-----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, EgVnPDZq/9zPz0kYsYav2mikr7vQWri6EPZp7EtHsZSzhxfuhNtCbkO7ykVmdL23 hwkRKeC3/dEFiSowbD8Qwg== 0000950134-01-506033.txt : 20010903 0000950134-01-506033.hdr.sgml : 20010903 ACCESSION NUMBER: 0000950134-01-506033 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010816 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20010831 FILER: COMPANY DATA: COMPANY CONFORMED NAME: FELCOR LODGING TRUST INC CENTRAL INDEX KEY: 0000923603 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 752541756 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-14236 FILM NUMBER: 1729331 BUSINESS ADDRESS: STREET 1: 545 E JOHN CARPENTER FREEWAY STREET 2: SUITE 1300 CITY: IRVING STATE: TX ZIP: 75062 BUSINESS PHONE: 9724444900 MAIL ADDRESS: STREET 1: 545 E JOHN CARPENTER FREEWAY STREET 2: SUITE 1300 CITY: IRVING STATE: TX ZIP: 75062 FORMER COMPANY: FORMER CONFORMED NAME: FELCOR SUITE HOTELS INC DATE OF NAME CHANGE: 19940523 8-K 1 d90386e8-k.txt FORM 8-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 8-K 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 16, 2001 FELCOR LODGING TRUST INCORPORATED (Exact name of registrant as specified in its charter) MARYLAND 1-14236 72-2541756 (State or other jurisdiction of (Commission File Number) (IRS Employer incorporation) 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 (NOT APPLICABLE) (Former name or former address, if changed since last report) 2 ITEM 5. OTHER EVENTS FelCor Lodging Trust Incorporated, a Maryland corporation ("FelCor"), FelCor Lodging Limited Partnership, a Delaware limited partnership ("FelCor OP"), MeriStar Hospitality Corporation, a Maryland corporation ("MeriStar"), and MeriStar Hospitality Operating Partnership, L.P., a Delaware limited partnership ("MeriStar OP"), entered into an Agreement and Plan of Merger, dated as of May 9, 2001 (the "Merger Agreement"). On August 16, 2001, FelCor, FelCor OP, MeriStar and MeriStar OP entered into a First Amendment (the "First Amendment") to the Merger Agreement and added FelCor Mergesub, L.L.C., a Delaware limited liability company ("FelCor Mergesub"), as a party to the Merger Agreement. The merger pursuant to the Merger Agreement, as amended, is currently expected to close in October 2001. A copy of the Merger Agreement and a more complete description of it and the associated transactions can be found in the Registration Statement on Form S-4 of FelCor and FelCor OP (file no. 333-62510) (the "Registration Statement"). A copy of the First Amendment is attached as Exhibit 2.1 to this report, and a more complete description of it and the associated transactions can be found in the Registration Statement. All investors are encouraged to read, carefully and in its entirety, the Registration Statement, the Merger Agreement and the First Amendment. The consolidated financial statements of MeriStar as of December 31, 2000 and 1999 and for the years ended December 31, 2000, 1999 and 1998, and as of June 30, 2001 and for the six months ended June 30, 2001 and 2000, are included in this Form 8-K, commencing on page F-1. See "Index to Financial Statements" below. ITEM 7. EXHIBITS (c) Exhibits. The following exhibits are furnished in accordance with Item 601 of Regulation S-K:
Exhibit No. Description 2.1* First Amendment to Agreement and Plan of Merger by and among FelCor Lodging Trust Incorporated, FelCor Lodging Limited Partnership, MeriStar Hospitality Corporation, MeriStar Hospitality Operating Partnership, L.P., and FelCor Mergersub, L.L.C., dated as of August 16, 2001
* Incorporated herein by reference to the Current Report on Form 8-K of MeriStar Hospitality Corporation filed with the Securities and Exchange Commission on August 29, 2001. 3 INDEX TO FINANCIAL STATEMENTS
MERISTAR HOSPITALITY CORPORATION Condensed Consolidated Balance Sheets--June 30, 2001 (unaudited) and December 31, 2000................................................................ F-2 Condensed Consolidated Statements of Operations and Other Comprehensive Income (Loss)--Six Months Ended June 30, 2001 and 2000 (unaudited)......................................................... F-3 Condensed Consolidated Statements of Cash Flows--Six Months Ended June 30, 2001 and 2000 (unaudited).....................................................................................F-5 Notes to Condensed Consolidated Financial Statements....................................................F-6 Independent Auditors' Report........................................................................ F-12 Consolidated Balance Sheets as of December 31, 2000 and 1999........................................ F-13 Consolidated Statements of Operations for the years ended December 31, 2000, 1999 and 1998.......... F-14 Consolidated Statements of Stockholders' Equity for the years ended December 31, 2000, 1999 and 1998......................................................................................... F-15 Consolidated Statements of Cash Flows for the years ended December 31, 2000, 1999 and 1998.......... F-16 Notes to the Consolidated Financial Statements...................................................... F-17 Schedule III--Real Estate and Accumulated Depreciation.............................................. F-33
F-1 4 MERISTAR HOSPITALITY CORPORATION CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
June 30, 2001 December 31, 2000 ------------- ----------------- (unaudited) Assets Investments in hotel properties $ 3,209,185 $ 3,193,730 Accumulated depreciation (342,051) (287,229) ------------- ------------- 2,867,134 2,906,501 Cash and cash equivalents 20,550 250 Accounts receivable, net 57,040 2,833 Prepaid expenses and other 15,765 2,767 Deferred tax asset 40 -- Note receivable from MeriStar Hotels & Resorts 36,000 -- Due from MeriStar Hotels & Resorts 10,893 22,221 Investments in affiliates 41,714 42,196 Restricted cash 20,201 19,918 Intangible assets, net of accumulated amortization of $10,978 and $9,729 21,570 16,322 ------------- ------------- $ 3,090,907 $ 3,013,008 ============= ============= Liabilities, Minority Interests and Stockholders' Equity Accounts payable, accrued expenses and other liabilities $ 131,324 $ 74,420 Accrued interest 44,352 28,365 Income taxes payable 1,603 1,151 Dividends and distributions payable 24,245 24,581 Deferred income taxes 10,559 10,140 Interest rate swaps 7,110 -- Long-term debt 1,653,050 1,638,319 ------------- ------------- Total liabilities 1,872,243 1,776,976 ------------- ------------- Minority interests 95,981 101,477 Stockholders' equity: Preferred stock, par value $0.01 per share Authorized - 100,000 shares -- -- Common stock, par value $0.01 per share Authorized - 250,000 shares Issued - 48,641 and 48,463 shares 486 485 Additional paid-in capital 1,180,687 1,177,218 Retained earnings 34,689 42,837 Accumulated other comprehensive loss (13,350) (6,081) Unearned stock-based compensation (5,708) (7,550) Less common stock held in treasury - 4,161 and 4,083 shares (74,121) (72,354) ------------- ------------- Total stockholders' equity 1,122,683 1,134,555 ------------- ------------- $ 3,090,907 $ 3,013,008 ============= =============
See accompanying notes to condensed consolidated financial statements. F-2 5 MERISTAR HOSPITALITY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS) UNAUDITED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three months ended Six months ended June 30, June 30, -------- -------- 2001 2000 2001 2000 ----------- ----------- ----------- ----------- Revenue: Hotel operations: Rooms $ 202,380 $ -- $ 402,760 $ -- Food and beverage 74,092 -- 145,383 -- Other operating departments 23,534 -- 46,005 -- Participating lease revenue 5,352 79,508 10,736 145,031 Office rental and other revenues 1,809 2,031 4,967 3,608 ----------- ----------- ----------- ----------- Total revenue 307,167 81,539 609,851 148,639 ----------- ----------- ----------- ----------- Hotel operating expenses by department: Rooms 46,565 -- 92,287 -- Food and beverage 52,486 -- 103,890 -- Other operating departments 12,046 -- 23,616 -- Office rental, parking and other operating expenses 688 737 1,625 1,343 Undistributed operating expenses: Administrative and general 43,138 2,379 88,055 4,150 Property operating costs 42,278 -- 84,977 -- Property taxes, insurance and other 18,654 12,402 37,041 25,093 Depreciation and amortization 28,708 28,113 58,405 54,743 Write down of investment in STS Hotel Net -- -- 2,112 -- Swap termination costs -- -- 9,297 -- FelCor merger costs 3,789 -- 3,789 -- Cost to terminate leases with Prime Hospitality Corporation 1,315 -- 1,315 -- ----------- ----------- ----------- ----------- Total operating expenses 249,667 43,631 506,409 85,329 ----------- ----------- ----------- ----------- Net operating income 57,500 37,908 103,442 63,310 Interest expense, net 30,032 29,657 60,261 58,417 ----------- ----------- ----------- ----------- Income before minority interests, income taxes, (loss)/gain on sale of assets and extraordinary (loss)/gain 27,468 8,251 43,181 4,893 Minority interests 2,017 1,109 3,121 1,247 ----------- ----------- ----------- ----------- Income before income taxes, (loss)/gain on sale of assets and extraordinary (loss)/gain 25,451 7,142 40,060 3,646 Income taxes 891 143 1,402 73 ----------- ----------- ----------- ----------- Income before (loss)/gain on sale of assets and extraordinary (loss)/gain 24,560 6,999 38,658 3,573 (Loss)/gain on sale of assets, net of tax effect of ($22) and $70 -- 3,425 (1,059) 3,425 Extraordinary (loss)/gain on early extinguishment of debt, net of tax effect of ($19) and $62 -- -- (1,224) 3,054 ----------- ----------- ----------- ----------- Net income $ 24,560 $ 10,424 $ 36,375 $ 10,052 =========== =========== =========== ===========
F-3 6 MERISTAR HOSPITALITY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME (LOSS) UNAUDITED (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Three months ended Six months ended June 30, June 30, -------- -------- 2001 2000 2001 2000 ------------ ------------ ------------ ------------ Other comprehensive income: Net income $ 24,560 $ 10,424 $ 36,375 $ 10,052 Foreign currency translation adjustment 815 (379) (159) (534) Derivative instruments transition adjustment -- -- (2,842) -- Change in valuation of derivative instruments 525 -- (4,268) -- ------------ ------------ ------------ ------------ Comprehensive income $ 25,900 $ 10,045 $ 29,106 $ 9,518 ============ ============ ============ ============ Earnings per share: Basic: Income before extraordinary (loss)/gain $ 0.55 $ 0.22 $ 0.84 $ 0.14 Extraordinary (loss)/gain -- -- (0.03) 0.07 ------------ ------------ ------------ ------------ Net income $ 0.55 $ 0.22 $ 0.81 $ 0.21 ============ ============ ============ ============ Diluted: Income before extraordinary (loss)/gain $ 0.52 $ 0.22 $ 0.82 $ 0.14 Extraordinary (loss)/gain -- -- (0.03) 0.07 ------------ ------------ ------------ ------------ Net income $ 0.52 $ 0.22 $ 0.79 $ 0.21 ============ ============ ============ ============
See accompanying notes to condensed consolidated financial statements. F-4 7 MERISTAR HOSPITALITY CORPORATION CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS UNAUDITED (IN THOUSANDS)
Six months ended June 30, -------- 2001 2000 ----------- ----------- Operating activities: Net income $ 36,375 $ 10,052 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 58,405 54,743 Loss/(gain) on sale of assets, before tax effect 1,081 (3,495) Write down of investment in STS Hotel Net 2,112 -- Extraordinary loss/(gain) on early extinguishment of debt, before tax effect 1,243 (3,116) Minority interests 3,121 1,247 Amortization of unearned stock based compensation 1,842 395 Deferred income taxes 379 56 Changes in operating assets and liabilities: Accounts receivable, net (7,007) (3,638) Prepaid expenses and other 502 8,295 Due from MeriStar Hotels & Resorts 11,328 (11,449) Accounts payable, accrued expenses and other liabilities (8,802) 69,253 Accrued interest 15,987 (1,144) Income taxes payable 452 (115) ----------- ----------- Net cash provided by operating activities 117,018 121,084 ----------- ----------- Investing activities: Investment in hotel properties (23,782) (61,243) Proceeds from disposition of assets 7,274 24,148 Hotel operating cash received in lease conversions 3,257 -- Investments in affiliates -- (5,511) Note receivable from MeriStar Hotels & Resorts (36,000) 57,110 Change in restricted cash (283) (1,477) ----------- ----------- Net cash (used in) provided by investing activities (49,534) 13,027 ----------- ----------- Financing activities: Deferred financing costs (9,906) (1,412) Proceeds from issuance of long-term debt 599,529 100,194 Principal payments on long-term debt (584,830) (141,359) Proceeds from issuance of common stock, net 705 1,207 Purchase of OP units (1,513) (7,535) Purchase of treasury stock (1,767) (34,468) Dividends paid to stockholders (45,251) (47,816) Distributions to minority investors (4,434) (4,853) ----------- ----------- Net cash (used in) financing activities (47,467) (136,042) ----------- ----------- Effect of exchange rate changes on cash and cash equivalents 283 (22) ----------- ----------- Net increase (decrease) in cash and cash equivalents 20,300 (1,953) Cash and cash equivalents, beginning of period 250 2,556 ----------- ----------- Cash and cash equivalents, end of period $ 20,550 $ 603 =========== ===========
See accompanying notes to condensed consolidated financial statements. F-5 8 MERISTAR HOSPITALITY CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2001 UNAUDITED (DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1. ORGANIZATION We own a portfolio of primarily upscale, full-service hotels in the United States and Canada. Our portfolio is diversified by franchise and brand affiliations. As of June 30, 2001, we owned 113 hotels, with 28,877 rooms, 109 of which are leased by our taxable subsidiaries and managed by MeriStar Hotels & Resorts, Inc., or MeriStar Hotels. Four of our hotels are leased by affiliates of Prime Hospitality Corporation. During 2000, substantially all of our hotels were leased to and operated by MeriStar Hotels. We were created on August 3, 1998, when American General Hospitality Corporation, a corporation operating as a real estate investment trust, and its associated entities merged with CapStar Hotel Company and its associated entities. In connection with the merger between CapStar and American General, MeriStar Hotels, a separate publicly traded company, was created to be the lessee and manager of nearly all of our hotels. On January 1, 2001, changes to the federal tax laws governing real estate investment trusts, commonly known as the REIT Modernization Act, or RMA, became effective. The REIT Modernization Act permits real estate investment trusts to create taxable subsidiaries on or after January 1, 2001, which are subject to taxation similar to subchapter C-Corporations. Because of the RMA, we have created a number of these taxable subsidiaries that are the lessees of our real property. The REIT Modernization Act prohibits our taxable subsidiaries from engaging in the following activities: o they may not manage the properties themselves; they will need to enter into an "arms length" management agreement with an independent third-party manager that is actively involved in the trade or business of hotel management and manages properties on behalf of other owners, o they may not lease a property that contains gambling operations, and o they may not own a brand or franchise. We believe that establishing taxable REIT subsidiaries to lease the properties provides a more efficient alignment of and ability to capture the economic interest of property ownership. Under the prior lease structure with MeriStar Hotels, we received lease payments based on the revenues generated by the properties, but MeriStar Hotels operated the properties in order to maximize net operating income from the properties. This inconsistency could potentially result in the properties being operated in a way that did not maximize revenues. With the assignment of the leases for each of the 106 properties managed by MeriStar Hotels to the taxable REIT