worldwide will be merged into the Trust, the stock of Seattle, Lauderdale and Denver (which own the Westin Hotel Seattle, the Westin Hotel Fort Lauderdale and the Westin Hotel Tabor Center, respectively) will be contributed to Realty and the stock of Atlanta and St. John (which own the Westin Peachtree Plaza and the Westin Resort, St. John, respectively) will be contributed to Operating. Also as part of the acquisition, certain assets of Westin Worldwide, including portions of its management and franchising operations, and of Seattle, Lauderdale and Denver are expected either to be transferred to the Corporation and Operating or transferred into subsidiaries in which the Trust will own nonvoting preferred stock and less than 10% of the voting stock and the Corporation will own more than 90% of the voting stock. The pro forma adjustments allocate Westin's assets between the Trust and the Corporation in accordance with the terms of the acquisition. The assets were allocated based upon a valuation performed by an independent accounting firm. As a result, all the properties owned by Westin (other than the Westin Peachtree Plaza and the Westin Resort, St. John) are combined with the Trust. The following is a list of the hotels that are wholly-owned by Westin:
NAME CITY STATE TOTAL ROOMS - ---------------------------------------------- ------------- ------------------- ----------- Hotels owned as of December 31, 1996 The Westin Hotel Seattle...................... Seattle Washington 865 The Westin San Francisco Airport.............. San Francisco California 388 The Westin Hotel Cincinnati................... Cincinnati Ohio 448 The Westin Galleria and Oaks.................. Houston Texas 891 The Westin South Coast Plaza.................. Orange County California 396 The Westin Hotel Fort Lauderdale.............. Ft. Florida 293 Lauderdale The Cherry Creek Inn.......................... Denver Colorado 320 ----- Sub-total................................ 3,601 -----
NAME CITY STATE/TERRITORY TOTAL ROOMS - ---------------------------------------------- ------------- ------------------- ----------- Hotels acquired since January 1, 1997 The Westin Hotel Indianapolis................. Indianapolis Indiana 573 The Westin Hotel Tabor Center................. Denver Colorado 420 The Westin Peachtree Plaza.................... Atlanta Georgia 1,068 The Westin Resort............................. St. John U.S. Virgin Islands 285 ----- Sub-total................................ 2,346 ----- Total.................................... 5,947 =====
F-26 30 In addition, Westin has joint venture interests in the following properties:
NAME/OWNERSHIP PERCENTAGE CITY STATE/PROVINCE TOTAL ROOMS - ---------------------------------------------- ------------- ------------------- ----------- The Westin Hotel O'Hare (49%)................. Chicago Illinois 525 The Westin Hotel Galleria (20%)............... Dallas Texas 431 The Westin Office Building (25%).............. Seattle Washington N/A(1) The Westin London (10%)....................... London Ontario 329
- ------------------------- (1) contains approximately 350,000 square feet The acquisition price for Westin is expected to be allocated as follows (in thousands):
TRUST CORPORATION COMBINED ---------- ----------- ---------- Wholly owned assets.................................... $ 694,118 $ 180,500 $ 874,618 Joint venture assets................................... 69,850 6,000 75,850 Notes receivable....................................... 14,076 -- 14,076 Other assets(1)........................................ 726,295 138,761 865,056 ---------- ----------- ---------- Total assets...................................... $1,504,339 $ 325,261 $1,829,600 ========= ========= =========
- --------------- (1) Other assets includes the value of existing management contracts, certain intangible assets, and an amount allocated to a wholly owned captive insurance company. As partial consideration for the acquisition of Westin, the Company intends to issue 6,285,783 shares of newly created Class A Exchangeable Preferred Stock with an aggregate value of approximately $310.8 million (using the closing stock price of $49.4375 per paired share on September 8, 1997) and 5,294,783 shares of newly created Class B Exchangeable Preferred Stock with an aggregate value of approximately $261.8 million (using the closing stock price of $49.4375 per paired share on September 8, 1997). The Company also intends to issue 991,000 limited partnership units of the Partnerships with an aggregate value of approximately $49.0 million (using the closing stock price of $49.4375 per paired share on September 8, 1997), exchangeable on a one for one basis for Class B Exchangeable Preferred Stock or paired