-----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, PCd1NVUwcxohL6Y3HFzZER33BuKZ/exu9cCvedRhDWID1FWs1EJyaM/VZYImzTc5 Uly2FUNUvAa+KmhzZc9Flg== 0000950153-96-000275.txt : 19960514 0000950153-96-000275.hdr.sgml : 19960514 ACCESSION NUMBER: 0000950153-96-000275 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960513 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DOUBLETREE CORP CENTRAL INDEX KEY: 0000923472 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS, ROOMING HOUSE, CAMPS & OTHER LODGING PLACES [7000] IRS NUMBER: 860762415 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-24392 FILM NUMBER: 96561897 BUSINESS ADDRESS: STREET 1: 410 N 44TH ST STREET 2: STE 700 CITY: PHOENIX STATE: AR ZIP: 85008 BUSINESS PHONE: 6022206666 10-Q 1 QUARTERLY REPORT FOR THE QUARTER ENDED 3/31/96 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q /X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the period ended March 31, 1996. / / Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. For the transition period from to . ------ ------ Commission File Number: 0-24392 DOUBLETREE CORPORATION (Exact name of registrant as specified in its charter) DELAWARE 86-0762415 (State or other jurisdiction of (IRS Employer Identification Number) incorporation or organization) 410 NORTH 44TH STREET, SUITE 700, 85008 PHOENIX, ARIZONA (Zip code) (Address of principal executive offices) (602) 220-6666 (Registrant's telephone number, including area code) NONE - -------------------------------------------------------------------------------- Former name, former address and former fiscal year, if changed since last report Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate the number of shares outstanding of each of the issuer's classes of stock, as of the last practicable date.
Class Outstanding at April 15, 1996 ----------------------------- ----------------------------- Common Stock ($.01 par value) 22,111,936 shares
2 DOUBLETREE CORPORATION FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1996 TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE ---- Item 1. Financial Statements: Consolidated Balance Sheets as of March 31, 1996 and December 31, 1995 1 Consolidated Statements of Operations for the three months ended March 31, 1996 and 1995 2 Consolidated Statements of Cash Flows for the three months ended March 31, 1996 and 1995 3 Notes to Consolidated Financial Statements 4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 8 PART II. OTHER INFORMATION Item 1. Legal Proceedings 11 Item 6. Exhibits and Reports on Form 8-K 11 SIGNATURES 11
3 PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS DOUBLETREE CORPORATION AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands except share data)
(UNAUDITED) DECEMBER 31, MARCH 31, 1995 1996 ----------- ---------- ASSETS Cash and cash equivalents $ 32,652 $ 19,024 Accounts receivable, net 17,907 16,533 Current portion of notes and other receivables 390 390 Other 2,694 3,285 --------- -------- Total current assets 53,643 39,232 --------- -------- Notes and other receivables, net of current portion 24,185 26,500 Investments 5,070 25,910 Hotel properties, net 10,572 10,429 Leasehold improvements and office equipment, net 3,968 3,923 Management contracts, net 49,634 49,472 Goodwill, net 15,431 15,330 Deferred costs and other assets 604 3,311 --------- -------- $ 163,107 $174,107 ========= ======== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable and accrued expenses $ 25,072 $ 22,587 Leases payable 6,744 8,295 Accrued interest payable 23 27 Current portion of notes payable 672 5,000 Income taxes payable 585 2,070 --------- -------- Total current liabilities 33,096 37,979 Deferred income taxes 15,625 16,641 --------- -------- 48,721 54,620 --------- -------- Commitments and contingencies Stockholders' equity: Common stock, $.01 par value. Authorized 100,000,000 shares; issued and outstanding 22,099,186 and 22,109,686 shares at December 31, 1995 and March 31, 1996, respectively 221 221 Additional paid-in capital 100,462 100,598 Unrealized gain on marketable equity securities 22 92 Unearned employee compensation (211) (194) Retained earnings 13,892 18,770 --------- -------- 114,386 119,487 --------- -------- $ 163,107 $174,107 ========= ========
See accompanying notes to consolidated financial statements. 1 4 DOUBLETREE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands except per share data) (unaudited)
THREE MONTHS ENDED MARCH 31, ---------------------- 1995 1996 ------- ------- Revenues: Management and franchise fees $ 6,826 $ 8,294 Reimbursements 10,700 10,679 Hotel revenues 29,667 41,853 Other fees and income 1,397 1,575 ------- ------- Total revenues 48,590 62,401 ------- ------- Operating costs and expenses: General and administrative 3,860 4,643 Reimbursable expenses 10,249 10,064 Hotel expenses 17,252 23,906 Lease expense 10,773 14,736 Depreciation and amortization 1,020 1,467 Interest expense 69 81 ------- ------- Total operating costs and expenses 43,223 54,897 ------- ------- Income before income taxes 5,367 7,504 Provision for income taxes 1,722 2,626 ------- ------- Net income $ 3,645 $ 4,878 ======= ======= Earnings per share $ 0.17 $ 0.22 ======= ======= Weighted average common and common equivalent shares outstanding 21,910 22,584 ======= =======