subsidiaries and the execution of the new management agreements, we gained the economic risks and rewards related to the properties that are usually associated with ownership of real estate, and property revenues became the basis for MeriStar Hotels' management fees. Subsidiaries of MeriStar Hotels assigned the participating leases to our wholly-owned taxable subsidiaries as of January 1, 2001. In connection with the assignment, the taxable subsidiaries executed new management agreements with a subsidiary of MeriStar Hotels to manage our hotels. Under these management agreements, the taxable subsidiaries pay a management fee to MeriStar Hotels for each property. The taxable subsidiaries in turn make rental payments to us under the participating leases. The management agreements have been structured to substantially mirror the economics of the former leases. The transactions did not result in any cash consideration exchanged among the parties except in regard to the transfer of hotel operating assets and liabilities to the taxable subsidiaries. Under the new management agreements, the base management fee is 2.5% of total hotel revenue plus incentives payments, based on meeting performance thresholds, that could total up to 1.5% of total hotel revenue. The agreements have an initial term of 10 years with three renewal periods of five years each at the option of MeriStar Hotels, subject to some exceptions. Because these leases have been assigned to our taxable subsidiaries, we now bear the operating risk associated with our hotels. On May 9, 2001, we and our operating partnership entered into an Agreement and Plan of Merger with FelCor Lodging Trust Incorporated and its operating partnership. Under the merger agreement, we will merge with and into FelCor. Immediately after the merger, a wholly-owned subsidiary of FelCor's operating partnership will be merged with and into our operating partnership. Our operating partnership will survive as a subsidiary of FelCor's operating partnership. Holders of our common stock will receive 0.784 of a share of FelCor common stock and $4.60 in cash for each share of F-6 9 MERISTAR HOSPITALITY CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) our common stock. The merger agreement requires the approval of holders of a majority of our outstanding shares of common stock and holders of a majority of the outstanding shares of common stock of FelCor. We currently expect the merger to close during the third quarter of 2001. A copy of the merger agreement has been filed as an exhibit to our current report of Form 8-K, filed on May 10, 2001. We have incurred $3,789 of costs related to this merger through June 30, 2001. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES We have prepared these unaudited interim financial statements according to the rules and regulations of the Securities and Exchange Commission. We have omitted certain information and footnote disclosures that are normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America. These interim financial statements should be read in conjunction with the financial statements, accompanying notes and other information included in our Annual Report on Form 10-K for the year ended December 31, 2000. Certain 2000 amounts have been reclassified to conform to the 2001 presentation. In our opinion, the accompanying unaudited condensed consolidated interim financial statements reflect all adjustments, which are of a normal and recurring nature, necessary for a fair presentation of the financial condition and results of operations and cash flows for the periods presented. The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires us to make estimates and assumptions. Such estimates and assumptions affect the reported amounts of assets and liabilities, as well as the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Our actual results could differ from those estimates. The results of operations for the interim periods are not necessarily indicative of the results for the entire year. Statement of Financial Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and Related Information" requires a public entity to report selected information about operating segments in financial reports issued to shareholders. Based on the guidance provided in the standard, we have determined that our business is conducted in one reportable segment. It also establishes standards for related disclosures about products and services, geographic areas and major customers. Revenues for Canadian operations totaled $6,061 and $1,753 for the three months ended June 30, 2001 and 2000, respectively. Revenues for Canadian operations totaled $11,583 and $3,178 for the six months ended June 30, 2001 and 2000, respectively. In December 1999, the Securities and Exchange Commission issued Staff Accounting Bulletin or SAB No. 101, "Revenue Recognition in Financial Statements". SAB No. 101 addresses lessor revenue recognition in interim periods related to rental agreements which provide for minimum rental payments, plus contingent rents based on the lessee's operations, such as a percentage of sales in excess of an annual specified revenue target. SAB No. 101 requires the deferral of contingent rental income until specified targets are met. This SAB relates only to the recognition of our lease revenue in interim periods for financial reporting purposes; it has no effect on the timing of rent payments under our leases. The effect of SAB No. 101 was to recognize additional revenue of $748 for the three months ended June 30, 2001 and to defer recognition of additional contingent rental income of $26,643 for the three months ended June 30, 2000. Additional contingent rental income of $425 and $59,322 was deferred for the six months ended June 30, 2001 and 2000. In June 1998, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 133, "Accounting for Derivative Instruments and Hedging Activities," which requires that an entity recognize all derivatives as either assets or liabilities in the balance sheet and measure those instruments at fair value. In June 1999, the Financial Accounting Standard Board issued Statement of Financial Accounting Standard No. 137 which amended Statement of Financial Accounting Standard No. 133 to defer the effective date to all fiscal quarters of all fiscal years beginning after June 15, 2000. In June 2000, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 138 which provides additional guidance and amendments to Statement of Financial Accounting Standard No. 133. We adopted these accounting pronouncements on January 1, 2001. Our interest rate risk management objective is to limit the impact of interest rate changes on earnings and cash flows. We assess interest rate cash flow risk by continually identifying and monitoring changes in interest rate exposures that may adversely impact expected future cash flows, and by evaluating hedging opportunities. We do not enter into derivative instruments for any purpose other than cash flow hedging purposes. F-7 10 MERISTAR HOSPITALITY CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Our interest rate swap agreements have been designated as hedges against changes in future cash flows associated with the interest payments of our variable rate debt obligations. Accordingly, the interest rate swap agreements are reflected at fair value in our consolidated balance sheet as of June 30, 2001 and the related unrealized gains or losses on these contracts are record in stockholders' equity as a component of accumulated other comprehensive income. We recognized a transition adjustment of $2,842 as the fair value of our derivative instruments at January 1, 2001. We recorded a liability and corresponding charge to other comprehensive loss for this amount. As of June 30, 2001, the fair value of our derivative instruments represents a liability of $7,110. The estimated net amount recorded in accumulated other comprehensive income expected to be reclassified to the statement of operations within the next six months is approximately $3,065. On June 30, 2001, the Financial Accounting Standards Board issued Statement of Financial Accounting Standard No. 141 "Business Combinations" and No. 142 "Goodwill and other Intangible Assets". We are currently in the process of evaluating the effect these new standards will have on our financial statements. 3. NOTE RECEIVABLE FROM MERISTAR HOTELS & RESORTS We may lend MeriStar Hotels up to $50,000 for general corporate purposes pursuant to a revolving credit agreement. The interest rate on this credit agreement is 650 basis points over the 30-day London Interbank Offered Rate. As of June 30, 2001, $36,000 was outstanding under this revolving credit agreement. The merger agreement requires that we amend this revolving credit facility so that it matures on February 28, 2004 with an interest rate of the 30-day London Interbank Offered Rate plus 600 basis points. 4. LONG-TERM DEBT Long-term debt consisted of the following:
June 30, 2001 December 31, 2000 ------------- ----------------- Senior unsecured notes $ 498,367 $ -- Credit facility 422,000 898,000 Secured facility 322,218 324,554 Subordinated notes 202,623 202,429 Convertible notes 154,300 154,300 Mortgage debt and other 53,542 59,036 ---------- ----------- $1,653,050 $ 1,638,319 ========== ===========
As of June 30, 2001 aggregate future maturities of the above obligations are as follows: 2001 $ 19,697 2002 47,897 2003 313,589 2004 240,168 2005 9,265 Thereafter 1,022,434 ---------- $1,653,050 ==========
On January 26, 2001, we sold $300,000 of 9.0% senior notes due 2008 and $200,000 of 9.13% senior notes due 2011. The notes are unsecured obligations of certain subsidiaries of ours and we guarantee payment of principal and interest on the notes. The net proceeds from the sale of $492,000 were used to repay amounts outstanding under the credit facility and to make payments to terminate certain swap agreements that hedged variable interest rates of the loans that were repaid. The repayments of term loans under the credit facility resulted in an extraordinary loss of $1,243 ($1,224, net of tax) from the write-off of deferred financing costs. In conjunction with the sales of the senior unsecured notes, we terminated three swap agreements with notional amounts totaling $300,000. These swap agreements were designated to the credit facility term loans that were repaid with the proceeds from the sale. We made payments totaling $9,297 to terminate these swap agreements. F-8 11 MERISTAR HOSPITALITY CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 5. DIVIDENDS AND DISTRIBUTIONS PAYABLE On June 28, 2001, we declared a dividend for the three months ended June 30, 2001 of $0.505 per share of common stock and per unit of limited partnership interest in our subsidiary operating partnership. The dividend was paid on July 31, 2001. 6. EARNINGS PER SHARE The following table presents the computation of basic and diluted earnings per share:
Three months ended Six months ended June 30, June 30, ------------------------------ ------------------------------ 2001 2000 2001 2000 ------------- ------------- ------------- ------------- BASIC EARNINGS PER SHARE COMPUTATION: Income before extraordinary (loss)/gain $ 24,560 $ 10,424 $ 37,599 $ 6,998 Dividends paid on unvested restricted stock (202) (288) (403) (335) ------------- ------------- ------------- ------------- Income available to common stockholders 24,358 10,136 37,196 6,663 Weighted average number of shares of common stock outstanding 44,472 45,480 44,483 45,997 ------------- ------------- ------------- ------------- Basic earnings per share before extraordinary (loss)/gain $ 0.55 $ 0.22 $ 0.84 $ 0.14 ============= ============= ============= ============= DILUTED EARNINGS PER SHARE COMPUTATION: Income available to common stockholders $ 24,358 $ 10,136 $ 37,196 $ 6,663 Minority interest, net of tax 1,982 647 3,054 -- Interest on convertible debt, net of tax 1,796 -- 3,591 -- Dividends on unvested restricted stock 8 -- -- -- ------------- ------------- ------------- ------------- Adjusted net income $ 28,144 $ 10,783 $ 43,841 $ 6,663 ============= ============= ============= ============= Weighted average number of shares of common stock outstanding 44,472 45,480 44,483 45,997 Common stock equivalents: Operating partnership units 4,236 2,919 4,265 -- Stock options 403 243 359 149 Convertible debt 4,538 -- 4,538 -- Restricted stock 16 -- -- -- ------------- ------------- ------------- ------------- Total weighted average number of diluted shares of common stock outstanding 53,665 48,642 53,645 46,146 ============= ============= ============= ============= Diluted earnings per share before extraordinary (loss)/gain $ 0.52 $ 0.22 $ 0.82 $ 0.14 ============= ============= ============= =============
F-9 12 MERISTAR HOSPITALITY CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 7. SUPPLEMENTAL CASH FLOW INFORMATION
Six months ended June 30, ---------------------------- 2001 2000 ------------ ------------ Cash paid for interest and income taxes: Interest, net of capitalized interest of $3,822 and $3,530 respectively $ 44,274 $ 59,471 Income taxes 574 264 Non-cash investing and financing activities: Deferred financing costs written-off 1,243 334 Conversion of OP Units to Common Stock 2,845 24 Dividends reinvested -- 23 Issuance of restricted stock -- 9,683 Deferred purchase price -- 8,000 Operating assets received and liabilities assumed from lease conversion: Accounts receivable 47,200 -- Prepaid expenses and other 13,500 -- Furniture and fixtures 315 -- Accumulated depreciation (163) -- Investment in affiliates, net 1,629 -- ------------ Total operating assets received 62,481 -- ============ Accounts payable and accrued expenses (65,706) -- Long-term debt (32) -- ------------ Total liabilities acquired (65,738) -- ============
