HFS INCORPORATED AND SUBSIDIARIES
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
The pro forma consolidated balance sheet as of December 31, 1995 is
presented as if the following transactions had occurred on December 31, 1995:
(1) the acquisition by merger of Coldwell Banker Corporation
("Coldwell Banker");
(2) the receipt of proceeds from the offering of 15,000,000 shares
of the Company's Common Stock (the "Common Stock"), to the
extent necessary to finance the acquisition of Coldwell Banker and
the related repayment of indebtedness of Coldwell
Banker and to pay acquisition expenses;
(3) the following acquisitions (collectively the "1996 Acquisitions"):
[a] six non-owned Century 21 regions ("Century 21 NORS");
[b] assets comprising the Travelodge franchise system
("Travelodge");
[c] assets comprising the Electronic Realty Associates franchise
system ("ERA");
(4) the February 22, 1996 issuance of $240 million of 4-3/4%
Convertible Senior Notes due 2003 (the "4-3/4% Notes") to the extent such
proceeds were used to finance the 1996 Acquisitions.
The pro forma statement of operations for the year ended December 31, 1995
is presented as if the above transactions and the August 1, 1995 acquisition
of Century 21 and the acquisition by merger (the "CCI Merger") in May 1995 of
Casino & Credit Services, Inc.'s gambling patron credit information business,
Central Credit Inc. ("CCI") had occurred on January 1, 1995.
The acquisitions have been or will be accounted for using the purchase
method of accounting. Accordingly, assets acquired and liabilities assumed
have been or will be recorded at their estimated fair values which are
subject to further refinement, including appraisals and other analyses, with
appropriate recognition given to the effect of current interest rates and
income taxes. Management does not expect that the final allocation of the
purchase price for the above acquisitions will differ materially from the
preliminary allocations. The Company has entered into certain immaterial
transactions which are not reflected in the pro forma statements of
operations.
The pro forma consolidated financial statements do not purport to present
the financial position or results of operations of the Company had the
transactions and events assumed therein occurred on the dates specified, nor
are they necessarily indicative of the results of operations that may be
achieved in the future. In addition to the cost savings reflected in the pro
forma consolidated statement of operations, management believes that certain
additional cost savings and revenue enhancements may be realized following
the acquisitions. These savings are expected to be realized primarily through
the restructuring of franchise services of the acquired companies as well as
revenue enhancements expected through leveraging of the Company's preferred
vendor programs. No assurances can be made as to the amount of cost savings
or revenue enhancements, if any, that actually will be realized. In addition,
there can be no assurance that the Company will complete the acquisition of
Coldwell Banker, in which case the Company would retain the proceeds from the
offering of the Shares for general corporate purposes, including acquisitions.
The pro forma consolidated financial statements do not reflect
approximately $16 million of expenses which the Company expects to incur
following the acquisition of Coldwell Banker relating to the contribution of
Coldwell Banker's 318 owned real estate brokerage offices ("Owned Brokerage
Business") to an independent trust (the "Trust") and the relocation of Company
headquarters.
The pro forma consolidated financial statements are based on certain
assumptions and adjustments described in the Notes to Pro Forma Consolidated
Balance Sheet and Statement of Operations and should be read in conjunction
therewith and with the consolidated financial statements and related notes of
the Company included in its Annual Report on Form 10-K.
