-----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, SQ1q2XZXYUkr0XsS7yJdaBVplplY+H9ye73F2mnFp+UnqNKGf+NCu8qKVJ25rzM3 guaXBYiIz+zExFroXYsC4w== 0000950134-97-006135.txt : 19970815 0000950134-97-006135.hdr.sgml : 19970815 ACCESSION NUMBER: 0000950134-97-006135 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19970814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: FELCOR SUITE HOTELS INC CENTRAL INDEX KEY: 0000923603 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 752541756 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-14236 FILM NUMBER: 97660259 BUSINESS ADDRESS: STREET 1: 545 E JOHN CARPENTER FREEWAY STREET 2: SUITE 1300 CITY: IRVING STATE: TX ZIP: 75062 BUSINESS PHONE: 2144444900 MAIL ADDRESS: STREET 1: 545 E JOHN CARPENTER FREEWAY STREET 2: SUITE 1300 CITY: IRVING STATE: TX ZIP: 75062 8-K/A 1 AMENDMENT NO. 1 TO FORM 8-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K\A AMENDMENT NO. 1 CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (Date of earliest event reported): AUGUST 13, 1997 (June 30, 1997) FELCOR SUITE HOTELS, INC. (Exact name of registrant specified in its charter) MARYLAND 0-24250 72-2541756 (State or other jurisdiction (Commission (IRS Employer of incorporation) File Number) Identification No.) 545 E. JOHN CARPENTER FREEWAY, SUITE 1300, IRVING, TEXAS 75062 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (972) 444-4900 2 ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS. (a) FINANCIAL STATEMENTS OF BUSINESSES ACQUIRED. Audited financial statements are included for the Sheraton Acquisition Hotels, including a combined balance sheet for the Sheraton Acquisition Hotels as of December 31, 1996 and March 31, 1997 (unaudited) the related combined statements of revenues over expenses, and combined statements of cash flows for the year ended December 31, 1996 and three months ended March 31, 1997 and 1996 (unaudited) and the combined statements of equity for the year ended December 31, 1996 and the three months ended March 31, 1997 (unaudited). (b) PRO FORMA FINANCIAL INFORMATION. The unaudited pro forma statements of operations of the Company and the Lessee are presented as if (i) the acquisitions of all hotels owned by the Company at December 31, 1996, (ii) those hotels acquired in 1997 through July 31, 1997 (collectively the "Hotels"), (iii) the equity offerings consummated during 1996 and 1997 and (iv) related transactions had occurred as of January 1, 1996 and all of the Hotels had been leased to the Lessee pursuant to the Percentage Leases. The unaudited consolidated balance sheet of the Company is presented as if the acquisition of the hotels acquired subsequent to March 31, 1997 and the consummation of the June 1997 equity offering and related transactions had occurred on March 31, 1997. (c) EXHIBITS.
Exhibit Number Description of Exhibit - ------ ---------------------- 23.1 -- Consent of Coopers and Lybrand, L.L.P.
2 3 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 hereunto duly authorized. Dated: August 13, 1997 FELCOR SUITE HOTELS, INC. By: /s/ Lester C. Johnson ----------------------------- Lester C. Johnson Vice President/Controller 3 4 INDEX TO FINANCIAL STATEMENTS
PAGE ---- SHERATON ACQUISITION HOTELS Combined audits on five Sheraton hotels in which the Company acquired on June 30, 1997. Report of Independent Accountants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Combined Balance Sheets as of December 31, 1996 and March 31, 1997 (unaudited) . . . . . . . . . . . . . 7 Combined Statements of Revenues Over Expenses for the Year Ended December 31, 1996 and Three Month Period Ended March 31, 1997 and 1996 (unaudited) . . . . . . . . . . . . . . . . . . . 8 Combined Statements of Equity for the Year Ended December 31, 1996 and the Three Months Ended March 31, 1997 (unaudited) . . . . . . . . . . . . . . . . . . . . . . . . 9 Combined Statements of Cash Flows for the Year Ended December 31, 1996 and the Three Months Ended March 31, 1997 and 1996 (unaudited) . . . . . . . . . . . . . . . . . . . . 10 Notes to Combined Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 PRO FORMA INFORMATION (unaudited) FelCor Suite Hotels, Inc. Pro Forma Consolidated Statements of Operations for the Three Months Ended March 31, 1997 and the Year Ended December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16 FelCor Suite Hotels, Inc. Pro Forma Consolidated Balance Sheet -- March 31, 1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 DJONT Operations, L.L.C. Pro Forma Condensed Consolidated Statements of Operations for the Three Months Ended March 31, 1997 and the Year Ended December 31, 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
4 5 SHERATON ACQUISITION HOTELS COMBINED FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1996 5 6 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Shareholders of FelCor Suite Hotels, Inc. We have audited the accompanying combined balance sheet of the Sheraton Acquisition Hotels (described in Note 1) as of December 31, 1996 and the related combined statements of revenues over expenses, equity and cash flows for the year then ended. These financial statements are the responsibility of the management of the Sheraton Hotels. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 audit provides a reasonable basis for our opinion. The accompanying financial statements were prepared for the purpose of complying with the rules and regulations of the Securities and Exchange Commission as described in Note 1 to the financial statements and are not intended to be a complete presentation of the Sheraton Acquisition Hotels. In our opinion, the financial statements referred to above present fairly, in all material respects, the combined financial position of the Sheraton Acquisition Hotels as of December 31, 1996 and the combined results of their operations and their cash flows for the year then ended in conformity with generally accepted accounting principles. COOPERS & LYBRAND L.L.P. Dallas, Texas July 25, 1997 6 7 SHERATON ACQUISITION HOTELS COMBINED BALANCE SHEETS December 31, 1996 and March 31, 1997 (unaudited)
December 31, March 31, ASSETS 1996 1997 ------------ ----------- (unaudited) Investment in hotel properties: Land $ 14,204,043 $ 14,204,043 Buildings 104,813,832 104,813,832 Furniture, fixtures and equipment 36,500,301 37,781,812 Construction in progress 1,253,760 914,692 ------------------ ---------------- 156,771,936 157,714,379 Accumulated depreciation (26,036,362) (28,056,900) ------------------ ---------------- Net investment in hotel properties 130,735,574 129,657,479 Cash and cash equivalents 2,085,720 2,134,703 Accounts receivable 3,468,670 4,549,611 Inventories 1,311,533 1,349,121 Deferred expenses, net 227,512 216,100 Prepaids and other 231,151 610,206 ------------------ ---------------- $ 138,060,160 $ 138,517,220 ================== ================ LIABILITIES AND PARTNERS' EQUITY Book overdrafts 2,482,262 939,329 Notes payable 58,614,625 58,593,387 Accounts payable, trade 2,225,498 1,553,496 Accrued expenses 11,718,846 2,461,286 ------------------ ---------------- Total liabilities 75,041,231 73,547,498 Partners' equity 63,018,929 64,969,722 ------------------ ---------------- Total liabilities and partners' equity $ 138,060,160 $ 138,517,220 ================== ================
The accompanying notes are an integral part of these financial statements. 7 8 SHERATON ACQUISITION HOTELS COMBINED STATEMENTS OF REVENUES OVER EXPENSES for the year ended December 31, 1996 and the three-months ended March 31, 1997 and 1996 (unaudited)
Year Ended Three Months Ended December 31, March 31, 1996 1997 1996 ---------------- --------------- -------------- (unaudited) (unaudited) Gross operating revenue: Suite revenue $ 50,006,866 $ 12,738,260 $ 13,651,405 Food and beverage revenue 22,047,844 5,608,403 5,539,458 Other 3,355,113 764,299 800,923 ---------------- --------------- -------------- Total revenue 75,409,823 19,110,962 19,991,786 ---------------- --------------- -------------- Expenses: Property and operating costs and expenses 18,031,160 3,986,668 4,478,691 General and administrative 7,732,418 1,638,561 1,877,982 Advertising and promotion 5,568,429 955,067 1,517,414 Utilities 2,551,498 616,165 595,372 Management fees 3,028,753 767,639 Food and beverage expenses 17,173,032 4,319,357 4,372,333 Depreciation and amortization 7,703,605 2,031,950 1,832,726 Real estate and personal property taxes and property insurance 3,688,624 953,947 934,189 Interest expense 5,702,959 1,410,432 1,406,790 Other expenses 2,567,203 489,853 506,674 ---------------- --------------- -------------- Total expenses 73,747,681 17,169,639 17,522,171 ---------------- --------------- -------------- Revenues over expenses $ 1,662,142 $ 1,941,323 $ 2,469,615 ================ =============== ==============
The accompanying notes are an integral part of these financial statements. 8 9 SHERATON ACQUISITION HOTELS COMBINED STATEMENTS OF EQUITY for the year ended December 31, 1996 and the three months ended March 31, 1997 (unaudited) Balance, December 31, 1995 $ 62,540,022 Revenues over expenses 1,662,142 Net distributions (1,183,235) -------------- Balance, December 31, 1996 63,018,929 Revenues over expenses (unaudited) 1,941,323 Net contributions (unaudited) 9,470 -------------- Balance, March 31, 1997 (unaudited) $ 64,969,722 ==============
