-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, MZYvlQjV35qaSrVIrWWS+CpCqhK55dZ+hnZ8nPUMr/+yxIemmo3LB3qWDDoHmR/b j0sUlYZ2/ztAigSz/3hxrA== 0000930661-99-001053.txt : 19990511 0000930661-99-001053.hdr.sgml : 19990511 ACCESSION NUMBER: 0000930661-99-001053 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990326 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990510 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PATRIOT AMERICAN HOSPITALITY INC/DE CENTRAL INDEX KEY: 0000016343 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 940358820 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-09319 FILM NUMBER: 99614820 BUSINESS ADDRESS: STREET 1: 1950 STEMMONS FRWY STREET 2: STE 6001 CITY: DALLAS STATE: TX ZIP: 75207 BUSINESS PHONE: 2148631000 MAIL ADDRESS: STREET 1: 1950 STEMMONS FRWY STREET 2: STE 6001 CITY: DALLAS STATE: TX ZIP: 75207 FORMER COMPANY: FORMER CONFORMED NAME: PATRIOT AMERICAN HOSPITALITY OPERATING CO DATE OF NAME CHANGE: 19970717 FORMER COMPANY: FORMER CONFORMED NAME: CALIFORNIA JOCKEY CLUB DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WYNDHAM INTERNATIONAL INC CENTRAL INDEX KEY: 0000715273 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS, ROOMING HOUSE, CAMPS & OTHER LODGING PLACES [7000] IRS NUMBER: 942878485 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-09320 FILM NUMBER: 99614821 BUSINESS ADDRESS: STREET 1: 1950 STEMMONS FRWY STREET 2: STE 6001 CITY: DALLAS STATE: TX ZIP: 75207 BUSINESS PHONE: 2148631000 MAIL ADDRESS: STREET 1: 1950 STEMMONS FRWY STREET 2: STE 6001 CITY: DALLAS STATE: TX ZIP: 75207 FORMER COMPANY: FORMER CONFORMED NAME: PATRIOT AMERICAN HOSPITALITY OPERATING CO\DE DATE OF NAME CHANGE: 19970723 FORMER COMPANY: FORMER CONFORMED NAME: BAY MEADOWS OPERATING CO DATE OF NAME CHANGE: 19920703 8-K/A 1 FORM 8-K/A SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) March 26, 1999 Commission File Number 1-9319 Commission File Number 1-9320 PATRIOT AMERICAN HOSPITALITY, INC. WYNDHAM INTERNATIONAL, INC. - -------------------------------------- -------------------------------------- (Exact name of registrant as (Exact name of registrant as specified in its charter) specified in its charter) Delaware Delaware - -------------------------------------- -------------------------------------- (State or other jurisdiction of (State or other jurisdiction of incorporation or organization) incorporation or organization) 94-0358820 94-2878485 - -------------------------------------- -------------------------------------- (I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.) 1950 Stemmons Freeway, Suite 6001 1950 Stemmons Freeway, Suite 6001 Dallas, Texas 75207 Dallas, Texas 75207 - -------------------------------------- -------------------------------------- (Address of principal executive (Address of principal executive offices)(Zip Code) offices)(Zip Code) (214) 863-1000 (214) 863-1000 - -------------------------------------- -------------------------------------- (Registrant's telephone number, (Registrant's telephone number, including area code) including area code) - -------------------------------------- -------------------------------------- PATRIOT AMERICAN HOSPITALITY, INC. AND WYNDHAM INTERNATIONAL, INC. ITEM 5. OTHER EVENTS The pro forma financial information for the year ended December 31, 1998 is being filed in accordance with Article 11 of Regulation S-X. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements None. (b) Pro Forma Financial Information The index to the separate and combined pro forma financial information for Patriot American Hospitality, Inc. and Wyndham International, Inc. is included on page F-1 of this report. (c) Exhibits None. 2 SIGNATURE Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrants have duly caused the report to be signed on their behalf by the undersigned thereunto duly authorized. DATED: May 7, 1999 PATRIOT AMERICAN HOSPITALITY, INC. /s/ Lawrence S. Jones By: _________________________________ Lawrence S. Jones Executive Vice President and Treasurer (Principal Financial and Accounting Officer) WYNDHAM INTERNATIONAL, INC. /s/ Lawrence S. Jones By: _________________________________ Lawrence S. Jones Executive Vice President and Treasurer (Principal Financial and Accounting Officer) 3 PATRIOT AMERICAN HOSPITALITY, INC. AND WYNDHAM INTERNATIONAL, INC. INDEX TO FINANCIAL INFORMATION
Page ---- Patriot American Hospitality, Inc. and Wyndham International, Inc-- Adjusted for the Investment, Restructuring, New Debt Financing and Interstate Spin-off: Pro Forma Condensed Combined Balance Sheet as of December 31, 1998 (unaudited).......................................... F-8 Pro Forma Condensed Combined Statement of Operations for the year ended December 31, 1998 (unaudited).......................................... F-13 Patriot American Hospitality Inc.: Pro Forma Condensed Consolidated Balance Sheet as of December 31, 1998 (unaudited)............................................................ F-18 Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 1998 (unaudited).......................................... F-20 Wyndham International, Inc.: Pro Forma Condensed Consolidated Balance Sheet as of December 31, 1998 (unaudited)............................................................ F-23 Pro Forma Condensed Consolidated Statement of Operations for the year ended December 31, 1998 (unaudited).......................................... F-25
F-1 PATRIOT AMERICAN HOSPITALITY, INC. AND WYNDHAM INTERNATIONAL, INC. INTRODUCTION TO PRO FORMA FINANCIAL STATEMENTS (unaudited) (dollars in thousands) Background Patriot American Hospitality, Inc. ("Old Patriot") was formed April 17, 1995 as a self-administered real estate investment trust ("REIT") for the purpose of acquiring equity interests in hotel properties. On October 2, 1995, Patriot completed an initial public offering of shares of common stock and commenced operations. On July 1, 1997, Old Patriot merged with and into California Jockey Club ("Cal Jockey"), with Cal Jockey being the surviving legal entity. Cal Jockey's shares of common stock are paired and trade together with the shares of common stock of Bay Meadows Operating Company. In connection with the Cal Jockey merger, Cal Jockey changed its name to "Patriot American Hospitality, Inc." ("Patriot") and Bay Meadows changed its name to "Patriot American Hospitality Operating Company". As a result of the merger with Wyndham Hotel Company in January, 1998, the operating company subsequently changed its name to "Wyndham International, Inc." ("Wyndham"). Patriot and Wyndham are now collectively referred to as the companies. Patriot and Wyndham are both Delaware corporations. The shares of common stock of Patriot are paired and trade together with the shares of common stock of Wyndham as a single unit pursuant to a stock pairing arrangement. The single unit comprised of one share of common stock of Patriot and one share of common stock of Wyndham is referred to as a paired share. Patriot and Wyndham conduct substantially all of their operations through Patriot American Hospitality Partnership, L.P. ("Patriot Partnership") and Wyndham International Operating Partnership, L.P. ("Wyndham Partnership"), respectively. Patriot Partnership and Wyndham Partnership are collectively referred to as the operating partnerships. As of December 31, 1998, Patriot owns an approximate 89% interest in the Patriot Partnership and Wyndham owns an approximate 87.8% in the Wyndham Partnership. At December 31, 1998, Patriot and Wyndham, through the operating partnerships and other subsidiaries, including hotels owned through unconsolidated subsidiaries, owned interests in 178 hotels with an aggregate of over 43,800 guest rooms and leased 121 hotels from third parties with over 15,800 guest rooms. In addition, Wyndham manages 161 hotels for third party owners with over 38,500 guest rooms and franchises 12 hotels with over 2,900 guest rooms. Patriot leases substantially all of the owned and leased hotels to Wyndham. Generally, the participating leases provide for the payment of the greater of base or participating rent, plus certain additional charges, as applicable. 1998 Business Transactions Wyndham Hotel Corporation On January 5, 1998, Wyndham Hotel Corporation merged with and into Patriot, with Patriot being the surviving corporation. As a result, its financial position and substantially all of its operations have been recognized in the Patriot and Wyndham combined financial statements as of and for the year ended December 31, 1998. Recent transactions On January 16, 1998, a subsidiary of Wyndham merged with and into WHG Casinos & Resorts, Inc., with WHG being the surviving corporation. Additionally during 1998, Patriot acquired the minority partners' interests in WHG Casinos and Resorts, Inc.'s subsidiaries. Patriot, acquired the Buena Vista Hotel located in Orlando, Florida and the Golden Door Spa located in Escondiado, California. These transactions are collectively referred to as the Recent Transactions. F-2 Arcadian International Limited In April 1998, Patriot completed its acquisition of Arcadian International Limited (the "Arcadian acquisition"). The transaction included the exercise of all outstanding options to purchase shares, the assumption of debt and the acquisition of the remaining shares in the Malmaison Group. Interstate Hotels Company On June 2, 1998 Interstate Hotels Company merged with and into Patriot with Patriot being the surviving company ("Interstate merger"). SF Hotel Company, L.P. On June 5, 1998, Patriot, through the Patriot operating partnership, acquired all of the partnership interests in SF Hotel Company, L.P. ("Summerfield acquisition"). CHC International, Inc On June 30, 1998 the hospitality-related businesses of CHCI merged (the "CHCI merger") with and into Wyndham with Wyndham being the surviving company. Financing Transactions Credit Facility In connection with the Interstate merger, the companies closed on the commitment from The Chase Manhattan Bank and Chase Securities, Inc. and PaineWebber Real Estate Securities, Inc. to increase Patriot's existing unsecured credit facilities to an aggregate of $2,700,000. The increased credit facilities include the $900,000 revolving credit facility ("Revolving Credit Facility") and a series of unsecured term loans in the aggregate amount of up to $1,800,000 (the "Term Loans"). Proceeds from the increased credit facilities were used to fund the cash portion of the Interstate merger consideration, as well as to refinance certain outstanding indebtedness of Patriot. Interest rates are based on the companies' leverage ratio and may vary from 1.5% to 2.5% over LIBOR. Under the original terms of the Patriot's credit facility, two of the term loans were scheduled to mature on January 31, 1999 ($350,000) and March 31, 1999 ($400,000), respectively. All of the lenders under the credit facility have agreed to extend the maturity of these two terms loans to June 30, 1999, subject to Patriot and Wyndham consummating the $1 billion equity investment by that date. If the $1 billion equity investment is not consummated by June 30, 1999, or the companies' agreement with the investors otherwise terminates, the maturity on these two term loans will be extended to March 31, 2000 and Patriot will be required to make a $300,000 amortization payment by December 31, 1999. Additionally, the Companies will be required to secure the credit facility with mortgages and other security interests. Patriot paid fees of approximately $11,700 to the lenders under the credit facility in connection with the agreement to extend the maturities of the term loans to June 30, 1999. Forward Equity Contracts Subject to Price Adjustments Patriot is party to transactions with three counterparties (UBS Limited and Union Bank of Switzerland London Branch (collectively, "UBS"), NationsBank Corporation ("Nations") and PaineWebber Financial Products, Inc. ("PaineWebber") involving the sale of an aggregate of 13.3 million paired shares, with related price adjustment mechanisms. F-3 As of December 31, 1998, Patriot has issued the paired shares and paid cash to each of the counterparties as follows (in millions):
