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EXHIBIT 99.1
BRISTOL HOTEL COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1998 AND DECEMBER 31, 1997
(Dollars in Thousands)
March 31, December 31,
1998 1997
---------- ------------
ASSETS (Unaudited)
Current assets
Cash and cash equivalents ................................................... $ 79,649 $ 86,167
Accounts receivable, net .................................................... 36,407 31,305
Inventory ................................................................... 8,393 8,286
Deposits and other current assets ........................................... 10,673 9,298
---------- ----------
Total current assets ............................................. 135,122 135,056
Property and equipment (net of accumulated depreciation
of $88,356 and $76,172, respectively) ........................................ 1,468,407 1,439,167
Other assets
Restricted cash ............................................................. 8,670 9,283
Investments in joint ventures, net .......................................... 12,659 12,396
Goodwill (net of accumulated amortization of $1,226
and $891, respectively) .................................................. 52,394 52,773
Deferred charges and other non-current assets, net .......................... 15,915 17,963
---------- ----------
Total assets ..................................................... $1,693,167 $1,666,638
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt ........................................... $ 8,025 $ 8,455
Accounts payable and accrued expenses ....................................... 45,957 29,852
Accrued property, sales and use taxes ....................................... 13,230 15,911
Accrued insurance reserves .................................................. 10,773 9,530
---------- ----------
Total current liabilities ........................................ 77,985 63,748
Long-term debt, excluding current portion ....................................... 706,865 708,864
Deferred income taxes ........................................................... 243,751 242,530
Other liabilities ............................................................... 2,693 2,702
---------- ----------
Total liabilities ................................................ 1,031,294 1,017,844
---------- ----------
Common stock ($.01 par value; 150,000,000 shares authorized, 45,734,472 shares
issued, and 43,804,901 and 43,641,401 shares outstanding at March 31, 1998
and December 31, 1997, respectively) ......................................... 438 436
Additional paid-in capital ...................................................... 608,529 606,935
Cumulative translation adjustment ............................................... 406 286
Retained earnings ............................................................... 52,500 41,137
---------- ----------
Total stockholders' equity ....................................... 661,873 648,794
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Total liabilities and stockholders' equity ....................... $1,693,167 $1,666,638
========== ==========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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BRISTOL HOTEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Unaudited, in thousands except per share amounts)
March 31,
------------------------------
1998 1997
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REVENUE
Rooms .................................................................... $ 120,372 $ 41,731
Food and beverage ........................................................ 28,050 12,475
Management fees .......................................................... 1,516 85
Other .................................................................... 8,864 3,970
------------ ------------
Total revenue ................................................. 158,802 58,261
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OPERATING COSTS AND EXPENSES
Departmental expenses:
Rooms ................................................................ 33,424 9,888
Food and beverage .................................................... 21,239 8,409
Other ................................................................ 2,455 1,207
Undistributed operating expenses:
Administrative and general ........................................... 15,737 5,116
Marketing ............................................................ 11,380 3,838
Property occupancy costs ............................................. 24,474 8,326
Depreciation and amortization ........................................ 12,906 5,164
Corporate expense .................................................... 6,290 3,012
------------ ------------
Operating income ............................................................. 30,897 13,301
Other (income) expense:
Interest expense ......................................................... 12,513 6,278
Equity in income of joint ventures ....................................... (554) --
------------ ------------
Income before income taxes ................................................... 18,938 7,023
Income taxes ................................................................. 7,576 2,613
------------ ------------
Net income ................................................................... $ 11,362 $ 4,410
============ ============
Earnings per common and common equivalent share:
Net income:
Basic ................................................................ $ 0.26 $ 0.18
Diluted .............................................................. $ 0.26 $ 0.17
Weighted average number of common and common equivalent shares outstanding:
Basic ................................................................ 43,718,751 24,848,760
Diluted .............................................................. 44,535,273 25,796,808
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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BRISTOL HOTEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(Unaudited, in thousands)
March 31,
----------------------
1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES:
Net income ...................................................................................... $ 11,362 $ 4,410
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ............................................................... 12,906 5,164
Amortization of deferred financing costs .................................................... 1,257 528
Equity in earnings of joint ventures ........................................................ (554) --
Non-cash portion of foreign currency translation ............................................ 120 --
Compensation expense recognized for employee stock options .................................. 73 64
Changes in working capital ...................................................................... 7,413 (3,628)
Increase in advance deposits .................................................................... 714 286
(Increase) decrease in restricted cash .......................................................... 613 (190)
Deferred income taxes provision ................................................................. 1,221 624
Distribution from joint ventures ................................................................ 175 --
Decrease in other liabilities ................................................................... (9) (1,062)
-------- --------
Cash provided by operating activities ................................................ 35,291 6,196
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Improvements to property and equipment .......................................................... (40,820) (6,156)
Purchase of property and equipment .............................................................. -- (35,000)
-------- --------
Cash used in investing activities .................................................... (40,820) (41,156)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of long-term debt .................................................................... (2,429) (1,665)
Proceeds from senior term facility .............................................................. -- 41,200
Proceeds from exercise of employee stock options ................................................ 1,523 --
Increase in deferred charges and other non-current assets ....................................... (83) (3,262)
-------- --------
Cash provided by (used in) financing activities ...................................... (989) 36,273
-------- --------
Net increase (decrease) in cash and cash equivalents ................................................ (6,518) 1,313
Cash and cash equivalents at beginning of period .................................................... 86,167 4,666
-------- --------
Cash and cash equivalents at end of period .......................................................... $ 79,649 $ 5,979
======== ========
The accompanying notes are an integral part of these condensed
consolidated financial statements.
