SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
------------------------
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of report (Date of earliest event reported): October 31, 1997
-----------------------------
Hudson Hotels Corporation
- -------------------------------------------------------------------------------
(Exact Name of Registrant, as specified in Chart)
New York 0-17838 16-1312167
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(State of Other Jurisdiction (Commission File Number) (IRS Employer Identification
or Incorporation) No.)
One Airport Way, Suite 200, Rochester, New York 14624
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (716) 436-6000
---------------------------
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(Former Name of Founder Address, if Changed Since Last Report)
HUDSON HOTELS CORPORATION
AMENDMENT NO. 1 TO
CURRENT REPORT
ON FORM 8-K/A
Hudson Hotels Corporation hereby amends items 2 and 7 of its Current
Report on Form 8-K, which was filed on November 14, 1997, as set forth in the
pages attached hereto:
ITEM 2. ACQUISITION OF ASSETS
Audited financial statements for nine (9) Hampton Inns acquired during the
fourth quarter of 1997 are presented in item 7.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
a. Financial Statements of Businesses Acquired:
Audited combined balance sheets of nine (9) Hampton Inns as of December
31, 1996 and 1995 and the related statements of operations, changes in
equity and cash flows for the years ended December 31, 1996, 1995 and
1994.
b. Pro Forma Financial Information:
Pro forma Condensed Consolidated Balance Sheet of the Company as of
September 30, 1997 (unaudited).
Pro forma Consolidated Statement of Income of the Company for the year
ended December 31, 1996 and nine months ended September 30, 1997
(unaudited).
Notes to Pro Forma Consolidated Balance Sheet and Statement of Operations
(unaudited)
c. Exhibits:
EXHIBIT NUMBER
--------------
10.3 Amended and Restated Mezzanine Loan Agreement
23 Consent of Independent Accountants
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 hereunto duly authorized.
HUDSON HOTELS CORPORATION
By: /s/ Taras M. Kolcio
------------------------
Taras M. Kolcio
Chief Financial Officer
GHI HAMPTON INN HOTELS
COMBINED FINANCIAL STATEMENTS AND ADDITIONAL INFORMATION
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
WITH REPORT OF INDEPENDENT AUDITORS
GHI HAMPTON INN HOTELS
COMBINED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
CONTENTS
Report of Independent Auditors......................................... 1
Combined Financial Statements
Combined Balance Sheets............................................. 2
Combined Statements of Operations................................... 3
Combined Statements of Changes in Equity............................ 4
Combined Statements of Cash Flows................................... 5
Notes to Combined Financial Statements.............................. 6
Report of Independent Auditors on Additional Information.............. 11
Additional Information.............................................. 12
INDEPENDENT AUDITORS' REPORT
To Hudson Hotels Corporation
Rochester, New York
We have audited the accompanying combined balance sheets of GHI Hampton Inn
Hotels (the "Properties") as of December 31, 1996 and 1995, and the related
combined statements of operations, changes in equity and cash flows for each of
the three years in the period ended December 31, 1996 (see Note 1). These
financial statements are the responsibility of the Properties management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the combined financial statements referred to above present
fairly, in all material respects, the combined financial position of GHI Hampton
Inn Hotels as of December 31, 1996 and 1995, and the combined results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1996, in conformity with generally accepted accounting principles.
CERTIFIED PUBLIC ACCOUNTANTS
/s/ Imowitz Koenig & Co., L. L.P.
New York, N.Y.
February 28, 1997, except for Note 7,
which is unaudited
1
GHI HAMPTON INN HOTELS
COMBINED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
DECEMBER 31,
----------------------
1996 1995
---------- ----------
ASSETS
Cash and cash equivalents................................................................. $ 760 $ 565
Accounts receivable and other assets...................................................... 315 285
Deferred costs............................................................................ 138 191
Restricted cash........................................................................... 43 105
Investment properties:
Land.................................................................................... 5,788 5,788
Buildings and related personal property................................................. 38,558 36,528
---------- ----------
44,346 42,316
Less: Accumulated depreciation.......................................................... (15,003) (13,009)
---------- ----------
Net investment properties................................................................. 29,343 29,307
---------- ----------
Total assets.............................................................................. $ 30,599 $ 30,453
---------- ----------
---------- ----------
LIABILITIES AND EQUITY
Accounts payable and other liabilities.................................................... $ 534 $ 514
Note and accrued interest payable to related party........................................ 2,352 2,197
Mortgage notes payable.................................................................... 16,997 17,204
---------- ----------
Total liabilities......................................................................... 19,883 19,915
Equity.................................................................................... 10,716 10,538
---------- ----------
Total liabilities and equity.............................................................. $ 30,599 $ 30,453
---------- ----------
---------- ----------
See accompanying notes.