8. PARTICIPATING LEASE AGREEMENTS Changes to the federal tax laws governing REITs became effective on January 1, 2001. Under those changes, we created taxable subsidiaries that lease the property we currently own. Our taxable subsidiaries are wholly-owned and are similar to a subchapter C corporation. Accordingly, on January 1, 2001, we and MeriStar Hotels assigned the participating leases to the taxable subsidiaries and the taxable subsidiaries entered into management agreements with MeriStar Hotels to manage our properties. Under these management agreements, the taxable subsidiaries pay MeriStar Hotels a management fee. The taxable subsidiaries in turn make rental payments to us under the participating leases. The management agreements have been structured to substantially mirror the economics and terms of the former leases. As of June 30, 2001, we lease four of our hotels to Prime Hospitality. These leases continue to have non-cancelable remaining terms ranging from 8 to 10 years, subject to earlier termination on the occurrence of certain contingencies, as defined. The rent due under each percentage lease is the greater of base rent or percentage rent, as defined. Percentage rent applicable to room and food and beverage revenue varies by lease and is calculated by multiplying fixed percentages by the total amounts of such revenues over specified threshold amounts. Both the minimum rent and the revenue thresholds used in computing percentage rents are subject to annual adjustments based on increases in the United States Consumer Price Index. Percentage rent applicable to other revenues is calculated by multiplying fixed percentages by the total amounts of such revenues. During interim reporting periods, we defer recognition of revenue for lease payments considered to be contingent until specified percentage rent thresholds are met. Total lease payments received from Prime Hospitality on our leases were $3,752 and $7,536 for the three and six months ended June 30, 2001 and $5,736 and $10,466 for the three and six months ended June 30, 2000. Total lease payments received on all of our leases were $108,631 and $201,385 for the three and six months ended June 30, 2000. F-10 13 MERISTAR HOSPITALITY CORPORATION NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) 9. STOCK-BASED COMPENSATION As of June 30, 2001, we have granted 586,500 shares of restricted stock to employees. This restricted stock vests ratably over a three-year or five-year period. The issuance of restricted stock has resulted in $5,708 of unearned stock-based compensation recorded as a reduction to stockholders' equity on our condensed consolidated balance sheet as of June 30, 2001. On March 29, 2000 we granted 462,500 Profits-Only Partnership Units, or POPs, to some of our executive officers and executive officers of MeriStar Hotels pursuant to our POPs Plan. The units vest ratably over three years based on achieving certain operating performance criteria and upon the occurrence of certain other events. We account for these POPs using variable plan accounting. On April 16, 2001, we granted 350,000 POPs to some of our executive officers pursuant to our POPs Plan. The units vest ratably over three years and upon the occurrence of certain other events. 10. ACQUISITIONS AND DISPOSITIONS On May 2, 2001, we terminated the leases of four of our hotels from affiliates of Prime Hospitality Corporation for a total cost of $1,315. Concurrently, we signed long-term management agreements with MeriStar Hotels for these properties. On March 21, 2001, we sold one hotel and received proceeds of $7,274. The sale resulted in a loss of $1,081 ($1,059, net of tax). 11. RECENT DEVELOPMENTS On May 9, 2001, we and our operating partnership entered into an Agreement and Plan of Merger with FelCor Lodging Trust Incorporated and its operating partnership. Under the merger agreement, we will merge with and into FelCor. Immediately after the merger, a wholly-owned subsidiary of FelCor's operating partnership will be merged with and into our operating partnership. Our operating partnership will survive as a subsidiary of FelCor's operating partnership. Holders of our common stock will receive 0.784 of a share of FelCor common stock and $4.60 in cash for each share of our common stock. The merger agreement requires the approval of holders of a majority of our outstanding shares of common stock and holders of a majority of the outstanding shares of common stock of FelCor. We currently expect the merger to close during the third quarter of 2001. A copy of the merger agreement has been filed as an exhibit to our current report of Form 8-K, filed on May 10, 2001. We have incurred $3,789 of costs related to this merger through June 30, 2001. FelCor has filed a registration statement on Form S-4 with the SEC in connection with the merger transaction. The registration statement has not yet been declared effective. The Form S-4 contains a prospectus, a proxy statement, and other documents for our stockholder meeting and that of FelCor, at which time the proposed transaction will be considered. We and FelCor plan to mail the proxy statement and prospectus contained in the Form S-4 to our respective stockholders after the registration statement is declared effective by the SEC. The Form S-4, proxy statement and prospectus will contain important information about us, FelCor, the merger and related matters. Investors and stockholders should read the Form S-4, proxy statement and the prospectus and the other documents filed with the SEC in connection with the merger carefully before they make any decision with respect to the merger. For more information regarding the persons participating in the solicitation and their interest in the merger, please see our Statement on Schedule 14 A, filed on May 10, 2001. F-11 14 INDEPENDENT AUDITORS' REPORT The Board of Directors MeriStar Hospitality Corporation: We have audited the accompanying consolidated balance sheets of MeriStar Hospitality Corporation and subsidiaries (the "Company) as of December 31, 2000 and 1999 and the related consolidated statements of operations, stockholders' equity, and cash flows for each of the years in the three-year period ended December 31, 2000. In connection with our audits of the consolidated financial statements, we have also audited the financial statement schedule of real estate and accumulated depreciation. These consolidated financial statements and financial statement schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these consolidated financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of MeriStar Hospitality Corporation and subsidiaries as of December 31, 2000 and 1999, and the results of their operations and their cash flows for each of the years in the three-year period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States of America. Also, in our opinion, the financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respects, the information set forth therein. KPMG LLP Washington, D.C. February 2, 2001 F-12 15 MERISTAR HOSPITALITY CORPORATION CONSOLIDATED BALANCE SHEETS DECEMBER 31, 2000 AND 1999 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2000 1999 ----------- ----------- ASSETS Investments in hotel properties ....................................... $ 3,193,730 $ 3,118,723 Accumulated depreciation .............................................. (287,229) (182,430) ----------- ----------- 2,906,501 2,936,293 Cash and cash equivalents ............................................. 250 2,556 Accounts receivable, net .............................................. 2,833 1,328 Prepaid expenses and other ............................................ 2,767 9,137 Note receivable from Lessee ........................................... -- 57,110 Due from Lessee ....................................................... 22,221 11,476 Investments in and advances to affiliates ............................. 42,196 40,085 Restricted cash ....................................................... 19,918 17,188 Intangible assets, net of accumulated amortization of $9,729 and $5,742 .............................................................. 16,322 19,028 ----------- ----------- $ 3,013,008 $ 3,094,201 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Accounts payable, accrued expenses and other liabilities .............. $ 74,420 $ 58,055 Accrued interest ...................................................... 28,365 31,380 Income taxes payable .................................................. 1,151 730 Dividends and distributions payable ................................... 24,581 26,263 Deferred income taxes ................................................. 10,140 9,345 Long-term debt ........................................................ 1,638,319 1,676,771 ----------- ----------- Total liabilities ..................................................... 1,776,976 1,802,544 ----------- ----------- Minority interests .................................................... 101,477 107,761 Stockholders' Equity: Common stock, par value $0.01 per share Authorized-- 250,000 shares Issued--48,463 and 47,664 shares .............................. 485 477 Additional paid-in capital ....................................... 1,177,218 1,164,750 Retained earnings ................................................ 42,837 30,168 Accumulated other comprehensive income ........................... (6,081) (5,247) Unearned stock-based compensation ................................ (7,550) -- Less common stock held in treasury--4,083 and 407 shares ......... (72,354) (6,252) ----------- ----------- Total stockholders' equity .................................. 1,134,555 1,183,896 ----------- ----------- $ 3,013,008 $ 3,094,201 =========== ===========
See accompanying notes to consolidated financial statements. F-13 16 MERISTAR HOSPITALITY CORPORATION CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
2000 1999 1998 --------- --------- --------- Revenue: Participating lease revenue ......................................................... $ 391,729 $ 368,012 $ 135,994 Hotel operations: Rooms ........................................................................... -- -- 275,610 Food and beverage ............................................................... -- -- 85,374 Other operating departments ..................................................... -- -- 19,496 Office rental, parking and other revenue ............................................ 9,049 6,892 5,649 Hotel management and other fees ..................................................... -- -- 3,174 --------- --------- --------- Total revenue .............................................................. 400,778 374,904 525,297 --------- --------- --------- Hotel operating expenses by department: Rooms ........................................................................... -- -- 65,048 Food and beverage ............................................................... -- -- 67,493 Other operating departments ..................................................... -- -- 10,121 Office rental, parking and other operating expenses ................................. 2,731 1,964 2,713 Undistributed operating expenses: Administrative and general ...................................................... 9,445 5,749 62,350 Property operating costs ........................................................ -- -- 50,027 Property taxes, insurance and other ............................................. 47,481 47,027 29,814 Lease expense ................................................................... -- -- 34,641 Depreciation and amortization ................................................... 111,947 103,099 60,703 Spin-off costs .................................................................. -- -- 8,481 --------- --------- --------- Total operating expenses ................................................... 171,604 157,839 391,391 --------- --------- --------- Net operating income ..................................................................... 229,174 217,065 133,906 Interest expense, net .................................................................... 117,524 100,398 64,378 --------- --------- --------- Income before minority interests, income taxes, gain on sale of assets, extraordinary gain(loss) and cumulative effect of accounting change ................... 111,650 116,667 69,528 Minority interests ....................................................................... 10,240 11,069 5,121 --------- --------- --------- Income before income taxes, gain on sale of assets, extraordinary gain(loss) and cumulative effect of accounting change ................................................ 101,410 105,598 64,407 Income taxes ............................................................................. 2,028 2,102 15,699 --------- --------- --------- Income before gain on sale of assets, extraordinary gain(loss) and cumulative effect of accounting change .................................................................. 99,382 103,496 48,708 Gain on sale of assets, net of tax effect of $70 ......................................... 3,425 -- -- Extraordinary gain(loss) on early extinguishment of debt, net of tax effect of $62 in 2000, ($93) in 1999, and ($2,083) in 1998 ............................................. 3,054 (4,532) (4,080) Cumulative effect of accounting change, net of tax effect of ($564) ...................... -- -- (921) --------- --------- --------- Net income ............................................................................... $ 105,861 $ 98,964 $ 43,707 ========= ========= ========= Earnings per share: Basic: Income before extraordinary gain(loss) and cumulative effect of accounting change .......................................................................... $ 2.21 $ 2.19 $ 1.45 Extraordinary gain(loss) .......................................................... 0.07 (0.10) (0.12) Cumulative effect of accounting change -- -- (0.03) --------- --------- --------- Net income ........................................................................ $ 2.28 $ 2.09 $ 1.30 ========= ========= ========= Diluted: Income before extraordinary gain(loss) and cumulative effect of accounting change .......................................................................... $ 2.14 $ 2.11 $ 1.40 Extraordinary gain(loss) .......................................................... 0.06 (0.08) (0.11) Cumulative effect of accounting change -- -- (0.03) --------- --------- --------- Net income ........................................................................ $ 2.20 $ 2.03 $ 1.26 ========= ========= =========
See accompanying notes to consolidated financial statements. F-14 17 MERISTAR HOSPITALITY CORPORATION CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (IN THOUSANDS)
COMMON STOCK ------------------------------------------------------ ISSUED TREASURY ADDITIONAL ------------------------- -------------------------- PAID IN RETAINED SHARES AMOUNT SHARES AMOUNT CAPITAL EARNINGS ----------- ----------- ----------- ----------- ----------- ----------- Balance, January 1, 1998 ............. 24,867 $ 249 -- $ -- $ 499,576 $ 22,114 Net income for the year ............ -- -- -- -- -- 43,707 Foreign currency translation adjustment ....................... -- -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- Comprehensive income ................. Issuances of common stock ............ 20,839 208 -- -- 654,671 -- Distribution to spun-off affiliate .......................... -- -- -- -- (52,310) -- Redemption of OP Units ............... 1,012 10 -- -- 31,420 -- Dividends declared ................... -- -- -- -- -- (38,599) ----------- ----------- ----------- ----------- ----------- ----------- Balance, December 31, 1998 ........... 46,718 467 -- -- 1,133,357 27,222 Net income for the year ............ -- -- -- -- -- 98,964 Foreign currency translation adjustment ....................... -- -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- Comprehensive income ................. Issuances of common stock ............ 95 1 -- -- 1,990 -- Shares repurchased ................... -- -- (407) (6,252) -- -- Redemption of OP Units ............... 851 9 -- -- 29,403 -- Dividends declared ................... -- -- -- -- -- (96,018) ----------- ----------- ----------- ----------- ----------- ----------- Balance, December 31, 1999 ........... 47,664 477 (407) (6,252) 1,164,750 30,168 Net income for the year ............ -- -- -- -- -- 105,861 Foreign currency translation adjustment ....................... -- -- -- -- -- -- ----------- ----------- ----------- ----------- ----------- ----------- Comprehensive income ................. Issuances of common stock ............ 133 1 -- -- 1,831 -- Issuances of restricted stock ........ 589 6 -- -- 10,614 -- Amortization on unearned stock-based compensation ............. -- -- -- -- -- -- Shares repurchased ................... -- -- (3,676) (66,102) -- -- Redemption of OP Units ............... 77 1 -- -- 23 -- Dividends declared ................... -- -- -- -- -- (93,192) ----------- ----------- ----------- ----------- ----------- ----------- Balance, December 31, 2000 ........... 48,463 $ 485 (4,083 $ (72,354) $ 1,177,218 $ 42,837 =========== =========== =========== =========== =========== =========== ACCUMULATED OTHER UNEARNED COMPREHENSIVE STOCK-BASED INCOME COMPENSATION TOTAL ----------- ------------- ----------- Balance, January 1, 1998 ............. $ (2,527) $ -- $ 519,412 Net income for the year ............ -- -- 43,707 Foreign currency translation adjustment ....................... (3,960) -- (3,960) ----------- ----------- ----------- Comprehensive income ................. 39,747 Issuances of common stock ............ -- -- 654,879 Distribution to spun-off affiliate .......................... -- -- (52,310) Redemption of OP Units ............... -- -- 31,430 Dividends declared ................... -- -- (38,599) ----------- ----------- ----------- Balance, December 31, 1998 ........... (6,487) -- 1,154,559 Net income for the year ............ -- -- 98,964 Foreign currency translation adjustment ....................... 1,240 -- 1,240 ----------- ----------- ----------- Comprehensive income ................. 100,204 ----------- Issuances of common stock ............ -- -- 1,991 Shares repurchased ................... -- -- (6,252) Redemption of OP Units ............... -- -- 29,412 Dividends declared ................... -- -- (96,018) ----------- ----------- ----------- Balance, December 31, 1999 ........... (5,247) -- 1,183,896 Net income for the year ............ -- -- 105,861 Foreign currency translation adjustment ....................... (834) -- (834) ----------- ----------- ----------- Comprehensive income ................. 105,027 ----------- Issuances of common stock ............ -- -- 1,832 Issuances of restricted stock ........ -- (10,620) -- Amortization on unearned stock-based compensation ............. -- 3,070 3,070 Shares repurchased ................... -- -- (66,102) Redemption of OP Units ............... -- -- 24 Dividends declared ................... -- -- (93,192) ----------- ----------- ----------- Balance, December 31, 2000 ........... $ (6,081) $ (7,550) $ 1,134,555 =========== =========== ===========