Settlement ---------------- Original Shares Shares Held As Sold Cash Collateral -------- ----- ---------- UBS.............................................. 3.25 $53.9 5.6 Nations.......................................... 4.9 0.2 22.6 PaineWebber...................................... 5.15 0.2 25.8 ---- ----- ---- 13.3 $54.3 54.0 ==== ===== ====
The total obligation to settle these forward equity contracts are currently estimated to be approximately $333,600 including fees and other costs. Planned Transaction Investment On February 18, 1999, Patriot, Wyndham, Patriot Partnership, Wyndham Partnership and affiliates of each of Apollo Real Estate Management III, L.P., Apollo Management IV, L.P., Thomas H. Lee Equity Fund IV, L.P., Beacon Capital Partners, L.P. and Rosen Consulting Group, entered into a purchase agreement under which the investors will purchase $1 billion of a new series B preferred stock of Wyndham. Patriot and Wyndham currently plan to use the proceeds from the investment to settle their forward equity contracts, as described above, to repay indebtedness, and for working capital and growth purposes. Wyndham will pay dividends on its series B preferred stock quarterly, on a cumulative basis, at a rate of 9.75% per year. For the first six years, dividends will be payable partly in cash and partly in additional shares of preferred stock, with the cash component initially equal to 30% for the first dividend payment and declining over the period to approximately 19.8% for the final dividend payment. Each share of series B preferred stock may be converted, at the option of its holder, into that number of shares of Wyndham common stock equal to $100.00 divided by the conversion price of the series B preferred stock. Initially the conversion price will be $8.59, but is subject to adjustment under certain circumstances. Restructuring Under the terms of the purchase agreement, relating to the $1 billion equity investment, Patriot and Wyndham are required to complete a restructuring of their existing paired share REIT structure prior to the investment. Under the terms of the restructuring, the following events will occur: . A reverse stock split of the common stock of Wyndham and Patriot. . A wholly-owned subsidiary of Wyndham will merge with and into Patriot with Patriot surviving. . The pairing agreement between Patriot and Wyndham will terminate. . Patriot will terminate its status as a real estate investment trust effective January 1, 1999. . The non-voting stock of specified corporate subsidiaries held by the Patriot Partnership will be transferred so that it will be owned directly by Patriot and/or Wyndham, rather than through the Patriot Partnership. F-4 . The third party partners in both the Patriot Partnership and the Wyndham Partnership will be offered an opportunity to exchange their limited partner interests for Wyndham common stock. . The preferred stockholders of Wyndham will be offered an opportunity to exchange their preferred stock for Wyndham common stock, and preferred stock not exchanged will be redeemed by Wyndham. Reverse Stock Split Prior to the merger of a subsidiary of Wyndham into Patriot, both Wyndham and Patriot will implement a one-for-twenty reverse stock split of their common stock. Redemption Option For a period of 170 days following the completion of the $1 billion equity investment, Wyndham may redeem up to $300 million of the series B preferred stock at a redemption price of $102.00 per share (102% of the stated amount $100.00) plus all accrued dividends. Wyndham currently plans to fund this redemption through the issuance of $300 million of series A preferred stock to its stockholders. The series A preferred stock has the same economic terms as the series B preferred stock. New Debt Financing New Credit Facility. Patriot has recently signed a commitment letter with Chase Securities Inc. and The Chase Manhattan Bank for new senior credit facilities for Wyndham in the amount of $1.8 billion, comprised of a term loan facility and a revolving loan facility. Definitive agreements relating to the new credit facility are expected to be finalized at the same time that the $1 billion equity investment is completed. The commitment letter provided that the Chase Manhattan Bank will act as the administrative agent and Chase Securities Inc. will act as the lead arranger for a syndicate of lenders which will provide Wyndham with $1 billion in term loans and up to $800 million under the revolving loan facility, of which a maximum of $560 million may be drawn at the closing of the investment. The term loan facility has a seven year term and the revolving facility has a five year term. The commitment letter based interest rates for the new credit facility upon LIBOR spreads varying from 1.25% to 3.00% per annum for the revolving loan facility and 2.75% to 3.75% per annum for the term loan facility, based both on Wyndham's leverage ratio and on whether any increasing rate loans are outstanding. However, at Wyndham's election or under other specified circumstances, the term loans and revolving loans may instead bear interest at an alternative base rate plus the applicable spread. The alternative base rate is equal to the greater of The Chase Manhattan Bank's prime rate or federal funds rate plus 0.5%, and the alternative spread is 1.0% below the applicable LIBOR spread. Subject to limited agreed-upon exceptions, the new credit facility will be guaranteed by the domestic subsidiaries of Wyndham, and will be secured by pledges of equity interests held by Wyndham and its subsidiaries. The proceeds from the term loan facility will be used to finance the restructuring of Wyndham and Patriot. The proceeds from the revolving loan facility will be used for working capital and general corporate purposes. Increasing Rate Loans. Wyndham and Patriot have signed a commitment letter with The Chase Manhattan Bank, Chase Securities Inc., Bear, Stearns & Co. Inc., and The Bear Stearns Companies Inc. providing that The Chase Manhattan Bank, The Bear, Stearns Companies Inc. and a possible syndicate of other lenders will provide an increasing rate loan facility in the amount of up to $650 million. The increasing rate loan carries a term of five years. Interest rates for the increasing rate loan are based on LIBOR spreads and are initially set at 0.25% below the initial LIBOR spread on the term loan facility, but increase by 0.50% every three months, with a cap of LIBOR plus 4.75%. However, under other specified circumstances, interest accrues at an alternate rate equal to the rate borne by three-month treasury securities plus 1.0%, plus the applicable spread. The lenders under the increasing rate loan receive the benefit of the same guarantees and pledges of security provided under the new credit facility. The proceeds from the increasing rate loan will be used to finance the restructuring of Wyndham and Patriot. F-5 After the six month anniversary of the closing of the investment, lenders transferring increasing rate loans may exchange the increasing rate loans for exchange notes carrying identical terms to the increasing rate loans. To the extent any increasing rate loans or exchange notes are outstanding 180 days after the closing of the $1 billion equity investment, Wyndham must by such date file and maintain a shelf registration statement with the Securities and Exchange Commission allowing the resale of any exchange notes outstanding thereafter. Wyndham may also offer registered substitute notes in exchange for all outstanding IRLs and exchange notes. Wyndham's ability to borrow under its revolving facility is subject to Wyndham's compliance with a number of customary financial and other covenants, including total leverage and interest coverage ratios, limitations on additional indebtedness, and limitations on investments and stockholder dividends. Wyndham and Patriot have agreed to pay the agents and the lenders customary fees for a facility of this nature. In April 1999, the Chase Manhattan Bank and Chase Securities Inc. notified the companies that they were exercising their rights under the "market flex" provisions of the commitment letters to change the terms of the senior credit facilities and the increasing rate loan facility. The total amount of the senior credit facilities was reduced by $200 million to $1.6 billion and the amount of the increasing rate loans was increased by $200 million to $850 million. The revolving credit facility has been reduced from $800 million to $600 million and the maximum that may be drawn at the closing has been reduced from $560 million to $400 million. Interest rates for the new credit facility remain based upon LIBOR with the varying spreads changed to 1.50% to 3.00% per annum for the revolving loan facility and 3.00% to 3.75% per annum for the term loan facility. For purposes of the pro forma financial statements the New Credit Facility and increasing rate loans are collectively referred to as new debt financing. Interstate Spin-off Interstate's Third-Party Hotel Management Business In May, 1998, Patriot along, with Interstate Hotels Company ("Interstate") entered into a settlement agreement with Marriott International, Inc. which addressed certain claims asserted by Marriott concerning Patriot's then proposed merger with Interstate. The settlement agreement provided for the dismissal of litigation brought by Marriott, and allowed Patriot's merger with Interstate to close. . In addition to dismissal of the Marriott litigation, the settlement agreement provides for the re-branding of ten Marriott hotels under the Wyndham name, Marriott's assumption of the management of ten Marriott hotels formerly managed by Interstate for the remaining term of the Marriott franchise agreement, and the divesture of the third-party management business which was operated by Interstate. . Patriot must complete the spinoff of third-party management business which was operated by Interstate no later than May 14, 1999. If Patriot does not complete the spin-off or the sale transaction by the final divestiture date, Marriott will be entitled to receive 110% of the fees otherwise due under the management contracts that they assume in the settlement. Patriot will also be subject to additional penalties including Marriott's right to purchase, subject to third-party consents, the hotels to be submanaged by Marriott and six additional