<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended March 31, 1997
BRISTOL HOTEL COMPANY
14285 Midway Road, Suite 300
Dallas, Texas 75244
972-391-3910
Commission File No. 1-14062
Incorporated in Delaware IRS No. 75-2584227
----------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
Common Stock , Par Value $.01 per share New York Stock Exchange
----------------
The Company (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.
The number of shares of common stock, par value $.01 per share,
outstanding at May 13,1997 was 25,927,148.
================================================================================
<PAGE> 2
BRISTOL HOTEL COMPANY
INDEX
<TABLE>
<CAPTION>
PAGE NO.
<S> <C>
PART I. FINANCIAL INFORMATION.
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets as of March 31, 1997 and
December 31, 1996 3
Condensed Consolidated Statements of Income for the three months ended
March 31, 1997 and 1996 4
Condensed Consolidated Statements of Cash Flows for the three months
ended March 31, 1997 and 1996 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition 9
PART II. OTHER INFORMATION.
Item 6. Exhibits and Reports on Form 8-K 11
SIGNATURE 12
</TABLE>
2
<PAGE> 3
BRISTOL HOTEL COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
AS OF MARCH 31, 1997 AND DECEMBER 31, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1997 1996
----------- -----------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents ....................................... $ 5,979 $ 4,666
Marketable securities ........................................... 122 116
Accounts receivable, net ........................................ 12,273 10,501
Inventory ....................................................... 3,419 3,320
Deposits and other current assets ............................... 6,042 6,354
----------- -----------
Total current assets ........................................ 27,835 24,957
Property and equipment, net .......................................... 588,556 552,564
Other assets:
Restricted cash ................................................. 3,259 3,069
Deferred charges and other non-current assets, net .............. 14,932 12,198
----------- -----------
Total assets .................................................... $ 634,582 $ 592,788
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt ............................... $ 15,518 $ 15,769
Accounts payable and accrued expenses ........................... 15,426 15,701
Accrued property, sales and use taxes ........................... 6,370 7,346
Accrued insurance reserves ...................................... 6,394 6,920
----------- -----------
Total current liabilities ................................... 43,708 45,736
Long-term debt, excluding current portion ............................ 256,711 216,925
Deferred income taxes ................................................ 76,243 75,619
Other liabilities .................................................... 1,289 2,351
----------- -----------
Total liabilities ........................................... 377,951 340,631
----------- -----------
Common stock ($.01 par value; 75,000,000 shares authorized, 16,565,840
shares issued and outstanding) .................................. 166 166
Additional paid-in capital ........................................... 231,245 231,181
Retained earnings .................................................... 25,220 20,810
----------- -----------
Total stockholders' equity .................................. 256,631 252,157
----------- -----------
Total liabilities and stockholders' equity .................. $ 634,582 $ 592,788
=========== ===========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
3
<PAGE> 4
BRISTOL HOTEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED, IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1997 1996
--------- ---------
<S> <C> <C>
Revenue:
Rooms .................................. $ 41,731 $ 35,454
Food and beverage ...................... 12,475 10,599
Other .................................. 4,055 3,624
--------- ---------
Total revenue ...................... 58,261 49,677
--------- ---------
Operating costs and expenses:
Departmental expenses:
Rooms .............................. 9,905 8,574
Food and beverage .................. 8,439 7,193
Other .............................. 1,207 1,146
Undistributed operating expenses:
Administrative and general ......... 4,699 4,633
Marketing .......................... 4,208 3,730
Property occupancy costs ........... 8,326 7,133
Depreciation and amortization ...... 5,164 3,988
Corporate expense .................. 3,012 2,962
--------- ---------
Operating income ............................ 13,301 10,318
Interest expense ............................ 6,278 4,206
--------- ---------
Income before income taxes .................. 7,023 6,112
Income taxes ................................ 2,613 2,249
--------- ---------
Net income .................................. $ 4,410 $ 3,863
========= =========
Net income per common share ................. $ 0.26 $ 0.23
========= =========
Weighted average number of common and
common equivalent shares outstanding 17,198 17,006
========= =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
4
<PAGE> 5
BRISTOL HOTEL COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND 1996
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, MARCH 31,
1997 1996
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income ................................................... $ 4,410 $ 3,863
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization ............................ 5,164 3,988
Amortization of deferred financing costs ................. 528 591
Compensation expense recognized for employee stock options 64 28
Changes in working capital ................................... (3,628) 1,471
Increase in advance deposits ................................. 286 5,046
Increase in restricted cash .................................. (190) (1,959)
Increase in deferred income taxes ............................ 624 1,493