See accompanying notes to consolidated financial statements. 2 5 DOUBLETREE CORPORATION AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands) (Unaudited)
THREE MONTHS ENDED MARCH 31, ------------------------ 1995 1996 -------- -------- Cash flows from operating activities: Net income $ 3,645 $ 4,878 Adjustments to reconcile net income to net cash provided (used) by operations: Provision for bad debts 12 97 Depreciation and amortization 1,020 1,467 Equity in (earnings) loss of partnerships (119) 36 Other non-cash expenses 70 17 Deferred income taxes 753 1,016 Net withdrawals from restricted cash 515 -- (Increase) decrease in accounts receivable (4,826) 1,317 (Increase) decrease in other assets 294 (486) Increase (decrease) in current liabilities (1,832) 555 -------- -------- Net cash provided (used) by operations (468) 8,897 -------- -------- Cash flows from investing activities: Purchases of furniture and equipment (517) (287) Investments in partnerships and ventures (658) (20,919) Distributions from partnerships and ventures 75 113 Investments in management contracts -- (665) Deposits in hotels to obtain management contracts 250 (250) Loans to owners of managed hotels (4,531) (2,355) Purchase of marketable equity securities (139) -- Increase in deferred costs -- (2,626) -------- -------- Net cash used by investing activities (5,520) (26,989) -------- -------- Cash flow from financing activities: Proceeds from exercise of common stock options -- 136 Cash distributions to stockholders (2) -- Proceeds from borrowings -- 5,000 Principal payments on notes payable (19) (672) -------- -------- Net cash provided (used) by financing activities (21) 4,464 -------- -------- Decrease in cash and cash equivalents (6,009) (13,628) Cash and cash equivalents at beginning of year 23,169 32,652 -------- -------- Cash and cash equivalents at end of period $ 17,160 $ 19,024 ======== ======== Supplemental cash flow information: Cash paid for interest $ 63 $ 77 ======== ======== Cash paid for income taxes $ 81 $ 125 ======== ========
See accompanying notes to consolidated financial statements. 3 6 DOUBLETREE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) BASIS OF PRESENTATION Doubletree Corporation (the Company) was incorporated on May 19, 1994 as a Delaware corporation to succeed to all the assets, liabilities and business operations of Doubletree Partners (formerly Guest Quarters Hotel Partnership (GQHP)). At March 31, 1996, the Company managed 86 hotels, leased 52 hotels, owned one hotel and had franchise agreements with 33 hotels. On February 27, 1996, the Company acquired a 100% interest in RFS, Inc. (RFS Management) in a transaction accounted for as a pooling of interests. Accordingly, the consolidated financial statements have been restated to include RFS Management as if it had been acquired at the beginning of the earliest period presented. In the opinion of management, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of only normal recurring adjustments, primarily eliminations of all significant intercompany transactions and accounts) necessary to present fairly the financial position, results of operations and cash flows for the periods presented. These consolidated financial statements should be read in conjunction with the consolidated financial statements and the related disclosures contained in the Company's Annual Report on Form 10-K for the year ended December 31, 1995, as filed with the Securities and Exchange Commission. The results of operations for the three months ended March 31, 1996 are not necessarily indicative of the results to be expected for the full year. (2) ACQUISITION OF RFS MANAGEMENT On February 27, 1996, the Company issued 2,727,811 shares of its common stock in exchange for all of the outstanding stock of RFS Management (a privately held hotel operator) in a transaction accounted for as a pooling of interests. RFS Management operates 50 hotels (44 hotels are leased and managed, 4 are leased only and 2 are managed). RFS Hotel Investors, Inc. (REIT) is the lessor for all leased hotels. Effective January 1, 1995, RFS Management was a Subchapter S Corporation for income tax purposes and, therefore, was not generally liable for income taxes for the year ending December 31, 1995. 4 7 DOUBLETREE CORPORATION AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) The following table presents total revenues and net income of the merged companies. Additionally, the table includes unaudited 1995 pro forma net income and earnings per share. The 1995 pro forma adjustments exclude business combination expenses, provide for additional tax expense due to the exclusion of the business combination expenses and increase the provision for taxes for RFS Management to a 35% rate which is the Company's 1995 effective tax rate.