Marriott hotels owned by Patriot at their then appraised values. Additionally, subject to any defenses Patriot may have, Patriot would owe Marriott liquidated damages with respect to the hotels converted to the Wyndham brand, those to be submanaged by Marriott, and the six additional Marriott hotels Marriott would have the option to purchase. Patriot also anticipates that Marriott would require third-party owners of Marriott-branded hotels that we manages to replace Patriot as manager of their hotels. As a result, each respective hotel would either: (1) lose the Marriott brand, at which time Patriot would have to compensate Marriott for any lost franchise fees or (2) terminate the management contract with Wyndham and enter into a contract with another manager. Patriot would owe liquidated damages on any third-party Marriott-franchised hotel which chooses to convert its brand. F-6 Summary The following unaudited Pro Forma Condensed Consolidated Balance Sheet is presented as if the $1 billion equity investment, the restructuring of Wyndham and Patriot, the new debt financing and the Interstate spin-off prior to the final divestiture date had occurred on December 31, 1998. In addition, the pro forma financial statements assume that all but 1.7 million units of limited partnership interests tender their units for shares of common stock. It is also assumed that the amendments to the operating partnership agreements being sought and the consents of solicitation will be approved. These amendments will allow for the distribution of the non-voting stock of specified corporate subsidiaries so that it will be owned directly by Patriot. Additionally, the Pro Forma Condensed Consolidated Statements of Operations of the companies for the year ended December 31, 1998 assumes these transactions as described above and the effects of the business transactions completed in 1998 as detailed on pages F-2 through F-3 had occurred on January 1, 1998. The following unaudited Pro Forma Condensed Combined Statements of Operations was derived from the Combined Statements of Operations of Patriot and Wyndham (together with their respective subsidiaries) filed with the Companies' Annual Report on Form 10-K for the year ended December 31, 1998. The unaudited Pro Forma Condensed Combined Statement of Operations was also derived in part from Interstate Hotels Management, Inc.'s unaudited Pro Forma Combined Statements of Operations and Owners' Equity filed on Form 8K, dated March 26, 1999. In management's opinion all the material adjustments necessary to reflect the effects of the planned transaction have been made. The following unaudited Pro Forma Condensed Combined Balance Sheet is not necessarily indicative of what the actual financial position would have been assuming such transaction had been completed as of December 31, 1998, nor does it purport to present the future financial position of Wyndham and Patriot. Additionally, the following unaudited Pro Forma Condensed Combined Statements of Operations are not necessarily indicative of what the actual results of operations of Wyndham and of Patriot would have been assuming such transactions had been completed at the beginning of the period presented, nor do they purport to present the results of operations for future periods. F-7 PATRIOT AMERICAN HOSPITALITY, INC. and WYNDHAM INTERNATIONAL, INC. Pro Forma Condensed Combined Balance Sheet As of December 31, 1998 (unaudited)
Patriot Wyndham Pro Forma Pro Forma Combined Exchange Equity Pro Forma (A) (B) Eliminations Pro Forma Offer Investment Total ---------- ---------- ------------ ---------- --------- ---------- ----------- (in thousands, except share amounts) ASSETS Current assets: Cash and cash equivalents............. $ 72,360 $ 35,840 -- $ 108,200 -- $ -- $ 108,200 Restricted Cash......... 17,525 13,534 -- 31,059 -- -- 31,059 Accounts and lease revenue receivable, net..................... 8,589 169,178 -- 177,767 -- -- 177,767 Notes and other receivables from Patriot................. -- 19,109 (19,109)(C) -- -- -- -- Notes and other amounts receivable from Wyndham................. 187,572 -- (187,572)(D) -- -- -- -- Inventories............. -- 23,583 -- 23,583 -- -- 23,583 Prepaid expense and other assets............ 22,594 51,887 -- 74,481 -- -- 74,481 ---------- ---------- ----------- ---------- --------- ---------- ----------- Total current assets... 308,640 313,131 (206,681) 415,090 -- 415,090 Investment in real estate and related improvements and land held for development, net of accumulated depreciation............ 4,960,429 622,027 (916)(E) 5,581,540 (119,863)(H) -- 5,461,677 Investment in unconsolidated subsidiaries............ 975,591 125,006 (915,491)(F) 185,106 (2,786)(H) -- 182,320 Subscription notes receivable.............. 133,669 91,020 (224,689)(G) -- -- -- -- Mortgage notes and other receivables from unconsolidated subsidiaries............ 78,403 -- -- 78,403 -- -- 78,403 Mortgage notes and other receivables............. 20,079 15,071 -- 35,150 -- -- 35,150 Management contracts, net of accumulated amortization............ -- 128,644 -- 128,644 -- -- 128,644 Leaseholds, net of accumulated amortization............ 94,668 50,103 -- 144,771 -- -- 144,771 Trade names and franchise costs, net of accumulated amortization............ -- 125,974 -- 125,974 -- -- 125,974 Goodwill and intangibles, net of accumulated amortization............ 139,240 414,649 -- 553,889 (12,265)(H) (84,190)(I) 457,434 Deferred expenses, net of accumulated amortization............ 36,900 1,098 -- 37,998 -- 54,589 (J) 92,587 Deferred acquisition costs................... 1,587 14,557 -- 16,144 -- -- 16,144 ---------- ---------- ----------- ---------- --------- ---------- ----------- Total assets........... $6,749,206 $1,901,280 $(1,347,777) $7,302,709 $(134,914) $ (29,601) $ 7,138,194 ========== ========== =========== ========== ========= ========== =========== LIABILITIES & SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses........ $ 63,850 $ 218,825 -- $ 282,675 -- $ -- $ 282,675 Dividends and distributions payable... -- -- -- -- -- -- -- Participating lease payments payable to Patriot................. -- 40,996 (40,996)(D) -- -- -- -- Deposits................ -- 25,998 -- 25,998 -- -- 25,998 Notes and other amounts payable to Patriot...... -- 146,576 (146,576)(D) -- -- -- -- Notes and other amounts payable to Wyndham...... 19,109 -- (19,109)(C) -- -- -- -- Current portion of borrowings under the credit facility, term loans, mortgage notes and capital leases...... 1,128,949 145,969 -- 1,274,918 -- (1,097,255)(K) 177,663 ---------- ---------- ----------- ---------- --------- ---------- ----------- Total current liabilities............ 1,211,908 578,364 (206,681) 1,583,591 -- (1,097,255) 486,336 Subscription notes payable................. 91,020 133,669 (224,689)(G) -- -- -- -- Borrowings under the credit facility, term loans, mortgage notes and capital leases...... 2,483,127 99,476 2,582,603 -- 604,906 (K) 3,187,509 Due to unconsolidated subsidiaries............ 7,919 -- -- 7,919 -- -- 7,919 Deferred income taxes... 38,912 72,940 -- 111,852 -- 750,000 (L) 861,852 Minority interest in the Operating partnerships.. 217,924 36,046 253,970 (217,876)(H) -- 36,094 Minority interest in consolidated subsidiaries............ 229,537 913,141 (915,491)(F) 227,187 -- -- 227,187 Stockholders' equity: Preferred Stock......... 54 36 -- 90 -- 1,074 (M) 1,164 Excess stock............ -- -- -- -- -- -- -- Common Stock............ 2,135 2,135 -- 4,270 8 (H) (4,195)(M) 83 Additional Paid in Capital................. 2,775,722 248,818 -- 3,024,540 82,954 (H) 912,161 (M) 4,019,655 Treasury Stock.......... -- -- -- -- -- (341,091)(N) (341,091) Notes receivable from shareholders and affiliates.............. (15,254) (1,110) -- (16,364) -- -- (16,364) Unearned stock compensation, net of accumulated amortization............ (5,494) -- (5,494) -- -- (5,494) Unrealized loss on securities available for sale.................... -- (1,245) -- (1,245) -- -- (1,245) Unrealized foreign exchange gain........... 1,142 1,607 -- 2,749 -- -- 2,749 Distribution of Interstate Management at book value.............. -- (62,315) -- (62,315) -- -- (62,315) Accumulated deficit and dividend distributions.. (289,446) (120,282) (916)(E) (410,644) -- (855,201)(O) (1,265,845) ---------- ---------- ----------- ---------- --------- ---------- ----------- Total shareholders' equity................. 2,468,859 67,644 (916) 2,535,587 82,962 (287,252) 2,331,297 ---------- ---------- ----------- ---------- --------- ---------- ----------- Total liabilities and shareholders' equity... $6,749,206 $1,901,280 $(1,347,777) $7,302,709 $(134,914) $ (29,601) $ 7,138,194 ========== ========== =========== ========== ========= ========== ===========
See notes on following pages. F-8 Notes to Pro Forma Condensed Consolidated Balance Sheet; (A) Represents the pro forma balance sheet of Patriot as of December 31, 1998 as adjusted for the Interstate Spin-off transaction. See page F-18. (B) Represents the pro forma balance sheet of Wyndham as of December 31, 1998 as adjusted for the Interstate Spin-off transaction. See page F-23. (C) Represents the intercompany elimination of notes and other receivable from Patriot and notes and other amounts payable to Wyndham Notes and other receivables from Patriot....................... $ (19,109) Notes and other amounts payable to Wyndham..................... 19,109 --------- $ -- =========
(D) Represents the intercompany elimination of notes and other amounts receivable from Wyndham and participating lease payments payable to Patriot and notes and other amounts payable to Patriot. Notes and other amounts receivable from Wyndham............... $ (187,572) Participating lease payments payable to Patriot............... 40,996 Notes and other amounts payable to Wyndham.................... 146,576 ---------- $ -- ==========
(E) Represents the intercompany elimination of design and construction fees capitalized by Patriot for hotels leased by Patriot to Wyndham. Investment in real estate and related improvements and land held for development, net of accumulated depreciation................. $(916) Accumulated deficit and dividend distributions.................... 916 ----- $ -- =====
(F) Represents the intercompany elimination of Patriot's investment of certain non-controlled subsidiaries, which are controlled by Wyndham, that were formed in connection with various mergers and acquisitions in 1998, and Wyndham's minority interest in these subsidiaries. Investment in unconsolidated subsidiaries..................... $ (915,491) Minority interest in consolidated subsidiaries................ 915,491 ---------- $ -- ==========
(G) In order to effect the issuance of the paired shares of common stock and OP Units which were issued in connection with certain of the Companies' mergers, other acquisition transactions and equity transactions, Patriot and Wyndham have issued promissory notes to fund the issuance of paired shares and OP Units. These promissory notes are referred to as subscription notes. The adjustment represents the elimination of these notes receivables and payables. Subscription notes receivable.................................. $(224,689) Subscription notes payable..................................... 224,689 --------- $ -- =========
