8-K/A 1 a05-14933_18ka.htm 8-K/A

 

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: August 16, 2005

 

Commission file number 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 No.)

 

116 Huntington Avenue, Boston, MA 02116

(Address of principal Executive Offices)

 

(Registrant’s Telephone Number, Including Area Code): 617-421-5400

 

Not Applicable

(Former name, former address if changed since last report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

o

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

 

o

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

 

o

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

 

 

o

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 


 

The Registrant hereby amends its Form 8-K of April 22, 2005, and its Form 8-K/A of July 5, 2005, to provide additional information regarding a transaction involving the Company’s Sonesta Beach Resort Key Biscayne, and to provide proforma financial information.

 

ITEM 2.01: COMPLETION OF ACQUISITION OR DISPOSITION OF ASSETS

 

On April 19, 2005, Sonesta Beach Resort Limited Partnership (“SBRLP”), a wholly owned subsidiary of Sonesta International Hotels Corporation, completed the transfer of the land and improvements of Sonesta Beach Resort, in Key Biscayne, Florida to a Partnership between SBRLP and affiliates of Fortune International, a Miami-based real estate development and brokerage firm (“Fortune”). SBRLP is a 50% limited partner in the new partnership, and affiliates of Fortune are the general partner and a limited partner, together owning a 50% interest in the Partnership.

 

The new Partnership, SBR-Fortune Associates, LLLP (“SBR-Fortune”), expects that the existing hotel, which has operated under the “Sonesta” flag since it opened in 1969, will remain in operation through July 2006, when it will be demolished and construction of a new 5-star resort is expected to begin. It is anticipated that the new condominium hotel will include 300-plus luxury hotel and residential condominium units, restaurants, meeting/function space, a spa, and other facilities customary to the finest resorts in South Florida.

 

On April 19, 2005, Sonesta transferred the land and improvements of Sonesta Beach Resort into SBR-Fortune, which is valuing the land at $120 million.  Sonesta received $30,011,000 in cash at the closing, and, in addition, an existing mortgage of $29,967,000 on the property was paid off by SBR-Fortune.  Sonesta also received a $60,022,000 equity position in SBR-Fortune. This value will be paid to Sonesta out of the first available net proceeds of the sale of condominium units, after repayment of (construction) debt.  Thereafter, Fortune will receive its initial $30 million equity contribution, plus any additional equity contributions it was required to make to develop the new resort.  Subsequent to Fortune fully recovering its investment, profits will be split equally.  Sonesta is not required to fund any additional equity beyond the contribution of the land.  Fortune will have the sole responsibility for arranging financing and completing construction of the new resort.

 

As of April 19, 2005, Sonesta will continue to operate the hotel under a token ($1 per year) lease with SBR-Fortune, until such time that SBR-Fortune is ready to commence construction on the new resort, which the parties currently estimate to be in August 2006.  Sonesta will be entitled to receive all operating profits during this period.  Sonesta does have the right to cease operations of the existing hotel on 60 days notice, in case revenues are insufficient to cover all expenses.

 

The cost of closing the existing hotel, including severance payments to employees, funding of vacation pay, pension obligations and other costs, will be paid by SBR-Fortune, up to a maximum of $4 million.  The Company believes this will be sufficient to cover these costs.

 

Once the new condominium hotel is completed, the non-guestroom areas of the hotel, which include restaurants, bars, meeting space, office and storage facilities, etc., (the “Hotel Lot”) will be transferred to a newly formed partnership, of which Sonesta is a 70% partner and general partner, and Fortune is a 30% limited partner.  Sonesta will operate the Hotel Lot, and will offer a rental program to the buyers of condo units that wish to make their units available for rental to the public.

