<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
or
[ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended June 30, 1996 Commission File No. 1-14062
BRISTOL HOTEL COMPANY
(Exact name of registrant as specified in its charter)
Delaware 75-2584227
(State of Incorporation) (I.R.S. Employer
Identification Number)
14285 Midway Road, Suite 300
Dallas, Texas 75244
(Address of principal executive offices)
214-788-0001
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
The number of shares of common stock, par value $.01 per share, outstanding at
August 10, 1996, was 16,565,840.
================================================================================
<PAGE>
BRISTOL HOTEL COMPANY
INDEX
-----
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
PART I FINANCIAL INFORMATION
Item 1 Financial Statements (unaudited):
--------------------------------------------
BRISTOL HOTEL COMPANY
Condensed Consolidated Balance Sheets as of
June 30, 1996 and December 31, 1995 3
Condensed Consolidated Statements of Income
for the three months ended June 30, 1996 and
1995 and pro forma for the three months ended
June 30, 1995 4
Condensed Consolidated Statements of Income for
the six months ended June 30, 1996 and the five
months ended June 30, 1995 and pro forma for
the six months ended June 30, 1995 5
Condensed Consolidated Statements of Cash Flows
for the six months ended June 30, 1996 and the
five months ended June 30, 1995 6
Notes to Condensed Consolidated Financial Statements 7-8
BRISTOL HOTEL ASSET COMPANY
Condensed Consolidated Balance Sheets as of June 30,
1996 and December 31, 1995 9
Condensed Consolidated Statements of Income for the
three months ended June 30, 1996 and 1995 10
Condensed Consolidated Statements of Income for the
six months ended June 30, 1996 and the five months
ended June 30, 1995 11
Condensed Consolidated Statements of Cash Flows for
the six months ended June 30, 1996 and the five
months ended June 30, 1995 12
Notes to Condensed Consolidated Financial Statements 13
Item 2 Management's Discussion and Analysis of Results of
--------------------------------------------------
Operations and Financial Condition 14-16
----------------------------------
PART II OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 17
SIGNATURE 17
</TABLE>
2
<PAGE>
BRISTOL HOTEL COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1996 AND DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................... $ 6,487 $ 7,906
Marketable securities......................... 915 726
Accounts receivable, net...................... 12,052 10,959
Inventory..................................... 3,119 2,880
Deposits and other current assets............. 8,598 9,661
-------- --------
Total current assets......................... 31,171 32,132
Property and equipment, net.................... 532,350 470,705
Other assets:
Restricted cash............................... 1,873 620
Deferred charges and other non-current
assets, net.................................. 9,046 9,444
-------- --------
Total assets................................. $574,440 $512,901
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt............. $ 6,857 $ 6,582
Accounts payable and accrued expenses......... 16,710 17,091
Accrued construction costs.................... 14,385 4,457
Accrued property, sales and use taxes......... 5,487 6,110
Accrued insurance reserves.................... 7,612 6,014
Advance deposits.............................. 6,695 304
-------- --------
Total current liabilities.................... 57,746 40,558
Long-term debt, excluding current portion...... 198,076 163,962
Deferred income taxes.......................... 71,929 69,448
Other liabilities.............................. 2,534 2,811
-------- --------
Total liabilities............................ 330,285 276,779
-------- --------
Common stock ($.01 par value; 75,000,000 shares
authorized, 16,565,840 shares issued and
outstanding).................................. 166 166
Additional paid-in capital..................... 232,690 232,633
Unrealized gain on marketable securities, net.. -- 262
Retained earnings.............................. 11,299 3,061
-------- --------
Total stockholders' equity................... 244,155 236,122
-------- --------
Total liabilities and stockholders' equity... $574,440 $512,901
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
3
<PAGE>
BRISTOL HOTEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995 AND
PRO FORMA FOR THE THREE MONTHS ENDED JUNE 30, 1995
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Historical Pro Forma
--------------------------- ---------
Three Months
Three Months Ended June 30, Ended June 30,
1996 1995 1995
---------- -------------- --------------
<S> <C> <C> <C>
Revenue:
Rooms............................. $35,814 $31,032 $32,089
Food and beverage................. 10,799 9,023 9,320
