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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1996
______________________________
INTERSTATE HOTELS COMPANY
FOSTER PLAZA 10
680 ANDERSEN DRIVE
PITTSBURGH, PENNSYLVANIA 15220
(412) 937-0600
PENNSYLVANIA 1-11731 25-1788101
(State of incorporation) (SEC File No.) (IRS Employer
Identification No.)
The Registrant (1) has filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the period
that the Registrant was required to file such reports, but (2) has not been
subject to such filing requirements for the past 90 days.
The number of shares of Common Stock, par value $0.01 per share,
outstanding at August 13, 1996 was 28,668,350.
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INDEX
INTERSTATE HOTELS COMPANY
Part I Financial Information Page No.
- ------ --------------------- --------
Item 1. Financial Statements (Unaudited)
Consolidated Balance Sheets - June 30, 1996 and
December 31, 1995
Consolidated Statements of Operations - Pro Forma
Three Months and Six Months Ended
June 30, 1995 and June 30, 1996
Consolidated Statements of Operations - Historical
Three Months and Six Months Ended
June 30, 1995 and June 30, 1996
Consolidated Statements of Cash Flows - Six Months
Ended June 30, 1995 and June 30, 1996
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Part II Other Information
- ------- -----------------
Item 4. Submission of Matters to a Vote of Security Holders
Item 6. (A) Exhibits
(B) Reports of Form 8-K
3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED).
INTERSTATE HOTELS COMPANY
CONSOLIDATED BALANCE SHEETS
-------
(In thousands, except per share amounts)
ASSETS
June 30, December 31,
1996 1995
--------------- ---------------
(unaudited) (A)
Current assets:
Cash and cash equivalents $ 38,078 $ 14,035
Accounts receivable 24,091 10,654
Net investment in direct financing leases 400 399
Deferred income taxes 4,048 --
Prepaid expenses and other current assets 4,005 313
--------- ---------
Total current assets 70,622 25,401
Restricted cash 10,864 2,096
Property and equipment, net 376,076 1,894
Investments in management contracts, net of accumulated amortization of
$18,464 at June 30, 1996 and $16,933 at December 31, 1995 4,007 5,861
Investments in hotel real estate 4,931 12,884
Officers and employees notes receivable 4,681 1,219
Affiliates notes receivable -- 8,718
Net investment in direct financing leases 930 836
Other assets 12,815 2,492
--------- ---------
Total assets $ 484,926 $ 61,401
========= =========
LIABILITIES AND EQUITY
Current liabilities:
Accounts payable 7,545 926
Accounts payable - health trust 1,192 5,505
Accrued payroll and related benefits 7,156 3,026
Other accrued liabilities 23,027 5,546
Current portion of long-term debt 5,171 363
--------- ---------
Total current liabilities 44,091 15,366
Long-term debt 219,620 35,907
Deferred income taxes 2,101 --
Other liabilities 1,213 --
--------- ---------
Total liabilities 267,025 51,273
--------- ---------
Minority interests 6,185 872
Equity:
Common stock, $.01 par value; authorized 75,000 shares;
issued and outstanding 27,220 shares as of June 30, 1996 272 3
Paid-in capital 220,525 26,883
Unearned compensation -- (3,263)
Accumulated deficit (9,081) (12,737)
Receivable from stockholders -- (1,630)
--------- ---------
Total equity 211,716 9,256
--------- ---------
Total liabilities and equity $ 484,926 $ 61,401
========= =========
(A) The year-end balance sheet data was derived from audited financial
statements, but does not include all disclosures required by
generally accepted accounting principles.
The accompanying notes are an integral part of the consolidated
financial statements.
4
INTERSTATE HOTELS COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
-------
(Unaudited, in thousands, except per share amounts)
Pro Forma (Note 3)
-----------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- ---------------------------
1995 1996 1995 1996
--------- --------- --------- ---------
Lodging revenues:
Rooms $ 27,731 $ 31,400 $ 52,721 $ 58,482
Food and beverage 16,407 18,074 31,212 33,863
Other departmental 3,039 3,268 5,993 6,387
Management and related fees 10,319 11,082 19,726 21,889
--------- --------- --------- ---------
57,496 63,824 109,652 120,621
--------- --------- --------- ---------
Lodging expenses:
Rooms 6,427 6,973 12,497 13,249
Food and beverage 11,775 12,794 22,962 24,236
Other departmental 1,646 1,458 3,199 2,737
Property costs 14,048 15,737 28,063 30,216
General and administrative 2,456 2,478 4,940 5,066
Payroll and related benefits 3,597 4,148 7,435 8,397
Depreciation and amortization 4,443 4,504 8,958 9,003
--------- --------- --------- ---------
44,392 48,092 88,054 92,904
--------- --------- --------- ---------
Operating income 13,104 15,732 21,598 27,717
Other expense:
Interest, net 4,572 4,570 9,144 9,196
Other, net 537 631 828 1,127
--------- --------- --------- ---------
Income before income taxes 7,995 10,531 11,626 17,394
Income tax expense 3,038 4,002 4,418 6,610
---------- --------- --------- ---------
Net income $ 4,957 $ 6,529 $ 7,208 $ 10,784
========== ========= ========= =========
Pro forma earnings per common
share and common share equivalent $ .17 $ .23 $ .25 $ .38
========== ========= ========= =========
Weighted average number of common
shares and common share
equivalents outstanding 28,703 28,703 28,703 28,703
========== ========= ========= =========
The accompanying notes are an integral
part of the consolidated financial statements.