 

1


 

ITEM 9.01: FINANCIAL STATEMENTS AND EXHIBITS

 

SONESTA INTERNATIONAL HOTELS CORPORATION

x $1,000

 

PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)

 

March 31, 2005

 

ASSETS

 

 

 

Historical

 

Adjustments

 

Pro forma
consolidated
balance sheet

 

Current assets:

 

 

 

 

 

 

 

Cash

 

$

5,220

 

$

30,011

(a)

$

29,530

 

 

 

 

 

(129

)(b)

 

 

 

 

 

 

(5,572

)(c)

 

 

 

 

 

 

 

 

 

 

Restricted cash

 

907

 

(363

)(b)

544

 

Accounts and notes receivable:

 

9,492

 

—

 

9,492

 

Prepaid and current deferred taxes

 

4,973

 

(4,274

)(d)

699

 

Inventories

 

1,107

 

—

 

1,107

 

Prepaid expenses and other

 

2,641

 

(250

)(a)

2,391

 

 

 

 

 

 

 

 

 

Total current assets

 

24,340

 

19,423

 

43,763

 

 

 

 

 

 

 

 

 

Long-term receivables and advances

 

8,777

 

—

 

8,777

 

 

 

 

 

 

 

 

 

Long-term deferred taxes

 

—

 

4,728

(d)

4,728

 

 

 

 

 

 

 

 

 

Property and equipment, at cost:

 

 

 

 

 

 

 

Land

 

9,102

 

—

 

9,102

 

Buildings

 

57,861

 

—

 

57,861

 

Furniture and equipment

 

42,280

 

—

 

42,280

 

Leasehold improvements

 

7,576

 

—

 

7,576

 

 

 

116,819

 

—

 

116,819

 

Less accumulated depreciation and amortization

 

40,968

 

—

 

40,968

 

Net property and equipment

 

75,851

 

—

 

75,851

 

 

 

 

 

 

 

 

 

Other long-term assets

 

2,561

 

—

 

2,561

 

 

 

 

 

 

 

 

 

 

 

$

111,529

 

$

24,151

 

$

135,680

 

 

2


 

SONESTA INTERNATIONAL HOTELS CORPORATION

x $1,000

 

PROFORMA CONDENSED CONSOLIDATED BALANCE SHEET

(Unaudited)

 

March 31, 2005

 

LIABILITIES, STOCKHOLDER’S EQUITY

 

 

 

Historical

 

Adjustments

 

Pro forma
consolidated
balance sheet

 

 

 

 

 

 

 

 

 

Current Liabilities:

 

 

 

 

 

 

 

Accounts payable

 

$

4,048

 

$

—

 

$

4,048

 

Advance deposits

 

2,450

 

—

 

2,450

 

Federal, foreign and state income taxes

 

597

 

6,335

(d)

6,932

 

Accrued liabilities

 

7,714

 

(492

)(b)

7,222

 

Total current liabilities

 

14,809

 

5,843

 

20,652

 

 

 

 

 

 

 

 

 

Long-term debt

 

69,600

 

(29,967

)(a)

34,061

 

 

 

 

 

(5,572

)(c)

 

 

 

 

 

 

 

 

 

 

Deferred federal and state income taxes

 

5,881

 

(5,881

)(d)

—

 

 

 

 

 

 

 

 

 

Other non-current liabilities

 

5,872

 

—

 

5,872

 

 

 

 

 

 

 

 

 

Finance obligation

 

—

 

59,728

(a)

59,728

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stockholders’ equity:

 

 

 

 

 

 

 

Common stock

 

4,882

 

—

 

4,882

 

Retained earnings

 

22,538

 

—

 

22,538

 

Treasury shares

 

(12,053

)

—

 

(12,053

)

Total common stockholders’ equity

 

15,367

 

—

 

15,367

 

 

 

 

 

 

 

 

 

 

 

$

111,529

 

$

24,151

 

$

135,680

 

 

3


 

SONESTA INTERNATIONAL HOTELS CORPORATION

x $1,000

 

PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

 

For the three month period ended March 31, 2005

 

 

 

Historical

 

Adjustments

 

Pro forma
consolidated
statement of
income

 

Revenues:

 

 

 

 

 

 

 

Rooms

 