Other operating departments....... 4,624 2,985 3,363
------- ------- -------
Total revenue.................. 51,237 43,040 44,772
------- ------- -------
Operating costs and expenses:
Departmental expenses:
Rooms.......................... 9,234 9,184 9,266
Food and beverage.............. 7,988 6,545 6,993
Other operating departments.... 1,143 1,310 1,395
Undistributed operating expenses:
Administrative and general..... 4,167 2,849 4,201
Marketing...................... 3,786 2,678 3,012
Property occupancy costs....... 6,664 6,319 6,673
Depreciation and amortization.. 4,421 3,362 3,450
Corporate expense.............. 2,552 2,777 1,878
------- ------- -------
Operating income................... 11,282 8,016 7,904
Other expenses:
Interest expense.................. 4,360 4,468 4,041
Other............................. -- 307 159
------- ------- -------
Net income before income taxes..... 6,922 3,241 3,704
Income taxes....................... 2,547 1,185 1,333
------- ------- -------
Net income......................... $ 4,375 $ 2,056 $ 2,371
======= ======= =======
Net income per common share........ $ 0.26 $ 0.18 $ 0.14
======= ======= =======
Weighted average number of common
and common equivalent shares
outstanding....................... 17,033 11,640 16,872
======= ======= =======
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
4
<PAGE>
BRISTOL HOTEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND
THE FIVE MONTHS ENDED JUNE 30, 1995 AND
PRO FORMA FOR THE SIX MONTHS ENDED JUNE 30, 1995
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Historical Pro Forma
------------------------------ ---------------
Six Months Five Months Six Months
Ended June 30, Ended June 30, Ended June 30,
1996 1995 1995
-------------- -------------- ---------------
<S> <C> <C> <C>
Revenue:
Rooms........................ $ 71,268 $52,386 $64,227
Food and beverage............ 21,398 15,347 18,906
Other operating
departments................. 8,248 5,217 6,242
-------- ------- -------
Total revenue............. 100,914 72,950 89,375
-------- ------- -------
Operating costs and expenses:
Departmental expenses:
Rooms..................... 17,808 14,460 18,023
Food and beverage......... 15,181 11,121 13,814
Other operating
departments.............. 2,288 1,781 2,055
Undistributed
operating expenses:
Administrative and
general.................. 8,800 6,012 8,107
Marketing................. 7,516 4,446 5,760
Property occupancy
costs.................... 13,797 10,924 13,065
Depreciation and
amortization............. 8,409 5,616 6,778
Corporate expense......... 5,514 4,353 3,886
-------- ------- -------
Operating income.............. 21,601 14,237 17,887
Other expenses:
Interest expense............. 8,566 7,245 7,806
Other........................ -- 207 70
-------- ------- -------
Net income before income taxes 13,035 6,785 10,011
Income taxes.................. 4,797 2,461 3,604
-------- ------- -------
Net income.................... $ 8,238 $ 4,324 $ 6,407
======== ======= =======
Net income per common share... $ 0.48 $ 0.37 $ 0.38
======== ======= =======
Weighted average number of
common and common equivalent
shares outstanding.......... 17,020 11,640 16,872
======== ======= =======
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
5
<PAGE>
BRISTOL HOTEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND THE FIVE MONTHS ENDED JUNE 30, 1995
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Five Months
Ended June 30, Ended June 30,
1996 1995
-------------- --------------
<S> <C> <C>
Cash flows from operating
activities:
Net income............................... $ 8,238 $ 4,324
Adjustments to reconcile
net income to net cash
provided by operating
activities:
Depreciation and amortization.......... 8,409 5,616
Other.................................. (164) 112
Changes in working capital............... 10,253 739
Increase in advance deposits............. 6,391 --
Increase in restricted cash.............. (1,253) (1,548)
Increase in deferred income
taxes................................... 2,481 5,059
Decrease in other
liabilities............................. (277) --
-------- --------
Cash provided by operating activities. 34,078 14,302
-------- --------
Cash flows from investing
activities:
Improvements to property
and equipment........................... (63,754) (36,535)
Purchase of property and
equipment............................... (6,300) --
-------- --------
Cash used in investing activities..... (70,054) (36,535)
-------- --------
Cash flows from financing activities:
Proceeds from short-term
loan from affiliate..................... -- 12,500
Repayments of long-term debt............. (3,562) (3,761)
Proceeds from issuance of long-term debt. 37,721 33,071
Decrease (increase) in
deferred charges and other
non-current assets...................... 398 (1,089)
Decrease in accounts
receivable - affiliate.................. -- 452
Decrease in distributions