shares. The Corporation expects to borrow approximately $294.2 million from the Trust to partially finance the acquisition of assets allocable to the Corporation. Finally, the consideration includes the assumption of approximately $1.030 billion of debt and the cash payment of approximately $178.0 million. The cash portion will be drawn down under the Company's revolving line of credit. The Company expects to refinance some of Westin's debt to obtain credit terms similar to the Company's existing credit facilities. NOTE 3. PRO FORMA ADJUSTMENTS (C) The Company expects to issue, in a take-down from a shelf registration statement to be filed with the Securities and Exchange Commission in connection with a public offering, approximately 10.7 million paired shares of the Company at an initial offering price of $49.4375 per paired share (using the closing price per paired share on September 8, 1997) (the "Offering"). Total combined net proceeds from the Offering of approximately $500 million will be used partially to fund the acquisition of Westin and to paydown existing indebtedness. Minority interest has been adjusted to reflect the 16.9% proforma minority interest subsequent to the Westin acquisition. (D) Reflects proceeds from the Offering to the Corporation which will be used to reduce intercompany indebtedness to the Trust and will be used by the Trust to pay down existing third-party indebtedness. (E) Reflects estimated deferred tax liability expected to be recorded as a result of the Westin acquisition. F-27 31 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION PRO FORMA COMBINED CONSOLIDATED AND SEPARATE CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND THE YEAR ENDED DECEMBER 31, 1996 (UNAUDITED) The following unaudited combined consolidated and separate consolidated pro forma statements of operations for the nine months ended September 30, 1997 and the year ended December 31, 1996 give effect as of January 1, 1996 to the pending acquisition of Westin. The pro forma information is based upon historical information and does not purport to present what actual results would have been had such transactions, in fact, occurred at January 1, 1996, or to project results for any future period. Historical Trust and Corporation results are for the nine months ended September 30, 1997 and the year ended December 31, 1996. The historical Westin results are for the nine months ended September 30, 1997 and the year ended December 31, 1996. Historical Trust and Corporation results include the results of the properties acquired in 1996 (the Westin in Washington, D.C. -- acquired on January 4, a 58.2% interest in the Park Plaza in Boston, Massachusetts -- acquired on January 24, the Doubletree Guest Suites DFW Airport in Irving, Texas, the Doubletree Guest Suites in Ft. Lauderdale, Florida and the Westin Hotel in Tampa, Florida -- all three acquired on April 26, the Midland Hotel in Chicago, Illinois -- acquired on March 22, the Clarion Hotel -- San Francisco Airport in Milbrae, California -- acquired on April 25, the Westin at the Philadelphia International Airport in Philadelphia, Pennsylvania -- acquired on June 3, the Days Inn in Philadelphia, Pennsylvania -- acquired on July 1, a portfolio of 8 hotels owned by an institution consisting of the Ritz Carlton in Kansas City, Missouri, the Ritz Carlton in Philadelphia, Pennsylvania, the Westin Hotel in Waltham, Massachusetts, the Westin LAX in Los Angeles, California, the Westin Horton Plaza in San Diego, California, the Westin Hotel Concourse in Atlanta, Georgia, the Doubletree Grand at Mall of America in Bloomington, Minnesota and the Wyndham Hotel in Ft. Lauderdale, Florida -- all acquired on August 12, a portfolio of 9 hotels owned by Hotels of Distinction Ventures, Inc. consisting of the Hotel Park Tucson in Tucson, Arizona, the Embassy Suites in Palm Desert, California, the Marque in Atlanta, Georgia, the Arlington Park Hilton in Arlington Heights, Illinois, the Sheraton Needham in Needham, Massachusetts, the Sheraton Minneapolis Metrodome in Minneapolis, Minnesota, the Embassy Suites in St. Louis, Missouri, the Radisson Marque in Winston-Salem, North Carolina (this property was sold in April, 1997) and the Allentown Hilton in Allentown, Pennsylvania -- all acquired on August 16 except the Sheraton Minneapolis Metrodome which closed on September 5, the Marriott Forrestal Village in Princeton, New Jersey -- acquired on August 29, the Doral Court and Doral Tuscany both in New York, New York -- acquired on September 19, and a 93.5% interest in the Westwood Marquis Hotel & Gardens in Westwood, California -- acquired on December 31) and the properties acquired in 1997 (the Deerfield Beach Hilton in Deerfield Beach, Florida -- acquired