WCH (CNDL) 8-K/A Acquisition or disposition of assets

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 8-K/A

CURRENT REPORT

PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES AND EXCHANGE ACT OF 1934

April 26, 2002
Date of Report (Date of earliest event reported)

CANDLEWOOD HOTEL COMPANY, INC.
(Exact name of registrant as specified in its charter)

Delaware (State or other Jurisdiction of Incorporation)	000-21583 (Commission File Number)	48-1188025 (IRS Employer Identification Number)
8621 E. 21st Street North Suite 200 Wichita, Kansas (Address of principal executive offices)		67206 (Zip Code)

(316) 631-1300
(Registrant’s telephone number, including area code)

N/A
(Former Name or Former Address, if Changed Since Last Report)

TABLE OF CONTENTS

	Item 2. Acquisition or Disposition of Assets.
	Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
SIGNATURES
EXHIBIT INDEX

Item 2. Acquisition or Disposition of Assets.

     On April 11, 2002, Candlewood Hotel Company, Inc. and certain of its subsidiaries (collectively, the “Company”) sold 21 hotels (the “Hotels”) to a subsidiary of Hospitality Properties Trust, a Maryland real estate investment trust (collectively, “HPT”), as part of a sale-leaseback arrangement. The sale to HPT and the simultaneous leaseback to the Company were made pursuant to a Purchase and Sale Agreement and an Agreement to Lease between the Company and HPT, dated as of April 11, 2002. The aggregate purchase price for the sale of the Hotels was $145 million. As a result of this sale-leaseback, 57 hotel properties are now leased by the Company under a single lease agreement with HPT.

     The Company hereby amends its Current Report on Form 8-K dated April 26, 2002 by filing certain pro forma financial information.

     The assumptions, estimates and adjustments made in preparing the pro forma financial statements are preliminary and have been made solely for purposes of developing such pro forma information. All interim financial data used to develop the unaudited pro forma condensed combining balance sheet and statements of operations are unaudited, but in the opinion of management, reflect all adjustments necessary (consisting only of normal recurring accruals) for a fair presentation thereof. However, results for interim periods may not be indicative of results that may be achieved in a full fiscal year.

Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.

(b)  Pro Forma Financial Information

     Unaudited consolidated pro forma financial information of the Company reflecting the sale of the Hotels to HPT, as of and for the three months ended March 31, 2002 and for the fiscal year ended December 31, 2001:

Index	Page
Candlewood Hotel Company, Inc. and Subsidiaries Unaudited Consolidated Pro Forma Financial Statements		F-1
Candlewood Hotel Company, Inc. and Subsidiaries Pro Forma Consolidated Balance Sheet at December 31, 2001		F-2
Candlewood Hotel Company, Inc. and Subsidiaries Pro Forma Consolidated Balance Sheet at March 31, 2002		F-3
Candlewood Hotel Company, Inc. and Subsidiaries Pro Forma Consolidated Income Statement for the year ended December 31, 2001		F-4
Candlewood Hotel Company, Inc. and Subsidiaries Pro Forma Consolidated Income Statement for the quarter ended March 31, 2002		F-5
Notes to Unaudited Consolidated Pro Forma Financial Statements		F-6, F-7

(c)  Exhibits

     See Index to Exhibits on page 4.

2

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.

	CANDLEWOOD HOTEL COMPANY, INC.
Date:   June 26, 2002	By:	/s/   Warren D. Fix
		Name:   Warren D. Fix Title:     Executive Vice President, Chief Financial Officer               and Secretary

3

EXHIBIT INDEX

Exhibits	Description of Document	Note
10.1	Purchase and Sale Agreement, dated as of April 11, 2002, by and among Candlewood Hotel Company, Inc. and certain of its affiliates, as sellers, and Hospitality Properties Trust, as purchaser.		(1	)
10.2	Second Amended and Restated Lease Agreement, dated as of April 11, 2002, by and between HPT CW Properties Trust, as landlord, and Candlewood Leasing No. 1, Inc., as tenant.		(1	)
10.3	Second Amended and Restated Assignment and Security Agreement, dated as of April 11, 2002, by and between Candlewood Leasing No. 1, Inc., assignor, and HPT CW Properties Trust, assignee.		(1	)
10.4	Fourth Amendment to Agreement to Lease, dated as of April 11, 2002, by and between Hospitality Properties Trust and Candlewood Hotel Company, Inc.		(1	)
10.5	Second Amended and Restated Guaranty Agreement, dated as of April 11, 2002, by Candlewood Hotel Company, Inc., as guarantor, for the benefit of HPT CW Properties Trust and Hospitality Properties Trust.		(1	)
10.6	Second Amended and Restated Security Agreement, dated as of April 11, 2002, by and between Candlewood Leasing No. 1, Inc., as tenant, and HPT CW Properties Trust, as secured party.		(1	)
10.7	Second Amended and Restated Stock Pledge Agreement, dated as of April 11, 2002, by Candlewood Hotel Company, Inc., as pledgor, for the benefit of HPT CW Properties Trust, as secured party.		(1	)