payable................................. -- (2,426)
-------- --------
Cash provided by financing
activities........................... 34,557 38,747
-------- --------
Net increase (decrease) in
cash and cash equivalents................ (1,419) 16,514
Cash and cash equivalents at
beginning of period...................... 7,906 5,413
-------- --------
Cash and cash equivalents at
end of period............................ $ 6,487 $ 21,927
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
6
<PAGE>
BRISTOL HOTEL COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
Bristol Hotel Company (the "Company") began operations in February
1995 to act as a holding company in connection with the acquisitions of Harvey
Hotel Company, Ltd. and its subsidiaries (together, "Harvey Hotel Companies")
and United Inns, Inc. ("United Inns"). The Company owns and/or operates 39
hotels located primarily in the southern United States. Prior to February 1995,
ten of the hotels had been owned or operated by Harvey Hotel Companies and 26
hotels had been owned by United Inns. Two additional hotels were acquired by the
Company subsequent to June 1995 and in May, 1996 the Company acquired the
Holiday Inn in Plano, Texas (see Note 3). In December 1995, the Company
completed an initial public offering of its common stock (the "Offering")
raising approximately $88.6 million in net proceeds. Concurrently, the Company
refinanced approximately $138 million of mortgage indebtedness with proceeds of
the Offering and the private issuance of $70 million aggregate principal amount
of senior secured notes ("Senior Notes"). The condensed pro forma statements of
income for the three months and the six months ended June 30, 1995, reflect the
operations and/or management of all hotels excluding the Holiday Inn - Plano for
the entire periods and excludes the operations of the Holiday Inn-Silber which
was sold by the Company in July, 1995. Interest expense in the pro forma
income statements reflect the refinancing of the mortgage indebtedness.
The condensed consolidated balance sheet at December 31, 1995, has
been condensed from the audited balance sheet at that date. The condensed
consolidated balance sheet at June 30, 1996, the condensed consolidated
statements of income for the three and six months ended June 30, 1996, and the
three and five months ended June 30, 1995, and the condensed consolidated
statements of cash flow for the six months ended June 30, 1996 and the five
months ended June 30, 1995, have been prepared by the Company and are
unaudited. In the opinion of management, all adjustments (which include only
normal recurring adjustments) necessary to present fairly the financial
position, results of operations and cash flows at June 30, 1996 and for the
periods presented have been made. Interim results are not necessarily
indicative of fiscal year performance because of seasonal and short-term
variations.
Certain information and footnote disclosures normally included in
financial statements presented in accordance with generally accepted accounting
principles have been condensed or omitted. The Company believes the disclosures
made are adequate to make the information presented not misleading. However, the
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the eleven months ended December 31,
1995.
2. MARKETABLE SECURITIES
Prior to May, 1996, the Company classified equity securities as
Available-for-Sale Securities (per FAS 115 -Accounting for Certain Investments
in Debt and Equity Securities) and the unrealized gains were reported as a
separate component of shareholders' equity. In May, 1996, management resolved
to sell the equity securities during 1996, accordingly, the securities were
reclassified as Trading Securities and an unrealized gain of approximately
$447,000 was recorded in earnings.
3. PROPERTY AND EQUIPMENT
On May 31, 1996, the Company acquired a 159 room Holiday Inn hotel
located in Plano, Texas for $6.3 million with proceeds from the Company's Term
Credit Agreement ("Term Agreement").
7
<PAGE>
BRISTOL HOTEL COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)
4. LONG-TERM DEBT
On June 21, 1996, in accordance with the terms of the Exchange and
Registration Rights Agreement dated December 18, 1995, the Company filed a
registration statement on Form S-4 with the Securities and Exchange Commission
whereby the Company agreed to exchange the Senior Notes for new notes (the "New
Notes"). The New Notes have an equal principal amount, rate and maturity date;
$70 million, 11.22% and December 18, 2000, respectively. The New Notes are
secured by a first-priority pledge of all outstanding shares of capital stock of
Bristol Hotel Asset Company, a Delaware corporation and wholly owned subsidiary
of the Company.
The following financial statements are for Bristol Hotel Asset
Company, which is a guarantor of the Senior Notes.