on January 8, the Radisson Denver South in Denver, Colorado -- acquired on January 17, the Embassy Suites Hotel in Atlanta, Georgia, the BWI Airport Marriott in Baltimore, Maryland, the Charleston Hilton North in Charleston, South Carolina, the Crowne Plaza Edison in Edison, New Jersey, the Courtyard by Marriott Crystal City in Arlington, Virginia, the Novi Hilton in Novi, Michigan, the Omni Waterside Hotel in Norfolk, Virginia, the Park Ridge Hotel in King of Prussia, Pennsylvania, the Sheraton Hotel in Long Beach, California, and the Sonoma County Hilton in Santa Rosa, California -- all acquired on February 14, the Days Inn Lake Shore Drive in Chicago, Illinois -- acquired February 21, the Hermitage Suites Hotel in Nashville, Tennessee -- acquired on March 11, the Hotel De La Poste in New Orleans, Louisiana -- acquired on March 12, the San Diego Marriott Suites in San Diego, California -- acquired on April 3, the Tremont Hotel in Chicago, Illinois -- acquired on April 4, the Raphael Hotel in Chicago, Illinois -- acquired May 7, the Stamford Sheraton in Stamford, Connecticut -- acquired on June 9, the Radisson Plaza Hotel in Southfield, Michigan -- acquired on July 10, the Westin Regina Resort in Los Cabos, Mexico, the Westin Regina Resort in Cancun, Mexico, and the Westin Regina Resort in Puerto Vallarta, Mexico -- acquired on August 21, a portfolio of 15 hotels, owned by Flatley Co./Tara Hotels, located in the Northeastern United States -- acquired on September 11, the Crowne Plaza in New Orleans, Louisiana -- acquired on September 16, and One Washington Circle in Washington, D.C. -- acquired on September 30) from their respective dates of acquisition. F-28 32 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION UNAUDITED COMBINED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (IN THOUSANDS)
HISTORICAL STARWOOD PRO FORMA LODGING W & S HOTEL LLC PRO FORMA STARWOOD LODGING COMBINED & SUBSIDIARIES ADJUSTMENTS COMBINED ---------------- --------------- ----------- ---------------- (A) (B) REVENUE Hotel operations: Rooms.............................. $403,235 $ 110,869 $ 24,222 $538,326 Food & beverage.................... 157,260 51,566 12,641 221,467 Other.............................. 43,119 12,916 2,683 58,718 -------- -------- ---------- -------- Total.......................... 603,614 175,351 39,546(C) 818,511 Gaming............................... 11,392 11,392 Interest from mortgage and other notes.............................. 10,576 3,128 13,704 Rent from leased hotel properties and income from investments............ 701 1,196 1,897 Management fees and other income..... 6,726 60,162 (1,496)(G) 65,392 Gain (loss) on sales of real estate investments and non-recurring items.............................. (221) 13,423 13,202 -------- -------- ---------- -------- 632,788 253,260 38,050 924,098 -------- -------- ---------- -------- EXPENSES Hotel operations: Rooms.............................. 98,004 23,391 5,773 127,168 Food & beverage.................... 118,058 36,798 8,780 163,636 Other.............................. 200,856 68,939 13,124 282,919 -------- -------- ---------- -------- 416,918 129,128 27,677(C) 573,723 (1,496)(G) (1,496) (1,832)(H) (1,832) -------- -------- ---------- -------- Total.......................... 416,918 129,128 24,349 570,395 Gaming............................... 12,554 12,554 Interest............................. 41,139 67,049(I) 80,438 (27,750)(J) Depreciation and amortization........ 104,271 65,240(K) 169,511 Administrative and general........... 19,002 13,290 32,292 -------- -------- ---------- -------- 593,884 142,418 128,888 865,190 -------- -------- ---------- -------- Income from operations before income taxes and minority interest........ 38,904 110,842 (90,838) 58,908 Provision for income taxes........... 12,370(L) 12,370 -------- -------- ---------- -------- Income from operations before minority interest.................. 38,904 $ 110,842 $(103,208) 46,538 ======== ========== Minority interest (M)................ 10,627 9,777 -------- -------- Income from operations............... $ 28,277 $ 36,761 ======== ======== Income from operations per Paired Share (N).......................... $ 0.60 $ 0.53 ======== ======== Weighted average number of Paired Shares............................. 46,830 69,111 ======== ========
See accompanying Notes to the Unaudited Combined Consolidated and Separate Consolidated Pro Forma Statements of Operations. F-29 33 STARWOOD LODGING TRUST UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (IN THOUSANDS)