Decrease in other liabilities ................................ (1,062) (40)
--------- ---------
Cash provided by operating activities .................... 6,196 14,481
--------- ---------
Cash flows from investing activities:
Improvements to property and equipment ....................... (6,156) (27,043)
Purchase of property and equipment ........................... (35,000) --
--------- ---------
Cash used in investing activities ........................ (41,156) (27,043)
--------- ---------
Cash flows from financing activities:
Repayments of long-term debt ................................. (1,665) (1,963)
Proceeds from senior term facility ........................... 41,200 10,829
Increase in deferred charges and other non-current assets .... (3,262) (1,066)
--------- ---------
Cash provided by financing activities .................... 36,273 7,800
--------- ---------
Net increase (decrease) in cash and cash equivalents .............. 1,313 (4,762)
Cash and cash equivalents at beginning of period .................. 4,666 7,906
--------- ---------
Cash and cash equivalents at end of period ........................ $ 5,979 $ 3,144
========= =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements
5
<PAGE> 6
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"). At March 31, 1997, the Company owned and/or
operated 39 hotels located primarily in the southern United States. On April
28, 1997, the Company acquired the ownership of 45 additional hotels and the
management of an additional 15 hotels, three of which are owned by joint
ventures in which the Company holds a 50% interest (see Note 4).
The condensed consolidated balance sheet at December 31, 1996 has been
derived from the audited balance sheet at that date. The condensed consolidated
balance sheet at March 31, 1997, the condensed consolidated statements of
income for the three months ended March 31, 1997 and 1996, and the condensed
consolidated statements of cash flow for the three months ended March 31, 1997
and 1996 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, in all material respects, the financial position
of the Company as of March 31, 1997, and the results of operations and cash
flows for the three months ended March 31, 1997 and 1996 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 year ended December 31, 1996.
2. PROPERTY AND EQUIPMENT
On January 31, 1997, the Company acquired The Allerton Hotel, a 382 room
hotel located on North Michigan Avenue in Chicago, Illinois for $35 million,
which was financed with borrowings from the Company's senior term facility. The
Company anticipates spending approximately $27 million in a comprehensive
redevelopment of The Allerton Hotel, which, when completed, will operate as a
Crowne Plaza hotel with over 400 rooms.
3. EARNINGS PER SHARE
The Company is required to adopt Statement of Financial Accounting
Standards No. 128, "Earnings per Share" ("SFAS 128") in the fourth quarter of
1997. The adoption of SFAS No. 128 is not expected to have a material effect on
the Company's consolidated financial statements. Therefore, pro forma results
for SFAS No. 128 have not been presented.
4. SUBSEQUENT EVENTS
On April 28, 1997, the Company completed the acquisition of the ownership
and/or management of 60 full-service Holiday Inn hotels in the United States
and Canada (the "Holiday Inn Acquisition"). With the Holiday Inn Acquisition,
the Company has become the largest Holiday Inn franchisee in the world and one
of the largest owner/operators of full-service hotels in the United States. The
Company's portfolio consists of 83 owned hotels containing approximately 24,000
rooms, 12 management contracts and three Company- managed hotels owned by joint
ventures in which the Company holds a 50% interest. In total, the Company owns
and/or manages over 28,000 rooms in North America. The Company, which has
historically operated
6
<PAGE> 7
BRISTOL HOTEL COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. SUBSEQUENT EVENTS (CONTINUED)
in the southern United States, now operates properties in 22 states, the
District of Columbia and Canada, including multiple properties in Los Angeles,
Memphis, Nashville, New Orleans, Orlando, San Antonio and San Francisco as well
as six properties in Canada.
As consideration for the Holiday Inn Acquisition, the Company issued
9,361,308 shares of Common Stock and paid $398 million in cash. The Company
obtained the financing for the Holiday Inn Acquisition under a new senior
credit facility that provides for up to $560 million aggregate amount of term
loan borrowings (the "New Credit Facility"). The New Credit Facility has been
utilized as follows (dollars in thousands):
<TABLE>
<S> <C>
Refinancing of existing debt ..................................... $ 108,176
Acquisition costs (excluding costs funded previously)............. 22,800
Final payment on existing Bristol mortgage indebtedness........... 25,809
Final payment of Holiday Inns debt................................ 299,622
Purchase of hotels ............................................... 98,000
Working capital................................................... 5,593
--------------
Total New Credit Facility......................................... $ 560,000
==============
</TABLE>
The New Credit Facility will mature in three years, subject to the Company's
option to extend the maturity for up to two additional years. Outstanding
principal amounts under the New Credit Facility bear interest at a rate equal
to, at the Company's election, one-, two-, three-, or six-month LIBOR plus
2.00%, subject to adjustment downward to 1.50% if certain ratings and financial
tests are satisfied. The Company has entered into interest rate cap transaction
agreements whereby the LIBOR rate is capped at 6% for $300 million of its
floating rate debt. The agreements are effective June 30, 1997 and terminate
April 30, 1998. The Company's obligations under the New Credit Facility are
secured principally by a pledge of the outstanding capital stock of the
Company's subsidiaries and mortgages on certain hotels.
