-----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, GL/NxECaf8OcOt9qikzIngwi3LxQFl68tptxkJ56lIu9jvnrrH/4FFR4123YJpZu Cw3KuQdr/XPk5xIis7wF5w== 0000950133-98-002856.txt : 19980807 0000950133-98-002856.hdr.sgml : 19980807 ACCESSION NUMBER: 0000950133-98-002856 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19980805 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19980806 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HUMPHREY HOSPITALITY TRUST INC CENTRAL INDEX KEY: 0000929545 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 521889548 STATE OF INCORPORATION: VA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 000-25060 FILM NUMBER: 98678063 BUSINESS ADDRESS: STREET 1: 12301 OLD COLUMBIA PIKE CITY: SILVER SPRING STATE: MD ZIP: 20904 BUSINESS PHONE: 3016804343 MAIL ADDRESS: STREET 1: 12301 OLD COLUMBIA PIKE CITY: SILVE SPRING STATE: MD ZIP: 20904 8-K/A 1 FORM 8-K/A RE: HUMPHREY HOSPITALITY TRUST, INC. 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 FORM 8-K A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report: August 05, 1998 Commission File Number: 0-25060 HUMPHREY HOSPITALITY TRUST, INC. (Exact name of registrant as specified in its charter) Virginia 0-25060 52-1889548 (State of Incorporation) (Commission File (I.R.S. employer Number) identification no.) 12301 Old Columbia Pike, Silver Spring MD 20904 (301) 680-4343 (Address of principal executive offices) (Registrant's telephone number) N/A (Former Name or Former Address, if Changed Since Last Report) 1 2 Item 2. Acquisitions or Disposition of Assets On June 25, 1998, Humphrey Hospitality Trust, Inc. (the "Company"), through its 87.57% interest in Humphrey Hospitality L.P. (the "Partnership"), completed the acquisition of a 73-room Best Western hotel in Ellenton, Florida and a 63-room Shoney's Inn hotel in Ellenton, Florida from Allen Investments Inc.. On June 26, 1998, the Company completed the acquisition of an 80-room Hampton Inn hotel in Brandon, Florida from Allen Investments, Inc.. The Partnership leased the properties to Humphrey Hospitality Management, Inc., the lessor of the Partnership's other hotel properties, pursuant to percentage leases which provide for rent based, in part, on the room revenues from the hotels. The lease for the Best Western and Shoney's Inn hotels located in Ellenton, Florida went into effect on June 25, 1998, the lease for the Hampton Inn hotel located in Brandon, Florida went into effect on June 26, 1998. 2 3 Item 7. Financial Statements, Pro Forma Financial Information and Exhibits (a) The following financial statement of the properties acquired and described in Item 2 is contained at pages 4 through 14. Allen Acquisition Hotels Independent Auditors Report; Combined Balance Sheets as of December 31, 1997 and March 31, 1998 (Unaudited); Combined Statements of Income for the year ended December 31, 1997 and the three months ended March 31, 1997 and 1998(Unaudited); Combined Statements of Equity for the year ended December 31, 1997 and the three months ended March 31, 1998 (Unaudited); Combined Statements of Cash Flows for the year ended December 31, 1997 and the three months ended March 31, 1997 and 1998 (Unaudited); Notes to Combined Financial Statements (b) The following pro forma financial statements required by Article 11 of Regulation S-X for Humphrey Hospitality Trust, Inc. and Humphrey Hospitality, Management, Inc. are contained at pages 14 through 31. Pro Forma Condensed Consolidated Balance Sheet as March 31, 1998 for Humphrey Hospitality Trust, Inc.; Pro Forma Condensed Consolidated Statement of Income for the year ended December 31, 1997 for Humphrey Hospitality Trust, Inc.; Pro Forma Condensed Consolidated Statement of Income for the three months ended March 31, 1998 for Humphrey Hospitality Trust, Inc.; Pro Forma Condensed Statement of Income for the year ended December 31, 1997 for Humphrey Hospitality Management, Inc. Pro Forma Condensed Statement of Operations for the three months ended March 31, 1998 for Humphrey Hospitality Management, Inc. 3 4 INDEPENDENT AUDITORS' REPORT To the Shareholders and Board of Directors Humphrey Hospitality Trust, Inc. We have audited the accompanying combined balance sheet of the Allen Acquisition Hotels as of December 31, 1997, and the related combined statements of income, equity and cash flows for the year then ended. These financial statements are the responsibility of the management of the Allen Acquisition Hotels. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit 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 audit provides 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 the Allen Acquisition Hotels as of December 31, 1997, the combined results of its operations and its combined cash flows for the year then ended in conformity with generally accepted accounting principles. REZNICK FEDDER & SILVERMAN Baltimore, Maryland May 18, 1998 4 5 COMBINED BALANCE SHEETS December 31, 1997 and March 31, 1998 (Unaudited)