HISTORICAL W & S HOTEL LLC PRO FORMA PRO FORMA TRUST & SUBSIDIARIES ADJUSTMENTS TRUST ---------------- --------------- ----------- ---------------- (A) (B) REVENUE Rents from Corporation.......... $157,571 $ $ 38,884(D) $196,455 Interest from Corporation....... 9,776 21,198(E) 30,974 Interest from mortgage and other notes......................... 10,576 3,128 13,704 Rent from leased hotel properties and income from investments................... 701 1,196 1,897 Other income.................... 1,853 1,853 Gain on sale of real estate investments and non-recurring items......................... 283 13,423 13,706 -------- ------- ------- ------- 180,760 17,747 60,082 258,589 -------- ------- ------- ------- EXPENSES Interest........................ 41,012 67,049(I) 80,311 (27,750)(J) Depreciation and amortization... 88,204 55,059(K) 143,263 Administrative and general...... 7,031 7,031 -------- ------- ------- ------- 136,247 94,358 230,605 -------- ------- ------- ------- Income from operations before minority interest............. 44,513 $17,747 $ (34,276) 27,984 ======= ======= Minority interest (M)........... 9,957 5,006 -------- ------- Income from operations.......... $ 34,556 $ 22,978 ======== ======= Income from operations per share (N)........................... $ 0.73 $ 0.33 ======== ======= Weighted average number of shares..................... 46,830 69,111 ======== =======
See accompanying Notes to the Unaudited Combined Consolidated and Separate Consolidated Pro Forma Statements of Operations. F-30 34 STARWOOD LODGING CORPORATION UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (IN THOUSANDS)
HISTORICAL W & S HOTEL LLC PRO FORMA PRO FORMA CORPORATION & SUBSIDIARIES ADJUSTMENTS CORPORATION ----------- --------------- ----------- ------------------- (A) (B) REVENUE Hotel operations: Rooms............................ $ 403,235 $ 110,869 $ 24,222 $ 538,326 Food & beverage.................. 157,260 51,566 12,641 221,467 Other............................ 43,119 12,916 2,683 58,718 -------- -------- --------- -------- Total......................... 603,614 175,351 39,546(C) 818,511 Gaming............................. 11,392 11,392 Management fees and other income... 4,873 60,162 (1,496)(G) 63,539 Loss on sales of real estate investments...................... (504) (504) -------- -------- --------- -------- 619,375 235,513 38,050 892,938 -------- -------- --------- -------- EXPENSES Hotel operations: Rooms............................ 98,004 23,391 5,773 127,168 Food & beverage.................. 118,058 36,798 8,780 163,636 Other............................ 200,856 68,939 13,124 282,919 -------- -------- --------- -------- 416,918 129,128 27,677(C) 573,723 (1,496)(G) (1,496) (1,832)(H) (1,832) -------- -------- --------- -------- Total......................... 416,918 129,128 24,349 570,395 Gaming............................. 12,554 12,554 Rent to Trust...................... 157,571 38,884(D) 196,455 Interest to Trust.................. 9,776 21,198(E) 30,974 Interest........................... 127 127 Depreciation and amortization...... 16,067 10,181(K) 26,248 Administrative and general......... 11,971 13,290 25,261 -------- -------- --------- -------- 624,984 142,418 94,612 862,014 -------- -------- --------- -------- Income (loss) before income taxes and minority interest............ (5,609) 93,095 (56,562) 30,924 Provision for income taxes......... 12,370(L) 12,370 -------- -------- --------- -------- Income before minority interest.... (5,609) $ 93,095 $ (68,932) 18,554 ======== ========= Minority interest(M)............... 670 4,771 -------- -------- Net income (loss).................. $ (6,279) $ 13,783 ======== ======== Net income (loss) per share(N)..... $ (0.13) $ 0.20 ======== ======== Weighted average number of shares........................... 46,830 69,111 ======== ========
See accompanying Notes to the Unaudited Combined Consolidated and Separate Consolidated Pro Forma Statements of Operations. F-31 35 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION UNAUDITED COMBINED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
W & S HOTEL HISTORICAL LLC PRO FORMA STARWOOD LODGING & PRO FORMA STARWOOD LODGING COMBINED SUBSIDIARIES ADJUSTMENTS COMBINED ---------------- ------------- ----------- ------------------ (A) (B) REVENUE Hotel operations: Rooms................................... $260,175 $ 102,091 $ 65,559 $427,825 Food & beverage......................... 94,816 52,036 33,551 180,403 Other................................... 30,119 14,245 7,743 52,107 -------- -------- -------- -------- Total............................... 385,110 168,372 106,853(C) 660,335 Gaming.................................... 23,630 23,630 Interest from mortgage and other notes.... 11,262 1,712 12,974 Rent from leased hotel properties and income from investments................. 822 5,036 (3,406)(F) 2,452 Management fees and other income.......... 