The following pro forma financial data give effect to the Holiday Inn
Acquisition and the refinancing of the indebtedness pursuant to borrowings
under the New Credit Facility (collectively, the "Pro Forma Transactions") as
if these transactions had occurred on January 1 of each period presented. The
Holiday Inn Acquisition will be accounted for under the purchase method of
accounting. The following unaudited pro forma financial data are not
necessarily indicative of the results that actually would have occurred had the
Pro Forma Transactions been consummated on the dates indicated or that may
occur in the future.
<TABLE>
<CAPTION>
FOR THE QUARTER ENDED MARCH 31,
1997 1996
----------- -----------
(Dollars in thousands)
<S> <C> <C>
Revenues $ 148,684 $ 133,751
Income before income taxes 12,533 8,729
Net income 7,697 5,435
Net income per share .29 .21
=========== ===========
Weighted average shares outstanding 26,559 26,367
=========== ===========
</TABLE>
7
<PAGE> 8
BRISTOL HOTEL COMPANY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
4. SUBSEQUENT EVENTS (CONTINUED)
On May 12, 1997, the Company entered into a Terms Agreement with Merrill
Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated pursuant to
which the Company intends to issue up to 3,162,500 shares of the Company's
Common Stock in connection with an underwritten public offering of such shares
(the "Offering"). The Offering is being made pursuant to a $500 million shelf
registration statement that became effective on April 22, 1997, after being
previously filed with the Securities and Exchange Commission on March 6, 1997.
The Company anticipates using the net proceeds from the Offering for general
corporate purposes including the funding of hotel redevelopment costs and
acquisitions. Pending such uses, the Company intends to use the net proceeds to
repay borrowings under the New Credit Facility.
8
<PAGE> 9
BRISTOL HOTEL COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Revenues increased $8.6 million, or 17.3%, to $58.3 million for 1997,
reflecting increases in all revenue categories, as discussed below.
Room revenues were $41.7 million for the three months ended March 31,
1997, an increase of $6.3 million, or 17.7%, from the comparable period in
1996, primarily due to the repositioning and reopening of several hotels during
the second half of 1996. Room revenue also increased due to the acquisition of
the Holiday Inn - Plano in May, 1996 and The Allerton Hotel in Chicago on
January 31, 1997. Average daily room rates and occupancy increased from $68.26
and 61.9% in the first quarter of 1996 to $68.82 and 70.6% in the same period
of 1997.
Food and beverage revenues increased by $1.9 million to $12.5 million
for the three months ended March 31, 1997, from $10.6 million for the three
months ended March 31, 1996, due primarily to increased hotel occupancy which
improved due to the reasons noted above.
Other revenues increased 11.9% or by $0.4 million, to $4.1 million
for the three months ended March 31, 1997. The increase in other revenue
attributable to increased occupancy was partially offset by the loss of the
management contract revenue for the Harvey Hotel - Downtown Dallas, which the
Company managed through December 20, 1996, at which time the hotel was sold by
its owner.
Gross operating income increased 24.4% from $17.3 million in the first
quarter of 1996 to $21.5 million in the same period of 1997. The increase is
primarily attributable to the increase in revenues and the emphasis on
controlling departmental, administrative and general, and marketing expenses,
offset by increased property occupancy costs. 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 March 31, 1997 was
36.8% compared to 34.8% for the three months ended March 31, 1996.
Property occupancy costs rose $1.2 million to $8.3 million for the
first quarter of 1997, primarily due to the increase in property tax valuations
for the repositioned hotels, and the operating costs for the hotels which were
closed during the first quarter of 1996 for redevelopment and reopened by the
first quarter of 1997.
Depreciation increased $1.2 million for the three months ended March
31, 1997, compared to the three months ended March 31, 1996, as a result of
significant capital improvements at several hotels and the addition of the
Holiday Inn - Plano and The Allerton Hotel.
