-----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, VQfyRFcxtvtteX7pSxIjKVHuxmZF61T7mscEWZB5tjYNwwGXKAzheAJdnjqQVSdv IcQ4w2tSIb4fdjwWxrjKcA== 0000950146-98-001566.txt : 19980915 0000950146-98-001566.hdr.sgml : 19980915 ACCESSION NUMBER: 0000950146-98-001566 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980713 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980914 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SONESTA INTERNATIONAL HOTELS CORP CENTRAL INDEX KEY: 0000091741 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 135648107 STATE OF INCORPORATION: NY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-09032 FILM NUMBER: 98708637 BUSINESS ADDRESS: STREET 1: 200 CLARENDON ST CITY: BOSTON STATE: MA ZIP: 02116 BUSINESS PHONE: 6174215400 MAIL ADDRESS: STREET 1: 200 CLARENDON ST CITY: BOSTON STATE: MA ZIP: 02116 FORMER COMPANY: FORMER CONFORMED NAME: HOTEL CORP OF AMERICA DATE OF NAME CHANGE: 19700622 FORMER COMPANY: FORMER CONFORMED NAME: CHILDS CO DATE OF NAME CHANGE: 19681121 8-K/A 1 SONESTA INTERNATIONAL HOTELS CORPORATION 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: July 13, 1998 Commission File No.: 0-9032 SONESTA INTERNATIONAL HOTELS CORPORATION ------------------------------------------------------ (Exact Name of Registrant as Specified in its Charter) New York ------------------------------------------------------ (State or Other Jurisdiction) 13-5648107 ------------------------------------------------------ (I.R.S. Employer Identification Number) 200 Clarendon Street, Boston, Massachusetts 02116 ------------------------------------------------------ (Address of Principal Executive Offices) Registrant's Telephone Number, Including Area Code: (617) 421-5400 Not Applicable ------------------------------------------------------ (Former Name or Former Address, if Changed Since Last Report) The Registrant hereby amends its Form 8-K of July 13, 1998, to include Item 7, consisting of the historical financial statements of the acquired company and pro forma financial information. Item 2. Acquisition or Disposition of Assets On July 1, 1998, the Registrant, through its subsidiary, Sonesta Beach Resort Limited Partnership ("Purchaser") -- a Delaware limited partnership of which the Registrant's wholly-owned subsidiaries, Florida Sonesta Corporation ("FSC") and Key Biscayne Land Corporation are the sole general partner with a one percent (1%) partnership interest, and a limited partner with a 98% partnership interest, respectively -- acquired from Key Biscayne Limited Partnership ("Seller") its rights, title and interests in and to the real and personal property known as Sonesta Beach Resort, in Key Biscayne, Florida ("the Resort"). The Seller has a one- percent (1%) limited partnership interest in the Purchaser. The Resort is a 300-room, full-service beachfront resort hotel sited on 10 acres in Key Biscayne, Florida. FSC has continuously operated the hotel under a management agreement since it sold the property to the Seller in 1984. The Resort has been operated by Sonesta as a deluxe beach hotel since it opened in the early 1970's. The Purchaser intends to continue operating the Resort as a deluxe resort hotel. The purchase price consisted of FSC's release of the Seller from indebtedness owed to FSC and/or its affiliates in connection with the Registrant's sale of the Resort to the Seller, in 1984, and loans advanced by FSC to restore the Resort following Hurricane Andrew, in 1992. This indebtedness is carried on Sonesta's books at approximately $10,720,000 at March 31, 1998, and the debt had matured or otherwise become due and payable at the end of 1997 and/or in early 1998. In addition, the Purchaser assumed a first mortgage loan in the amount of $22,431,000; interest on this first mortgage loan is payable monthly at 11.78% per annum until April 1999 when it increases to 12.78% per annum, and matures in October 2000. No principal payments are due until the maturity date. The Purchaser has also agreed to pay the Seller additional compensation if it sells the Resort prior to January 1, 2002. The transaction was completed pursuant to a pre-packaged bankruptcy. A Joint Plan of Reorganization was filed by the Seller and FSC in the U.S. Bankruptcy Court for the Southern District of Florida, Miami Division, on April 23, 1998, and the Plan was confirmed by the Court on June 25, 1998. 1 Item 7. Financial Statements and Exhibits. a) Financial statements of Key Biscayne Limited Partnership ("KBLP"):
