SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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): July 10, 2003
Commission File Number: 333-84334
RFS PARTNERSHIP, L.P.
(Exact name of registrant as specified in its charter)
Tennessee 62-1541639
- ------------------- -------------------------
(State of organization) (I.R.S. Employer
Identification No.)
450 South Orange Avenue, Orlando, Florida 32801
- ------------------------------------------- -------------------------
(Address of principal executive office) (Zip Code)
(800) 650-1000
- --------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
(Page 1 of 3)
This Amendment No. 1 on Form 8-K/A amends the Current Report on Form 8-K,
dated July 15, 2003 and filed with the Securities and Exchange Commission on
July 25, 2003 (the "Current Report"), of RFS Partnership, L.P., a Tennessee
limited partnership, to provide the requisite pro forma financial information
required by Item 7. Except as set forth in Item 7, no other changes are made to
the Current Report.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(b) Pro Forma Financial Information. See Index to Financial Statements
on page F-1.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
(Page 2 of 3)
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be filed on its behalf by
the undersigned thereunto duly authorized.
RFS PARTNERSHIP, L.P.
By: CNL Rose GP Corp., its general
partner
Dated: September 17, 2003 By: /s/ Thomas J. Hutchison III
-------------------------------
Name: Thomas J. Hutchison III
Title: Chief Executive Officer
(Page 3 of 3)
Index to RFS Partnership, L.P. Pro Forma Financial Information
(Unaudited) Pro Forma Consolidated
Balance Sheet as of June 30, 2003............................................F-3
(Unaudited) Pro Forma Consolidated Statement
of Earnings for the Six Months Ended June 30, 2003...........................F-4
(Unaudited) Pro Forma Consolidated Statement
of Earnings for the Year Ended December 31, 2002.............................F-5
Notes to Pro Forma Financial Statements......................................F-6
F-1
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The following Unaudited Pro Forma Consolidated Statements of Earnings of
RFS Partnership, L.P. and its subsidiaries (the "Company" or "RFS") for the six
months ended June 30, 2003 and the year ended December 31, 2002, and the
Unaudited Pro Forma Consolidated Balance Sheet of the Company as of June 30,
2003 (together with the Unaudited Pro Forma Consolidated Statements of Earnings,
the "Pro Forma Consolidated Financial Statements"), have been prepared to
illustrate the estimated effect of being acquired by CNL Hospitality Properties,
Inc. ("CHP"), including the contribution of five hotel Properties with book
values of approximately $127.3 million by CHP to the Company, repayment of loan
facility of $8.5 million, the receipt of permanent financing of approximately
$142.8 million, the repayment of approximately $41.8 million in secured notes
(the "Acquisition Transaction"). The Unaudited Pro Forma Consolidated Balance
Sheet has been adjusted to give effect to the Acquisition Transaction as if it
had occurred on June 30, 2003 and the Unaudited Pro Forma Consolidated
Statements of Earning have been adjusted to give pro forma effect to the
Acquisition Transaction as if it had occurred on January 1, 2002. The pro forma
adjustments also reflect the Company's preliminary determination of purchase
accounting adjustments as a result of the acquisition by CHP and are based upon
available information and certain assumptions that the Company believes are
reasonable. The actual allocation of the purchase price and the resulting effect
on income from operations may differ significantly from the pro forma amounts
included herein. Consequently, the amounts reflected in the Pro Forma
Consolidated Financial Statements are subject to change, and the final amounts
may differ substantially. The Pro Forma Consolidated Financial Statements should
be read in conjunction with the Company's consolidated financial statements and
notes thereto included in the Form 10-K dated December 31, 2002.
This pro forma consolidated financial information is presented for
informational purposes only and does not purport to be indicative of the
Company's financial results or conditions if the various events and transactions
reflected therein had occurred on the dates, or been in effect during the
periods, indicated. This pro forma consolidated financial information should not
be viewed as indicative of the Company's financial results or conditions in the
future.