8
<PAGE>
BRISTOL HOTEL ASSET COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1996 AND DECEMBER 31, 1995
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................ $ 6,487 $ 7,906
Marketable securities................................ 915 726
Accounts receivable, net............................. 12,052 10,959
Inventory............................................ 3,119 2,880
Deposits and other current assets.................... 8,598 9,661
-------- --------
Total current assets.............................. 31,171 32,132
Property and equipment, net........................... 532,350 470,705
Other assets:
Restricted cash...................................... 1,873 620
Deferred charges and other non-current assets,
net................................................. 9,046 9,444
-------- --------
Total assets...................................... $574,440 $512,901
======== ========
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current portion of long-term
debt................................................ $ 6,857 $ 6,582
Accounts payable and accrued
expenses............................................ 14,281 16,911
Accrued construction costs........................... 14,385 4,457
Accrued property, sales and use taxes................ 5,487 6,110
Accrued insurance reserves........................... 7,612 6,014
Advance deposits..................................... 6,695 304
-------- --------
Total current liabilities......................... 55,317 40,378
Long-term debt, excluding
current portion...................................... 129,946 96,062
Deferred income taxes................................. 71,929 69,448
Other liabilities..................................... 2,534 2,811
-------- --------
Total liabilities................................. 259,726 208,699
-------- --------
Common stock ($.01 par value;
1,000 shares authorized, 1,000
shares issued and outstanding)....................... -- --
Additional paid-in capital............................ 300,756 300,699
Unrealized gain on marketable
securities, net...................................... -- 262
Retained earnings..................................... 13,958 3,241
-------- --------
Total stockholder's equity........................ 314,714 304,202
-------- --------
Total liabilities and stockholder's equity........ $574,440 $512,901
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
9
<PAGE>
BRISTOL HOTEL ASSET COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
Three Months Three Months
Ended June 30, Ended June 30,
1996 1995
-------------- --------------
<S> <C> <C>
Revenue:
Rooms....................................... $35,814 $31,032
Food and beverage........................... 10,799 9,023
Other operating departments................. 4,624 2,985
------- -------
Total revenue.............................. 51,237 43,040
------- -------
Operating costs and expenses:
Departmental expenses:
Rooms...................................... 9,234 9,184
Food and beverage.......................... 7,988 6,545
Other operating departments................ 1,143 1,310
Undistributed operating expenses:
Administrative and general................. 4,167 2,849
Marketing.................................. 3,786 2,678
Property occupancy costs..................... 6,664 6,319
Depreciation and amortization................ 4,421 3,362
Corporate expense............................ 2,552 2,777
------- -------
Operating income............................. 11,282 8,016
Other expenses (income):
Interest expense............................ 2,389 4,468
Other....................................... -- 307
------- -------
Net income before income taxes............... 8,893 3,241
Income taxes................................. 3,273 1,185
------- -------
Net income................................... $ 5,620 $ 2,056
======= =======
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
10
<PAGE>
BRISTOL HOTEL ASSET COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND THE FIVE MONTHS ENDED JUNE 30, 1995
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Five Months
Ended June 30, Ended June 30,
1996 1995
-------------- --------------
<S> <C> <C>
Revenue:
Rooms....................................... $ 71,268 $52,386
Food and beverage........................... 21,398 15,347
Other operating departments................. 8,248 5,217
-------- -------
Total revenue.............................. 100,914 72,950
-------- -------
Operating costs and expenses:
Departmental expenses:
Rooms...................................... 17,808 14,460
Food and beverage.......................... 15,181 11,121
Other operating departments................ 2,288 1,781
Undistributed operating expenses:
Administrative and general................. 8,800 6,012
Marketing.................................. 7,516 4,446
Property occupancy costs................... 13,797 10,924
Depreciation and amortization.............. 8,409 5,616
Corporate expense.......................... 5,514 4,353
-------- -------
Operating income............................. 21,601 14,237
Other expenses (income):
Interest expense............................ 4,642 7,245
Other....................................... -- 207
-------- -------
Net income before income taxes............... 16,959 6,785
Income taxes................................. 6,242 2,461
-------- -------
Net income................................... $ 10,717 $ 4,324
======== =======
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
11
<PAGE>
BRISTOL HOTEL ASSET COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND THE FIVE MONTHS ENDED JUNE 30, 1995
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