5
INTERSTATE HOTELS COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
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(Unaudited, in thousands)
Historical
-----------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------- ---------------------------
1995 1996 1995 1996
--------- --------- --------- ---------
Lodging revenues:
Rooms -- $ 2,033 -- $ 2,033
Food and beverage -- 1,021 -- 1,021
Other departmental -- 221 -- 221
Net management fees $ 6,724 7,796 $ 12,570 14,978
Other management-related fees 4,679 4,875 9,082 9,988
--------- --------- --------- ---------
11,403 15,946 21,652 28,241
--------- --------- --------- ---------
Lodging expenses:
Rooms -- 384 -- 384
Food and beverage -- 743 -- 743
Other departmental -- 92 -- 92
Property costs -- 880 -- 880
General and administrative 2,237 2,238 4,317 4,576
Payroll and related benefits 3,569 4,148 7,404 8,397
Non-cash compensation -- 11,896 - 11,896
Depreciation and amortization 961 1,340 2,002 2,441
--------- --------- --------- ---------
6,767 21,721 13,723 29,409
--------- --------- --------- ---------
Operating income (loss) 4,636 (5,775) 7,929 (1,168)
Other income (expense):
Interest, net 76 (528) 128 (1,015)
Other, net -- 635 -- 751
--------- --------- --------- ---------
Income (loss) before income taxes 4,712 (5,668) 8,057 (1,432)
Income tax expense -- 6,631 -- 6,631
--------- --------- --------- ---------
Income (loss) before extraordinary items 4,712 (12,299) 8,057 (8,063)
Extraordinary loss from early extinguishment
of debt, net of deferred tax
benefit of $3,937 -- 7,643 -- 7,643
--------- --------- --------- ---------
Net income (loss) $ 4,712 $ (19,942) $ 8,057 $ (15,706)
========= ========= ========= =========
The accompanying notes are an integral
part of the consolidated financial statements.
6
INTERSTATE HOTELS COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------
(Unaudited, in thousands)
Six Months Ended
June 30,
------------------------------
1995 1996
---------- ----------
Cash flows from operating activities:
Net income (loss) $ 8,057 $ (15,706)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Depreciation and amortization 2,002 2,441
Minority interests' share of equity loss from
investment in hotel real estate -- (540)
Write-off of deferred financing fees -- 6,231
Non-cash stock compensation -- 11,896
Deferred income taxes -- 2,694
Other (39) (175)
Cash provided (used) by assets and liabilities:
Accounts receivable (1,913) (1,489)
Prepaid expenses and other assets (174) (657)
Accounts payable 2,700 (3,857)
Accrued liabilities 2,623 5,285
------- --------
Net cash provided by operating activities 13,256 6,123
------- --------
Cash flows from investing activities:
Investments in contracts (90) (77)
Equity investment in hotel real estate -- (4,931)
Change in notes receivable, net (1,857) (3,462)
Acquisition of hotels, net of cash received -- (115,490)
Purchase of property and equipment (310) (283)
Purchase of assets to be leased (374) (320)
Other (207) (2,695)
------- --------
Net cash used in investing activities (2,838) (127,258)
------- --------
Cash flows from financing activities:
Proceeds from long-term debt -- 195,000
Repayment of long-term debt (300) (240,439)
Financing costs paid -- (9,349)
Proceeds from issuance of common stock, net -- 235,151
Capital contributions 600 --
Change in funds restricted for debt service -- (83)
Funds advanced to stockholders (6,985) (6,423)
Repayment of funds advanced to stockholders 2,493 8,053
Repayment of notes payable to stockholders -- (30,000)
Distributions and capital distributions paid (4,228) (6,732)
------- --------
Net cash (used in) provided by financing activities (8,420) 145,178
------- --------
Net increase in cash and cash equivalents 1,998 24,043
Cash and cash equivalents at beginning of period 6,702 14,035
------- --------
Cash and cash equivalents at end of period $ 8,700 $ 38,078
======= ========
Supplemental disclosure of cash flow information:
Cash paid for interest $ 153 $ 2,534
======= ========
Supplemental disclosure of non-cash investing and financing activities:
Notes payable issued to stockholders -- $ 30,000
======= ========
Assets contributed for stock -- $ 9,916
======= ========
The accompanying notes are an integral
part of the consolidated financial statements.
7
INTERSTATE HOTELS COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited, dollars in thousands except per share amounts)
-------
1. ORGANIZATION AND BASIS OF PRESENTATION:
Interstate Hotels Company (the Company) provides management and other
related services principally to hotels through its wholly-owned
subsidiaries. As of June 30, 1996, the Company also owned eight hotels
and had a majority interest in six other hotels (collectively, the
Owned Hotels). The Company was formed on April 19, 1996. As a result
of the transactions discussed in Note 2, the consolidated interim
financial statements of the Company as of June 30, 1996 consist of the
historical results of Interstate Hotels Corporation and Affiliates
(IHC), the Company's predecessor, and the operations of the Owned
Hotels from the date of their acquisition. Prior thereto, the
consolidated interim financial statements reflect only the historical
activity of IHC. All significant intercompany transactions and
balances have been eliminated in consolidation.
The accompanying consolidated interim financial statements have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission (the SEC).
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to such rules and
regulations. The consolidated interim financial statements should be
read in conjunction with the financial statements, notes thereto and
other information included in the Company's Registration Statement on
Form S-1 (No. 333-03958), filed with the SEC on April 26, 1996,
as amended (the Registration Statement).
The accompanying unaudited consolidated interim financial statements
reflect, in the opinion of management, all adjustments, which are of a
normal and recurring nature, necessary for a fair presentation of the
financial position and results of operations for the periods
presented. The preparation of financial statements in accordance with
generally accepted accounting principles requires management to make
estimates and assumptions. Such estimates and assumptions affect the
reported amounts of assets and liabilities, as well as the disclosure
of contingent assets and liabilities at the date of the financial
statements, and the reported amounts of revenue and expenses during
the reporting period. Actual results could differ from those
estimates. The results of operations for the interim periods are not
necessarily indicative of the results for the entire year.
2. INITIAL PUBLIC OFFERING:
In June 1996, the Company completed an initial public offering of
11,000,000 shares of its common stock at a price of $21 per share (the
Initial Offering). In July 1996, the underwriters of the Company's
Initial Offering exercised their over-allotment options and purchased
an additional 1,448,350 shares of common stock at $21 per share from
the Company. After underwriting discounts, commissions and other
Initial Offering expenses, net proceeds to the Company were $211,851
from the Initial Offering and $28,601 from the exercise of the
over-allotment options. The Company used a significant portion of the
proceeds of the Initial Offering to repay certain debt obligations and
to fund hotel acquisitions.
8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited, dollars in thousands except per share amounts)
-------
2. INITIAL PUBLIC OFFERING, continued:
The following transactions were consummated prior to or
concurrently with the consummation of the Initial Offering:
EXERCISE OF THE BLACKSTONE OPTION: In October 1995, IHC granted
Blackstone Real Estate Advisors L.P. and certain of its affiliates
(collectively, Blackstone) an option (the Blackstone Option) to
purchase an equity interest in a new company to be formed to succeed
IHC for an exercise price of $23,300. In connection with the
Initial Offering, Blackstone exercised the Blackstone Option and
received 2,133,333 shares of common stock of the Company.
