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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) November 13, 2000
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CRESTLINE CAPITAL CORPORATION
(Exact Name of Registrant as Specified in its Charter)
Maryland 1-14635 52-2151967
(State or Other Jurisdiction (Commission File (I.R.S. Employer
of Incorporation) Number) Identification Number)
6600 Rockledge Drive, Bethesda, Maryland 20817
(Address of Principle Executive Offices) (Zip Code)
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Registrant's Telephone Number, Including Area Code (240) 694-2000
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FORM 8-K
Item 2. Acquisition or Disposition of Assets
Crestline Capital Corporation (the "Company") announced that it had
reached a definitive agreement with a subsidiary of Host Marriott Corporation
("Host Marriott") on November 13, 2000 for the purchase and sale of the
Company's entities owning the lease rights to Host Marriott's portfolio of full-
service hotels. The purchase and sale transaction will generally transfer
ownership of those lessee entities currently owned by the Company to a
subsidiary of Host Marriott for a total consideration of $205 million, the
proceeds of which will be paid entirely in cash. The transaction, which is
subject to normal closing conditions, is expected to close at the beginning of
2001.
Item 7. Financial Statements and Exhibits
(b) Pro forma financial information.
. Unaudited Pro Forma Balance Sheet as of September 8, 2000
. Unaudited Pro Forma Statement of Operations for the Thirty-six
Weeks Ended September 8, 2000
. Unaudited Pro Forma Statement of Operations for the Fiscal Year
Ended December 31, 1999
(c) Exhibits.
99.1 Press release announcing the execution of a definitive
agreement for the purchase and sale of lessee entities.
99.2 Acquisition and Exchange Agreement dated November 13, 2000 by
and among Crestline Capital Corporation and Host Marriott L.P.
SIGNATURES
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 hereunto duly authorized.
CRESTLINE CAPITAL CORPORATION
By: /s/ Larry K. Harvey
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Larry K. Harvey
Date: November 28, 2000 Senior Vice President, Treasurer and Controller
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PRO FORMA FINANCIAL INFORMATION
The accompanying unaudited pro forma consolidated statements of operations for
the thirty-six weeks ended September 8, 2000 and the fiscal year ended December
31, 1999 reflect the following transactions as if they occurred at the beginning
of the period presented. The accompanying unaudited pro forma consolidated
balance sheet as of September 8, 2000 reflects the following transactions as if
they occurred on that date.
On November 13, 2000, the Company and a subsidiary of Host Marriott entered into
an acquisition and exchange agreement for the sale of the Company's entities
owning the lease rights to Host Marriott's portfolio of full-service hotels.
The transaction will generally transfer ownership of those lessee entities
currently owned by the Company to a subsidiary of Host Marriott for a total
consideration of $205 million, the proceeds of which will be paid entirely in
cash. The transaction is expected to close at the beginning of 2001. In
connection with the sale of its full-service hotel lessee entities, the
Company's full-service hotel working capital and full-service hotel working
capital notes will be transferred to a subsidiary of Host Marriott.
The accompanying unaudited pro forma statements of operations do not reflect a
$205 million gain before income taxes on the above transaction as it is non-
recurring in nature. In addition, the accompanying unaudited pro forma
consolidated financial statements do not include any assumptions for use of the
proceeds received from the sale of the lessee entities.
As a result of the sale of its full-service hotel lessee entities, the Company's
employees responsible for asset managing the full-service hotels will be
terminated by the Company and the Company will not exercise its option to extend
the asset management agreement with Host Marriott.
The unaudited pro forma financial statements present the Company's financial
position and results of operations as if the transactions discussed above were
completed. These presentations do not purport to represent what the Company's
results of operations would actually have been if these transactions had in fact
occurred on such date or at the beginning of such period or to project the
Company's results of operations for any future date or period.
The unaudited pro forma financial statements are based upon certain assumptions,
as set forth in the notes to the unaudited pro forma financial statements, that
the Company believes are reasonable under the circumstances and should be read
in conjunction with the Company's consolidated financial statements and notes
thereto included in the Company's Form 10-K as of December 31, 1999 and Form 10-
Q as of September 8, 2000.