Six Months Five Months
Ended June 30, Ended June 30,
1996 1995
-------------- --------------
<S> <C> <C>
Cash flows from operating activities:
Net income................................... $ 10,717 $ 4,324
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization.............. 8,409 5,616
Other...................................... (394) 112
Changes in working capital................... 8,004 739
Increase in advance deposits................. 6,391 --
Increase in restricted cash.................. (1,253) (1,548)
Increase in deferred income taxes............ 2,481 5,059
Decrease in other liabilities................ (277) --
-------- --------
Cash provided by operating activities..... 34,078 14,302
-------- --------
Cash flows from investing activities:
Improvements to property and equipment....... (63,754) (36,535)
Purchase of property and equipment........... (6,300) --
-------- --------
Cash used in investing activities......... (70,054) (36,535)
-------- --------
Cash flows from financing activities:
Proceeds from short-term loan from affiliate. -- 12,500
Payments of long-term debt................... (3,562) (3,761)
Proceeds from issuance of long-term debt..... 37,721 33,071
Decrease (increase) in deferred charges
other non-current assets.................... 398 (1,089)
Decrease in accounts receivable - affiliate.. -- 452
Decrease in distributions payable............ -- (2,426)
-------- --------
Cash provided by financing activities..... 34,557 38,747
-------- --------
Net increase (decrease) in cash and cash
equivalents.................................. (1,419) 16,514
Cash and cash equivalents at beginning of
period....................................... 7,906 5,413
-------- --------
Cash and cash equivalents at end of period.... $ 6,487 $ 21,927
======== ========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
12
<PAGE>
BRISTOL HOTEL ASSET COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
Bristol Hotel Asset Company (the "Asset Company") was formed in
November 1995 as a wholly owned subsidiary of Bristol Hotel Company (the "Parent
Company"). Upon formation, the equity interests of several entities owned by,
or under common control with, the Parent Company, were contributed to the Asset
Company. In December 1995, 15 entities (previously owned by United Inns,
Inc.), owning 24 hotels were merged into the Asset Company. The operating
results of the Asset Company are substantially the operating results of the
Parent Company. However, the Parent Company rather than the Asset Company, is
the obligor on the $70 million Senior Notes as discussed in Note 4 below.
The condensed consolidated balance sheet at December 31, 1995 has been
condensed from the audited balance sheet at that date. The condensed
consolidated balance sheet at June 30, 1996, the condensed consolidated
statements of income for the three months and the six months ended June 30,
1996, and the three months and five months ended June 30, 1995, and the
condensed consolidated statements of cash flow for the six months ended June 30,
1996, and five months ended June 30, 1995, have been prepared by the Asset
Company and are unaudited. In the opinion of management, all adjustments
(which include only normal recurring adjustments) necessary to present fairly
the financial position, results of operations and cash flows at June 30, 1996
and for the periods presented have been made. Interim results are not
necessarily indicative of fiscal year performance because of the impact of
seasonal and short-term variations.
Certain information and footnote disclosures normally included in
financial statements presented in accordance with generally accepted accounting
principles have been condensed or omitted. The Company believes the disclosures
made are adequate to make the information presented not misleading. However, the
condensed consolidated financial statements should be read in conjunction with
the consolidated financial statements and notes thereto included in the Parent
Company's Annual Report on Form 10-K for the eleven months ended December 31,
1995.
2. MARKETABLE SECURITIES
Prior to May, 1996, the Company classified equity securities as
Available-for-Sale Securities (per FAS 115 -Accounting for Certain Investments
in Debt and Equity Securities) and the unrealized gains were reported as a
separate component of shareholders' equity. In May, 1996, management resolved
to sell the equity securities during 1996, accordingly, the securities were
reclassified as Trading Securities and an unrealized gain of approximately
$447,000 was recorded in earnings.
3. PROPERTY AND EQUIPMENT
On May 31, 1996, the Company acquired a 159 room Holiday Inn hotel
located in Plano, Texas for $6.3 million with proceeds from the Term Agreement.
4. COMMITMENTS AND CONTINGENCIES
The Asset Company is guarantor of the $70 million Senior Notes of the
Parent Company, which are also secured by a first-priority pledge of all
outstanding shares of capital stock of Asset Company. See Note 4 of the Parent
Company's Notes to Consolidated Condensed Financial Statements.
13
<PAGE>
BRISTOL HOTEL COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Overview
- --------
As discussed in Note 1 to the Company's Notes to Condensed
Consolidated Financial Statements, the Company began operations in February
1995. Historical results for 1995 include five months of operations and/or
management of the original 36 hotels. The pro forma results for the three and
six months ended June 30 1995, include operations and/or management of the
hotels currently owned or managed by the Company except for Holiday Inn - Plano.
