SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) January 14, 1997
HOST MARRIOTT CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Delaware
(State or Other Jurisdiction of Incorporation)
1-5664
(Commission File Number)
53-0085950
(I.R.S. Employer Identification Number)
10400 Fernwood Road, Bethesda, Maryland 20817
(Address of Principle Executive Offices) (Zip Code)
Registrant's Telephone Number, Including Area Code (301) 380-9000
(Former Name or Former Address, if changed since last report.)
Item 5. Other Events
The Registrant is filing this Current Report on Form 8-K to identify certain
transactions which have occurred subsequent to the close of the Company's third
quarter, as well as other events that have occurred throughout fiscal years 1995
and 1996, the effects of which may be relevant to investors. See the
introduction to the Pro Forma Condensed Consolidated Financial Data for a
discussion of these transactions and the related pro forma financial statements.
Item 7. Financial Statements and Exhibits
(b) Pro forma financial information of the Company as of September 6, 1996
and for the thirty-six weeks ended September 6, 1996 and for the
fiscal year ended December 29, 1995:
Page
----
Unaudited Pro Forma Condensed Consolidated Financial Data 3
Unaudited Pro Forma Condensed Consolidated Balance Sheet
as of September 6, 1996 5
Unaudited Pro Forma Condensed Consolidated Statement of Operations
for the thirty-six weeks ended September 6, 1996 6
Unaudited Pro Forma Condensed Consolidated Statement of Operations
for the fiscal year ended December 29, 1995 7
Notes to Pro Forma Condensed Consolidated Financial Data 8
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.
Host Marriott Corporation
By: /s/ Donald D. Olinger
-------------------------
Donald D. Olinger
Senior Vice President and
Corporate Controller
January 14, 1997
2
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL DATA
The unaudited Pro Forma Condensed Consolidated Statements of Operations of the
Company reflect the following transactions for the thirty-six weeks ended
September 6, 1996 and for the fiscal year ended December 29, 1995, as if such
transactions had been completed at the beginning of each period:
- - 1996 acquisition of a controlling interest in 17 full-service hotel
properties
- - 1996 acquisition of six full-service hotel properties
- - March 1996 Stock Offering (as defined below)
- - December 1996 purchase of a mortgage note secured by the New York Marriott
Financial Center Hotel
- - December 1996 Convertible Preferred Stock Offering (as defined below)
- - December 1996 repayment of a mortgage note secured by the Philadelphia
Convention Center Hotel
- - 1996 sale/leaseback of 16 Courtyard and 18 Residence Inn properties
- - 1995 acquisition of eight full-service hotel properties (see discussion
below)
- - 1995 sale/leaseback of 37 Courtyard properties
- - 1995 sale of the Company's remaining four Fairfield Inns
- - May 1995 Debt Offering (as defined below)
- - December 1995 Debt Offering (as defined below)
The unaudited Pro Forma Condensed Consolidated Balance Sheet of the Company as
of September 6, 1996 reflects the following fourth quarter 1996 transactions:
- - acquisition of a controlling interest in the Marriott Suites Limited
Partnership ("MSLP"), which owns four full-service hotel properties
- - acquisition of a controlling interest in a partnership which owns the
Ritz-Carlton in Naples, Florida and the Ritz-Carlton, Buckhead in Atlanta,
Georgia
- - acquisition of controlling interests in the partnerships which own the
Toronto Airport Marriott, the Salt Lake City Marriott, and the Radisson
Hotel in Calgary, Canada, respectively
- - acquisition of two full-service hotel properties, the Ritz-Carlton in
downtown Atlanta and the Palm Beach Gardens Marriott
- - December 1996 purchase of a mortgage note secured by the New York Marriott
Financial Center Hotel
- - December 1996 repayment of a mortgage note secured by the Philadelphia
Marriott Hotel
- - December 1996 Convertible Preferred Stock Offering
- - exercise of 6.3 million warrants to purchase the Company's common stock for
$44 million, which resulted in the issuance of 6.3 million shares of common
stock
During 1996, the Company acquired six full-service hotel properties and a
controlling interest in an additional 17 full-service hotel properties, and
purchased the mortgage note secured by the New York Marriott Financial Center
Hotel Also, during 1996, the Company sold and leased back 16 Courtyard
properties and 18 Residence Inns. The Company completed the issuance of 11
million shares of Company-Obligated, Mandatorily- Redeemable Convertible
Preferred Stock of a Subsidiary Trust for net proceeds of $530 million on
December 2, 1996 (the "December 1996 Convertible Preferred Stock Offering") and
completed the issuance of 31.6 million shares of the Company's common stock for
net proceeds of nearly $400 million on March 27, 1996 (the "March 1996 Stock
Offering"). The Company also repaid a mortgage note secured by the Philadelphia
Marriott Hotel in December 1996.