F-9 (H) Represents the adjustment in the basis of the related asset, liability, or shareholders' equity as a result of the use of the purchase method of accounting for the exchange of certain partners' common and preferred OP Units for the Companies' common stock. Step-Down in Basis of the Asset: Investment in real estate, and related improvements and land held for development, net of accumulated depreciation........ $(119,863) Investment in unconsolidated subsidiaries..................... (2,786) Goodwill and intangibles, net of accumulated amortization..... (12,265) --------- Total Step-down in basis of assets.......................... (134,914) ========= Reduction of Minority Interest: Minority interest in the Operating Partnership................ 217,876 =========
Adjustment to par value of common stock: Par value of common stock for shares issued in exchange for common and preferred units of limited partnership interests in the Operating Partnership (based on 13,529,998 issued at $.0005 per share)............................................................. 8 ===
Adjustments to additional paid in capital: Estimated Book Value of Sponsor's interest.......................... 22,835 Estimated Fair Market Value of Non Sponsor's interest............... 60,119 ------ Total adjustments to additional paid in capital................... 82,954 ======
(I) Represents the write-off of net book value of the intangible asset related to the structure recorded, as a result of the Cal Jockey merger. In connection with the change in tax legislation, the paired share REIT structures have been limited in their ability to expand their business through the limitation, set by Congress regarding business transactions between the REIT and its related operating company. As a result of this legislation, Patriot and Wyndham have revised their on going business strategy. Pursuant to the restructuring, Patriot and Wyndham will terminate their pairing agreement and no longer maintain the paired share REIT structure. Wyndham has recognized the write-off of this intangible as an adjustment to retained earnings in the pro forma condensed consolidated balance sheet. (J) Represents the pro forma adjustment for the write-off of net deferred financing costs associated with the existing $2.7 billion credit facility and the addition of deferred financing costs to be incurred in connection with the new debt financing. The write-off of deferred loan costs have been reflected as a pro forma adjustment to retained earnings in the pro forma condensed consolidated balance sheet. Write-off of net deferred financing cost associated with the credit facility............................................. $(14,536) Addition of deferred financing costs associated with the new debt financing.............................................. 69,125 -------- $ 54,589 ========
F-10 (K) Represents the pro forma adjustments to the current portion and long term portion of debt obligations as a result of the investment, the restructuring and new debt financing.
Balance ----------- Pro forma adjustments to debt as a result of New Debt Financing: New revolving loan facility bearing interest at a rate of 8.00% per annum (LIBOR plus 2.75%)........................... $ 400,000 New term loan facility bearing interest at a rate of 8.75% per annum (LIBOR plus 3.00%)................................. 1,000,000 Increasing rate loans bearing interest at a rate of .25% below the initial new term loan facility increasing .50% every three months........................................... 850,000 Other mortgage financing bearing interest at a rate of 8.75% per annum.................................................... 279,993 ----------- 2,529,993 Reduction of debt for the assumed repayment of the following long-term obligations: Existing credit facility..................................... (875,587) Tranche III and B term loans................................. (1,049,500) ----------- (1,925,087) ----------- Pro Forma adjustment to long-term debt obligations....... $ 604,906 =========== Current portion of long term debt to be repaid: Tranche I and II term loans.................................. (750,000) Promissory note payable to Chase Securities, Inc. ........... (49,255) Unsecured note payable to PaineWebber Real Estate, Inc. ..... (160,000) Mortgage note payable to PaineWebber Real Estate, Inc. ...... (103,000) Mortgage note payable to PaineWebber Real Estate, Inc. ...... (35,000) ----------- Pro Forma adjustment to current portion of debt obligations.............................................. $(1,097,255) ===========
(L) The restructuring will be reflected for as a reorganization of two companies under common control and will be accounted for in a manner similar to that used in pooling of interest accounting. There will be no revaluation of the assets and liabilities of the combining companies. Wyndham will take a one-time charge of approximately $750,000 related to a deferred tax liability that will result from the change in tax status from a REIT to a C Corporation, as required by SFAS No. 109. After the restructuring, Wyndham's financial statements will be presented on a consolidated basis representing the operations of the corporation (Wyndham) and its subsidiaries, including Patriot. (M) Represents the adjustments to shareholders' equity as follows: Adjustment to par value of preferred stock: Par value of series B preferred (based on 116,414,000 preferred shares issued at a par value of $0.01 per share)................ $1,164 Historical par value of preferred stock to be converted or retired as a result of the Investment and Restructuring................. (90) ------ $1,074 ======
F-11 Adjustment to par value of common stock: Par value of common stock after reverse stock split and preferred shares converted pursuant to the restructuring (based on 164,898,000 shares at a par value of $0.0005 per share)................. $ 83 Pro forma par value of shares exchanged for units of limited partnership interests in the operating partnership.......... (8) Historical par value of common stock......................... (4,270) ---------- $ (4,195) ========== Adjustment to additional paid in capital: Investment................................................... $1,000,000 Historical par value of preferred stock...................... 90 Historical par value of common stock......................... 4,270 Pro forma par value of shares exchanged for units of limited partnership interest in the Operating Partnerships.......... 8 Par value adjustment for series B preferred (1,164) Par value adjustment for reverse stock split................. (83) Cost of the Investment (including advisory fees, legal and accounting and costs of the transaction)............................... (90,960) ---------- $ 912,161 ==========
The total number of series B preferred shares issued is based on a conversion price of $8.59 per share. The amount by which the conversion price can be adjusted relating to indemnification for breaches by Wyndham and Patriot of general representations and warranties and for special costs related to the consummation of the restructuring of Wyndham and Patriot and related to shareholder litigation is subject to a maximum amount of approximately $2.27 per share. In order for the total conversion price adjustments relating to the indemnification to equal $2.27, Wyndham and Patriot would generally have to incur approximately $380,000 in losses, pursuant to the purchase agreement. There is no maximum amount on conversion price adjustments relating to breaches of covenants. Neither is there a maximum amount on the separate indemnity relating to sales by the counterparties to the companies' forward equity contracts of paired shares of Wyndham and Patriot common stock issued as collateral under the forward equity contracts. If the conversion price was adjusted by the maximum amount to $6.32, an additional 41,808,000 shares of common stock would be issuable upon conversion of the series B preferred stock. See Note (P) page F-14 for discussion of earnings per share. (N) Represents the recognition of treasury stock as a result of the cash settlement of the forward equity contracts for the return of approximately 13.3 million shares, shares held as collateral for the obligations and the retirement of Patriot B preferred stock returned for cash of $25.00 per share. The treasury stock will be recorded at cost and as a reduction of stockholders' equity. Forward equity shares.......................................... $327,125 Patriot B preferred stock...................................... 13,966 -------- $341,091 ========
(O) Pro forma adjustments to retained earnings are as follows: Write-off of intangibles related to structure................. $ 84,190 Write-off of deferred financing costs......................... 14,536 Estimated deferred tax liability.............................. 750,000 Transaction costs to settle forward equity contracts.......... 6,475 --------- $ 855,201 =========
F-12 Patriot American Hospitality, Inc. and Wyndham International Inc. Pro Forma Condensed Combined Statements of Operations for the year ended December 31, 1998 (unaudited)
Patriot Wyndham Elimination Combined Exchange Equity Pro Forma Pro Forma(A) Pro Forma(B) Entries Pro Forma (G) Offer Investment Total ------------ ------------ ----------- ------------- -------- ---------- ---------- Revenue: Hotel revenue.......... -- $2,153,954 -- $2,153,954 $ -- $ -- $2,153,954 Participating lease revenue................ $704,937 -- $(667,242)(C) 37,695 -- -- 37,695 Racecourse facility and land lease revenue................ -- 51,259 -- 51,259 -- -- 51,259 Management fee and service fee income..... -- 56,012 (916)(D) 55,096 -- -- 55,096 Interest and other income................. 17,853 23,522 (21,620)(E) 19,755 -- -- 19,755 -------- ---------- --------- ---------- ------- -------- ---------- Total revenue........ 722,790 2,284,747 (689,778) 2,317,759 -- -- 2,317,759 Expenses: Hotel expenses......... 127,253 1,419,999 -- 1,547,252 -- -- 1,547,252 Racecourse facility operations............. -- 43,198 -- 43,198 -- -- 43,198 General and administrative......... 31,157 76,612 -- 107,769 -- 7,550 (J) 115,319 Interest expense....... 319,520 39,240 (21,620)(E) 337,140 -- (34,500)(K) 302,640 Cost of acquiring leaseholds and license agreements............. 11,686 52,721 -- 64,407 -- -- 64,407 Treasury lock settlement............. 49,334 -- -- 49,334 -- -- 49,334 Loss on sale of assets................. 9,453 -- -- 9,453 -- -- 9,453 Impairment loss on assets held for sale... 27,897 23,184 -- 51,081 -- -- 51,081 Depreciation and amortization........... 195,678 66,658 -- 262,336 (4,651)(H) (2,193)(L) 255,492 Lease payments......... -- 667,242 (667,242)(C) -- -- -- -- -------- ---------- --------- ---------- ------- -------- ---------- 771,978 2,388,854 (688,862) 2,471,970 (4,651) (29,143) 2,438,176 -------- ---------- --------- ---------- ------- -------- ---------- Operating loss.......... (49,188) (104,107) (916) (154,211) 4,651 29,143 (120,417) Equity in earnings of unconsolidated subsidiaries........... 45,495 3,330 (36,502)(F) 12,323 -- -- 12,323 -------- ---------- --------- ---------- ------- -------- ---------- Loss before income tax provision, and minority interests............... (3,693) (100,777) (37,418) (141,888) 4,651 29,143 (108,094) Income tax (provision)/benefit.... (2,777) (13,043) -- (15,820) -- 22,261 (M) 6,441 -------- ---------- --------- ---------- ------- -------- ---------- Loss before minority interests............... (6,470) (113,820) (37,418) (157,708) 4,651 51,404 (101,653) Minority interest in the operating partnership............ 352 12,523 -- 12,875 (10,993)(I) -- 1,882 Minority interest in consolidated subsidiaries........... (8,057) (41,067) 36,502 (F) (12,622) -- -- (12,622) -------- ---------- --------- ---------- ------- -------- ---------- Net loss................ $(14,175) $ (142,364) $ (916) $ (157,455) $(6,342) $ 51,404 $ (112,393) ======== ========== ========= ========== ======= ======== ========== Basic loss per common share(N)................ $ (0.27) $ (0.96) -- $ (1.23) -- -- $ (1.29) ======== ========== ========== ========== Dilutive loss per common share(N)................ $ (1.37) $ (0.96) -- $ (2.34) -- -- $ (1.29) ======== ========== ========== ==========
