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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the period ended June 30, 1996.
[ ] Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934. For the transition period from _____ to ______.
Commission File Number: 0-24392
DOUBLETREE CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 86-0762415
(State or other jurisdiction of (IRS Employer Identification
incorporation or organization) Number)
410 NORTH 44TH STREET, SUITE 700,
PHOENIX, ARIZONA 85008
(Address of principal executive (Zip code)
offices)
(602) 220-6666
(Registrant's telephone number, including area code)
NONE
Former name, former address and former fiscal year, if changed since last report
Indicate by check mark whether 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 preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes of
stock, as of the last practicable date.
Class Outstanding at July 15, 1996
Common Stock ($.01 par value) 23,077,461 shares
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DOUBLETREE CORPORATION
FORM 10-Q
FOR THE QUARTER ENDED
JUNE 30, 1996
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION PAGE
Item 1. Financial Statements:
Consolidated Balance Sheets as of June 30, 1996
and December 31, 1995 3
Consolidated Statements of Operations for the three
and six months ended June 30, 1996 and 1995 4
Consolidated Statements of Cash Flows for the six
months ended June 30, 1996 and 1995 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10
PART II. OTHER INFORMATION:
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 6. Exhibits and Reports on Form 8-K 14
SIGNATURES 14
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ITEM 1. FINANCIAL STATEMENTS
DOUBLETREE CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands except share data)
(UNAUDITED)
DECEMBER 31, JUNE 30,
1995 1996
ASSETS ----------- --------
Cash and cash equivalents $ 32,652 $ 46,566
Accounts receivable, net 17,907 20,596
Current portion of notes and other receivables 390 477
Other 2,694 2,944
--------- --------
Total current assets 53,643 70,583
--------- --------
Notes and other receivables, net of current portion 24,185 30,949
Investments 5,070 29,892
Hotel properties, net 10,572 10,289
Leasehold improvements and office equipment, net 3,968 3,526
Management contracts 49,634 48,275
Goodwill 15,431 15,228
Deferred costs and other assets 604 3,231
--------- --------
$ 163,107 $211,973
========= ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable and accrued expenses $ 25,072 $ 25,347
Accrued lease expense 6,744 10,122
Accrued interest payable 23 15
Current portion of notes payable 672 ---
Income taxes payable 585 3,774
--------- --------
Total current liabilities 33,096 39,258
Deferred income taxes 15,625 18,254
--------- --------
48,721 57,512
--------- --------
Commitments and contingencies
Stockholders' equity:
Common stock, $.01 par value.
Authorized 100,000,000 shares; issued and
outstanding 22,099,186 and 23,070,961
shares at December 31, 1995 and June 30,
1996, respectively 221 231
Additional paid-in capital 100,462 128,061
Unrealized gain on marketable equity securities 22 26
Unearned employee compensation (211) (176)
Retained earnings 13,892 26,319
--------- --------
114,386 154,461
--------- --------
$ 163,107 $211,973
========= ========
See accompanying notes to consolidated financial statements.
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DOUBLETREE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands except per share data)
(unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------------- ----------------------------------
1995 1996 1995 1996
--------------- ---------------- ---------------- ---------------
Revenues:
Management and franchise fees $ 7,710 $ 10,225 $ 14,536 $ 18,519
Reimbursements 11,709 12,235 22,409 22,914
Hotel revenues 39,175 48,447 68,842 90,300
Other fees and income 1,177 2,059 2,574 3,634
--------- --------- --------- ---------
Total revenues 59,771 72,966 108,361 135,367
--------- --------- --------- ---------
Operating costs and expenses:
General and administrative 3,527 4,501 7,387 9,144
Reimbursable expenses 11,199 11,516 21,448 21,580
Hotel expenses 22,092 25,488 39,343 49,394
Lease expense 13,606 18,310 24,379 33,046
Interest expense 63 62 132 143
Depreciation and amortization 1,036 1,473 2,056 2,940
--------- --------- --------- ---------
Total operating costs
and expenses 51,523 61,350 94,745 116,247
--------- --------- --------- ---------
Income before income taxes 8,248 11,616 13,616 19,120
Provision for income taxes 2,507 4,067 4,229 6,693
--------- --------- --------- ---------
Net income $ 5,741 $ 7,549 $ 9,387 $ 12,427
========= ========= ========= =========
Earnings per share $ 0.26 $ 0.33 $ 0.43 $ 0.54
========= ========= ========= =========
Weighted average common and common
equivalent shares outstanding 22,057 23,173 21,984 22,849
========= ========= ====== =========
See accompanying notes to consolidated financial statements.