During 1995, the Company acquired nine full-service hotel properties. The
accompanying unaudited Pro Forma Condensed Consolidated Statements of Operations
do not reflect any pro forma adjustments related to the New York Vista Hotel
(renamed the Marriott World Trade Center) due to the suspension of hotel
operations and the renovation of the hotel as a result of extensive damage from
an explosion on February 26, 1993. Because the hotel did not resume full
operations until late 1995, the historical operations of the hotel during the
fiscal year ended December 29, 1995 are not meaningful.
HMH Properties, Inc. ("HMH Properties"), an indirect wholly-owned subsidiary of
the Company, issued $600 million of debt (the "Properties Notes") in May 1995
(the "May 1995 Debt Offering"). The Properties Notes were issued at par and
carry a 9.5% interest rate with a final maturity of May 2005. The net proceeds
to the Company were used to defease, and subsequently redeem, bonds which
carried a weighted average interest rate of 10.4%, and to pay down a portion of
the line of credit with Marriott International. Additionally, the Company
replaced its $630 million line of credit with Marriott International with a $225
million line of credit (the "MI Line of Credit").
3
In December 1995, HMC Acquisition Properties, Inc. ("Acquisitions"), an indirect
wholly-owned subsidiary of the Company, issued $350 million of 9% senior notes
(the "Acquisitions Notes") to several initial purchasers (the "December 1995
Debt Offering"). The Acquisitions Notes were issued at par and have a final
maturity of December 2007. The proceeds were utilized to repay in full the $210
million of outstanding borrowings under, and terminate, Acquisitions' $230
million revolving credit facility (the "Revolver"), to acquire three
full-service hotel properties and to finance future acquisitions of full-service
hotel properties.
During 1995, the Company sold the 199-room Springfield Radisson Hotel which was
acquired as part of a portfolio of lodging properties by the Company in 1994. No
adjustment has been reflected in the accompanying unaudited Pro Forma Condensed
Consolidated Statements of Operations due to the immateriality of the operating
results for this property.
The unaudited Pro Forma Condensed Consolidated Financial Data of the Company are
presented for informational purposes only and may not reflect the Company's
future results of operations and financial position or what the results of
operations and financial position of the Company would have been had such
transactions occurred as of the dates indicated. The unaudited Pro Forma
Condensed Consolidated Financial Data and Notes thereto should be read in
conjunction with the Company's Consolidated Financial Statements and Condensed
Consolidated Financial Statements and Notes thereto and "Management's Discussion
and Analysis of Financial Condition and Results of Operations" included in the
Company's Annual Report on Form 10-K.
4
HOST MARRIOTT CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
(in millions)
As of September 6, 1996
------------------------------------------------
Pro Forma
Historical Adjustments Pro Forma
------------------------------------------------
ASSETS
Property and Equipment............................................. $ 3,280 $ 557 (A) $ 3,837
Notes and Other Receivables........................................ 199 -- 199
Due from Hotel Managers............................................ 73 -- 73
Investments in Affiliates.......................................... 13 (2) (A) 11
Other Assets....................................................... 247 6 (A) 374
101 (B)
20 (C)
Cash and Cash Equivalents.......................................... 647 (324) (A) 687
530 (C)
44 (D)
(109) (E)
(101) (B)
--------- ---------- ---------
$ 4,459 $ 722 $ 5,181
========= ========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Debt
Debt carrying a parent company guarantee of repayment........... $ 220 $ -- $ 220
Debt not carrying a parent company guarantee of repayment....... 2,362 (109) (E) 2,477
224 (A)
--------- --------- --------
2,582 115 2,697
Accounts Payable and Accrued Expenses.............................. 67 -- 67
Deferred Income Taxes.............................................. 465 -- 465
Other Liabilities.................................................. 265 12 (A) 278
1 (A)
--------- --------- --------
Total Liabilities.......................................... 3,379 128 3,507
--------- --------- --------
Company-Obligated, Mandatorily-Redeemable Convertible
Preferred Securities of a Subsidiary Trust...................... -- 550 (C) 550
--------- --------- --------
Shareholders' Equity
Common Stock.................................................... 195 6 (D) 201
Additional Paid-in Capital...................................... 876 38 (D) 914
Retained Earnings............................................... 9 -- 9
--------- --------- --------
Total Shareholders' Equity................................. 1,080 44 1,124
--------- --------- --------
$ 4,459 $ 722 $ 5,181
========= ========== =========
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Data.