See accompanying notes to the consolidated financial statements. F-15 18 MERISTAR HOSPITALITY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31, 2000, 1999 AND 1998 (IN THOUSANDS)
2000 1999 1998 ----------- ----------- ----------- Operating activities: Net income ....................................................................... $ 105,861 $ 98,964 $ 43,707 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization .................................................. 111,947 103,099 60,703 Gain on assets sold, before tax effect ......................................... (3,495) -- -- Extraordinary (gain)loss on early extinguishment of debt, before tax ........... (3,116) 4,625 6,163 effect Cumulative effect of accounting change, before tax effect ...................... -- -- 1,485 Minority interests ............................................................. 10,240 11,069 5,121 Non-cash spin-off costs ........................................................ -- -- 3,205 Amortization of unearned stock based compensation .............................. 3,070 -- -- Deferred income taxes .......................................................... 795 892 (4,445) Changes in operating assets and liabilities: Accounts receivable, net ..................................................... (1,505) 1,716 29,673 Prepaid expenses and other ................................................... 6,370 (5,260) 24,760 Income tax receivable ........................................................ -- 339 -- Intangible assets, net ....................................................... -- (245) -- Due from Lessee .............................................................. (10,745) (4,039) (7,437) Accounts payable, accrued expenses, accrued interest and other liabilities ... 4,194 17,303 765 Income taxes payable ......................................................... 421 730 (904) ----------- ----------- ----------- Net cash provided by operating activities ........................................... 224,037 229,193 162,796 ----------- ----------- ----------- Investing activities: Investment in hotel properties, net .............................................. (90,703) (170,063) (701,710) Proceeds from disposition of assets .............................................. 24,148 8,900 -- Purchases of intangible assets ................................................... -- -- (5,584) Investments in and advances to affiliates, net ................................... (2,111) (31,298) (2,320) Purchases of minority interests .................................................. -- (72) (44) Repayments of notes receivable ................................................... 57,110 9,890 (67,000) Change in restricted cash ........................................................ (2,730) (5,309) (8,847) ----------- ----------- ----------- Net cash used in investing activities ............................................... (14,286) (187,952) (785,505) ----------- ----------- ----------- Financing activities: Deferred financing costs ......................................................... (1,615) (6,899) (4,251) Proceeds from issuance of long-term debt ......................................... 179,388 484,924 1,407,261 Principal payments on long-term debt ............................................. (214,724) (410,217) (821,051) Proceeds from issuances of common stock, net ..................................... 1,741 1,991 1,870 Purchase of OP units ............................................................. (7,535) -- -- Purchases of treasury stock ...................................................... (66,102) (6,252) -- Spin-off to stockholders ......................................................... -- -- (23,745) Dividends paid to stockholders ................................................... (94,062) (94,774) (16,178) Distributions to minority investors .............................................. (9,212) (11,585) (650) ----------- ----------- ----------- Net cash (used in) provided by financing activities ................................. (212,121) (42,812) 543,256 ----------- ----------- ----------- Effect of exchange rate changes on cash and cash equivalents ........................ 64 (53) 204 Net decrease in cash and cash equivalents ........................................... (2,306) (1,624) (79,249) Cash and cash equivalents, beginning of year ........................................ 2,556 4,180 83,429 ----------- ----------- ----------- Cash and cash equivalents, end of year .............................................. $ 250 $ 2,556 $ 4,180 =========== =========== ===========
See accompanying notes to consolidated financial statements. F-16 19 MERISTAR HOSPITALITY CORPORATION NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2000, 1999 AND 1998 (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE AMOUNTS) 1. ORGANIZATION MeriStar Hospitality Corporation (the "Company") owns a portfolio of primarily upscale, full-service hotels, diversified by franchise and brand affiliations, in the United States and Canada. Substantially all of the Company's hotels are leased to and operated by MeriStar Hotel & Resorts, Inc. ("OpCo"), an affiliated entity. As of December 31, 2000, the Company owned 114 hotels with 29,090 rooms, 106 of which are leased and operated by OpCo. On August 3, 1998, CapStar Hotel Company ("CapStar") merged (the "Merger") with and into American General Hospitality Corporation ("AGH"), with the surviving entity being named MeriStar Hospitality Corporation. In conjunction with the Merger, CapStar also distributed on a pro rata basis to its stockholders all of the capital stock of OpCo, which consisted of CapStar's hotel operations (including leased hotels) and management business (the "Spin-Off"). In order to maintain its tax status as a Real Estate Investment Trust ("REIT"), the Company has not been permitted to engage in the operations of its hotel properties. To comply with this requirement, the Company has leased all of its real property to third-party lessee/managers--OpCo and Prime Hospitality Corporation. On January 1, 2001, the REIT Modernization Act (the "RMA") became law. The RMA permits the Company to create a wholly-owned taxable REIT subsidiary (the "TRS") on or after January 1, 2001, which will be subject to taxation similar to a C-Corporation. The TRS will be allowed to lease the real property owned by the Company. Also, the RMA prohibits the TRS from engaging in certain activities. First, a TRS may not manage the properties itself; it will need to enter into an "arms length" management agreement with an independent third-party manager that is actively involved in the trade or business of hotel management and manages properties on behalf of other owners. Second, a TRS may not lease a property that contains gambling operations. Third, a TRS may not own a brand or franchise. The Company believes that establishing a TRS to lease its properties will provide a more efficient alignment of and ability to capture the economic interests of property ownership. Until January 1, 2001, the Company leased 106 hotels to OpCo. Each of the leases was a 12-year participating lease under which OpCo paid the Company a fixed base rent plus participating rent based on a percentage of hotel revenues. Because of the RMA, the Company has created a TRS. The Company and OpCo have also agreed to assign the leases for the 106 hotels to the TRS. The new management agreements have been structured to mirror the current economics of the existing leases. The transactions did not result in any cash consideration exchanged among the parties. Under the new management agreements, the base management fee is 2.5 percent of total hotel operating revenue with incentives up to an additional 1.5 percent of total revenue if certain operating thresholds are achieved. The agreements have an initial term of 10 years with three renewal periods of five years each at OpCo's option, subject to some exceptions. Because of these changes, the Company now bears the operating risk associated with its properties. As of February 2, 2001, twelve states, including California, Texas and Florida have not enacted legislation that would permit a REIT to lease properties to a TRS. It is expected that each state will ultimately enact legislation, during 2001 that will be retroactive to January 1, 2001, conforming its law to the federal law. However, if conforming legislation is not enacted, the Company could lose its status as a REIT in those states and would be taxed as a C-Corporation. Accordingly, the Company may be required to provide for current and deferred taxes. F-17 20 MERISTAR HOSPITALITY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 2000, 1999 AND 1998 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation--The consolidated financial statements include the accounts of the Company and all of its majority owned subsidiaries. All significant intercompany balances and transactions have been eliminated. Investments in unconsolidated joint ventures and affiliated companies in which the Company holds a voting interest of 50% or less and exercises significant influence are accounted for using the equity method. The Company uses the cost method to account for its investment in entities in which it does not have the ability to exercise significant influence. Cash Equivalents and Restricted Cash--The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Restricted cash represents amounts required to be maintained in escrow under certain of the Company's credit facilities. Investments in Hotel Properties--Investments in hotel properties are recorded at cost, which includes the allocated purchase price for hotel acquisitions, or at fair value at the time of contribution for contributed property. Property and equipment balances are depreciated using the straight-line method over lives ranging from five to 40 years. For the years ended December 31, 2000, 1999 and 1998, the Company capitalized interest of $8,613, $12,540, and $5,182, respectively. Properties held for sale are carried at the lower of their carrying values or estimated fair values less costs to sell. Depreciation of these properties is discontinued when an operating property is classified as held for sale. Properties held for sale are not material and, therefore, are included in investments in hotel properties. Intangible Assets--Intangible assets consist primarily of deferred financing fees. These deferred fees are amortized on a straight-line basis over the lives of the related borrowings for up to 10 years. Total accumulated amortization at December 31, 2000 and 1999 was $9,729 and $5,742, respectively. In 1999 and 1998, the Company recognized extraordinary losses of $4,532 and $4,080, (net of tax effect of $93 and $2,083), respectively, due to the write-off of unamortized deferred financing fees in conjunction with refinancing certain credit facilities. Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed of--The carrying values of long-lived assets, which include property and equipment and all intangibles, are evaluated periodically in relation to the operating performance and future undiscounted cash flows of the underlying assets. Adjustments are made if the sum of expected undiscounted future net cash flows is less than book value. No impairment losses were recorded during 2000, 1999 or 1998. Income Taxes--The Company accounts for income taxes in accordance with the provisions of Statement of Financial Accounting Standards ("SFAS") No. 109, "Accounting for Income Taxes." Deferred income taxes reflect the tax consequences on future years of differences between the tax basis of assets and liabilities and their financial reporting amounts. In conjunction with the Merger on August 3, 1998, the Company became a REIT and is therefore no longer subject to federal income taxes, provided that it complies with various requirements necessary to maintain REIT status. The Company is subject to state and local taxes in certain jurisdictions. Foreign Currency Translation--Results of operations for the Company's Canadian hotels are maintained in Canadian dollars and translated using the average exchange rates during the period. Assets and liabilities are translated to U.S. dollars using the exchange rate in effect at the balance sheet date. Resulting translation adjustments are reflected in accumulated other compensation income. F-18 21 MERISTAR HOSPITALITY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 2000, 1999 AND 1998 Revenue Recognition--Prior to the Merger, revenue was earned through the operations and management of the hotel properties and was recognized when earned. Subsequent to the Merger, the Company earns participating lease revenue. Participating lease revenue represents lease payments from lessees pursuant to participating lease agreements. Office, retail and parking rental is generally recognized on a straight-line basis over the terms of the respective leases. Participating Lease Agreements--The Company's participating leases have non-cancelable remaining terms ranging from 8 to 10 years, subject to earlier termination on the occurrence of certain contingencies, as defined. The rent due under each percentage lease is the greater of base rent or percentage rent, as defined. Percentage rent applicable to room and food and beverage revenue varies by lease and is calculated by multiplying fixed percentages by the total amounts of such revenues over specified threshold amounts. Both the minimum rent and the revenue thresholds used in computing percentage rents are subject to annual adjustments based on increases in the United States Consumer Price Index. Percentage rent applicable to other revenues is calculated by multiplying fixed percentages by the total amounts of such revenues. During interim reporting periods, the Company defers recognition of revenue for lease payments considered to be contingent until specified percentage rent thresholds are met. Changes to the federal tax laws governing REITs were enacted in 1999 and became effective on January 1, 2001. Under those changes, the Company is permitted to create subsidiaries that lease the property the Company currently owns and are taxable, similar to a subchapter C-Corporation. The Company's taxable subsidiaries are wholly-owned. Accordingly, the Company and OpCo assigned the participating leases to the taxable subsidiaries and the taxable subsidiaries entered into management agreements with OpCo to manage the Company's properties. Under these management agreements, the taxable subsidiaries pay OpCo a management fee. The taxable subsidiaries in turn make rental payments to the Company under the participating leases. The management agreements have been structured to substantially mirror the economics of the former leases. Financial Instruments--From time to time the Company enters into swap and collar agreements that are designated as, and are effective as, hedges against the impact of interest rate fluctuation on certain of the Company's existing and probable future long-term debt instruments. Because these agreements qualify for hedge accounting treatment, any gains or losses are recognized as adjustments to interest expense over the lives of the underlying debt instruments. For hedge agreements associated with anticipated future debt instruments, gains or losses are deferred until those debt instruments are entered into. If the Company determines it is no longer probable that the Company will enter into an anticipated debt instrument, any related deferred gains or losses are recognized in the current period. Use of Estimates--The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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. Segment Information--SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" requires a public entity to report selected information about operating segments in financial reports issued to shareholders. It also establishes standards for related disclosures about product and services, geographic areas and major customers. Based on the guidance provided in the standard, the Company has determined that its business is conducted in one operating segment. F-19 22 MERISTAR HOSPITALITY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 2000, 1999 AND 1998 The following table summarizes geographic information required to be disclosed under SFAS No. 131:
2000 1999 1998 ---------- ---------- ---------- REVENUE: U.S ........................................... $ 394,257 $ 367,893 $ 510,344 Foreign ....................................... 6,521 7,011 14,953 ---------- ---------- ---------- $ 400,778 $ 374,904 $ 525,297 ========== ========== ========== INVESTMENTS IN HOTEL PROPERTIES, NET: U.S ........................................... $2,850,348 $2,876,909 Foreign ....................................... 56,153 59,384 ---------- ---------- $2,906,501 $2,936,293 ========== ==========
Comprehensive Income--FAS No. 130, "Reporting Comprehensive Income," requires an enterprise to display comprehensive income and its components in a financial statement to be included in an enterprise's full set of annual financial statements or in the notes to financial statements. Comprehensive income represents a measure of all changes in equity of an enterprise that result from recognized transactions and other economic events for the period other than transactions with owners in their capacity as owners. Comprehensive income of the Company includes net income and other comprehensive income from foreign currency items. Cumulative Effect of Accounting Change--In April 1998, the American Institute of Certified Public Accountants issued Statement of Position ("SOP") No. 98-5, "Reporting on the Costs of Start-Up Activities," which requires that all non-governmental entities expense costs of start-up activities, including organizational costs, as those costs are incurred and requires the write-off of any unamortized balances upon implementation. SOP No. 98-5 is effective for financial statements issued for periods beginning after December 15, 1998. The Company chose to adopt SOP No.98-5 effective July 1, 1998. The cumulative effect of this accounting change was a charge against income for the year ended December 31, 1998 of $921 (net of tax benefit of $564). New Accounting Pronouncements--In June 1998, the Financial Accounting Standards Board ("FASB") issued SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities," which requires that an entity recognize all derivatives as either assets or liabilities in statements of financial position and measure those instruments at fair value. In June 1999, the FASB issued SFAS No. 137 which amended SFAS No. 133 to defer the effective date to all fiscal quarters of fiscal years beginning after June 15, 2000. In June 2000, the FASB issued SFAS No. 138 which provides additional guidance and amendments to SFAS No. 133. The Company does not believe this new accounting standard will have a material effect on its financial statements. Reclassifications--Certain 1999 and 1998 amounts have been reclassified to conform to 2000 presentation. For the years ended December 31, 1999 and 1998, the Company has reclassified distributions to common OP Unit holders as a component of minority interest, resulting in an increase to retained earnings and a corresponding decrease to minority interests of $13,294 and $3,567 as of December 31, 1999 and 1998, respectively. This reclassification also results in a decrease in dividends declared in the consolidated statements of stockholders' equity of $9,727 and $3,567 for the years ended December 31, 1999 and 1998, respectively. F-20 23 MERISTAR HOSPITALITY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 2000, 1999 AND 1998 3. INVESTMENTS IN HOTEL PROPERTIES Investments in hotel properties consists of the following:
DECEMBER 31, ----------------------- 2000 1999 ---------- ---------- Land ...................................... $ 317,072 $ 318,360 Buildings ................................. 2,461,089 2,378,318 Furniture, fixtures and equipment ......... 338,350 320,787 Construction-in-progress .................. 77,219 101,258 ---------- ---------- Total ................................ $3,193,730 $3,118,723 ========== ==========
4. INVESTMENTS IN AND ADVANCES TO AFFILIATES The Company has ownership interests in certain unconsolidated joint ventures and affiliated companies. In 2000, the Company invested $2,100 in STS Hotel Net, a company that provides high-speed internet portals to guest rooms. This investment is accounted for using the cost method. In 1999, the Company invested $40,000 in MeriStar Investment Partners, LP ("MIP"), a joint venture established to acquire upscale, full-service hotels. The Company's investment is in the form of a preferred partnership interest. The Company receives a 16% preferred return on its investment. 5. NOTE RECEIVABLE WITH LESSEE On March 1, 2000, OpCo repaid the remaining balance of $57,100 on its revolving credit agreement with the Company upon closing its bank revolving credit facility. At that time, OpCo's revolving credit agreement with the Company was also amended to reduce the maximum borrowing limit from $75,000 to $50,000. Any amounts outstanding will bear interest at the rate of the 30-day London Interbank Offered Rate plus 650 basis points. 6. LONG-TERM DEBT Long-term debt consists of the following:
DECEMBER 31, ----------------------- 2000 1999 ---------- ---------- New Credit Facility ............. $ 898,000 $ 908,000 New Secured Facility ............ 324,554 328,954 Subordinated Notes .............. 202,429 202,041 Convertible Notes ............... 154,300 172,500 Mortgage Debt and Other ......... 59,036 65,276 ---------- ---------- $1,638,319 $1,676,771 ========== ==========
New Credit Facility--In conjunction with the Merger, the Company entered into a $1,000,000 senior secured credit facility (the "New Credit Facility"). The New Credit Facility is structured as a $300,000, five-year term loan facility; a $200,000, five-and-a-half year term loan facility; and a $500,000, three-year revolving credit facility with two one-year optional extensions. The New Credit Facility is secured by the Company's F-21 24 MERISTAR HOSPITALITY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 2000, 1999 AND 1998 Common Stock and its general partnership, limited partnership and limited liability company ownership interests in its subsidiaries. The interest rate on the term loans and revolving facility ranges from 100 to 200 basis points over the 30-day London Interbank Offered Rate ("LIBOR"), depending on certain financial performance covenants and long-term senior unsecured debt ratings. The weighted average interest rate on borrowings outstanding under the New Credit Facility as of December 31, 2000 and 1999 was 8.3% and 8.4%, respectively. As of December 31, 2000, the Company had $98.0 million available under the New Credit Facility's revolving facility. New Secured Facility--In 1999, the Company completed a $330,000 10-year non-recourse financing ("New Secured Facility") secured by a portfolio of 19 hotels. The loan bears a fixed interest rate of 8.01% and matures in 2009. The Company used most of the net proceeds to repay the amounts outstanding under prior credit facilities. Subordinated Notes--In 1999, the Company sold $55,000 aggregate principal amount (issue price of $51,906, net of discount) of 8.75% senior subordinated notes ("Subordinated Notes") due 2007, generating net proceeds of $51,219 million to the Company. The Company used the net proceeds to repay indebtedness under its New Credit Facility and to invest in MIP. These notes are unsecured obligations of the Company and provide for semi-annual payments of interest on February 15 and August 15, commencing on August 15, 1999. In 1997, the Company completed the offering of $150,000 aggregate principal amount (issue price of $149,799, net of discount) of its 8.75% senior subordinated notes due 2007 (the "Subordinated Notes"), generating net proceeds to the Company of $144,620. The indenture pursuant to which the Subordinated Notes were issued contains certain covenants, including maintenance of certain financial ratios, reporting requirements, and other customary restrictions. The Subordinated Notes are unsecured obligations of the Company and provide for semi-annual payments of interest on February 15 and August 15, commencing on February 15, 1998. Convertible Notes--In 1997, the Company completed the offering of $172,500 aggregate principal amount of its 4.75% convertible subordinated notes due 2004 (the "Convertible Notes"), generating net proceeds to the Company of $167,581. The proceeds were used to repay outstanding indebtedness under a prior credit facility and to finance certain hotel acquisitions. The Convertible Notes are unsecured obligations of the Company and provide for semi-annual payments of interest on April 15 and October 15, commencing on April 15, 1998. During 2000, the Company repurchased $18,200 of its Convertible Notes at a discount. This resulted in an extraordinary gain of $3,116 ($3,054, net of tax effect). Mortgage Debt--In connection with the Merger, the Company assumed mortgage debt secured by seven hotels. The mortgage debt matures between 2001 and 2012 and the interest rates on the mortgages range from 7.5% to 10.5%. Hedge Agreements--As of December 31, 2000, the Company has seven swap agreements with notional principal amounts totaling $700,000. These swap agreements provide hedges against the impact future interest rates have on the Company's floating London Interbank Offered Rate ("LIBOR") debt instruments. The swap agreements effectively fix the 30-day LIBOR between 6.0% and 7.2%. The swap agreements expire between September 2001 and July 2003. For the year ended December 31, 2000, the Company has received net payments of $3,081 on these swaps and other similar swaps that expired during the year. In anticipation of the August 1999 completion the New Secured Facility, the Company entered into two separate hedge transactions during July 1999. Upon completion of the New Secured Facility, the Company terminated the underlying treasury lock agreements, resulting in a net payment to the Company of $5,100. This F-22 25 MERISTAR HOSPITALITY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 2000, 1999 AND 1998 amount was deferred and is being recognized as a reduction to interest expense over the life of the underlying debt. As a result, the effective interest rate on the New Secured Facility is 7.76%. Additionally, in anticipation of the August 1997 offering of $150,000 aggregate principal amount of its 8.75% senior subordinated notes due 2007 (the "Subordinated Notes"), the Company entered into separate hedge transactions during June and July 1997. Upon completion of the Subordinated Notes offering, the Company terminated the underlying swap agreements, resulting in a net payment to the Company of $836. This amount was deferred and is being recognized as a reduction to interest expense over the life of the underlying debt. As a result, the effective interest rate on the Subordinated Notes is 8.69%. As of December 31, 2000, after consideration of the hedge agreements described above, the Company has fixed the effective interest rate on 88% of its debt and its overall weighted average interest rate is 7.93%. Future Maturities--Aggregate future maturities of the above obligations are as follows: 2001.......... $ 28,288 2002.......... 47,897 2003.......... 667,589 2004.......... 361,168 2005.......... 9,265 Thereafter.... 524,112 ---------- $1,638,319 ==========
Management has determined that the fair value of the outstanding balance of the Company's long-term debt approximates $1,589,311 at December 31, 2000. 7. INCOME TAXES The Company's income taxes were allocated as follows:
2000 1999 1998 -------- -------- -------- Taxes on income before gain on sale of assets, extraordinary gain (loss) and cumulative effect of accounting change ...................... $ 2,028 $ 2,102 $ 15,699 Taxes on gain on sale of assets ........................................... 70 -- -- Tax liability or (benefit) on extraordinary gain (loss) ................... 62 (93) (2,083) Tax benefit on cumulative effect of accounting change ..................... -- -- (564) -------- -------- -------- $ 2,160 $ 2,009 $ 13,052 ======== ======== ========
The Company's effective income tax rate differs from the federal statutory income tax rate as follows:
2000 1999 1998 -------- -------- -------- Statutory tax rate ........................................... 35.0% 35.0% 35.0% Effect of REIT dividends paid deduction ...................... (35.0) (35.0) (35.0) Effect of federal taxes in pre-REIT period ................... -- -- 17.9 State and local taxes ........................................ 1.7 1.7 2.1 Difference in effective rate on foreign subsidiaries ......... 0.3 0.3 2.8 Other ........................................................ -- -- 0.2 ---- ---- ---- 2.0% 2.0% 23.0% ==== ==== ====
F-23 26 MERISTAR HOSPITALITY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 2000, 1999 AND 1998 The components of income tax expense related to income before gain on sale of assets, extraordinary gain(loss) and cumulative effect of accounting change are as follows:
2000 1999 1998 -------- -------- -------- Current: Federal ......... $ -- $ -- $ 14,873 State ........... 800 1,020 3,771 Foreign ......... 433 190 1,500 -------- -------- -------- 1,233 1,210 20,144 Deferred: Federal ......... -- -- (3,546) State ........... 685 842 (899) Foreign ......... 110 50 -- -------- -------- -------- 795 892 (4,445) -------- -------- -------- $ 2,028 $ 2,102 $ 15,699 ======== ======== ========
The tax effects of the principal temporary differences that give rise to the Company's net deferred tax liability are as follows:
DECEMBER 31, ----------------- 2000 1999 ------- ------ Accelerated depreciation.............. $ 2,611 $1,846 Fair value of hotel assets acquired... 6,800 6,800 Allowance for doubtful accounts....... (30) (30) Accrued vacation...................... (15) (15) Accrued expenses...................... 482 482 Other................................. 292 262 ------- ------ Net deferred tax liability............ $10,140 $9,345 ======= ======
