Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The Unaudited Pro Forma Condensed Consolidated Balance Sheet of the
Company as of June 30, 1997 is presented assuming: (i) all of the 41 hotels
owned by the Company on September 8, 1997 (the "Owned Hotels") and the two
hotels under purchase contract on September 8, 1997 (the "Additional
Acquisitions") were owned on June 30, 1997 and (ii) the $150 million senior
subordinated notes (the "Notes") offering was completed and the Company's
$450 million senior secured credit facility (the "Credit Facility") and the
$100 million non-recourse debt facility (the "Non-Recourse Facility") were
entered into on June 30, 1997.
The Unaudited Pro Forma Condensed Consolidated Statements of Operations
of the Company for the six months ended June 30, 1997 and for the year ended
December 31, 1996 are presented assuming: (i) all of the Owned Hotels and the
Additional Acquisitions were owned at the beginning of the periods presented
and (ii) the initial public offering of 9,250,000 shares of common stock, the
secondary offering of 5,750,000 shares of common stock, and the Notes offering
(collectively, the "Offerings"), the Credit Facility and the Non-Recourse
Facility were completed at the beginning of the periods presented.
The National Airport Hilton was acquired subsequent to June 30, 1997,
and is separately disclosed because the acquisition of this hotel constituted
an acquisition of a "significant amount of assets" as such phrase is defined
in Item 2 of Form 8-K and Sections 210.11-01(b), 210.11-01(d) and 210.3-05(b)
(2)(ii) of Regulation S-X.
In management's opinion, all material adjustments necessary to reflect
the transactions are presented in the pro forma adjustments columns, which
are further described in the notes to the Unaudited Pro Forma Condensed
Consolidated Financial Statements. The Unaudited Pro Forma Condensed
Consolidated Financial Statements are not necessarily indicative of what the
Company's financial position or results of operations actually would have
been if all the Owned Hotels and the Additional Acquisitions were, in fact,
owned on such dates presented and if the Offerings, the Credit Facility and
the Non-Recourse Facility were completed on such dates. Additionally, the pro
forma information does not purport to project the Company's financial
position or results of operations at any future date or for any future
period. The Unaudited Pro Forma Condensed Consolidated Financial Statements
should be read in conjunction with the historical consolidated financial
statements and related notes thereto of the Company.
CapStar Hotel Company
Unaudited Pro Forma Condensed Consolidated Balance Sheet
June 30, 1997
Pro Forma Adjustments
-----------------------------------------------------
Owned Hotels,
Credit Facility,
Non-Recourse
Facility and National Additional
Historical (A) Notes (B) Airport Hilton (C) Acquisitions(D) Pro Forma
------------- ------------ ----------------- --------------- ---------
Assets
Cash $ 11,489 $ (5,562) $ 15 $ -- $ 5,942
Property and equipment, net:
Land 81,683 32,916 5,529 5,811 125,939
Building and improvements 404,798 141,654 27,644 29,054 603,150
Furniture, fixtures and equipment 44,556 16,359 3,686 3,874 68,475
Construction-in-progress 5,314 5 -- -- 5,319
------------- ---------- ----------- ---------- --------
Total property and equipment, net 536,351 190,934 36,859 38,739 802,883
Deposits and other assets 60,233 (6,102) 25 -- 54,156
------------- ---------- ----------- ---------- --------
Total assets $ 608,073 $ 179,270 $ 36,899 $ 38,739 $862,981
------------- ---------- ----------- ---------- --------
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Liabilities, Minority Interest and
Stockholders' Equity
Other liabilities $ 35,333 $ 2,904 $ 262 $ -- $ 38,499
Long-term debt:
Senior secured credit facility 168,500 (168,500) -- -- --
Credit Facility -- 198,563 36,637 38,739 273,939
Non-Recourse Facility -- 52,750 -- -- 52,750
Notes -- 150,000 -- -- 150,000
Other obligations 66,495 (50,000) -- -- 16,495
------------- ---------- ----------- ---------- --------
Total liabilities 270,328 185,717 36,899 38,739 531,683
Minority interest 22,270 -- -- -- 22,270
Stockholders' equity 315,475 (6,447) -- -- 309,028
------------- ---------- ----------- ---------- --------
Total liabilities, minority interest
and stockholders' equity $ 608,073 $ 179,270 $ 36,899 $ 38,739 $862,981
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(A) Reflects the historical unaudited condensed consolidated balance sheet of
the Company as of June 30, 1997.
