<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
AMENDMENT NO.3
FORM 8-K/A
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report: March 6, 1997
(Date of earliest event reported)
Boykin Lodging Company
(Exact Name of registrant as specified in its charter)
Ohio 001-11975 34-1824586
---- ----------- ----------
(State or other jurisdiction (Commission (IRS Employer Identification
of Incorporation) File Number) Identification Number)
Terminal Tower, Suite 1500, 50 Public Square, Cleveland, Ohio 44113-2258
- ------------------------------------------------------------- ----------
(Address of Principal Executive Offices) (Zip Code)
(216) 241-6375
--------------
(registrant's telephone number, including area code)
<PAGE> 2
THIS FORM 8-K HAS BEEN AMENDED TO INCLUDE PRO FORMA FINANCIAL INFORMATION.
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
- ------- ------------------------------------
Raleigh, North Carolina business purchase
- -----------------------------------------
On March 19, 1997, the Company acquired the Holiday Inn Crabtree in
Raleigh, North Carolina. The acquisition price was $7.5 million and was funded
with cash proceeds from the Company's initial public offering, which was
completed in November 1996. The seller was Patrick Investment Corp. Neither the
Company, nor any of its shareholders, directors or officers own any interests in
the seller. The hotel, built in 1974, contains 176 guest rooms in a twelve story
tower, has approximately 4,500 square feet of meeting space, a 120 seat
restaurant, 25 seat lounge, a pool, and other full service hotel amenities. The
Company expects to invest approximately $3 million in capital improvements to
the hotel. The hotel is operated under a license agreement with Holiday Inns.
The Company purchased all of the seller's interest in the hotel,
improvements and furnishings. The Company entered into a ground lease with the
seller for a term of 99 years on a "triple net" basis for an annual rental
payment of $10. The ground lease gives the Company the option to purchase the
land for a nominal sum at it's option.
The Company has leased the hotel to Boykin Management Company Limited
Liability Company (the Lessee), an entity in which the Company's chairman and
chief executive officer, Robert W. Boykin, owns a 53.8% interest. The Lessee
will continue the business of operating the hotel.
In determining the price to be paid for the hotel, the Company
considered the historical and expected cash flow from the hotel, the nature of
the occupancy and average daily rate trends, current operating costs and taxes,
the physical condition of the property, the potential to increase its cash flow
and other factors including the sales prices of similar properties. No
independent appraisal of the hotel was performed in connection with the
acquisition.
<PAGE> 3
ITEM 7 Financial Statements, Pro Forma Financial Information and Exhibits
------------------------------------------------------------------
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Boykin Lodging Company:
We have audited the accompanying balance sheet of the Holiday Inn Crabtree as of
December 31, 1996 and the related statements of income, owner's equity and cash
flows for the year ended December 31, 1996. These financial statements are the
responsibility of the Company's management. 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 financial statements referred to above present fairly, in
all material respects, the financial position of the Holiday Inn Crabtree as of
December 31, 1996 and the results of its operations and its cash flows for the
year ended December 31, 1996, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Cleveland, Ohio,
May 17, 1997.
<PAGE> 4
HOLIDAY INN CRABTREE
--------------------
BALANCE SHEET
-------------
DECEMBER 31, 1996
-----------------
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
INVESTMENT IN HOTEL PROPERTY, at cost:
Land $ 867,055
Buildings and improvements 2,505,772
Furniture and equipment 751,935
----------------
4,124,762
Less- Accumulated depreciation (1,023,493)
----------------
Net investment in hotel property 3,101,269
CASH 36,939
ACCOUNTS RECEIVABLE, net of allowance for doubtful accounts
of approximately $7,800 206,634
PREPAIDS AND OTHER ASSETS 41,481
----------------
$ 3,386,323
================
LIABILITIES AND OWNER'S EQUITY
------------------------------
LONG-TERM DEBT $ 3,451,936
CAPITAL LEASE OBLIGATIONS 182,882
ACCOUNTS PAYABLE, trade 77,330
ACCRUED EXPENSES AND OTHER LIABILITIES 261,529
AMOUNT DUE TO OWNER 140,000
----------------
4,113,677
OWNER'S EQUITY (727,354)
----------------
$ 3,386,323
================
</TABLE>
The accompanying notes to financial statements are an
integral part of this balance sheet.