December 31, March 31, 1997 1998 -------------- --------------- (Unaudited) ASSETS INVESTMENT IN HOTEL PROPERTIES Land $ 1,200,000 $ 1,200,000 Land improvements 205,000 205,000 Buildings and improvements 7,992,804 7,992,804 Furniture and equipment 803,427 803,427 ------------- ------------- 10,201,231 10,201,231 Less accumulated depreciation 550,659 655,056 ------------- ------------- Net investment in hotel properties 9,650,572 9,546,175 OTHER Cash 211,594 329,817 Accounts receivable 66,300 75,558 Deposits 23,756 23,756 Mortgage costs, net of accumulated amortization of $27,000 and $32,788 186,820 181,032 Franchise fees, net of accumulated amortization of $4,800 and $5,671 60,200 59,329 ------------- ------------- $ 10,199,242 $ 10,215,667 ============= ============= LIABILITIES AND EQUITY LIABILITIES Long-term debt $ 6,601,042 $ 6,561,629 Accounts payable and accrued expenses 86,103 138,804 Accrued interest payable 48,094 48,094 ------------- ------------- 6,735,239 6,748,527 EQUITY 3,464,003 3,467,140 ------------- ------------- $ 10,199,242 $ 10,215,667 ============= =============
See notes to combined financial statements 5 6 COMBINED STATEMENTS OF INCOME Year ended December 31, 1997 and the three months ended March 31, 1997 and 1998 (Unaudited)
March 31, December 31, ---------------------------- 1997 1997 1998 ------------ ------------ ------------ (Unaudited) Revenue Room revenue $ 3,148,341 $ 836,734 $ 1,157,336 Telephone revenue 57,869 11,109 18,107 Other revenue 61,819 19,166 9,056 ------------ ------------ ------------ Total revenue 3,268,029 867,009 1,184,499 ------------ ------------ ------------ Expenses Salaries and wages 657,446 141,203 178,044 Room expense 109,349 54,425 14,657 Restaurant expense 75,101 - 22,724 Telephone 47,238 13,494 12,372 General and administrative 113,259 23,544 53,434 Marketing and promotion 86,596 4,011 9,196 Security 16,103 - 265 Utilities 193,520 34,956 47,302 Repairs and maintenance 108,824 24,252 24,274 Taxes and insurance 127,570 34,339 25,946 Real estate taxes 116,614 28,676 41,000 Franchise fees 190,320 43,967 41,617 Interest expense 554,872 110,322 144,475 Depreciation and amortization 355,572 68,958 111,056 ------------ ------------ ------------ Total expenses 2,752,384 582,147 726,362 ------------ ------------ ------------ NET INCOME $ 515,645 $ 284,862 $ 458,137 ============ ============ ============
See notes to combined financial statements 6 7 COMBINED STATEMENTS OF EQUITY Year ended December 31, 1997 and the three months ended March 31, 1998 (Unaudited) Balance, December 31, 1996 $ 3,427,739 Distributions (479,381) Net income 515,645 -------------- Balance, December 31, 1997 3,464,003 Distributions (455,000) Net income 458,137 -------------- Balance, March 31, 1998 (Unaudited) $ 3,467,140 ==============
See notes to combined financial statements 7 8 COMBINED STATEMENT OF CASH FLOWS Year ended December 31, 1997 and the three months ended March 31, 1997 and1998 (Unaudited)
March 31, December 31, ----------------------------- 1997 1997 1998 ------------- ------------- ------------ (Unaudited) Cash flows from operating activities Net income $ 515,645 $ 284,862 $ 458,137 Adjustments to reconcile net income to net cash provided by operating activities Depreciation 330,989 64,213 104,397 Amortization 24,583 4,745 6,659 Changes in assets and liabilities Increase in accounts receivable (24,080) - (9,258) Increase in deposits (3,000) - - (Decrease) increase in accounts payable and accrued expenses (21,405) 28,676 52,701 Increase in accrued interest payable 11,246 - - ------------- ------------- ------------ Net cash provided by operating activities 833,978 382,496 612,636 ------------- ------------- ------------ Cash flow from investing activities Investment in hotel property (1,722,924) (29,460) - ------------- ------------- ------------ Net cash used in investing activities (1,722,924) (29,460) - ------------- ------------- ------------ Cash flow from financing activities Proceeds from mortgages payable 1,474,795 - - Principal payments on long-term debt (136,925) (30,133) (39,413) Distributions (479,381) (211,831) (455,000) ------------- ------------- ------------ Net cash provided by (used in) financing activities 858,489 (241,964) (494,413) ------------- ------------- ------------ NET (DECREASE) INCREASE IN CASH (30,457) 111,072 118,223 Cash, beginning 242,051 221,807 211,594 ------------- ------------- ------------ Cash, ending $ 211,594 $ 332,879 $ 329,817 ============= ============= ============ Supplemental disclosures of cash flow information Cash paid during the year for interest $ 554,872 $ 110,322 $ 144,475 ============= ============= ============