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DOUBLETREE CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
SIX MONTHS ENDED
JUNE 30,
----------------------
1995 1996
-------- --------
Cash flows from operating activities:
Net income $ 9,387 $12,427
Adjustments to reconcile net income to
net cash provided by operations:
Provision for bad debts 69 202
Depreciation and amortization 2,056 2,940
Equity in (earnings) losses of partnerships (231) 37
Other non-cash expenses 70 35
Deferred income taxes 2,118 2,629
Net withdrawals from restricted cash 535 ---
Increase in accounts receivable (5,209) (2,687)
Increase in other assets (702) (113)
Increase in current liabilities 3,249 7,085
-------- --------
Net cash provided by operations 11,342 22,555
-------- --------
Cash flows from investing activities:
Purchases of furniture and equipment (948) (656)
Investments in partnerships (692) (25,146)
Distributions from partnerships 153 292
Purchase of marketable equity securities (369) ---
Deposits in hotels to obtain management contracts 250 (250)
Investments in management contracts (4,671) (811)
Proceeds from termination of management contracts 408 ---
Loans to owners of managed hotels, net (7,800) (6,381)
Increase in deferred costs --- (2,626)
-------- ---------
Net cash used in investing activities (13,669) (35,578)
-------- --------
Cash flows from financing activities:
Proceeds from issuance of common stock, net of
offering costs 6,620 27,372
Proceeds from exercise of common stock options --- 237
Distributions to shareholders (6) ---
Proceeds of borrowings --- 5,000
Principal payments on notes payable (807) (5,672)
-------- --------
Net cash provided by financing activities 5,807 26,937
-------- --------
Net increase in cash and cash equivalents 3,480 13,914
Cash and cash equivalents at beginning of year 23,169 32,652
-------- --------
Cash and cash equivalents at end of period $ 26,649 $ 46,566
======== =======-
Supplemental cash flow information:
Cash paid for interest $ 121 $ 151
======== ========
Cash paid for income taxes $ 768 $ 875
======== ========
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DOUBLETREE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
(1) BASIS OF PRESENTATION
Doubletree Corporation (the Company) was incorporated on May 19, 1994
as a Delaware corporation to succeed to all the assets, liabilities and business
operations of Doubletree Partners (formerly Guest Quarters Hotel Partnership
(GQHP)). At June 30, 1996, the Company managed 87 hotels, leased 54 hotels,
owned one hotel and had franchise agreements with 37 hotels.
On February 27, 1996, the Company acquired a 100% interest in RFS,
Inc. (RFS Management) in a transaction accounted for as a pooling of interests.
Accordingly, the consolidated financial statements have been restated to include
RFS Management as if it had been acquired at the beginning of the earliest
period presented.
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only normal
recurring adjustments, primarily eliminations of all significant intercompany
transactions and accounts) necessary to present fairly the financial position,
results of operations and cash flows for the periods presented. These
consolidated financial statements should be read in conjunction with the
consolidated financial statements and the related disclosures contained in the
Company's Annual Report on Form 10-K for the year ended December 31, 1995, as
filed with the Securities and Exchange Commission. The results of operations for
the six months ended June 30, 1996 are not necessarily indicative of the results
to be expected for the full year.
(2) ACQUISITION OF RFS MANAGEMENT
On February 27, 1996, the Company issued 2,727,811 shares of its
common stock in exchange for all of the outstanding stock of RFS Management (a
privately held hotel operator that leases / manages hotel properties) in a
transaction accounted for as a pooling of interests. RFS Hotel Investors, Inc.
(REIT) is the lessor for all hotels leased by RFS Management.
Effective January 1, 1995, RFS Management was a Subchapter S
Corporation for income tax purposes and, therefore, was not generally liable for
income taxes for the year ending December 31, 1995.
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DOUBLETREE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
The following table presents total revenues, net income, pro forma
net income and pro forma earnings per share of the merged companies for the
three and six month periods ended June 30, 1995 and for the year ended December
31, 1995. The 1995 pro forma adjustments exclude business combination expenses,
provide for additional tax expense due to the exclusion of the business
combination expenses and increase the provision for taxes for RFS Management to
a 35% rate which was the Company's 1995 effective tax rate.