Three Months Ended Year Ended December 31, March 31, ----------------------- --------- Actual Actual Pro forma Pro forma 1993 1994 1995 1995 ---- ---- ---- ---- Total revenues Doubletree $36,048 $ 78,173 $ 107,956 $ 21,801 RFS Management 12,159 62,610 122,816 26,789 ------- -------- --------- -------- Total revenues, as reported $48,207 $140,783 $ 230,772 $ 48,590 ======= ======== ========= ======== Net income Doubletree $ 4,368 $ 12,578 $ 15,662 $ 3,109 RFS Management 565 657 2,129 536 ------- -------- --------- -------- Net income, as reported $ 4,933 $ 13,235 17,791 3,645 ========= ======== Business combination expenses 2,565 -- Pro forma additional income tax expense (1,620) (155) --------- -------- Pro forma net income $ 18,736 $ 3,490 ========= ======== Pro forma earnings per share $ 0.84 $ 0.16 ========= ======== Weighted average shares outstanding 22,219 21,910 ========= ========
The Company incurred pre-tax expenses in the fourth quarter of 1995 related to the business combination of approximately $2,565,000. The costs incurred include legal, professional and accounting fees, due diligence and certain other costs necessary to complete the transaction. Certain of the franchisors required the payment of an application fee, as a result of the merger, of approximately $2,600,000 which is being amortized over the terms of the respective franchise agreements. (3) HOTEL PROPERTIES As of March 31, 1996 the Company leased 52 hotels, of which 48 are leased from the REIT under leases (Percentage Leases) which require the payment of rent equal to the greater of fixed base rent or percentage rent based on a percentage of gross room revenue, food revenue and beverage revenue (if the hotel offers food and beverage service). The Percentage Leases are all cross defaulted with one another. The remaining four leases require the payment of base rent and additional rent based on the gross revenues of the hotels. All hotel leases are operating leases. (4) DEFERRED COSTS AND OTHER ASSETS At March 31, 1996 deferred costs and other assets primarily consist of franchise application fees paid in connection with the acquisition of RFS Management which are amortized over the lives of the franchise agreements. The initial cost of obtaining franchise licenses for hotels leased by RFS Management are paid by the owner. Accumulated amortization at March 31, 1996 is $3,000. 5 8 (5) INVESTMENTS As of March 31, 1996 the Company and its subsidiaries have general and/or limited partnership interests in 16 partnerships. Eleven of the partnerships own hotels while the others own retail or industrial properties. Six of the partnership interests were acquired in the acquisition of RFS Management. The Company's percentage of ownership in such partnerships at March 31, 1996 ranges from less than 1% to 49.9%. The investments include an investment in a partnership that is a majority owned subsidiary of the REIT. These partnership interests are convertible into common stock of the REIT. The Company, through RFS Management, purchased 973,684 shares of the REIT's convertible preferred stock for $19 per share or approximately $18,500,000. This investment is recorded at cost as there is no ready market for these securities. The convertible preferred stock will pay a fixed annual dividend of $1.45 per share and is convertible on a one-for-one share basis at the end of seven years. Separately, the REIT granted the Company a 10-year right of first refusal to manage and lease future hotels acquired or developed by the REIT. The Company has committed to the REIT to maintain $15,000,000 of net worth in RFS Management. Investments also include 35,000 shares of REIT common stock recorded at market value. The unrealized gain is reflected in stockholders' equity as these securities are classified as available-for-sale. Investments consist of the following (in thousands):
DECEMBER 31, March 31, 1995 1996 ---- ---- REIT convertible preferred stock $ -- $ 18,500 REIT common shares 538 608 Hotel partnerships 3,746 4,050 Candlewood 1,098 3,064 Other (312) (312) -------- -------- $ 5,070 $ 25,910 ======== ========