See notes to combined financial statements 8 9 NOTES TO COMBINED FINANCIAL STATEMENTS December 31, 1997 and March 31, 1998 (Amounts and disclosures as of March 31, 1997 and 1998 and for the three months then ended are unaudited) NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The Allen Acquisition Hotels combined financial statements are a combination of the balance sheets and statements of income, equity and cash flows of three hotel properties owned and operated by Allen Investments Inc. (the Company), a sub-chapter S corporation. In May 1998, the Company entered into an agreement to sell its hotel properties to Humphrey Hospitality Limited Partnership. The sales agreement does not extend to any other assets or liabilities of the Company. The hotel properties combined in these financial statements consist of the following:
Date Hotel Opened/Acquired Rooms Location - --------------- -------------------- ---------- ----------------- Shoney's Inn May 1997 63 Ellenton, Florida Hampton Inn November 1996 80 Brandon, Florida Best Western December 1994 73 Ellenton, Florida
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 reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Investment in Hotel Properties ------------------------------ The hotel property is stated at cost. Depreciation is provided for in amounts sufficient to relate the cost of depreciable assets to operations by use of the straight-line method over estimated useful lives: Building and improvement 15-40 years Land improvements 15 years Furniture and equipment 5-7 years
9 10 NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED December 31, 1997 and March 31, 1998 (Amounts and disclosures as of March 31, 1997 and 1998 and for the three months then ended are unaudited) NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Maintenance and repairs are charged to operations as incurred. Additions and major improvements are capitalized. Upon sale or disposition, both the asset and related accumulated depreciation are relieved and the related gain or loss is included in operations. The Company evaluates long-lived assets for potential impairment by analyzing the operating results, trends and prospects for the properties and considering any other events and circumstances which might indicate potential impairment. Mortgage Costs -------------- Mortgage costs are amortized over the term of the debt using the straight-line method. Franchise Fees -------------- The Shoney's Inn Hotel is operated under a franchise agreement with Sholodge Franchise Systems, Inc. The Best Western Hotel is operated under a franchise agreement with Best Western. The Hampton Inn Hotel is operated under a franchise agreement with Promuse Hotels, Inc. Franchise fees are amortized over the term of the franchise agreement using the straight-line method. Revenue Recognition ------------------- Room and other revenue is recognized as earned. Ongoing credit evaluations are performed and accounts deemed uncollectible are charged to operations. Income Taxes ------------ No provision or benefit for income taxes has been included in the financial combined statements for the Company since taxable income or loss passes through to, and is reportable by, the owners individually. Concentration of Credit Risk ---------------------------- The Company maintains its deposits with major banks. At December 31, 1997 and March 31, 1998, the balances reported by the banks exceeded the Federal depository insurance limits, however management believes that no significant concentration of credit risk exists with respect 10 11 NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED December 31, 1997 and March 31, 1998 (Amounts and disclosures as of March 31, 1997 and 1998 and for the three months then ended are unaudited) to these uninsured cash balances. 11 12 NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED December 31, 1997 and March 31, 1998 (Amounts and disclosures as of March 31, 1997 and 1998 and for the three months then ended are unaudited) NOTE B - LONG-TERM DEBT Long-term debt at December 31, 1997 and March 31, 1997 and 1998, consisted of the following:
March 31, December 31, --------------------------------- 1997 1997 1998 ------------ ------------- ---------------- (Unaudited) Shoney's Inn - ------------ Mortgage payable in equal monthly installments of principal and interest of $17,317 bearing interest at 8.75% per annum. On May 11, 2002, the interest rate will be adjusted to a rate equal to the Current Index, as defined plus 275 basis points. The mortgage matures on May 1, 2007. $ 1,988,495 $ - $ 1,983,975 Best Western - ------------ Mortgage payable in equal monthly installments of $16,465 bearing interest at 8.98% per annum through March 28, 2003. 1,453,920 1,502,353 1,437,039 Hampton Inn - ----------- Mortgage payable in equal monthly installments of $30,353 bearing interest at 9.50% per annum through October 31, 2001. On November 1, 2001, the interest rate will be adjusted to an amount equal to 300 basis points added to the weekly average yield of United States Treasury Securities equivalent adjusted to a constant maturity of five years rounded up to the nearest one-eighth of one percent, and this rate shall be effective until maturity on November 1, 2006. 3,158,627 3,205,481 3,140,615 ----------- ----------- ----------- $ 6,601,042 $ 4,707,834 $ 6,561,629 ========== =========== ===========
12 13 NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED December 31, 1997 and March 31, 1998 (Amounts and disclosures as of March 31, 1997 and 1998 and for the three months then ended are unaudited) NOTE B - LONG-TERM DEBT - (Continued) The mortgages are secured by the hotel property and guaranteed by the owners of Allen Investments, Inc. Annual principal payments on the mortgages for the five years following December 31, 1997 and March 31, 1998, are as follows:
December 31, March 31, -------------- ------------- (Unaudited) 1998 $ 170,837 $ - 1999 $ 180,331 $ 172,942 2000 $ 202,707 $ 185,936 2001 $ 216,792 $ 205,945 2002 $ 240,779 $ 222,765 2003 $ - $ 245,368
NOTE C - COMMITMENTS Franchise fees represent the annual expense for franchise royalties, reservation and advertising services under the terms of the hotel franchise agreements. The payments are based upon percentages of gross room revenue. 13 14 Humphrey Hospitality Trust, Inc. and Subsidiaries PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET March 31, 1998 This unaudited Pro Forma Condensed Consolidated Balance Sheet of Humphrey Hospitality Trust, Inc. and Subsidiaries (the Company) is presented as if the consummation of the April 1998 Offering and the acquisition of the Allen Acquisition Hotels had occurred on March 31, 1998. Such pro forma information is based upon the consolidated balance sheet of the Company as of March 31, 1998. It should be read in conjunction with the consolidated financial statements of the Company as of March 31, 1998, previously filed with the Securities and Exchange Commission in Form 10-Q. In management's opinion all adjustments necessary to reflect the effects of the above transactions have been made. This unaudited Pro Forma Condensed Consolidated Balance Sheet is not necessarily indicative of what the actual financial position would have been assuming such transactions had been completed as of March 31, 1998, nor does it purport to represent the future financial position of the Company. 14 15 Humphrey Hospitality Trust, Inc. and Subsidiaries PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET - CONTINUED March 31, 1998 (Unaudited, in thousands)
The Proceeds Company of Pro Forma Pro Forma Consolidated Offering Company Use of Company (C) Historical (a) (b) Proceeds ------------- ---------- ----------- ----------- ------------ ASSETS Net investment in hotel properties $ 50,334 $ - $ 50,334 $ 10,975 (d) $ 61,309 Cash and cash equivalents 14 11,013 11,027 (11,013)(e) 14 Accounts receivable from leasee 1,215 - 1,215 - 1,215 Reserve for replacements 33 - 33 - 33 Deferred expenses, net 857 - 857 - 857 Other assets 271 - 271 - 271 ----------- -------- --------- ---------- ---------- Total assets $ 52,724 $ 11,013 $ 63,737 $ (38) $ 63,699 =========== ======== ========= ========== ========== LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Mortgages and bonds payable $ 31,021 $ - $ 31,021 $ (38)(f) 30,983 Dividends payable 559 - 559 - 559 Accounts payable and accrued expenses 400 - 400 - 400 ----------- -------- --------- ---------- ---------- Total liabilities 31,980 - 31,980 (38) 31,942 ----------- -------- --------- ---------- ---------- MINORITY INTEREST 3,303 - 3,303 635 (g) 3,938 ----------- -------- --------- ---------- ---------- SHAREHOLDERS' EQUITY Common stock 35 12 47 - 47 Additional paid-in capital 17,984 11,001 28,985 (635)(h) 28,350 Distributions in excess of earnings (578) - (578) - (578) ----------- -------- --------- ---------- ---------- 17,441 11,013 28,454 (635) 27,819 ----------- -------- --------- ---------- ----------