Pro Forma
-------------------------------------------------------
Three Months Six Months Year Ended
Ended Ended December 31,
June 30, 1995 June 30, 1995 1995
------------- ------------- ------------
Total revenues
Doubletree $ 28,889 $ 50,690 $ 107,956
RFS Management 30,882 57,671 122,816
------ ------ -------
Total revenues, as reported $ 59,771 $ 108,361 $ 230,772
====== ======= =======
Net income
Doubletree $ 4,559 $ 7,666 $ 15,662
RFS Management 1,182 1,721 2,129
------ ------- -------
Net income, as reported 5,741 9,387 17,791
Business combination expenses - - 2,565
Pro forma additional income tax expense (380) (536) (1,620)
------- -------- --------
Pro forma net income $ 5,361 $ 8,851 $ 18,736
====== ======= =======
Pro forma earnings per share $ 0.24 $ 0.40 $ 0.84
====== ======= =======
Weighted average shares outstanding 22,057 21,984 22,219
====== ======= =======
The Company incurred pre-tax expenses in the fourth quarter of 1995
related to the business combination of $2,565,000. The costs incurred include
legal, professional and accounting fees, due diligence and certain other costs
necessary to complete the transaction.
Certain of the franchisors required the payment of an application
fee, as a result of the merger, of approximately $2,600,000 which is being
amortized over the terms of the respective franchise agreements.
(3) HOTEL PROPERTIES
As of June 30, 1996 the Company leased 54 hotels, of which 49 are
leased from the REIT, substantially all of which are cross defaulted with one
another. All of the Company's leases require the payment of rent equal to the
greater of fixed base rent or percentage rent based on a percentage of gross
room revenue, food revenue and beverage revenue (if the hotel offers food and
beverage service). All hotel leases are operating leases.
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(4) DEFERRED COSTS AND OTHER ASSETS
At June 30, 1996 deferred costs and other assets primarily consist of
franchise application fees paid in connection with the acquisition of RFS
Management which are amortized over the lives of the franchise agreements. The
initial cost of obtaining franchise licenses for hotels leased by RFS Management
are paid by the owner. Accumulated amortization at June 30, 1996 is $60,000.
(5) INVESTMENTS
As of June 30, 1996 the Company and its subsidiaries have general
and/or limited partnership interests in 17 partnerships. Eleven of the
partnerships own hotels while the others own retail or industrial properties.
Six of the partnership interests were acquired in the acquisition of RFS
Management. The Company's percentage of ownership in such partnerships at June
30, 1996 ranges from less than 1% to 49.9%. The investments include an
investment in a partnership that is a majority owned subsidiary of the REIT.
These partnership interests are convertible into common stock of the REIT.
The Company, through RFS Management, purchased 973,684 shares of the
REIT's convertible preferred stock (the REIT Preferred Shares) for $19 per share
or $18,500,000. This investment is recorded at cost as there is no ready market
for these securities. The convertible preferred stock will pay a fixed annual
dividend of $1.45 per share and is convertible on a one-for-one share basis at
the end of seven years. Separately, the REIT granted the Company a 10-year right
of first refusal to manage and lease future hotels acquired or developed by the
REIT. The Company has committed to the REIT to maintain $15,000,000 of net worth
in RFS Management.
Investments also include 35,000 shares of REIT common stock recorded
at market value. The unrealized gain is reflected in stockholders' equity as
these securities are classified as available-for-sale.
Investments consist of the following (in thousands):
DECEMBER 31, June 30,
1995 1996
---- ----
REIT convertible preferred stock $ ---- $18,500
REIT common shares 538 542
Hotel partnerships 3,746 4,171
Candlewood 1,098 6,991
Other (312) (312)
------ -------
$5,070 $29,892
====== =======
(6) NOTE PAYABLE
The Company has a credit facility, due December 16, 1999, which
allows the Company to borrow up to $30,000,000. The Company borrowed $5,000,000
against the facility in February 1996 and repaid the entire amount prior to June
30, 1996. Interest expense related to the borrowing amounted to $105,000.
Interest is payable monthly at LIBOR plus a variable rate between 0.675% and
1.50%. The credit facility requires the payment of a quarterly commitment fee
that ranges between 0.20% and 0.375% of the unused balance.