(6) NOTE PAYABLE The Company has a credit facility, due December 16, 1998, which allows the Company to borrow up to $30,000,000, $5,000,000 of which was outstanding as of March 31, 1996. The Company repaid $3,000,000 subsequent to March 31, 1996. Interest is payable monthly at LIBOR plus a variable rate between 0.675% and 1.50%. The credit facility requires the payment of a quarterly commitment fee that ranges between 0.20% and 0.375% of the unused balance. (7) STOCKHOLDERS' EQUITY In January 1995, RFS Management issued 12 restricted shares of RFS Management common stock to certain of its employees. These shares vest ratably over a four year period from the date of issuance. The estimated fair market value of these shares at issuance was $281,000. The shares were exchanged for approximately 36,500 Company common shares, subject to the same restrictions, in connection with the acquisition of RFS Management. (8) STOCK OPTIONS The Company has one stock option plan, the 1994 Equity Participation Plan (the Plan), in which options may be granted to key personnel to purchase shares of the Company's common stock at a price not less than the current market price at the date of the grant. The options vest annually and ratably over the four-year period from the date of grant and expire ten years after the grant date. Subsequent to March 31, 1996, the Company's shareholders approved an increase in the maximum number of shares available under the Plan from 2,000,000 to 3,300,000. As of March 31, 1996, options for 1,810,375 shares, net of terminations, have been granted at prices ranging from $13.00 to $28.88, of which 234,250 are currently exercisable. The Plan also provides for the issuance of stock appreciation rights, restrictive stock or other awards, none of which have been granted. 6 9 (9) EARNINGS PER SHARE For the three month periods ended March 31, 1995 and 1996, earnings per share has been calculated assuming the 2,727,811 shares issued to acquire RFS Management were outstanding the entire period. The common equivalent shares include employee stock options which have been deemed exercised for the purpose of computing earnings per share, based on the average market price during the period. 7 10 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion of the results of operations and financial condition should be read in conjunction with the accompanying financial statements and notes thereto and the Company's Annual Report on Form 10-K, as filed with the Securities and Exchange Commission. RESULTS OF OPERATIONS Three Months Ended March 31, 1996 Compared With Three Months Ended March 31, 1995 Total revenues increased $13.8 million or 28% to $62.4 million for the three months ended March 31, 1996 compared to $48.6 million for the three months ended March 31, 1995. Revenues from management and franchise fees increased $1.5 million or 22% in 1996 due to fees from new contracts (net of contracts lost) of $0.7 million, higher incentive fees of $0.7 million and increased fees from comparable hotels of $0.4 million. Reduced fees from renegotiated contracts and management contracts which converted to franchise contracts offset the management and franchise fee revenue growth by $0.3 million. Revenues from reimbursements decreased slightly in 1996 as compared to 1995. The margin from purchasing and other support services included in reimbursable activity (reimbursable revenues less reimbursable expenses) increased $0.2 million to $0.6 million, reflecting the continued implementation of purchasing agreements that lower the price of products to the hotel owner while concurrently providing the Company with a fee in return for negotiating and managing the program. Hotel revenues increased $12.2 million in 1996 or 41% principally due to an increase in the net number of owned and leased hotels in 1996 as compared to 1995. Hotel revenues for 1996 reflect the net addition of seven leased hotels since the comparable period of 1995. The margin on hotel results (hotel revenues less hotel expenses and lease expenses) increased from $1.6 million to $3.2 million reflecting the net addition of these properties since the prior year and the improvement in operating margin from 5.5% to 7.7%. Other fees and income increased $0.2 million in 1996 or 13% resulting principally from an increase in interest earned on loans to hotel owners in conjunction with obtaining management contracts and an increase in franchise application fees. General and administrative expenses increased $0.8 million in 1996 or 20% primarily due to the addition of employees resulting from the general growth of the Company, the formation of the franchise development team and an increase in legal costs. Depreciation and amortization increased $0.4 million primarily due to increased amortization associated with investments in management contracts. Interest expense increased nominally. The provision for income taxes reflects a 35% effective tax rate for the three months ended March 31, 1996 compared to a 32% effective tax rate for 1995. The lower effective tax rate