See notes on following pages. F-13 Notes to Pro Forma Condensed Combined Statement of Operations; (A) Represents the Pro Forma Condensed Consolidated Statements of Operations for Patriot for the year ended December 31, 1998. See page F-20. (B) Represents the Pro Forma Condensed Consolidated Statements of Operations for Wyndham for the year ended December 31, 1998. See page F-25. (C) Represents elimination of lease revenue and expense related to the hotels and the Racecourse facility leased by Patriot to Wyndham. (D) Represents elimination of design and construction fees related to the hotels leased by Patriot to Wyndham. (E) In connection with the mergers and other transactions, Patriot (including the Patriot Partnership) subscribed for shares of Wyndham common stock or units of limited partnership interest in the Wyndham Partnership and Wyndham subscribed for shares of Patriot common stock in order to effect the exchange of paired shares or pairs of units of limited partnership interest in the operating partnerships in consummation of the transactions. These subscriptions for shares of common stock and units of limited partnership interest were funded through the issuance of promissory notes referred to as "subscription notes" payable to Wyndham or Patriot, as the case may be. The subscription notes accrue interest at rates ranging from LIBOR plus 1% to a fixed rate of 8.7% per annum and mature on various dates through January 2001. The pro forma elimination entry relating to interest income and expense consists of: Interest income and expense related to the Subscription Notes.. $ 18,293 Interest income and expense related to the participating note held by Wyndham related to the Buena Vista Palace Hotel....... 1,852 Interest income and expense related to a note receivable issued to Old Patriot in connection with the sale of certain assets to PAH RSI, L.L.C., which assets were acquired by Wyndham........ 1,186 Other intercompany income and expense items.................... 289 -------- $ 21,620 ========
(F) Represents elimination of Patriot's equity in the earnings of certain non- controlled subsidiaries that were formed in connection with various mergers and acquisitions in 1998. The entities are controlled by Wyndham, and as a result, the operating results of these entities have been combined with those of Wyndham for pro forma financial reporting purposes. (G) Represents the pro forma results of operations for Patriot and Wyndham combined for the year ended December 31, adjusted for the 1998 Transactions and the Interstate Spin off Transaction, as if they had be consummated on January 1, 1998. See pages F-20 and F-25. (H) Represents the pro forma adjustment to reduce depreciation and amortization for the step-down in basis as a result of the use of the purchase method of accounting for the exchange of certain partners' common and preferred OP units for the Companies' common stock. (I) Represents the reduction in minority interest due to a reduction in minority interest percentage as a result of the exchange of the minimum of amount of limited partners' common and preferred OP units for the Companies' common stock. The impact to the results of operations if all the remaining partners were to elect to exchange their interest would be to reduce minority interest in the operating partnership by $1,882 and increase the Companies' net loss from $110,163 to $112,045. The net loss applicable to the common shareholder would increase to $212,081, with a net loss per share of $1.27 based on the weighted average shares of 166,598 (including the exchange of 1,700 of remaining units exchanged for shares). (J) Represents the pro forma adjustment for incremental administrative fees of approximately $1,075 in fees related to the new credit facilities and approximately $6,475 in fees related to settlement of the forward equity contracts. F-14 (K) Represents the pro forma adjustment to debt and interest expense as a result of the investment and new credit facilities as follows:
Balance Interest ----------- --------- Pro forma adjustments to debt as a result of New Debt Financing: New revolving loan facility bearing interest at a rate of 8.00% per annum (LIBOR plus 2.75%)....... $ 400,000 $ 32,444 New term loan facility bearing interest at a rate of 8.75% per annum (LIBOR plus 3.00%)............ 1,000,000 88,715 Increasing rate loans bearing interest at a rate of .25% below the initial new term loan facility increasing .50% every three months............... 850,000 79,717 Other mortgage financing bearing interest at a rate of 8.75% per annum.......................... 279,993 24,839 Additional deferred loan costs of approximately $69,125 amortized over periods of 5 to 7 years... -- 11,382 ----------- --------- 2,529,993 237,097 Reduction of debt for the assumed repayment of the following long-term obligations: Existing credit facility......................... (875,587) (72,968) Tranche III and B term loans..................... (1,049,500) (97,160) Amortization of deferred loan costs related to the existing credit facility for the year ended December 31, 1998................................ -- (31,661) ----------- --------- (1,925,087) (201,789) ----------- --------- Pro Forma adjustment to long-term debt obligations.................................. $ 604,906 =========== Current portion of long term debt to be repaid: Tranche I and II term loans...................... (750,000) (46,386) Promissory note payable to Chase Securities, Inc. ............................................ (49,255) (606) Unsecured note payable to PaineWebber Real Estate, Inc. .................................... (160,000) (12,113) Mortgage note payable to PaineWebber Real Estate, Inc. ............................................ (103,000) (8,044) Mortgage note payable to PaineWebber Real Estate, Inc. ............................................ (35,000) (2,659) ----------- --------- Pro Forma adjustment to current portion of debt obligations............................. $(1,097,255) $ (69,808) =========== ========= Pro Forma adjustments to interest expense: Pro forma adjustments to interest as a result of new debt financing............................... $ 237,097 Reduction of interest expense for the assumed repayment of long-term debt obligations....................... (201,789) Interest expense related to current portion of debt obligations to be repaid.................... (69,808) --------- Pro Forma adjustment to interest expense..... $ (34,500) =========
An increase of 0.125% in the interest rate would increase pro forma interest expense to $304,845, increasing net loss to $114,585. Net loss applicable to common shareholders would increase to $214,621, loss per common share would increase to $1.30 based on 164,898 weighted average number of common shares and common share equivalents outstanding. (L) Represents the adjustment to reduce depreciation and amortization for the goodwill to be written off in connection with the restructuring. (M) Represents the tax benefit to Wyndham as a result of the restructuring of Wyndham and Patriot. The restructuring of Wyndham and Patriot results in Wyndham, Patriot and certain corporate subsidiaries of Patriot reporting and filing on a consolidated basis for federal income tax purposes. The tax benefit is derived from the reversal of certain timing differences between financial and income tax reporting methods and does not represent the amount of cash taxes for which Wyndham would be liable. F-15 (N) As a result of the $1 billion equity investment and the restructuring of Patriot and Wyndham, Wyndham will issue 116,414,000 shares of series B preferred stock to the investors at $8.59 per share for a total investment of $1 billion. Proceeds from the investment will be used to repay the obligations in connection with the forward equity contracts of approximately $333,600. Based upon the number of paired shares issued at December 31, 1998, a total of 67,300,000 shares of common stock will be retired to treasury stock in connection with the repayment of the forward equity transactions. Additionally, the holders of Wyndham Series A and B Preferred Stock will be offered the opportunity to exchange their securities for Wyndham common stock. For purposes of the calculation, Wyndham Series A and B Preferred Stock will be assumed to be converted to Wyndham common stock. Holders of Patriot preferred stock will have the right to receive $25.00 for each of their paired shares. For purposes of the pro forma statement, the Patriot B preferred holders are assumed to receive total cash of approximately $13,966 (based on 558,700 shares at $25.00 per share). As a result, the total number of common shares outstanding on a pro forma basis would be 164,898,000. Pro forma basic and dilutive earnings per share are as follows:
Pro Forma Pro Forma Basic Dilutive ---------- ---------- Earnings per common share: Net loss attributable to common shareholders..... $ (112,393) $ (112,393) Investor Preferred Dividends..................... (100,036) (100,036) ---------- ---------- Net loss available to common shareholders........ (212,429) (212,429) ========== ========== Weighted average shares.......................... 164,898 164,898 ========== ========== Net loss per common share........................ $ (1.29) $ (1.29) ========== ==========
For the pro forma calculation, the dilutive effect of the series B preferred shares of 124,654,000, unvested stock grants of 880,000 and the option to purchase 733,000 common shares were excluded from the computation of dilutive earnings per share for the year ended December 31, 1998 because they are anti-dilutive. F-16 The combined Companies are in a loss position for the twelve months ended December 31, 1998. Basic and dilutive earnings per share, on a pro forma basis, before the effects of the Exchange Offer and restructuring are as follows:
Basic Diluted --------- --------- Combined net loss................................. $(157,455) $(157,455) Preferred stock dividends......................... (7,956) (7,956) Adjustment for equity forwards (1)................ (21,151) (188,592) --------- --------- Net loss to common shareholders.................. $(186,562) $(354,003) ========= ========= Weighted average number of paired shares and paired share equivalents outstanding: Basic........................................... 151,313 151,313 ========= ========= Diluted......................................... 151,313 151,313 ========= =========