<PAGE> 5
HOLIDAY INN CRABTREE
--------------------
STATEMENT OF INCOME
-------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
<TABLE>
<CAPTION>
HOTEL OPERATIONS:
<S> <C>
Room revenue $3,369,756
Food and beverage revenue 704,401
Other revenue 82,142
-------------
Total revenues 4,156,299
-------------
EXPENSES:
Departmental expenses-
Rooms 941,406
Food and beverage 494,274
Other 31,036
General and administrative 474,649
Advertising and promotion 119,317
Utilities 160,526
Management fees to related party 432,720
Franchisor royalties and other charges 195,041
Repairs and maintenance 240,715
Real estate and personal property taxes, insurance
and rent 87,562
Interest expense 385,658
Depreciation 237,200
Other 5,637
-------------
Total expenses 3,805,741
-------------
INCOME BEFORE PROVISION FOR INCOME TAXES 350,558
PROVISION FOR INCOME TAXES 140,000
-------------
NET INCOME $ 210,558
=============
</TABLE>
The accompanying notes to financial statements
are an integral part of this statement.
<PAGE> 6
HOLIDAY INN CRABTREE
--------------------
STATEMENT OF OWNER'S EQUITY
---------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
<TABLE>
<CAPTION>
<S> <C>
BALANCE, DECEMBER 31, 1995 $(937,912)
Net income 210,558
-------------
BALANCE, DECEMBER 31, 1996 $(727,354)
=============
</TABLE>
The accompanying notes to financial statements are an
integral part of this statement.
<PAGE> 7
HOLIDAY INN CRABTREE
--------------------
STATEMENT OF CASH FLOWS
-----------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
<TABLE>
<CAPTION>
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C>
Net income $ 210,558
Adjustments to reconcile net income to net cash provided by operating
activities-
Depreciation expense 237,200
Changes in assets and liabilities-
Accounts receivable (67,763)
Prepaids and other assets 4,134
Accounts payable, amount due to owner, accrued expenses and
other liabilities 778
-------------
Net cash provided by operating activities 384,907
-------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Improvements and additions to hotel properties, net (112,703)
-------------
Net cash used for investing activities (112,703)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term borrowings 300,000
Principal payments on long-term debt (489,405)
Principal payments on capital lease obligations (55,561)
-------------
Net cash used for financing activities (244,966)
-------------
NET CHANGE IN CASH 27,238
CASH AT BEGINNING OF PERIOD 9,701
-------------
CASH AT END OF PERIOD 36,939
=============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid $ 427,000
</TABLE>
The accompanying notes to financial statements are an
integral part of this statement.
<PAGE> 8
HOLIDAY INN CRABTREE
--------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
DECEMBER 31, 1996
-----------------
1. DESCRIPTION OF BUSINESS AND BASIS OF PRESENTATION:
--------------------------------------------------
Description of Business
- -----------------------
The Holiday Inn Crabtree (the Hotel) is owned and operated by Patrick
Investments Corporation (Patrick), a wholly-owned subsidiary of Toomey
Enterprises, Inc. (a Virginia corporation). The Hotel is a 176-room full
service Holiday Inn located in Raleigh, North Carolina.
Basis of Presentation
- ---------------------
The accompanying financial statements are prepared on the accrual basis of
accounting and include the accounts of the Hotel using historical cost basis.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
-------------------------------------------
Investment in Hotel Property
- ----------------------------
The hotel property is stated at cost. Depreciation is computed using primarily
accelerated methods based upon the following estimated useful lives:
Buildings and improvements 5-32 years
Furniture and equipment 3-7 years
The management of the Hotel reviews the hotel property for impairment when
events or changes in circumstances indicate the carrying amount of the hotel
property may not be recoverable. When such conditions exist, management
estimates the future cash flows from operations and disposition of the hotel
property. If the estimated undiscounted future cash flows are less than the
carrying amount of the asset, an adjustment to the related estimated fair market
value would be recorded and an impairment loss would be recognized. No such
impairment losses have been recognized.