(B) Reflects the Company's cost basis and financing for 8 of the Owned Hotels
acquired subsequent to June 30, 1997. Also included are the effects of
the Company's Credit Facility, Non-Recourse Facility and Notes offering
which were consummated after June 30, 1997. Deposits and other assets
reflect the deferral of financing fees related to the new financing
activities net of the write-off associated with refinanced facilities, and
the use of purchase deposits.
(C) Reflects the Company's cost basis and financing for the National Airport
Hilton.
(D) Reflects the Company's cost basis and financing for the Additional
Acquisitions.
CapStar Hotel Company
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Six Months Ended June 30, 1997
Pro Forma Adjustments
------------------------------------------------
Owned Hotels,
Offerings,
Credit Facility,
Non-Recourse National
Facility Airport Additional
Historical(A) and Notes(B) Hilton(B) Acquisitions(B) Pro Forma
------------- ------------ -------------- ------------- ---------
Revenue from hotel operations:
Rooms $ 79,254 $ 36,676 $ 4,764 $ 4,859 $ 125,553
Food and beverage 34,676 12,141 1,361 2,215 50,393
Other hotel revenue 5,664 2,931 295 251 9,141
Office rental and other revenues -- 2,844 -- -- 2,844
Hotel management, accounting and other 2,225 (98) -- -- 2,127
------------- ----------- -------------- ------------ ---------
Total revenue 121,819 54,494 6,420 7,325 190,058
Hotel operating expense by department:
Rooms 18,954 9,849 1,008 1,233 31,044
Food and beverage 27,338 9,889 1,095 1,629 39,951
Other operating departments 3,008 1,680 177 153 5,018
Office rental and other expenses -- 1,184 -- -- 1,184
Undistributed operating expenses:
Administrative and general 19,839 5,422 1,102 783 27,146
Property operating costs 13,960 10,997 820 1,065 26,842
Property taxes, insurance and other 5,064 3,472 288 289 9,113
Depreciation and amortization 8,220 4,359 609 640 13,828
------------- ----------- -------------- ------------ ---------
96,383 46,852 5,099 5,792 154,126
Interest expense, net 8,440 8,642 476 1,059 18,617
Total expenses 104,823 55,494 5,575 6,851 172,743
------------- ----------- -------------- ------------ ---------
Income (loss) before minority interest and
income taxes 16,996 (1,000) 845 474 17,315
Minority interest (620) (236) -- -- (856)
------------- ----------- -------------- ------------ ---------
Income (loss) before income taxes 16,376 (1,236) 845 474 16,459
Income tax provision 6,288 (475) 325 182 6,320
------------- ----------- -------------- ------------ ---------
Net income (loss) (C) $ 10,088 $ (761) $ 520 $ 292 $ 10,139
------------- ----------- -------------- ------------ ---------
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Earnings per share (D) $ 0.62 $ 0.53
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(A) Reflects the historical unaudited condensed consolidated statement of
operations of the Company for the six months ended June 30, 1997.
(B) Reflects the pre-acquisition operations of the Owned Hotels (including
separate disclosure for the National Airport Hilton) and Additional
Acquisitions to provide six months of hotel operations. The pre-acquisition
operations were obtained from the hotel pre-acquisition financial
statements. Also reflects adjustments to (i) eliminate management fee
revenues for the Owned Hotels for services that were provided by the
Company, (ii) reflect federal and state income taxes (assuming a 38.4%
combined effective rate), (iii) reflect pro forma depreciation and
amortization expense on the Company's cost basis as if the hotels had been
acquired as of the beginning of the period, (iv) reflect net amortization
expense associated with financing activities and (v) record interest based
on the terms of the Company's credit facilities.
(C) Subsequent to June 30, 1997, the Company incurred expenses associated with
the write-off of deferred financing costs related to the refinanced credit
facilities. These extraordinary costs are charged to operations as incurred
and have not been included in the Unaudited Pro Forma Condensed Consolidated
Statement of Operations.