for 1995 reflects the election of RFS Management to be taxed as a Subchapter S Corporation for income tax purposes and, therefore, it was generally not subject to federal income taxes. Had RFS Management been included in the 1995 consolidated income tax returns of the Company, the provision for income taxes for the three months ended March 31, 1995 would have increased by $0.2 million. Net income and earnings per share for the three months ended March 31, 1996 were $4.9 million and $0.22, respectively, compared to $3.6 million and $0.17, respectively, in 1995. With a normalized effective tax rate for RFS Management in 1995 of 35%, net income would have increased from 1995 to 1996 by 40% from $3.5 million and per share earnings would have increased 38% from $0.16. LIQUIDITY AND CAPITAL RESOURCES As of March 31, 1996, the Company's balance sheet reflected $1.3 million of working capital which represents a decrease of $19.3 million from December 31, 1995 principally attributable to the Company's $18.5 million investment in the 973,684 shares of the REIT's convertible preferred stock (the REIT Preferred Shares). The Company generated cash 8 11 from operating activities of $8.9 million during the three months ended March 31, 1996 as compared to using $0.5 million of cash for operations during the same period of 1995. The increase was due to increases in earnings and expenses not requiring the use of cash, improved timing of the collection of certain accounts receivable, namely incentive fees, and an increase in accounts payable. The Company requires capital primarily for making selective investments in the underlying hotels that it manages as a means of obtaining and enhancing the profitability of management contracts. The Company used $27.0 million of cash for investing activities in the 1996 quarter of which $18.5 million was contributed to RFS Management and subsequently invested in the REIT Preferred Shares. In connection with the acquisition of RFS Management, the Company also paid $2.6 million in application fees to certain of the franchisors of the hotels leased by RFS Management which will be amortized over the terms of the respective franchise agreements. Additionally, during the quarter, the Company made loans to owners of hotels in conjunction with obtaining new management contracts of $2.4 million and invested $2.4 million in hotel partnerships and ventures, of which $2.1 million was contributed to Candlewood. The Company has committed to contribute up to $15 million to Candlewood, of which $3.3 million had been funded as of March 31, 1996. The balance of $11.7 million is anticipated to be contributed during the next twelve months. Such contributions will be used for general corporate purposes as well as funding a portion of the development/construction costs of certain hotels. In connection with the acquisition of RFS, the credit facility was amended allowing the Company to maintain borrowings outstanding under the credit facility of up to $30.0 million through December 1997, and up to $12.5 million from December 1997 until scheduled maturity in December 1998. All borrowings outstanding under the credit facility are due in December 1998. Subsequent to December 31, 1995, the Company borrowed $5.0 million under the credit facility, of which $3.0 million was repaid in April 1996. Annually, the Company can request an extension of the maturity date by one year. Accordingly, should the Company request an extension in 1996 and the Lender agrees to such extension, the initial reduction in the commitment would be extended to 1998 and the maturity date would be December 1999. The credit facility provides for automatic reductions in the amount of the facility by 100% of the net proceeds from the sale or other disposition of certain types of loans or investments or the issuance of certain debt obligations and by 50% of the new proceeds from the issuance of certain equity securities. The Lender waived this required reduction with respect to both the initial public offering and the offering in June 1995. The agreement governing the credit facility contains numerous affirmative and negative covenants with which the Company must comply and includes restrictions on the types of business in which the Company may engage, the payment of dividends, investments, the incurrence of debt and liens, mergers and consolidations and the disposition of assets. Such agreement also contains covenants which require the Company to maintain certain financial ratios and meet other criteria. The obligations of the Company under the credit facility are