ACQUISITION OF THE BLACKSTONE HOTEL INTERESTS: In March 1996, a
subsidiary of the Company entered into a purchase and sale agreement to
acquire all of Blackstone's interests in thirteen of the Owned Hotels
(the Blackstone Acquisition). In connection with the Initial Offering,
the Blackstone Acquisition was consummated for a cash purchase price of
$124,400. In addition to the Blackstone Acquisition, Blackstone also
contributed their interest in one hotel in consideration for $8,300 of
common stock of the Company. Additionally, the principal shareholders
of IHC contributed their equity interests in the Owned Hotels to the
Company in exchange for common stock of the Company concurrent with the
Initial Offering. The Blackstone Acquisition has been accounted for
using the purchase method of accounting except that carryover basis was
used for 9.3% of the acquired interests. The contributions of interests
in the Owned Hotels in exchange for common stock of the Company have
been accounted for using carryover basis.
3. PRO FORMA INFORMATION:
The unaudited pro forma consolidated statements of operations for the
three-month and six-month periods ended June 30, 1995 and 1996 are
presented as if the acquisitions of Blackstone's interests in all
of the Owned Hotels, the acquisition of the Boston Marriott Westborough
Hotel and the consummation of the transactions described in Note 2 had
occurred on January 1, 1995. Such pro forma information is based in
part upon information contained in the Company's Registration Statement
and should be read in conjunction with the Registration Statement. In
management's opinion, all pro forma adjustments necessary to reflect
the effects of these transactions have been made. The pro forma
information does not include earnings on the Company's pro forma cash
and short-term investments or certain one-time charges to income, and
does not purport to present what the actual results of operations of
the Company would have been if the previously mentioned transactions
had occurred on such dates or to project the results of operations of
the Company for any future period.
9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited, dollars in thousands except per share amounts)
-------
4. EARNINGS PER SHARE:
Prior to the consummation of the Company's Initial Offering, the
predecessors of the Company were organized as S corporations,
partnerships and limited liability companies. Accordingly, the Company
believes that the historical earnings per share calculations required
in accordance with Accounting Principles Board Opinion No. 15 are not
meaningful for periods prior to the Initial Offering and, therefore,
have not been provided. Rather, pro forma earnings per share is a
more meaningful measure of the Company's results of operations for the
periods presented.
The weighted average number of common shares and common share
equivalents used in the computation of pro forma earnings per share
for the three-month and six-month periods ended June 30, 1995 and 1996
are as follows:
Weighted average common shares
and common share equivalents issued 28,667,000
Dilutive effect of stock options 36,000
----------
28,703,000
==========
The pro forma earnings per share for the three-month and six-month
periods ended June 30, 1995 and 1996 have been calculated by dividing
pro forma net income by the weighted average number of shares of common
stock deemed to be outstanding. Net income has been adjusted to pro
forma net income by reflecting the transactions discussed in Note 2 and
other required adjustments as discussed in Note 3 as if the
transactions had occurred on January 1, 1995.
5. INVESTMENTS IN HOTEL REAL ESTATE:
The Company accounts for its investments in hotel real estate
as follows:
o Majority-owned hotels: The Company consolidates all
majority-owned interests in hotels.
o Less than majority owned: The Company accounts for investments
in less than 50% but greater than 20% owned entities in which
it can exert significant influence on the equity method of
accounting. The Company accounts for all other investments on
the cost method.
As of June 30, 1996, investments under the balance sheet caption
investments in hotel real estate consisted primarily of minority
interests in two hotel partnerships in which the Company does not
exert significant influence. As of December 31, 1995, this caption
consisted of an investment in which the Company had a less than 50%
controlling interest. As part of the transaction discussed in Note 2,
the Company acquired a majority interest in this investment and has
accounted for the acquisition using the purchase method of accounting.
10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited, dollars in thousands except per share amounts)
-------
6. LONG-TERM DEBT:
Long-term debt consisted of the following:
June 30, December 31,
1996 1995
---------- ------------
Term Loan and Revolving Credit Facility $ 195,000 --
CGL Loan 29,250 --
IHC revolving credit and term loan facility -- $ 35,000
Other 541 1,270
-------- ---------
224,791 36,270
Less current portion 5,171 363
--------- ---------
$ 219,620 $ 35,907
========= =========
Effective June 25, 1996, the Company entered into a $195,000 Term
Loan and a $100,000 Revolving Credit Facility (collectively, the
Credit Facilities). The Term Loan is payable over seven years in
accelerating quarterly installments beginning September 26, 1996 and
includes certain mandatory prepayment provisions. All remaining unpaid
accrued interest and principal on the Term Loan will be due June 26,
2003. The Revolving Credit Facility provides for borrowings under
letters of credit, revolving loans for working capital and acquisition
loans to be used to finance additional hotel acquisitions.
The proceeds from the Term Loan were used to refinance certain
indebtedness of the Company and to pay fees and expenses incurred in
connection with the Credit Facilities. Proceeds from the Term Loan in
the amount of $90,000 were used to purchase a subordinated
participation interest in the $119,250 mortgage indebtedness of
Interestone/CGL, a subsidiary of the Company (CGL Loan). As of June 30,
1996, on a consolidated basis, the Company had outstanding, in addition
to the Term Loan, $29,250 of the CGL Loan. The CGL Loan requires
no principal payments until the indebtedness matures on June 25, 2003.
All other terms of the CGL Loan, including interest and covenants, are
identical to the Credit Facilities.
Interest on the Credit Facilities and the CGL Loan is payable subject
to the Company's election of the Base Rate Option or the Eurodollar
Option. The Base Rate Option is the lender's prime rate plus 1%. The
Eurodollar Option can be applied for periods of one, two, three or six
months, and is LIBOR plus 2%. The Company elected the Eurodollar Option
to be in effect as of June 30, 1996, and was 7.5%. Additionally, the
Company has purchased two interest rate protection agreements: an
interest rate cap that limits LIBOR to 5.5% on $105,000 of the
indebtedness through June 28, 1999 and an interest rate swap that
provides for a fixed LIBOR rate of 5.8% on $72,105 of the
indebtedness through December 15, 2000.