(Left blank intentionally)
F-2
RFS PARTNERSHIP, L.P.
AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 2003
(in thousands)
Historical
RFS LP RFS LP Pro Forma
June 30, Transaction RFS LP
2003 Adjustments Consolidated
------------- ----------- ------------
Investments in hotel $ 587,660 $ 242,589 (a) $ 830,249
Cash and cash equivalents 5,894 5,894
Restricted cash 5,474 5,474
Accounts receivable 5,058 5,058
Deferred expenses, net 7,779 3,214 (d) 10,993
Other assets 4,105 4,105
Deferred income taxes 27,376 27,376
------------ ----------- ------------
Total assets $ 643,346 $ 245,803 $ 889,149
============ =========== ============
Accounts payable and accrued
expenses $ 25,454 $ 11,836 (a) $ 37,290
Borrowing on line of credit 8,500 (8,500) (d) -
Mortgage notes payable 157,941 142,770 (c) 300,711
Senior notes payable 121,220 (41,770) (c) 79,450
------------- ----------- ------------
Total liabilities 313,115 104,336 417,451
------------- ----------- ------------
Commitments and contingencies
Redeemable limited partnership units 29,837 (29,837) (b,c) -
Partners capital:
General partnership units
Total partner's capital 300,394 171,304 (c) 471,698
------------- ----------- ------------
Total liabilities and
partners equity $ 643,346 245,803 $ 889,149
============= =========== ============
See accompanying notes to unaudited pro forma consolidated financial statements.
F-3
RFS PARTNERSHIP, L.P.
AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FOR THE SIX MONTHS ENDED JUNE 30, 2003
(in thousands)
Historical
RFS LP RFS LP Pro Forma
June 30, Transaction RFS LP
2003 Adjustements Consolidated
------------ ------------- ------------
Revenues:
Rooms $ 80,046 9,414(1) $ 89,460
Food and beverage 8,635 2,760(1) 11,395
Other operating departments 2,808 534(1) 3,342
Lease revenue 2,842 2,281(1) 5,123
Deferred revenue (1,461) (1,461)
Other 208 208
----------- ------------ -----------
Total hotel revenue 93,078 14,989 108,067
---------- ------------ -----------
Hotel operating expenses:
Rooms 16,829 2,528(1) 19,357
Food and beverage 6,247 2,459(1) 8,706
Other operating departments 825 200(1) 1,025
Property operating costs 11,468 3,047(1) 14,515
Property taxes, insurance and
other 6,113 1,042(1) 7,155
Franchise cost 7,751 89(1) 7,840
Maintenance and repairs 5,360 991(1) 6,351
Management fees 2,653 672(1) 3,325
Depreciation and amortization 15,619 1,916(3) 17,535
General and administrative 10,001 10,001
----------- ------------- -----------
Total hotel operating
expenses 82,866 12,944 95,810
----------- ------------- -----------
Operating income 10,212 2,045 12,257
Interest expense and loan
cost amortization 13,927 2,245(2) 16,172
Benefit from taxes (1,546) (1,546)
Loss on sale of assets 9 9
----------- ------------ -----------
Net loss from operations $(2,178) (200) $ (2,378)
=========== ============ ===========
Earnings (loss) per unit data:
Basic earnings (loss) per
unit $ (0.07) (4)
===========
Weighted average common
units outstanding basic and
diluted 31,233 (4)
===========
See accompanying notes to unaudited pro forma consolidated financial statements.
F-4
RFS PARTNERSHIP, L.P.