5
HOST MARRIOTT CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in millions, except per share amounts)
Thirty-six Weeks Ended September 6, 1996
--------------------------------------------------------------------
Acquisition
Disposition & Other
Pro Forma Pro Forma
Historical Adjustments Adjustments Pro Forma
--------------------------------------------------------------------
Revenues
Hotels.......................................... $ 455 $ -- $ 112 (F) $ 567
Other........................................... 9 -- (1) (F) 8
--------- --------- --------- ---------
464 -- 111 575
--------- --------- --------- ---------
Operating Costs and Expenses
Hotels.......................................... 291 6 (G) 50 (F) 347
Other........................................... 24 -- -- 24
--------- -------- --------- --------
315 6 50 371
--------- -------- --------- --------
Operating Profit................................... 149 (6) 61 204
Minority Interest.................................. (2) -- (4) (F) (6)
Corporate Expenses................................. (25) -- -- (25)
Interest Expense................................... (152) -- (22) (F) (167)
7 (H)
Dividends on Convertible Preferred Securities...... -- -- (26) (I) (26)
Interest Income.................................... 29 -- 5 (H) 26
(1) (F)
(7) (J)
--------- --------- --------- ---------
Income (Loss) from Continuing Operations
Before Income Taxes............................. (1) (6) 13 6
(Provision) Benefit for Income Taxes............... (6) 2 (Q) (5) (Q) (9)
--------- --------- --------- ---------
Income (Loss) from Continuing Operations........... $ (7) $ (4) $ 8 $ (3)
========= ========= ========= =========
Income (Loss) per Common Share from
Continuing Operations........................... $ (.04) $ (.02)
========= =========
Weighted Average Shares Outstanding................ 183.1 11.1 (R) 194.2
========= ========= =========
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Data.
6
HOST MARRIOTT CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in millions, except per share amounts)
Fiscal Year 1995
--------------------------------------------------------------------
Acquisition
Disposition & Other
Pro Forma Pro Forma
Historical Adjustments Adjustments Pro Forma
--------------------------------------------------------------------
Revenues
Hotels........................................ $ 474 $ (1) (K) $ 207 (F) $ 710
30 (L)
Other......................................... 10 -- 2 (F) 12
--------- --------- --------- ---------
484 (1) 239 722
--------- --------- --------- ---------
Operating Costs and Expenses
Hotels........................................ 281 26 (G) 109 (F) 442
(1) (K) 17 (L)
10 (M)
Other......................................... 89 -- -- 89
--------- --------- --------- ---------
370 35 126 531
--------- --------- --------- ---------
Operating Profit................................. 114 (36) 113 191
Minority Interest................................ (2) -- (5) (F) (7)
Corporate Expenses............................... (36) -- -- (36)
Interest Expense................................. (178) 4 (N) 7 (H) (241)
(57) (F)
(3) (L)
3 (O)
(17) (P)
Dividends on Convertible Preferred Securities.... -- -- (37) (I) (37)
Interest Income.................................. 27 -- 7 (H) 34
--------- --------- --------- --------
Income (Loss) from Continuing Operations
Before Income Taxes and Extraordinary
Item ......................................... (75) (32) 11 (96)
(Provision) Benefit for Income Taxes............. 13 11 (Q) (4) (Q) 20
--------- --------- --------- ---------
Income (Loss) from Continuing Operations
Before Extraordinary Item..................... $ (62) $ (21) $ 7 $ (76)
========= ========= ========= =========
Loss per Common Share from
Continuing Operations......................... $ (.39) $ (.40)
========= =========
Weighted Average Share Outstanding............... 158.3 31.5 (R) 189.8
========= ========= =========
See Notes to Unaudited Pro Forma Condensed Consolidated Financial Data.
7
NOTES TO UNAUDITED PRO FORMA
CONDENSED CONSOLIDATED FINANCIAL DATA
A) Represents the adjustment to record the fourth quarter 1996 acquisition of
two full-service properties and controlling interests in nine full-service
hotel properties:
- Record property and equipment of $557 million
- Record the mortgage debt of $224 million for two full-service properties
- Record the use of cash of $324 million for acquisition costs
- Record the elimination of the prior investment of $2 million in one
partnership
- Record other assets of $6 million
- Record minority interest liability of $12 million and other liabilities
of $1 million
B) Represents the adjustment to record the fourth quarter 1996 purchase of the
mortgage securing the New York Marriott Financial Center Hotel for $101
million.
