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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 8-K/A
Current Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of report (date of earliest event reported): May 14, 1998
CANDLEWOOD HOTEL COMPANY, INC.
(Exact name of Registrant as specified in charter)
DELAWARE 0-12708 48-1188025
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification Number)
LAKEPOINT OFFICE PARK, 9342 EAST CENTRAL 67206
WICHITA, KANSAS (Zip Code)
(Address of principal executive offices)
Registrant's telephone number, including area code: (316) 631-1300
None
(Former name or former address, if changed since last report)
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Candlewood Hotel Company, Inc. (the "Registrant") hereby amends
its Current Report on Form 8-K dated June 8, 1998 by filing certain pro forma
financial information, and to reflect that, pursuant to that certain Second
Amendment to Purchase and Sale Agreement, Agreement to Lease, Lease Agreement
and Incidental Documents dated as of July 31, 1998, the total number of the
Registrant's hotels to be transferred to HPT CW II Properties Trust has been
increased from 16 to 17, and the aggregate purchase price has been increased
from $135 million $141 million.
Certain matters discussed within this Form 8-K/A are
forward-looking statements within the meaning of the Private Litigation Reform
Act of 1995 and as such may involve known and unknown risks, uncertainties and
other factors which may cause the actual results, performance or achievements of
the Registrant to be different from any future results, performance or
achievements expressed or implied by such forward-looking statements. Although
the Registrant believes the expectations reflected in such forward-looking
statements are based upon reasonable assumptions, it can give no assurance that
its expectations will be attained. These risks are detailed from time to time in
the Registrant's filings with the Securities and Exchange Commission.
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ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(b) Unaudited consolidated pro forma financial information of the Registrant
reflecting the sale of 17 of the Registrant's Hotels to HPT CW II Properties
Trust, as of and for the three months ended March 31, 1998 and for the fiscal
year ended December 31, 1997:
Page
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Candlewood Hotel Company, Inc. and Subsidiaries Unaudited
Consolidated Pro Forma Financial Statements............................. F-1
Pro Forma Consolidated Balance Sheets for the three months ended March 31,
1998.................................................................... F-2
Pro Forma Condensed Consolidated Income Statements for the fiscal year ended
December 31, 1997 and for the three months ended March 31, 1998......... F-3
Notes to Unaudited Consolidated Pro Forma Financial Statements.......... F-4
(c) Exhibits
Exhibit Number Description of Document
- -------------- -----------------------
10 Second Amendment to Purchase and Sale Agreement , Agreement to
Lease, Lease Agreement and Incidental Documents dated as of July
31, 1998
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Dated: August 6, 1998 CANDLEWOOD HOTEL COMPANY, INC.
By: /S/ WARREN D. FIX
-----------------------------
Name: Warren D. Fix
Title: Chief Financial Officer
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CANDLEWOOD HOTEL COMPANY, INC. AND SUBSIDIARIES
Unaudited Consolidated Pro Forma Financial Statements
The following unaudited adjusted pro forma balance sheet at March 31,
1998 is intended to present the financial position of the Company as if the
transactions described in the Notes to the Unaudited Consolidated Pro Forma
Financial Statements (the "Transactions") were consummated at March 31, 1998.
The following unaudited adjusted pro forma statements of income are intended to
present the results of operations of the Company as if the Transactions were
consummated on January 1, 1997. 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, 1997 and for the three months ended March
31, 1998, as filed with the Company's Annual Report on Form 10-K for the year
ended December 31, 1997 and its Quarterly Report on Form 10-Q for the quarterly
period ended March 31, 1998, 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
Transactions. Certain properties reflected in the pro forma financial statements
are currently under construction or development and the Transactions have not
been consummated with respect to such properties. Other properties were under
construction during the periods presented. The accompanying pro forma operating
data does not give further effect to the completion of construction or the
related lease commencement for any period prior thereto. Construction projects
not completed by March 31, 1998 are likewise not reflected in the pro forma
balance sheet data, as described in the notes thereto.