The accompanying notes are an integral part of these financial statements. 9 10 SHERATON ACQUISITION HOTELS COMBINED STATEMENTS OF CASH FLOWS for the year ended December 31, 1996 and the three months ended March 31, 1997 and 1996 (unaudited)
Year Ended Three Months Ended December 31, March 31, 1996 1997 1996 ---------------- ----------------- ----------------- (unaudited) (unaudited) Cash flows from operating activities: Revenues over expenses $ 1,662,142 $ 1,941,323 $ 2,469,615 Adjustments to reconcile revenues over expenses to net cash provided by operating activities: Depreciation and amortization 7,703,605 2,031,950 1,832,726 Loss on disposal of furniture, fixtures, and equipment 335,500 Changes in assets and liabilities: Accounts receivable (268,019) (1,080,941) (1,335,332) Inventories 143,731 (37,588) 10,707 Prepaid expenses and other assets 62,438 (379,055) (1,808,117) Accounts payable, trade (1,180,350) (672,002) (1,243,485) Accrued expenses 257,701 742,440 2,646,260 ---------------- ----------------- ----------------- Net cash provided by operating activities 8,716,748 2,546,127 2,572,374 Cash flows from investing activities: Additions to hotel properties (8,903,038) (942,443) (388,608) ---------------- ----------------- ----------------- Cash flows from financing activities: Change in book overdrafts 1,081,005 (1,542,933) 1,092,179 Proceeds from issuance of notes payable 2,050,176 2,031,718 Payments on long-term notes payable (1,091,303) (21,238) (192,408) Net contributions from (distributions to) affiliate (1,183,235) 9,470 (4,347,753) ---------------- ----------------- ----------------- Net cash provided by (used in) financing 856,643 (1,554,701) (1,416,264) activities ---------------- ----------------- ----------------- Net increase in cash and cash equivalents 670,353 48,983 767,502 Cash and cash equivalents at beginning of periods 1,415,367 2,085,720 1,415,367 ---------------- ----------------- ----------------- Cash and cash equivalents at end of periods $ 2,085,720 $ 2,134,703 $ 2,182,869 ================ ================= ================= Supplemental disclosure of cash flow information: Cash paid during the year for interest $ 6,477,565 $ 1,529,829 $ 1,587,012 ================ ================= =================
The accompanying notes are an integral part of these financial statements. 10 11 SHERATON ACQUISITION HOTELS NOTES TO COMBINED FINANCIAL STATEMENTS 1. ORGANIZATION AND BASIS OF PRESENTATION The Sheraton Acquisition Hotels (collectively the "Hotels") consists of the following hotels:
Year Property Hotel Brand Hotel Location Opened Dallas Park Central Sheraton Dallas, Texas 1983 Phoenix Crescent Sheraton Phoenix, Arizona 1986 Atlanta Gateway Sheraton Atlanta, Georgia 1986 Atlanta Galleria Sheraton Atlanta, Georgia 1990 Gateway O'Hare Sheraton Chicago, Illinois 1994
The accompanying combined financial statements of the Hotels have been presented on a combined basis because the Hotels are the subject of a business combination with FelCor Suite Hotels, Inc. (the "Company"), a Maryland corporation established to acquire equity interests in existing hotel properties. The Hotels are owned by ITT Sheraton Corporation or its wholly-owned subsidiaries (collectively "Sheraton" or "Management"). These financial statements have been prepared to show the operations and financial position of the Hotels, substantially all of whose assets and operations were sold to the Company as of June 30, 1997. The Hotels are included in Sheraton's consolidated federal tax return. The Company has qualified as a REIT and does not pay any federal income taxes. Accordingly, the combined financial statements have been presented on a pretax basis. The accompanying unaudited interim combined financial statements as of March 31, 1997 and 1996 have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Those financial statements reflect, in the opinion of management, all adjustments necessary for a fair presentation of the interim combined financial statements. All such adjustments are of a normal and recurring nature. 11 12 SHERATON ACQUISITION HOTELS NOTES TO COMBINED FINANCIAL STATEMENTS, CONTINUED 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES INVESTMENT IN HOTEL PROPERTIES Hotel properties are recorded at cost and are depreciated using the straight-line method over the estimated useful lives of the assets; 40 years for buildings, 15 years for building improvements and 5-15 years for furniture, fixtures and equipment. Major renewals, betterments and improvements are capitalized. For the Atlanta Galleria hotel, which was developed by Sheraton, property and equipment includes cost and property taxes incurred during the construction period, as well as closing and certain other costs directly related to the development and construction of the hotels. At each reporting period, management of the Sheraton Acquisition Hotels reviews the carrying value of each hotel property to determine if facts and circumstances exist which would suggest that the investment in the hotel property may be impaired or that the depreciation period should be modified. Management does not believe that there are any current facts or circumstances indicating impairment of any of its investments in hotel properties at December 31, 1996. Expenditures for maintenance and repairs are charged against operations as incurred. Upon disposition, both the asset and accumulated depreciation accounts are relieved and the related gain or loss is credited or charged to the income statement. CASH AND CASH EQUIVALENTS All highly liquid debt investments with a maturity of three months or less when purchased are considered to be cash equivalents. REPLACEMENT RESERVE FUND A replacement reserve fund is maintained by the Sheraton Gateway O'Hare Hotel for the primary purpose of funding the replacement of, and additions to furniture, fixtures, equipment, and other capital assets. An amount equal to 3% of the gross revenues of the hotel, as defined by the loan agreement, is required to be deposited into the replacement reserve fund on a monthly basis. The balance as of December 31, 1996 was $394,164. INVENTORIES Inventories, consisting predominately of room linens and foods and beverages, are stated at the lower of cost (generally, first-in, first-out) or market. DEFERRED EXPENSES Deferred expenses at December 31, 1996 consist of deferred financing fees of the Sheraton Gateway O'Hare hotel of $292,112 net of accumulated amortization of $64,600. Amortization of these fees is computed using the interest method over the maturity of the loan. REVENUE RECOGNITION Revenue is recognized as earned. Ongoing credit evaluations are performed and an allowance for potential credit losses is provided against the portion of accounts receivable which is estimated to be uncollectible. Such losses have been within management's expectations. 12 13 SHERATON ACQUISITION HOTELS NOTES TO COMBINED FINANCIAL STATEMENTS, CONTINUED 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amounts of cash and cash equivalents, trade receivables, other assets, accounts payable and amounts included in accruals meeting the definition of a financial instrument approximate fair value due to the short maturity of these instruments. The carrying amount of the Hotels' debt approximates fair value due to the Hotels' ability to obtain such borrowings at comparable rates. CONCENTRATION OF CREDIT RISK The Hotels maintain cash in bank deposit accounts which, at times, may exceed federally insured limits. The Hotels have not experienced any losses in such accounts. 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 reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. NOTES PAYABLE Long-term debt consists of the following at December 31, 1996: Note payable, collateralized by a mortgage on substantially all property and equipment of the Sheraton Atlanta Gateway Hotel, interest at 8.50%, principal due in annual payments of $750,000 beginning in 1996 and the remaining balance payable upon maturity in April 2000. $ 16,250,000 Note payable, collateralized by a mortgage on substantially all property and equipment of the Sheraton Dallas Park Central Hotel, interest at 10%, principal due upon maturity in March 1998. 28,000,000 Note payable, collateralized by a mortgage on substantially all property and equipment of the Sheraton Gateway O'Hare Hotel, interest rate at 8.0625%, principal due upon maturity in August 14,343,387 2001. 21,238 -------------- Obligations under capital lease $ 58,614,625 ==============
13 14 SHERATON ACQUISITION HOTELS NOTES TO COMBINED FINANCIAL STATEMENTS, CONTINUED 3. NOTES PAYABLE, CONTINUED Principal maturities of notes payable at December 31, 1996, are as follows: 1997 $ 771,238 1998 28,750,000 1999 750,000 2000 14,000,000 Thereafter 14,343,387 ------------------- $ 58,614,625 ===================
INTEREST RATE SWAP In accordance with the Loan Agreement with Credit Lyonnais, the Sheraton Gateway O'Hare Hotel ("Chicago") entered into an interest rate exchange agreement. The purpose of the agreement is to limit the interest that Chicago is required to pay under their mortgage note with Credit Lyonnais.