15 16 Humphrey Hospitality Trust, Inc. and Subsidiaries PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET - CONTINUED March 31, 1998 (Unaudited, in thousands)
The Proceeds Company of Pro Forma Pro Forma Consolidated Offering Company Use of Company (C) Historical (a) (b) Proceeds ------------- ---------- ----------- ----------- ------------ $ 52,724 $ 11,013 $ 63,737 $ (38) $ 63,699 =========== ======== ========= ========== ==========
16 17 Humphrey Hospitality Trust, Inc. and Subsidiaries PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET - CONTINUED March 31, 1998 (Unaudited, in thousands) - ------------- (a) Represents proceeds of the April 1998 Offering ($12,075) less expenses of the Offering ($1,062). (b) Represents the combined interests of the Company after the proceeds of the April 1998 Offering, but before the use of proceeds. (c) Represents the combined interests of the Company after the use of the proceeds of the April 1998 Offering and the acquisition of the Allen Acquisition Hotels. (d) Represents the purchase price of the Allen Acquisition Hotels, including related closing costs. (e) Net decrease reflects the use of cash for the repayment of a portion of the Credit Facility. (f) Net decrease reflects the repayment of a portion of the Credit Facility from the net proceeds ($11,013) of the April 1998 Offering and borrowings from the Company's Credit Facility in connection with the acquisition of the Allen Acquisition Hotels ($10,975). (g) Represents an adjustment to minority interest to arrive at the interest in Humphrey Hospitality Limited Partnership (the Partnership) that will not be owned by the Company, determined as follows: Net proceeds of the April 1998 Offering $ 11,013 Shareholders' equity as of March 31, 1998 17,441 Minority interest in the Partnership as of March 31, 1998 3,303 ----------- 31,757 Minority interest percentage subsequent to the April 1998 Offering x 12.4% ----------- Minority interest after the April 1998 Offering $ 3,938 ===========
(h) Net decrease reflects the adjustment to the minority interest in the Partnership as follows: Minority interest after the April 1998 Offering $ 3,938 Less minority interest prior to the April 1998 Offering 3,303 ----------- Adjustment to minority interest $ 635 ===========
17 18 Humphrey Hospitality Trust, Inc. and Subsidiaries PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME Year ended December 31, 1997 This unaudited Pro Forma Condensed Consolidated Statement of Income of Humphrey Hospitality Trust, Inc. and Subsidiaries (the Company) is presented as if the consummation of the April 1998 Offering, the application of the proceeds of the Offerings, and the acquisition of the Allen Acquisition Hotels had occurred on January 1, 1997. It should be read in conjunction with the consolidated financial statements of Humphrey Hospitality Trust, Inc. for the year ended December 31, 1997 previously filed with the Securities and Exchange Commission in Form 10-K and the financial statements of the Allen Acquisition Hotels for the year ended December 31, 1997, at pages 5 through 14. In management's opinion, all adjustments necessary to reflect the effects of the above transactions have been made. This unaudited Pro Forma Condensed Consolidated Statement of Income is not necessarily indicative of what actual results of operations of the Company would have been assuming such transactions had been completed as of January 1, 1997, nor does it purport to represent the results of operations for future periods. 18 19 Humphrey Hospitality Trust, Inc. and Subsidiaries PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME - CONTINUED Year ended December 31, 1997 (Unaudited, in thousands)
The Company Pro Forma Consolidated Pro Forma Consolidated Historical Adjustments Total (a) ------------- ------------ ------------ Operating data Percentage lease revenue $ 7,326 $ 1,493 (b) $ 8,819 Other revenue 106 - 106 ----------- ---------- ---------- Total revenue 7,432 1,493 8,925 Depreciation and amortization 1,634 386 (C) 2,020 Real estate and personal property taxes and property insurance 476 160 (d) 636 Interest expense 1,764 (223)(e) 1,541 General and administrative 484 - 484 Ground rent 52 - 52 Minority interest 465 56 (f) 521 ----------- ---------- ---------- Net income applicable to common shares $ 2,557 $ 1,114 $ 3,671 =========== ========== ========== Basic earnings per common share $ 0.73 $ - $ 0.79 Diluted earnings per common share $ 0.73 $ - $ 0.79 Weighted average share: Basic 3,481,700 - 4,631,700(g) Diluted 4,139,073 - 5,289,073(h)