Page Balance sheets as of December 31, 1997 and 1996 3 Statements of operations and accumulated deficit for the three years ended December 31, 1997, 1996 and 1995 5 Statements of Cash flow for the three years ended December 31, 1997, 1996 and 1995 6 Notes to financial statements 7 Report of independent auditors 14 b) Pro Forma financial information (unaudited) of the Registrant reflecting the acquisition of a 99% partnership interest in Sonesta Beach Resort Key Biscayne from KBLP: Proforma condensed consolidated balance sheet as of June 30, 1998 15 Proforma condensed consolidated statement of operations for the six month period ended June 30, 1998 17 Proforma condensed consolidated statement of operations for the year ended December 31, 1997 18 Notes to Proforma consolidated financial statements 19
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. SONESTA INTERNATIONAL HOTELS CORPORATION By: ____________________________________ Boy van Riel Vice President & Treasurer July 13, 1998 2 KEY BISCAYNE LIMITED PARTNERSHIP Balance Sheets
December 31 1997 1996 ------------------------------- Assets Current assets: Cash and cash equivalents $ 774,074 $ 761,117 Accounts receivable trade, less allowance for doubtful accounts of $33,000 in 1997 and 1996 2,422,488 2,174,432 Inventories 430,567 388,900 Prepaid expenses 754,301 376,301 Other assets 79,839 72,885 ----------- ----------- Total current assets 4,461,269 3,773,635 Property and equipment, at cost: Land 6,218,403 6,218,403 Building and improvements 23,344,066 22,840,338 Furniture and equipment 4,402,900 3,678,885 ----------- ----------- 33,965,369 32,737,626 Less accumulated depreciation and amortization 6,928,377 5,703,759 ----------- ----------- Net property and equipment 27,036,992 27,033,867 ----------- ----------- $31,498,261 $30,807,502 =========== ===========
3 KEY BISCAYNE LIMITED PARTNERSHIP Balance Sheets
December 31 1997 1996 ---------------------------- Liabilities Current liabilities: Accounts payable $ 828,232 $ 695,716 Accounts payable to operator 209,330 485,595 Advance deposits 1,027,974 841,213 Accrued liabilities: Salaries and wages 740,513 597,390 Interest 137,500 339,010 Taxes other than income taxes 262,361 181,787 Other 626,526 574,196 ------------ ------------ 1,766,900 1,692,383 ------------ ------------ Total current liabilities 3,832,436 3,714,907 Long-term debt 41,088,735 41,808,176 Deferred interest payable 18,298,153 15,918,317 Pension liability, non current 233,495 226,587 Partners' deficit: Partnership capital 15,267,588 15,267,588 Accumulated deficit (47,222,146) (46,128,073) ------------ ------------ Total partners' deficit (31,954,558) (30,860,485) ------------ ------------ $ 31,498,261 $ 30,807,502 ============ ============
See accompanying notes. 4 KEY BISCAYNE LIMITED PARTNERSHIP STATEMENTS OF OPERATIONS AND ACCUMULATED DEFICIT Years ended December 31, 1997, 1996 and 1995
1997 1996 1995 Revenue: Rooms $ 15,060,609 $ 13,486,028 $ 12,637,257 Food and beverage 7,792,035 7,240,550 7,159,614 Parking, telephone and other 2,547,557 2,224,203 2,105,884 ------------ ------------ ------------ 25,400,201 22,950,781 21,902,755 Costs and expenses: Costs and operating expenses 11,735,287 10,688,062 10,303,445 Advertising and promotion 1,995,123 1,797,604 1,821,161 Administrative and general 3,738,204 3,409,315 3,029,164 Human resources 386,586 328,659 305,112 Maintenance 1,320,729 1,289,550 1,222,956 Property taxes 671,337 660,182 557,204 Rentals 53,955 41,356 98,196 Depreciation and amortization 1,224,124 1,120,421 1,048,866 ------------ ------------ ------------ 21,125,345 19,335,149 18,386,104 Operating income 4,274,856 3,615,632 3,516,651 Interest expense (5,437,667) (5,277,343) (5,266,617) Interest income 68,738 21,159 25,592 Insurance gain -- 900,419 -- ------------ ------------ ------------ Net loss (1,094,073) (740,133) (1,724,374) Accumulated deficit at Beginning of year (46,128,073) (45,387,940) (43,663,566) ------------ ------------ ------------ Accumulated deficit at end of year $(47,222,146) $(46,128,073) $(45,387,940) ============ ============ ============