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BRISTOL HOTEL COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
Bristol Hotel Company (the "Company" or "Bristol") is a Delaware
corporation which was incorporated in November 1994 and began
operations after the acquisitions of Harvey Hotel Company, Ltd. and its
subsidiaries and United Inns, Inc. At March 31, 1998, the Company owned
86 hotels and managed 15 additional hotels, two of which are owned by
joint ventures in which the Company owns a 50% interest. The
properties, which contain approximately 28,800 rooms, are located in 22
states, the District of Columbia and Canada. The Company acquired the
ownership and/or management of 60 of these properties on April 28, 1997
(the "Holiday Inn Acquisition").
The condensed consolidated balance sheet at December 31, 1997 has been
derived from the audited balance sheet at that date. The condensed
consolidated balance sheet at March 31, 1998, the condensed
consolidated statements of income for the three months ended March 31,
1998 and 1997, and the condensed consolidated statements of cash flow
for the three months ended March 31, 1998 and 1997 have been prepared
by the Company and are unaudited. In the opinion of management, all
adjustments (which include only normal recurring adjustments) necessary
to present fairly, in all material respects, the financial position of
the Company as of March 31, 1998, and the results of operations and
cash flows for the three months ended March 31, 1998 and 1997 have been
made. Interim results are not necessarily indicative of fiscal year
performance because of seasonal and short-term variations.
2. SUBSEQUENT EVENTS
On April 21, 1998, the Company acquired the 187-room Sheraton Four
Points Hotel in Leominster, Massachusetts for $9.0 million. The
purchase price was funded with borrowings from the FelCor Facility (as
described below).
On April 30, 1998 the Company acquired 20 midwestern hotels (the "Omaha
Acquisition"). The total consideration for these assets was $40 million
of assumed debt (of which $24.9 million was paid off at closing), $20
million in cash and 1.43 million shares of the Company's common stock.
The portfolio consists of nine full-service Holiday Inns, five Holiday
Inn Express hotels, five Hampton Inns and one Homewood Suites, with
locations in Omaha, Nebraska; Moline, Illinois; Davenport, Iowa;
central Kansas and Midland/Odessa, Texas. The Company funded the cash
portion of the purchase price and the $24.9 million of debt prepayments
with borrowings under the FelCor Facility (as described below).
On April 21, 1998, the Company entered into an interim credit facility
with FelCor Suite Hotels, Inc. ("FelCor") pursuant to which the Company
can borrow up to $120 million to fund acquisitions and redevelopment
costs and for other corporate purposes (the "FelCor Facility"). The
FelCor Facility bears interest at a rate of LIBOR plus 2% and will
mature on December 31, 2003.
On May 11, 1998, the Company refinanced its existing $455 million loan
from Nomura Asset Capital Corporation and Bankers Trust Company with a
new $455 million loan from Bankers Trust Company (the "BT Loan"). The
BT Loan is secured by a pledge of stock in the subsidiaries of the
Company, bears interest at LIBOR plus 1-3/4% and will mature on May 11,
2001. The Company incurred approximately $34 million in yield
maintenance costs and prepayment penalties related to the payoff of the
existing facility, which, along with approximately $6.8 million of
deferred financing charges, will be recognized as an extraordinary loss
in the second quarter of 1998.
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BRISTOL HOTEL COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. PROPOSED MERGER WITH FELCOR SUITE HOTELS, INC.
