UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
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): | January 26, 2007 |
Interstate Hotels & Resorts, Inc.
Delaware | 1-14331 | 52-2101815 | ||
(State or other jurisdiction | (Commission | (I.R.S. Employer | ||
of incorporation) | File Number) | Identification No.) |
4501 North Fairfax Drive, Suite 500, | 22203 | |
Arlington, Virginia | ||
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code: (703) 387-3100
Not Applicable
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |
o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |
o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |
o Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.01 Completion of Acquisition or Disposition of Assets.
Item 5.02 | Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers. |
(b) | Pro Forma Financial Information |
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
September 30, 2006
(In thousands)
Interstate | ||||||||||||||
Hotels & | ||||||||||||||
Resorts, Inc. | Disposition of | |||||||||||||
Historical | BridgeStreet | Pro Forma | ||||||||||||
ASSETS | ||||||||||||||
Current assets: | ||||||||||||||
Cash and cash equivalents | $ | 12,320 | $ | 3,282 | A | $ | 9,038 | |||||||
Restricted cash | 4,181 | — | 4,181 | |||||||||||
Accounts receivable, net of allowance for doubtful accounts | 55,810 | 15,921 | B | 39,889 | ||||||||||
Due from related parties, net of allowance for doubtful accounts | 1,498 | — | 1,498 | |||||||||||
Prepaids expenses and other current assets | 14,354 | 9,642 | C | 4,712 | ||||||||||
Total current assets | 88,163 | 28,845 | 59,318 | |||||||||||
Marketable securities | 1,385 | — | 1,385 | |||||||||||
Property and equipment, net | 69,546 | 2,299 | D | 67,247 | ||||||||||
Investments in and advances to affiliates | 10,630 | — | 10,630 | |||||||||||
Notes receivable | 4,962 | — | 4,962 | |||||||||||
Deferred income taxes, net | 14,721 | — | 14,721 | |||||||||||
Goodwill | 86,185 | 9,857 | E | 76,328 | ||||||||||
Intangible assets, net | 32,707 | 14 | F | 32,693 | ||||||||||
�� | ||||||||||||||
Total assets | $ | 308,299 | $ | 41,015 | $ | 267,284 | ||||||||
LIABILITIES, MINORITY INTERESTS AND STOCKHOLDERS’ EQUITY | ||||||||||||||
Current liabilities: | ||||||||||||||
Accounts payable | $ | 4,991 | $ | 2,281 | G | $ | 2,710 | |||||||
Accrued expenses | 75,879 | 7,737 | G | 68,142 | ||||||||||
Current portion of long-term debt | 3,750 | — | 3,750 | |||||||||||
Total current liabilities | 84,620 | 10,018 | 74,602 | |||||||||||
Deferred compensation | 1,329 | — | 1,329 | |||||||||||
Long-term debt | 67,552 | — | 67,552 | |||||||||||
Total liabilities | 153,501 | 10,018 | 143,483 | |||||||||||
Minority interest | 468 | — | 468 | |||||||||||
Commitments and contingencies | ||||||||||||||
Total stockholders’ equity | 154,330 | 30,997 | H | 123,333 | ||||||||||
Total liabilities, minority interests and stockholders’ equity | $ | 308,299 | $ | 41,015 | $ | 267,284 | ||||||||
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
For the Nine Months Ended September 30, 2006
(In thousands, except per share amounts)
Interstate | ||||||||||||||
Hotels & | ||||||||||||||
Resorts, Inc. | Disposition of | |||||||||||||
Historical | BridgeStreet | Pro Forma | ||||||||||||
Revenue: | ||||||||||||||
Lodging | $ | 18,609 | $ | — | $ | 18,609 | ||||||||
Management fees | 34,386 | — | 34,386 | |||||||||||
Management fees-related parties | 12,030 | — | 12,030 | |||||||||||
Termination fees | 18,774 | — | 18,774 | |||||||||||
Termination fees-related parties | 6,117 | — | 6,117 | |||||||||||
Corporate housing | 101,066 | 101,066 | I | — | ||||||||||
Other | 9,117 | — | 9,117 | |||||||||||
200,099 | 101,066 | 99,033 | ||||||||||||
Other revenue from managed properties | 645,553 | — | 645,553 | |||||||||||
Total revenue | 845,652 | 101,066 | 744,586 | |||||||||||
Operating expenses by department: | ||||||||||||||
Lodging | 13,670 | — | 13,670 | |||||||||||
Corporate housing | 80,079 | 80,079 | J | — | ||||||||||