See accompanying notes. 5 KEY BISCAYNE LIMITED PARTNERSHIP STATEMENTS OF CASH FLOWS Years ended December 31, 1997, 1996, and 1995
1997 1996 1995 ----------------------------------------- Cash provided (used) by operating activities Net loss $(1,094,073) $ (740,133) $(1,724,374) Items not requiring (providing) cash Depreciation and amortization 1,224,124 1,120,421 1,048,866 Deferred interest 2,380,331 2,034,419 1,879,819 Pension expense 6,908 38,181 40,000 Change in assets and liabilities Accounts receivable (248,056) 82,861 (979,723) Inventories (41,667) (28,917) (9,622) Prepaid expenses (378,000) 75,704 (224,282) Other assets (6,954) 91,644 (121,018) Accounts payable 132,516 151,075 60,109 Advance deposits 186,761 35,353 (146,490) Accounts payable to operator (276,265) (145,471) 318,010 Accrued liabilities 74,517 95,520 240,381 ----------- ----------- ----------- Cash provided by operating activities 1,960,142 2,810,657 381,676 Cash used by investing activities Expenditures for property and equipment (1,227,743) (972,914) (512,324) ----------- ----------- ----------- Cash used by investing activities (1,227,743) (927,914) (512,324) Cash used by financing activities Payments on long-term debt (719,442) (1,670,401) (152,915) ----------- ----------- ----------- Cash used by financing activities (719,442) (1,670,401) (152,915) Net increase (decrease) in cash and cash 12,957 167,342 (283,563) equivalents Cash and cash equivalents at beginning of year 761,117 593,775 877,338 ----------- ----------- ----------- Cash and cash equivalents at end of year $ 774,074 $ 761,117 $ 593,775 =========== =========== =========== Cash paid for: Interest $ 3,258,848 $ 3,251,016 $ 3,162,393 =========== =========== ===========
See accompanying notes. 6 KEY BISCAYNE LIMITED PARTNERSHIP NOTES TO FINANCIAL STATEMENTS Years ended December 31, 1997, 1996 and 1995 1. SIGNIFICANT ACCOUNTING POLICIES Basis of presentation Key Biscayne Limited Partnership ("KBLP") is the owner of the Sonesta Beach Resort, located in Key Biscayne, Florida (the Resort). KBLP purchased the Resort from Sonesta International Hotels Corporation (Sonesta) in 1984. The Resort is operated by Florida Sonesta Corporation, a subsidiary of Sonesta, under a long-term management agreement. Sonesta has provided loans to KBLP both in connection with the purchase of the Resort in 1984, and in connection with the restoration and re-opening of the Resort following Hurricane Andrew, which caused severe damage to the Resort in 1992. The debt to Sonesta matured or otherwise became payable at the end of 1997 and in early 1998 (see Note 5, Long-term Debt). Key Biscayne Hotel Associates, Ltd. and VMS Realty Investment, Ltd., the general partners of KBLP, hold interests of 98.99% and .91%, respectively. Limited Partners hold a .1% interest. Partners' deficit balances attributable to the General and Limited Partners are as follows:
General Partners Limited Partners Loss for years ended December 31, 1997 (1,092,978) (1,095) 1996 (739,393) (740) 1995 (1,722,650) (1,724) Deficit at December 31, 1997 (31,908,272) (46,286) 1996 (30,815,294) (45,191)