- -------- (1) The adjustment relates to the mark-to-market adjustment for the UBS and Nations forward equity contracts which can be settled in cash or stock, at the Companies' option. At December 31, 1998, the PaineWebber Transaction can be settled only in stock, only the guaranteed return portion as adjusted in the earnings per share calculations. There is no mark-to- market adjustment for the PaineWebber transaction which is accounted for by the Reverse Treasury Method. F-17 PATRIOT AMERICAN HOSPITALITY INC. PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET As of December 31, 1998 (unaudited)
Historical Interstate Pro Forma 12/31/1998(A) Spin-off 12/31/98 ------------- ---------- ---------- (in thousands, except share amounts) ASSETS Investment in real estate and related improvements and land held for development, net of accumulated amortization........................... $4,960,429 -- $4,960,429 Cash and Cash Equivalents............... 72,360 -- 72,360 Restricted Cash......................... 17,525 -- 17,525 Accounts receivable..................... 8,589 -- 8,589 Investment in unconsolidated subsidiaries........................... 975,591 -- 975,591 Mortgage notes and other receivables from unconsolidated subsidiaries....... 78,403 -- 78,403 Subscription Notes receivable from Wyndham................................ 133,669 -- 133,669 Notes and other amounts receivable from Wyndham................................ 180,152 7,420 187,572 Other notes receivable.................. 20,079 -- 20,079 Leaseholds, net of accumulated amortization........................... 102,088 (7,420)(B) 94,668 Goodwill and intangibles, net of accumulated amortization............... 139,240 -- 139,240 Deferred expenses, net of accumulated amortization........................... 36,900 -- 36,900 Deferred acquisition costs.............. 1,587 -- 1,587 Inventories............................. -- -- -- Other assets............................ 22,594 -- 22,594 ---------- ------- ---------- Total assets........................ $6,749,206 $ -- $6,749,206 ========== ======= ========== LIABILITIES & SHAREHOLDERS' EQUITY Borrowings under credit facility, term loans, mortgage notes and capital leases................................. $3,612,076 $ -- $3,612,076 Subscription Notes payable to Wyndham... 91,020 -- 91,020 Notes and other amounts payable to Wyndham................................ 19,109 -- 19,109 Accounts payable and accrued expenses... 63,850 -- 63,850 Dividends and distributions payable..... -- -- -- Deferred income taxes................... 38,912 -- 38,912 Due to unconsolidated subsidiaries...... 7,919 -- 7,919 Minority interest in the Patriot Partnerships........................... 217,924 -- 217,924 Minority interest in consolidated subsidiaries........................... 229,537 -- 229,537 Shareholders' equity: Preferred stock....................... 54 -- 54 Excess stock.......................... -- -- -- Common stock.......................... 2,135 -- 2,135 Additional paid in capital.............. 2,775,722 -- 2,775,722 Notes receivable from shareholders...... (15,254) -- (15,254) Unearned stock compensation, net of accumulated amortization............... (5,494) -- (5,494) Unrealized foreign exchange gain........ 1,142 -- 1,142 Accumulated deficit and dividend distributions.......................... (289,446) -- (289,446) ---------- ------- ---------- Total shareholders' equity.......... 2,468,859 -- 2,468,859 ---------- ------- ---------- Total liabilities and shareholders' equity............................. $6,749,206 $ -- $6,749,206 ========== ======= ==========
See notes on following page. F-18 Notes to Pro Forma Condensed Consolidated Balance Sheet: (A) Represents the consolidated balance sheets of Patriot as presented in the Companies' Annual Report on Form 10-K as of December 31, 1998. (B) Represents the pro forma adjustment to reduce investments in leaseholds for the transfer of certain leases held by Patriot to Interstate Management in connection with the Spin-off. Notes and other amounts receivable from Wyndham.................. $ 7,420 Leaseholds, net of accumulated amortization...................... (7,420) ------- $ -- =======
F-19 PATRIOT AMERICAN HOSPITALITY, INC. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS For the Year Ended December 31, 1998 (unaudited) (in thousands, except for per share amounts)
Patriot Recent Arcadian Summerfield Interstate Pro Historical Transactions Acquisition Acquisition Merger Forma (A) (B) (C) (D) (E) Total ---------- ------------ ----------- ----------- ---------- -------- Revenue: Participating lease revenue.............. $578,029 $1,335 (F) $ 3,803 (F) $ 23,194 (F) $98,576 (F) $704,937 Interest and other income............... 17,381 472 -- -- -- 17,853 -------- ------ ------- -------- ------- -------- Total revenue....... 595,410 1,807 3,803 23,194 98,576 722,790 -------- ------ ------- -------- ------- -------- Expenses: Hotel expenses........ 100,324 362 (G) 468 17,174 (G) 8,925 (G) 127,253 General and administrative....... 29,784 -- -- -- 1,373 31,157 Interest expense...... 245,205 601 (H) 6,708 (H) 7,488 (H) 59,518 (H) 319,520 Cost of acquiring leaseholds and license agreements... 11,686 -- -- -- -- 11,686 Treasury lock settlement........... 49,334 -- -- -- -- 49,334 Loss on sale of assets............... 9,453 -- -- -- -- 9,453 Impairment loss on assets held for sale................. 27,897 -- -- -- -- 27,897 Depreciation and amortization......... 161,857 877 (I) 2,120 (I) 3,769 (I) 27,055 (I) 195,678 -------- ------ ------- -------- ------- -------- Total expenses...... 635,540 1,840 9,296 28,431 96,871 771,978 -------- ------ ------- -------- ------- -------- Operating (loss) income................. (40,130) (33) (5,493) (5,237) 1,705 (49,188) Equity in earnings (loss) of unconsolidated subsidiaries......... 36,726 7,805 (J) (128)(K) (6,293)(L) 7,385 (M) 45,495 -------- ------ ------- -------- ------- -------- (Loss) income before income tax provision, minority interests and extraordinary item..... (3,404) 7,772 (5,621) (11,530) 9,090 (3,693) Income tax provision.. (2,742) (35)(N) -- -- -- (2,777) -------- ------ ------- -------- ------- -------- (Loss) income before minority interest and extraordinary item..... (6,146) 7,737 (5,621) (11,530) 9,090 (6,470) Minority interest in operating partnership.......... (98) (931)(O) -- 1,381 (O) -- 352 Minority interest in consolidated subsidiaries......... (8,084) 27 (P) -- -- -- (8,057) -------- ------ ------- -------- ------- -------- Net (loss) income before extraordinary item..... $(14,328) $6,833 $(5,621) $(10,149) $ 9,090 $(14,175) ======== ====== ======= ======== ======= ======== Basic loss per common share before extraordinary item (Q):................... $ (0.30) $ (0.27) ======== ======== Diluted loss per common share before extraordinary item (Q):................... $ (1.51) $ (1.37) ======== ========
See notes on following page. F-20 Notes to Pro Forma Condensed Consolidated Statement of Operations: (A) Represents Patriot's historical results of operations before extraordinary items for the twelve months ended December 31, 1998 as reported in the Companies' Annual Report on Form 10K. (B) Represents adjustments to Patriot's results of operations assuming recent transactions, including the acquisition of the Buena Vista Hotel, the merger with WHG and related acquisition of minority interests and the Golden Door Spa completed by Patriot during the twelve months ended December 31, 1998 had been consummated on January 1, 1998. (C) Represents adjustments to Patriot's results of operations assuming the Arcadian Acquisition had been consummated as of January 1, 1998. (D) Represents adjustments to Patriot's results of operations assuming the Summerfield Acquisition had been consummated as of January 1, 1998. (E) Represents adjustments to Patriot's results of operations assuming the Interstate Merger and the related financing transactions had been consummated as of January 1, 1998. (F) Represents adjustments to lease revenue assuming the hotels and leasehold interests currently owned by Patriot and its subsidiaries had been leased to the Lessees or Wyndham as of January 1, 1998. No lease income is included in the pro forma statement of operations for time periods prior to completion of construction or commencement of operations. (G) Represents pro forma ground lease payments to be made with respect to certain of the hotels, and hotel lease expense related to the hotels leased by Patriot from third-party owners, which Patriot sub-leases to Wyndham. (H) Interest expense consists of the following components:
Recent Arcadian Summerfield Interstate Transactions Acquisition Acquisition Merger ------------ ----------- ----------- ---------- Related to acquisition of hotels and hotel management businesses.... $601 $6,308 $7,256 $51,573 Related to subscription notes payable to Wyndham.................. -- -- 232 1,254 Related to amortization of deferred loan costs...... -- 400 -- 6,691 ---- ------ ------ ------- $601 $6,708 $7,488 $59,518 ==== ====== ====== =======
The Pro Forma amounts presented assume an average interest rate of 7.39% per annum (assuming LIBOR plus 2.25%) on the amounts outstanding on the Revolving Credit Facility. Amortization of deferred loan costs is computed using the straight-line method (which approximates the interest method) over the term of the related loans. As a result of the closing of the repayment of debt assumed in connection with the Wyndham merger, deferred loan costs related to the debt repaid were written off. In addition, Patriot incurred certain prepayment penalties related to the early repayment of certain debt. These amounts, net of the minority interest share, were reported as an extraordinary item in Patriot's historical results of operations and has been eliminated for pro forma presentation purposes. In addition, as a result of the increase in Patriot's existing credit facilities, additional deferred loan costs totaling approximately $27,405 have been included in the borrowings under the credit facility and mortgage notes in the pro forma financial statements. An increase of 0.125% in the interest rate would increase pro forma interest expense to $320,461, increasing net loss to $15,103. Net loss applicable to common shareholders would increase to $41,504, however, loss per common share would remain at $0.27 based on 151,313 weighted average number of common shares and common share equivalents outstanding. (I) Represents adjustments to depreciation and amortization in accordance with Patriot policy. Depreciation is computed using the straight-line method and is based upon the estimated useful lives of 30 to 40 years for the hotel buildings and improvements, 7 years for the Racecourse facility and 3 to 10 years for furniture, fixtures and equipment ("FF&E"). These estimated useful lives are based on management's F-21 knowledge of the properties and the industry in general. Amortization of goodwill related to mergers