Interest expense increased by $2.1 million to $6.3 million in the
three months ended March 31, 1997, compared to the three months ended March 31,
1996. This increase was due primarily to increased borrowings during 1996 for
renovation costs and borrowings during 1997 of $35 million for the purchase of
The Allerton Hotel and $6.2 million for costs related to the Holiday Inn
Acquisition.
As a result of the factors described above, net income increased to
$4.4 million for the three months ended March 31, 1997, from $3.9 million for
the three months ended March 31, 1996, an increase of 14.2%.
9
<PAGE> 10
BRISTOL HOTEL COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS
AND FINANCIAL CONDITION (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
The Company has two principal sources of capital to fund its
operational and capital needs: cash flow from operations, which it typically
measures in terms of EBITDA (earnings before interest, taxes, depreciation and
amortization), and the New Credit Facility. EBITDA is considered to be
principally available to pay income taxes, fund routine capital maintenance and
to pay debt service, both interest and principal. Management believes that
EBITDA is an effective measure of operating performance because it is industry
practice to evaluate hotel properties using multiples of EBITDA. EBITDA is
unaffected by the debt and equity structure of the property owner. EBITDA does
not represent cash flow from operations as defined by GAAP, and is not
necessarily indicative of cash available to fund all cash flow needs and should
not be considered as an alternative to net income for purposes of evaluating
the Company's operating performance. Management believes that cash flow from
operations and financing available to the Company will be sufficient to cover
the Company's foreseeable working capital, capital expenditure and debt service
requirements. EBITDA totaled $18.5 million for the three months ended March 31,
1997, compared to $14.3 million for the three months ended March 31, 1996, an
increase of 29.4%.
Cash provided from operating activities was $6.2 million for the three
months ended March 31, 1997, as compared to $14.5 million for the same period
in 1996. The $8.3 million decrease from 1996 to 1997 relates primarily to
advance deposits and changes in working capital. In the first quarter of 1996,
the Company collected over $5 million in advance deposits from reservations for
Olympics-related business scheduled for the second and third quarters of 1996.
Increases in accounts receivable primarily related to higher revenues generated
in the first quarter as compared to the last quarter of 1996 and a higher
percentage of group business in the first quarter of 1997 contributed to the
increase in negative working capital.
In connection with the Holiday Inn Acquisition, which was financed
with the New Credit Facility (discussed in Note 4), the Company announced that
it expects to spend at least $200 million to redevelop a substantial number of
the acquired assets. In addition, the Company has adopted a growth-oriented
strategy that contemplates additional acquisitions. The Company presently
expects to fund redevelopment costs and future acquisitions principally with
cash generated by operations and borrowings under the New Credit Facility.
Pursuant to the shelf registration statement filed by the Company
(discussed in Note 4), the Company expects to close on an offering of 2.75
million shares of Common Stock in May, 1997. Additionally, the Company has
granted to the underwriters of the Offering a 30-day option to purchase up to
412,500 additional shares of Common Stock.
10
<PAGE> 11
PART II.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
No. 27 Financial Data Schedule
(b) Reports on Form 8-K
Current Report on Form 8-K dated March 14, 1997.
Current Report on Form 8-K/A dated March 14, 1997.
11
<PAGE> 12
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: May 14, 1997 By /s/ Jeffrey P. Mayer
-----------------------
Jeffrey P. Mayer
Senior Vice President and Chief
Financial Officer
(Chief Accounting Officer)
12
<PAGE> 13
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<S> <C>
27 - Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 5,979
<SECURITIES> 122
<RECEIVABLES> 12,469
<ALLOWANCES> (196)
<INVENTORY> 3,419
<CURRENT-ASSETS> 27,835
<PP&E> 625,481
<DEPRECIATION> (36,925)
<TOTAL-ASSETS> 634,582
<CURRENT-LIABILITIES> 43,708
<BONDS> 256,711
0
0
<COMMON> 166
<OTHER-SE> 256,465
<TOTAL-LIABILITY-AND-EQUITY> 634,582
<SALES> 0
<TOTAL-REVENUES> 58,261
<CGS> 0
<TOTAL-COSTS> 36,784
<OTHER-EXPENSES> 8,176
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,278
<INCOME-PRETAX> 7,023
<INCOME-TAX> 2,613
<INCOME-CONTINUING> 4,410
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,410
<EPS-PRIMARY> .26
<EPS-DILUTED> .26
</TABLE>