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(7) STOCKHOLDERS' EQUITY
In January 1995, RFS Management issued 12 restricted shares of RFS
Management common stock to certain of its employees. These shares vest ratably
over a four year period from the date of issuance. The estimated fair market
value of these shares at issuance was $281,000. The shares were exchanged for
approximately 36,500 Company common shares, subject to the same restrictions, in
connection with the acquisition of RFS Management.
In May 1996, the Company completed a public offering of 4,234,300
shares of its common stock (of which 952,300 shares were newly issued shares of
the Company) at a price to the public of $31.25 per share. The net proceeds to
the Company, after expenses of the offering and giving effect to the
underwriters' discount, were $27.4 million.
(8) STOCK OPTIONS
The Company has one stock option plan, the 1994 Equity Participation
Plan (the Plan), in which options may be granted to key personnel to purchase
shares of the Company's common stock at a price not less than the current market
price at the date of the grant. The options vest annually and ratably over the
four-year period from the date of grant and expire ten years after the grant
date. In April 1996, the Company's shareholders approved an increase in the
maximum number of shares available under the Plan from 2,000,000 to 3,300,000.
As of June 30, 1996, options for 1,805,625 shares, net of terminations, have
been granted at prices ranging from $13.00 to $27.88, of which 443,275 are
currently exercisable. The Plan also provides for the issuance of stock
appreciation rights, restrictive stock or other awards, none of which have been
granted.
(9) EARNINGS PER SHARE
For each of the periods presented, earnings per share has been
calculated assuming the 2,727,811 shares issued to acquire RFS Management were
outstanding the entire period. The common equivalent shares include employee
stock options which have been deemed exercised for the purpose of computing
earnings per share, based on the average market price during the period.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The following discussion of the results of operations and financial
condition should be read in conjunction with the accompanying financial
statements and notes thereto and the Company's Annual Report on Form 10-K, as
filed with the Securities and Exchange Commission.
RESULTS OF OPERATIONS
Three Months Ended June 30, 1996 Compared With Three Months Ended June 30, 1995
Total revenues increased $13.2 million or 22% to $73.0 million for the
three months ended June 30, 1996 compared to $59.8 million for the three months
ended June 30, 1995.
Revenues from management and franchise fees increased $2.5 million or
33% in 1996 due to higher incentive fees of $1.3 million, fees from new
contracts (net of contracts lost) of $0.6 million, and increased fees from
comparable hotels of $0.6 million
Revenues from reimbursements increased $0.5 million or 4% in 1996 as
compared to 1995. The margin from purchasing and other support services included
in reimbursable activity (reimbursable revenues less reimbursable expenses)
increased $0.2 million to $0.7 million, reflecting an increase in fees earned
from managing hotel renovation projects and the continued implementation of
purchasing agreements that lower the price of products to the hotel owner while
concurrently providing the Company with a fee in return for negotiating and
managing the program.
Hotel revenues increased $9.3 million in 1996 or 24% principally due to
improved average daily rates and occupancies at existing hotels and the net
addition of seven leased hotels in 1996 compared to 1995. The margin on hotel
results (hotel revenues less hotel expenses and lease expenses) increased $1.2
million or 34% from $3.5 million to $4.7 million reflecting the improvement in
the operating margin from 8.9 % to 9.6%. and the net addition of seven
properties since the prior year.
Other fees and income increased $0.9 million in 1996 or 75% resulting
principally from an increase in interest and dividend income of $0.5 million and
increased franchise application and technical service fees.
General and administrative expenses increased $1.0 million in 1996 or
28% primarily due to the addition of employees resulting from the general growth
of the Company. Depreciation and amortization increased $0.4 million primarily
due to increased amortization associated with investments in management
contracts.
The provision for income taxes reflects a 35% effective tax rate for
the three months ended June 30, 1996 compared to a 30% effective tax rate for
1995. The lower effective tax rate for 1995 reflects the election of RFS
Management to be taxed as a Subchapter S Corporation for income tax purposes
and, therefore, it was generally not subject to federal income taxes. Had RFS
Management been included in the 1995 consolidated income tax returns of the
Company, the provision for income taxes for the three months ended June 30, 1995
would have increased by $0.4 million.
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Net income and earnings per share for the three months ended June 30,
1996 were $7.5 million and $0.33, respectively, compared to $5.7 million and
$0.26, respectively, in 1995. With a normalized effective tax rate for RFS
Management in 1995 of 35%, net income would have increased from 1995 to 1996 by
41% from $5.4 million to $7.5 million and per share earnings would have
increased 38% from $0.24 to $0.33.