secured by all notes receivable and the stock of certain significant subsidiaries. The Lender waived any restrictions imposed by such covenants with respect to the transactions with RFS Management and the REIT. The Company has guaranteed certain mortgages, leases and construction bonds up to $6.5 million ($2.9 million of which is collateralized by letters of credit). The Company has committed to lend up to $8.9 million, $7.7 million to the owner of the Doubletree Hotel in Somerset, New Jersey, of which $1.4 million is for renovations and $6.3 million is to provide bridge financing, if needed. The remaining loan commitments are to three other hotels primarily for renovations. The Company is committed, subject to certain conditions, to contributing an additional $3.1 million to an investment partnership formed for the purposes of acquiring hotels. The Company through its corporate subsidiaries serves as the general partner of certain limited partnerships which own hotels. Debt of these partnership is typically secured by first mortgages on the properties and generally is nonrecourse to the partners. However, such corporate subsidiaries are liable, as a general partner, for the recourse obligations of the partnerships they manage. No assurance can be given that the Company will not be required to fund additional commitments. 9 12 Certain hotel management contracts provide that if a hotel does not achieve agreed-upon performance levels, the Company may elect or may be required to fund any performance shortfalls for a specified period of time. In general, if the Company elects not to fund the shortfall, the hotel owner may elect to terminate the management contract. If the Company elects to fund the shortfall, but performance standards are not achieved at the expiration of the funding period, the owner may elect to terminate the management contract at that time. The Company has not been required to fund any shortfalls during the three year and three month period ended March 31, 1996. On April 30, 1996, as amended May 7, 1996, the Company filed a registration statement on Form S-3 with the Securities and Exchange Commission. The Registration Statement proposes to offer 3,682,000 shares of common stock (excluding up to 552,300 additional shares which may be sold by the Company to cover over-allotments) of which 400,000 shares are being sold by the Company and 3,282,000 shares are being sold by certain stockholders of the Company. Management believes that a combination of its existing cash and cash equivalents, net cash to be provided from operations, its borrowing ability under the credit facility and the net proceeds expected to be received from the sale of shares recently registered to be sold will be sufficient to fund its operations and capital outlays. 10 13 PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The Company is not party to any litigation, other than routine litigation incidental to the business of the Company. The Company believes that such litigation is not material to the business of the Company, either individually or in the aggregate. The Company has received a letter claiming that its Club Hotels by Doubletree brand hotel name infringes on another hotel chain's brand name. Based in part on the advice of outside counsel, the Company believes that the claim is unfounded. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K The Company filed a current report on Form 8-K dated February 27, 1996 that described the acquisition of all of the outstanding common stock of RFS, Inc. (a privately held hotel operator) in exchange for 2,727,811 shares of the Company's common stock. The business combination was accounted for as a pooling-of-interests. As a result, the consolidated financial statements of Doubletree Corporation have been restated to include RFS, Inc. as if it had been acquired as of the beginning of the earliest period presented. The separate audited financial statements of RFS, Inc. for the three years ended December 31, 1995, were filed with the Report on Form 8-K. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Doubletree Corporation May 10, 1996 By /s/ ____________________________ William L. Perocchi Executive Vice President, Chief Financial Officer and Treasurer (Principal Financial Officer and Duly Authorized Officer) 11 EX-27 2 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 19,024 608 43,607 (184) 0 39,232 18,158 (3,806) 174,107 37,979 5,000 0 0 221 119,266 174,107 2,236 62,401 2,111 54,719 0 97 81 7,504 2,626 4,878 0 0 0 4,878 0.22 0.22
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