- -------------- (a) Represents results of operations for the Current Hotels and the Allen Acquisition Hotels on a pro forma basis as if the Allen Acquisition Hotels were owned by the Company and leased under the Percentage Leases, and reflecting the reduction in debt resulting from the April 1998 Offering as of the beginning of the period presented. (b) Represents lease payments from the Lessee to the Partnership calculated on a pro forma basis using the rent provisions in the Percentage Leases and the historical revenue of the 19 20 Humphrey Hospitality Trust, Inc. and Subsidiaries PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME - CONTINUED Year ended December 31, 1997 (Unaudited, in thousands) Allen Acquisition Hotels. 20 21 Humphrey Hospitality Trust, Inc. and Subsidiaries PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME - CONTINUED Year ended December 31, 1997 (Unaudited, in thousands) (c) Represents depreciation on the Allen Acquisition Hotels. Depreciation is computed using the straight-line method based upon estimated useful lives of 30-40 years for building and 5 years for furniture and equipment and the purchase prices of the Allen Acquisition Hotels. The estimated useful lives are based on management's knowledge of the properties and the hotel industry in general. (d) Represents estimated real estate and personal property taxes and property insurance for the Allen Acquisition Hotels to be paid by the Partnership. (e) Represents interest computed on approximately $25.3 million of debt remaining outstanding during the period after giving affect to the April 1998 Offering and the proposed use of proceeds from that Offering to retire existing debt and the borrowings from the Credit Facility to fund the purchase of the Allen Acquisition Hotels. (f) Calculated at 12.4% of total revenue minus depreciation and amortization, real estate and personal property taxes, property insurance, interest expense, general and administrative expenses, and ground rent. (g) Represents 3,481,700 common shares outstanding during the period presented plus 1,150,000 common shares issued in connection with the April 1998 Offering. (h) Assumes the conversion of the Units in the Partnership held by the minority interest, consisting of 657,373 Units outstanding during the period presented. 21 22 Humphrey Hospitality Trust, Inc. and Subsidiaries PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME Three months ended March 31, 1998 This unaudited Pro forma Condensed Consolidated Statement of Income of Humphrey Hospitality Trust. Inc. and Subsidiaries (the Company) is presented as if the consummation of the April 1998 Offering, the application of the proceeds of the Offering, and the acquisition of the Allen Acquisition Hotels had occurred on January 1, 1997. It should be read in conjunction with the consolidated financial statements of Humphrey Hospitality Trust, Inc. for the year ended December 31, 1997 previously filed with the Securities and Exchange Commission in Form 10-K and the financial statements of the Allen Acquisition Hotels for the year ended December 31, 1997, at pages 5 through 14. In management's opinion, all adjustments necessary to reflect the effects of the above transactions have been made. This unaudited Pro Forma Condensed Consolidated Statement of Income is not necessarily indicative of what actual results of operations of the Company would have been assuming such transactions had been completed as of January 1, 1997, nor does it purport to represent the results of operations for future periods. 22 23 Humphrey Hospitality Trust, Inc. and Subsidiaries PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME - CONTINUED Three months ended March 31, 1998 (Unaudited, in thousands)
The Company Pro Forma Consolidated Pro Forma Consolidated Historical Adjustments Total (a) ------------ ------------ ------------ Operating data Percentage lease revenue $ 1,904 $ 482 (b) $ 2,386 Other revenue 4 - 4 ---------- ---------- ---------- Total revenue 1,908 482 2,390 Depreciation and amortization 552 96 (C) 648 Real estate and personal property taxes and property insurance 139 50 (d) 189 Interest expense 659 (10)(e) 649 General and administrative 125 - 125 Ground rent 16 - 16 Minority interest 66 29 (f) 95 ---------- ---------- ---------- Net income applicable to common shareholders $ 351 $ 317 $ 668 ========== ========== ========== Basic earnings per common share $ 0.10 - $ 0.14 Diluted earnings per common share $ 0.10 - $ 0.14 Weighted average shares Basic 3,481,700 - 4,631,700(g) Diluted 4,139,073 - 5,289,073(h)