(1) Incorporated by reference from Candlewood Hotel Company, Inc.’s Current Report on Form 8-K filed April 26, 2002.

4

CANDLEWOOD HOTEL COMPANY, INC. AND SUBSIDIARIES
Unaudited Consolidated Pro Forma Financial Statements

     The following unaudited adjusted pro forma balance sheets at December 31, 2001 and March 31, 2002, respectively, are intended to present the financial position of the Company as if the transaction described in the Notes to the Unaudited Consolidated Pro Forma Financial Statements (the “Transaction”) was consummated at January 1, 2001 and January 1, 2002, respectively. The following unaudited adjusted pro forma statements of income are intended to present the results of operations of the Company as if the Transaction was consummated on January 1, 2001 and January 1, 2002, respectively. These unaudited adjusted pro forma financial statements should be read in conjunction with, and are qualified in their entirety by reference to, the separate financial statements of the Company as of and for the year ended December 31, 2001 and for the three months ended March 31, 2002, as filed with the Company’s Annual Report on Form 10-K for the year ended December 31, 2001 and its Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2002, respectively.

     These unaudited adjusted pro forma financial statements are not necessarily indicative of the expected financial position or results of operations of the Company for any future period. Differences would result from, among other considerations, future changes in the Company’s portfolio of investments, changes in interest rates, changes in capital structure of the Company, changes in operating results at individual hotels and changes in the Company’s operating expenses.

     The following unaudited pro forma balance sheet and unaudited pro forma statements of income were prepared pursuant to the Securities and Exchange Commission’s rules for the presentation of pro forma data. The pro forma and adjusted pro forma data give effect to the consummation by the Company of the Transaction.

F-1

CANDLEWOOD HOTEL COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
December 31, 2001
(amounts in thousands)
(unaudited)

				Historical
				Dec. 31, 2001			Pro Forma			Proforma
				(1)			Adjustments			Dec. 31, 2001
Assets:
Investment in hotels completed and under construction:
	Hotels completed			$	263,160		$	(168,782	)(2)	$	94,378
					263,160			(168,782	)		94,378
	Accumulated depreciation and amortization				(24,878	)		15,134	(2)		(9,744	)
		Net investment in hotels			238,282			(153,648	)		84,634
Cash and cash equivalents					17,966			7,215	(3)		25,181
Deposits					30,086			16,000	(4)		46,086
Accounts and other receivables					4,663			1,211	(3)		5,874
Investments in joint ventures					12,994			—			12,994
Other assets					17,347			(5,915	)(5)		11,432
			Total assets	$	321,338		$	(135,137	)	$	186,201
Liabilities and Stockholders’ (Deficit):
Mortgages and notes payable				$	191,456		$	(134,166	)(6)	$	57,290
Accounts payable and other accrued expenses					16,364			(2,520	)		13,844
Deferred gain on sale of hotels					16,995			9,272	(8)		26,267
Other liabilities					768			—			768
		Total liabilities			225,583			(127,414	)		98,169
Redeemable, convertible, cumulative preferred stock (Series “A”), $1,000 stated value, 65,000 shares authorized and outstanding net of offering costs					63,047			—			63,047
Redeemable, convertible, cumulative preferred stock (Series “B”), $1,000 stated value, 42,000 shares authorized and outstanding net of offering costs					40,491			—			40,491
Stockholders’ (Deficit):
	Common stock, $.01 par value, 100,000,000 shares authorized 9,025,000 issued and outstanding				90			—			90
	Additional paid-in capital				32,421			—			32,421
	Accumulated deficit				(40,294	)		(7,723	)(9)		(48,017	)
		Total stockholders’ (deficit)			(7,783	)		(7,723	)		(15,506	)
			Total liabilities and stockholders’ (deficit)	$	321,338		$	(135,137	)	$	186,201

F-2

CANDLEWOOD HOTEL COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
March 31, 2002
(amounts in thousands)
(unaudited)