$

14,272

 

$

—

 

$

14,272

 

Food and beverage

 

6,667

 

—

 

6,667

 

Management, license and service fees

 

1,715

 

—

 

1,715

 

Parking, telephone and other

 

2,474

 

—

 

2,474

 

Total revenues

 

25,128

 

—

 

25,128

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

Costs and operating expenses

 

10,646

 

—

 

10,646

 

Advertising and promotion

 

1,859

 

—

 

1,859

 

Administrative and general

 

4,246

 

(128

)(a)

4,118

 

Human resources

 

402

 

—

 

402

 

Maintenance

 

1,395

 

—

 

1,395

 

Rentals

 

2,569

 

—

 

2,569

 

Property taxes

 

674

 

—

 

674

 

Depreciations and amortization

 

1,988

 

(38

)(a)

1,950

 

 

 

23,779

 

(166

)

23,613

 

Operating income

 

1,349

 

166

 

1,515

 

 

 

 

 

 

 

 

 

Other income (deductions):

 

 

 

 

 

 

 

Interest expense

 

(1,524

)

656

(a)

(748

)

 

 

 

 

120

(b)

 

 

 

 

 

 

 

 

—

 

Interest income

 

138

 

183

(c)

321

 

Foreign exchange loss

 

(10

)

—

 

(10

)

 

 

(1,396

)

959

 

(437

)

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

(47

)

1,125

 

1,078

 

 

 

 

 

 

 

 

 

Federal, foreign and state income tax provision (benefit)

 

(4,150

)

404

(d)

(3,746

)

 

 

—

 

—

 

—

 

Net income

 

$

4,103

 

$

721

 

$

4,824

 

 

 

 

 

 

 

 

 

Basis earnings per share of common stock

 

$

1.11

 

$

0.19

 

$

1.30

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding

 

3,698

 

3,698

 

3,698

 

 

4


 

SONESTA INTERNATIONAL HOTELS CORPORATION

x $1,000

 

PROFORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

 

For the year ended December 31, 2004

 

 

 

Historical

 

Adjustments

 

Pro forma
consolidated
statement of
income

 

Revenues:

 

 

 

 

 

 

 

Rooms

 

$

51,291

 

$

—

 

$

51,291

 

Food and beverage

 

25,602

 

—

 

25,602

 

Management, license and service fees

 

4,319

 

—

 

4,319

 

Parking, telephone and other

 

8,695

 

—

 

8,695

 

Total revenues

 

89,907

 

—

 

89,907

 

 

 

 

 

 

 

 

 

Costs and expenses:

 

 

 

 

 

 

 

Costs and operating expenses

 

40,923

 

—

 

40,923

 

Advertising and promotion

 

7,203

 

—

 

7,203

 

Administrative and general

 

15,354

 

(616

)(a)

14,738

 

Human resources

 

1,588

 

—

 

1,588

 

Maintenance

 

5,596

 

—

 

5,596

 

Rentals

 

7,098

 

—

 

7,098

 

Property taxes

 

2,483

 

—

 

2,483

 

Depreciations and amortization

 

8,160

 

(150

)(a)

8,010

 

 

 

88,405

 

(766

)

87,639

 

Operating income

 

1,502

 

766

 

2,268

 

 

 

 

 

 

 

 

 

Other income (deductions):

 

 

 

 

 

 

 

Interest expense

 

(6,249

)

2,715

(a)

(3,055

)

 

 

 

 

479

(b)

 

 

 

 

 

 

 

 

 

 

Interest income

 

389

 

732

(c)

1,121

 

Foreign exchange loss

 

10

 

—

 

10

 

Gain on sales of assets

 

172

 

—

 

172

 

 

 

(5,678

)

3,926

 

(1,752

)

 

 

 

 

 

 

 

 

Income (loss) before income taxes

 

(4,176

)

4,692

 

516

 

 

 

 

 

 

 

 

 

Federal, foreign and state income tax provision (benefit)

 