- -------------- (a) Represents results of operations for the Current Hotels and the Allen Acquisition Hotels on a pro forma basis as if the Allen Acquisition Hotels were owned by the Company and leased under the Percentage Leases, and reflecting the reduction in debt resulting from the April 1998 Offering as of the beginning of the period presented. (b) Represents lease payments from the Lessee to the Partnership calculated on a pro forma basis using the rent provisions in the Percentage Leases and the historical revenue of the Allen Acquisition Hotels. 23 24 Humphrey Hospitality Trust, Inc. and Subsidiaries PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME - CONTINUED Three months ended March 31, 1998 (Unaudited, in thousands) (c) Represents depreciation on the Allen Acquisition Hotels. Depreciation is computed using the straight-line method based upon estimated useful lives of 30-40 years for building and 5 years for furniture and equipment and the purchase prices of the Allen Acquisition Hotels. The estimated useful lives are based on management's knowledge of the properties and the hotel industry in general. (d) Represents estimated real estate and personal property taxes and property insurance for the Allen Acquisition Hotels to be paid by the Partnership. (e) Represents interest computed on approximately $24.6 million of debt remaining outstanding during the period after giving effect to the April 1998 Offering and the proposed use of proceeds from that Offering to retire existing debt and the borrowings from the Credit Facility to fund the purchase of the Allen Acquisition Hotels. (f) Calculated at 12.4% of total revenue minus depreciation and amortization, real estate and personal property taxes, property insurance, interest expense, general and administrative expenses, and ground rent. (g) Represents 3,481,700 common shares outstanding during the period presented plus 1,150,000 common shares issued in connection with the April 1998 Offering. (h) Assumes the conversion of the Units in the Partnership held by the minority interest, consisting of 657,373 Units outstanding during the period presented. 24 25 Humphrey Hospitality Management, Inc. PRO FORMA CONDENSED STATEMENT OF INCOME Year ended December 31, 1997 This unaudited Pro Forma Condensed Statement of Income of Humphrey Hospitality Management, Inc. is presented as if the consummation of the April 1998 Offering, (the Offering) and the acquisition of the Allen Acquisition Hotels had occurred on January 1, 1997, and the percentage leases for the Allen Acquisition Hotels were effective on January 1, 1997. Such estimated information should be read in conjunction with the financial statements of Humphrey Hospitality Management, Inc., previously filed with the Securities and Exchange Commission in Form 10-K of Humphrey Hospitality Management, Inc., for the year ended December 31, 1997, and the financial statements of the Allen Acquisition Hotels for the year ended December 31, 1997, at pages 5 through 14. In management's opinion, all adjustments necessary to reflect the effects of the above transactions have been made. This unaudited Pro Forma Condensed Statement of Income is not necessarily indicative of what actual results of operations of Humphrey Hospitality Management, Inc. would have been assuming such transactions had been completed as of January 1, 1997, nor does it purport to represent the results of operations for future periods. 25 26 Humphrey Hospitality Management, Inc. PRO FORMA CONDENSED STATEMENT OF INCOME - CONTINUED Year ended December 31, 1997
Humphrey Allen Hospitality Acquisition Management, Hotels Inc. Combined Pro Forma Historical Historical Adjustments Total (a) -------------- ------------ ------------- ------------ Room revenue $ 15,581 $ 3,150 $ - $ 18,731 Other revenue 871 118 - 989 ----------- ---------- ----------- ---------- Total revenue 16,452 3,268 - 19,720 ----------- ---------- ----------- ---------- Expenses Hotel operating costs 5,094 837 - 5,931 General and administrative 729 113 (5)(b) 837 Marketing and promotion 621 87 - 708 Utilities 768 194 - 962 Repairs and maintenance 384 109 - 493 Taxes and insurance 245 128 (43)(C) 330 Franchise fees 875 190 - 1,065 Interest - 555 (555)(d) - Real estate taxes - 117 (117)(C) - Depreciation and amortization - 356 (356)(d) - Management fees - 68 - 68 Percentage lease payments 7,326 - 1,493 (e) 8,819 ----------- ---------- ----------- ---------- 16,042 2,754 417 19,213 ----------- ---------- ----------- ---------- $ 410 $ 514 $ (417) $ 507 =========== ========== =========== ==========