AND SUBSIDIARIES
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF EARNINGS
FOR THE YEAR ENDED DECEMBER 31, 2002
(in thousands)
Historical
RFS LP RFS LP Pro Forma
December 31, Transaction RFS LP
2002 Adjustments Consolidated
----------- ------------ -------------
Revenues:
Rooms $ 169,357 15,071(1) $ 184,428
Food and beverage 17,452 5,071(1) 22,523
Other operating departments 6,449 1,462(1) 7,911
Lease revenue 5,229 4,562(1) 9,791
Other 411 411
----------- ------------ ----------
Total hotel revenue 198,898 26,166 225,064
----------- ------------ ----------
Hotel operating expenses:
Rooms 34,679 4,226(1) 38,905
Food and beverage 12,793 4,438(1) 17,231
Other operating departments 1,874 517(1) 2,391
Property operating costs 21,798 4,067(1) 25,865
Property taxes, insurance
and other 12,536 2,184(1) 14,720
Franchise cost 16,265 16(1) 16,281
Maintenance and repair 9,485 1,067(1) 10,552
Management fees 4,876 1,088(1) 5,964
Depreciation and
amortization 31,059 3,326(3) 34,385
General and administrative 19,079 19,079
----------- ----------- ----------
Total hotel operating 164,444 20,929 185,373
expenses ------------ ----------- ----------
Operating income 34,454 5,237 39,691
Debt extinguishments and
swap termination cost 10,122 10,122
Interest expense and loan
cost amortization 27,101 4,488(2) 31,589
Losses from discontinued
operations 3,709 3,709
Benefit from taxes (1,096) (1,096)
Loss on redemption of
preferred units 1,562 1,562
Preferred dividends 1,890 1,890
Gain on sale of assets (950) (950)
----------- ------------ -----------
Net loss from operations $ (7,884) $ 749 $ (7,135)
=========== ============ ===========
Earnings (loss) per unit data:
Basic earnings (loss)
per unit $ (0.26) (4)
===========
Weighted average common
units outstanding--basic
and diluted 29,905 (4)
===========
See accompanying notes to unaudited pro forma consolidated financial statements.
F-5
RFS PARTNERSHIP, L.P.
AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND THE YEAR ENDED DECEMBER 31, 2002
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET:
(a) The estimated cash paid in connection with the transaction and
preliminary adjustments to the historical book value of RFS as a result
of the Acquisition Transaction are as follows (in thousands):
Historical book value of RFS net assets acquired $ 300,394
Adjustments to net assets:
Termination and severance liability (11,836)
Write off of deferred loan cost related to senior notes
(from Note (d)) (3,786)
----------
Adjusted net assets acquired $ 284,772
==========
Cash consideration for Acquisition Transaction including
transaction costs
(from Note (b)) $400,013
Less: Adjusted net assets acquired (284,772)
----------
Net purchase price in excess of net assets acquired $ 115,241
Plus: Contribution of five hotel properties from CNL 127,348
Hospitality Properties, Inc. ==========
Total increase in net assets $ 242,589
==========
Severance and termination costs, estimated to be approximately $11.8 million and
deferred loan cost of approximately $3.7 million, have been reflected as
liabilities in the accompanying Unaudited Pro Forma Consolidated Balance Sheet.
In connection with the Acquisition Transaction , CHP contributed five hotel
Properties with a combined book value of approximately $127.3 million to the
Company, that have been reflected as assets in the accompanying Unaudited Pro
Forma Consolidated Balance Sheet.
(b) Reflects the sources and uses of funds for the Acquisition
Transaction (in thousands):
Sources of funds:
Cash consideration received $344,350
Permanent financing obtained * 142,770
---------
Total sources of funds $487,120
=========
Uses of funds:
Cash consideration for RFS Transaction $379,571
Estimated transaction costs 20,442
Repayment of loan facility 8,500
Loan cost on new permanent financing 7,000
Acquisition of minority interest OP units 29,837
Repayment of senior notes 41,770
---------
Total uses of funds $487,120
=========
* The Acquisition Transaction will initially be financed with proceeds from a
bridge loan, which will be refinanced with proceeds from the issuance of debt
securities. The interest cost under the bridge loan is not expected to be
materially greater than the interest cost for the permanent debt security
financing.