Subsequent Events A Joint Plan of Reorganization was filed by KBLP and Florida Sonesta Corporation in the U.S. Bankruptcy court for the Southern District of Florida, Miami Division, in April 1998. The Plan was confirmed by the Court on June 25, 1998. Under the Plan, Sonesta Beach Resort Limited Partnership (SBRLP), in which KBLP has a one percent limited partnership interest, acquired all real and personal property of the Resort. FSC and Key Biscayne Land Corporation, both 7 subsidiaries of Sonesta International Hotels Corporation, are the sole general partner and a limited partner of SBRLP, with a 1% and 98% partnership interest, respectively. This transaction was completed on July 1, 1998. FSC and affiliates of KBLP released KBLP from its indebtedness in connection with the Resort (see Note 5 (b), 5 (c) and 5 (d), Long-Term debt). SBRLP assumed the first mortgage note (see Note 5 (a)), and assumed the indebtedness to FSC and extended its maturity on a long-term basis. Merchandise and supplies Merchandise and supplies are stated at the lower of cost (first-in, first-out) or market. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Advertising The cost of advertising is generally expensed as incurred. Revenues Revenues are generally recognized as services are provided. Property and equipment Depreciation and amortization of items of property and equipment are computed on the straight-line method using the following estimated useful lives: Buildings and improvements 30 to 40 years Furniture and equipment 5 to 10 years
Beginning in 1997, the cost of operating equipment (chinaware, glassware, linens, etc.) is charged to expenses in the period during which such equipment is put in circulation. Previously, the cost of such equipment was amortized over its useful life. The effect of the change was not deemed to be material to the Partnerships' financial position or results of operations. Included in furniture and equipment is the value, at cost, of the operating equipment not in circulation. 8 NOTES TO FINANCIAL STATEMENTS (continued) Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand and short-term, highly liquid investments with maturities of less than 91 days, which are readily convertible into cash. Income Taxes No provisions for income taxes has been made as the liability for such taxes is the obligation of the partners of KBLP. 2. TRANSACTIONS WITH MANAGEMENT COMPANY The Resort is operated by Sonesta under a long-term management agreement. For its services, Sonesta is entitled to a management fee of 3% and a marketing fee of 1 1/2% of gross revenues of the Resort. Sonesta is also entitled to certain incentive fees based on net operating income, as defined. No incentive fees were earned by Sonesta during the periods reflected in these financial statements. Sonesta also charges the Resort for certain other services, such as purchasing and design services, and advertising and reservation services. During 1997, 1996, and 1995, Sonesta's management and marketing fee charges totaled $1,143,000, $1,033,000 and $986,000 respectively. During 1997, 1996 and 1995, Sonesta's charges also included reservation fees of $55,000, $37,000 and $41,000, respectively, and fees charged by Sonesta's advertising subsidiary of $76,000 in 1997, and $69,000 in each of the years 1996 and 1995. Charges from Sonesta for design and purchasing services were $90,000, $59,000 and $50,000 in 1997, 1996 and 1995, respectively. 3. TRANSACTIONS WITH AFFILIATED COMPANIES The Resort pays a management fee equal to 3/4 of 1% of revenues to Strategic Realty Inc., an affiliate of the general partner of KBLP, which provides asset management services for the Resort which include services pertaining to accounting, tax and insurance related matters, and certain other services. During 1997, 1996 and 1995, Strategic Realty Inc.'s fees totaled $191,000, $172,000 and $164,000, respectively. 9 NOTES TO FINANCIAL STATEMENTS (continued) 4. COSTS AND EXPENSES The following summarizes costs and operating expenses:
1997 1996 1995 ----------- ----------- ----------- Rooms $ 3,658,022 $ 3,213,190 $ 2,939,407 Food and beverage 6,121,442 5,705,097 5,603,998 Heat, light and power 879,667 856,427 837,479 Other 1,076,156 913,348 922,561 ----------- ----------- ----------- $11,735,287 $10,688,062 $10,303,445 =========== =========== ===========
5. LONG-TERM DEBT Long-term debt consists of the following:
1997 1996 ------------ ------------ First mortgage note (a) $ 22,431,486 $ 22,431,486 Mortgage notes from Sonesta (b) 11,500,000 11,500,000 Mortgage loans from Affiliates (c) 3,317,426 3,317,426 Other loans from operator (d) 3,839,823 4,559,264 ------------ ------------ Subtotal 41,088,735 41,808,176 Deferred interest 18,298,153 15,918,317 ------------ ------------ Total long-term debt $ 59,386,888 $ 57,726,493 ============ ============