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CRESTLINE CAPITAL CORPORATION
UNAUDITED PRO FORMA BALANCE SHEET
As of September 8, 2000
(in thousands, except share data)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
----------- ----------- ----------
<S> <C> <C> <C>
ASSETS
Property and equipment, net............................ $732,456 $ - $732,456
Hotel working capital.................................. 89,650 (82,321)(B) 7,329
Due from hotel managers................................ 49,876 (39,982)(C) 9,894
Due from Marriott Senior Living Services............... 6,274 - 6,274
Other assets........................................... 74,718 (6,660)(C) 68,058
Cash and cash equivalents.............................. 33,143 205,000 (A) 137,915
(84,050)(A)
39,982 (C)
6,660 (C)
(58,358)(D)
(3,106)(E)
(1,356)(F)
-------- -------- --------
$986,117 $(24,191) $961,926
======== ======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
Debt:
<S> <C> <C> <C>
Mortgage debt......................................... $ 289,118 $ - $ 289,118
Other debt............................................ 26,581 - 26,581
--------- --------- ---------
315,699 - 315,699
Hotel working capital notes payable to Host Marriott.. 89,650 (82,321)(B) 7,329
--------- --------- ---------
Total debt........................................... 405,349 (82,321) 323,028
Accounts payable and accrued expenses.................. 11,473 - 11,473
Lease payable.......................................... 66,366 (58,358)(D) 8,008
Deferred income taxes.................................. 66,526 (3,106)(E) 63,420
Other liabilities...................................... 33,423 (1,356)(F) 32,067
--------- --------- ---------
Total liabilities.................................... 583,137 (145,141) 437,996
--------- --------- ---------
Shareholders' equity:
Common stock, 75 million shares authorized,
22.1 million shares issued and outstanding
$.01 par value....................................... 221 - 221
Additional paid-in capital............................ 447,377 - 447,377
Retained earnings..................................... 75,810 120,950 (A) 196,760
Treasury stock, 6.4 million shares.................... (120,428) - (120,428)
--------- --------- ---------
Total shareholders' equity........................... 402,980 120,950 523,930
--------- --------- ---------
$ 986,117 $ (24,191) $ 961,926
========= ========= =========
</TABLE>
See Notes to Unaudited Pro Forma Financial Statements.
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CRESTLINE CAPITAL CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
Thirty-six Weeks Ended September 8, 2000
(in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
----------- ----------- ---------
<S> <C> <C> <C>
REVENUES
Hotels
Rooms.................................................. $2,002,567 $(1,738,888)(G) $263,679
Food and beverage...................................... 845,186 (830,942)(G) 14,244
Other.................................................. 223,624 (210,072)(G) 13,552
---------- ----------- --------
Total hotel revenues................................ 3,071,377 (2,779,902) 291,475
---------- ----------- --------
Senior living
Routine................................................ 164,446 - 164,446
Ancillary.............................................. 16,115 - 16,115
---------- ----------- --------
Total senior living revenues........................ 180,561 - 180,561
---------- ----------- --------
Other revenues........................................... 3,049 (3,049)(H) -
Equity in earnings of affiliates......................... 384 - 384
---------- ----------- --------
Total revenues......................................... 3,255,371 (2,782,951) 472,420
---------- ----------- --------
OPERATING COSTS AND EXPENSES
Hotels
Property-level operating costs and expenses
Rooms............................................... 467,210 (409,705)(G) 57,505
Food and beverage................................... 629,722 (616,818)(G) 12,904
Other............................................... 775,658 (676,565)(G) 99,093
Other operating costs and expenses
Management fees..................................... 193,951 (165,560)(G) 28,391
Lease expense....................................... 948,125 (875,569)(G) 72,556
Depreciation and amortization....................... 3,536 - 3,536
Other............................................... 2,143 - 2,143
---------- ----------- --------
Total hotel operating costs and expenses........... 3,020,345 (2,744,217) 276,128
---------- ----------- --------
Senior living
Property-level operating costs and expenses
Routine............................................. 105,751 - 105,751
Ancillary........................................... 9,982 - 9,982
Other operating costs and expenses
Depreciation and amortization....................... 16,591 - 16,591
Management fees..................................... 11,005 - 11,005
Property taxes and other............................ 6,654 - 6,654
---------- ----------- --------
Total senior living operating costs and expenses... 149,983 - 149,983
---------- ----------- -------
Other operating costs and expenses....................... 2,746 (2,056)(H) 690
---------- ----------- --------
Total operating costs and expenses................. 3,173,074 (2,746,273) 426,801
---------- ----------- --------
OPERATING PROFIT BEFORE MINORITY INTEREST,
CORPORATE EXPENSES AND INTEREST........................ 82,297 (36,678) 45,619
Minority interest expense................................ (950) - (950)
Corporate expenses....................................... (11,796) 426 (I) (11,370)
Interest expense......................................... (22,638) 2,941 (G) (19,697)
Interest income.......................................... 2,916 - 2,916
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INCOME BEFORE INCOME TAXES AND
EXTRAORDINARY ITEM..................................... 49,829 (33,311) 16,518
Provision for income taxes............................... (20,430) 13,658 (J) (6,772)
---------- ----------- --------
INCOME BEFORE EXTRAORDINARY ITEM......................... $ 29,399 $ (19,653) $ 9,746
========== =========== ========
BASIC EARNINGS PER COMMON SHARE.......................... $ 1.79 $ .59
========== ========
DILUTED EARNINGS PER COMMON SHARE........................ $ 1.74 $ .58
========== ========
BASIC WEIGHTED AVERAGE SHARES OUTSTANDING................ 16,467 16,467
========== ========
DILUTED WEIGHTED AVERAGE SHARES
OUTSTANDING............................................ 16,939 16,939
========== ========
</TABLE>
See Notes to Unaudited Pro Forma Financial Statements.