3,424 69,693 (753)(G) 72,364 Gain on sales of real estate investments............................. 4,290 4,290 -------- -------- -------- -------- 428,538 244,813 102,694 776,045 -------- -------- -------- -------- EXPENSES Hotel operations: Rooms................................... 67,017 23,221 15,655 105,893 Food & beverage......................... 72,696 36,569 23,503 132,768 Other................................... 135,302 73,270 35,759 244,331 -------- -------- -------- -------- 275,015 133,060 74,917(C) 482,992 (753)(G) (753) (997)(H) (997) -------- -------- -------- -------- Total............................... 275,015 133,060 73,167 481,242 Gaming.................................... 21,834 21,834 Interest.................................. 23,337 89,397(I) 75,734 (37,000)(J) Depreciation and amortization............. 55,745 86,986(K) 142,731 Administrative and general................ 16,495 23,990 40,485 -------- -------- -------- -------- 392,426 157,050 212,550 762,026 -------- -------- -------- -------- Income before income taxes and minority interest....................... 36,112 87,763 (109,856) 14,019 Provision for income taxes................ 9,803(L) 9,803 -------- -------- -------- -------- Income before minority interest........... 36,112 $ 87,763 $ (119,659) 4,216 ======== ======== Minority interest (M)..................... 10,238 2,460 -------- -------- Net income................................ $ 25,874 $ 1,756 ======== ======== Net income per Paired Share (N)........... $ 0.87 $ 0.03 ======== ======== Weighted average number of Paired Shares.................................. 29,884 52,165 ======== ========
See accompanying Notes to the Unaudited Combined Consolidated and Separate Consolidated Pro Forma Statements of Operations. F-32 36 STARWOOD LODGING TRUST UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
HISTORICAL W & S HOTEL LLC PRO FORMA PRO FORMA TRUST & SUBSIDIARIES ADJUSTMENTS TRUST ---------------- --------------- ----------- --------------- (A) (B) REVENUE Rents from Corporation............. $ 87,593 $ $ 38,394(D) $ 125,987 Interest from Corporation.......... 9,084 28,264(E) 37,348 Interest from mortgage and other notes............................ 11,262 1,712 12,974 Rent from leased hotel properties and income from investments...... 822 5,036 (3,406)(F) 2,452 Other income....................... 2,008 2,008 Gain on sale of real estate investments...................... 4,290 4,290 -------- ------ -------- -------- 115,059 6,748 63,252 185,059 -------- ------ -------- -------- EXPENSES Interest........................... 23,088 89,397(I) 75,485 (37,000)(J) Depreciation and amortization...... 42,517 73,411(K) 115,928 Administrative and general......... 4,134 4,134 -------- ------ -------- -------- 69,739 125,808 195,547 -------- ------ -------- -------- Income (loss) before minority interest......................... 45,320 $ 6,748 $ (62,556) (10,488) ====== ======== Minority interest (M).............. 11,731 (498) -------- -------- Net income (loss).................. $ 33,589 $ (9,990) ======== ======== Net income (loss) per share (N).... $ 1.12 $ (0.19) ======== ======== Weighted average number of shares........................... 29,884 52,165 ======== ========
See accompanying Notes to the Unaudited Combined Consolidated and Separate Consolidated Pro Forma Statements of Operations F-33 37 STARWOOD LODGING CORPORATION UNAUDITED CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 (IN THOUSANDS)
HISTORICAL W & S HOTEL LLC PRO FORMA PRO FORMA CORPORATION & SUBSIDIARIES ADJUSTMENTS CORPORATION ----------- --------------- ----------- --------- (A) (B) REVENUE Hotel operations: Rooms........................................ $ 260,175 $ 102,091 $ 65,559 $427,825 Food & beverage.............................. 94,816 52,036 33,551 180,403 Other........................................ 30,119 14,245 7,743 52,107 -------- -------- -------- -------- Total.................................... 385,110 168,372 106,853(C) 660,335 Gaming......................................... 23,630 23,630 Management fees and other income............... 1,416 69,693 (753)(G) 70,356 -------- -------- -------- -------- 410,156 238,065 106,100 754,321 -------- -------- -------- -------- EXPENSES Hotel operations: Rooms........................................ 67,017 23,221 15,655 105,893 Food & beverage.............................. 72,696 36,569 23,503 132,768 Other........................................ 135,302 73,270 35,759 244,331 -------- -------- -------- -------- 275,015 133,060 74,917(C) 482,992 (753)(G) (753) (997)(H) (997) -------- -------- -------- -------- Total.................................... 275,015 133,060 73,167 481,242 Gaming......................................... 