HFS INCORPORATED AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF DECEMBER 31, 1995
(IN THOUSANDS)
HISTORICAL
-----------------------------------------
COLDWELL 1996 PRO FORMA
HFS BANKER ACQUISITIONS ADJUSTMENT (A) PRO FORMA
------------ ----------- -------------- -------------- ------------
ASSETS
Current assets
Cash and cash equivalents .................. $ 16,109 $ 21,449 $ 12,198 $(31,051) $ 18,705
Royalty accounts and notes receivable, net 37,326 12,499 15,050 (14,356) 50,519
Relocation receivables ..................... 51,180 47,313 -- -- 98,493
Marketing and reservation receivables, net 22,297 -- -- -- 22,297
Other current assets ....................... 21,304 4,686 3,550 (2,097) 28,014
571
Deferred income taxes ...................... 20,200 4,818 -- (4,818) 20,200
------------ ----------- -------------- -------------- ------------
Total current assets ........................ 168,416 90,765 30,798 (51,751) 238,228
Property and equipment, net ................. 67,892 63,230 3,717 (41,947) 92,892
Franchise agreements, net ................... 517,218 14,780 46,220 578,218
Excess of cost over fair value of net assets
acquired, net .............................. 356,754 37,091 -- 164,217 558,062
Intangible assets -- Coldwell Banker ....... -- -- -- 716,308 716,308
Deferred income taxes ....................... -- 9,551 -- (1,106) 8,445
Other assets ................................ 55,528 9,292 7,508 (6,867) 68,890
3,429
------------ ----------- -------------- -------------- ------------
Total ....................................... $1,165,808 $ 209,929 $ 56,803 $828,503 $2,261,043
============ =========== ============== ============== ============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and other accrued
liabilities ............................... $ 80,260 $ 122,617 $ 28,373 $(59,423) $ 171,827
Income taxes payable ....................... 38,640 9,002 -- (9,002) 38,640
Accrued acquisition obligations ............ 3,740 -- -- 21,708 25,448
Current portion of long-term debt .......... 2,249 37,425 4,409 (5,130) 38,953
------------ ----------- -------------- -------------- ------------
Total current liabilities ................... 124,889 169,044 32,782 (51,847) 274,868
------------ ----------- -------------- -------------- ------------
Long-term debt .............................. 300,778 84,905 11,252 (95,538) 476,477
175,080
Other non-current liabilities ............... 17,150 2,653 14,731 (17,327) 17,207
Deferred income taxes ....................... 82,800 -- -- -- 82,800
Series A Adjustable Rate
Preferred Stock of Century 21 .............. 80,000 -- -- -- 80,000
STOCKHOLDERS' EQUITY
Common Stock ............................... 1,025 58 77 11 1,171
Additional paid-in capital ................. 475,562 59,124 39,008 671,222 1,244,916
Retained earnings (deficit) ................ 83,604 (105,855) (41,047) 146,902 83,604
------------ ----------- -------------- -------------- ------------
Total stockholders' equity (deficit) ....... 560,191 (46,673) (1,962) 818,135 1,329,691
------------ ----------- -------------- -------------- ------------
Total ....................................... $1,165,808 $ 209,929 $ 56,803 $828,503 $2,261,043
============ =========== ============== ============== ============
- - ------------
Note: Certain reclassifications have been made to the historical balance
sheets of acquired companies to conform with the Company's classification.
See notes to pro forma consolidated balance sheet
and statement of operations.
HFS INCORPORATED AND SUBSIDIARIES
HISTORICAL COMBINED BALANCE SHEET OF 1996 ACQUISITIONS
AS OF DECEMBER 31, 1995
(IN THOUSANDS)
CENTURY 21
NORS TRAVELODGE ERA TOTAL
------------ ------------ ---------- ----------
ASSETS
Current assets
Cash and cash equivalents ................. $ 4,956 $ -- $ 7,242 $ 12,198
Royalty accounts and notes receivable, net 9,617 3,726 1,707 15,050
Other current assets ...................... 479 612 2,459 3,550
------------ ------------ ---------- ----------
Total current assets ....................... 15,052 4,338 11,408 30,798
Property and equipment, net ................ 2,674 333 710 3,717
Franchise agreements, net .................. -- -- 14,780 14,780
Other assets ............................... 3,562 1,420 2,526 7,508
------------ ------------ ---------- ----------
Total ...................................... $21,288 $6,091 $ 29,424 $ 56,803
============ ============ ========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and other accrued
liabilities .............................. $ 5,058 $3,252 $ 20,063 $ 28,373
Current portion of long-term debt ........ 35 -- 4,374 4,409
------------ ------------ ---------- ----------
Total current liabilities .................. 5,093 3,252 24,437 32,782
Long-term debt ............................. 309 -- 10,943 11,252
Other non-current liabilities .............. 579 -- 14,152 14,731
STOCKHOLDERS' EQUITY
Common stock .............................. 77 -- -- 77
Additional paid-in capital ................ 104 -- 38,904 39,008
Retained earnings (deficit) ............... 15,126 2,839 (59,012) (41,047)
------------ ------------ ---------- ----------
Total stockholders' equity (deficit) ...... 15,307 2,839 (20,108) (1,962)
------------ ------------ ---------- ----------
Total ...................................... $21,288 $6,091 $ 29,424 $ 56,803
============ ============ ========== ==========
Note: Certain reclassifications have been made to the historical balance
sheets of acquired companies to conform with the Company's classification.
See notes to pro forma consolidated balance sheet
and statement of operations.