10 NOTES TO FINANCIAL STATEMENTS (continued) a) This loan in the original amount of $22,000,000 is secured by a first mortgage on the Sonesta Beach Resort Key Biscayne property. By agreement certain unpaid interest during 1992 and 1993 was added to the loan, which brought the loan to its current balance. The loan requires monthly interest payments based on a pay rate of 10.78% until November 1, 1997, 11.78% from November 1, 1997 until April 1, 1999, and 12.78% from April 1, 1999 until the maturity date, which is October 1, 2000. The loan accrues interest at a rate of 12.78% per annum, and the deferred interest, being the difference between the interest at 12.78% and the interest based on the aforementioned pay rate, will become payable only in the event that the loan is not repaid at maturity. The deferred interest is not recorded on the accompanying balance sheets. No principal payments are due during the term of the loan. b) KBLP received two loans from Sonesta in 1984. The first loan of $5,000,000 has an interest rate of 14-1/2%, of which 11% is payable in quarterly installments, and 3-1/2% is deferred until maturity. This loan matured on December 31, 1997. The second loan in the amount of $6,500,000 accrues simple interest at a rate of 10% per year. The maturity date of this loan is December 31, 2004. No principal payments are due on either of these loans until maturity. The maturity of the aforementioned loan of $5,000,000, which totaled $11,481,332 including deferred interest on the maturity date, caused certain other loans from Sonesta to become due and payable. c) These loans consist of an assignment note of $2,000,000 which accrues interest at 12%, and a loan of $1,317,426 which accrues interest at 10% per annum. These notes matured on December 31, 1997. Both loans are secured by mortgages on the Resort's property, which are junior to the mortgages which secure the loans mentioned in (a) and (b) above. The terms and amounts of these notes were amended pursuant to KBLP's plan of reorganization (see Note 1). d) Sonesta, the operator of the Resort made loans in the original aggregate amount of $5,475,000 under five separate agreements during 1993 and 1994. These loans earn interest at rates ranging from the prime rate (8-1/2% at December 31, 1997) to 14-1/2%. Of these loans, an amount of $2,684,000 and interest thereon is secured by a mortgage on the resort's property. Principal and interest are payable from available cash flow after payment of all resort expenses, including the fees mentioned in notes 2 and 3, and after payment of interest on the first mortgage loan in (a) above, and the current interest payable on the $5,000,000 mortgage loan in (b) above. 11 NOTES TO FINANCIAL STATEMENTS (continued) 6. PENSION AND BENEFIT PLANS Pension Plan Substantially all of the KBLP's employees participate in a non-contributory defined benefit pension plan (the Plan). Benefits are based on the employee's years of service and the highest average monthly salary during any 60 consecutive months of employment. KBLP's funding policy is to contribute annually at least the minimum contribution required by ERISA. The pension cost for the Plan for the years 1997 and 1996 was computed as follows:
1997 1996 --------- --------- Service cost $ 235,539 $ 219,149 Interest cost 198,087 193,423 Return on plan assets (325,077) (138,624) Amortization of: Unrecognized transition liability 72,131 72,131 Unrecognized asset (gain) loss 160,033 (27,023) --------- --------- $ 340,713 $ 319,056 ========= =========
The following table sets forth the funded status of the Plan at December 31, 1997 and 1996:
1997 1996 ---------- ---------- Actuarial present value of accumulated benefit obligation: Vested $1,844,226 $1,804,085 Nonvested 199,289 120,586 ---------- ---------- Accumulated benefit obligation 2,043,515 1,924,671 Effect of assumed increase in compensation levels 1,001,993 835,725 ---------- ---------- Projected benefit obligation 3,045,508 2,760,396 Market value of Plan assets 1,741,466 1,592,748 ---------- ---------- Projected benefit obligation in excess of Plan assets 1,304,042 1,167,648 Unrecognized net gain (5,424) 94,743 Unrecognized net transition obligation (735,734) (807,864) ---------- ---------- Accrued pension liability, including current portion $ 562,884 $ 454,527 ========== ==========
12 NOTES TO FINANCIAL STATEMENTS (continued) The Plan's assets include equity and fixed income securities, short-term investments and cash. Assumptions used to develop the pension costs were:
1997 1996 ---- ---- Assumed discount rate 7.0% 7.25% Assumed rate of compensation increases 4.0% 4.0% Expected weighted average rate of return on Plan assets 8.5% 8.5%
Savings Plan The Resort has an employee savings plan (the "Savings Plan") that qualifies as a deferred salary arrangement under Section 401(K) of the Internal Revenue Code. The Savings Plan started on August 1, 1996. Under the Savings Plan, participating employees may defer a portion of their pre-tax earnings up to the Internal Revenue Service annual contribution limit. All employees of the Resort are eligible to participate in the Savings Plan. Participating employees may choose to invest their contributions in each one of the seven mutual funds, which include equity funds, balanced funds and a money market fund. The Savings Plan does not provide for contributions by the Resort. 7. YEAR 2000 (Unaudited) During 1997, KBLP committed to address issues related to required changes in computer systems for the year 2000. KBLP expects that by December 31, 1998, all year 2000 issues will have been addressed, either by programming changes implemented by third party vendors to purchased systems, or through the upgrading or purchase of year 2000 compliant hardware and equipment. Extensive testing is expected in 1998 and 1999. Management believes there is no material risk that KBLP will fail to address year 2000 issues in a timely manner. KBLP expects that costs related to the year 2000 issue will not be material. 13 Report of Independent Auditors The Board of Directors and Shareholders Sonesta International Hotels Corporation: We have audited the accompanying balance sheets of Key Biscayne Limited Partnership (the "Partnership") as of December 31, 1997 and 1996, and the related statements of operations and accumulated deficit, and cash flows for each of the three years in the period ended December 31, 1997. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Key Biscayne Limited Partnership at December 31, 1997 and 1996, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1997, in conformity with generally accepted accounting principles. /s/ Ernst & Young LLP Boston, Massachusetts August 21, 1998 14 SONESTA INTERNATIONAL HOTELS CORPORATION x $ 1,000 PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) June 30, 1998
Sonesta Beach Pro forma ASSETS Resort, Other consolidated Historical Key Biscayne adjustments balance sheet Current assets: Cash $ 4,160 $ 3,456 $ -- $ 7,616 Accounts and notes receivable 7,483 2,619 (756) (a) 9,324 (22) (b) Current portion of deferred taxes 254 -- 66 (g) 320 Inventories 799 402 -- 1,201 Prepaid expenses 1,292 415 -- 1,707 -------- -------- -------- --------- Total current assets 13,988 6,892 (712) 20,168 Long-term receivables and advances 13,387 -- (225) (b) 2,442 (10,720) (c) Property and Equipment, at cost: Land 3,013 6,218 782 (f) 10,013 Buildings 41,455 23,297 620 (b) 68,378 (21,722) (c) 1,740 (d) 2,953 (g) (4,555) (e) 24,590 (f) Furniture and equipment 22,970 4,718 (2,404) (f) 25,284 Leasehold improvements 2,951 -- -- 2,951 Projects in progress 241 286 -- 527 -------- -------- -------- --------- 70,630 34,519 2,004 107,153 Less accumulated depreciation and amortization 25,597 7,567 (7,567) (f) 25,597 -------- -------- -------- --------- Net property and equipment 45,033 26,952 9,571 81,556 Other long-term assets 1,081 -- -- 1,081 -------- -------- -------- --------- $73,489 $33,844 $ (2,086) $105,247 ======== ======== ======== =========