Management believes that, due to the substantial difference in comparability
between the Company's historical results for 1995 and 1996, the use of the pro
forma results for 1995 provides a more meaningful basis for comparison to 1996.
Results of Operations
- ---------------------
Three Months Ended June 30, 1996 Compared with Pro Forma Three Months Ended
- ---------------------------------------------------------------------------
June 30, 1995
- -------------
Revenues increased $6.5 million, or 14.4%, to $51.2 million for 1996,
reflecting increases in all revenue categories, as discussed below.
Room revenues were $35.8 million for the three months ended June 30,
1996, an increase of $3.7 million, or 11.6%, from the comparable pro forma
period in 1995, due primarily to improved occupancy and average daily room rates
of 69.5% and $65.97, respectively, for the three months ended June 30, 1996, as
compared to 64.7% and $62.83, respectively, for the same pro forma period in
1995. The improvements in occupancy and average daily room rates are primarily
attributable to the successful repositioning and/or redevelopment of several of
the former United Inns hotels.
Food and beverage revenues improved by $1.5 million to $10.8 million
for the three months ended June 30, 1996, from $9.3 million for the pro forma
three months ended June 30, 1995, due primarily to the higher occupancy levels
in the Company's hotels and increased sales effort in the banquet and catering
departments of the 26 hotels formerly owned by United Inns. Other operating
revenues increased 37.5% or by $1.3 million, to $4.6 million for the three
months ended June 30, 1996, due primarily to improved occupancy, the increased
emphasis on maximizing telephone revenue for the former United Inns hotels and
the $0.4 million unrealized gain on marketable securities (see Note 2 to the
Notes to Condensed Consolidated Financial Statements).
Gross operating margin (consisting of total revenues less departmental
expenses, administrative and general expenses, marketing expenses and property
occupancy costs as a percentage of total revenues) for the three months ended
June 30, 1996 was 35.6% compared to 29.6% for the pro forma three months ended
June 30, 1995. The 6.0% percentage increase is due in part to increased
operating efficiencies in the rooms and property operations departments and,
also, to the unrealized gain on marketable securities discussed above, offset
slightly by increases in marketing expenses and property occupancy costs. The
increases in marketing expenses reflect the restaffing and increased direct
sales effort for the former United Inns hotels. Property occupancy cost
increases are due to increases in property taxes primarily as a result of
capital improvements and increases in land rentals calculated as a percentage of
revenues.
Depreciation increased $1.0 million for the three months ended June
30, 1996, compared to the pro forma three months ended June 30, 1995, primarily
as a result of the significant capital improvements at several of the former
United Inn hotels.
Corporate expenses increased $0.7 million for the three months ended
June 30, 1996, compared to the pro forma three months ended June 30, 1995,
primarily as a result of continuing acquisition activities and increased levels
of service provided to the Company's hotel operations.
Interest expense increased by $0.3 million to $4.4 million in the
three months ended June 30, 1996, compared to the pro forma three months ended
June 30, 1995. This increase was due primarily to increased borrowings during
1996.
As a result of the factors described above, net income increased to
$4.4 million for the three months ended June 30, 1996, from $2.4 million for the
pro forma three months ended June 30, 1995, an increase of 84.5%.
14
<PAGE>
BRISTOL HOTEL COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Six Months Ended June 30, 1996 Compared with Pro Forma Six Months Ended
- -----------------------------------------------------------------------
June 30, 1995
- -------------
Revenues increased $11.5 million, or 12.9%, to $100.9 million for
1996, reflecting increases in all revenue categories, as discussed below.
Room revenues were $71.3 million for the six months ended June 30,
1996, an increase of $7.0 million, or 11.0%, from the comparable pro forma
period in 1995, due primarily to improved occupancy and average daily room
rates. Occupancy for the three months ended March 31, 1996, and the three months
June 30, 1996, increased over the comparable pro forma periods of 1995, by a
3.2% and a 4.8% point change, respectively. Average daily room rates for the
three months ended March 31, 1996, and the three months June 30, 1996, increased
over the comparable pro forma periods of 1995, by 7.9% and 5.0%, respectively.
The improvements in occupancy and average daily room rates are primarily
attributable to the successful repositioning and/or redevelopment of several of
the former United Inns hotels.