Six Months Ended June 30, 1996 Compared With Six Months Ended June 30, 1995
Total revenues increased $27.0 million or 25% to $135.4 million for the
six months ended June 30, 1996 compared to $108.4 million for the six months
ended June 30, 1995.
Revenues from management and franchise fees increased $4.0 million or
27% in 1996 compared to the same period in 1995. The increase is attributable to
increased incentive fees of $2.0 million, fees from new contracts (net of
contracts lost) of $1.4 million, and increased fees from comparable hotels of
$0.9 million. The growth in revenue was offset by reduced fees of approximately
$0.3 million form renegotiated contracts and management contracts which
converted to franchise agreements.
Reimbursement revenues increased by $0.5 million in the first six
months of 1996 compared to the same period in 1995. The margin from purchasing
and other support services included in reimbursable activity increased by $0.4
million to $1.3 million reflecting the implementation of new purchasing
agreements and increased purchasing volume through existing agreements.
Hotel revenues increased $21.5 million or 31% in the first six months
of 1996 reflecting improved average daily rates and occupancies and the net
addition of ten leased hotels as compared with the same period in 1995. The
margin on hotel operating results increased 54% from $5.1 million to $7.9
million, reflecting the net addition of these properties and an improvement in
the operating margin from 7.4% to 8.7%.
Other fees and income increased $1.1 million or 41% primarily as a
result of a $0.7 million increase in interest earned on loans made to hotel
owners in conjunction with obtaining management contracts and dividends on the
Company's investment in the REIT. Increased revenues from franchise application
fees and technical service fees of $0.6 million were offset by losses from hotel
partnerships in which the Company has an equity interest.
General and administrative expenses increased $1.8 million or 24% over
the first six months of 1995 primarily due to the addition of employees, the
formation of a franchise development team and an increase in legal and
professional fees, all of which is attributable to the Company's growth.
Depreciation and amortization increased $0.9 million over the comparable 1995
period primarily due to increased amortization associated with investments in
management contracts.
The provision for income taxes reflects a 35% effective tax rate for
the first six months of 1996 compared with a 31% effective tax rate for the
comparable 1995 period. The lower effective tax rate for 1995 reflects the
election of RFS Management to be taxed as a Subchapter S Corporation for income
tax purposes and, therefore, it was generally not subject to federal income
taxes. Had RFS management been included in the 1995 consolidated income tax
returns of the Company, the income tax provision for the first six months of
1995 would have increased by $0.5 million.
Net income and earnings per share for the six months ended June 30,
1996 were $12.4 million and $0.54, respectively, compared to $9.4 million and
$0.43, respectively, in 1995. With a normalized effective tax rate for RFS
Management in 1995 of 35%, net income would have increased from 1995 to 1996 by
40% from $8.9 million to $12.4 million and per share earnings would have
increased 35% from $0.40 to $0.54.
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LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1996, the Company's balance sheet reflected $31.3
million of working capital which represents an increase of $10.8 million from
December 31, 1995. The increase is principally attributable to $27.4 million of
net proceeds generated by the Company's May public offering of common stock and
cash generated from operations. The Company generated cash from operating
activities of $22.6 million during the six months ended June 1996 as compared to
$11.3 million during the same period of 1995. The increase was due to increases
in net income, expenses not requiring the use of cash, and an increase in
current liabilities principally due to the timing of hotel lease and income tax
payments.
The Company requires capital primarily for making selective investments
in the underlying hotels that it manages as a means of obtaining and enhancing
the profitability of management contracts. The Company used $35.6 million of
cash for investing activities in the first six months of 1996 of which $18.5
million was contributed to RFS Management and subsequently invested in the REIT
Preferred Shares. Additionally, the Company made loans to owners of hotels in
conjunction with obtaining new management contracts of $6.4 million and invested
$6.6 million in hotel partnerships and ventures, of which $6.2 million was
contributed to Candlewood. The Company has committed to contribute up to $15
million to Candlewood, of which $7.4 million had been funded as of June 30,
1996. The balance of $7.6 million is anticipated to be contributed during the
next six months. Such contributions will be used for general corporate purposes
as well as funding a portion of the development/construction costs of certain
hotels.