SWAP RATE SWAP RATE RECEIVED (VARIABLE) SWAP NOTATION AMOUNT PAID (FIXED) AT DECEMBER 31, 1996 MATURITY $14,343,387 7.64% 8.047% September 1, 2001
The differences to be paid or received by Chicago under the terms of the swap agreement are accrued as interest rate changes and recognized as an adjustment to interest expense. Chicago does not hold this instrument for trading purposes. 4. RELATED-PARTY TRANSACTIONS MANAGEMENT AGREEMENT The Hotels have entered into management agreements with Sheraton to manage and operate the Hotels. Management fee expense, which is discretionary and is not based upon contracts, was $3,028,753 for the year ended December 31, 1996. 14 15 SHERATON ACQUISITION HOTELS NOTES TO COMBINED FINANCIAL STATEMENTS, CONTINUED 5. COMMITMENTS AND CONTINGENCIES Certain equipment is leased under noncancellable operating lease agreements expiring at varying intervals through March 2000. Minimum future rental payments required under these leases as of December 31, 1996 are as follows: 1997 $ 235,590 1998 98,127 1999 67,063 2000 9,541 ---------------- $ 410,321 ================
15 16 FELCOR SUITE HOTELS, INC. PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED, AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE DATA) The following unaudited Pro Forma Consolidated Statements of Operations of FelCor Suite Hotels, Inc. (the "Company") are presented as if the acquisitions of all hotels owned by the Company at December 31, 1996, those hotels acquired in 1997 through July 31, 1997 (collectively the "Hotels"), the equity offerings consummated during 1996 and 1997, including the June 1997 equity offering and related transactions had occurred as of January 1, 1996 and the Hotels had all been leased to DJONT Operations, L.L.C. or consolidated subsidiaries (the "Lessee") pursuant to Percentage Leases. Such pro forma information is based in part upon the Consolidated Statements of Operations of the Company, Pro Forma Statements of Operations of DJONT Operations, L.L.C. (the "Lessee") and the historical Statements of Operations of the acquired hotels. In management's opinion, all adjustments necessary to reflect the effects of these transactions have been made. The following unaudited Pro Forma Consolidated Statements of Operations for the periods presented are not necessarily indicative of what actual results of operations of the Company would have been assuming such transactions had been completed on January 1, 1996, nor does it purport to represent the results of operations for future periods.
YEAR ENDED DECEMBER 31, 1996 ---------------------------- PRO FORMA ADJUSTMENTS --------------------- 1996 ACQUISITIONS 1997 ACQUISITIONS HISTORICAL AND PREFERRED AND EQUITY COMPANY STOCK OFFERING(A) OFFERINGS(B) TOTAL ------- ----------------- ------------ ------------ Statement of Operations Data: Revenues: Percentage lease revenue (C) . . . . $ 97,950 $ 12,127 $ 59,636 $169,713 Income from unconsolidated partnerships (D) . . . . . . . . . 2,010 805 308 3,123 Other income (E) . . . . . . . . . . 984 (984) ---------- --------- --------- -------- Total revenues . . . . . . . . . . 100,944 11,948 59,944 172,836 ---------- --------- --------- -------- Expenses: General and administrative (F) . . . 1,819 76 1,408 3,303 Depreciation (G) . . . . . . . . . . 26,544 4,559 13,604 44,707 Taxes, insurance and other (H) . . . 13,897 1,292 8,767 23,956 Interest expense (I) . . . . . . . . 9,803 6,100 8,287 24,190 Minority interest in Operating Partnership (J) . . . . . . . . . 5,590 (417) 820 5,993 Minority interest in other partnerships (K) . . . . . . . . . 236 236 ---------- --------- --------- -------- Total expenses . . . . . . . . . . 57,653 11,610 33,122 102,385 ---------- --------- --------- -------- Net income . . . . . . . . . . . . . . . 43,291 338 26,822 70,451 Preferred dividends (L) . . . . . . . . . 7,734 4,064 11,798 ---------- --------- --------- -------- Net income applicable to common shareholders (M) . . . . . . . . . $ 35,557 $ (3,726) $ 26,822 $ 58,653 ========== ========= ========= ======== Net income per common share (M) . . . . . $ 1.54 $ 1.62 ---------- -------- Weighted average number of common shares outstanding . . . . . . . . . . . 23,076 36,237 ========== ========
16 17 FELCOR SUITE HOTELS, INC. PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED, AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE DATA)
THREE MONTHS ENDED MARCH 31, 1997 --------------------------------- PRO FORMA 1997 HISTORICAL ACQUISITIONS AND COMPANY EQUITY OFFERINGS TOTAL ------- ---------------- ----- Statement of Operations Data: Revenues: Percentage lease revenue (C) . . . . . . . . . $35,370 $14,259 $49,629 Income from unconsolidated partnerships (D) . 1,127 (285) 842 Other income (E) . . . . . . . . . . . . . . . 95 (95) ------- -------- ------- Total revenues . . . . . . . . . . . . . . . 36,592 13,879 50,471 ------- -------- ------- Expenses: General and administrative (F) . . . . . . . . 972 100 1,072 Depreciation (G) . . . . . . . . . . . . . . . 10,417 2,755 13,172 Taxes, insurance and other (H) . . . . . . . . 5,207 2,188 7,395 Interest expense (I) . . . . . . . . . . . . . 5,601 1,421 7,022 Minority interest in Operating Partnership (J) 1,417 191 1,608 Minority interest in other partnerships (K) . 21 88 109 ------- -------- ------- Total expenses . . . . . . . . . . . . . . . 23,635 6,743 30,378 ------- -------- ------- Net income . . . . . . . . . . . . . . . . . . . . 12,957 7,136 20,093 Preferred dividends (L) . . . . . . . . . . . . . . 2,949 2,949 ------- -------- ------- Net income applicable to common shareholders (M) . $10,008 $ 7,136 $17,144 ======= ======== ======= Net income per common share (M) . . . . . . . . . . $ 0.39 $ 0.47 ======= ======= Weighted average number of common shares outstanding . . . . . . . . . . . . . . . . . 25,459 36,526 ======= =======
17 18 NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS (A) Represents pro forma adjustments to reflect the historical results of operations prior to the acquisition by the Company for those hotels acquired by the Company in 1996 as adjusted to give effect to the provisions of the Percentage Leases; the effect of the preferred stock offering prior to the date issued in May 1996; and other pro forma adjustments reflecting additional overhead expenses and interest expenses. Those hotels acquired during 1996 and the dates of acquisition are as follows: Anaheim, California, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . . . . January 3, 1996 Baton Rouge, Louisiana, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . . January 3, 1996 Birmingham, Alabama, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . . . . January 3, 1996 Deerfield Beach, Florida, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . January 3, 1996 Ft. Lauderdale, Florida, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . . January 3, 1996 Miami (Airport), Florida, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . January 3, 1996 Milpitas, California, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . . . January 3, 1996 Phoenix (Camelback), Arizona, Embassy Suites . . . . . . . . . . . . . . . . . . . . January 3, 1996 South San Francisco, California, Embassy Suites . . . . . . . . . . . . . . . . . . . January 3, 1996 Lexington, Kentucky, Hilton . . . . . . . . . . . . . . . . . . . . . . . . . . . . . January 10, 1996 Piscataway, New Jersey, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . . January 10, 1996 Beaver Creek (Avon-Vail), Colorado, Embassy Suites . . . . . . . . . . . . . . . . . February 20, 1996 Boca Raton, Florida, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . . . . February 28, 1996 LAX (El Segundo), California, Embassy Suites . . . . . . . . . . . . . . . . . . . . March 27, 1996 Mandalay, California, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . . . May 8, 1996 Napa, California, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . . . . . May 8, 1996 Deerfield, Illinois, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . . . . June 20, 1996 San Rafael (Marin County), California, Embassy Suites . . . . . . . . . . . . . . . . July 18, 1996 Parsippany, New Jersey, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . . August 1, 1996 Charlotte, North Carolina, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . August 1, 1996 Indianapolis, Indiana, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . . . August 1, 1996 Atlanta-Buckhead, Georgia, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . October 17, 1996 Kingston Plantation (Myrtle Beach), South Carolina, Embassy Suites . . . . . . . . . December 5, 1996