Food and beverage revenues improved by $2.5 million to $21.4 million
for the six months ended June 30, 1996, from $18.9 million for the pro forma six
months ended June 30, 1995, due primarily to the higher occupancy levels in the
Company's hotels and increased sales effort in the banquet and catering
departments of the 26 hotels formerly owned by United Inns. Other operating
revenues increased 32.1% or by $2.0 million, to $8.2 million for the six months
ended June 30, 1996, due primarily to improved occupancy , the increased
emphasis on maximizing telephone revenue for the former United Inns hotels and
the $0.4 million unrealized gain on marketable securities.
Gross operating margin (consisting of total revenues less departmental
expenses, administrative and general expenses, marketing expenses and property
occupancy costs as a percentage of total revenues) for the six months ended June
30, 1996, was 35.2% compared to 31.9% for the pro forma six months ended June
30, 1995. The 3.3% percentage increase is due primarily to increased operating
efficiencies in the rooms and property operations departments and, also, the
unrealized gain on marketable securities offset slightly by increases in
marketing expenses and property occupancy costs. The increases in marketing
expenses reflect the restaffing and increased direct sales effort for the former
United Inns hotels. Property occupancy cost increases are due to increases in
property taxes primarily as a result of capital improvements and increases in
land rentals calculated as a percentage of revenues.
Depreciation increased $1.6 million for the six months ended June 30,
1996, compared to the pro forma six months ended June 30, 1995, primarily as a
result of the significant capital improvements at several of the former United
Inn hotels.
Corporate expenses increased $1.6 million for the six months ended
June 30, 1996 compared to the pro forma six months ended June 30, 1995,
primarily as a result of acquisition activities and additional costs incurred in
the first three months of 1996 to establish the Company as a public entity.
Interest expense increased by $0.8 million to $8.6 million in the six
months ended June 30, 1996, compared to the pro forma six months ended June 30,
1995. This increase was due primarily to increased borrowings during 1996.
As a result of the factors described above, net income increased to
$8.2 million for the six months ended June 30, 1996, from $6.4 million for the
pro forma six months ended June 30, 1995, an increase of 28.1%.
15
<PAGE>
BRISTOL HOTEL COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION
Cash Flows and Financial Condition
- ----------------------------------
Cash provided from operating activities was $34.0 million for six
months ended June 30, 1996, as a result of net income before depreciation and
amortization and the receipt of approximately $6.4 million in advance deposits
during the period. The advance deposits resulted primarily from reservations for
Olympics-related business scheduled for the third quarters in the Company's
various Atlanta hotels. This cash was combined with cash available at the start
of the year and borrowings under the Term Agreement to fund over $63 million in
renovation costs for properties in the second and third phases of the Company's
redevelopment program and the purchase of the Holiday Inn in Plano, Texas. The
increase in negative working capital as of June 30, 1996, as compared to
December 31, 1995, is due primarily to timing differences between the incurrence
of renovation costs and borrowings under the Term Agreement.
EBITDA totaled $30.0 million for the six months ended June 30, 1996,
compared to $19.6 million for the five months ended June 30, 1995. EBITDA was
$5.4 million (22.0%) over the pro forma six months ended June 30, 1995,
primarily due to improved performance as a result of the successful
repositioning and/or redevelopment of several of the former United Inns hotels
and improved operating efficiencies.
The Company intends to complete its redevelopment program during 1996
and believes that funds provided from operations combined with approximately
$28.6 million available under the Term Agreement will be more than adequate to
meet the costs of the program. An additional amount of up to $53.7 million is
available under the Term Agreement to fund acquisitions and related
refurbishments. The Company is pursuing several other potential acquisitions
and believes that other hotels will be acquired during the next few quarters.
16
<PAGE>
PART II
Item 6 Exhibits and Reports on Form 8-K
(a) Exhibits
No. 27 Financial Data Schedule
(b) Reports on Form 8-K
Registrant filed one Current Report on Form 8-K, dated June 21,
1996 with the Securities and Exchange Commission, which reported the Company's
appointment of Arthur Andersen LLP as independent accountants for fiscal 1996 to
replace Price Waterhouse LLP.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
BRISTOL HOTEL COMPANY
Date: August 14, 1996 By /s/ Jeffrey P. Mayer
-------------------------------------
Jeffrey P. Mayer
Vice President and Chief Financial Officer
(Chief Accounting Officer)
17
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