F-1
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CANDLEWOOD HOTEL COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEETS
(amounts in thousands)
(unaudited)
Historical Pro Forma
March 31, Pro Forma March 31,
1998 (1) Adjustments 1998
---------- ------------ ----------
Assets:
Investment in hotels completed and
under construction:
Hotels completed $ 52,775 $ (24,298) (3) $ 28,477
Hotels under construction 101,880 -- (3) 101,880
Other costs 8,353 (571) (3) 7,782
---------- ------------ ----------
163,008 (24,869) 138,139
---------- ------------ ----------
Accumulated depreciation and amortization (554) 73 (3) (481)
---------- ------------ ----------
Net investment in hotels 162,454 (24,796) 137,658
Cash and cash equivalents 18,060 1,767 (2) 19,827
Deposits 9,199 10,060 (4) 19,259
Accounts and other receivables 6,192 -- 6,192
Deferred taxes 190 1,106 (5) 1,296
Other assets 1,717 -- 1,717
---------- ------------ ----------
Total assets $ 197,812 $ (11,863) $ 185,949
========== ============ ==========
Liabilities and stockholders' equity:
Mortgages and notes payable $ 61,724 $ (16,967) (7) $ 44,757
Accounts payable and other accrued expenses 32,334 -- 32,334
Deferred gain on sale of hotels 7,833 5,104 (6) 12,937
Other liabilities 1,524 -- 1,524
---------- ------------ ----------
Total liabilities 103,415 (11,863) 91,552
Redeemable, convertible preferred stock
(Series "A"), $1,000 par value, 65,000
shares authorized and outstanding, net of 61,339 -- 61,339
offering costs
Stockholders' equity:
Preferred stock, $.01 par value, 5,000,000
shares authorized, none issued -- -- --
Common stock, $.01 par value, 100,000,000
shares authorized, 9,025,000 issued and 90 -- 90
outstanding
Additional paid-in capital 35,270 -- 35,270
Accumulated deficit (2,302) -- (2,302)
---------- ------------ ----------
Total stockholders' equity 33,058 -- 33,058
---------- ------------ ----------
Total liabilities and stockholders' equity $ 197,812 $ (11,863) $ 185,949
========== ============ ==========
F-2
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CANDLEWOOD HOTEL COMPANY, INC. AND SUBSIDIARIES
PRO FORMA CONSOLIDATED INCOME STATEMENTS
(amounts in thousands, except share data)
Historical Pro Forma
Year Ended Year Ended
December 31, Pro Forma December 31,
1997 (8) Adjustments 1997
-------------- ------------- -------------
(unaudited) (unaudited)
Revenues:
Hotel operations $ 6,223 $ -- $ 6,223
Other income 221 -- 221
-------------- ------------- -------------
Total hotel operating revenues 6,444 -- 6,444
-------------- ------------- -------------
Proceeds from sale of hotels, net of
deferred gain 29,134 18,383 (6) 47,517
Gain recognized on sale of hotels -- -- --
-------------- ------------- -------------
Total revenues 35,578 18,383 53,961
-------------- ------------- -------------
Operating costs and expenses:
Hotel operating expenses 4,792 -- 4,792
Corporate operating expenses 2,529 -- 2,529
Rent expense -- 120 (9) 120
Depreciation and amortization 1,022 -- (10) 1,022
-------------- ------------- -------------
Total operating costs and expenses 8,343 120 8,463
-------------- ------------- -------------
Cost of hotels sold 29,134 18,383 (6) 47,517
-------------- ------------- -------------
(1,899) (120) (2,019)
Interest income 1,216 -- 1,216
Interest expense (134) -- (134)
-------------- ------------- -------------
Net loss (817) (120) (937)
-------------- ------------- -------------
Preferred stock dividends unpaid at December
31, 1997 (1,248) -- (1,248)
-------------- ------------- -------------
Net loss available to common stockholders $ (2,065) $ (120) $ (2,185)
============== ============= =============
Net loss per share of common stock - basic and
diluted $ (0.23) -- $ (0.24)
Weighted average shares outstanding 9,025 -- 9,025
Historical Pro Forma
3 Months 3 Months
Ended March Pro Forma Ended March
31, 1998 (8) Adjustments 31, 1998
-------------- ------------- -------------
(unaudited) (unaudited) (unaudited)
Revenues:
Hotel operations $ 6,917 $ -- $ 6,917
Other income 174 -- 174
-------------- ------------- -------------
Total hotel operating revenues 7,091 -- 7,091
-------------- ------------- -------------
Proceeds from sale of hotels, net of
deferred gain 48,922 24,796 (6) 73,718
Gain recognized on sale of hotels 40 -- 40