C) Represents the adjustment to record the December 1996 Preferred Stock
Offering as follows:
- Record net cash proceeds of $530 million
- Record other assets of $20 million for deferred fees
- Record the $550 million of Company-Obligated, Mandatorily-Redeemable
Convertible Preferred Securities of a Subsidiary Trust
D) Represents the adjustment to record the exercise of 6.3 million warrants
into 6.3 million shares of the Company's common stock as follows:
- Record net proceeds of $44 million (proceeds are net of the 11%, or $6
million, of the proceeds allocated to Host Marriott Services
Corporation ("Services")) as required under the distribution agreement
relating to the Company's spin-off of Services in December 1995.
- Record the issuance of 6.3 million shares of common stock with a par
value of approximately $6 million, and including additional paid-in
capital of $38 million
E) Represents the adjustment to record the repayment of the $109 million
mortgage loan secured by the Philadelphia Convention Center Hotel.
F) Represents the adjustment to record the revenue, operating costs, and
secured debt interest expense and to reduce interest income for the 1996
acquisitions of six full-service properties and the purchase of
controlling interests in an additional 17 full-service properties, as if
they were added at the beginning of the applicable period.
G) Represents the net adjustment to eliminate the depreciation expense and
record the incremental lease expense for the 1996 sale/leaseback of the 18
Residence Inns and 16 Courtyard properties prior to their sale.
H) Represents the adjustment to record interest income for the fourth quarter
1996 acquisition of the mortgage loan secured by the New York Marriott
Financial Center and the adjustment to reduce interest expense for the
fourth quarter 1996 payoff of the mortgage loan secured by the Philadelphia
Marriott Hotel.
I) Represents the adjustment to record the quarterly dividend payments to the
preferred shareholders for the December 1996 Convertible Preferred Stock
Offering, as if the offering had taken place at the beginning of the
applicable period.
J) Represents the adjustment to eliminate interest income on the proceeds from
the March 1996 Stock Offering, which were utilized for the 1996 acquisition
of full-service hotel properties, or controlling interests therein.
K) Represents the adjustment to eliminate the revenues and the operating costs
for the 1995 sale of the four remaining Fairfield Inns.
8
L) Represents the adjustment to reflect the incremental increase in revenue,
operating costs and secured debt interest expense for the 1995 acquisition
of eight full-service properties, as if they were added at the beginning of
the applicable period. On February 26, 1993, an explosion caused damage to
the structure and interior of the New York Vista Hotel, as well as the
adjoining World Trade Center complex. As a result of the damage, all hotel
operations were suspended and the hotel underwent extensive renovation.
Because the hotel did not resume full operations until late 1995, the
historical operations of the hotel during for the fiscal year ended
December 29, 1995 are not meaningful and the accompanying unaudited Pro
Forma Condensed Consolidated Statements of Operations do not reflect any
adjustments related to the hotel.
M) Represents the net adjustment to eliminate the depreciation expense and
record the incremental lease expense for the 1995 sale/leaseback of the 37
Courtyard properties.
N) Represents the adjustment to reduce interest expense for the redemption of
senior notes of Host Marriott Hospitality, Inc. (the "Hospitality Notes")
with the net sales proceeds from the sale and leaseback of 21 Courtyard
properties.
O) Represents the adjustment to reduce interest expense to reflect the
decrease in interest rates as a result of the issuance of the Properties
Notes and the decrease in commitment fees as a result of the MI Line of
Credit. Extraordinary losses of approximately $17 million, net of tax,
related to the 1995 redemption of certain of the Hospitality Notes are not
reflected in the accompanying unaudited Pro Forma Condensed Consolidated
Statement of Operations.
P) Represents the adjustment to interest expense to eliminate the interest
expense and related amortization of deferred financing fees for the
Revolver, and to record the interest expense and related amortization of
deferred financing fees as a result of the issuance of the Acquisitions
Notes.
Q) Represents the income tax impact of pro forma adjustments at statutory
rates.
R) Represents the adjustment to increase the weighted average number of shares
of common stock outstanding assuming the March 1996 Stock Offering had been
completed at the beginning of each period presented.
9