Maintenance and repairs are charged to operations as incurred; major renewals
and betterments are capitalized. Upon the sale or disposition of a fixed asset,
the asset and related accumulated depreciation are removed from the accounts,
and the gain or loss is included in the determination of net income.
Revenue Recognition
- -------------------
Revenue is recognized as earned. Ongoing credit evaluations are performed and an
allowance for potential credit losses is provided against the portion of
accounts receivable which is estimated to be uncollectible. Such losses have
been within management's expectations.
<PAGE> 9
-2-
Income Taxes
- ------------
The taxable income or loss of the Hotel is included in the consolidated federal
tax return of Toomey Enterprises, Inc. In the accompanying statement of income,
the income tax provision is calculated using an effective tax rate of 40%, and
results in an adjustment to the amount due to owner in the accompanying balance
sheet. The Hotel has no material permanent or temporary differences.
Management's Use of Estimates in the
Preparation of Financial Statements
- -----------------------------------
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 disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. ACQUISITION BY BOYKIN LODGING COMPANY:
--------------------------------------
On March 19, 1997, Boykin Lodging Company (BLC) acquired certain assets and
assumed certain liabilities of the Hotel from Patrick in exchange for aggregate
cash consideration of $7,500,000. In connection with the sale transaction, the
long-term debt of the Hotel was retired.
4. LONG-TERM DEBT:
---------------
<TABLE>
<S> <C>
Promissory note due to United Carolina Bank, payable
in monthly installments of principal and interest of
$31,000; interest is at prime plus 1.5% with a ceiling of
11%; matures July 2008; secured by certain real and
personal property $2,828,551
Promissory note due to United Carolina Bank, payable
in monthly installments of principal and interest of
$14,000; interest is at 9.25%; matures November 1998;
collateralized by certain real and personal property 288,313
Note payable due to Beltsville Mortgage Corp; principal
originally payable in full at maturity in February 1997;
interest at 18% is payable monthly; collateralized by
certain real and personal property 335,072
-------------
$3,451,936
=============
</TABLE>
As indicated in Note 3, in connection with the sale of the Hotel to BLC, all of
the above long-term debt was retired.
5. CAPITAL LEASE OBLIGATIONS:
--------------------------
The Hotel leases certain equipment pursuant to long-term leases. As the leases
contain bargain purchase options, the leases have been accounted for as capital
leases. The lease terms range from 36 to 84 months, and require monthly payments
ranging from $300 to $2,500. The leases expire at various dates through November
2000. The leases were capitalized based upon interest rates ranging from 10% to
18%. The lease obligations were retired by BLC in May 1997.
<PAGE> 10
-3-
6. COMMITMENTS:
------------
Franchise Agreements
- --------------------
The Hotel is operated as a Holiday Inn pursuant to the terms of a hotel
franchise agreement expiring in 2003. The franchise agreement requires payments
for franchisor royalties and marketing contributions that are computed at 6.5%
of gross room revenue.
The franchise agreement contains provisions whereby the franchisor would be
entitled to additional payments in the event the franchisee would terminate the
franchise agreement prior to maturity.
7. RELATED PARTY TRANSACTIONS:
---------------------------
The shareholders of Toomey Enterprises, Inc., the parent of Patrick, received
approximately $433,000 in 1996 as consideration for consulting and management
services provided to the Hotel.