-------------- ------------- -------------
Total revenues 56,053 24,796 80,849
-------------- ------------- -------------
Operating costs and expenses:
Hotel operating expenses 4,409 -- 4,409
Corporate operating expenses 808 -- 808
Rent expense 1,422 579 (9) 2,001
Depreciation and amortization 347 (73) (10) 274
-------------- ------------- -------------
Total operating costs and expenses 6,986 506 7,492
-------------- ------------- -------------
Cost of hotels sold 48,922 24,796 (6) 73,718
-------------- ------------- -------------
145 (506) (361)
Interest income 362 -- 362
Interest expense (38) -- (38)
-------------- ------------- -------------
Net profit 469 (506) (37)
-------------- ------------- -------------
Preferred stock dividends unpaid at March 31,
1998 (1,202) -- (1,202)
-------------- ------------- -------------
Net loss available to common stockholders $ (733) $ (506) $ (1,239)
============== ============= =============
Net loss per share of common stock - basic and
diluted $ (0.08) -- $ (0.14)
Weighted average shares outstanding 9,025 -- 9,025
See accompanying notes to consolidated financial statements.
F-3
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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 March 31,
1998.
2) Represents the sale of four hotels open but not acquired as of March 31,
1998. Represents the net effect of the pro forma adjustments on cash:
Purchase price $ 29,900
Repayment of loans on the four open hotels (16,967)
Security deposits and other deposits held by HPT (10,060)
Taxes (1,106)
--------
Net effect on cash $ 1,767
========
The Company expects that the total purchase price for the 17 hotels in
the Transaction will be approximately $141,400 and that the total
security and other deposits held initially by the purchaser, Hospitality
Properties Trust ("HPT"), will be approximately $14,140.
3) Of the 17 hotels to be sold in the Transaction, 13 were under
development by the Company as of March 31, 1998. The total value of the
hotels under development, as reflected in the balance sheet items Hotels
Under Construction, Other Costs and Accumulated Depreciation and
Amortization was approximately $44,106. The pro forma adjustments do not
reflect the sale of these 13 properties.
4) Represents security and other deposits held by HPT.
5) Represents the payment of deferred taxes, calculated using the Company's
estimated statutory rate of 38.5%.
6) Represents the calculation of deferred gain on the sale of the four
hotels open as of March 31, 1998 and December 31, 1997:
3/31/98 12/31/97
------- --------
Proceeds from sale of hotels $29,900 $ 29,900
Cost of hotels sold (24,796) (18,383)
-------- ---------
Deferred gain on sale $ 5,104 $ 11,517
======== =========
7) Represents the repayment of the loans on the four hotels open as of
March 31, 1998. The total outstanding indebtedness on the 13 hotels
under development as of March 31, 1998 hotels was approximately $6,943.
The pro forma adjustments do not reflect the sale of these 13
properties.
8) Represents the historical income statement of the Company for the
periods presented.
9) Represents the pro forma effect of leases entered into for hotels open
during the period presented. The foregoing pro forma income statement
assumes the four hotels which were completed prior to March 31, 1998
were sold as of their completion date. The Company estimates that in the
first full year following the sale of all 17 hotels the lease payment
will be approximately $14,140. Pro forma percentage rent cannot be
calculated at this time, as no hotels have completed the stabilization
period. Stabilization is deemed to have occurred on the first day of the
thirteenth month following the hotel opening.
10) Represents the pro forma adjustment to depreciation and amortization.
The lease is considered an operating lease under FAS 13, and therefore
the Company would not have to record depreciation and amortization for
the hotels in the Transaction.
F-4
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EXHIBIT INDEX
Exhibit Number Description of Document
- -------------- -----------------------
10 Second Amendment to Purchase and Sale Agreement, Agreement to
Lease, Lease Agreement and Incidental Documents dated as of July
31, 1998