HFS INCORPORATED AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
HISTORICAL
-----------------------------------
COLDWELL ACQUIRED PRO FORMA
HFS BANKER COMPANIES ADJUSTMENTS PRO FORMA
---------- ---------- ----------- -------------- -----------
REVENUE:
Franchise ........................... $361,238 $ 68,064 $128,233 $ 25,950 (B) $583,485
Owned brokerage business ............ -- 535,207 -- (535,207)(C) --
Relocation services ................. 8,204 75,866 6,514 -- 90,584
Other ............................... 43,541 20,264 29,848 (4,421) 89,232
---------- ---------- ----------- -------------- -----------
Total revenue ..................... 412,983 699,401 164,595 (513,678) 763,301
---------- ---------- ----------- -------------- -----------
EXPENSES:
Marketing and reservation ........... 143,965 -- 20,996 -- 164,961
Selling, general and administrative 55,538 32,367 102,857 (50,537)(D) 140,225
Ramada license fee .................. 18,911 -- -- -- 18,911
Owned brokerage ..................... -- 521,376 -- (521,376)(C) --
Depreciation and amortization ...... 30,857 22,425 8,483 11,049 (E) 72,814
Interest ............................ 20,124 5,329 6,227 (23) (F) 31,657
Relocation .......................... 3,783 62,439 4,881 -- 71,103
Other ............................... 3,235 -- 14,757 (399)(G) 17,593
---------- ---------- ----------- -------------- -----------
Total expenses .................... 276,413 643,936 158,201 (561,286) 517,264
---------- ---------- ----------- -------------- -----------
Income before income taxes and
minority interest ................... 136,570 55,465 6,394 47,608 246,037
Provision for income taxes ........... 55,175 24,385 3,542 16,297 (H) 99,399
---------- ---------- ----------- -------------- -----------
Income before minority interest ..... 81,395 31,080 2,852 31,311 146,638
Minority interest-preferred dividend 1,665 -- -- 1,796 (I) 3,461
---------- ---------- ----------- -------------- -----------
Net income ........................... $ 79,730 $ 31,080 $ 2,852 $ 29,515 $143,177
========== ========== =========== ============== ===========
PER SHARE INFORMATION (FULLY DILUTED)
Net income .......................... $ 0.73 $ 1.11
========== ===========
Weighted average common and common
equivalent shares outstanding ..... 115,654 17,789 (J) 133,443
========== ============== ===========
- - ------------
Note: Certain reclassifications have been made to the historical results of
acquired companies to conform with the Company's classification
See notes to pro forma consolidated balance sheet
and statement of operations.
HFS INCORPORATED AND SUBSIDIARIES
HISTORICAL COMBINED STATEMENTS OF OPERATIONS
OF ACQUIRED COMPANIES
FOR THE YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
CENTURY 21
CCI(1) CENTURY 21(1) NORS TRAVELODGE ERA TOTAL
------- ------------- ------------ ------------ ---------- ----------
REVENUE:
Franchise .......................... $ -- $53,992 $29,021 $18,361 $26,859 $128,233
Relocation services ................ -- 6,514 -- -- -- 6,514
Other .............................. 3,326 10,164 403 79 15,876 29,848
------- ------------- ------------ ------------ ---------- ----------
Total revenue .................... 3,326 70,670 29,424 18,440 42,735 164,595
------- ------------- ------------ ------------ ---------- ----------
EXPENSES:
Marketing and reservation .......... -- 5,128 2,912 12,956 -- 20,996
Selling, general and administrative -- 47,232 22,851 2,648 30,126 102,857
Depreciation and amortization ..... 529 5,217 578 8 2,151 8,483
Interest ........................... -- 2,904 54 -- 3,269 6,227
Relocation ......................... -- 4,881 -- -- -- 4,881
Other .............................. 1,917 2,751 -- -- 10,089 14,757
------- ------------- ------------ ------------ ---------- ----------
Total expenses ................... 2,446 68,113 26,395 15,612 45,635 158,201
------- ------------- ------------ ------------ ---------- ----------
Income (loss) before income taxes .. 880 2,557 3,029 2,828 (2,900) 6,394
Provision for income taxes .......... 313 2,097 -- 1,132 -- 3,542
------- ------------- ------------ ------------ ---------- ----------
Net income (loss) ................... $ 567 $ 460 $ 3,029 $ 1,696 $(2,900) $ 2,852
======= ============= ============ ============ ========== ==========
- - ------------
(1) Reflects results of operations for the period from January 1, 1995 to
the respective dates of acquisition.