A nonrefundable commitment fee equal to 3/8 of 1% of the unused
portion of the Revolving Credit Facility is payable quarterly.
Additionally, letter of credit fees equal to 2.25% of the outstanding
letters of credit are payable quarterly.
11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited, dollars in thousands except per share amounts)
-------
6. LONG-TERM DEBT, continued:
The Credit Facilities and the CGL Loan contain certain restrictive
covenants, including the maintenance of several financial ratios,
restrictions on the payment of dividends, limitations on additional
indebtedness, limitations on changes in members of the Board of
Directors and certain other reporting requirements. The Company has
pledged substantially all of the assets of the Company and an interest
in the rights to the cash flows of certain of the Owned Hotels as
collateral for the Credit Facilities and the CGL Loan.
Aggregate scheduled maturities of long-term debt outstanding as of
June 30, 1996 for each of the five years ending December 31 and
thereafter are as follows:
1996 $ 2,500
1997 7,671
1998 12,681
1999 20,189
2000 30,000
Thereafter 151,750
---------
$ 224,791
=========
7. SHAREHOLDERS' EQUITY:
The Company's Articles of Incorporation grant the Board of Directors
the authority to issue up to 25,000,000 shares of preferred stock
having such rights, preferences and privileges as designated by the
Board without shareholder approval. The rights of the holders of common
stock will be subject to, and may be adversely affected by, the rights
of the holders of any shares of such preferred stock that may be issued
in the future.
8. NON-CASH COMPENSATION:
Prior to the Initial Offering, the Company issued 785,533 shares of
restricted stock to certain executives and employees to replace certain
prior options issued by IHC in 1995. The restricted shares were valued
based on the estimated value of the common stock of the Company at the
time the restricted stock was issued. The issuance of the restricted
stock resulted in a one-time charge of $11,896, which is classified as
non-cash compensation expense in the accompanying consolidated
statements of operations.
9. INCOME TAXES:
IHC was organized as S corporations, partnerships and limited liability
companies for federal and state income tax purposes until the Initial
Offering. Accordingly, IHC was not subject to income tax, as all
taxable income or loss of IHC was reported on the tax return of its
shareholders or owners. As a result of the change in IHC's tax status
to a C corporation effective with the consummation of the Initial
Offering, the Company recorded income tax expense amounting to $6,261
to establish deferred taxes existing as of the date of the change in
tax status. The difference between the Company's effective income tax
rate and statutory federal income tax rate for the six-month period
ended June 30, 1996 results mainly from the change in tax entity and
from state income taxes.
12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued
(Unaudited, dollars in thousands except per share amounts)
-------
10. EXTRAORDINARY ITEMS:
In June 1996, the Company recorded an extraordinary loss amounting to
$7,643, net of a deferred tax benefit of $3,937, as a result of the
early extinguishment of certain debt. The extraordinary loss related
principally to the write-off of deferred financing fees, prepayment
penalties and loan commitment fees.
11. SUBSEQUENT EVENTS:
As discussed in Note 3, the Company acquired the Boston Marriott
Westborough Hotel on July 1, 1996 for $18,900. This acquisition is
included in the pro forma consolidated statements of operations.
The Company also purchased three additional hotels in July 1996. These
three separate acquisitions include: the Brentwood Holiday Inn located
in Nashville, Tennessee, the Blacksburg Marriott Hotel located in
Blacksburg, Virginia and the Roanoke Marriott Hotel located in Roanoke,
Virginia. The total aggregate purchase price of these three hotels was
$50,400. These acquisitions have not been included in the pro forma
financial results of the Company because consummation of the
acquisitions was not probable as of June 30, 1996.
13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
PRO FORMA THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO PRO FORMA THREE MONTHS
ENDED JUNE 30, 1995
Pro forma total revenues increased by $6.3 million, or 11.0%, from $57.5 million
in the three months ended June 30, 1995 to $63.8 million in the three months
ended June 30, 1996. The most significant portion of this increase related to
lodging revenues, which consists of rooms, food and beverage and other revenues.
Pro forma lodging revenues increased by $5.5 million, or 11.8%, from $47.2
million in the three months ended June 30, 1995 to $52.7 million in the three
months ended June 30, 1996. The increase was due to the overall improvement in
the operating performance of the Owned Hotels, which was attributed to a change
in franchise affiliations for certain of the Owned Hotels, fewer hotel
renovations in 1996 than in 1995 and an overall improvement in economic
conditions in certain geographic regions. This increase in lodging revenues was
consistent with the increase in the Owned Hotels' room revenues of $3.7 million,
or 13.2%, to $31.4 million in the three months ended June 30, 1996. For the
Owned Hotels, the average room rate increased by 9.7%, from $87.74 during the
three months ended June 30, 1995 to $96.28 during the three months ended June
30, 1996, and occupancy increased from 75.8% to 76.9%, respectively. This
resulted in an 11.3% increase in revenue per available room (REVPAR) to $74.05
during the three months ended June 30, 1996. The Philadelphia, Atlanta,
Chicago, Denver, Houston and Colorado Springs markets had the most significant
impact on average rate and occupancy growth. Pro forma management and related
fees increased by $0.8 million, or 7.4%, from $10.3 million in the three months
ended June 30, 1995 to $11.1 million in the three months ended June 30, 1996 due
primarily to the performance improvement of existing managed hotels and
incremental revenues associated with the net addition of new hotels, many of
which utilize the Company's other contractual services. Such contractual
services include insurance services, purchasing and renovation services, MIS
support, centralized accounting, leasing and training and relocation programs.
Pro forma lodging expenses, which consists of rooms, food and beverage,
property costs and other expenses, increased by $3.1 million, or 9.0%, from
$33.9 million in the three months ended June 30, 1995 to $37.0 million in the
three months ended June 30, 1996. The pro forma operating margin of the Owned
Hotels increased from 28.2% during the three months ended June 30, 1995 to
29.9% during the three months ended June 30, 1996. The increase was attributed
to the increase in revenues and the overall improvement in operating
efficiencies of the Owned Hotels.