(D) In computing historical and pro forma earnings per share, weighted average
shares of common stock and common stock equivalents of 16,356,343 and
19,547,910, respectively, were used and net income has been adjusted for
certain minority interests.
CapStar Hotel Company
Unaudited Pro Forma Condensed Consolidated Statement of Operations
Year Ended December 31, 1996
Pro Forma Adjustments
------------------------------------------------
Owned Hotels,
Offerings,
Credit Facility,
Non-Recourse National
Facility Airport Additional
Historical(A) and Notes(B) Hilton(B) Acquisitions(B) Pro Forma
------------- ----------- -------------- --------------- ---------
Revenue from hotel operations
Rooms $ 68,498 $ 147,042 $ 8,213 $ 8,756 $ 232,509
Food and beverage 30,968 53,921 2,663 4,771 92,323
Other hotel revenue 5,981 12,744 597 494 19,816
Office rental and other revenues -- 5,668 -- -- 5,668
Hotel management, accounting and other 4,345 (1,487) -- -- 2,858
------------- ----------- -------------- ------------ --------
Total revenue 109,792 217,888 11,473 14,021 353,174
Hotel operating expenses by department:
Rooms 17,509 35,990 1,931 2,209 57,639
Food and beverage 24,589 42,805 2,217 3,801 73,412
Other operating departments 2,513 8,091 406 328 11,338
Office rental and other expenses -- 2,683 -- -- 2,683
Undistributed operating expenses:
Administrative and general 20,448 31,752 1,450 658 54,308
Property operating costs 12,586 33,131 1,932 2,232 49,881
Property taxes, insurance and other 4,565 12,639 677 574 18,455
Depreciation and amortization 8,248 17,213 1,218 1,280 27,959
-------------- ---------- -------------- ----------- ---------
Total operating expenses 90,458 184,304 9,831 11,082 295,675
Interest expense, net 12,346 21,924 951 2,096 37,317
Total expenses 102,804 206,228 10,782 13,178 332,992
--------------- ----------- -------------- ----------- --------
Income before minority interest
and income taxes 6,988 11,660 691 843 20,182
Minority interest 39 (1,112) -- -- (1,073)
--------------- ----------- -------------- ----------- --------
Income before income taxes 7,027 10,548 691 843 19,109
Income tax provision 2,674 4,356 276 338 7,644
--------------- ----------- --------------- ----------- --------
Net income from continuing operations (C) $ 4,353 $ 6,192 $ 415 $ 505 $ 11,465
--------------- ----------- --------------- ----------- --------
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Earnings per share (D) $ 0.31 $ 0.61
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(A) Reflects the historical condensed consolidated statement of operations of
the Company for the year ended December 31, 1997.
(B) Reflects the pre-acquisition operations of the Owned Hotels (including
separate disclosures for the National Airport Hilton) and Additional
Acquisitions to provide a full year of hotel operations. The
pre-acquisition operations were obtained from the hotel pre-acquisition
financial statements. Also reflects adjustments to (i) eliminate management
fee revenues for the Owned Hotels for services that were provided by the
Company, (ii) reflect federal and state income taxes (assuming a 40%
combined effective rate), (iii) reflect estimated incremental general and
administrative expenses associated with public ownership, (iv) reflect pro
forma depreciation and amortization expense on the Company's cost basis as
if the hotels had been acquired as of the beginning of the period,
(v) reflect net amortization expense associated with financing activities
and (vi) record interest based on the terms of the Company's credit
facilities.
(C) Subsequent to June 30, 1997, the Company incurred expenses associated with
the write-off of deferred financing costs related to the refinanced credit
facilities. These extraordinary costs are charged to operations as incurred
and have not been included in the Unaudited Pro Forma Condensed Consolidated
Statement of Operations.
(D) Historical earnings per share have been calculated using actual income
for the period from the initial public offering on August 20, 1996
through December 31, 1996. The weighted average number of common stock
and common stock equivalents used in the calculation was 12,754,321.
In computing pro forma earnings per share, weighted average shares of
common stock and common stock equivalents of 19,313,844 were used and
net income has been adjusted for certain minority interests.