Note: Certain reclassifications have been made to the historical results of
acquired companies to conform with the Company's classification
See notes to pro forma consolidated balance sheet
and statement of operations.
HFS INCORPORATED AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET AND
STATEMENT OF OPERATIONS
A. ACQUISITION OF COLDWELL BANKER AND 1996 ACQUISITIONS:
The purchase price for the Coldwell Banker and 1996 Acquisitions have been
allocated to assets acquired and liabilities assumed at their estimated fair
values. Pro forma adjustments consist of the elimination of certain acquired
assets and assumed liabilities, net of the fair value ascribed to such assets
and liabilities.
The Company acquired Coldwell Banker and the 1996 Acquisitions for the
following consideration ($000's):
COLDWELL 1996
BANKER ACQUISITIONS TOTAL
---------- -------------- ----------
Cash consideration (i).................................. $743,500 $171,080 $914,580
Issuance of approximately 0.9 million shares of Company
Common Stock .......................................... -- 46,000 46,000
---------- -------------- ----------
TOTAL PRO FORMA ACQUISITION COST ....................... 743,500 217,080 960,580
---------- -------------- ----------
Fair value of net assets acquired:
Historical book value of acquired companies .......... (46,673) (1,962) (48,635)
Elimination of net assets (liabilities) not acquired
or assumed:
Cash and cash equivalents ............................ 1,147 (12,198) (11,051)
Accounts and notes receivable ........................ (3,032) (11,324) (14,356)
Deferred income taxes, current ....................... (4,818) -- (4,818)
Other current assets ................................. 1,453 (3,550) (2,097)
Property and equipment ............................... (38,230) (3,717) (41,947)
Franchise agreements ................................. -- (14,780) (14,780)
Deferred income taxes, non-current ................... (9,551) -- (9,551)
Other assets ......................................... (759) (6,108) (6,867)
Accounts payable and other ........................... 31,050 28,373 59,423
Income taxes payable ................................. 9,002 -- 9,002
Current portion of long-term debt .................... 721 4,409 5,130
Long-term debt ....................................... 84,286 11,252 95,538
Other non-current liabilities ........................ 2,596 14,731 17,327
Fair value of assets acquired and liabilities assumed:
Deferred income taxes -- current (ii) ................. -- 8,445 8,445
Franchise agreements .................................. 61,000 61,000
Accrued acquisition liabilities ....................... -- (21,708) (21,708)
---------- -------------- ----------
FAIR VALUE OF IDENTIFIABLE NET ASSETS ACQUIRED ........ 27,192 52,863 $ 80,055
========== ============== ==========
INTANGIBLE ASSETS -- COLDWELL BANKER (iii) ............. $716,308
==========
EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED . $164,217
==============
- - ------------
(i) The adjustment reflects $640,000 for the acquisition of Coldwell
Banker, $20,000 of related expenses and repayment of $83,500 of indebtedness of
Coldwell Banker outstanding as of December 31, 1995. The Company expects that
$100,000 of such indebtedness will be outstanding and repaid upon consummation
of the Merger. The pro forma adjustment to cash includes $20,000 of purchase
price paid with acquired Coldwell Banker cash.
(ii) The pro forma adjustment to deferred income taxes recorded in
connection with acquisitions results from differences in the fair values of
net assets acquired and liabilities assumed and their respective income tax
bases.
(iii) The Company has not completed the valuation of franchise agreements
and other identifiable intangible assets.