2
GHI HAMPTON INN HOTELS
COMBINED STATEMENTS OF OPERATIONS
(DOLLARS IN THOUSANDS)
DECEMBER 31
-------------------------------
1996 1995 1994
--------- --------- ---------
REVENUE
Hotel operations................................................................. $ 16,981 $ 17,080 $ 16,415
EXPENSES
Hotel operations................................................................. 10,776 10,582 10,210
Depreciation and amortization.................................................... 2,007 1,742 1,489
Interest......................................................................... 2,075 2,001 2,022
--------- --------- ---------
Total expenses................................................................. 14,858 14,325 13,721
--------- --------- ---------
Net income....................................................................... $ 2,123 $ 2,755 $ 2,694
--------- --------- ---------
--------- --------- ---------
See accompanying notes.
3
GHI HAMPTON INN HOTELS
COMBINED STATEMENTS OF CHANGES IN EQUITY
(DOLLARS IN THOUSANDS)
Equity at December 31, 1993........................................................ $ 10,871
Net income for the year ended December 31, 1994.................................... 2,694
Distributions...................................................................... (3,380)
---------
Equity at December 31, 1994........................................................ 10,185
Net income for the year ended December 31, 1995.................................... 2,755
Distributions...................................................................... (2,402)
---------
Equity at December 31, 1995........................................................ 10,538
Net income for the year ended December 31, 1996.................................... 2,123
Distributions...................................................................... (1,945)
---------
Equity at December 31, 1996........................................................ $ 10,716
---------
---------
See accompanying notes.
4
GHI HAMPTON INN HOTELS
COMBINED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
1996 1995 1994
--------- --------- ---------
YEARS ENDED DECEMBER 31,
-------------------------------
Cash flows from operating activities:
Net Income......................................................................... $ 2,123 $ 2,755 $ 2,694
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation....................................................................... 1,994 1,729 1,474
Amortization....................................................................... 53 57 58
Deferred income.................................................................... -- (25) (25)
Change in accounts:
Accounts receivable and other assets............................................... (30) 7 (10)
Accounts payable and other liabilities............................................. 20 (119) (203)
Accrued interest payable to related party.......................................... 155 49 126
--------- --------- ---------
Net cash provided by operating activities............................................ 4,315 4,453 4,114
--------- --------- ---------
Cash flows from investing activities:
Property improvements and replacements............................................. (2,030) (2,123) (846)
Restricted cash decrease (increase)................................................ 62 33 (138)
--------- --------- ---------
Net cash (used in) investing activities.............................................. (1,968) (2,090) (984)
--------- --------- ---------
Cash flows from financing activities:
Payments on mortgage notes payable................................................. (207) (187) $ (169)
Satisfaction of note payable....................................................... -- -- (2,030)
Loan received from related party................................................... -- -- 2,048
Distributions paid................................................................. (1,945) (2,402) (3,380)
--------- --------- ---------
Net cash (used in) financing activities.............................................. (2,152) (2,589) (3,531)
--------- --------- ---------
Net increase (decrease) in cash and cash equivalents................................. 195 (226) (401)
Cash and cash equivalents at beginning of year....................................... 565 791 1,192
--------- --------- ---------
Cash and cash equivalents at end of year............................................. $ 760 $ 565 $ 791
--------- --------- ---------
--------- --------- ---------
Supplemental disclosure of cash flow information: Interest paid in cash during the
year............................................................................... $ 1,856 $ 2,074 $ 1,905
--------- --------- ---------
--------- --------- ---------
See accompanying notes.