There is no valuation allowance for deferred tax assets as of December 31, 2000 or 1999 as management believes it is more likely than not that these deferred tax assets will be fully realized. In conjunction with the Merger and related transactions, the Company had several significant events that affect income tax-related balances for the year ended December 31, 2000 and 1999. These events are summarized below: o REITs are subject to federal income taxes in certain instances for asset dispositions occurring within 10 years of electing REIT status. The Company does not expect to incur federal tax liability resulting from the disposition of assets with built-in gain. The 2000 asset dispositions were not subject to the built-in gain rules. o As described above, for purposes of preparing the Company's financial statements, the Company established a new accounting basis for AGH's assets and liabilities based on their fair values. In accordance with generally accepted accounting principles, the Company has provided a deferred income tax liability for the estimated future tax effect of differences between the accounting and tax bases of assets acquired from AGH. This deferred income tax liability, related to future state and local income taxes, is estimated as $6,800, based on information available at the date of the Merger and subsequently. F-24 27 MERISTAR HOSPITALITY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 2000, 1999 AND 1998 8. STOCKHOLDERS' EQUITY AND MINORITY INTERESTS Common Stock Transactions--On March 15, 1998, CapStar and AGH entered into the Merger Agreement. Pursuant to the Merger, CapStar shareholders received one share each in the Company and OpCo, for each CapStar share owned. AGH shareholders received 0.8475 shares of the Company for each AGH share owned. To effect the Merger, the Company issued 20,607,611 shares valued at $755,907 to former AGH shareholders. CapStar also distributed on a pro rata basis to its stockholders all of the capital stock of OpCo, which consisted of CapStar's hotel operations (including leased hotels) and management business. In conjunction with the Spin-Off, the Company distributed $23,745 of cash and $28,565 of net assets to the new shareholders of OpCo. During the 1999 Annual Meeting of Stockholders, the shareholders authorized 100,000,000 shares of preferred stock, par value $0.01 per share, of the Company to be issued from time to time with such rights, preferences and priorities as the Board of Directors shall designate. In September 1999, the Company's Board of Directors authorized the repurchase of up to five million shares of its Common Stock from time to time in open market or privately negotiated transactions. As of December 31, 2000 the Company has repurchased a total of 4,083,204 shares for $72,354. In May 2000, the Company implemented a stock purchase plan that allowed eligible employees to purchase the Company's common stock at a discount to market value. The Company had reserved 500,000 shares of common stock for issuance under this plan. OP Units--Substantially all of the Company's assets are held indirectly by and operated through MeriStar Hospitality Operating Partnership, L.P. (the "Operating Partnership"), the Company's subsidiary operating partnership. The Operating Partnership's partnership agreement provides four classes of partnership interests ("OP Units"): Common OP Units, Class B OP Units, Class C OP Units and Class D OP Units. Common OP Units and Class B OP Units receive quarterly distributions per OP Unit equal to the dividend paid on each share of the Company's Common Stock. Class C OP Units receive a non-cumulative, quarterly distribution equal to $0.5575 per Class C OP Unit until such time as the dividend rate on the Company's Common Stock exceeds $0.5575 whereupon the Class C OP Units automatically convert into Common OP Units. Class D OP Units pay a 6.5% cumulative annual preferred return based on an assumed price per common share of $22.16, compounded quarterly to the extent not paid on a current basis, and are entitled to a liquidation preference of $22.16 per Class D OP Unit. The Company may redeem them at any time after April 1, 2000 at a price of $22.16 per share for cash or, at the Company's option, for shares of common stock having a value equal to the redemption price. The holders have the option to redeem the Class D OP Units at any time after April 1, 2004 for cash or, at the holders option, for shares of common stock having a value equal to $22.16. All net income earned and capital proceeds received by the Operating Partnership, after payment of the annual preferred return and, if applicable, the liquidation preference, are shared by the holders of the Common OP Units. During 1999, 65,875 Common OP Units were issued to partially finance the purchase of a hotel and 974,588 Common OP units were issued as a conditional component of a purchase agreement for a hotel purchased in 1998. During 1998, 962,858 Common and Class B OP Units were issued to partially finance the purchases of certain hotels and 3,305,175 Common OP Units were issued to former holders of AGH OP Units. During 1997, the Company issued 1,483,759 Common and Class B OP Units and 392,157 Class D OP Units to partially finance the purchases of both certain hotels and lease contracts on hotels. F-25 28 MERISTAR HOSPITALITY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 2000, 1999 AND 1998 On March 21, 2000, June 21, 2000, September 25, 2000 and December 20, 2000, the Company declared its first, second, third and fourth quarter dividends, respectively, equivalent to an annual rate of $2.02 per share of Common Stock and OP Unit in the Operating Partnership. The amount of the dividend for each quarter was $0.505 per share of Common Stock and OP Unit and was paid on April 28, 2000, July 31, 2000, October 31, 2000 and January 31, 2001, respectively. On March 17, 1999, June 21, 1999, September 15, 1999 and December 6, 1999, the Company declared its first, second, third and fourth quarter dividends, respectively, equivalent to an annual rate of $2.02 per share of Common Stock and OP Unit in the Operating Partnership. The amount of the dividend for each quarter was $0.505 per share of Common Stock and OP Unit and was paid on April 30, 1999, July 30, 1999, October 29, 1999 and January 31, 2000, respectively. On September 2, 1998 and November 4, 1998, respectively, the Company declared its third and fourth quarter dividends, equivalent to an annual rate of $2.02 per share of Common Stock and OP Unit in the Operating Partnership. The third quarter dividend was paid on a prorated basis from August 4, 1998 (the first day of operations following the Merger) through September 30, 1998. The amount of the dividend was $0.31837 per share of Common Stock and OP Unit and was paid on October 30, 1998. The fourth quarter dividend of $0.505 per share of Common Stock and OP Unit and was paid on January 29, 1999. F-26 29 MERISTAR HOSPITALITY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 2000, 1999 AND 1998 9. EARNINGS PER SHARE The following is a reconciliation of the numerators and denominators of the basic and diluted earnings per share computations for income before extraordinary loss and cumulative effect of accounting change ("EPS"):
YEAR ENDED DECEMBER 31, ---------------------------------- 2000 1999 1998 --------- --------- --------- Basic EPS Computation: Net income before extraordinary gain(loss) and cumulative effect of accounting change .................................................. $ 102,807 $ 103,496 $ 48,708 Dividends paid on unvested restricted stock .............................. (1,168) -- -- --------- --------- --------- Income available to common shareholders .................................. 101,639 103,496 48,708 Weighted average number of shares of Common Stock outstanding ........................................................... 45,958 47,276 33,653 --------- --------- --------- Basic EPS before extraordinary gain(loss) and cumulative effect of accounting change .................................................. $ 2.21 $ 2.19 $ 1.45 ========= ========= ========= Diluted EPS Computation: Income available to common shareholders .................................. $ 101,639 $ 103,496 $ 48,708 Minority interest, net of tax ............................................ 554 10,143 2,633 Interest on convertible debt, net of tax ................................. 7,338 8,137 -- Dividends on unvested restricted stock ................................... 254 -- -- --------- --------- --------- Adjusted net income ...................................................... $ 109,785 $ 121,776 $ 51,341 --------- --------- --------- Weighted average number of shares of Common Stock outstanding ........................................................... 45,958 47,276 33,653 Common Stock equivalents: Stock options ....................................................... 208 102 383 OP Units ............................................................ 441 5,205 2,624 Convertible debt .................................................... 4,612 5,066 -- Restricted stock .................................................... 176 -- -- --------- --------- --------- Total weighted average number of diluted shares of Common Stock outstanding ..................................................... 51,395 57,649 36,660 --------- --------- --------- Diluted EPS before extraordinary gain(loss) and cumulative effect of accounting change ........................................... $ 2.14 $ 2.11 $ 1.40 ========= ========= =========
In certain years, the effects of certain OP Units and convertible debt were not included in the computation of diluted EPS as their effect was anti-dilutive. 10. RELATED-PARTY TRANSACTIONS Pursuant to an intercompany agreement, the Company and OpCo provide each other with, among other things, reciprocal rights to participate in certain transactions entered into by each party. In particular, OpCo has a right of first refusal to become the lessee of any real property acquired by the Company. OpCo also may provide the Company with certain services including administrative, renovation supervision, corporate, accounting, finance, insurance, legal, tax, information technology, human resources, acquisition identification and due diligence, and operational services, for which OpCo is compensated in an amount that the Company would be charged by a third party for comparable services. During the years ended December 31, 2000, 1999 and 1998, the Company paid OpCo $1,165, $1,600 and $781 respectively, for such services. F-27 30 MERISTAR HOSPITALITY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 2000, 1999 AND 1998 Summarized financial information of the Company's significant lessee, OpCo, is as follows:
2000 1999 ---------- ----------- BALANCE SHEET DATA: Total assets.......... $ 339,118 $ 258,931 Total liabilities..... $ 254,673 $ 179,168 OPERATING DATA: Revenue............... $1,411,619 $1,292,114 Net income............ $ (9,380) $ 6,685
OpCo has a revolving credit facility with the Company. On March 1, 2000, OpCo repaid the remaining balance of $57,100 on its revolving credit agreement with the Company upon closing its bank revolving credit facility. At this time, the revolving credit agreement was amended to reduce the maximum borrowing limit from $75,000 to $50,000 and the interest rate on the facility was changed from LIBOR plus 350 basis points to LIBOR plus 650 basis points. During 2000, 1999 and 1998, the Company earned interest of $955, $4,907, and $1,967, respectively, from this facility. There were no amounts outstanding under this facility at December 31, 2000. In order for AGH to qualify as a REIT prior to the Merger, AGH's operating partnership sold certain personal property relating to certain of the hotels acquired by AGH in connection with its initial public offering to AGH Leasing, L.P. (which has since come under the control of OpCo) for $315, which amount was paid by issuance of a promissory note to AGH's operating partnership. The note was transferred to the Company in connection with the Merger. The promissory note bears interest at the rate of 10.0% per annum and requires the payment of quarterly installments of principal and interest over a five-year period ending on July 31, 2000. This note was repaid during 2000. Certain members of management and their respective affiliates owned equity interests relating to a hotel which was acquired by the Company in January 1999. Such persons and affiliates received an aggregate of $1,488 of the Company's OP Units in exchange for such interests in the hotel. Certain members of management and their respective affiliates owned equity interests relating to a hotel which was acquired by AGH in November 1997. Such persons and affiliates received an aggregate of $13,650 in operating partnership units in AGH's operating partnership ("AGH OP Units") in exchange for such interests in the hotel; which converted to 11,568 OP Units at the Merger. The AGH OP Units were converted into 11,568 shares of Common Stock in December 1998. Of the $150,000 aggregate principal amount of Subordinated Notes sold by the Company in August 1997, $50,000 principal amount was sold at a price of 97.866% to an affiliate of Oak Hill Capital Partners. One of the principal stockholders of Oak Hill is a director of the Company. The Subordinated Notes purchased are identical to those purchased by third parties, including voting rights. 11. STOCK-BASED COMPENSATION Stock Options At the date of the Merger, CapStar had outstanding approximately 1,758,000 options (the "CapStar Options") under an equity incentive plan. As a result of the Merger, all holders of CapStar Options received one option in the Company and one option of OpCo, and the original exercise price of the CapStar Options was allocated between the two companies. In addition, approximately 1,060,000 of the CapStar Options became fully vested as of the Merger date. F-28 31 MERISTAR HOSPITALITY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 2000, 1999 AND 1998 In connection with the Merger, a new equity incentive plan (the "Equity Incentive Plan") was adopted. This plan authorizes 4,549,561 shares of common stock to be awarded. Awards may be granted to officers or other key employees of the Company or an affiliate. These shares are exercisable in three annual installments and expire ten years from the grant date. In addition, the Company adopted a new equity incentive plan for non-employee directors (the "Directors' Plan"). The Directors' Plan authorizes up to 125,000 options to be awarded. These shares are exercisable in three annual installments and expire ten years from the grant date. As of December 31, 2000, 115,000 options had been awarded. Stock option activity for 2000, 1999 and 1998 is as follows:
EQUITY INCENTIVE PLAN DIRECTORS' PLAN ------------------------ ------------------------ NUMBER OF AVERAGE NUMBER AVERAGE SHARES OPTION PRICE OF SHARES OPTION PRICE ---------- ---------- ---------- ------------ Balance, January 1, 1998 ........................ 1,601,406 $ 26.28 -- $ -- Granted .................................... 2,171,796 24.78 45,000 21.38 Exercised .................................. (37,823) 17.45 -- -- Forfeited .................................. (32,000) 29.44 -- -- ---------- ---------- ---------- ---------- Balance, December 31, 1998 ...................... 3,703,379 24.80 45,000 21.38 Granted .................................... 1,015,750 19.37 35,000 23.63 Exercised .................................. (94,012) 15.64 -- -- Forfeited .................................. (264,064) 27.87 -- -- ---------- ---------- ---------- ---------- Balance, December 31, 1999 ...................... 4,361,053 23.56 80,000 22.36 Granted .................................... 584,875 16.13 35,000 19.00 Exercised .................................. (47,153) 17.26 -- -- Forfeited .................................. (113,441) 28.62 -- -- ---------- ---------- ---------- ---------- Balance, December 31, 2000 ...................... 4,785,334 $ 22.68 115,000 $ 21.34 ========== ========== ========== ========== Shares exercisable at December 31, 1998 ......... 2,231,072 $ 24.63 -- $ -- ========== ========== ========== ========== Shares exercisable at December 31, 1999 ......... 2,577,620 $ 24.53 15,000 $ 21.38 ========== ========== ========== ========== Shares exercisable at December 31, 2000 ......... 3,482,816 $ 23.99 26,667 $ 22.56 ========== ========== ========== ==========
The following table summarizes information about stock options outstanding at December 31, 2000:
RANGE OF EXERCISE PRICES OPTIONS OUTSTANDING OPTIONS EXERCISABLE - ------------------------ ----------------------- --------------------------------- WEIGHTED AVERAGE WEIGHTED WEIGHTED REMAINING AVERAGE AVERAGE NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE OUTSTANDING LIFE PRICE EXERCISABLE PRICE ----------- ----------- --------- ----------- --------- $14.88 to $19.19 2,013,572 7.59 $ 17.18 1,051,410 $ 16.59 $19.75 to $25.31 1,240,502 7.05 21.63 878,873 21.69 $25.80 to $31.42 1,435,280 6.02 29.98 1,435,280 29.98 $31.51 to $32.08 210,980 7.00 32.05 143,920 32.04 --------- --------- --------- --------- --------- $14.88 to $32.08 4,900,334 6.97 $ 22.70 3,509,483 $ 23.98 ========= ========= ========= ========= =========