- ------------- (a) Represents results of operations for the Current Hotels and the Allen Acquisition Hotels 26 27 Humphrey Hospitality Management, Inc. PRO FORMA CONDENSED STATEMENT OF INCOME - CONTINUED Year ended December 31, 1997 on a pro forma basis as if the Allen Acquisition Hotels were owned by the Company at the beginning of the periods presented and leased to the Lessee under the Percentage Leases throughout the periods presented. (b) Decrease reflects the elimination of certain nonrecurring charitable contributions, professional fees and other general and administrative expenses. (c) Decrease reflects real estate and personal property taxes and an allocation of property insurance to be paid by the Partnership. (d) Decrease reflects the elimination of interest expense and depreciation and amortization expense at the Lessee level. (e) Represents lease payments calculated on a pro forma basis using the proposed rent provisions in the Percentage Leases and the historical revenue of the Allen Acquisition Hotels and the rent provisions in the revised Percentage Leases. 27 28 Humphrey Hospitality Management, Inc. PRO FORMA CONDENSED STATEMENT OF OPERATIONS Three months ended March 31, 1998 This unaudited Pro Forma Condensed Statement of Operations of Humphrey Hospitality Management, Inc. is presented as if the consummation of the April 1998 Offering and acquisition of the Allen Acquisition Hotels had occurred on January 1, 1998, and the percentage leases for the Allen Acquisition Hotels were effective on January 1, 1998. Such estimated information should be read in conjunction with the financial statements of Humphrey Hospitality Management, Inc. previously filed with the Securities and Exchange Commission in Form 10-Q of Humphrey Hospitality Management, Inc., for the three months ended March 31, 1998, and the financial statements of the Allen Acquisition Hotels for the three months ended March 31, 1998, at pages 5 through 14. In management's opinion, all adjustments necessary to reflect the effects of the above transactions have been made. This unaudited Pro Forma Condensed Statement of Operations is not necessarily indicative of what actual results of operations of Humphrey Hospitality Management, Inc. would have been assuming such transactions had been completed as of January 1, 1998, nor does it purport to represent the results of operations for future periods. 28 29 Humphrey Hospitality Management, Inc. PRO FORMA CONDENSED STATEMENT OF OPERATIONS - CONTINUED Three months ended March 31, 1998 (Unaudited, in thousands)
Humphrey Allen Hospitality Acquisition Management, Hotels Inc. Combined Pro Forma Historical Historical Adjustments Total (a) -------------- ------------ ------------- ------------ Room revenue $ 3,662 $ 1,157 $ - $ 4,819 Other revenue 246 27 - 273 ----------- ---------- ----------- ---------- Total revenue 3,908 1,184 - 5,092 ----------- ---------- ----------- ---------- Expenses Hotel operating costs 1,422 228 - 1,650 General and administrative 215 49 - 264 Marketing and promotion 174 9 - 183 Utilities 235 47 - 282 Repairs and maintenance 97 29 - 126 Taxes and insurance 72 26 (9)(b) 89 Franchise fees 189 42 - 231 Interest - 144 (144)(C) - Real estate taxes - 41 (41)(b) - Depreciation and amortization - 111 (111)(C) - Percentage lease payments 1,904 - 482 (d) 2,386 ----------- ---------- ----------- ---------- 4,308 726 177 5,211 ----------- ---------- ----------- ---------- $ (400) $ 458 $ (177) $ (119) =========== ========== =========== ==========
- ------------- (a) Represents results of operations for the Current Hotels and the Allen Acquisition Hotels on a pro forma basis as if the Allen Acquisition Hotels were owned by the Company at the beginning of the periods presented and leased to the Lessee under the Percentage Leases throughout the periods presented. (b) Decrease reflects real estate and personal property taxes and an allocation of property insurance to be paid by the Partnership. 29 30 Humphrey Hospitality Management, Inc. PRO FORMA CONDENSED STATEMENT OF OPERATIONS - CONTINUED Three months ended March 31, 1998 (Unaudited, in thousands) (c) Decrease reflects the elimination of interest expense and depreciation and amortization expense at the Lessee level. (d) Represents lease payments calculated on a pro forma basis using the proposed rent provisions in the percentage leases and the historical revenue of the Allen Acquisition Hotels and the rent provisions in the revised Percentage Leases. 30 31 SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. Humphrey Hospitality Trust, Inc. -------------------------------- Date: 8/05/98 By: /s/ James I. Humphrey Jr -------------------- ------------------------------------ James I. Humphrey Jr. Chairman and President 31 -----END PRIVACY-ENHANCED MESSAGE-----