F-6
RFS PARTNERSHIP, L.P.
AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED FOR
THE SIX MONTHS ENDED JUNE 30, 2003 AND THE YEAR ENDED DECEMBER 31, 2002
(c) The adjustments to partners' capital as a result of the Acquisition
Transaction are as follows (amounts in thousands):
Partners' capital:
Contribution of five hotel Properties from CHP (from Note (a)) $127,348
Net purchase price in excess of net assets acquired
(from Note (a)) 115,241
Permanent financing obtained net of retirement of approximately
$41.8 million in secured notes (101,000)
Retirement of minority interest RFS OP units 29,837
Repayment of loan facility 8,500
Estimated loan costs of new permanent financing (from Note (d)) 7,000
Write off of existing loan costs on senior notes (from Note (d)) (3,786)
Assumption of termination and severance liability (11,836)
----------
Net increase in partners' capital $171,304
==========
(d) In connection with the Acquisition Transaction, the Company repaid a loan
facility of approximately $8.5 million which appears on the historical RFS
balance sheet as of June 30, 2003. Additionally, the Company obtained new
permanent financing totaling approximately $142.8 million in connection
with the transaction. As a result, certain RFS historical loan costs will
be written off for approximately $3.7 million and new loan costs of
approximately $7.0 will be incurred by the Company. In addition, the
Company will pay off senior notes for approximately $41.8 million. The
above table is a summary of adjustments related to the Acquisition
Transaction which have been included on the accompanying Unaudited Pro
Forma Consolidated Balance Sheet (in thousands):
Adjustments to loan costs:
Write off of existing loan costs related to
repaid loan facility $ (3,786)
Additional loan costs in connection with new
permanent financing 7,000
----------
Total change in loan costs $ 3,214
==========
F-7
RFS PARTNERSHIP, L.P.
AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND THE YEAR ENDED DECEMBER 31, 2002
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF EARNINGS:
(1) Reflects increase in hotel revenue and hotel operating expenses
resulting from the five contributed hotel properties of approximately $14.9
million and $11.0 million respectively, for the six months ended June 30,
2003 and $26.1 million and $17.6 million respectively, for the year ended
December 31, 2002. Adjustments for estimated pro forma, hotel revenues and
hotel operating expenses reflects historical data from hotel operational
financial statements. The following table summarizes the adjustments to
hotel revenue and hotel operating expenses (in thousands):
Year ended Six months
December ended June
31, 2002 30, 2003
------------ ----------
TRS properties:
Hotel operating revenues:
Room $ 15,071 $ 9,414
Food and beverage 5,071 2,760
Other hotel operating 1,462 534
Lease revenue 4,562 2,281
----------- ----------
Total hotel operating
revenue 26,166 14,989
----------- ----------
Hotel operating expenses:
Room $ 4,226 $ 2,528
Food and beverage 4,438 2,459
Other hotel operating 517 200
Property operating
cost 4,067 3,046
Property taxes, 2,184 1,042
insurance and other
Franchise costs 16 89
Maintenance and repair 1,067 991
Management fess 1,088 672
----------- ----------
Total hotel operating
revenue 17,603 11,027
----------- ----------
Net revenue from hotel
operations $ 8,563 $ 3,962
=========== ==========
F-8
RFS PARTNERSHIP, L.P.
AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND THE YEAR ENDED DECEMBER 31, 2002
(2) Reflects increase in interest and loan cost amortization expense
resulting from the repayment of a loan facility of approximately $7.0
million and $8.5 million as of December 31, 2002 and June 30, 2003,
respectively, which is included on the RFS historical balance sheet.