5
GHI HAMPTON INN HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1996
NOTE 1--ORGANIZATION AND BASIS OF PRESENTATION
The accompanying combined financial statements of GHI Hampton Inn Hotels
include the assets, liabilities and results of operations of nine Hampton
Inn Hotels (the "Properties"), which were owned (see Note 7 relating to the
subsequent sale of these hotels), as follows:
Growth Hotel Investors (a California limited partnership) ("GHI")
Hampton Inn -- Albuquerque North
Hampton Inn -- Syracuse (GHI owned a controlling interest through its
investment in North Coast Syracuse Limited Partnership)
Growth Hotel Investors II (a California partnership) ("GHI II")
Hampton Inn -- Eden Prairie
Hampton/GHI Associates No. I (GHI and GHI II owned a controlling interest
through their investment in GHI Combined Fund No. 1)
Hampton Inn -- Spartanburg
Hampton Inn -- Amarillo
Hampton Inn -- Greenville
Hampton Inn -- Greensboro
Hampton Inn -- Atlanta/Roswell
Hampton Inn -- San Antonio (Northwest)
The operations, assets, liabilities and minority interests of GHI and GHI II
related to an additional 19 hotels owned and/or controlled by GHI and GHI II
are not reflected in these financial statements. In addition, partnership
administrative expenses relating to GHI and GHI II are not reflected in
these financial statements.
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
Advertising
The Properties expense the costs of advertising as incurred.
Investment Properties
Investment properties are stated at cost. Depreciation is computed using the
straight-line method based on estimated useful lives ranging from 5 to 39
years.
The Properties have adopted "FASB Statement No. 121, Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of," which requires impairment losses to be recorded on long-lived assets
used in operations when indicators of impairment are present and the
undiscounted future cash flows estimated to be generated by those assets are
less than the assets'
6
GHI HAMPTON INN HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 2--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
carrying amount. The impairment loss is measured by comparing the fair value
of the asset to its carrying amount. The adoption of FASB 121 had no effect
on these financial statements.
Cash and Cash Equivalents
The Properties consider all highly liquid investments with a maturity, when
purchased, of three months or less to be cash equivalents. At certain times,
the amount of cash deposited at a bank may exceed the limit on insured
deposits.
Deferred Costs
Deferred costs represent deferred financing costs and deferred franchise
fees. Financing costs are deferred and amortized, as interest expense, over
the lives of the related loans, or expensed, if financing is not obtained.
Franchise fees paid in connection with the acquisition of the hotels are
deferred and are amortized over the lives of the franchise agreements, which
range from ten to twenty years.
At December 3,1 1996 and 1995, accumulated amortization of deferred costs
totaled approximately $238,000 and $486,000. The Properties' policy is to
write off fully amortized costs. In 1996, $301,000 of fully amortized
deferred costs were written off.
Income Taxes
Taxable income or loss of the Properties is reported in the income tax
returns of GHI and GHI II's partners. Accordingly, no provision for income
taxes is made in the financial statements of the Properties.
The aggregate cost of the investment properties for federal income tax
purposes as of December 31, 1996 and 1995, is approximately $48.2 million
and $46.2 million, respectively. The accumulated depreciation taken for
federal income tax purposes at December 31, 1996 and 1995, is approximately
$21.9 million and $19.6 million, respectively.
NOTE 3--RESTRICTED CASH
Restricted cash represents funds provided for and maintained by certain
properties pursuant to the related notes payable agreements, to meet future
capital requirements and debt service payments.
7
GHI HAMPTON INN HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 4--MORTGAGES PAYABLE
PRINCIPAL PRINCIPAL
BALANCE AT BALANCE
DECEMBER 31, PERIOD INTEREST MATURITY DUE AT
PROPERTY 1996 AMORTIZED RATE DATE MATURITY
- -------------------------------------------------------- ------------ ----------- ----------- ----------- -----------
Hampton Inn -- Albuquerque North........................ $ 2,375 (1) 10% 8/97 $ 2,375
Hampton Inn -- Eden Prairie............................. 2,603 30 yrs. 11.5% 4/98 2,566
Hampton Inn -- Spartanburg.............................. (2) 1,769 30 yrs. 10% 7/97 1,753
Hampton Inn -- Amarillo................................. (2) 1,120 30 yrs. 10% 7/97 1,112
Hampton Inn -- Greenville............................... (2) 2,054 30 yrs. 10% 7/97 2,037
Hampton Inn -- Greensboro............................... (2) 1,982 30 yrs. 10% 7/97 1,966
Hampton Inn -- Atlanta -- Roswell....................... (2) 2,643 30 yrs. 10% 7/97 2,622
Hampton Inn -- San Antonio Northwest.................... (2) 2,451 30 yrs. 10% 7/97 2,432
------------
$16,997
------------
------------
- ------------------------
(1) Interest only payments
(2) The mortgages encumbering these (and ten other) properties are cross
collateralized.
Properties and improvements are pledged as collateral for the related notes
payable.