HFS INCORPORATED AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET AND
STATEMENT OF OPERATIONS --(CONTINUED)
A. ACQUISITION OF COLDWELL BANKER AND 1996 ACQUISITIONS: (Continued)
The pro forma adjustments include the elimination of Coldwell Banker and
1996 Acquisitions' stockholders' net deficit, the issuance of approximately
13.6 million shares to finance the acquisition of Coldwell Banker and
approximately 923,000 shares in connection with the acquisition of certain
Century 21 NORS entities among the 1996 Acquisitions. The number of Company
shares of common stock issued in connection with the acquisition of Coldwell
Banker assumes a market value of Company Common Stock of $55 per share
representing the closing price on the date the Coldwell Banker acquisition
was publicly announced and expenses related to the offering of such shares
approximating $26.5 million. The adjustment to stockholders' equity is
calculated as follows ($000's):
ADDITIONAL
COMMON PAID-IN ACCUMULATED
STOCK CAPITAL DEFICIT TOTAL
-------- ------------ ------------- ----------
$
Issuance of Company Common Stock .............. $146 $769,354 -- $769,500
Elimination of Coldwell Banker stockholders'
net deficit .................................. (58) (59,124) 105,855 46,673
Elimination of 1996 Acquisitions stockholders'
net deficit .................................. (77) (39,008) 41,047 1,962
-------- ------------ ------------- ----------
Adjustment to stockholders' equity ............ $ 11 $671,222 $146,902 $818,135
======== ============ ============= ==========
B. FRANCHISE REVENUE:
The pro forma adjustment reflects the elimination of franchise revenue
associated with discontinued Century 21 international based operations, the
elimination of franchise revenue paid by the Century 21 NORS to Century 21
under sub-franchise agreements and the addition of franchise fees to be
received under franchise contracts to be executed with owned brokerage
offices upon contribution of the Owned Brokerage Business to the Trust. Pro
forma adjustments to franchise revenue consists of the following:
Eliminate:
Discontinued operations ............................. $ (57)
Century 21 revenue included as Century 21 NORS (1996
Acquisitions) SG&A ................................. (4,500)
Add:
Franchise fees from Owned Brokerage Business ...... 30,507
---------
Total ............................................... $25,950
=========
C. OWNED BROKERAGE BUSINESS REVENUE AND EXPENSES:
The pro forma adjustments reflect the elimination of revenue and expenses
for Coldwell Banker's 318 owned offices involved in the Owned Brokerage
Business. The Company intends to contribute the Owned Brokerage Business
following the acquisition of Coldwell Banker by contributing corresponding
net assets to the Trust. The free cash flow of the Trust will be expended at the
discretion of the trustees for the benefit of the real estate franchisees
represented by the owned brokerage offices of the Trust.
HFS INCORPORATED AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET AND
STATEMENT OF OPERATIONS --(CONTINUED)
D. SELLING, GENERAL AND ADMINISTRATIVE EXPENSE:
The pro forma adjustments eliminate redundant costs associated with the
restructuring of franchise services and the resulting termination of certain
functions and positions in connection with Company acquisitions. Adjustments
are comprised of the following ($000's):
COLDWELL CENTURY 21
CENTURY 21 BANKER NORS TRAVELODGE ERA TOTAL
------------ ---------- ------------ ------------ -------- ---------
Payroll and related ........ $10,885 $ -- $ 7,706 $1,110 $7,236 $26,937
Professional ............... 2,693 1,500 1,486 154 387 6,220
Occupancy .................. 3,628 2,754 186 1,172 7,740
Conventions and meetings .. 1,302 410 1,712
Franchise fees (see Note B) 4,500 4,500
Other ...................... 1,826 (1,517) 1,916 167 1,036 3,428
------------ ---------- ------------ ------------ -------- ---------
SUB-TOTAL .................. $20,334 $ (17) $18,772 $1,617 $9,831 $50,537
============ ========== ============ ============ ======== =========
E. DEPRECIATION AND AMORTIZATION:
The pro forma adjustment for depreciation and amortization is comprised of
($000's):
CCI COLDWELL 1996
MERGER CENTURY 21 BANKER ACQUISITIONS TOTAL
-------- ------------ ----------- -------------- -----------
Elimination of historical expense ........... $(529) $(5,217) $(22,425) $(2,737) $(30,908)
Property and equipment ...................... 100 534 1,314 -- 1,948
Information data base ....................... 375 -- -- 375
Excess of cost over fair value of net assets
acquired ................................... 289 2,041 -- 4,107 6,437
Intangible assets -- Coldwell Banker ....... -- -- 28,652 -- 28,652
Franchise agreements ........................ 1,628 -- 2,917 4,545
-------- ------------ ----------- -------------- -----------
Total ....................................... $ 235 $(1,014) $ 7,541 $ 4,287 $ 11,049
======== ============ =========== ============== ===========
CCI Merger
The estimated fair values of CCI's information data base, property and
equipment and excess of cost over fair value of net assets acquired are $7.5
million, $1.0 million and $33.8 million, respectively, and are amortized on a
straight-line basis over the periods to be benefited which are ten, five and
forty years, respectively. The benefit periods associated with the excess
cost over fair value of net assets acquired were determined based on CCI's
position as the dominant provider of gambling patron credit information
services since 1956, its ability to generate operating profits and expansion
of its customer base and the longevity of the casino gaming industry.