The Company has adopted the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation." Accordingly, the Company applies Accounting Principles Board Opinion No. 25 in accounting F-29 32 MERISTAR HOSPITALITY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 2000, 1999 AND 1998 for the Equity Incentive Plan and therefore no compensation cost has been recognized for the Equity Incentive Plan. Pro forma information regarding net income and diluted EPS is required by SFAS No. 123, and has been determined as if the Company had accounted for its employee stock options under the fair value method. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted average assumptions for 2000, 1999 and 1998:
2000 1999 1998 ---- ---- ---- Risk-free interest rate............ 6.71% 6.70% 5.51% Dividend rate...................... $2.02 $2.02 $2.02 Volatility factor.................. 0.27 0.31 0.35 Weighted average expected life..... 3.06 years 3.07 years 6.09 years
The Company's pro forma net income and diluted EPS as if the fair value method had been applied were $98,216 and $2.07 for 2000, $98,273 and $2.02 for 1999, and $32,402 and $0.96 for 1998. The effects of applying SFAS No. 123 for disclosing compensation costs may not be representative of the effects on reported net income and diluted EPS for future years. Other Stock Compensation In conjunction with the Merger, holders of CapStar options were granted a total of 150,000 shares of stock with a value of $3,205. This restricted stock vests ratably over a three-year period. As of December 31, 2000, the Company granted 586,500 shares of restricted stock. This restricted stock vests ratably over a three-year or five-year period. The issuance of restricted stock has resulted in $7,550 of unearned stock-based compensation recorded as a reduction to stockholders' equity on the Company's consolidated balance sheet as of December 31, 2000. On March 29, 2000 the Company issued 462,500 Profits-Only OP Units to certain of the Company's executive officers and executive officers of OpCo pursuant to the Profits-Only Operating Partnership Units Plan which is filed as an exhibit to this Form 10-K. The units vest over three years based on achieving certain operating performance criteria and upon the occurrence of certain other events. 12. COMMITMENTS AND CONTINGENCIES The Company leases land at certain hotels from third parties. Certain leases contain contingent rent features based on gross revenues at the respective property. Future minimum lease payments required under these operating leases as of December 31, 2000 were as follows: 2001.......... $ 1,556 2002.......... 1,556 2003.......... 1,556 2004.......... 1,559 2005.......... 1,559 Thereafter.... 57,396 ------- $65,182 =======
F-30 33 MERISTAR HOSPITALITY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 2000, 1999 AND 1998 Until January 1, 2001 the Company leased all of its hotels to OpCO and one other lessee under noncancellable participating leases that expire from 2009 to 2011. Beginning January 1, 2001, the Company will lease eight hotels to one lessee under non cancelable participating leases that expire in 2009. The Company also leases certain office, retail and parking space to outside parties under non-cancelable operating leases with initial or remaining terms in excess of one year. Future minimum rental receipts under these leases as of December 31, 2000 were as follows: 2001.......... $ 20,289 2002.......... 19,801 2003.......... 18,937 2004.......... 18,590 2005.......... 16,945 Thereafter.... 63,428 -------- $157,990 ========
In the course of the Company's normal business activities, various lawsuits, claims and proceedings have been or may be instituted or asserted against the Company. Based on currently available facts, management believes that the disposition of matters that are pending or asserted will not have a material adverse effect on the consolidated financial position, results of operations or liquidity of the Company. 13. ACQUISITIONS AND DISPOSITIONS During 2000, the Company sold three limited service hotels and received proceeds of $24,148. This resulted in a gain on sale of assets of $3,495 ($3,425, net of tax). The company also purchased a full service hotel for $19,400. Of the $19,400, $11,400 was paid in cash and $8,000 will be paid from the hotel's future cash flow within the next five years. The acquisition was funded using existing cash and borrowings on the New Credit Facility. During 1999, the Company acquired one hotel for a purchase price of $10,642 of cash and $1,488 of OP Units. The acquisition was funded using existing cash and borrowings on the New Credit Facility. The Company also sold 2 hotels during 1999 for a total price of $8,900. The resulting gain on the sales was immaterial. During 1998, the Company acquired 70 hotels (containing 17,332 rooms), of which 53 were acquired pursuant to the Merger. The Company purchased AGH for approximately $1,306,000 through the issuance of approximately 23,913,000 shares of Common Stock and OP Units in the Company's subsidiary operating partnership. The total purchase price for the remaining 17 acquired hotels during 1998 was $549,068 of cash and $16,932 of OP Units. The cash portions of these acquisitions were funded through borrowings on the New Credit Facility and a prior credit facility. The following unaudited pro forma information is presented as if the Merger, the Spin-Off and all 117 hotels owned at December 31, 1998 had been acquired at the beginning of 1998. The pro forma information is provided for informational purposes only. It is based on historical information and does not necessarily reflect the actual results that would have occurred nor is it necessarily indicative of future results of operations of the Company. Pro forma information for 1998 for total revenue, net income and diluted EPS is $332,632, $96,232 and $2.05, respectively. F-31 34 MERISTAR HOSPITALITY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) DECEMBER 31, 2000, 1999 AND 1998 14. QUARTERLY FINANCIAL INFORMATION (UNAUDITED) The following is a summary of the Company's quarterly results of operations:
2000 1999 ----------------------------------------- ----------------------------------------- FIRST SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER QUARTER ------- ------- ------- ------- ------- ------- ------- ------- Total revenue .......................... $ 67,100 $ 81,539 $117,631 $134,508 $ 64,093 $ 74,055 $103,214 $133,542 Total operating expenses ............... 41,698 43,631 42,506 43,769 39,521 38,687 37,727 41,904 Net operating income ................... 25,402 37,908 75,125 90,739 24,572 35,368 65,487 91,638 Income before extraordinary (loss) gain ................................. (3,426) 10,424 41,259 54,550 267 7,179 37,709 58,341 Net (loss) income ...................... (372) 10,424 41,259 54,550 267 7,179 33,177 58,341 Diluted (loss) earnings per share ...... $ (0.01) $ 0.22 $ 0.83 $ 1.13 $ -- $ 0.15 $ 0.67 $ 1.14
15. SUPPLEMENTAL CASH FLOW INFORMATION
2000 1999 1998 ---- ---- ---- Cash paid for interest and income taxes: Interest, net of capitalized interest of $8,613, $12,540 and $5,182, respectively .......................................... $ 120,539 $ 93,491 $ 48,156 Income taxes ......................................................... 874 1,261 18,591 Non-cash investing and financing activities: Deferred financing costs written off ................................. 334 -- -- Long-term debt assumed in purchase of property and equipment ......................................................... -- -- 543 OP Units issued in purchase of property and equipment ................ -- 1,488 16,932 Redemption of OP Units ............................................... 24 29,412 31,430 Dividends reinvested ................................................. 91 -- -- Issuance of restricted stock ......................................... 10,620 -- -- Deferred purchase price .............................................. 8,000 -- -- Book value of assets distributed to spun-off affiliate ............... -- -- $ 41,449 Book value of liabilities distributed to spun-off affiliate .......... -- -- (11,768) Book value of debt distributed to spun-off affiliate ................. -- -- (1,116) Fair value of assets acquired in Merger .............................. -- -- $ 1,306,018 Fair value of liabilities assumed in Merger .......................... -- -- (26,167) Fair value of debt assumed in Merger ................................. -- -- (523,944)
16. SUBSEQUENT EVENT On January 26, 2001, the Company sold $300,000 of 9.0% senior notes due 2008 and $200,000 of 9.13% senior notes due 2011 (collectively the "Senior Unsecured Notes"). The notes are unsecured obligations of the Company and a number of its subsidiaries guarantee payment of principal and interest on the notes on a senior, unsecured basis. The net proceeds from the sale of $492,000 were used to repay amounts outstanding under the New Credit Facility and to make payments to terminate certain swap agreements that hedged variable interest rates of the loans that were repaid. In conjunction with the sales of the Senior Unsecured Notes, the Company terminated three of the seven swap agreements with notional amounts totaling $300,000. These swap agreements were designated to the New Credit Facility term loans that were repaid with the proceeds from the sale. The Company made payments totaling $9,297 to terminate these swap agreements. F-32 35 MERISTAR HOSPITALITY CORPORATION SCHEDULE III-REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 2000 (DOLLARS IN THOUSANDS)
INITIAL COST COSTS SUBSEQUENT TO COMPANY TO ACQUISITION GROSS AMOUNT AT END OF YEAR --------------- ------------------- ------------------------------ BUILDING BUILDING BUILDING ACCUM- AND AND AND ULATED YEAR OF ENCUM- IMPROVE- IMPROVE- IMPROVE- DEPRECIA- CONSTRUC- DESCRIPTION BRANCES LAND MENTS LAND MENTS LAND MENTS TION TION ----------- ------- ----- -------- ------- ---------- -------- --------- --------- --------- Hotel Assets: Salt Lake Airport Hilton, UT ................ -- $ 770 $12,828 $ -- $ 2,827 $ 770 $15,655 $ 2,184 1980 Radisson Hotel, Schaumburg, IL ............ -- 1,080 5,131 -- 2,282 1,080 7,413 908 1979 Sheraton Hotel, Colorado Springs, CO ...... (1) 1,071 14,592 1 3,728 1,072 18,320 2,387 1974 Hilton Hotel, Bellevue, WA ........................ 48 5,211 6,766 -- 3,186 5,211 9,952 1,108 1979 Marriott Hotel, Somerset, NJ .............. (1) 1,978 23,001 -- 4,390 1,978 27,391 3,357 1978 Westin Atlanta Airport, Atlanta, GA ............... -- 2,650 15,926 (300) 9,403 2,350 25,329 3,084 1982 Sheraton Hotel, Charlotte, NC ............. (1) 4,700 11,057 -- 3,906 4,700 14,963 1,739 1985 Radisson Hotel Southwest, Cleveland, OH ........................ -- 1,330 6,353 -- 4,547 1,330 10,900 1,190 1978 Orange County Airport Hilton, Irvine, CA ........ (1) 9,990 7,993 -- 3,133 9,990 11,126 1,255 1976 The Latham Hotel, Washington, DC ............ -- 6,500 5,320 -- 3,889 6,500 9,209 915 1981 Hilton Hotel, Arlington, TX ............. (1) 1,836 14,689 79 2,828 1,915 17,517 2,018 1983 Hilton Hotel, Arlington, VA ............. -- 4,000 15,069 -- 496 4,000 15,565 1,716 1990 Southwest Hilton, Houston, TX ............... -- 2,300 15,665 -- 1,244 2,300 16,909 1,728 1979 Embassy Suites, Englewood, CO ............. (1) 2,500 20,700 -- 2,782 2,500 23,482 2,380 1986 Holiday Inn, Colorado Springs, CO ............... -- 1,600 4,232 -- 1,057 1,600 5,289 482 1974 Embassy Row Hilton, Washington, DC ............ -- 2,200 13,247 -- 2,240 2,200 15,487 1,482 1969 Hilton Hotel & Towers, Lafayette, LA ............. (1) 1,700 16,062 -- 1,808 1,700 17,870 1,712 1981 Hilton Hotel, Sacramento, CA ............ (1) 4,000 16,013 -- 1,678 4,000 17,691 1,768 1983 Santa Barbara Inn, Santa Barbara, CA ......... -- 2,600 5,141 -- 1,110 2,600 6,251 602 1959 San Pedro Hilton, San Pedro, CA ................. -- 640 6,047 -- 2,300 640 8,347 753 1989 Doubletree Hotel, Albuquerque, NM ........... (1) 2,700 15,075 -- 823 2,700 15,898 1,565 1975 Westchase Hilton & Towers, Houston, TX ....... (1) 3,000 23,991 -- 1,531 3,000 25,522 2,485 1980 Four Points Hotel, Cherry Hill, NJ ........... -- 1,700 4,178 -- 2,181 1,700 6,359 553 1991 Sheraton Great Valley Inn, Frazer, PA ........... -- 2,150 11,653 11 2,712 2,161 14,365 1,190 1971 Holiday Inn Calgary Airport, Calgary, Alberta, Canada ........... -- 751 5,011 (36) 1,428 715 6,439 1,261 1981 Sheraton Hotel Dallas, Dallas, TX ................ -- 1,300 17,268 -- 2,358 1,300 19,626 1,771 1974 Radisson Hotel Dallas, Dallas, TX ................ -- 1,800 17,580 -- 1,466 1,800 19,046 1,746 1972 Sheraton Hotel Guildford, Surrey, BC, Canada .................... -- 2,366 24,008 (112) (258) 2,254 23,750 3,558 1992 Doubletree Guest Suites, Indianapolis, IN ........................ 1,000 8,242 -- 893 1,000 9,135 824 1987 DATE DESCRIPTION ACQUIRED LIFE ----------- -------- ---- Hotel Assets: Salt Lake Airport Hilton, UT ................ 3/3/95 40 Radisson Hotel, Schaumburg, IL ............ 6/30/95 40 Sheraton Hotel, Colorado Springs, CO ...... 6/30/95 40 Hilton Hotel, Bellevue, WA ........................ 8/4/95 40 Marriott Hotel, Somerset, NJ .............. 10/3/95 40 Westin Atlanta Airport, Atlanta, GA ............... 11/15/95 40 Sheraton Hotel, Charlotte, NC ............. 2/2/96 40 Radisson Hotel Southwest, Cleveland, OH ........................ 2/16/96 40 Orange County Airport Hilton, Irvine, CA ........ 2/22/96 40 The Latham Hotel, Washington, DC ............ 3/8/96 40 Hilton Hotel, Arlington, TX ............. 4/17/96 40 Hilton Hotel, Arlington, VA ............. 8/23/96 40 Southwest Hilton, Houston, TX ............... 10/31/96 40 Embassy Suites, Englewood, CO ............. 12/12/96 40 Holiday Inn, Colorado Springs, CO ............... 12/17/96 40 Embassy Row Hilton, Washington, DC ............ 12/17/96 40 Hilton Hotel & Towers, Lafayette, LA ............. 12/17/96 40 Hilton Hotel, Sacramento, CA ............ 12/17/96 40 Santa Barbara Inn, Santa Barbara, CA ......... 12/17/96 40 San Pedro Hilton, San Pedro, CA ................. 1/28/97 40 Doubletree Hotel, Albuquerque, NM ........... 1/31/97 40 Westchase Hilton & Towers, Houston, TX ....... 1/31/97 40 Four Points Hotel, Cherry Hill, NJ ........... 3/20/97 40 Sheraton Great Valley Inn, Frazer, PA ........... 3/27/97 40 Holiday Inn Calgary Airport, Calgary, Alberta, Canada ........... 4/1/97 40 Sheraton Hotel Dallas, Dallas, TX ................ 4/1/97 40 Radisson Hotel Dallas, Dallas, TX ................ 4/1/97 40 Sheraton Hotel Guildford, Surrey, BC, Canada .................... 4/1/97 40 Doubletree Guest Suites, Indianapolis, IN ........................ 4/1/97 40