On March 24, 1998, the Company announced a proposed merger with FelCor,
subject to approval by shareholders of both companies. Under the terms
of the proposed merger (the "FelCor Merger"), Felcor will acquire the
real estate holdings and assume the associated debt of the Company in
return for 31.7 million shares of newly issued FelCor stock. Prior to
the FelCor Merger, the Company will spin-off, as a taxable dividend,
its hotel operating business as a separate publicly traded hotel
operating company to be known as Bristol Hotels & Resorts ("New
Bristol"). The spin-off will be followed by the merger of Bristol into
Felcor, with Felcor acquiring all of Bristol's remaining assets,
including its 110 owned hotels (giving effect to acquisitions closed
subsequent to quarter end).
Each of the Company's hotels acquired by FelCor in the merger will be
leased to and operated by New Bristol. The merged company, which will
be renamed FelCor Lodging Trust, Ltd., will be the largest non-paired
share lodging REIT and New Bristol will be the largest independent
hotel operating company in the U.S. The two companies will be
separately owned and managed, but are expected to work together in the
acquisition and leasing of additional hotels.
In the spin-off, Bristol stockholders will receive one common share of
New Bristol for every two of their existing Bristol common shares. In
the merger, Bristol stockholders will receive 0.685 FelCor common
shares for each of their existing Bristol common shares. FelCor
stockholders will continue to hold their current FelCor common shares.
As a result of these transactions, existing Bristol stockholders will
own all of New Bristol's equity and 44% of FelCor's outstanding common
equity. The spin-off will be taxable to Bristol and its stockholders,
while the merger will be tax-free.
The following unaudited pro forma statements of income of New Bristol
give effect to Bristol's contribution of its hotel operating business
to New Bristol, the Holiday Inn Acquisition, the spin-off, the merger
and the Omaha Acquisition as if each event had occurred on January 1 of
the periods presented. The pro forma statements of income are presented
for illustrative purposes only and do not purport to be indicative of
the results that would have actually been obtained had such
transactions been completed for the periods presented or that may be
obtained in the future.
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BRISTOL HOTEL COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
3. PROPOSED MERGER WITH FELCOR SUITE HOTELS, INC. (CONTINUED)
Pro Forma for the Three
Months Ended March 31,
1998 1997
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(unaudited, in thousands
except per share amounts)
-------------------------
Total revenue ....................................... $ 170,410 $ 160,448
Departmental expenses ............................... 62,206 60,240
Undistributed operating expenses (including tenant
lease expense) ................................... 105,457 97,562
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Operating income .................................... 2,747 2,646
Interest expense .................................... 205 205
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Income before income taxes .......................... 2,542 2,441
Income taxes ........................................ 1,017 974
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Net income .......................................... $ 1,525 $ 1,467
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Earnings per common and common
equivalent share ................................. $ 0.09 $ 0.10
========== ==========
Weighted average number of common and
common equivalent shares outstanding ............. 17,565,343 15,101,288
========== ==========
4. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
The following unaudited pro forma statement of income gives effect to
the Holiday Inn Acquisition and related debt refinancings as if each
event had occurred on January 1, 1997. The pro forma statement of
income is presented for illustrative purposes only and does not purport
to be indicative of the results that would have actually been obtained
had such transactions been completed as of the assumed dates and for
the period presented or that may be obtained in the future. This pro
forma statement of income is used for comparison to the actual
operating results for the three months ended March 31, 1998 in
"Management's Discussion and Analysis of Results of Operations and
Financial Condition."
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BRISTOL HOTEL COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME (CONTINUED)
Pro Forma for the
Three Months Ended
March 31, 1997
-----------------
(unaudited, in thousands
except per share amounts)
Total revenue ............................................ $ 148,684
Departmental expenses .................................... 55,152
Undistributed operating expenses ......................... 66,074
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Operating income ......................................... 27,458
Other (income) expenses:
Interest expense ....................................... 14,809
Equity in income of joint ventures ..................... (339)
-----------
Income before income taxes ............................... 12,988
Income taxes ............................................. 5,012
-----------
Net income ............................................... $ 7,976
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Earnings per common and common
equivalent share ...................................... $ 0.20
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Weighted average number of common and
common equivalent shares outstanding .................. 39,838,770
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NOTE TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
A. Bristol acquired the Allerton Hotel in Chicago (the
"Allerton") on January 31, 1997. There were no adjustments
made to the pro forma condensed consolidated statement of
income for this property. Results of operations for this
property are included from the acquisition date.
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