14
General and administrative expenses are associated with the management of hotels
and consist primarily of centralized management expenses such as operations
management, sales and marketing, finance and other hotel support services, as
well as general corporate expenses. Pro forma general and administrative
expenses in the three months ended June 30, 1996 remained relatively consistent
with pro forma general and administrative expenses in the three months ended
June 30, 1995 due to the relatively fixed nature of these expenses. Pro forma
general and administrative expenses as a percentage of pro forma revenues
decreased to 3.9% during the three months ended June 30, 1996 compared to 4.3%
during the three months ended June 30, 1995 as a result of operating leverage.
Pro forma payroll and related benefits expenses increased by $0.5 million, or
15.3%, from $3.6 million in the three months ended June 30, 1995 to $4.1
million in the three months ended June 30, 1996. The increase was due
primarily to the addition of new employees related to the growth of the
Company's hotel management business. Pro forma payroll and related benefits
expenses as a percentage of pro forma revenues remained relatively consistent
during the three months ended June 30, 1996 and 1995.
Pro forma depreciation and amortization of $4.5 million in the three months
ended June 30, 1996 remained relatively consistent with pro forma depreciation
and amortization of $4.4 million in the three months ended June 30, 1995.
Pro forma operating income increased by $2.6 million, or 20.1%, from $13.1
million in the three months ended June 30, 1995 to $15.7 million in the three
months ended June 30, 1996. Accordingly, pro forma operating margin increased
from 22.8% during the three months ended June 30, 1995 to 24.6% during the
three months ended June 30, 1996. As discussed above, the improvement in the
pro forma operating margin was attributed to the increase in pro forma revenues
and the overall decrease in pro forma operating expenses as a percentage of pro
forma revenues.
The pro forma income tax expense of $4.0 million in the three months ended June
30, 1996 and $3.0 million in the three months ended June 30, 1995 was computed
as if the Company were subject to federal and state income taxes for the entire
period, based on an effective tax rate of 38%.
As a result of the changes noted above, pro forma net income increased by $1.5
million, or 31.7%, from $5.0 million in the three months ended June 30, 1995 to
$6.5 million in the three months ended June 30, 1996. Accordingly, pro forma
net income margin increased from 8.6% during the three months ended June 30,
1995 to 10.2% during the three months ended June 30, 1996.
15
PRO FORMA SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO PRO FORMA SIX MONTHS ENDED
JUNE 30, 1995
Pro forma total revenues increased by $10.9 million, or 10.0%, from $109.7
million in the six months ended June 30, 1995 to $120.6 million in the six
months ended June 30, 1996. The most significant portion of this increase
related to pro forma lodging revenues, which increased by $8.8 million, or
9.8%, from $89.9 million in the six months ended June 30, 1995 to $98.7 million
in the six months ended June 30, 1996. The increase was due to the overall
improvement in the operating performance of the Owned Hotels, which was
attributed to a change in franchise affiliations for certain of the Owned
Hotels, fewer hotel renovations in 1996 than in 1995 and an overall improvement
in economic conditions in certain geographic regions. This increase in lodging
revenues was consistent with the increase in the Owned Hotels' room revenues of
$5.8 million, or 10.9%, to $58.5 million in the six months ended June 30, 1996.
For the Owned Hotels, the average room rate increased by 8.1%, from $87.25
during the six months ended June 30, 1995 to $94.35 during the six months ended
June 30, 1996, and occupancy increased from 72.8% to 73.6%, respectively. This
resulted in a 9.4% increase in REVPAR to $69.49 during the six months ended June
30, 1996. Pro forma management and related fees increased by $2.2 million, or
11.0%, from $19.7 million in the six months ended June 30, 1995 to $21.9 million
in the six months ended June 30, 1996 due primarily to the performance
improvement of existing managed hotels and incremental revenues associated with
the net addition of new hotels, many of which provide for incentive management
fees and utilize the Company's other contractual services.
Pro forma lodging expenses increased by $3.7 million, or 5.6%, from $66.7
million in the six months ended June 30, 1995 to $70.4 million in the six
months ended June 30, 1996. The pro forma operating margin for the Owned
Hotels increased from 25.8% during the six months ended June 30, 1995 to 28.7%
during the six months ended June 30, 1996. The increase was attributed to the
increase in revenues and the overall improvement in operating performance and
operating efficiencies of the Owned Hotels.
Pro forma general and administrative expenses increased slightly from $4.9
million in the six months ended June 30, 1995 to $5.1 million in the six months
ended June 30, 1996. Pro forma general and administrative expenses as a
percentage of pro forma revenues decreased to 4.2% during the six months ended
June 30, 1996 compared to 4.5% during the six months ended June 30, 1995 as a
result of operating leverage.
Pro forma payroll and related benefits expenses increased by $1.0 million, or
12.9%, from $7.4 million in the six months ended June 30, 1995 to $8.4 million
in the six months ended June 30, 1996. The increase was due primarily to the
addition of new employees related to the growth of the Company's hotel
management business. Pro forma payroll and related benefits expenses as a
percentage of pro forma revenues remained relatively consistent during the six
months ended June 30, 1996 and 1995.
16
Pro forma depreciation and amortization in the six months ended June 30, 1996
remained relatively consistent with pro forma depreciation and amortization in
the six months ended June 30, 1995.
Pro forma operating income increased by $6.1 million, or 28.3%, from $21.6
million in the six months ended June 30, 1995 to $27.7 million in the six
months ended June 30, 1996. Accordingly, pro forma operating margin increased
from 19.7% during the six months ended June 30, 1995 to 23.0% during the six
months ended June 30, 1996. As discussed above, the improvement in the pro
forma operating margin was attributed to the increase in pro forma revenues and
the overall decrease in pro forma operating expenses as a percentage of pro
forma revenues.
The pro forma income tax expense of $6.6 million in the six months ended June
30, 1996 and $4.4 million in the three months ended June 30, 1995 was computed
as if the Company were subject to federal and state income taxes for the entire
period, based on an effective tax rate of 38%.
As a result of the changes noted above, pro forma net income increased by $3.6
million, or 49.6%, from $7.2 million in the six months ended June 30, 1995 to
$10.8 million in the six months ended June 30, 1996. Accordingly, pro forma
net income margin increased from 6.6% during the six months ended June 30, 1995
to 8.9% during the six months ended June 30, 1996.