21,834 21,834 Rent to Trust.................................. 87,593 38,394(D) 125,987 Interest to Trust.............................. 9,084 28,264(E) 37,348 Interest....................................... 249 249 Depreciation and amortization.................. 13,228 13,575(K) 26,803 Administrative and general..................... 12,361 23,990 36,351 -------- -------- -------- -------- 419,364 157,050 153,400 729,814 -------- -------- -------- -------- Income (loss) before income taxes and minority interest..................................... (9,208) 81,015 (47,300) 24,507 Provision for income taxes..................... 9,803(L) 9,803 -------- -------- -------- -------- Income before minority interest................ (9,208) $ 81,015 $ (57,103) 14,704 ======== ======== Minority interest (M).......................... (1,493) 2,958 -------- -------- Net income (loss).............................. $ (7,715) $ 11,746 ======== ======== Net income (loss) per share (N)................ $ (0.26) $ 0.22 ======== ======== Weighted average number of shares.............. 29,884 52,165 ======== ========
See accompanying Notes to the Unaudited Combined Consolidated and Separate Consolidated Pro Forma Statements of Operations. F-34 38 STARWOOD LODGING TRUST AND STARWOOD LODGING CORPORATION NOTES TO THE UNAUDITED COMBINED CONSOLIDATED AND SEPARATE CONSOLIDATED PRO FORMA STATEMENTS OF OPERATIONS FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND THE YEAR ENDED DECEMBER 31, 1996 NOTE 1. BASIS OF PRESENTATION The Trust and the Corporation have unilateral control of Realty and Operating, respectively, and, therefore, the historical financial statements of Realty and Operating are consolidated with those of the Trust and the Corporation. Unless the context otherwise requires, all references herein to the "Company" refer to the Trust and the Corporation, and all references to the "Trust" and the "Corporation" include the Trust and the Corporation and those entities respectively owned or controlled by the Trust or the Corporation, including Realty and Operating. NOTE 2. PRO FORMA ADJUSTMENTS (A) Reflects the Company's historical statements of operations. Results of operations for properties sold or pending sale are not considered material to the pro forma presentation. The historical statements of operations for the year ended December 31, 1996 exclude the impact of extraordinary items. (B) Reflects Westin's historical statements of operations excluding depreciation and amortization, interest expense and provision for income taxes which are reflected as pro forma adjustments. The following is a reconciliation of the historical results of Westin in the pro forma statements of operations to the unaudited statement of operations for the nine months ended September 30, 1997 and to the audited statement of operations for the year ended December 31, 1996: FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997: Income before depreciation and amortization, interest and provision for income taxes per pro forma combined statement of operations............................ $110,842 Depreciation and amortization..................................................... 36,402 Interest expense.................................................................. 34,536 Provision for income taxes........................................................ 16,295 ------ Net income per unaudited statement of operations.................................. $ 23,609 ====== FOR THE YEAR ENDED DECEMBER 31, 1996: Income before depreciation and amortization, interest and provision for income taxes per pro forma combined statement of operations............................ $ 87,763 Depreciation and amortization..................................................... 42,566 Interest expense.................................................................. 41,965 Provision for income taxes........................................................ 3,904 ------ Net loss per audited statement of operations...................................... $ (672) ======
F-35 39 Listed below are the effects each wholly-owned hotel had on the combined pro forma statements of operations for the nine months ended September 30, 1997 and the year ended December 31, 1996 (in thousands): FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