Undistributed operating expenses: | ||||||||||||||
Administrative and general | 58,553 | 15,324 | K | 43,229 | ||||||||||
Depreciation and amortization | 5,908 | 1,193 | L | 4,715 | ||||||||||
Restructuring charges | — | — | — | |||||||||||
Asset impairments and write-offs | 10,666 | — | 10,666 | |||||||||||
168,876 | 96,596 | 72,280 | ||||||||||||
Other expenses from managed properties | 645,553 | — | 645,553 | |||||||||||
Total operating expenses | 814,429 | 96,596 | 717,833 | |||||||||||
OPERATING INCOME | 31,223 | 4,470 | 26,753 | |||||||||||
Interest expense, net | (4,795 | ) | (18 | ) | M | (4,777 | ) | |||||||
Equity in earnings of affiliates | 4,311 | — | 4,311 | |||||||||||
Gain on sale of investment and extinguishment of debt | — | — | — | |||||||||||
INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTERESTS AND INCOME TAXES | 30,739 | 4,452 | 26,287 | |||||||||||
Income tax expense | (11,615 | ) | (1,402 | ) | N | (10,213 | ) | |||||||
Minority interest expense | (171 | ) | — | (171 | ) | |||||||||
INCOME FROM CONTINUING OPERATIONS | $ | 18,953 | $ | 3,050 | $ | 15,903 | ||||||||
BASIC AND DILUTED EARNINGS PER SHARE: | ||||||||||||||
Basic earnings per share from continuing operations | $ | 0.61 | $ | 0.51 | ||||||||||
Diluted earnings per share from continuing operations | $ | 0.60 | $ | 0.51 | ||||||||||
Weighted average basic shares outstanding (in thousands) | 30,983 | 30,983 | ||||||||||||
Weighted average diluted shares outstanding (in thousands) | 31,424 | 31,424 |
UNAUDITED PRO FORMA CONDENSED STATEMENT OF OPERATIONS
For the Year Ended December 31, 2005
(In thousands, except per share amounts)
Interstate | ||||||||||||||
Hotels & | ||||||||||||||
Resorts, Inc. | Disposition of | |||||||||||||
Historical | BridgeStreet | Pro Forma | ||||||||||||
Revenue: | P | |||||||||||||
Lodging | $ | 12,638 | $ | — | $ | 12,638 | ||||||||
Management fees | 48,379 | — | 48,379 | |||||||||||
Management fees-related parties | 22,295 | — | 22,295 | |||||||||||
Termination fees | 1,392 | — | 1,392 | |||||||||||
Termination fees-related parties | 5,807 | — | 5,807 | |||||||||||
Corporate housing | 120,519 | 120,519 | I | — | ||||||||||
Other | 11,140 | — | 11,140 | |||||||||||
222,170 | 120,519 | 101,651 | ||||||||||||
Other revenue from managed properties | 893,760 | — | 893,760 | |||||||||||
Total revenue | 1,115,930 | 120,519 | 995,411 | |||||||||||
Operating expenses by department: | ||||||||||||||
Lodging | 10,009 | — | 10,009 | |||||||||||
Corporate housing | 96,868 | 96,868 | J | — | ||||||||||
Undistributed operating expenses: | ||||||||||||||
Administrative and general | 79,219 | 19,247 | K | 59,972 | ||||||||||
Depreciation and amortization | 9,141 | 1,101 | L | 8,040 | ||||||||||
Restructuring charges | 2,043 | 91 | O | 1,952 | ||||||||||
Asset impairments and write-offs | 5,583 | — | 5,583 | |||||||||||
202,863 | 117,307 | 85,556 | ||||||||||||
Other expenses from managed properties | 893,760 | — | 893,760 | |||||||||||
Total operating expenses | 1,096,623 | 117,307 | 979,316 | |||||||||||
OPERATING INCOME | 19,307 | 3,212 | 16,095 | |||||||||||
Interest expense, net | (8,971 | ) | — | (8,971 | ) | |||||||||
Equity in earnings of affiliates | 3,492 | — | 3,492 | |||||||||||
Gain on sale of investment and extinguishment of debt | 4,658 | — | 4,658 | |||||||||||
INCOME FROM CONTINUING OPERATIONS BEFORE MINORITY INTERESTS AND INCOME TAXES | 18,486 | 3,212 | 15,274 | |||||||||||
Income tax expense | (7,327 | ) | (1,012 | ) | N | (6,315 | ) | |||||||
Minority interest expense | (173 | ) | — | (173 | ) | |||||||||
INCOME FROM CONTINUING OPERATIONS | $ | 10,986 | $ | 2,200 | $ | 8,786 | ||||||||
BASIC AND DILUTED EARNINGS PER SHARE: | ||||||||||||||
Basic earnings per share from continuing operations | $ | 0.36 | $ | 0.29 | ||||||||||
Diluted earnings per share from continuing operations | $ | 0.36 | $ | 0.29 | ||||||||||
Weighted average basic shares outstanding (in thousands) | 30,522 | 30,522 | ||||||||||||
Weighted average diluted shares outstanding (in thousands) | 30,825 | 30,825 |