The fair value of the Properties' mortgage debt, after discounting the
scheduled loan payments to maturity, approximates its carrying balance. This
estimate is not necessarily indicative of the amounts that might be paid in
actual market conditions.
Scheduled principal payments on the mortgage notes payable subsequent to
December 31, 1996, are as follows (in thousands):
1997 $ 14,424
1998 2,573
---------
$ 16,997
---------
---------
NOTE 5--RELATED PARTY NOTE PAYABLE
The mortgage note encumbering the Syracuse property was satisfied on May 31,
1994 with the proceeds of a $2,048,000 unsecured loan from GHI. The loan
bears interest at the prime rate plus 2% (the interest rate at December 31,
1996 was 10.25%) and is due on demand. Related party note payable also
includes another note of $100,000. Accrued interest payable was
approximately $204,000 and $50,000 at December 31, 1996 and 1995,
respectively.
NOTE 6--RELATED PARTY TRANSACTIONS
The Properties have agreements with affiliates of GHI and GHI II's joint
venture partners, which provide for the management and operations of the
joint venture properties and services provided under each property's
franchise agreement. Fees paid pursuant to these agreements are generally
8
GHI HAMPTON INN HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
DECEMBER 31, 1996
NOTE 6--RELATED PARTY TRANSACTIONS (CONTINUED)
based on a percentage of gross revenues from operations of the property.
Fees paid for the years ended December 31, 1996, 1995 and 1994 were
approximately $2,132,000; $2,248,000; and $2,166,000, respectively. These
expenses are included in operating expenses.
NOTE 7--SUBSEQUENT EVENT -- (UNAUDITED)
On June 24, 1997, the partnerships owning the Properties sold substantially
all of their properties to an unrelated third party. These combined
financial statements of the nine Properties have been prepared at the
request of a potential buyer of these properties from the unrelated third
party.
9
ADDITIONAL INFORMATION
10
INDEPENDENT AUDITORS' REPORT
ON ADDITIONAL INFORMATION
To Hudson Hotels Corporation
Rochester, New York
Our report on our audits of the combined balance sheets of GHI Hampton Inn
Hotels as of December 31, 1996 and 1995 and the related combined statements of
operations, changes in equity and cash flows for each of the three years in the
period ended December 31, 1996 appears on page 1. The audits were conducted for
the purpose of forming an opinion on the combined financial statements taken as
a whole. Schedule I and II are presented for purposes of additional analysis and
are not a required part of the combined financial statements. Such information,
except for that portion marked "unaudited" (Schedule II), on which we express no
opinion, has been subjected to the auditing procedures applied in the audit of
the combined financial statements, and, in our opinion, the information is
fairly stated in all material respects in relation to the combined financial
statements taken as a whole.
Certified Public Accountants
/s/ Imowitz Koenig & Co., L.L.P.
New York, N.Y.
February 28, 1997
11
GHI HAMPTON INN HOTELS
SCHEDULE 1 -- REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
INITIAL COST GROSS AMOUNTS AT WHICH
----------------------------------------- --------------------------
COST CAPITALIZED
BUILDINGS AND (REMOVED) BUILDINGS AND
RELATED PERSONAL SUBSEQUENT TO RELATED PERSONAL
DESCRIPTION ENCUMBRANCE LAND PROPERTY ACQUISITION LAND PROPERTY
- ------------------------------------- ------------- --------- -------------- --------------- ---------- ---------------
Hampton Inn -- Albuquerque No........ $ 2,375 $ 824 $ 4,140 $ 969 $ 824 $ 5,109
Albuquerque, New Mexico
Hampton Inn -- Syracuse.............. -- 388 3,723 1,196 368 4,939
East Syracuse, New York
Hampton Inn -- Eden Prairie.......... 2,603 880 4,426 836 853 5,289
Eden Prairie, Minnesota
Hampton Inn -- Spartanburg........... 1,769 276 3,545 358 276 3,903
Spartanburg, South Carolina
Hampton Inn -- Amarillo.............. 1,120 501 1,810 396 501 2,206
Amarillo, Texas
Hampton Inn -- Greenville............ 2,054 539 3,942 106 539 4,048
Greenville, South Carolina
Hampton Inn -- Greensboro............ 1,982 439 3,866 254 439 4,120
Greensboro, North Carolina
Hampton Inn -- Atlanta -- Roswell.... 2,643 1,207 4,668 (141) 1,207 4,527
Roswell, Georgia
Hampton Inn -- San Antonio --
Northwest.......................... 2,451 781 4,475 (58) 781 4,417
San Antonio, Texas --------- --------- --------- --------- --------- ---------
Total................................ $ 16,997 $ 5,835 $ 34,595 $ 3,916 $ 5,788 $ 38,558
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
CARRIED AT DECEMBER 31,1996
---------------------------
DEPRECIABLE
ACCUMULATED DATE OF DATE OF LIFE --
DESCRIPTION TOTAL DEPRECIATION ACQUISITION CONSTRUCTION YRS.