EXCESS OF REVENUES HOTEL REVENUES EXPENSES OVER EXPENSES - ----------------------------------------------------- -------- -------- ------------- The Westin Hotel Seattle............................. $ 35,816 $ 22,320 $13,496 The Westin Hotel San Francisco Airport............... 19,058 13,039 6,019 The Westin Hotel Cincinnati.......................... 15,547 11,719 3,828 The Westin Hotel Galleria and Oaks................... 34,573 30,494 4,079 The Westin South Coast Plaza......................... 14,878 12,775 2,103 The Westin Hotel Fort Lauderdale..................... 8,377 6,862 1,515 The Cherry Creek Inn................................. 6,033 4,109 1,924 The Westin Hotel Indianapolis (acquired March 4, 1997).............................................. 16,566 10,873 5,693 The Westin Hotel Tabor Center (acquired June 24, 1997).............................................. 7,114 4,400 2,714 The Westin Peachtree Plaza (acquired June 4, 1997)... 17,389 12,537 4,852 The Westin Resort St. John (acquired May 15, 1997)(1)........................................... -------- -------- ------- Total........................................... $175,351 $129,128 $46,223 ======== ======== =======
- --------------- (1) Hotel closed for renovation due to hurricane damage. FOR THE YEAR ENDED DECEMBER 31, 1996
EXCESS OF REVENUES OVER HOTEL REVENUES EXPENSES EXPENSES - --------------------------------------------------------- -------- -------- --------- The Westin Hotel Seattle................................. $ 45,547 $ 32,013 $13,534 The Westin Hotel San Francisco Airport................... 21,905 16,463 5,442 The Westin Hotel Cincinnati.............................. 20,672 16,014 4,658 The Westin Hotel Galleria and Oaks....................... 43,880 39,018 4,862 The Westin South Coast Plaza............................. 18,147 15,106 3,041 The Westin Hotel Fort Lauderdale......................... 11,500 9,665 1,835 The Cherry Creek Inn..................................... 6,721 4,781 1,940 -------- -------- --------- Total............................................... $168,372 $133,060 $35,312 ======== ======== =======
F-36 40 Listed below are the effects each joint venture had on the combined pro forma statements of operations for the nine months ended September 30, 1997 and the year ended December 31, 1996 (in thousands): FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
WESTIN O'HARE GALLERIA SIXTH & VINWEST HOTEL HOTEL HOTEL VIRGINIA LONDON ONTARIO, VENTURE VENTURE PROPERTIES INC.(1) TOTAL ------- -------- ---------- ---------------- ------- Operating revenues........................ $23,400 $ 22,403 $7,443 $4,810 $58,056 Operating expenses........................ 17,491 14,485 3,527 4,524 40,027 Depreciation and amortization............. 2,156 2,736 1,960 319 7,171 ------- -------- ---------- ------- ------- Operating income.......................... 3,753 5,182 1,956 (33) 10,858 Interest expense.......................... 1,714 4,336 1,738 318 8,106 Other expense (income).................... (30) (55) 23 (62) ------- -------- ---------- ------- ------- Net income (loss)....................... 2,039 876 273 (374) 2,814 ------- -------- ---------- ------- ------- Westin ownership percentage............... 49% 20% 25% 10% ------- -------- ---------- ------- ------- Westin Share.............................. $ 990 $ 175 $ 68 $ (37) $ 1,196 ======= ======= ======= =========== =======
- ------------------------- (1) Westin acquired an interest in this property in February, 1997. FOR THE YEAR ENDED DECEMBER 31, 1996
WESTIN ARIZONA O'HARE GALLERIA SIXTH & BILTMORE HOTEL HOTEL VIRGINIA PARTNERS(1) VENTURE VENTURE PROPERTIES TOTAL ----------- ------- ------- ---------- -------- Operating revenues.......................... $55,653 $29,395 $30,586 $8,446 $124,080 Operating expenses.......................... 39,847 22,268 20,124 4,067 86,306 Depreciation and amortization............... 5,298 2,029 3,344 2,114 12,785 ----------- ------- ------- ---------- -------- Operating income............................ 10,508 5,098 7,118 2,265 24,989 Interest expense............................ 5,851 2,214 5,638 2,418 16,121 Other expense............................... 150 150 ----------- ------- ------- ---------- -------- Net income (loss)......................... 4,657 2,884 1,330 (153) 8,718 ----------- ------- ------- ---------- -------- Westin ownership percentage................. 50% 49% 20% 25% ----------- ------- ------- ---------- -------- 2,328 1,402 266 (38) 3,958 Preferred return............................ 1,078 1,078 ----------- ------- ------- ---------- -------- Westin Share................................ $ 3,406 $ 1,402 $ 266 $ (38) $ 5,036 ======== ======= ======= ======= ========
- ------------------------- (1) Ownership interest sold in February, 1997 (see footnotes F and H below). (C) Since January 1, 1997 Westin has acquired four hotel properties including the 573-room Westin Hotel Indianapolis in Indianapolis, Indiana acquired on March 4, 1997; the 285-room Westin Resort, St. John on the U.S. Virgin Islands acquired on May 15, 1997; the 1,068-room Westin Peachtree Plaza in Atlanta, Georgia acquired on June 4, 1997; and the 420-room Westin Hotel Tabor Center in Denver, Colorado acquired on June 24, 1997. F-37 41 Listed below are the pro forma adjustments necessary to show the effect on the results of operations of the acquired hotels as if they had been acquired at January 1, 1996: FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997