Additionally, reflects repayment of approximately $41.8 million on its
senior notes and the acquisition of approximately $142.8 million in new
permanent financing by the Company, including estimated debt acquisition
costs. The following is a summary of the interest expense adjustment
calculation for the year ended December 31, 2002 (in thousands):
Estimated
Estimated Annual
Balance Rate Interest
---------------------------------
Additional interest and loan cost
amortization as a result of RFS Transaction:
Acquisition of permanent financing * $ 142,770 5.82% $ 8,309
Estimated loan cost amortization
($7,000 for 6 years) 1,167
------------
Total estimated additional expenses 9,476
------------
Reduction in interest and loan cost
amortization as a result of repayment:
Loan facility 6,950 3.32% 230
Senior notes 41,770 9.75% 4,073
Estimated loan cost amortization
($4,107 for 6 years) 685
------------
Total estimated expense reduction $ 4,988
------------
Net increase in interest and loan cost
amortization under new debt structure 4,488
============
* Blended estimated interest rate.
In the event that interest rates on floating rate debt increase by
one-eight of one percent, the pro forma adjustment for interest expense
would increase by approximately $0.1 million.
F-9
RFS PARTNERSHIP, L.P.
AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND THE YEAR ENDED DECEMBER 31, 2002
(2) The following summary of the interest expense adjustment calculation
for the six months ended June 30, 2003 (in thousands):
Estimated
Estimated Annual
Balance Rate Interest
-----------------------------
Additional interest and loan cost amortization
as a result of RFS Transaction:
Acquisition of permanent financing * $ 142,770 5.82% $ 4,155
Estimated loan cost amortization
($7,000 for 6 years) 583
------------
Total estimated additional expenses 4,738
------------
Reduction in interest and loan cost
amortization as a result of repayment:
Loan facility 8,500 3.32% 141
Senior notes 41,770 9.75% 2,036
Estimated loan cost amortization
($3,786 for 6 years) 316
------------
Total estimated expense reduction $ 2,493
------------
Net increase in interest and loan cost
amortization under new debt structure $ 2,245
============
* Blended estimated interest rate.
In the event that interest rates on floating rate debt increase by
one-eight of one percent, the pro forma adjustment for interest expense
would increase by approximately $0.5 million.
F-10
RFS PARTNERSHIP, L.P.
AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
FOR THE SIX MONTHS ENDED JUNE 30, 2003 AND THE YEAR ENDED DECEMBER 31, 2002
(3) Adjustments for estimated pro forma depreciation and amortization of
real estate assets are based on the adjusted basis of hotel property assets
and their estimated fair values. The increase in the historical cost basis
of hotel properties acquired by the Company through the Acquisition
Transaction (see note (a) above) was approximately $220.8 million and
$242.6 million for the year ended December 31, 2002 and the six months
ended June 30, 2003, respectively. The following table summarizes the
adjustments to depreciation and amortization of real estate assets (in
thousands):
Year ended Six months
December ended June
31,2002 30, 2003
------------ ------------
Hotel properties acquired at historical
RFS book value $ 593,289 $ 587,660
Allocation of purchase price to hotel
properties 220,765 242,589
------------ ------------
Estimated total fixed assets $ 814,054 $ 830,249
Estimated allocation between land,
buildings and equipment:
Land $ 75,707 9.3% 77,213 9.3%
Buildings 603,214 74.1% 615,215 74.1%
Equipment 135,133 16.6% 137,821 16.6%
------------ ------------
Total $ 814,054 100% 830,249 100%
============ ============
Annual and six month ended estimated
depreciation expense
Buildings (40 years) $ 15,080 7,690
Equipment (7 years) 19,305 9,845
------------ ------------
Total estimated depreciation expense 34,385 17,535
Less historical RFS depreciation
expense (31,059) (15,619)
------------ ------------
Estimated adjustment to depreciation
expense $ 3,326 $ 1,916
============ ============
(4) As a result of the Acquisition Transaction, RFS is a wholly owned
subsidiary of CHP and results of operations on a per unit basis is
considered irrelevant and, therefore, is not presented as a pro forma
basis.
F-11