(B) Represents pro forma adjustments to reflect the historical results of operations prior to the acquisition by the Company for those hotels acquired by the Company in 1997 through July 31, to give effect to the provisions of the Percentage Leases; the effect of the Company's common stock offering in the first quarter of 1997; the common stock offering in June 1997; and other pro forma adjustments reflecting additional overhead expenses and interest expense. Those hotels acquired during 1997 and dates of acquisition are as follows: Omaha, Nebraska, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . . . . . . February 1, 1997 Bloomington, Minnesota, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . . February 1, 1997 Atlanta (Perimeter Center), Georgia, Embassy Suites . . . . . . . . . . . . . . . . . February 1, 1997 Kansas City (Country Club Plaza), Missouri, Embassy Suites . . . . . . . . . . . . . February 1, 1997 Overland Park, Kansas, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . . . February 1, 1997 Raleigh, North Carolina, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . . February 1, 1997 San Antonio (Northwest), Texas, Embassy Suites . . . . . . . . . . . . . . . . . . . February 1, 1997 Austin (Airport North), Texas, Embassy Suites . . . . . . . . . . . . . . . . . . . . February 1, 1997 Covina, California, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . . . . February 1, 1997 Secaucus, New Jersey, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . . . February 1, 1997 Los Angeles (LAX Airport North), California, Embassy Suites . . . . . . . . . . . . . February 18, 1997 Dana Point, California, Hilton Inn . . . . . . . . . . . . . . . . . . . . . . . . . February 21, 1997 Troy, Michigan, Doubletree Guest Suites . . . . . . . . . . . . . . . . . . . . . . . March 20, 1997 Austin (Downtown), Texas, Doubletree Guest Suites . . . . . . . . . . . . . . . . . . March 20, 1997 Baltimore Washington International Airport (BWI), Maryland, Doubletree Guest Suites . March 20, 1997 San Antonio (Airport), Texas, Embassy Suites . . . . . . . . . . . . . . . . . . . . May 16, 1997
18 19 Nashville (Airport), Tennessee, Doubletree Guest Suites . . . . . . . . . . . . . . June 5, 1997 Dallas (Market Center), Texas, Embassy Suites . . . . . . . . . . . . . . . . . . . June 30, 1997 Syracuse, New York, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . . . . June 30, 1997 Atlanta (Gateway), Georgia, Sheraton . . . . . . . . . . . . . . . . . . . . . . . . June 30, 1997 Atlanta (Galleria), Georgia , Sheraton Suites . . . . . . . . . . . . . . . . . . . . June 30, 1997 Chicago (O'Hare), Illinois, Sheraton Suites . . . . . . . . . . . . . . . . . . . . . June 30, 1997 Dallas (Park Central), Texas, Sheraton . . . . . . . . . . . . . . . . . . . . . . . June 30, 1997 Phoenix (Crescent), Arizona, Sheraton . . . . . . . . . . . . . . . . . . . . . . . June 30, 1997 Lake Buena Vista (Disney World), Florida, Doubletree Guest Suites . . . . . . . . . July 31, 1997 Raleigh/Durham, North Carolina, Doubletree Guest Suites . . . . . . . . . . . . . . July 31, 1997 Tampa (Rocky Point), Florida, Doubletree Guest Suites . . . . . . . . . . . . . . . July 31, 1997
(C) Represents historical or pro forma lease revenue from the Lessee to the Company calculated by applying the contractual or anticipated rent provisions of the Percentage Leases to the historical suite revenues, food and beverage rents and food and beverage revenues of all the Hotels which are consolidated for financial reporting purposes. The income from unconsolidated partnerships is included as a separate line item in the accompanying Pro Forma Statement of Operations as described in Note D. Historical suite revenues for the time period prior to the acquisition by the Company, the date of acquisition, the contractual or anticipated pro forma Percentage Lease revenue for the time period prior to acquisition by the Company and a summary of contractual or anticipated Percentage Lease terms follows (in thousands): 19 20
Suite Revenue for the Period Prior to Acquisition by the Company -------------- Date of Three Months The Year Ended Description of Property Acquisition 3-31-97 12-31-96 ----------------------- ----------- ------- -------- Consolidated Hotels: Bloomington, MN, Doubletree Guest Suites February 1, 1997 $ 372 $ 6,342 Omaha, NE, Doubletree Guest Suites February 1, 1997 332 4,754 Los Angeles (LAX North), Doubletree Guest Suites February 18, 1997 830 6,263 Dana Point, CA, Doubletree Guest Suites February 21, 1997 832 3,716 Troy, MI, Doubletree Guest Suites March 20, 1997 1,489 6,342 Austin, TX, Doubletree Guests March 20, 1997 1,366 5,696 Baltimore (BWI), MD, Doubletree Guest Suites March 20, 1997 1,167 6,236 Nashville, TN, Doubletree Guest Suites June 5, 1997 691 3,164 Dallas Market Center, TX, Doubletree Guest Suites June 30, 1997 2,007 7,716 Syracuse, NY, Embassy Suites June 30, 1997 1,336 5,572 Dallas (Park Central), TX, Sheraton June 30, 1997 3,289 13,520 Phoenix (Crescent), AZ, Sheraton June 30, 1997 3,338 9,581 Chicago (O'Hare), IL, Sheraton Gateway Suites June 30, 1997 2,155 8,973 Atlanta (Airport), GA, Sheraton Gateway Hotel June 30, 1997 2,196 9,841 Atlanta (Galleria), GA, Sheraton Suites June 30, 1997 1,759 8,091 Lake Buena Vista, FL, Doubletree Guest Suites July 31, 1997 2,688 8,446 Raleigh, NC, Doubletree Guest Suites July 31, 1997 1,398 5,327 Tampa (Rocky Point), FL, Doubletree Guest Suites July 31, 1997 1,864 5,499 --------- ----------- Total consolidated hotels $29,109 $125,079 ======= ======== Unconsolidated Partnership Hotels: Atlanta (Perimeter Center), GA, Embassy Suites February 1, 1997 $ 600 $ 8,085 Austin (Airport North), TX, Embassy Suites February 1, 1997 528 7,542 Covina, CA, Embassy Suites February 1, 1997 417 4,053 Overland Park, KS, Embassy Suites February 1, 1997 403 5,624 Kansas City (Plaza), MO, Embassy Suites February 1, 1997 547 7,604 Raleigh, NC, Embassy Suites February 1, 1997 624 7,592 San Antonio (NW I-10), TX, Embassy Suites February 1, 1997 337 5,614 Secaucus, NJ, Embassy Suites February 1, 1997 722 9,816 San Antonio (Airport), TX, Embassy Suites May 16, 1997 1,882 7,235 --------- ----------- Total unconsolidated hotel partnerships $ 6,060 $ 63,165 ======== ========= Percentage Lease Revenue for the Period Prior to Acquisition by the Company -------------- Date of Three Months The Year Ended Description of Property Acquisition 3-31-97 12-31-96 ----------------------- ----------- ------- -------- Consolidated Hotels: Bloomington, MN, Doubletree Guest Suites February 1, 1997 $ 146 $ 3,049 Omaha, NE, Doubletree Guest Suites February 1, 1997 145 2,285 Los Angeles (LAX North), Doubletree Guest Suites February 18, 1997 341 2,591 Dana Point, CA, Doubletree Guest Suites February 21, 1997 400 1,395 Troy, MI, Doubletree Guest Suites March 20, 1997 791 3,316 Austin, TX, Doubletree Guests March 20, 1997 710 2,828 Baltimore (BWI), MD, Doubletree Guest Suites March 20, 1997 516 2,943 Nashville, TN, Doubletree Guest Suites June 5, 1997 267 1,320 Dallas Market Center, TX, Doubletree Guest Suites June 30, 1997 952 3,583 Syracuse, NY, Embassy Suites June 30, 1997 499 2,130 Dallas (Park Central), TX, Sheraton June 30, 1997 1,631 6,748 Phoenix (Crescent), AZ, Sheraton June 30, 1997 1,634 4,025 Chicago (O'Hare), IL, Sheraton Gateway Suites June 30, 1997 1,263 5,265 Atlanta (Airport), GA, Sheraton Gateway Hotel June 30, 1997 979 4,548 Atlanta (Galleria), GA, Sheraton Suites June 30, 1997 783 3,817 Lake Buena Vista, FL, Doubletree Guest Suites July 31, 1997 1,499 4,467 Raleigh, NC, Doubletree Guest Suites July 31, 1997 704 2,623 Tampa (Rocky Point), FL, Doubletree Guest Suites July 31, 1997 999 2,703 ---------- ----- Total consolidated hotels $14,259 $59,636 ======= ======= Unconsolidated Partnership Hotels: Atlanta (Perimeter Center), GA, Embassy Suites February 1, 1997 $ 271 $ 3,889 Austin (Airport North), TX, Embassy Suites February 1, 1997 245 3,792 Covina, CA, Embassy Suites February 1, 1997 154 1,293 Overland Park, KS, Embassy Suites February 1, 1997 173 2,641 Kansas City (Plaza), MO, Embassy Suites February 1, 1997 236 3,594 Raleigh, NC, Embassy Suites February 1, 1997 296 3,693 San Antonio (NW I-10), TX, Embassy Suites February 1, 1997 117 2,487 Secaucus, NJ, Embassy Suites February 1, 1997 268 4,082 San Antonio (Airport), TX, Embassy Suites May 16, 1997 831 3,113 ------ ------ Total unconsolidated hotel partnerships $ 2,591 $28,584 ======== =======