HISTORICAL THREE MONTHS ENDED JUNE 30, 1996 COMPARED TO HISTORICAL THREE MONTHS
ENDED JUNE 30, 1995
Total revenues increased by $4.5 million, or 39.8%, from $11.4 million in the
three months ended June 30, 1995 to $15.9 million in the three months ended
June 30, 1996. The most significant portion of this increase related to
lodging revenues, which increased by $3.3 million in the three months ended
June 30, 1996 due to the acquisition of the Owned Hotels on June 25, 1996. Net
management fees increased by $1.1 million, or 15.9%, from $6.7 million in the
three months ended June 30, 1995 to $7.8 million in the three months ended June
30, 1996 due to the addition of 39 new management contracts and increased
revenues associated with the performance improvement of existing managed
hotels. The increase in net management fees was partially offset by the loss
of 28 management contracts primarily due to the divestiture of hotels by
third-party hotel owners. Other management-related fees increased by $0.2
million, or 4.2%, from $4.7 million in the three months ended June 30, 1995 to
$4.9 million in the three months ended June 30, 1996 due to incremental
revenues associated with the net addition of new hotels, many of which utilize
the Company's other contractual services.
Lodging expenses increased by $2.1 million in the three months ended June 30,
1996 due to the acquisition of the Owned Hotels.
17
General and administrative expenses in the three months ended June 30, 1996
remained relatively consistent with general and administrative expenses in the
three months ended June 30, 1995 due to the relatively fixed nature of these
expenses. General and administrative expenses as a percentage of revenues
decreased to 14.0% during the three months ended June 30, 1996 compared to
19.6% during the three months ended June 30, 1995 as a result of the
acquisition of the Owned Hotels.
Payroll and related benefits expenses increased by $0.5 million, or 16.2%, from
$3.6 million in the three months ended June 30, 1995 to $4.1 million in the
three months ended June 30, 1996. The increase was due primarily to the
addition of new employees related to the growth of the Company's hotel
management business. Payroll and related benefits expenses as a percentage of
revenues decreased to 26.0% during the three months ended June 30, 1996
compared to 31.3% during the three months ended June 30, 1995 as a result of
the acquisition of the Owned Hotels.
Non-cash compensation of $11.9 million in the three months ended June 30, 1996
was incurred as a result of the issuance of 785,533 shares of restricted stock
to certain executives and key employees of the Company to replace certain
options issued by IHC in 1995.
Depreciation and amortization increased by $0.3 million from $1.0 million in
the three months ended June 30, 1995 to $1.3 million in the three months ended
June 30, 1996 due to the acquisition of the Owned Hotels.
Operating income (exclusive of non-cash compensation) increased by $1.5
million, or 32.0%, from $4.6 million in the three months ended June 30, 1995 to
$6.1 million in the three months ended June 30, 1996. Accordingly, operating
margin decreased from 40.7% during the three months ended June 30, 1995 to
38.4% during the three months ended June 30, 1996 due primarily to the
acquisition of the Owned Hotels.
Interest, net was $0.5 million of expense in the three months ended June 30,
1996 compared to $0.1 million of income in the three months ended June 30,
1995. The change was due to the increase in interest expense of $0.8 million
from $0.1 million in the three months ended June 30, 1995 to $0.9 million in
the three months ended June 30, 1996 due to the acquisition of the Owned
Hotels. The increase was offset by the increase in interest income of $0.2
million from $0.2 million in the three months ended June 30, 1995 to $0.4
million in the three months ended June 30, 1996 due to higher available cash
generated from operations.
Other, net of $0.6 million in the three months ended June 30, 1996 consisted
primarily of minority interests.
Income tax expense of $6.6 million in the three months ended June 30, 1996 was
attributed primarily to deferred taxes recorded on the date IHC changed its tax
status from a pass-through entity for tax purposes to a C corporation.
18
An extraordinary loss of $7.6 million, net of a deferred tax benefit of $3.9
million, in the three months ended June 30, 1996 was incurred as a result of
the early extinguishment of certain debt. The extraordinary loss related to
the write-off of deferred financing fees, prepayment penalties and loan
commitment fees.
As a result of the changes noted above, a net loss of $19.9 million was
recorded in the three months ended June 30, 1996 compared to net income of $4.7
million in the three months ended June 30, 1995.
HISTORICAL SIX MONTHS ENDED JUNE 30, 1996 COMPARED TO HISTORICAL SIX MONTHS
ENDED JUNE 30, 1995
Total revenues increased by $6.5 million, or 30.4%, from $21.7 million in the
six months ended June 30, 1995 to $28.2 million in the six months ended June
30, 1996. The most significant portion of this increase related to lodging
revenues, which increased by $3.3 million in the six months ended June 30, 1996
due to the acquisition of the Owned Hotels. Net management fees increased by
$2.4 million, or 19.2%, from $12.6 million in the six months ended June 30,
1995 to $15.0 million in the six months ended June 30, 1996 due to the addition
of 39 new management contracts and increased revenues associated with the
performance improvement of existing managed hotels. Approximately $0.6 million
of this increase resulted from increases in incentive management fees due to
performance improvement of existing managed hotels and the increase in the
number of new management contracts that provide for incentive management fees.
The increase in net management fees was partially offset by the loss of 28
management contracts primarily due to the divestiture of hotels by third-party
hotel owners. Other management-related fees increased by $0.9 million, or
10.0%, from $9.1 million in the six months ended June 30, 1995 to $10.0 million
in the six months ended June 30, 1996 due to incremental revenues associated
with the net addition of new hotels, many of which utilize the Company's other
contractual services.
Lodging expenses increased by $2.1 million in the six months ended June 30,
1996 due to the acquisition of the Owned Hotels.
General and administrative expenses increased slightly from $4.3 million in the
six months ended June 30, 1995 to $4.6 million in the six months ended June 30,
1996. General and administrative expenses as a percentage of revenues
decreased to 16.2% during the six months ended June 30, 1996 compared to 19.9%
during the six months ended June 30, 1995 as a result of the acquisition of the
Owned Hotels.
Payroll and related benefits expenses increased by $1.0 million, or 13.4%, from
$7.4 million in the six months ended June 30, 1995 to $8.4 million in the six
months ended June 30, 1996. The increase was due primarily to the addition of
new employees related to the growth of the Company's hotel management business.