- ------------------------------------- --------- ------------ ----------- ------------ -----------
Hampton Inn -- Albuquerque No........ $ 5,933 $ 2,041 1987 4/24/87 5-39 yrs.
Albuquerque, New Mexico
Hampton Inn -- Syracuse.............. 5,307 2,127 1985 12/20/85 5-39 yrs.
East Syracuse, New York
Hampton Inn -- Eden Prairie.......... 6,142 1,947 1987 12/30/87 5-39 yrs.
Eden Prairie, Minnesota
Hampton Inn -- Spartanburg........... 4,179 1,617 1984 12/19/86 5-39 yrs.
Spartanburg, South Carolina
Hampton Inn -- Amarillo.............. 2,707 919 1985 12/19/86 5-39 yrs.
Amarillo, Texas
Hampton Inn -- Greenville............ 4,587 1,608 1985 12/19/86 5-30 yrs.
Greenville, South Carolina
Hampton Inn -- Greensboro............ 4,559 1,600 1986 12/19/86 5-39 yrs.
Greensboro, North Carolina
Hampton Inn -- Atlanta -- Roswell.... 5,734 1,621 1987 3/4/87 5-30 yrs.
Roswell, Georgia
Hampton Inn -- San Antonio --
Northwest.......................... 5,198 1,523 1987 6/23/87 5-30 yrs.
San Antonio, Texas --------- ----------
Total................................ $ 44,346 $ 15,003
--------- ----------
--------- ----------
See independent auditors' report on additional information.
12
GHI HAMPTON INN HOTELS
SCHEDULE 1 -- REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
DECEMBER 31,
--------------------
1996 1995
--------- ---------
RECONCILIATION OF REAL ESTATE
Balance at beginning of year................................................................ $ 42,316 $ 44,277
Property improvements....................................................................... 2,030 2,123
Retirement of assets........................................................................ -- (4,084)
--------- ---------
Balance at end of year...................................................................... $ 44,346 $ 42,316
--------- ---------
--------- ---------
RECONCILIATION OF ACCUMULATED DEPRECIATION
Balance at beginning of year................................................................ $ 13,009 $ 15,364
Additions charged to expense................................................................ 1,994 1,729
Retirement of assets........................................................................ -- (4,084)
--------- ---------
Balance at end of year...................................................................... $ 15,003 $ 13,009
--------- ---------
--------- ---------
See independent auditor's report on additional information.
13
GHI HAMPTON INN HOTELS
SCHEDULE II -- HOTEL OPERATIONS (UNAUDITED)
(DOLLARS IN THOUSANDS)
DECEMBER 31,
-------------------------------
1996 1995 1994
--------- --------- ---------
Telephone Expense............................................ $ 311 $ 257 $ 257
Management Fee............................................... 787 776 764
Repairs and Maintenance...................................... 1,057 831 820
Real Estate and Property Taxes............................... 814 765 733
Insurance.................................................... 149 184 206
Utilities.................................................... 655 629 619
Other Operating Expenses..................................... 7,003 7,140 6,811
--------- --------- ---------
Total Hotel Operations....................................... $ 10,776 $ 10,582 $ 10,210
--------- --------- ---------
--------- --------- ---------
See independent auditors' report on additional information.
14
HUDSON HOTELS CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
(UNAUDITED)
The following information reflects pro forma consolidated balance sheet of
Hudson Hotels Corporation and subsidiaries ("the Company") as of September 30,
1997 and consolidated results of operations data of the Company for the nine
months ended September 30, 1997 and the year ended December 31, 1996.
The pro forma consolidated balance sheet data is presented as if the
acquisition of nine (9) Hampton Inns from Equity Inns Partnership, L.P. and the
issuance of the related debt for the acquisition occurred on September 30, 1997.