Century 21
The estimated fair values of Century 21 property and equipment, franchise
agreements and excess of cost over fair value of net assets acquired are $5.5
million, $33.5 million and $140.0 million, respectively, and are amortized on
a straight-line basis over the periods to be benefited which are seven,
twelve and forty years, respectively. The benefit periods associated with the
excess cost over fair value of net assets acquired were determined based on
Century 21's position as the world's largest franchisor of residential real
estate brokerage offices, the most recognized brand name in the residential
real estate brokerage industry and the longevity of the residential real
estate brokerage business.
HFS INCORPORATED AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET AND
STATEMENT OF OPERATIONS --(CONTINUED)
E. DEPRECIATION AND AMORTIZATION: (Continued)
Coldwell Banker
The estimated fair value of Coldwell Banker's property and equipment of
$25 million is amortized over the estimated average benefit period of seven
to twenty-five years.
The Company has not completed its valuation of franchise agreements and
therefore has not determined the amount of costs in excess of fair value of
net identifiable assets acquired. However, based on a preliminary analysis,
the Company believes that the aggregate intangibles will have a benefit
period of twelve to forty years. For purposes of the pro forma financial
statements, an estimated average life of twenty-five years was used to
calculate the amortization expense.
1996 Acquisitions
The estimated fair values of 1996 Acquisitions franchise agreements
aggregate $61.0 million and are being amortized on a straight line basis over
the periods to be benefited, which range from twelve to thirty years. The
estimated fair values of 1996 Acquisitions excess of cost over fair value of
net assets acquired aggregate $164.2 million, and are each being amortized on
a straight line basis over the periods to be benefited, which are forty
years.
F. INTEREST EXPENSE ($000'S):
Elimination of historical interest expense of 1996
Acquisitions and Century 21 $(6,227)
Reversal of Coldwell Banker ................................... (5,329)
Century 21 .................................................... 2,835
4 3/4 % Notes ................................................. 8,698
----------
TOTAL ......................................................... $ (23)
==========
Century 21
The pro forma adjustment reflects the recording of interest expense on $60
million of borrowings under the Company's revolving credit facility at an
interest rate of 6.3%. Borrowings represent the amount necessary to finance
the initial cash purchase price net of $10.2 million of acquired cash.
Coldwell Banker
The pro forma adjustment reflects the reversal of interest expense
relating to the following ($000's):
Expense associated with the Owned Brokerage Business ...... $ 138
Expense associated with revolving credit facility
borrowings which will be repaid with proceeds from the
offering of the shares of Common Stock relating to the
acquisition of Coldwell Banker ............................ 5,191
-------
Total ...................................................... $5,329
=======
HFS INCORPORATED AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET AND
STATEMENT OF OPERATIONS --(CONTINUED)
F. INTEREST EXPENSE ($000'S): (Continued)
4 3/4% Notes
The pro forma adjustment reflects interest expense of $8.7 million related
to the issuance of the 4-3/4% Notes to the extent that such proceeds were
used to finance the 1996 Acquisitions.
G. OTHER EXPENSES:
The pro forma adjustment eliminates $399,000 of accounting, legal and
other administrative expenses allocated to CCI which would not have been
incurred by the Company.
H. INCOME TAXES:
The pro forma adjustment to income taxes is comprised of ($000's):
Reversal of historical provision of:
Company ............................... $(55,175)
CCI ................................... (313)
Century 21 ............................ (2,097)
Coldwell Banker ....................... (24,385)
Travelodge ............................ (1,132)
Pro forma provision .................... 99,399
-----------
Incremental provision for income taxes $ 16,297
===========
The pro forma effective tax rate approximates the Company's historical
effective tax rate.
I. MINORITY INTEREST-PREFERRED DIVIDENDS:
The pro forma adjustment represents dividends on the redeemable Series A
Adjustable Rate Preferred Stock of Century 21. Preferred dividends are
calculated based on an $80 million face value and a 4.9% dividend rate.
J. WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING:
The pro forma adjustment to weighted average shares consists of the
following (000's):
CCI ............ 896
Century 21 ..... 2,334
Coldwell Banker 13,636
Century 21 NORS 923
--------
Total .......... 17,789
========
The unaudited Pro Forma Consolidated Statement of Operations is presented
as if the acquisitions took place at the beginning of the period presented;
thus, the stock issuances referred to above are considered outstanding as of
the beginning of the period for purposes of per share calculations. The pro
forma adjustments reflects the issuance of 13.6 million shares in the offering
of the shares, the proceeds of which will be used to finance the acquisition of
Coldwell Banker and the related repayments of Coldwell Banker indebtedness and
to pay acquisition expenses.