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<PAGE>
CRESTLINE CAPITAL CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
Fiscal Year Ended December 31, 1999
(in thousands, except per share data)
<TABLE>
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
----------- ----------- ----------
<S> <C> <C> <C>
REVENUES
Hotels
Rooms........................................ $2,687,437 $(2,380,936)(G) $306,501
Food and beverage............................ 1,206,391 (1,191,357)(G) 15,034
Other........................................ 301,162 (287,463)(G) 13,699
---------- ----------- --------
Total hotel revenues........................ 4,194,990 (3,859,756) 335,234
---------- ----------- --------
Senior living
Routine...................................... 223,794 - 223,794
Ancillary.................................... 22,704 - 22,704
---------- ----------- --------
Total senior living revenues................ 246,498 - 246,498
---------- ----------- --------
Other revenues................................ 4,770 (4,770)(H) -
Equity in earnings of affiliates.............. 867 - 867
---------- ----------- --------
Total revenues............................... 4,447,125 (3,864,526) 582,599
---------- ----------- --------
OPERATING COSTS AND EXPENSES
Hotels
Property-level operating costs and expenses
Rooms....................................... 633,771 (566,566)(G) 67,205
Food and beverage........................... 891,670 (878,457)(G) 13,213
Other....................................... 1,061,249 (941,932)(G) 119,317
Other operating costs and expenses
Management fees............................. 250,151 (215,738)(G) 34,413
Lease expense............................... 1,280,321 (1,200,387)(G) 79,934
Depreciation and amortization............... 2,934 - 2,934
---------- ----------- --------
Total hotel operating costs and expenses... 4,120,096 (3,803,080) 317,016
---------- ----------- --------
Senior living
Property-level operating costs and expenses
Routine..................................... 145,778 - 145,778
Ancillary................................... 15,414 - 15,414
Other operating costs and expenses
Depreciation and amortization............... 21,624 - 21,624
Management fees............................. 14,965 - 14,965
Property taxes and other.................... 8,549 - 8,549
---------- ----------- --------
Total senior living operating costs and
expenses................................... 206,330 - 206,330
---------- ----------- --------
Other operating costs and expenses............ 9,859 (3,764)(H) 6,095
---------- ----------- --------
Total operating costs and expenses.......... 4,336,285 (3,806,844) 529,441
---------- ----------- --------
OPERATING PROFIT BEFORE MINORITY INTEREST,
CORPORATE EXPENSES AND INTEREST.............. 110,840 (57,682) 53,158
Minority interest expense..................... (1,327) - (1,327)
Corporate expenses............................ (16,469) 688 (H) (14,962)
819 (I)
Interest expense.............................. (27,711) 4,480 (G) (23,231)
Interest income............................... 2,269 - 2,269
---------- ----------- --------
INCOME BEFORE INCOME TAXES.................... 67,602 (51,695) 15,907
Provision for income taxes.................... (27,717) 21,195 (J) (6,522)
---------- ----------- --------
NET INCOME.................................... $ 39,885 $ (30,500) $ 9,385
========== =========== ========
BASIC EARNINGS PER COMMON SHARE............... $ 1.95 $ .46
========== ========
DILUTED EARNINGS PER COMMON SHARE............. $ 1.91 $ .45
========== ========
BASIC WEIGHTED AVERAGE SHARES
OUTSTANDING.................................. 20,423 20,423
========== ========
DILUTED WEIGHTED AVERAGE SHARES
OUTSTANDING.................................. 20,840 20,840
========== ========
</TABLE>
See Notes to Unaudited Pro Forma Financial Statements.
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CRESTLINE CAPITAL CORPORATION
NOTES TO UNAUDITED PRO FORMA FINANCIAL STATEMENTS
(A) Represents the adjustment to record the sale of the lessee entities for the
full-service hotel leases to a subsidiary of Host Marriott for $205 million
in cash and the payment of income taxes of $84 million on the $205 million
in proceeds.
(B) Represents the adjustment to record the transfer of the full-service hotel
working capital notes and the full-service hotel working capital to a
subsidiary of Host Marriott each totaling $82.3 million.
(C) Represents the collection of the amounts due from the hotel managers for
full-service leased hotels totaling $40.0 million, as well as $6.7 million
due from a loan servicer for one of the leased full-service hotels with
securitized debt.
(D) Represents the payment of the lease payable to Host Marriott for the full-
service hotel leases totaling $58.4 million.
(E) Represent the payment of deferred income taxes of $3.1 million related to
the Company's full-service hotel leases.
(F) Represents the payment to a subsidiary of Host Marriott for the assumption
of a liability for deferred incentive management and franchise fees of
certain leased full-service hotels.
(G) Represents the elimination of the full-service hotel operating results and
interest expense on the full-service hotel working capital notes.
(H) Represents the elimination of the revenues from the asset management
contract with Host Marriott and the elimination of the salary costs and
other operating costs and expenses related to certain terminated asset
management employees.
(I) Represents the elimination of direct corporate expenses related to the
operation of the leased full-service hotels.
(J) Represents the income tax impact of pro forma adjustments at statutory
rates.
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