The pro forma consolidated results of operations data for the nine months
ended September 30, 1997 and year ended December 31, 1996 is presented as if the
acquisition of the nine (9) Hampton Inns and the following transactions had
occurred on January 1, 1996: (i) issuance of a $3.9 million note between the
Company and Equity Inns Partnership, L.P., payable over the next two years,
secured by stock issued in the name of Hudson Hotels Properties Corp. (a
wholly-owned subsidiary of Hudson Hotels Corporation) (ii) the issuance of $18
million of additional mezzanine debt payable over the next five years to the
extent such proceeds were used to finance the acquisition and (iii) the issuance
of a $30 million twenty five (25) year mortgage.
The acquisition has been 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, 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 transactions will differ materially from the
preliminary allocations.
The pro forma financial information does 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. The pro forma consolidated results of operations does not reflect
certain additional cost savings and revenue enhancements that management
believes may be realized following the acquisitions. These savings are expected
to be realized through consolidation of certain services as well as revenue
enhancements by increasing marketing efforts for the properties acquired and/or
possible repositioning of some of the properties based on their location. During
1997, a portion of the rooms in the nine (9) Hampton Inns were under renovation,
which reduced revenues for 1997. Efforts will be made to increase revenue
through enhancements. No assurances can be made as to the amount of cost savings
or revenue enhancements, if any, that actually will be realized.
The pro forma consolidated financial statements are based on certain
assumptions and adjustments described in the notes to the 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 December 31, 1996 10-KSB and the September 30, 1997
10-QSB and the financial statements and related notes of the acquired entities
included elsewhere herein and the 8-K/A filed on November 24, 1997, in
conjunction with the acquisition of the nine (9) Hampton Inns.
HUDSON HOTELS CORPORATION AND SUBSIDIARIES
PROFORMA CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1997
(UNAUDITED)
(DOLLARS IN THOUSANDS)
(B)
(A) EQUITY INNS (C)
HUDSON HOTELS PARTNERSHIP, PRO FORMA
CORPORATION L.P. ADJUSTMENTS COMPANY
-------------- --------------- ----------- -----------
ASSETS
Current Assets
Cash and Cash Equivalents............................. 2,112 -- 1,443 3,555
Cash--restricted...................................... 2,158 -- 715 2,873
Accounts Receivable--Trade............................ 848 -- -- 848
Accounts Receivable--Affiliate........................ 193 -- -- 193
Other Current Assets.................................. 1,080 130 1,210
------- ------ ----------- -----------
Total Current Assets................................ 6,391 -- 2,288 8,679
Investment in Partnership Interests..................... 1,900 -- -- 1,900
Investment in Land...................................... 781 -- -- 781
Real Estate Development................................. 3,383 -- -- 3,383
Property and Equipment--Net............................. 82,770 40,666 6,483 129,919
Deferred Tax Asset...................................... 450 -- -- 450
Mortgage Note Receivable--Affiliate..................... 1,100 -- -- 1,100
Other Assets............................................ 7,427 819 (985) 7,261
------- ------ ----------- -----------
Total Assets........................................ 104,202 41,485 7,786 153,473
------- ------ ----------- -----------
------- ------ ----------- -----------
LIABILITIES AND SHAREHOLDERS' INVESTMENT
Current Liabilities..................................... 8,564 -- (2,613) 5,951
Deferred Revenue--Beach Club............................ 94 -- -- 94
Long-Term Debt.......................................... 80,064 -- 51,884 131,948
Deferred Revenue--Land Sale............................. 185 -- -- 185
Limited Partners' Interest in Consolidated
Partnerships.......................................... 1,099 -- -- 1,099
Partnership Interest.................................... -- 41,485 (41,485) --
Shareholders' Investment
Common Stock.......................................... 5 -- -- 5
Preferred Stock....................................... 1 -- -- 1
Additional Paid in Capital............................ 17,078 -- -- 17,078
Warrants Outstanding.................................. 50 -- -- 50
Accumulated Deficit................................... (2,897) -- -- (2,897)
Treasury Stock........................................ (41) -- -- (41)