Annual Percentage Lease Terms --------------------------------------- Suite First Second Revenue Description of Property Tier Tier Breakpoint ----------------------- ---- ---- ---------- Consolidated Hotels: Bloomington, MN, Doubletree Guest Suites 17% 65% $2,468 Omaha, NE, Doubletree Guest Suites 17% 65% $1,703 Los Angeles (LAX North), Doubletree Guest Suites 17% 65% $3,176 Dana Point, CA, Doubletree Guest Suites 17% 65% $2,211 Troy, MI, Doubletree Guest Suites 17% 65% $1,935 Austin, TX, Doubletree Guests 17% 65% $1,961 Baltimore (BWI), MD, Doubletree Guest Suites 17% 65% $2,536 Nashville, TN, Doubletree Guest Suites 17% 65% $1,585 Dallas Market Center, TX, Doubletree Guest Suites 17% 65% $3,069 Syracuse, NY, Embassy Suites 17% 65% $3,227 Dallas (Park Central), TX, Sheraton 17% 65% $4,997 Phoenix (Crescent), AZ, Sheraton 17% 65% $5,175 Chicago (O'Hare), IL, Sheraton Gateway Suites 17% 65% $1,602 Atlanta (Airport), GA, Sheraton Gateway Hotel 17% 65% $4,215 Atlanta (Galleria), GA, Sheraton Suites 17% 65% $3,185 Lake Buena Vista, FL, Doubletree Guest Suites 17% 65% $2,272 Raleigh, NC, Doubletree Guest Suites 17% 65% $1,900 Tampa (Rocky Point), FL, Doubletree Guest Suites 17% 65% $1,939 Total consolidated hotels Unconsolidated Partnership Hotels: Atlanta (Perimeter Center), GA, Embassy Suites 17% 65% $2,949 Austin (Airport North), TX, Embassy Suites 17% 65% $2,378 Covina, CA, Embassy Suites 17% 65% $3,066 Overland Park, KS, Embassy Suites 17% 65% $2,114 Kansas City (Plaza), MO, Embassy Suites 17% 65% $2,976 Raleigh, NC, Embassy Suites 17% 65% $2,711 San Antonio (NW I-10), TX, Embassy Suites 17% 65% $2,474 Secaucus, NJ, Embassy Suites 17% 65% $4,788 San Antonio (Airport), TX, Embassy Suites 17% 65% $3,311 Total unconsolidated hotel partnerships
20 21 (D) Represents historical or pro forma income from unconsolidated partnerships to the Company calculated by applying the Company's pro rata ownership percentage to the net income of the unconsolidated partnerships, computed using the contractual or anticipated rent provisions of the Percentage Leases to the historical suite revenues, food and beverage rents and food and beverage revenues of all the hotels; historical taxes, insurance and other; historical depreciation expense; and historical interest expenses. The Company's cost in excess of net book value of the partnership assets deducted to arrive at income from unconsolidated partnerships. This computation is as follows:
THREE MONTHS ENDED YEAR ENDED MARCH 31, 1997 DECEMBER 31, 1996 -------------- ----------------- Statements of operations information: Percentage lease revenue . . . . . . . . . . . . . . . . . $2,591 $28,584 Depreciation . . . . . . . . . . . . . . . . . . . . . . . 1,190 12,536 Taxes, insurance and other . . . . . . . . . . . . . . . . 448 3,166 Interest expense . . . . . . . . . . . . . . . . . . . . . 986 9,725 ------ ------- Net income (loss) . . . . . . . . . . . . . . . . . . . . (33) 3,157 50 % of income (loss) attributable to the Company . . . . (17) 1,579 Amortization of cost in excess of book value (See Note G) (268) (1,271) ------- -------- Income (loss) from unconsolidated partnerships . . . . . . $ (285) $ 308 ======= ========
(E) Represents elimination of historical interest income earned on excess cash. (F) Pro forma general and administrative expenses represent executive compensation, legal, audit and other expenses. These amounts are based on historical general and administrative expenses as well as probable 1997 expenses. (G) Represents depreciation on the Hotels. Depreciation is computed based on estimated useful lives of 40 years for buildings and improvements and five years for furniture, fixtures and equipment. These estimated useful lives are based on management's knowledge of the properties and the hotel industry in general. The pro forma depreciation adjustment for the hotels acquired in 1997 and for the year ended December 31, 1996 is as follows: 21 22 FelCor Suite Hotels, Inc. Real Estate and Accumulated Depreciation as of March 31, 1997 (in thousands)
Asset Cost --------------------------------------------------- Date of Building and Furniture Description of Property Acquisition Land Improvements and Fixtures Total ----------------------- ----------- ---- ------------ ------------ ----- Consolidated Hotels: Bloomington, MN, Doubletree Guest Suites February 1, 1997 $ 2,038 $ 17,731 $ 612 $ 20,381 Omaha, NE, Doubletree Guest Suites February 1, 1997 1,876 16,328 563 18,767 Los Angeles (LAX North), Doubletree Guest Suites February 18, 1997 2,208 19,205 662 22,075 Dana Point, CA, Doubletree Guest Suites February 21, 1997 1,787 15,545 536 17,868 Troy, MI, Doubletree Guest Suites March 20, 1997 2,957 25,794 887 29,638 Austin, TX, Doubletree Guests March 20, 1997 2,506 21,858 752 25,116 Baltimore (BWI), MD, Doubletree Guest Suites March 20, 1997 2,566 22,381 770 25,717 Nashville, TN Doubletree Guest Suites June 5, 1997 1,080 9,396 324 10,800 Dallas (Market Center), TX Embassy Suites June 30, 1997 2,920 25,404 876 29,200 Syracuse, NY Embassy Suites June 30, 1997 1,750 15,225 525 17,500 Atlanta (Airport), GA Sheraton Suites hotel June 30, 1997 3,000 26,100 900 30,000 Atlanta (Galleria), GA Sheraton hotel June 30, 1997 3,600 31,320 1,080 36,000 Chicago (O'Hare), IL Sheraton Suite hotel June 30, 1997 4,800 41,760 1,440 48,000 Dallas (Park Central), TX Sheraton hotel June 30, 1997 5,000 43,500 1,500 50,000 Phoenix (Crescent), AZ Sheraton hotel June 30, 1997 3,600 31,320 1,080 36,000 Pickett Acquisition (3) Doubletree Guest Suites July 31, 1997 7,230 62,901 2,169 72,300 ------- -------- ------- -------- Total consolidated hotels $48,918 $425,768 $14,676 $489,362 ======= ======== ======= ======== Annual Depreciation Expense ---------------------------------------- Date of Building and Furniture Description of Property Acquisition Improvements and Fixtures Total ----------------------- ----------- ------------ ------------ ----- Consolidated Hotels: Bloomington, MN, Doubletree Guest Suites February 1, 1997 $ 443 $ 122 $ 565 Omaha, NE, Doubletree Guest Suites February 1, 1997 408 113 521 Los Angeles (LAX North), Doubletree Guest Suites February 18, 1997 480 132 612 Dana Point, CA, Doubletree Guest Suites February 21, 1997 389 107 496 Troy, MI, Doubletree Guest Suites March 20, 1997 645 177 822 Austin, TX, Doubletree Guests March 20, 1997 546 150 696 Baltimore (BWI), MD, Doubletree Guest Suites March 20, 1997 560 154 714 Nashville, TN Doubletree Guest Suites June 5, 1997 235 65 300 Dallas (Market Center), TX Embassy Suites June 30, 1997 633 180 813 Syracuse, NY Embassy Suites June 30, 1997 381 105 486 Atlanta (Airport), GA Sheraton Suites hotel June 30, 1997 653 180 833 Atlanta (Galleria), GA Sheraton hotel June 30, 1997 783 216 999 Chicago (O'Hare), IL Sheraton Suite hotel June 30, 1997 1,044 293 1,337 Dallas (Park Central), TX Sheraton hotel June 30, 1997 1,088 305 1,393 Phoenix (Crescent), AZ Sheraton hotel June 30, 1997 784 222 1,006 Pickett Acquisition (3) Doubletree Guest Suites July 31, 1997 1,572 439 2,011 ------- ------ ------- Total consolidated hotels $10,644 $2,960 $13,604 ======= ====== =======