				Historical
				Mar. 31, 2002			Pro Forma			Proforma
				(1)			Adjustments			March 31, 2002
Assets:
Investment in hotels completed and under construction:
	Hotels completed			$	99,208		$	—		$	99,208
	Hotels held for sale				161,403			(161,403	)(2)		—
					260,611			(161,403	)		99,208
	Accumulated depreciation and amortization				(27,112	)		16,403	(2)		(10,709	)
		Net investment in hotels			233,499			(145,000	)		88,499
Cash and cash equivalents					9,379			10,620	(3)		19,999
Deposits					30,086			16,000	(4)		46,086
Accounts and other receivables					5,013			1,211	(3)		6,224
Investments in joint ventures					12,519			—			12,519
Other assets					18,019			(5,569	)(5)		12,450
			Total assets	$	308,515		$	(122,738	)	$	185,777
Liabilities and Stockholders’ (Deficit):
Mortgages and notes payable				$	191,823		$	(130,415	)(6)	$	61,408
Accounts payable and other accrued expenses					15,126			(271	)		14,855
Deferred gain on sale of hotels					16,712			9,673	(8)		26,385
Other liabilities					811			—			811
		Total liabilities			224,472			(121,013	)		103,459
Redeemable, convertible, cumulative preferred stock (Series “A”), $1,000 stated value, 65,000 shares authorized and outstanding net of offering costs					64,504			—			64,504
Redeemable, convertible, cumulative preferred stock (Series “B”), $1,000 stated value, 42,000 shares authorized and outstanding net of offering costs					41,452			—			41,452
Stockholders’ (Deficit):
	Common stock, $.01 par value, 100,000,000 shares authorized 9,025,000 issued and outstanding				90			—			90
	Additional paid-in capital				30,002			—			30,002
	Accumulated deficit				(52,005	)		(1,725	)(9)		(53,730	)
		Total stockholders’ (deficit)			(21,913	)		(1,725	)		(23,638	)
			Total liabilities and stockholders’ (deficit)	$	308,515		$	(122,738	)	$	185,777

F-3

CANDLEWOOD HOTEL COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED INCOME STATEMENT
For the Year Ended December 31, 2001
(amounts in thousands, except per share data)
(unaudited)

			Historical						Pro Forma
			Year Ended						Year Ended
			December 31,			Pro Forma			December 31,
			2001 (7)			Adjustments			2001
Revenues:
	Hotel operations		$	127,092		$	—		$	127,092
	Other income			3,031			—			3,031
		Total hotel operating revenues		130,123			—			130,123
	Proceeds from sale of hotels			28,850			145,000	(8)		173,850
	Gain recognized on sale of hotels			1,280			545	(8)		1,825
		Total revenues		160,253			145,545			305,798
Operating costs and expenses:
	Hotel operating expenses			74,451			—			74,451
	Corporate operating expenses			7,162			—			7,162
	Rent expense			26,523			16,000	(9)		42,523
	Hotel opening costs			230			—			230
	Depreciation and amortization			11,641			(6,552	)(9)		5,089
	Impairment loss on assets held for sale			—			—			—
		Total operating costs and expenses		120,007			9,448			129,455
	Cost of hotels sold			29,064			153,648	(9)		182,712
				11,182			(17,551	)		(6,369	)
Interest income				761			—			761
Interest expense				(17,081	)		11,867	(9)		(5,214	)
		Net loss before extraordinary item		(5,138	)		(5,684	)		(10,822	)
Extraordinary item				—			(2,039	)(9)		(2,039	)
		Net loss after extraordinary item		(5,138	)		(7,723	)		(12,861	)
Preferred stock dividends				(8,025	)		—			(8,025	)
		Net loss available to common stockholders	$	(13,163	)	$	(7,723	)	$	(20,886	)
Net loss per share of common stock — basic and diluted			$	(1.46	)	$	(0.86	)	$	(2.31	)
Weighted average shares outstanding				9,025			9,025			9,025

F-4

CANDLEWOOD HOTEL COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED INCOME STATEMENT
For the Quarter Ended March 31, 2002
(amounts in thousands, except per share data)
(unaudited)