and other acquisitions of businesses is computed using the straight-line method over estimated useful lives ranging from 5 to 40 years. (J) Represents Patriot's pro forma equity in earnings of the non-controlled subsidiaries that own the Wyndham trade names and franchise related assets, the management and franchising contracts and the hotel management company and which are controlled by Wyndham. In addition, represents equity in losses of the partnerships that own the El San Juan Hotel & Casino and the El Conquistador and the WHG management company. These entities are also controlled by Wyndham. (K) Represents Patriot's pro forma equity in losses of the non-controlled subsidiaries that own certain management-related assets acquired in the Arcadian acquisition. Subsidiaries of Wyndham own the controlling interest in these entities. (L) Represents Patriot's pro forma equity in earnings of the non-controlled subsidiaries that own the management contracts and hotel management business acquired in the Summerfield acquisition. Subsidiaries of Wyndham own the controlling interest in these entities. (M) Represents Patriot's pro forma equity in losses of the non-controlled subsidiaries that own the management contracts and hotel management business acquired in the Interstate merger. Subsidiaries of Wyndham own the controlling interest in these entities. (N) Represents an adjustment for estimated state income tax liabilities. (O) Represents the adjustment to minority interest to reflect the estimated minority interest percentage subsequent to the assumed transactions of approximately 11%. (P) Represents the minority interest related to partnerships and limited liability companies that own certain of the hotels assuming such entities had been formed and the hotels owned by such entities had been acquired at January 1, 1998. (Q) A reconciliation of net loss to common share holders is as follows:
Basic Diluted -------- --------- Net loss........................................... $(14,175) $ (14,175) Preferred stock dividends.......................... (5,250) (5,250) Adjustment for equity forwards (/1/)............... (21,151) (188,592) -------- --------- Net loss to common shareholders.................. $(40,576) $(208,017) ======== ========= Weighted average number of paired shares and paired share equivalents outstanding: Basic.......................................... 151,313 151,313 ======== ========= Diluted........................................ 151,313 151,313 ======== =========
- -------- (1) The adjustment relates to the mark-to-market adjustment for the UBS and Nations forward equity contracts, which can be settled in cash or stock, at the Companies' option. At December 31, 1998, PaineWebber can be settled only in stock, on the guaranteed return portion as adjusted in the earnings per share calculation. There is no mark-to-market adjustment for PaineWebber which is accounted for by the Reverse Treasury Method. F-22 WYNDHAM INTERNATIONAL, INC. PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET As of December 31, 1998 (unaudited)
Historical Interstate Pro Forma 12/31/1998 (A) Spin-off (B) 12/31/98 -------------- ------------ ---------- (in thousands, except share amounts) ASSETS Current assets: Cash and cash equivalents........... $ 50,725 $ (14,885)(C) $ 35,840 Restricted cash..................... 18,344 (4,810) 13,534 Accounts receivable................. 185,994 (16,816) 169,178 Notes and other receivables from Patriot............................ 19,109 -- 19,109 Inventories......................... 23,583 -- 23,583 Prepaid expense and other assets.... 28,195 (3,863) 24,332 ---------- --------- ---------- Total current assets.............. 325,950 (40,374) 285,576 Investment in real estate and related improvements and land held for development, net of accumulated depreciation........................ 626,103 (4,076) 622,027 Investment in unconsolidated subsidiaries........................ 86,812 38,194 (D) 125,006 Subscription notes receivable from Patriot............................. 91,020 -- 91,020 Mortgage notes and other receivables......................... 21,255 (6,184) 15,071 Management contracts, net of accumulated amortization............ 194,014 (65,370) 128,644 Leaseholds, net of accumulated amortization........................ 77,834 (27,731) 50,103 Trade names and franchise costs, net of accumulated amortization......... 125,974 -- 125,974 Deferred acquisition costs........... 14,557 -- 14,557 Goodwill, net of accumulated amortization........................ 414,649 -- 414,649 Deferred expenses, net of accumulated amortization........................ 1,098 -- 1,098 Other assets......................... 27,555 -- 27,555 ---------- --------- ---------- Total assets...................... $2,006,821 $(105,541) $1,901,280 ========== ========= ========== LIABILITIES & SHAREHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses........................... $ 249,981 $ (31,156)(E) $ 218,825 Dividends and distributions payable............................ -- -- -- Participating lease payments payable to Patriot......................... 40,996 -- 40,996 Deposits............................ 26,392 (394) 25,998 Notes and other amounts payable to Patriot............................ 139,156 7,420 146,576 Current portion of mortgage notes and capital leases................. 145,969 -- 145,969 ---------- --------- ---------- Total current liabilities......... 602,494 (24,130) 578,364 Subscription notes payable to Patriot............................ 133,669 -- 133,669 Mortgage notes payable and capital leases............................. 99,476 -- 99,476 Due to unconsolidated subsidiaries.. -- -- -- Deferred income taxes............... 84,551 (11,611) 72,940 Minority interest in the Wyndham Partnerships....................... 36,046 -- 36,046 Minority interest in consolidated subsidiaries....................... 915,491 (2,350) 913,141 Shareholders' equity: Preferred stock..................... 36 -- 36 Excess stock........................ -- -- -- Common stock........................ 2,135 -- 2,135 Additional paid in capital........... 248,818 -- 248,818 Notes receivable from affiliates..... (1,110) -- (1,110) Unearned stock compensation, net of accumulated amortization............ -- -- -- Unrealized loss on securities held for sale............................ (1,245) -- (1,245) Unrealized foreign exchange gain..... 1,607 -- 1,607 Distribution of Interstate Management at book value....................... -- (62,315)(F) (62,315) Accumulated deficit and dividend distribution........................ (115,147) (5,135)(G) (120,282) ---------- --------- ---------- Total shareholders' equity........ 135,094 (67,450) 67,644 ========== ========= ========== Total liabilities and shareholders' equity............. $2,006,821 $(105,541) $1,901,280 ========== ========= ==========
See notes on following page. F-23 Notes to Pro Forma Condensed Consolidated Balance Sheet: (A) Represents the consolidated balance sheets of Wyndham as presented in the Companies' Annual Report on Form 10-K as of December 31, 1998. (B) Represents the pro forma adjustments to reflect the estimated effects of the Spin-off to the Companies' financial position as of December 31, 1998. The Spin-off includes the transfer of the third-party hotel management business of Interstate, an ownership interest in the Charles Hotel Complex and the long-term leasehold interests in certain hotels (the "Leased Hotels') and certain assets and liabilities of Wyndham. After the Spin- off, Wyndham will own an approximate 55% non-controlling interest in Interstate Hotels LLC, a subsidiary of Interstate Management, which is reflected in equity in earnings of unconsolidated subsidiaries. (C) Represents the following pro forma adjustments; Historical cash of Interstate Management as of December 31, 1998......................................................... $ 1,652 Repayment of amounts due to Wyndham........................... (18,597) Additional working capital contribution to Interstate Management by the Companies at date of Spin-off.............. 31,830 -------- $ 14,885 ========
(D) Represents the following pro forma adjustments: Transfer of investment in the Charles Hotel Complex to Interstate Management........................................ $(22,150) Recognition of Wyndham's 55% non-controling interest in Interstate Management........................................ 60,344 -------- $ 38,194 ========
(E) Represents the pro forma adjustments for accounts payable and accrued expenses and the estimated accrued tax liability. The accrued tax liability is calculated using an effective tax rate of 40% times the excess of the fair market value of the assets being transferred over their book value for federal income tax purposes. Reduction of accounts payable and accrued expenses............... $36,156 Estimated accrued tax liability.................................. (5,000) ------- $31,156 =======
(F) Represents the pro forma adjustment to reflect the distribution of Interstate Management at book value to the shareholders. (G) Represents the pro forma adjustments for estimated accrued tax liability and the loss on the sale of The Charles Hotel Complex. In connection with the Spin-off, the Companies and Interstate Management have reached a tentative agreement under which all of the equity interests in the Charles Hotel Complex will be sold to an existing independent joint venture partner. The pro forma net loss on the sale is $135. Estimated accrued liability....................................... $5,000 Loss on sale...................................................... 135 ------ $5,135 ======
F-24 WYNDHAM INTERNATIONAL, INC. PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS For the Year Ended December 31, 1998 (unaudited) (in thousands, except for per share amounts)