In connection with the acquisition of RFS, the credit facility was
amended allowing the Company to maintain borrowings outstanding under the credit
facility of up to $30.0 million through December 1997, and up to $12.5 million
from December 1997 until scheduled maturity in December 1998. Annually, the
Company can request an extension of the maturity date by one year. In May 1996,
the Company requested an extension which was granted by the Lender. Accordingly,
the initial reduction in the commitment has been extended to 1998 and the
maturity date is December 1999. In February 1996, the Company borrowed $5.0
million under the credit facility and repaid the entire amount by June 30 1996.
The credit facility provides for automatic reductions in the amount of the
facility by 100% of the net proceeds from the sale or other disposition of
certain types of loans or investments or the issuance of certain debt
obligations and by 50% of the new proceeds from the issuance of certain equity
securities. The Lender has waived this required reduction with respect to each
of the Company's public offerings of common stock.
The agreement governing the credit facility contains numerous
affirmative and negative covenants with which the Company must comply and
includes restrictions on the types of business in which the Company may engage,
the payment of dividends, investments, the incurrence of debt and liens, mergers
and consolidations and the disposition of assets. Such agreement also contains
covenants which require the Company to maintain certain financial ratios and
meet other criteria. The obligations of the Company under the credit facility
are secured by all notes receivable and the stock of certain significant
subsidiaries. The Lender waived any restrictions imposed by such covenants with
respect to the transactions with RFS Management and the REIT.
The Company has guaranteed certain mortgages, leases and construction
bonds up to $6.5 million ($2.9 million of which is collateralized by letters of
credit).
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The Company has committed to lend up to $9.0 million, $7.0 million of
which is to the owner of the Doubletree Hotel in Somerset, New Jersey, of which
$0.7 million is for renovations and $6.3 million is to provide bridge financing,
if needed. The remaining loan commitments are to two other hotels for
renovations.
The Company is committed, subject to certain conditions, to
contributing an additional $3.1 million to an investment partnership formed for
the purposes of acquiring hotels. The Company through its corporate subsidiaries
serves as the general partner of certain limited partnerships which own hotels.
Debt of these partnerships is typically secured by first mortgages on the
properties and generally is nonrecourse to the partners. However, such corporate
subsidiaries are liable, as a general partner, for the recourse obligations of
the partnerships they manage. No assurance can be given that the Company will
not be required to fund additional commitments.
Certain hotel management contracts provide that if a hotel does not
achieve agreed-upon performance levels, the Company may elect or may be required
to fund any performance shortfalls for a specified period of time. In general,
if the Company elects not to fund the shortfall, the hotel owner may elect to
terminate the management contract. If the Company elects to fund the shortfall,
but performance standards are not achieved at the expiration of the funding
period, the owner may elect to terminate the management contract at that time.
The Company funded $487,000 in June 1996 in connection with a shortfall at one
hotel. There were no shortfall funding payments in 1995 or 1994.
Management believes that a combination of its existing cash and cash
equivalents, net cash to be provided from operations and its borrowing ability
under the credit facility will be sufficient to fund its operations and capital
outlays.
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PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Annual Meeting of the Shareholders of Doubletree Corporation was
held on April 22, 1996. The shareholders voted on the election of eight
directors, all of which were elected as follows:
Votes for: Votes Withheld:
---------- ---------------
William R. Fatt 15,850,217 5,555
Richard J. Ferris 15,850,117 5,655
Dale F. Frey 15,850,017 5,755
Ronald K. Gamey 15,850,213 5,555
Richard M. Kelleher 15,850,317 5,455
Norman B. Leventhal 15,850,316 5,465
John H. Myers 15,850,017 5,755
Peter V. Ueberroth 15,850,317 5,455
The shareholders also voted to approve a second amendment to the
Company's 1994 Equity Participation Plan (the Plan) to increase the aggregate
number of shares of Common Stock subject to the Plan from 2,000,000 to 3,300,000
as follows: 14,271,949 votes for, 1,443,742 votes against and 4,277 shares
abstained from voting.
The shareholders also voted to ratify the selection of KPMG Peat
Marwick LLP as the Company's independent auditors for the fiscal year ending
December 31, 1996 as follows: 15,852,935 votes for, 2,400 votes against and 437
shares abstained from voting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K: None
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.
Doubletree Corporation
August 12, 1996 By /s/
-------------------------------------
William L. Perocchi
Executive Vice President,
Chief Financial Officer and Treasurer
(Principal Financial Officer and
Duly Authorized Officer)
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