			Historical						Pro Forma
			3 Months Ended						3 Months Ended
			March 31,			Pro Forma			March 31,
			2002 (7)			Adjustments			2002
Revenues:
	Hotel operations		$	29,976		$	—		$	29,976
	Other income			456			—			456
		Total hotel operating revenues		30,432			—			30,432
	Proceeds from sale of hotels			—			145,000	(8)		145,000
	Gain recognized on sale of hotels			283			144	(8)		427
		Total revenues		30,715			145,144			175,859
Operating costs and expenses:
	Hotel operating expenses			19,202			—			19,202
	Corporate operating expenses			1,442			—			1,442
	Rent expense			7,174			4,000	(9)		11,174
	Hotel opening costs			—			—			—
	Depreciation and amortization			2,669			(1,591	)(9)		1,078
	Impairment loss on assets held for sale			8,604			—			8,604
		Total operating costs and expenses		39,091			2,409			41,500
	Cost of hotels sold			—			145,000	(8)		145,000
				(8,376	)		(2,265	)		(10,641	)
Interest income				93			—			93
Interest expense				(3,428	)		2,344	(9)		(1,084	)
		Net loss before extraordinary item		(11,711	)		79			(11,632	)
Extraordinary item				—			(1,804	)(9)		(1,804	)
		Net loss after extraordinary item		(11,711	)		(1,725	)		(13,436	)
Preferred stock dividends				(1,979	)		—			(1,979	)
		Net loss available to common stockholders	$	(13,690	)	$	(1,725	)	$	(15,415	)
Net loss per share of common stock — basic and diluted			$	(1.52	)	$	(0.19	)	$	(1.71	)
Weighted average shares outstanding				9,025			9,025			9,025

F-5

CANDLEWOOD HOTEL COMPANY, INC. AND SUBSIDIARIES
Notes to Unaudited Consolidated Pro Forma Financial Statements
(amounts in thousands)

1)	Represents the historical balance sheet of the Company at December 31, 2001 and March 31, 2002, respectively.
2)	Represents the historical cost and accumulated depreciation of the 21 hotels sold in the Transaction at December 31, 2001 and March 31, 2002, respectively.
3)	Represents the net effect of the pro forma adjustments on cash and accounts receivable at December 31, 2001 and March 31, 2002, respectively.

	Dec. 31, 2001			Mar. 31, 2002
Purchase price	$	145,000		$	145,000
Security deposit placed with HPT		(16,000	)		(16,000	)
Release of rent guarantee deposit		10,065			10,065
Title company holdback		(1,211	)		(1,211	)
Repayment of mortgage loan debt		(120,666	)		(119,915	)
Repayment of Hilton Corporation corporate debt		(13,500	)		(10,500	)
Release of escrowed funds		5,915			5,569
Legal fees and closing costs		(2,388	)		(2,388	)
Net effect on cash	$	7,215		$	10,620

4)	Represents security deposit placed with HPT for the 21 hotels sold in the Transaction.
5)	Represents the release of FF&E escrowed funds from the lenders for the 21 hotels sold in the Transaction.
6)	Represents the repayment of mortgage debt and Hilton Corporation corporate debt at December 31, 2001 and March 31, 2002, respectively.

	Dec. 31, 2001		Mar. 31, 2002
Mortgage debt	$	120,666	$	119,915
Corporate debt		13,500		10,500
	$	134,166	$	130,415

7)	Represents the historical income statement of the Company for the year ended December 31, 2001 and the quarter ended March 31, 2002, respectively.
8)	Represents the sales price, cost of sales and calculation of the deferred gain on the sale of the 21 hotels at December 31, 2001 and March 31, 2002, respectively.

	Dec. 31, 2001			Mar. 31, 2002
Proceeds from sale of hotels	$	145,000		$	145,000
Cost of hotels sold		(145,000	)		(145,000	)
Transaction costs		(248	)		(248	)
Release of rent guarantee deposit		10,065			10,065
Deferred gain on sale of hotels		9,817			9,817
Gain recognized on sale of hotels		(545	)		(144	)
Adjusted proforma deferred gain on sale	$	9,272		$	9,673

F-6

9) Represents the pro forma adjustment to rent expense, depreciation and amortization expense, and interest expense for the year ended December 31, 2001 and the quarter ended March 31, 2002, respectively.

	Dec. 31, 2001			Mar. 31, 2002
Gain recognized on sale of hotels	$	545		$	144
Rent expense		(16,000	)		(4,000	)
Depreciation and amortization expense		6,552			1,591
Loss on sale of assets		(8,648	)		—
Interest expense		11,867			2,344
Extraordinary loss on extinguishment of debt		(2,039	)		(1,804	)
	$	(7,723	)	$	(1,725	)

F-7