15 SONESTA INTERNATIONAL HOTELS CORPORATION x $ 1,000 PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited) June 30, 1998
LIABILITIES, STOCKHOLDERS' EQUITY Sonesta Beach Pro forma AND PARTNERS' DEFICIT Resort, Other consolidated Historical Key Biscayne adjustments balance sheet Current liabilities: Current portion of long-term debt and capitalized lease obligations $ 3,997 $ -- $ -- $ 3,997 Accounts payable 2,840 1,346 (618) (a) 3,568 Advance deposits 1,358 1,122 -- 2,480 Federal, foreign and state income taxes 690 -- -- 690 Accrued liabilities 9,090 1,673 (138) (a) 10,998 -- -- 373 (b) -- -------- -------- -------- -------- Total current liabilities 17,975 4,141 (383) 21,733 Long-term debt 27,121 59,806 (32,442) (c) 51,670 1,740 (d) (4,555) (e) Deferred federal and state income taxes 2,389 -- 3,019 (g) 5,408 Other non-current liabilities 1,276 432 -- 1,708 Commitments and contingencies Redeemable preferred stock 294 -- -- 294 Common stockholders' equity: Common stock 3,488 3,488 Retained earnings 29,072 29,072 Partners' deficit (30,535) 30,535 (f) -- Treasury shares (8,126) -- -- (8,126) -------- -------- -------- -------- Total common stockholders' equity 24,434 (30,535) 30,535 24,434 -------- -------- -------- -------- $ 73,489 $ 33,844 $ (2,086) $105,247 ======== ======== ======== ========
16 SONESTA INTERNATIONAL HOTELS CORPORATION x $ 1,000 PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) For the six month period ended June 30, 1998
Pro forma Sonesta Beach consolidated Resort, Other statement Historical Key Biscayne adjustments of income Revenues: Rooms $ 22,470 $ 9,390 $ -- $ 31,860 Food & beverage 8,853 4,288 -- 13,141 Management, license and service fees 3,851 1,239 (723) (a) 4,367 Parking, telephone and other 2,922 -- -- 2,922 -------- ------- ------ -------- Total revenues 38,096 14,917 (723) 52,290 Costs and expenses: Costs and operating expenses 14,668 6,134 -- 20,802 Advertising and promotion 2,875 801 (222) (a) 3,454 Administrative and general 6,472 1,862 (501) (a) 7,833 Human resources 786 182 -- 968 Maintenance 2,596 675 -- 3,271 Rentals 4,422 30 -- 4,452 Property taxes 595 363 -- 958 Depreciation and amortization 2,520 637 (111) (e) 3,046 -------- ------- ------ -------- 34,934 10,684 (834) 44,784 -------- ------- ------ -------- Operating income 3,162 4,233 111 7,506 Other income (deductions): Interest expense (1,449) (2,856) 275 (b) (2,473) 1,260 (c) 297 (d) Interest income 527 42 (275) (b) 294 Foreign exchange gain 1 -- -- 1 Gain on sales of assets 16 -- -- 16 -------- ------- ------ -------- (905) (2,814) 1,557 (2,162) Income before income taxes 2,257 1,419 1,668 5,344 Federal, foreign and state income tax provision 956 -- 1,182 (f) 2,138 -------- ------- ------ -------- Net income 1,301 1,419 486 $3,206 ======== ======= ====== ======== Basic earnings per share of common stock $ 0.62 $1.54 Weighted average number of shares outstanding 2,068 2,068
17 SONESTA INTERNATIONAL HOTELS CORPORATION x $ 1,000 PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) For the year ended December 31, 1997
Pro forma Sonesta Beach consolidated Resort, Other statement Historical Key Biscayne adjustments of income Revenues: Rooms $ 39,865 $ 15,061 $ -- $ 54,926 Food & beverage 16,423 7,792 -- 24,215 Management, license and service fees 6,884 -- (1,364) (a) 5,520 Parking, telephone and other 5,296 2,547 -- 7,843 -------- -------- ------- -------- Total revenues 68,468 25,400 (1,364) 92,504 Costs and expenses: Costs and operating expenses 28,035 11,735 -- 39,770 Advertising and promotion 5,520 1,995 (512) (a) 7,003 Administrative and general 12,653 3,738 (852) (a) 15,539 Human resources 1,607 387 -- 1,994 Maintenance 5,017 1,321 -- 6,338 Rentals 6,499 54 -- 6,553 Property taxes 1,185 671 -- 1,856 Depreciation and amortization 4,603 1,224 (263) (e) 5,564 -------- -------- ------- -------- 65,119 21,125 (1,627) 84,617 -------- -------- ------- -------- Operating income 3,349 4,275 263 7,887 Other income (deductions): Interest expense (2,861) (5,438) 550 (b) (4,931) 2,413 (c) 405 (d) Interest income 1,103 69 (550) (b) 622 Foreign exchange loss (3) -- -- (3) Gain on sales of assets 22 -- -- 22 -------- -------- ------- -------- (1,739) (5,369) 2,818 (4,290) Income (loss) before income taxes 1,610 (1,094) 3,081 3,597 Federal, foreign and state income tax provision 677 -- 761 (f) 1,438 -------- -------- ------- -------- Net income (loss) $ 933 $ (1,094) $ 2,320 $ 2,159 ======== ======== ======= ======== Basic earnings per share of common stock $ 0.44 $ 1.03 Weighted average number of shares outstanding 2,068 2,068