EXCESS OF REVENUES OVER HOTEL REVENUES EXPENSES EXPENSES - ---------------------------------------------------------------- -------- -------- --------- The Westin Hotel Tabor Center................................... $ 11,854 $ 8,531 $ 3,323 The Westin Hotel Indianapolis................................... 3,215 2,832 383 The Westin Peachtree Plaza...................................... 24,477 16,314 8,163 The Westin Resort St. John(1)................................... -------- -------- --------- Total......................................................... $ 39,546 $ 27,677 $11,869 ======= ======= =======
- ------------------------- (1) Hotel closed for renovation due to hurricane damage. FOR THE YEAR ENDED DECEMBER 31, 1996
EXCESS OF REVENUES OVER HOTEL REVENUES EXPENSES EXPENSES - ---------------------------------------------------------------- -------- -------- --------- The Westin Hotel Tabor Center................................... $ 23,131 $ 16,456 $ 6,675 The Westin Hotel Indianapolis................................... 25,606 18,276 7,330 The Westin Peachtree Plaza...................................... 58,116 40,185 17,931 The Westin Resort St. John(1)................................... -------- -------- --------- Total......................................................... $106,853 $ 74,917 $31,936 ======== ======= =======
- ------------------------- (1) Hotel closed for renovation due to hurricane damage. (D) The Trust intends to lease the hotels it will acquire to the Corporation under leases that provide for annual base or minimum rents plus contingent or percentage rents based on the gross revenue of the properties and are accounted for as operating leases. (E) Reflects interest expense on funds borrowed by the Corporation from the Trust to acquire certain assets in the Westin transaction including the Westin Peachtree Plaza in Atlanta, Georgia and the Westin Resort St. John on the U.S. Virgin Islands. (F) Reflects the elimination of joint venture income related to the sale, during February 1997, of Westin's 50% ownership investment in the Biltmore Hotel Partners. (G) Reflects the elimination of franchise fees paid by the Company to Westin on seven Westin hotels owned by the Company as of September 30, 1997 including the Westin Los Angeles Airport in Los Angeles, California; the Westin Horton Plaza in San Diego, California; the Westin Washington in Washington, DC; the Westin Tampa Airport in Tampa, Florida; the Westin Atlanta North in Atlanta, Georgia; the Westin Philadelphia Airport in Philadelphia, Pennsylvania and the Westin Waltham in Waltham, Massachusetts. (H) Reflects the elimination of franchise fees incurred by the Company on hotels the Company intends to convert to Westins. These franchise fees represent franchise fees incurred from the date the hotel was acquired until the end of each period presented and therefore may not represent a full period of franchise fees expense. (I) Reflects the addition of interest expense at the Company's current weighted average borrowing rate (7.4%) on the $1.030 billion of assumed debt and the $178.0 million cash drawn down to acquire Westin. F-38 42 (J) Reflects the reduction of interest expense due to the pay down of approximately $500.0 million of debt with the net proceeds of a public offering of approximately 10.7 million paired shares at $49.4375 per paired share (using the closing price per paired share on September 8, 1997). (K) Reflects depreciation and amortization expense on the Company's basis in the assets acquired in the Westin transaction. (L) Reflects the estimated income tax expense on the pro forma Corporation results using an effective income tax rate of 40%. (M) Reflects the minority interests of the partners in the income of the Partnerships. (N) Net income (loss) per paired share has been computed using the weighted average number of paired shares and equivalent paired shares outstanding and includes Class A and Class B Exchangeable Preferred Stock expected to be issued as partial consideration for the Westin acquisition (see footnote B to the unaudited combined consolidated and separate consolidated pro forma balance sheets) and common stock expected to be issued pursuant to a public offering (see footnote K above). All paired share information has been adjusted to reflect a 3-for-2 stock split effective January 27, 1997. F-39 -----END PRIVACY-ENHANCED MESSAGE-----