Payroll and related benefits expenses as a percentage of revenues decreased to
29.7% during the six months ended June 30, 1996 compared to 34.2% during the
six months ended June 30, 1995 as a result of the acquisition of the Owned
Hotels.
19
Non-cash compensation of $11.9 million in the six months ended June 30, 1996
was incurred as a result of the issuance of 785,533 shares of restricted stock
to certain executives and key employees of the Company to replace certain
options issued by IHC in 1995.
Depreciation and amortization increased by $0.4 million from $2.0 million in
the six months ended June 30, 1995 to $2.4 million in the six months ended June
30, 1996 due to the acquisition of the Owned Hotels.
Operating income (exclusive of non-cash compensation) increased by $2.8
million, or 35.3%, from $7.9 million in the six months ended June 30, 1995 to
$10.7 million in the six months ended June 30, 1996. Accordingly, operating
margin decreased from 36.6% during the six months ended June 30, 1995 to 38.0%
during the six months ended June 30, 1996 due primarily to the acquisition of
the Owned Hotels.
Interest, net was $1.0 million of expense in the six months ended June 30, 1996
compared to $0.1 million of income in the six months ended June 30, 1995. The
change was due to the increase in interest expense of $1.6 million from $0.2
million in the six months ended June 30, 1995 to $1.8 million in the six months
ended June 30, 1996 due to the acquisition of the Owned Hotels. The increase
was offset by the increase in interest income of $0.5 million from $0.3 million
in the six months ended June 30, 1995 to $0.8 million in the six months ended
June 30, 1996 due to higher available cash generated from operations.
Other, net of $0.8 million in the six months ended June 30, 1996 consisted
primarily of minority interests.
Income tax expense of $6.6 million in the six months ended June 30, 1996 was
attributed primarily to deferred taxes recorded on the date IHC changed its tax
status from a pass-through entity for tax purposes to a C corporation.
An extraordinary loss of $7.6 million, net of a deferred tax benefit of $3.9
million, in the six months ended June 30, 1996 was incurred as a result of the
early extinguishment of certain debt. The extraordinary loss related to the
write-off of deferred financing fees, prepayment penalties and loan commitment
fees.
As a result of the changes noted above, a net loss of $15.7 million was
recorded in the six months ended June 30, 1996 compared to net income of $8.1
million in the six months ended June 30, 1995.
20
LIQUIDITY AND CAPITAL RESOURCES
The Company completed the Initial Offering of 11,000,000 shares of its common
stock in June 1996 at a price of $21 per share. The Company received net
proceeds of $235.2 million from the Initial Offering and the exercise of the
Blackstone Option after deducting underwriting discounts and commissions and
expenses payable by the Company. In July 1996, the Company received an
additional $28.6 million of net proceeds from the sale to the underwriters of an
additional 1,448,350 shares of common stock upon exercise of the over-allotment
options granted to the underwriters in connection with the Initial Offering. As
of June 30, 1996, the Company had used $115.5 million, net of cash acquired, of
the Initial Offering proceeds to purchase controlling equity interests in 14
hotels.
A portion of the proceeds of the Initial Offering were used, together with the
proceeds of a new $195 million term loan (the "Term Loan"), to repay $240.4
million of indebtedness. The Company also obtained a new $100 million revolving
credit facility (the "Acquisition Facility" and, together with the Term Loan,
the "Credit Facilities") which may be used to finance the expansion of existing
facilities, to obtain management contracts for hotel properties and to finance
the acquisition of hotel properties. The Credit Facilities carry variable
interest rates based on LIBOR plus 2%, and the Company has entered into interest
rate protection agreements covering $177.0 million of indebtedness. The Credit
Facilities have a seven-year term and require accelerating quarterly principal
payments, beginning on September 26, 1996. In addition to certain mandatory
prepayment provisions, the Credit Facilities contain certain restrictive
covenants, including the maintenance of financial ratios, restrictions on the
payment of dividends, and limitations on additional indebtedness. The Company
is in compliance with all of the restrictive covenants. As a result of the
above transactions, net of repayment of the notes payable to stockholders of $30
million and a capital distribution of $6.7 million, total funds provided by
financing activities was $145.2 million in the six months ended June 30, 1996.
Principally as the result of the purchase of the equity interests in 14 hotels
discussed above, cash of $127.3 million was used in investing activites during
the six-month period ended June 30, 1996.
The Company's capital expenditure budgets for existing properties (before
acquisitions) for the remainder of 1996 and 1997 are $9.2 million and $8.7
million, respectively. The Company intends to pursue a growth-oriented
strategy involving, among other things, the acquisition of additional
management contracts (which may from time to time require capital expenditures
by the Company), as well as acquisitions of interests in additional hotel
properties and hotel management companies. Management believes that the
Acquisition Facility, plus cash provided by operations, will be sufficient to
pursue the Company's strategy for the immediate future. However, depending
upon conditions in the capital and other financial markets and other factors,
the Company may from time to time consider the issuance of debt or other
securities, the proceeds of which could be used to finance acquisitions, to
refinance debt or for other general corporate purposes.
21
In the six months ended June 30, 1996, the Company had a net loss from
operations of $15.7 million. This amount included non-cash items, which
consisted of non-cash stock compensation of $11.9 million as a result of the
issuance of restricted stock to certain executives and key employees, the
write-off of $6.2 million in deferred financing fees as a result of the
repayment of certain indebtedness, the recognition of $2.7 million of deferred
income tax expense and $2.4 million in depreciation and amortization. As a
result, net cash provided from operations amounted to $6.1 million in the six
months ended June 30, 1996. Management of the Company believes that, with
respect to its current operations, the Company's cash on hand and funds
generated from operations will be sufficient to cover its reasonably foreseeable
working capital, capital expenditures and debt service requirements.