8. FAIR VALUE OF FINANCIAL INSTRUMENTS:
------------------------------------
Statement of Financial Accounting Standards No. 107 requires disclosure about
fair value for all financial instruments, whether or not recognized for
financial statement purposes. Disclosure about fair value of financial
instruments is based on pertinent information available to management as of
December 31, 1996. Considerable judgment is necessary to interpret market data
and develop estimated fair value. Accordingly, the estimates presented herein
are not necessarily indicative of the amounts which could be realized on
disposition of the financial instruments. The use of different market
assumptions and/or estimation methodologies may have a material effect on the
estimated fair value amounts.
Long-Term Debt and Capital Lease Obligations
- --------------------------------------------
Management estimates that the fair values of the long-term debt and capital
lease obligations approximate carrying values based upon the Hotel's effective
borrowing rate for issuance of debt with similar terms and remaining maturities.
<PAGE> 11
PRO FORMA FINANCIAL INFORMATION
-------------------------------
The following unaudited Pro Forma Consolidated Statements of Income of Boykin
Lodging Company (the Company) for the year ended December 31, 1996 and the three
months ended March 31, 1997 are presented as if (i) the Company's initial public
offering as of November 4, 1996 (the Offering) and the related formation
transactions as discussed in the Company's Form S-11, as amended, dated October
4, 1996, and (ii) the acquisition of the Holiday Inn Crabtree on March 19, 1997
had been consummated as of January 1, 1996. The pro forma information does not
reflect the acquisition of the Melbourne Beach Hilton which occurred on March
13, 1997, nor does it reflect the acquisition of the French Lick Springs Resort
which occurred on April 4, 1997. The pro forma information is not necessarily
indicative of what actual results of operations of the Company would have been
had such transactions been consummated as of January 1, 1996, nor does it
purport to represent the results of operations for future periods.
<PAGE> 12
BOYKIN LODGING COMPANY
----------------------
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996
------------------------------------
(Unaudited, amounts in thousands except per share data)
<TABLE>
<CAPTION>
Offering and
Historical Formation
Company Transactions Acquisition Pro Forma
---------- ------------- ----------- ---------
(A) (B) (C)
<S> <C> <C> <C> <C>
LEASE REVENUE $ 3,258 $ 24,553 $ 1,354 $ 29,165
INTEREST INCOME 120 -- -- 120
-------- -------- -------- --------
Total revenue 3,378 24,553 1,354 29,285
-------- -------- -------- --------
REAL ESTATE RELATED DEPRECIATION
AND AMORTIZATION 1,344 6,792 279 8,415
REAL ESTATE AND PERSONAL PROPERTY TAXES,
INSURANCE AND GROUND RENT 620 3,438 88 4,146
GENERAL AND ADMINISTRATIVE 450 1,000 -- 1,450
INTEREST EXPENSE 54 (54) -- --
AMORTIZATION OF DEFERRED
FINANCING COSTS 69 367 -- 436
-------- -------- -------- --------
2,537 11,543 367 14,447
-------- -------- -------- --------
INCOME BEFORE MINORITY INTEREST
AND EXTRAORDINARY ITEM 841 13,010 987 14,838
MINORITY INTEREST (40) (1,517) (153) (1,710)
-------- -------- -------- --------
INCOME BEFORE EXTRAORDINARY ITEM $ 801 $ 11,493 $ 834 $ 13,128
======== ======== ======== ========
INCOME PER SHARE BEFORE
EXTRAORDINARY ITEM $ .09 $ 1.38
======== ========
WEIGHTED AVERAGE SHARES
OUTSTANDING 8,981 9,516
</TABLE>
See the accompanying notes to pro forma
consolidated statements of income.