Wyndham Recent Arcadian Summerfield Interstate CHCI Historical Transactions Acquisition Acquisition Merger Merger Pro Forma (A) (B) (C) (D) (E) (F) Other Total ---------- ------------ ----------- ----------- ---------- ------- ------- ---------- Revenue: Hotel revenue..... $1,842,682 $51,770 $16,426 $53,746 $324,467 $58,785 $ -- $2,347,876 Racecourse facility revenue.. 51,259 -- -- -- -- -- -- 51,259 Management fee and service fee income............ 89,983 (1,833) -- 1,814 17,817 646 -- 108,427 Interest and other income............ 18,303 193 690 550 2,536 1,844 -- 24,116 ---------- ------- ------- ------- -------- ------- ------- ---------- Total revenue... 2,002,227 50,130 17,116 56,110 344,820 61,275 -- 2,531,678 ---------- ------- ------- ------- -------- ------- ------- ---------- Expenses: Hotel expenses.... 1,251,548 41,235 13,278 25,738 227,822 34,655 -- 1,594,276 Racecourse facility operations........ 43,198 -- -- -- -- -- -- 43,198 General and administrative.... 87,882 -- -- 4,964 16,627 497 -- 109,970 Interest expense.. 35,690 2,872 (G) -- -- -- 678 (H) -- 39,240 Cost of acquiring leaseholds........ 52,721 -- -- -- -- -- -- 52,721 Impairment loss on assets held for sale.............. 23,184 -- -- -- -- -- -- 23,184 Depreciation and amortization...... 69,375 1,758 (I) 118 (I) 1,649 (I) 11,323 (I) 619 (I) -- 84,842 Participating lease payments.... 519,589 1,335 (J) 3,803 (J) 23,194 (J) 98,576 (J) 20,745 (J) -- 667,242 ---------- ------- ------- ------- -------- ------- ------- ---------- Total expenses.. 2,083,187 47,200 17,199 55,545 354,348 57,194 -- 2,614,673 ---------- ------- ------- ------- -------- ------- ------- ---------- Operating (loss) income............. (80,960) 2,930 (83) 565 (9,528) 4,081 -- (82,995) Equity in earnings of unconsolidated subsidiaries...... 3,134 (1,677) (K) -- -- -- -- -- 1,457 ---------- ------- ------- ------- -------- ------- ------- ---------- (Loss) income before income tax provision, minority interest and extraordinary item............... (77,826) 1,253 (83) 565 (9,528) 4,081 -- (81,538) Income tax provision......... (14,381) -- -- -- -- -- (8,626)(L) (23,007) ---------- ------- ------- ------- -------- ------- ------- ---------- (Loss) income before minority interest and extraordinary item............... (92,207) 1,253 (83) 565 (9,528) 4,081 (8,626) (104,545) Minority interest in Wyndham partnership....... 12,750 (175)(M) (5)(M) -- (M) -- (M) (47)(M) -- 12,523 Minority interest in consolidated subsidiaries...... (31,705) (6,155)(N) 128 (N) 6,293 (N) (9,934)(N) -- 539 (O) (40,834) ---------- ------- ------- ------- -------- ------- ------- ---------- (Loss) income before extraordinary item............... $ (111,162) $(5,077) $ 40 $ 6,858 $(19,462) $ 4,034 $(8,087) $ (132,856) ========== ======= ======= ======= ======== ======= ======= ========== Basic loss per common share before extraordinary item (S)................ $ (0.83) $ (0.90) ---------- ---------- Diluted loss per common share before extraordinary item (S)................ $ (0.83) $ (0.90) ========== ========== Interstate Spin-off Pro Forma Transaction(P) Total --------------- ---------- Revenue: Hotel revenue..... (193,922) 2,153,954 Racecourse facility revenue.. -- 51,259 Management fee and service fee income............ (52,415)(Q) 56,012 Interest and other income............ (594) 23,522 --------------- ---------- Total revenue... (246,931) 2,284,747 --------------- ---------- Expenses: Hotel expenses.... (174,277) 1,419,999 Racecourse facility operations........ -- 43,198 General and administrative.... (33,358) 76,612 Interest expense.. -- 39,240 Cost of acquiring leaseholds........ -- 52,721 Impairment loss on assets held for sale.............. 23,184 Depreciation and amortization...... (18,184) 66,658 Participating lease payments.... -- 667,242 --------------- ---------- Total expenses.. (225,819) 2,388,854 --------------- ---------- Operating (loss) income............. (21,112) (104,107) Equity in earnings of unconsolidated subsidiaries...... 1,873(R) 3,330 --------------- ---------- (Loss) income before income tax provision, minority interest and extraordinary item............... (19,239) (100,777) Income tax provision......... 9,964 (13,043) --------------- ---------- (Loss) income before minority interest and extraordinary item............... (9,275) (113,820) Minority interest in Wyndham partnership....... -- 12,523 Minority interest in consolidated subsidiaries...... (233) (41,067) --------------- ---------- (Loss) income before extraordinary item............... $ (9,508) $(142,364) =============== ========== Basic loss per common share before extraordinary item (S)................ $ (0.96) ---------- Diluted loss per common share before extraordinary item (S)................ $ (0.96) ==========
See notes on following page F-25 Notes to Pro Forma Condensed Consolidated Statement of Operations: (A) Represents the historical results of operations of Wyndham for the twelve months ended December 31, 1998 as reported in the Companies' Annual Report of Form 10-K. (B) Represents adjustments to Wyndham's results of operations assuming that Recent Transactions completed by the Companies during the twelve months ended December 31, 1998 had occurred as of January 1 1998. No adjustment is made to the results of operations for time periods prior to the completion of construction or commencement of operations. (C) Represents adjustments to Wyndham's results of operations for the hotel leases and management contracts acquired as a result of the Arcadian acquisition assuming such leases and management contracts had been acquired as of January 1, 1998. No adjustment is made to the results of operations for time periods prior to the completion of construction or commencement of operations. (D) Represents adjustments to Wyndham's results of operations for the hotel investments and management operations acquired by Wyndham as a result of the Summerfield acquisition assuming such investments had been acquired as of January 1, 1998. No adjustment is made to the results of operations for time periods prior to the completion of construction or commencement of operations. (E) Represents adjustments to Wyndham's results of operations for the hotel leases and management contracts acquired as a result of the Interstate merger, assuming such leases and management contracts had been acquired as of January 1, 1998. No adjustment is made to the results of operations for time periods prior to the completion of construction or commencement of operations. (F) Represents adjustments to Wyndham's results of operations for the hotel leases and management contracts acquired by Wyndham as a result of the CHCI merger assuming such leases and management contracts had been acquired as of January 1, 1998. No adjustment is made to the results of operations for time periods prior to the completion of construction or commencement of operations. (G) Represents pro forma interest expense on debt and capital lease obligations related to the Condado Plaza Hotel, the El San Juan Hotel & Casino and the El Conquistador. As a result of the WHG Transactions, Wyndham acquired a controlling interest in the partnerships that own the El San Juan Hotel & Casino and the El Conquistador. As a result, the results of operations of these partnerships are included in Wyndham's consolidated operating results. These debt and capital lease obligations bear interest at rates ranging from LIBOR plus 0.9% (estimated as 6.589%) to 12.0% per annum. An increase of 0.125% in the interest rate would increase pro forma interest expense to $39,258, increasing net loss to $142,382. Net loss applicable to common shares holders would increase to $145,088, however, loss per common share would remain at $0.96 based on 151,313 weighted average number of common shares and common share equivalents outstanding. (H) Represents pro forma interest expense on debt obligations assumed in connection with the CHCI merger. (I) Represents the following pro forma adjustments to depreciation and amortization in accordance with Wyndham policy. Depreciation is computed using the straight-line method and is based upon the estimated useful lives of 30 to 40 years for buildings and improvements and 3 to 10 years for FF&E. Amortization of goodwill related to the acquisition of the management operations of entities acquired is computed using the straight- line method over estimated useful lives of 5 to 40 years. Amortization of management contracts tradenames and franchise costs is computed using the straight-line method over estimated useful lives ranging from 6 to 30. (J) Represents pro forma lease payments from Wyndham to Patriot calculated based upon the historical operating results of the hotels for the twelve months ended December 31, 1998. (K) Represents adjustment to eliminate Wyndham's equity in earnings of unconsolidated subsidiaries related to WHG. Subsequent to the WHG Transactions, these entities are consolidated with Wyndham. (L) Represents an adjustment to the estimated federal and state tax liability as a result of the pro forma adjustments to the operating results for the twelve months ended December 31, 1998. (M) Represents the adjustment to minority interest to reflect the estimated minority interest percentage in the Wyndham Partnership subsequent to the assumed transactions of approximately 12.2%. F-26 (N) Represents adjustments for Patriot's minority interest in the non- controlled subsidiaries. These entities are controlled by Wyndham. (O) Represents the elimination of minority interest from the historical financial statements of minority interests in WHG and CHCI. (P) Represents the pro forma adjustments based on the Pro Forma Combined Statement of Operations of Interstate Management for the year ended December 31, 1998 pursuant to the Spin-off. (Q) Represents the following pro forma adjustments related to the Spin-off: Interstate Management historical management fees............... $ 40,781 Interstate Management historical other income.................. 20,454 Management and other fees from seven of the Companies' hotels to be managed by Interstate Management................. 3,207 Hotels owned by Patriot and managed by Interstate Management... (12,207) -------- $ 52,415 ========
(R) Represents the pro forma adjustment to historical operations to reflect the reduction of equity in earnings of unconsolidated subsidiaries for the transfer of the Charles Hotel Complex in the Spin-off. Currently the Companies own an approximate 49% non-controlling interest in this complex. Consequently, the results of operations for the complex are not consolidated but are reflected through equity in earnings of unconsolidated subsidiaries. The adjustment to reduce equity in earnings of unconsolidated subsidiaries is $2,151. Additionally, as a result of the Spin-off, Wyndham will own a non-controlling interest of approximately 55% of Interstate Hotels LLC, a subsidiary of Interstate Management, the newly formed entity. Wyndham will account for their ownership as a equity investment and record their share of estimated earnings of Interstate Hotels, LLC as equity in earning in unconsolidated subsidiaries. The pro forma adjustment for the estimated earnings for the year ended December 31, 1998 is $4,024. (S) Wyndham is in a loss position for the twelve months ended December 31, 1998. Therefore basic and diluted earnings per share are identical since the securities which could have a dilutive impact on earnings per share are anti-dilutive. Net loss..................................................... $(142,364) Preferred stock dividend..................................... (2,706) --------- Net loss to common stockholders............................ $(145,070) ========= Weighted average number of common shares outstanding: Basic...................................................... 151,313 ========= Diluted.................................................... 151,313 =========
Wyndham is in a loss position (prior to the Interstate Spin off transaction) for the twelve months ended December 31, 1998. Therefore basic and diluted earnings per share are identical since the securities which could have a dilutive impact on earnings per share are anti-dilutive. Net loss..................................................... $(132,856) Preferred stock dividend..................................... (2,706) --------- Net loss to common stockholders............................ $(135,562) ========= Weighted average number of common shares outstanding: Basic...................................................... 151,313 ========= Diluted.................................................... 151,313 =========
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