22
PART II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
In connection with the Company's initial public offering, by unanimous
written consent dated June 12, 1996, the Company's shareholders approved (i)
amendments to the Company's articles of incorporation, (ii) the Company's 1996
Equity Incentive Plan, Stock Purchase Plan, Director Option Plan and Management
Bonus Plan and (iii) grants of options to employees to purchase an aggregate of
900,000 shares of common stock of the Company.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
2 Formation Agreement, dated June 25, 1996, among the Company and the parties identified on the signature
page thereof
3(a) Amended and Restated Articles of Incorporation of the Company
3(b) Amended and Restated By-Laws of the Company
4 Credit Agreement, dated June 25, 1996, among Interstate Hotels Corporation, Credit Lyonnais and the other
parties signatory thereto
10(a) Stockholders Agreement, dated June 25, 1996, among the Company, Blackstone Real Estate Advisors L.P. and the
shareholders named therein
10(b) Registration Rights and Shareholders Agreement, dated June 25, 1996, among the Company and the shareholders
named therein
10(c) First Amendment to Interstone Three Partners I L.P. Limited Partnership Agreement, dated June 25, 1996, among
BJS Interstone Management Associates, IHC/Interstone Corporation, Blackstone Real Estate Partners I L.P. and
IHC/Interstone Partnership II, L.P.
10(d) First Amendment to Interstone Three Partners II L.P. Limited Partnership Agreement among BJS Interstone
Management Associates, IHC/Interstone Corporation, Blackstone Real Estate Partners II L.P. and IHC/Interstone
Partnership II, L.P.
10(e) First Amendment to Interstone Three Partners III L.P. Limited Partnership Agreement, dated June 25, 1996, among
BJS Interstone Management Associates, IHC/Interstone Corporation, Blackstone Real Estate Partners III L.P.,
Blackstone RE Offshore Capital Partners L.P. and IHC/Interstone Partnership II, L.P.
10(f) First Amendment to Interstone Three Partners IV L.P. Limited Partnership Agreement, dated June 25, 1996, among
BJS Interstone Management Associates, IHC/Interstone Corporation, Blackstone Real Estate Partners IV L.P.,
Blackstone RE Capital Partners II L.P. and IHC/Interstone Partnership II, L.P.
10(g)* Interstate Hotels Company Equity Incentive Plan
10(h)* Interstate Hotels Company Stock Purchase Plan
10(i)* Interstate Hotels Company Management Bonus Plan
23
10(j)* Interstate Hotels Company Stock Option Plan for Non-Employee Directors
10(k)* Employment Agreement between the Company and Milton Fine
10(l)* Employment Agreement between the Company and W. Thomas Parrington, Jr.
10(m)* Employment Agreement between the Company and J. William Richardson
10(n)* Employment Agreement between the Company and Robert L. Froman
10(o)* Employment Agreement between the Company and Marvin I. Droz
10(p)* Form of Severance Agreement between the Company and each of Milton Fine,
W. Thomas Parrington, Jr., J. William Richardson, Robert L. Froman and Marvin I. Droz
10(q)* Form of Indemnification Agreement between the Company and each of its Directors
10(r)* Interstate Hotels Company Supplemental Deferred Compensation Plan
10(s)* Deferred Compensation Agreement between the Company and W. Thomas Parrington, Jr.
10(t)* Deferred Compensation Agreement between the Company and J. William Richardson
27 Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter for which this
report is filed.
- -------------
* Previously filed as an exhibit to the Company's Registration Statement on
Form S-1 (No. 333-3958) and incorporated herein by reference.
24
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 thereunto duly authorized.
INTERSTATE HOTELS COMPANY
Date: August 13, 1996 By: /s/ J.William Richardson
------------------------------
J. William Richardson
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
25
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
2 Formation Agreement, dated June 25, 1996, among the Company and the parties
identified on the signature page thereof
3(a) Amended and Restated Articles of Incorporation of the Company
3(b) Amended and Restated By-Laws of the Company
4 Credit Agreement, dated June 25, 1996, among Interstate Hotels Corporation, Credit
Lyonnais and the other parties signatory thereto
10(a) Stockholders Agreement, dated June 25, 1996, among the Company, Blackstone Real
Estate Advisors L.P. and the shareholders named therein
10(b) Registration Rights and Shareholders Agreement, dated June 25, 1996, among the
Company and the shareholders named therein
10(c) First Amendment to Interstone Three Partners I L.P. Limited Partnership Agreement,
dated June 25, 1996, among BJS Interstone Management Associates, IHC/Interstone
Corporation, Blackstone Real Estate Partners I L.P. and IHC/Interstone
Partnership II, L.P.
10(d) First Amendment to Interstone Three Partners II L.P. Limited Partnership Agreement
among BJS Interstone Management Associates, IHC/Interstone Corporation, Blackstone
Real Estate Partners II L.P. and IHC/Interstone Partnership II, L.P.
10(e) First Amendment to Interstone Three Partners III L.P. Limited Partnership Agreement,
dated June 25, 1996, among BJS Interstone Management Associates, IHC/Interstone
Corporation, Blackstone Real Estate Partners III L.P., Blackstone RE Offshore Capital
Partners L.P. and IHC/Interstone Partnership II, L.P.
10(f) First Amendment to Interstone Three Partners IV L.P. Limited Partnership Agreement,
dated June 25, 1996, among BJS Interstone Management Associates, IHC/Interstone
Corporation, Blackstone Real Estate Partners IV L.P., Blackstone RE Capital
Partners II L.P. and IHC/Interstone Partnership II, L.P.
10(g)* Interstate Hotels Company Equity Incentive Plan
10(h)* Interstate Hotels Company Stock Purchase Plan
10(i)* Interstate Hotels Company Management Bonus Plan
10(j)* Interstate Hotels Company Stock Option Plan for Non-Employee Directors
10(k)* Employment Agreement between the Company and Milton Fine
10(l)* Employment Agreement between the Company and W. Thomas Parrington, Jr.
26
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
10(m)* Employment Agreement between the Company and J. William Richardson
10(n)* Employment Agreement between the Company and Robert L. Froman
10(o)* Employment Agreement between the Company and Marvin I. Droz
10(p)* Form of Severance Agreement between the Company and each of Milton Fine,
W. Thomas Parrington, Jr., J. William Richardson, Robert L. Froman and
Marvin I. Droz
10(q)* Form of Indemnification Agreement between the Company and each of its Directors
10(r)* Interstate Hotels Company Supplemental Deferred Compensation Plan
10(s)* Deferred Compensation Agreement between the Company and W. Thomas Parrington, Jr.
10(t)* Deferred Compensation Agreement between the Company and J. William Richardson
27 Financial Data Schedule
- --------------
* Previously filed as an exhibit to the Company's Registration Statement on
Form S-1 (No. 333-3958) and incorporated herein by reference.