Acquisition Cost Annual Acquisition Acquisition in Excess of Net Amortization Date Cost Book Value of Excess Cost ---- ---- ---------- -------------- Unconsolidated Partnership Hotels: Atlanta (Perimeter Center), GA, Embassy Suites February 1, 1997 $ 9,620 $ 9,199 $ 230 Austin (Airport North), TX, Embassy Suites February 1, 1997 8,965 6,486 162 Covina, CA, Embassy Suites February 1, 1997 2,229 (3,329) (83) Overland Park, KS, Embassy Suites February 1, 1997 5,673 4,928 123 Kansas City (Plaza), MO, Embassy Suites February 1, 1997 8,224 7,161 179 Raleigh, NC, Embassy Suites February 1, 1997 9,739 8,764 219 San Antonio (NW I-10), TX, Embassy Suites February 1, 1997 4,768 3,445 86 Secaucus, NJ, Embassy Suites February 1, 1997 9,001 7,103 178 San Antonio (Airport), TX, Embassy Suites May 16, 1997 6,500 7,085 177 ------- ------- ------- Total unconsolidated hotel partnerships $64,719 $50,842 $1,271 ======= ======= ======
22 23 (H) Pro forma real estate, personal property tax, franchise taxes, property insurance, ground lease and other expenses for the year ended December 31, 1996 represent expenses to be paid by the Partnership. Such amounts were primarily derived from historical amounts paid with respect to the Hotels. The three months ended March 31, 1997 real estate, personal property and franchise taxes, property insurance, and ground lease expenses are computed in a similar manner as the year ended December 31, 1996 pro forma adjustments. A schedule of property taxes and insurance derived from the historical amounts paid for the hotels acquired in 1997 follows:
PROPERTY TAXES PROPERTY INSURANCE -------------- ------------------ 3/31/97 12/31/96 3/31/97 12/31/96 ------- -------- ------- -------- (IN THOUSANDS) DESCRIPTION OF PROPERTY ----------------------- Consolidated Hotels: Bloomington, MN, Doubletree Guest Suites $ 59 $ 707 $ 1 $ 17 Omaha, NE, Doubletree Guest Suites 14 170 1 13 Los Angeles (LAX North), Doubletree Guest Suites 44 320 20 91 Dana Point, CA, Doubletree Guest Suites 16 62 25 13 Troy, MI, Doubletree Guest Suites 91 354 5 21 Austin, TX, Doubletree Guests 97 466 3 13 Baltimore (BWI), MD, Doubletree Guest Suites 38 223 2 7 Lake Buena Vista, FL, Doubletree Guest Suites 99 399 4 16 Raleigh, NC, Doubletree Guest Suites 40 149 4 14 Tampa (Rocky Point), FL, Doubletree Guest Suites 59 237 10 39 Nashville, TN, Doubletree Guest Suites 21 75 2 8 Dallas Market Center, TX, Doubletree Guest Suites 139 505 5 19 Syracuse, NY, Embassy Suites 84 329 5 16 Dallas (Park Central), TX Sheraton 169 595 15 70 Phoenix, AZ, Sheraton Crescent 206 748 7 24 Chicago (O'Hare), IL, Sheraton Gateway Suites 323 1,366 5 20 Atlanta (Airport), GA, Sheraton Gateway Hotel 123 443 6 25 Atlanta (Galleria), GA, Sheraton Suites 96 369 4 16 ------ ------ ---- ---- Total consolidated hotels $1,718 $7,517 $124 $442 ====== ====== ==== ==== Unconsolidated Partnership Hotels: Atlanta (Perimeter Center), GA, Embassy Suites $ 22 $ 172 $ 2 $ 17 Austin (Airport North), TX, Embassy Suites 41 435 2 17 Covina, CA, Embassy Suites 14 (810) 8 96 Overland Park, KS, Embassy Suites 34 370 1 14 Kansas City (Plaza), MO, Embassy Suites 35 359 3 29 Raleigh, NC, Embassy Suites 17 171 1 16 San Antonio (NW I-10), TX, Embassy Suites 35 385 1 15 Secaucus, NJ, Embassy Suites 47 560 2 22 San Antonio (Airport), TX, Embassy Suites 116 418 5 18 ------ ------ ---- ---- Total unconsolidated hotel partnerships $ 361 $2,060 $ 25 $244 ====== ====== ==== ====
(I) Represents both historical and pro forma interest expense computed based on borrowings outstanding for the respective periods multiplied by the applicable fixed or variable interest rate as stated in the applicable debt instruments. The pro forma adjustment assumes additional borrowings against the Chase Line of Credit in the amount of $92.7 million were required in order to finance the 1997 Acquisition Hotel purchases and includes additional interest expense incurred prior to the acquisition date by the Company. The increase in the pro forma debt balance from December 31, 1996 to March 31, 1997 primarily relates to borrowings associated with the renovation of the Company's hotels. The variable interest rates used to calculate the pro forma adjustment to interest expense were the same as the historical rates used to calculate the outstanding borrowings on the Line of Credit for the same respective periods ended December 31, 1996 and March 31, 1997. The period end pro forma debt balances, average interest rates and pro forma interest expense for the year end December 31, 1996 and March 31, 1997 follow: 23 24
DECEMBER 31, 1996 (IN THOUSANDS) -------------- DEBT INTEREST INTEREST BALANCE RATE EXPENSE(1) ------- ---- ---------- Line of Credit . . . . . . . . . . . . . . . . . . . . . $235,396 7.30% $16,419 Term Loan . . . . . . . . . . . . . . . . . . . . . . . . 85,000 7.41% 1,693 Renovation loan . . . . . . . . . . . . . . . . . . . . . 25,000 7.27% 852 Other debt payable . . . . . . . . . . . . . . . . . . . 1,550 6.75% 3,520 Capital leases . . . . . . . . . . . . . . . . . . . . . 12,875 12.50% 1,706 -------- ------- $359,821 $24,190 ======== =======
MARCH 31, 1997 (IN THOUSANDS) -------------- DEBT INTEREST INTEREST BALANCE RATE EXPENSE(1) ------- ---- ----------- Line of Credit . . . . . . . . . . . . . . . . . . . . . $225,260 7.30% $4,232 Term Loan . . . . . . . . . . . . . . . . . . . . . . . . 85,000 7.97% 1,693 Renovation loan . . . . . . . . . . . . . . . . . . . . . 25,000 6.24% 390 Other debt payable . . . . . . . . . . . . . . . . . . . 650 6.00% 320 Capital leases . . . . . . . . . . . . . . . . . . . . . 12,577 12.50% 387 -------- ------ $348,487 $7,022 ======== ======
(1) Pro forma interest expense represents interest expense applicable to the pro forma weighted average borrowings outstanding during the periods presented which at times exceeds the pro forma borrowings outstanding at the end of the periods. (J) Calculated as approximately 7.41% and 7.84% of income before minority interest for pro forma results of operations for the three months ended March 31, 1997 and the year ended December 31, 1996, respectively. (K) Represents historical and pro forma minority interest expense related to 3 hotels in which Doubletree has a 10% limited partnership interest. Minority interest is calculated as 10% of net income computed using the rent provisions of the Percentage Leases to the historical suite revenues; historical taxes, insurance and other; historical depreciation expense; and historical interest expenses. This computation is as follows:
THREE MONTHS ENDED YEAR ENDED MARCH 31, 1997 DECEMBER 31, 1996 -------------- ----------------- Statement of operations information: Percentage lease revenue . . . . . . . . . . . $ 2,017 $9,087 Depreciation . . . . . . . . . . . . . . . . . 671 3,521 Taxes, insurance and other . . . . . . . . . . 251 1,123 Interest expense . . . . . . . . . . . . . . . 217 2,081 ------ ------ Net income (loss) before minority interest . . $ 878 $2,362 ====== ====== Minority interest expense - 10% of Net income $ 88 $ 236 ====== ======
(L) The 1996 pro forma adjustment to preferred dividends assumes the Series A Preferred Stock was issued on January 1, 1996. The adjustment reflects the additional dividends that would have been paid in 1996 and prior to May 6, 1996, the actual date of issuance. (M) Pro forma income applicable to common shareholders excludes the extraordinary charge from write off of deferred financing fees in the amount of approximately $2,354,000 from the "Historical Company" for the year ended December 31, 1996. 24 25 FELCOR SUITE HOTELS, INC. PRO FORMA CONSOLIDATED BALANCE SHEET MARCH 31, 1997 (UNAUDITED, AMOUNTS IN THOUSANDS) The following unaudited Pro Forma Consolidated Balance Sheet of FelCor Suite Hotels, Inc. (the "Company") is presented as if the acquisition of the hotels acquired subsequent to March 31, 1997 and the consummation of the June 1997 equity offering and related transactions had occurred on March 31, 1997. Such pro forma information is based in part upon the consolidated balance sheet of the Company. In management's opinion, all adjustments necessary to reflect the effects of these transactions have been made. The following unaudited Pro Forma Consolidated Balance Sheet is not necessarily indicative of what the actual financial position of the Company would have been assuming such transactions had been completed as of March 31, 1997, nor does it purport to represent the future financial position of the Company.
PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA ---------- ----------- --------- ASSETS Investment in hotels . . . . . . . . . . . . . . . . . . . . $1,061,340 $329,800 (A) 1,391,140 Investment in unconsolidated partnerships . . . . . . . . . . 118,320 6,500 (B) 124,820 Cash and cash equivalents . . . . . . . . . . . . . . . . . . 10,957 (1,625)(C) 9,332 Deposits . . . . . . . . . . . . . . . . . . . . . . . . . . 1,616 1,616 Due from Lessee . . . . . . . . . . . . . . . . . . . . . . . 15,630 15,630 Deferred expenses . . . . . . . . . . . . . . . . . . . . . . 3,702 3,702 Other assets . . . . . . . . . . . . . . . . . . . . . . . . 793 793 ---------- --------- ---------- Total assets . . . . . . . . . . . . . . . . . . . . $1,212,358 $334,675 $1,547,033 ========== ======== ========== LIABILITIES AND SHAREHOLDERS' EQUITY Distributions payable . . . . . . . . . . . . . . . . . . . . $ 17,610 $ 17,610 Accrued expenses and other liabilities . . . . . . . . . . . 4,740 4,740 Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . 353,650 $(17,740)(D) 335,910 Capital lease obligations . . . . . . . . . . . . . . . . . . 12,577 12,577 Minority interest in Operating Partnership . . . . . . . . . 62,661 11,682 (E) 74,343 Minority interest in other partnerships . . . . . . . . . . . 8,043 8,043 ---------- -------- ---------- Total liabilities . . . . . . . . . . . . . . . . . 459,281 (6,058) 453,223 ---------- -------- ---------- Shareholders' Equity: Preferred stock . . . . . . . . . . . . . . . . . . . . . . . 151,250 151,250 Common stock . . . . . . . . . . . . . . . . . . . . . . . . 266 112 (F) 378 Treasury stock . . . . . . . . . . . . . . . . . . . . . . . (41,106)(G) (41,106) Additional paid in capital . . . . . . . . . . . . . . . . . 620,465 381,727 (H) 1,002,192 Unearned officers' and directors' compensation . . . . . . . (2,448) (2,448) Distributions in excess of earnings . . . . . . . . . . . . . (16,456) (16,456) ---------- -------- ---------- Total shareholders' equity . . . . . . . . . . . . . 753,077 340,733 1,093,810 ---------- -------- ---------- Total liabilities and shareholders' equity . . . . . $1,212,358 $334,675 $1,547,033 ========== ======== ==========
25 26 FELCOR SUITE HOTELS, INC. NOTES TO PRO FORMA BALANCE SHEET (A) Increase represents the following hotel purchase transactions: Five Sheraton hotels (purchased June 30, 1997) $200,000 Four Doubletree Guest Suites hotels (purchased June 5, 1997 (1) and July 31, 1997 (3) 83,100 Two Embassy Suites hotels (purchased June 30, 1997) 46,700 -------- $329,800 ========
(B) Increase represents the unconsolidated 50% hotel partnership interest in the San Antonio (Airport) Embassy Suites hotel purchased for $6.5 million on May 16, 1997. (C) Decrease represents cash portion of purchase price of San Antonio (Airport) Embassy Suites Hotel. (D) Decrease represents payments against outstandings on the Company's line of credit from funds received from the June 1997 equity offering. (E) Increase represents $4.9 million in Partnership Units issued for acquisition of 50% partnership interest in the San Antonio (Airport) Embassy Suites hotel and the adjustment necessary to reflect a pro forma 7.4% minority interest in the Operating Partnership at March 31, 1997. (F) Increase reflects the par value of common stock in the June 1997 equity offering. (G) Represents 1.2 million shares of common stock repurchased from Promus at $36.625 per share net of underwriters' discount and offering expenses. (H) Net increase reflects the proceeds from the June 1997 offering less the par value of the common stock issued and offering expenses less an allocation to minority interest as follows (in thousands): Gross proceeds from June 1997 offering(1) . . . . . . . . . . . . . . . . $410,200 (11.2 million shares at $36.625 per share) Offering expenses including underwriters' discount . . . . . . . . . . . (21,554) Par value of common stock . . . . . . . . . . . . . . . . . . . . . . . . (112) Allocation to minority interest . . . . . . . . . . . . . . . . . . . . . (6,807) -------- Net change in additional paid in capital . . . . . . . . . . . . . . . . $381,727 =========
(1) Includes 1.2 million shares of common stock repurchased from Promus. 26 27 DJONT OPERATIONS, L.L.C. PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1996 AND THE THREE MONTHS ENDED MARCH 31, 1997 (UNAUDITED, AMOUNTS IN THOUSANDS EXCEPT FOR PER SHARE DATA) The following unaudited Pro Forma Consolidated Statements of Operations of DJONT Operations, L.L.C. (the "Lessee") are presented as if the acquisitions of all hotels owned by FelCor Suite Hotels, Inc. (the "Company") at December 31, 1996 and those hotels acquired in 1997, through July 31, 1997, and related transactions had occurred as of January 1, 1996 and the Hotels had all been leased to the Lessee pursuant to Percentage Leases. Such pro forma information is based in part upon the Pro Forma Consolidated Statements of Operations of the Company, and the historical Statements of Operations of the 1997 Acquisitions. In management's opinion, all adjustments necessary to reflect the effects of these transactions have been made. The following unaudited Pro Forma Consolidated Statements of Operations for the periods presented are not necessarily indicative of what actual results of operations of the Lessee would have been assuming such transactions had been completed on January 1, 1996, nor does it purport to represent the results of operations for future periods.