18 NOTES TO THE PROFORMA FINANCIAL STATEMENTS (Unaudited) Basis of presentation The proforma balance sheet at June 30, 1998 presents the historical balance sheet of the Registrant and is adjusted to reflect the acquisition of the Sonesta Beach Resort Key Biscayne, assuming this transaction took place on June 30, 1998. The proforma statements of operations for the year ended December 31, 1997 and for the six month period ended June 30, 1998 present the historical statements of income of the Registrant for the year ended December 31, 1997 and the six month period ended June 30, 1998, both of which are adjusted to reflect the acquisition of Sonesta Beach Resort Key Biscayne assuming this transaction took place on January 1, 1997 and January 1, 1998, respectively. Please note that because of the seasonal nature of the tourist industry in Florida, income during the first 6 months of the year is higher than during the last 6 months of the year. Adjustments to proforma balance sheets Following is a summary of the required adjustments to the proforma balance sheet at June 30, 1998: (a) Elimination of intercompany payables and receivables, and elimination of interest accrual and receivable between KBLP and Sonesta at June 30, 1998. (b) Accrual of costs for legal and accounting services related to the transaction. (c) Elimination of Sonesta's loans from KBLP recorded at June 30, 1998 on Sonesta's books in the amount of $10,720,000, and adjustment of the loans and deferred interest owed by KBLP to Sonesta of $21,722,000, which had previously been fully reserved by Sonesta. (d) Adjustment of the first mortgage loan assumed by Sonesta to reflect interest at current market rates on this loan until its maturity in October 2000. (e) Write down of KBLP's loans to its affiliated parties from the amounts recorded on KBLP's books at June 30, 1998, to the actual liability assumed by Sonesta. 19 (f) Adjustment of KBLP's partners capital, its accumulated deficit and accumulated depreciation, and the adjustment of the real and personal property to the book value of the assets assumed by Sonesta. (g) Recording of deferred tax assets and liabilities, primarily due to book and tax basis differences of the assets assumed by Sonesta. Adjustments to proforma statements of operations Following is a description of the required adjustments to the proforma statements of operations for the six month period ending June 30, 1998 and the year ending December 31, 1997: (a) To eliminate management, marketing, and other fees earned by Sonesta under its management agreement with KBLP prior to July 1, 1998. (b) To eliminate current interest paid by KBLP to Sonesta pursuant to a second mortgage loan from Florida Sonesta Corporation to KBLP. (c) To adjust KBLP's statement of operations for interest expense recorded on Sonesta loans, which was reserved by Sonesta due to non-payment, and by interest on other loans which are not being assumed by Sonesta. (d) To adjust interest expense for: - reduction in interest expense on the first mortgage loan assumed by Sonesta due to adjustment of the above market interest rate to market rate. - addition of interest expense on a new $500,000 loan payable to affiliates of the Seller on December 31, 2001. (e) Adjustment of depreciation expense based on consolidated book value of the assets of Sonesta Beach Resort Key Biscayne following the transaction. (f) Provision for federal and state income taxes on the additional income from Sonesta Beach Resort Key Biscayne. 20 -----END PRIVACY-ENHANCED MESSAGE-----