------- ------ ----------- -----------
Total Shareholder's Investment...................... 14,196 -- -- 14,196
------- ------ ----------- -----------
Total Liabilities and Shareholders' Investment...... 104,202 41,485 7,786 153,473
------- ------ ----------- -----------
------- ------ ----------- -----------
- ------------------------
See notes to pro forma consolidated balance sheet and statement of operations
HUDSON HOTELS CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATION
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT FOR EARNINGS PER SHARE)
(E)
(D) (E) EQUITY INNS (C)
HUDSON HOTELS GHI HAMPTON PARTNERSHIP, PRO FORMA
CORPORATION INN HOTELS L.P. ADJUSTMENTS COMPANY
-------------- ------------- --------------- ----------- ----------
OPERATING REVENUES
Hotel Operations.................... $ 27,004 $ 7,487 $ 5,024 $ -- $ 39,515
Management Fees..................... 697 -- -- -- 697
Royalties........................... 544 -- -- -- 544
Other............................... 212 -- -- -- 212
-------------- ------ ------ ----------- ----------
Total Operating Revenues.......... 28,457 7,487 5,024 -- 40,698
Operating Expense..................... 19,769 4,814 4,697 (2,626) (L) 26,654
-------------- ------ ------ ----------- ----------
Income from operations before
depreciation and amortization
(EBITDA).......................... 8,688 2,673 327 (2,626) 14,314
Depreciation and Amortization......... 2,889 722 -- 672 (H) 4,283
-------------- ------ ------ ---------- ----------
Income from Operations................ 5,799 1,951 327 1,954 10,031
Other Income (Expenses)
Gain on Sale of Worldwide Franchise
Rights............................ -- -- -- -- --
Interest--net......................... (5,974) (836) -- (2,649) (I) (9,459)
Gain on Repurchase of Franchise
Rights.............................. -- -- -- -- --
-------------- ------ ------ ----------- ----------
Total Other Income (Expense).......... (5,974) (836) -- (2,649) (9,459)
Income from Operations, Before Income
Taxes, Minority Interest and Equity
in Net Losses of Affiliates......... (175) 1,115 327 (695) 572
BENEFIT/(PROVISION) FROM TAXES........ 73 -- -- (306) (J) (233)
-------------- ------ ------ ----------- ----------
Income From Operations Before Minority
Interest and Equity in Net Losses of
Affiliates.......................... (102) 1,115 327 (1.001) 339
MINORITY INTEREST..................... (80) -- -- -- (80)
EQUITY IN INCOME OF AFFILIATES........ 73 -- -- -- 73
-------------- ------ ------ ----------- ----------
NET INCOME............................ $ (109) $ 1,115 $ 327 (1.001) $ 332
-------------- ------ ------ ----------- ----------
-------------- ------ ------ ----------- ----------
NET INCOME PER SHARE-- PRIMARY........ $ (0.04) $ 0.05
-------------- ----------
-------------- ----------
NET INCOME PER SHARE-- FULLY
DILUTED............................. N/A N/A
------------- ----------
------------- ----------
WEIGHTED AVERAGE SHARES OUTSTANDING
-PRIMARY.......................... 4,943,591 4,943,591
-------------- ----------
-------------- ----------
-FULLY DILUTED.................... N/A N/A
-------------- ----------
-------------- ----------
- ------------------------
See notes to pro forma consolidated balance sheet and statement of operations
HUDSON HOTELS CORPORATION AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATION
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT EARNINGS PER SHARE)
(F)
(K) GHI HAMPTON (C)
HUDSON HOTELS INN HOTELS PRO FORMA
CORPORATION COMPANY ADJUSTMENTS COMPANY
-------------- ------------- ------------- ----------
OPERATING REVENUES
Hotel Operations...................................... 11,730 16,981 -- 28,711
Management Fees....................................... 978 -- -- 978
Royalties............................................... 602 -- -- 602
Other................................................. 838 -- -- 838
-------------- ------ ------ ----------
Total Operating Revenues............................ 14,148 16,981 -- 31,129
Operating Expenses...................................... 10,708 10,776 (787)(G) 20,697
-------------- ------ ------ ----------
Income from Operations Before Depreciation and
Amortization (EBITDA)............................... 3,440 6,205 787 10,432
Depreciation and Amortization........................... 1,022 2,007 (61)(H) 2,968
-------------- ------ ------ ----------
Income from Operations................................ 2,418 4,198 848 7,464
Other Income (Expenses)
Gain on Sale of Worldwide Franchise Rights............ 1,386 -- -- 1,386
Interest--net......................................... (1,770) (2,075) (2,877)(I) (6,722)
Non-recurring charge.................................... (551) -- -- (551)
-------------- ------ ------ ----------