YEAR ENDED DECEMBER 31, 1996 --------------------------------------------------- 1996 ACQUISITIONS 1997 ACQUISITIONS HISTORICAL AND PREFERRED AND EQUITY PRO FORMA COMPANY STOCK OFFERING(A) OFFERINGS (B) ADJUSTMENTS TOTAL ------- ----------------- ------------- ----------- ----- Revenues: Suite revenue . . . . . . . . $ 234,451 $46,393 188,243 $469,087 Food and beverage revenue . . 15,119 8,194 35,569 58,882 Food and beverage rent . . . . 2,334 408 538 3,280 Other revenue . . . . . . . . 17,340 2,802 13,291 $ (316) (C) 33,117 --------- ------- -------- ------- -------- Total revenues . . . . . 269,244 57,797 237,641 (316) 564,366 --------- ------- -------- ------- -------- Expenses: Property operating costs and expenses . . . . . . . 66,236 12,417 57,131 135,784 Other operating expenses . . . 81,045 20,182 81,268 182,495 Management and franchise fees 11,770 5,491 10,754 (3,604) (D) 24,411 Taxes, insurance and other . . 5,912 (862) 18,155 (12,522) (E) 10,683 Interest expense . . . . . . . 30,545 (30,545) (F) Depreciation and amortization 32,179 (32,179) (G) Percentage lease payments . . 107,935 20,248 88,220 (H) 216,403 Lessee overhead expenses . . . 1,776 (236) 1,540 --------- ------- -------- ------- -------- Income before minority interest . (5,430) 557 7,609 (9,686) (6,950) Minority interest . . . . . . (92) (I) (92) --------- ------- -------- ------- -------- Net loss . . . . . . . . . . . . $ (5,430) $ 557 $ 7,609 $(9,594) $(6,858) ========= ======= ======== ======= ========
27 28 DJONT OPERATIONS, L.L.C. PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1997 --------------------------------------- 1997 HISTORICAL ACQUISITIONS AND PRO FORMA COMPANY EQUITY OFFERING(B) ADJUSTMENTS TOTAL ------------- ------------------ ----------- ----- Revenues: Suite revenue . . . . . . . . . $ 93,153 $35,169 $128,322 Food and beverage revenue . . . 4,028 8,881 12,909 Food and beverage rent . . . . . 965 51 1,016 Other revenue . . . . . . . . . 7,069 2,536 $ (73) (C) 9,532 -------- ------- ------- -------- Total revenues . . . . . . . . 105,215 46,637 (73) 151,779 -------- ------- ------- -------- Expenses: Property operating costs and expenses . . . . . . . . . 25,182 10,630 35,812 Other operating costs . . . . . 26,911 16,662 43,573 Management and franchise fees . 4,987 2,728 (1,196) (D) 6,519 Taxes, insurance and other . . . 1,588 3,591 (2,553) (E) 2,626 Interest expense . . . . . . . . 4,591 (4,591) (F) Depreciation and amortization . 5,546 (5,546) (G) Percentage lease expenses . . . 44,615 16,850 (H) 61,465 Lessee overhead expenses . . . . 518 518 -------- ------- ------- -------- Income before minority interest . . . 1,414 2,889 (3,037) 1,266 -------- ------- ------- -------- Minority interest . . . . . . . 300 (213) (I) 87 -------- ------- ------- -------- Net income . . . . . . . . . . . . . $ 1,114 $ 2,889 $(2,824) $ 1,179 ======== ======= ======= ========
28 29 DJONT OPERATIONS, L.L.C. NOTES TO PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (A) Represents the historical results of operations and pro forma adjustments, for the period prior to the acquisition by the Company, of the hotels acquired by the Company in 1996. Those hotels acquired in 1996 and dates of acquisition are as follows: Anaheim, California, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . . January 3, 1996 Baton Rouge, Louisiana, Embassy Suites . . . . . . . . . . . . . . . . . . . . . January 3, 1996 Birmingham, Alabama, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . . January 3, 1996 Deerfield Beach, Florida, Embassy Suites . . . . . . . . . . . . . . . . . . . . January 3, 1996 Ft. Lauderdale, Florida, Embassy Suites . . . . . . . . . . . . . . . . . . . . . January 3, 1996 Miami (Airport), Florida, Embassy Suites . . . . . . . . . . . . . . . . . . . . January 3, 1996 Milpitas, California, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . January 3, 1996 Phoenix (Camelback), Arizona, Embassy Suites . . . . . . . . . . . . . . . . . . January 3, 1996 South San Francisco, California, Embassy Suites . . . . . . . . . . . . . . . . . January 3, 1996 Lexington, Kentucky, Hilton . . . . . . . . . . . . . . . . . . . . . . . . . . . January 10, 1996 Piscataway, New Jersey, Embassy Suites . . . . . . . . . . . . . . . . . . . . . January 10, 1996 Beaver Creek (Avon-Vail), Colorado, Embassy Suites . . . . . . . . . . . . . . . February 20, 1996 Boca Raton, Florida, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . . February 28, 1996 LAX (El Segundo), California, Embassy Suites . . . . . . . . . . . . . . . . . . March 27, 1996 Mandalay, California, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . May 8, 1996 Napa, California, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . . . May 8, 1996 Deerfield, Illinois, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . . June 20, 1996 San Rafael (Marin County), California, Embassy Suites . . . . . . . . . . . . . . July 18, 1996 Parsippany, New Jersey, Embassy Suites . . . . . . . . . . . . . . . . . . . . . August 1, 1996 Charlotte, North Carolina, Embassy Suites . . . . . . . . . . . . . . . . . . . . August 1, 1996 Indianapolis, Indiana, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . August 1, 1996 Atlanta-Buckhead, Georgia, Embassy Suites . . . . . . . . . . . . . . . . . . . . October 17, 1996 Kingston (Myrtle Beach), South Carolina, Embassy Suites . . . . . . . . . . . . . December 5, 1996
(B) Represents the historical results of operations for the period prior to the acquisition by the Company, for those hotels acquired by the Company in 1997. Those hotels acquired during 1997 and dates of acquisition are as follows: Omaha, Nebraska, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . . . . February 1, 1997 Bloomington, Minnesota, Embassy Suites . . . . . . . . . . . . . . . . . . . . . February 1, 1997 Atlanta (Perimeter Center), Georgia, Embassy Suites . . . . . . . . . . . . . . . February 1, 1997 Kansas City (Country Club Plaza), Missouri, Embassy Suites . . . . . . . . . . . February 1, 1997 Overland Park, Kansas, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . February 1, 1997 Raleigh, North Carolina, Embassy Suites . . . . . . . . . . . . . . . . . . . . . February 1, 1997 San Antonio (I-10), Texas, Embassy Suites . . . . . . . . . . . . . . . . . . . . February 1, 1997 Austin (Downtown), Texas, Embassy Suites . . . . . . . . . . . . . . . . . . . . February 1, 1997 Covina, California, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . . February 1, 1997 Secaucus, New Jersey, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . February 1, 1997 Los Angeles (LAX Airport North), California, Embassy Suites . . . . . . . . . . . February 18, 1997 Dana Point, California, Hilton Inn . . . . . . . . . . . . . . . . . . . . . . . February 21, 1997 Troy, Michigan, Doubletree Guest Suites . . . . . . . . . . . . . . . . . . . . . March 20, 1997 Austin, Texas, Doubletree Guest Suites . . . . . . . . . . . . . . . . . . . . . March 20, 1997 Baltimore (Washington International Airport), Maryland, Doubletree Guest Suites . March 20, 1997 San Antonio (Airport), Texas, Embassy Suites . . . . . . . . . . . . . . . . . . May 16, 1997
29 30 Nashville (Airport), Tennessee, Doubletree Guest Suites . . . . . . . . . . . . June 5, 1997 Dallas (Market Center), Texas, Embassy Suites . . . . . . . . . . . . . . . . . . June 30, 1997 Syracuse, New York, Embassy Suites . . . . . . . . . . . . . . . . . . . . . . . June 30, 1997 Atlanta (Gateway), Georgia, Sheraton . . . . . . . . . . . . . . . . . . . . . June 30, 1997 Atlanta (Galleria), Georgia, Sheraton Suites . . . . . . . . . . . . . . . . . . June 30, 1997 Chicago (O'Hare), Illinois, Sheraton Suites . . . . . . . . . . . . . . . . . . June 30, 1997 Dallas (Park Central), Texas, Sheraton . . . . . . . . . . . . . . . . . . . . . June 30, 1997 Phoenix (Crescent), Arizona, Sheraton . . . . . . . . . . . . . . . . . . . . . June 30, 1997 Lake Buena Vista (Disney World), Florida, Doubletree Guest Suites . . . . . . . July 31, 1997 Raleigh/Durham, North Carolina, Doubletree Guest Suites . . . . . . . . . . . . July 31, 1997 Tampa (Rocky Point), Florida, Doubletree Guest Suites . . . . . . . . . . . . . July 31, 1997
(C) Reflects the elimination of historical interest income earned on excess cash. (D) Represents the elimination of historical management and franchise fees, and the addition of management and franchise fees to be incurred under the new management agreements for the 1997 Acquisitions. The management fees were calculated based on the terms of the management agreements. Also included in the pro forma adjustment are computations for the incentive management fee which varies according to the management agreement. (E) Reflects the elimination of historical real estate and personal property taxes and property insurance which is to be paid by the Partnership for the 1997 Acquisitions. (F) Reflects the elimination of historical interest expense for the 1997 Acquisitions. Any future interest expense related to debt will be paid by the Partnership. (G) Reflects the elimination of historical depreciation and amortization for the 1997 Acquisitions. (H) Represents lease expenses calculated on a pro forma basis by applying the contractual or anticipated rent provisions of the Percentage Leases to the historical suite revenues, pro forma restaurant rent and historical food and beverage revenues of the Hotels. (I) Represents minority interest from preferred equity positions in subsidiaries of DJONT. 30 31 INDEX TO EXHIBITS
Exhibit Number Description of Exhibit - ------- ---------------------- 23.1 Consent of Coopers and Lybrand, L.L.P.
EX-23.1 2 CONSENT OF COOPERS & LYBRAND, L.L.P. 1 CONSENT OF INDEPENDENT ACCOUNTANTS To the Board of Directors of FelCor Suite Hotels, Inc. We consent to the incorporation by reference in the registration statement of FelCor Suite Hotels, Inc. on Form S-3 (File Nos. 333-25717, 333-04947 and 333-3170) and Form S-8 (File No. 333-32579) of our report dated July 25, 1997 on our audit of the combined financial statements of the Sheraton Acquisition Hotels as of December 31, 1996 and for the year then ended, which report is included in this Form 8/K-A. COOPERS & LYBRAND, L.L.P. Dallas, Texas August 13, 1997 -----END PRIVACY-ENHANCED MESSAGE-----