A | Remove the cash related to BridgeStreet. |
B | Remove gross accounts receivable of $16.8 million and $0.9 million of allowance for doubtful accounts from customers for stays in the leased apartments. |
C | Remove prepaid expenses of $9.6 million that consist of prepaid rent, insurance, advertising, security deposits and other miscellaneous prepaid expenses. |
D | Remove $6.5 million of gross fixed assets, such as furniture, leasehold improvements and computer equipment and $4.2 million of related accumulated depreciation. |
E | Remove goodwill of $9.9 million that resulted when the Company merged with Interstate Hotels Corporation in July 2002. |
F | Remove intangible asset related to customer rental contracts which the Company assumed as part of the acquisition of a corporate housing business in Chicago, IL. |
G | Remove accounts payable and accrued expenses of $10.0 million related to trade payables due to vendors, sales tax payable, accrued payroll and other various miscellaneous accrued expenses. |
H | Remove the related stockholders’ equity for BridgeStreet. |
I | Remove corporate housing revenue of $101.1 million and $120.5 million, for the nine months ended September 30, 2006 and full year 2005, respectively. This consists of revenues earned when customers stay in leased apartments. |
J | Remove corporate housing expense of $80.1 million and $96.9 million, for the nine months ended September 30, 2006 and full year 2005, respectively. These costs include lease payments for apartments and furniture, utilities, housekeeping services and costs associated with our field staff. |
K | Remove administrative and general expense of $15.3 million and $19.2 million, for the nine months ended September 30, 2006 and full year 2005, respectively. These costs are associated with the management of the corporate housing facilities. |
L | Remove depreciation and amortization expense of $1.2 million and $1.1 million, for the nine months ended September 30, 2006 and full year 2005, respectively. |
M | Remove interest expense of $18,000 for the nine months ended September 30, 2006. The interest expense is related to capital leases. |
N | Remove income tax expense of $1.4 million and $1.0 million, for the nine months ended September 30, 2006 and full year 2005, respectively. The composite tax rate for the BridgeStreet subsidiary was 31.5% in both periods. |
O | Remove restructuring expense of $0.1 million for the full year 2005. This is related to severance for former personnel of the Company’s corporate housing business in connection with the consolidation and restructuring in one of the field offices. |
P | To present the 2005 statement of operations in accordance with the 2006 presentation, certain reclassifications have been made to the amounts filed in the 2005 10-K. Lodging revenue was $12,656 and is now $12,638. Other fees was $11,434 and is now $11,140. Interest Income was $980 and is now $1,292. These reclassifications were made to accurately present interest income. Termination fees and termination fees-related party have been removed from management fees and management fees-related party to be presented as their own line item. Management fees was $49,771 and is now $48,379. Management fees-related parties was $28,102 and is now $22,295. |
(d) | Exhibits |
Exhibit Number | Description | |
2.1 | Purchase and Sale Agreement, by and among Interstate Hotels & Resorts, Inc., Interstate Operating Company, L.P. and Amkadian Holdings, Inc., entered into as of January 26, 2007. |
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.
Interstate Hotels & Resorts, Inc. | ||
January 29, 2007 | By: /s/ Christopher L. Bennett |
Name: Christopher L. Bennett | ||||||
Title: Executive Vice President and General Counsel | ||||||
Exhibit Index
Exhibit Number | Description | |
2.1 | Purchase and Sale Agreement, by and among Interstate Hotels & Resorts, Inc., Interstate Operating Company, L.P. and Amkadian Holdings, Inc., entered into as of January 26, 2007. |