Total Other Income (Expense)........................ (935) (2,075) (2,877) (5,887)
Income from Operations, Before Income Taxes, Minority
Interest and Equity in Net Losses of Affiliates....... 1,483 2,123 (2,029) 1,577
BENEFIT/(PROVISION) FROM TAXES.......................... (472) -- (37)(J) (509)
-------------- ------ ------ ----------
Income from Operations Before Minority Interest and
Equity in Net Losses of Affiliates.................... 1,011 2,123 (2,066) 1,068
MINORITY INTEREST....................................... (392) -- -- (392)
EQUITY IN INCOME OF AFFILIATES 17 -- -- 17
-------------- ------ ------ ----------
NET INCOME.............................................. 636 2,123 (2,066) 693
-------------- ------ ------ ----------
-------------- ------ ------ ----------
NET INCOME PER SHARE--PRIMARY........................... $ 0.12 $ 0.13
-------------- ----------
-------------- ----------
NET INCOME PER SHARE--FULLY DILUTED..................... N/A N/A
-------------- ----------
-------------- ----------
WEIGHTED AVERAGE SHARES OUTSTANDING:
- -PRIMARY................................................ 4,248,521 4,248,521
-------------- ----------
-------------- ----------
- -FULLY DILUTED.......................................... 5,342,382 5,342,382
-------------- ----------
-------------- ----------
- ------------------------
See notes to pro forma consolidated balance sheet and statement of operations
HUDSON HOTELS CORPORATION AND SUBSIDIARIES
NOTES TO PRO FORMA CONSOLIDATED BALANCE SHEET AND STATEMENT OF OPERATIONS
(UNAUDITED)
(A) Reflects the Company's unaudited historical consolidated balance sheet as of
September 30, 1997, as reported on Form 10-QSB.
(B) Reflects the historical unaudited balance sheets as of September 30, 1997,
for the assets acquired by the Company.
(C) Acquisition of Assets
The purchase price for the nine (9) Hampton Inns acquired has been allocated
to assets acquired at their estimated fair values. The pro forma adjustments
consist of the elimination of assets and liabilities not acquired by the
Company, net of the fair value ascribed to purchased assets. In addition,
costs incurred to secure financing were capitalized and will be amortized
over the term of the related financing.
The Company acquired the nine (9) Hampton Inns for $46,250,000. The terms of
the transaction provided for a $225,000 cash payment, with the balance
comprised of a $30 million mortgage, a $3.9 million two year note and $18
million of additional mezzanine debt.
(D) Represents the Company's unaudited historical consolidated statement of
operation for the nine months ended September 30, 1997.
(E) From January 1, 1997 to June 23, 1997, the nine (9) Hampton Inns were owned
by GHI Hampton Inns Hotels. From June 24, 1997 to September 30, 1997, the
nine (9) Hampton Inns were owned by Equity Inns Partnership, L.P. ("the
Seller"). Since the Seller is a REIT and cannot operate the properties, the
operating results under the Equity Inns Partnership, L.P. caption represents
the unaudited results of operations for the nine (9) Hampton Inns of the
hotel operator.
(F) Reflects the historical statement of operations for the nine (9) Hampton
Inns for the year ended December 31, 1996.
(G) Represents the elimination of management fees paid by the nine (9) Hampton
Inns to an outside management company, which will no longer be incurred, as
part of the acquisition.
(H) Reflects adjusted depreciation and amortization related to the acquisition
of the nine (9) Hampton Inns. The furniture, fixtures and equipment have an
estimated useful life of five to seven years. The hotel structures have a
useful life of forty years. Financing acquisition costs will be amortized
from five to twenty five years, the terms associated with the financing.
(I) Reflects adjusted interest expense for debt incurred as part of the
acquisition of the nine (9) Hampton Inns. The Company obtained a total of
$51.9 million in financing, of which $30 million represents a first
mortgage, $18 million of mezzanine debt financing and a $3.9 million note
from Equity Inns Partnership, L.P.
(J) The pro forma adjustment to income taxes is based on the statutory tax rate.
(K) Reflects the Company's historical consolidated statement of operations for
the year ended December 31, 1996, as reported on Form 10-KSB.
(L) Represents the elimination of management fees paid by the nine (9) Hampton
Inns to an outside management company from the period January 1, 1997 to
June 23, 1997, which will no longer be incurred as part of the acquisition.
In addition, ground rent, which was incurred by the hotel operator from June
24 to September 30, 1997, was eliminated, as this will no longer be incurred
as part of the acquisition.