426

 

1,741

(d)

(1,991

)

 

 

 

 

(4,158

)(e)

 

 

 

 

—

 

—

 

—

 

Net income (loss)

 

$

(4,602

)

$

7,109

 

$

2,507

 

 

 

 

 

 

 

 

 

Basis earnings (loss) per share of common stock

 

$

(1.24

)

$

1.92

 

$

0.68

 

 

 

 

 

 

 

 

 

Weighted average number of shares outstanding

 

3,698

 

3,698

 

3,698

 

 

5


 

NOTES TO THE PROFORMA FINANCIAL STATEMETNS (Unaudited)

 

Basis of presentation

 

The proforma balance sheet at March 31, 2005 presents the historical balance sheet of the Registrant and is adjusted to reflect the transfer of the land and improvements of the Sonesta Beach Resort Key Biscayne, assuming this transaction took place on March 31, 2005.

 

The proforma statements of operations for the year ended December 31, 2004, and for the three month period ended March 31, 2005, present the historical statements of income of the Registrant for the year ended December 31, 2004 and the three month period ended March 31, 2005, both of which are adjusted to reflect the transfer of the land and improvements of Sonesta Beach Resort Key Biscayne, and the temporary operations of the resort by the Company under the lease with SBR-Fortune, assuming this transaction took place on January 1, 2004 and January 1, 2005, respectively.

 

In accordance with Statement of Financial Accounting Standards (SFAS) no. 66 “Accounting for Sales of Real Estate”, the Company has deferred gain recognition on the property transfer due to its continuing involvement, and has recognized the cash received and the debt which was repaid as a finance obligation.

 

Since the Company continues to operate the existing Hotel, all the Hotel’s assets remain included in fixed assets, and continue to be depreciated.  All revenues and continuing expenses of the hotel operations are included in the statement of operations.

 

For federal and state income tax purposes, the Company will report a taxable gain in 2005 of approximately $29.7 million on this transaction, but will have the benefit of loss carryforwards from 2003 and 2004 of approximately $10.6 million.

 

Adjustments to proforma balance sheets

 

Following is a summary of the required adjustments to the proforma balance sheet at March 31, 2005:

 

a)              To record the cash proceeds and the repayment of the mortgage loan secured by the Sonesta Beach Resort Key Biscayne, reduced by the write off of unamortized loan costs, as a finance obligation.

 

b)             Payment of accrued and deferred interest on the Key Biscayne mortgage loan.

 

c)              To record the additional principal repayment of $5,572,000 on the mortgage loan secured by the Royal Sonesta Hotel Boston (Cambridge).

 

d)             To record the federal and state tax due for 2005 on the taxable income resulting from the transaction.

 

6


 

Adjustments to proforma statements of operations

 

Following is a description of the required adjustments to the proforma statements of operations for the three month period ending March 31, 2005 and the year ending December 31, 2004:

 

a)              Reduction of interest expense due to the repayment of the mortgage loan secured by the Sonesta Beach Resort Key Biscayne; reduction of depreciation expense due to the reduction in replacements of furniture, fixtures and equipment; and a reduction of administrative and general expenses, since the partnership into which the hotel assets were transferred will bear the expense of insuring the property.

 

b)             Reduction of the interest expense on the mortgage loan secured by Royal Sonesta Hotel Boston (Cambridge) because of the additional principal repayment.

 

c)              To record income earned from the investment of the cash proceeds.

 

d)             To record federal and state tax expense on the increase in income.

 

e)              To record a federal and state tax benefit for the 2003 and 2004 net operating losses, for which previously valuation allowances were recorded, since it was uncertain that the Company would realize a benefit for these losses.

 

SIGNATURE

 

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 thereunto duly authorized

 

 

 

SONESTA INTERNATIONAL HOTELS CORPORATION

 

 

 

By:

 /S/ Boy van Riel

 

 

 

Boy van Riel

 

 

Vice President and Treasurer

 

 

August 16, 2005

 

7