<PAGE> 13
BOYKIN LODGING COMPANY
----------------------
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
------------------------------------------
FOR THE THREE MONTHS ENDED MARCH 31, 1997
-----------------------------------------
(Unaudited, amounts in thousands except per share data)
<TABLE>
<CAPTION>
Historical
Company Acquisition Pro Forma
----------- ----------- ---------
(A) (C)
<S> <C> <C> <C>
LEASE REVENUE $ 7,208 $ 246 $ 7,454
INTEREST INCOME 231 -- 231
------- ------- -------
Total revenue 7,439 246 7,685
------- ------- -------
REAL ESTATE RELATED DEPRECIATION AND
AMORTIZATION
1,941 70 2,011
REAL ESTATE AND PERSONAL PROPERTY TAXES,
INSURANCE AND GROUND RENT 1,022 36 1,058
GENERAL AND ADMINISTRATIVE 488 -- 488
INTEREST EXPENSE 52 -- 52
AMORTIZATION OF DEFERRED FINANCING COSTS 109 -- 109
------- ------- -------
3,612 106 3,718
------- ------- -------
INCOME BEFORE MINORITY INTEREST AND
EXTRAORDINARY ITEM
3,827 140 3,967
MINORITY INTEREST (446) (22) (468)
------- ------- -------
NET INCOME BEFORE EXTRAORDINARY ITEM $ 3,381 $ 118 $ 3,499
======= ======= =======
EARNINGS PER SHARE $ .36 $ .37
======= =======
WEIGHTED AVERAGE SHARES OUTSTANDING 9,516 9,516
</TABLE>
See the accompanying notes to pro forma
consolidated statements of income.
<PAGE> 14
BOYKIN LODGING COMPANY
----------------------
NOTES TO PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
----------------------------------------------------
FOR THE YEAR ENDED DECEMBER 31, 1996 AND
----------------------------------------
THE THREE MONTHS ENDED MARCH 31, 1997
-------------------------------------
(Unaudited, amounts in thousands)
(A) With respect to the year ended December 31, 1996, reflects the Company's
historical consolidated statement of income for the period November 4,
1996 (commencement of operations) through December 31, 1996. With respect
to the three months ended March 31, 1997, reflects the Company's
historical consolidated statement of income for the period indicated.
(B) Represents pro forma adjustments to the Company's historical consolidated
statement of income for the year ended December 31, 1996 to reflect the
assumed consummation of the Offering and related formation transactions as
of January 1, 1996. For additional information, please see pages F-1
through F-60 (Historical and Pro Forma Financial Statements) of the
Company's Form S-11, as amended, dated October 29, 1996, and the Company's
annual report on Form 10-K for the year ended December 31, 1996.
(C) Represents pro forma adjustments to reflect the assumed consummation of the
acquisition of the Holiday Inn Crabtree as of January 1, 1996. The pro
forma adjustments include the following:
1.Pro forma lease payments to the Partnership calculated on a pro forma
basis by applying the rent provision of the percentage lease agreement to
the historical revenues of the Holiday Inn Crabtree for the applicable
period. As the hotel operating revenues will be earned by the Lessee,
historical operating revenues of the acquired hotel property have not
been reflected in the accompanying pro forma consolidated income
statements.
2.Pro forma depreciation of the building and improvements and furniture and
equipment of the Holiday Inn Crabtree. Depreciation is computed using the
straight-line method and is based upon estimated useful lives of 30 years
for building and improvements and 7 years for furniture and equipment.
The purchase price allocation related to the acquisition of the Holiday
Inn Crabtree, including transaction related costs, was as follows:
<TABLE>
<S> <C>
Land $ 725
Buildings and improvements 6,534
Furniture and equipment 431
-------
$ 7,690
=======
</TABLE>
<PAGE> 15
3.Historical amounts of real estate and personal property taxes, property
and casualty insurance related to the Holiday Inn Crabtree to be paid by
the Partnership. All other hotel operating expenses will be incurred by
the Lessee and, therefore, historical amounts of such expenses have not
been reflected in the accompanying pro forma consolidated income
statements.
4.Minority interest related to the pro forma adjustments, calculated at
15.5%.
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused Amendment No. 3 to this report to be signed on
its behalf by the undersigned hereunto duly authorized.
BOYKIN LODGING COMPANY
Date: June 19, 1997 By: /s/ RAYMOND P. HEITLAND
Raymond P. Heitland, Chief Financial Officer