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INITIAL COST COSTS SUBSEQUENT TO COMPANY TO ACQUISITION GROSS AMOUNT AT END OF YEAR ----------------- -------------------- ------------------------------ BUILDING BUILDING BUILDING ACCUM- AND AND AND ULATED YEAR OF ENCUM- IMPROVE- IMPROVE- IMPROVE- DEPRECIA- CONSTRUC- DESCRIPTION BRANCES LAND MENTS LAND MENTS LAND MENTS TION TION ----------- ------- ----- -------- ------- ---------- -------- --------- --------- ---------- Ramada Vancouver Centre, Vancouver, BC, Canada ................. -- 4,400 7,840 (208) 2,160 4,192 10,000 1,605 1968 Holiday Inn Sports Complex, Kansas City, MO ................... -- 420 4,742 -- 1,551 420 6,293 538 1975 Hilton Crystal City, Arlington, VA .............. -- 5,800 29,879 -- 1,036 5,800 30,915 2,681 1974 Doubletree Resort Hotel, Cathedral City, CA ................... -- 1,604 16,141 -- 2,837 1,604 18,978 1,557 1985 Radisson Hotel & Suites, Chicago, IL ......................... 4,870 39,175 -- 1,793 4,870 40,968 3,544 1971 Georgetown Inn, Washington, DC ............. -- 6,100 7,103 -- 1,486 6,100 8,589 655 1962 Embassy Suites Center City, Philadelphia, PA ........... (1) 5,500 26,763 -- 1,457 5,500 28,220 2,382 1963 Doubletree Hotel Austin, Austin, TX ......... (1) 2,975 25,678 -- 2,501 2,975 28,179 2,295 1984 Radisson Plaza Hotel, Lexington, KY .............. 240 1,100 30,375 -- 6,254 1,100 36,629 2,876 1982 Jekyll Inn, Jekyll Island, GA ................. -- -- 7,803 -- 3,218 -- 11,021 848 1971 Holiday Inn Metrotown, Burnaby, BC, Canada ................. -- 1,115 5,303 (53) 1,292 1,062 6,595 890 1989 Embassy Suites International Airport, Tucson, AZ ......................... -- 1,640 10,444 -- 2,214 1,640 12,658 901 1982 Westin Morristown, NJ ......................... -- 2,500 19,128 100 3,501 2,600 22,629 1,626 1962 Doubletree Hotel Bradley International Airport, Windsor Locks, CT .................. -- 1,013 10,228 87 1,422 1,100 11,650 838 1985 Sheraton Hotel, Mesa, AZ ......................... -- 1,850 16,938 -- 2,315 1,850 19,253 1,382 1985 Metro Airport Hilton & Suites, Detroit, MI ......................... -- 1,750 12,639 -- 1,311 1,750 13,950 995 1989 Marriott Hotel, Los Angeles, CA ................ -- 5,900 48,250 -- 7,208 5,900 55,458 3,956 1983 Austin Hilton & Towers, TX ................. -- 2,700 15,852 -- 2,674 2,700 18,526 1,291 1974 Dallas Renaissance North, TX .................. -- 3,400 20,813 -- 3,550 3,400 24,363 1,708 1979 Houston Sheraton Brookhollow Hotel, TX ......................... -- 2,500 17,609 -- 2,148 2,500 19,757 1,467 1980 Seelbach Hilton, Louisville, KY ............. -- 1,400 38,462 -- 5,550 1,400 44,012 3,017 1905 Midland Hilton & Towers, TX ................. -- 150 8,487 -- 1,715 150 10,202 708 1976 Westin Oklahoma, OK ......... -- 3,500 27,588 -- 1,683 3,500 29,271 2,159 1977 Sheraton Hotel, Columbia, MD ............... -- 3,600 21,393 -- 3,744 3,600 25,137 1,513 1972 Radisson Cross Keys, Baltimore, MD .............. -- 1,500 5,615 -- 1,492 1,500 7,107 417 1973 Sheraton Fisherman's Wharf, San Francisco, CA .............. (1) 19,708 61,751 -- 2,985 19,708 64,736 4,356 1975 Hartford Hilton, CT ......... -- 4,073 24,458 -- 2,824 4,073 27,282 1,642 1975 Holiday Inn Dallas DFW AirportSouth, TX ......................... 12,634 3,388 28,847 -- 8 3,388 28,855 1,747 1974 Courtyard by Marriott Meadowlands, NJ ............ 3,979 -- 9,649 -- 45 -- 9,694 581 1993 Hotel Maison de Ville, New Orleans, LA ......................... -- 292 3,015 -- (2) 292 3,013 181 1778 Hilton Hotel Toledo, OH ......................... -- -- 11,708 -- 38 -- 11,746 708 1987 Holiday Inn Select Dallas DFW Airport West, TX ................... -- 947 8,346 -- 213 947 8,559 812 1974 DATE DESCRIPTION ACQUIRED LIFE ----------- -------- ---- Ramada Vancouver Centre, Vancouver, BC, Canada ................. 4/1/97 40 Holiday Inn Sports Complex, Kansas City, MO ................... 4/30/97 40 Hilton Crystal City, Arlington, VA .............. 7/1/97 40 Doubletree Resort Hotel, Cathedral City, CA ................... 7/1/97 40 Radisson Hotel & Suites, Chicago, IL ......................... 7/15/97 40 Georgetown Inn, Washington, DC ............. 7/15/97 40 Embassy Suites Center City, Philadelphia, PA ........... 8/12/97 40 Doubletree Hotel Austin, Austin, TX ......... 8/14/97 40 Radisson Plaza Hotel, Lexington, KY .............. 8/14/97 40 Jekyll Inn, Jekyll Island, GA ................. 8/20/97 40 Holiday Inn Metrotown, Burnaby, BC, Canada ................. 8/22/97 40 Embassy Suites International Airport, Tucson, AZ ......................... 10/23/97 40 Westin Morristown, NJ ......................... 11/20/97 40 Doubletree Hotel Bradley International Airport, Windsor Locks, CT .................. 11/24/97 40 Sheraton Hotel, Mesa, AZ ......................... 12/5/97 40 Metro Airport Hilton & Suites, Detroit, MI ......................... 12/16/97 40 Marriott Hotel, Los Angeles, CA ................ 12/18/97 40 Austin Hilton & Towers, TX ................. 1/6/98 40 Dallas Renaissance North, TX .................. 1/6/98 40 Houston Sheraton Brookhollow Hotel, TX ......................... 1/6/98 40 Seelbach Hilton, Louisville, KY ............. 1/6/98 40 Midland Hilton & Towers, TX ................. 1/6/98 40 Westin Oklahoma, OK ......... 1/6/98 40 Sheraton Hotel, Columbia, MD ............... 3/27/98 40 Radisson Cross Keys, Baltimore, MD .............. 3/27/98 40 Sheraton Fisherman's Wharf, San Francisco, CA .............. 4/2/98 40 Hartford Hilton, CT ......... 5/21/98 40 Holiday Inn Dallas DFW AirportSouth, TX ......................... 8/3/98 -- Courtyard by Marriott Meadowlands, NJ ............ 8/3/98 40 Hotel Maison de Ville, New Orleans, LA ......................... 8/3/98 40 Hilton Hotel Toledo, OH ......................... 8/3/98 40 Holiday Inn Select Dallas DFW Airport West, TX ................... 8/3/98 40
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INITIAL COST COSTS SUBSEQUENT TO COMPANY TO ACQUISITION GROSS AMOUNT AT END OF YEAR ----------------- -------------------- ------------------------------ BUILDING BUILDING BUILDING ACCUM- AND AND AND ULATED YEAR OF ENCUM- IMPROVE- IMPROVE- IMPROVE- DEPRECIA- CONSTRUC- DESCRIPTION BRANCES LAND MENTS LAND MENTS LAND MENTS TION TION ----------- ------- ----- -------- ------- ---------- -------- --------- --------- --------- Holiday Inn Select New Orleans International Airport, LA ......................... (1) 3,040 25,616 -- 2,150 3,040 27,766 1,610 1973 Crowne Plaza Madison, WI ......................... (1) 2,629 21,634 -- 210 2,629 21,844 1,384 1987 Wyndham Albuquerque Airport Hotel, NM .......... -- -- 18,889 -- 112 -- 19,001 1,146 1972 Wyndham San Jose Airport Hotel, CA .......... -- -- 35,743 -- 997 -- 36,740 2,194 1974 Holiday Inn Select Mission Valley, CA ......... 2,410 20,998 -- 176 2,410 21,174 1,282 1970 Sheraton Safari Hotel, Lake Buena Vista, FL ....... -- 4,103 35,263 -- 9,062 4,103 44,325 2,437 1985 Hilton Monterey, CA ......... -- 2,141 17,666 -- 4,964 2,141 22,630 1,219 1971 Hilton Hotel Durham, NC ......................... -- 1,586 15,577 -- 2,390 1,586 17,967 973 1987 Wyndham Garden Hotel Marietta, GA ............... -- 1,900 17,077 -- 611 1,900 17,688 1,038 1985 Westin Resort Key Largo, FL .................. -- 3,167 29,190 -- 340 3,167 29,530 1,814 1985 Doubletree Guest Suites Atlanta, GA ................ 8,678 2,236 18,514 -- 3,798 2,236 22,312 1,310 1985 Radisson Hotel Arlington Heights, IL ......................... -- 1,540 12,645 -- 6,848 1,540 19,493 954 1981 Holiday Inn Select Bucks County, PA ........... -- 2,610 21,744 -- 2,773 2,610 24,517 1,335 1987 Hilton Hotel Cocoa Beach, FL .................. -- 2,783 23,076 -- 1,784 2,783 24,860 1,494 1986 Radisson Twin Towers Orlando, FL ................ -- 9,555 73,486 -- 8,209 9,555 81,695 4,701 1972 Crowne Plaza Phoenix, AZ ......................... -- 1,852 15,957 -- 3,448 1,852 19,405 1,145 1981 Hilton Airport Hotel Grand Rapids, MI ........... (1) 2,049 16,657 -- 539 2,049 17,196 1,033 1979 Marriott West Loop Houston, TX ................ (1) 2,943 23,934 -- 2,623 2,943 26,557 1,563 1976 Courtyard by Marriott Durham, NC ................. -- 1,406 11,001 -- 47 1,406 11,048 659 1996 Courtyard by Marriott, Marina Del Rey, CA ......... (1) 3,450 24,534 -- 359 3,450 24,893 1,531 1976 Courtyard by Marriott, Century City, CA ........... -- 2,165 16,465 -- 20 2,165 16,485 1,016 1986 Courtyard by Marriott, Lake Buena Vista, FL ....... -- -- 41,267 -- 2,438 -- 43,705 2,565 1972 Crowne Plaza, San Jose, CA ......................... (1) 2,130 23,404 (24) 1,501 2,106 24,905 1,501 1975 Doubletree Hotel Westshore, Tampa, FL ....... -- 2,904 23,476 -- 7,312 2,904 30,788 1,596 1972 Howard Johnson Resort Key Largo, FL .............. -- 1,784 12,419 -- 507 1,784 12,926 767 1971 Radisson Annapolis, MD ......................... -- 1,711 13,671 -- 1,945 1,711 15,616 829 1975 Holiday Inn Fort Lauderdale, FL ............. -- 2,381 19,419 -- 2,126 2,381 21,545 1,225 1969 Holiday Inn Madeira Beach, FL .................. -- 1,781 13,349 -- 26 1,781 13,375 811 1972 Holiday Inn Chicago O'Hare, IL ................. 19,080 4,290 72,631 -- 12,812 4,290 85,443 4,638 1975 Holiday Inn & Suites Alexandria, VA ............. -- 1,769 14,064 -- 52 1,769 14,116 882 1985 Hilton Clearwater, FL ....... -- -- 69,285 -- 3,608 -- 72,893 4,298 1980 Radisson Rochester, NY ......................... -- -- 6,499 -- 2,520 -- 9,019 438 1971 Radisson Old Towne Alexandria, VA ............. -- 2,241 17,796 -- 3,690 2,241 21,486 1,223 1975 Ramada Inn Clearwater, FL ......................... -- 1,270 13,453 -- 89 1,270 13,542 1,612 1969 Richmond Hotel and Conference Center .......... -- 245 3,380 -- 58 245 3,438 712 1975 DATE DESCRIPTION ACQUIRED LIFE ----------- -------- ---- Holiday Inn Select New Orleans International Airport, LA ......................... 8/3/98 40 Crowne Plaza Madison, WI ......................... 8/3/98 40 Wyndham Albuquerque Airport Hotel, NM .......... 8/3/98 40 Wyndham San Jose Airport Hotel, CA .......... 8/3/98 40 Holiday Inn Select Mission Valley, CA ......... 8/3/98 40 Sheraton Safari Hotel, Lake Buena Vista, FL ....... 8/3/98 40 Hilton Monterey, CA ......... 8/3/98 40 Hilton Hotel Durham, NC ......................... 8/3/98 40 Wyndham Garden Hotel Marietta, GA ............... 8/3/98 40 Westin Resort Key Largo, FL .................. 8/3/98 40 Doubletree Guest Suites Atlanta, GA ................ 8/3/98 40 Radisson Hotel Arlington Heights, IL ......................... 8/3/98 40 Holiday Inn Select Bucks County, PA ........... 8/3/98 40 Hilton Hotel Cocoa Beach, FL .................. 8/3/98 40 Radisson Twin Towers Orlando, FL ................ 8/3/98 40 Crowne Plaza Phoenix, AZ ......................... 8/3/98 40 Hilton Airport Hotel Grand Rapids, MI ........... 8/3/98 40 Marriott West Loop Houston, TX ................ 8/3/98 40 Courtyard by Marriott Durham, NC ................. 8/3/98 40 Courtyard by Marriott, Marina Del Rey, CA ......... 8/3/98 40 Courtyard by Marriott, Century City, CA ........... 8/3/98 40 Courtyard by Marriott, Lake Buena Vista, FL ....... 8/3/98 40 Crowne Plaza, San Jose, CA ......................... 8/3/98 40 Doubletree Hotel Westshore, Tampa, FL ....... 8/3/98 40 Howard Johnson Resort Key Largo, FL .............. 8/3/98 40 Radisson Annapolis, MD ......................... 8/3/98 40 Holiday Inn Fort Lauderdale, FL ............. 8/3/98 40 Holiday Inn Madeira Beach, FL .................. 8/3/98 40 Holiday Inn Chicago O'Hare, IL ................. 8/3/98 40 Holiday Inn & Suites Alexandria, VA ............. 8/3/98 40 Hilton Clearwater, FL ....... 8/3/98 40 Radisson Rochester, NY ......................... 8/3/98 40 Radisson Old Towne Alexandria, VA ............. 8/3/98 40 Ramada Inn Clearwater, FL ......................... 8/3/98 40 Richmond Hotel and Conference Center .......... 8/3/98 40
F-35 38
INITIAL COST COSTS SUBSEQUENT TO COMPANY TO ACQUISITION GROSS AMOUNT AT END OF YEAR ----------------- -------------------- ------------------------------ BUILDING BUILDING BUILDING ACCUM- AND AND AND ULATED YEAR OF ENCUM- IMPROVE- IMPROVE- IMPROVE- DEPRECIA- CONSTRUC- DESCRIPTION BRANCES LAND MENTS LAND MENTS LAND MENTS TION TION ----------- ------- ----- -------- ------- ---------- -------- --------- --------- --------- Crowne Plaza Las Vegas, NV ................... -- 3,006 24,011 -- 15 3,006 24,026 2,593 1989 Crowne Plaza Portland, OR ................ 4,917 2,950 23,254 -- 58 2,950 23,312 2,623 1988 Four Points Hotel, Mt. Arlington, NJ .......................... 4,328 6,553 6,058 -- 64 6,553 6,122 645 1984 Ramada Inn Mahwah, NJ .......................... -- 1,117 8,994 -- 121 1,117 9,115 898 1972 Ramada Plaza Meriden, CT ................. -- 1,247 10,057 -- 12 1,247 10,069 974 1985 Ramada Plaza Shelton, CT ................. 4,567 2,040 16,235 -- 28 2,040 16,263 1,529 1989 Sheraton Crossroads Mahwah, NJ .................. -- 3,258 26,185 -- 188 3,258 26,373 2,785 1986 St. Tropez Suites, Las Vegas, NV ............... -- 3,027 24,429 -- 24 3,027 24,453 2,360 1986 Doral Forrestal, Princeton, NJ ............... -- 9,578 57,555 -- 7,135 9,578 64,690 3,726 1981 South Seas Plantation, Captiva, FL ................. -- 3,084 83,573 -- 7,161 3,084 90,734 6,525 1975 Radisson Suites Beach Resort, Marco Island, FL .......................... -- 7,120 35,300 -- 2,103 7,120 37,403 4,106 1983 Best Western Sanibel Island, FL .......................... -- 3,868 3,984 17 302 3,885 4,286 665 1967 The Dunes Golf & Tennis Club, Sanibel Island, FL .......................... -- 7,705 3,043 9 21 7,714 3,064 246 1964 Sanibel Inn, Sanibel Island, FL .......................... -- 8,482 12,045 -- (74) 8,482 11,971 989 1964 Seaside Inn, Sanibel Island, FL .......................... -- 1,702 6,416 22 73 1,724 6,489 481 1964 Song of the Sea, Sanibel Island, FL .......................... -- 339 3,223 19 31 358 3,254 280 1964 Sundial Beach Resort, Sanibel Island, FL .................. -- 320 12,009 -- 556 320 12,565 806 1975 Holiday Inn, Madison, WI ................. -- 4,143 6,692 -- 78 4,143 6,770 337 1965 Safety Harbor Resort and Spa, Sanibel Island, FL .......................... -- 732 19,618 -- 1,538 732 21,156 1,547 1926 -------- ---------- ------ -------- -------- ---------- -------- $317,460 $2,207,320 $(388) $253,769 $317,072 $2,461,089 $188,647 ======== ========== ===== ======== ======== ========== ======== DATE DESCRIPTION ACQUIRED LIFE ----------- -------- ---- Crowne Plaza Las Vegas, NV ................... 8/3/98 40 Crowne Plaza Portland, OR ................ 8/3/98 40 Four Points Hotel, Mt. Arlington, NJ .......................... 8/3/98 40 Ramada Inn Mahwah, NJ .......................... 8/3/98 40 Ramada Plaza Meriden, CT ................. 8/3/98 40 Ramada Plaza Shelton, CT ................. 8/3/98 40 Sheraton Crossroads Mahwah, NJ .................. 8/3/98 40 St. Tropez Suites, Las Vegas, NV ............... 8/3/98 40 Doral Forrestal, Princeton, NJ ............... 8/11/98 40 South Seas Plantation, Captiva, FL ................. 10/1/98 40 Radisson Suites Beach Resort, Marco Island, FL .......................... 10/1/98 40 Best Western Sanibel Island, FL .......................... 10/1/98 40 The Dunes Golf & Tennis Club, Sanibel Island, FL .......................... 10/1/98 40 Sanibel Inn, Sanibel Island, FL .......................... 10/1/98 40 Seaside Inn, Sanibel Island, FL .......................... 10/1/98 40 Song of the Sea, Sanibel Island, FL .......................... 10/1/98 40 Sundial Beach Resort, Sanibel Island, FL .................. 10/1/98 40 Holiday Inn, Madison, WI ................. 1/11/99 40 Safety Harbor Resort and Spa, Sanibel Island, FL .......................... 5/31/00 40
- -------- (1) These properties secure the New Secured Facility which, as of December 31, 2000, had an outstanding balance of $324,554. The components of hotel property and equipment are as follows:
Property and Accumulated Equipment Depreciation ------------ ------------ Land............................................... $ 317,072 $ -- Building and Improvements.......................... 2,461,089 188,647 Furniture and equipment............................ 338,350 98,582 Construction in progress........................... 77,219 -- ---------- -------- Total property and equipment..................... $3,193,730 $287,229 ========== ========
F-36 39 A reconciliation of the Company's investment in hotel property and equipment and related accumulated depreciation is as follows:
2000 1999 1998 ----------- ----------- ----------- Hotel property and equipment Balance, beginning of period ..................... $ 3,118,723 $ 2,957,543 $ 947,597 Acquisitions during period ....................... 19,618 12,081 1,865,142 Improvements and construction-in- progress ........................................ 78,911 160,294 144,804 Cost of real estate sold ......................... (23,522) (11,195) -- ----------- ----------- ----------- Balance, end of period ........................... 3,193,730 3,118,723 2,957,543 ----------- ----------- ----------- Accumulated depreciation Balance, beginning of period ..................... 182,430 83,797 26,858 Additions-depreciation expense ................... 107,363 99,297 56,939 Cost of real estate sold ......................... (2,564) (664) -- ----------- ----------- ----------- Balance, end of period ........................... 287,229 182,430 83,797 ----------- ----------- ----------- Net hotel property and equipment, end of period .......................................... $ 2,906,501 $ 2,936,293 $ 2,873,746 =========== =========== ===========
F-37 40 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. FELCOR LODGING TRUST INCORPORATED Date: August 31, 2001 By: /s/ Lawrence D. Robinson ------------------------------ Lawrence D. Robinson Executive Vice President, General Counsel and Secretary -----END PRIVACY-ENHANCED MESSAGE-----