<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
-------------------------
Date of Report (Date of earliest event reported): March 26, 1999
<TABLE>
<S> <C>
Commission File Number 1-9319 Commission File Number 1-9320
PATRIOT AMERICAN HOSPITALITY, INC. WYNDHAM INTERNATIONAL, INC.
- ------------------------------------------------------ -----------------------------------------------------
(Exact Name of Registrant as Specified in its Charter) (Exact Name of Registrant as Specified in its Charter)
DELAWARE DELAWARE
- ------------------------------------------------------ -----------------------------------------------------
(State or Other Jurisdiction of (State or Other Jurisdiction of
Incorporation of Organization) Incorporation of Organization)
94-0358820 94-2878485
- ------------------------------------------------------ -----------------------------------------------------
(I.R.S. Employer Identification No.) (I.R.S. Employer Identification No.)
1950 Stemmons Freeway, Suite 6001 1950 Stemmons Freeway, Suite 6001
Dallas, Texas 75207 Dallas, Texas 75207
- ------------------------------------------------------ -----------------------------------------------------
(Address of Principal Executive Offices) (Zip Code) (Address of Principal Executive Offices) (Zip Code)
(214) 863-1000 (214) 863-1000
- ------------------------------------------------------ -----------------------------------------------------
(Registrant's telephone number, including area code) (Registrant's telephone number, including area code)
</TABLE>
JAMES D. CARREKER
Chief Executive Officer
Patriot American Hospitality, Inc.
Wyndham International, Inc.
-------------------------------
copies to:
GILBERT G. MENNA, P.C.
KATHRYN I. MURTAGH, ESQ.
Goodwin, Procter & Hoar LLP
Exchange Place
Boston, Massachusetts 02109-2881
(617) 570-1000
-------------------------------
<PAGE> 2
Item 5. Other Events.
REASONS FOR THE SPIN-OFF
Before Patriot American Hospitality, Inc. and Wyndham International, Inc.
(Patriot/Wyndham combined and separately Patriot and Wyndham) agreed to acquire
Interstate Hotels Company (IHC) in December 1997, Patriot/Wyndham negotiated a
non-binding letter of intent with Marriott International, Inc. (Marriott) to
address Marriott's concerns regarding the acquisition of IHC, their largest
franchisee, by a competitor, Patriot/Wyndham. Despite lengthy and intensive
negotiations, Patriot/ Wyndham and Marriott were unable to reach a definitive
agreement prior to the planned closing of the IHC merger and Marriott filed suit
in March 1998 seeking to block the merger. Patriot/Wyndham, IHC and Marriott
reached a settlement on May 27, 1998 which allowed the IHC merger to close on
June 2, 1998. A major component of the settlement agreement was the transfer of
certain operations, principally IHC's third-party hotel management business, to
a newly created subsidiary of Patriot/Wyndham, Interstate Hotels Management,
Inc. (Interstate Management), and the subsequent spin-off of Interstate
Management from Patriot/Wyndham.
THE SPIN-OFF
When the spin-off is consummated, Patriot/Wyndham will distribute to their
shareholders one Interstate Management share for every 19.57 Patriot/Wyndham
securities owned on the record date for the spin-off. At the time of the
spin-off, Marriott will also purchase four percent of the outstanding Interstate
Management shares for approximately $2.3 million. We expect the spin-off to
occur in April, 1999.
OWNERSHIP OF INTERSTATE MANAGEMENT FOLLOWING THE SPIN-OFF
At the time of the spin-off, Marriott will purchase four percent of Interstate
Management outstanding shares for approximately $2.3 million. Following the
spin-off, in order to reduce the percentage of Interstate Management shares
owned by affiliates of Patriot/Wyndham, Interstate Management will redeem the
248,385 Interstate Management shares which are to be distributed in the spin-off
to the holders of Series A Preferred Stock of Patriot/Wyndham. Following the
spin-off and these transactions, holders of Patriot/Wyndham securities will own
92% of Interstate Management shares, Marriott will own four percent of
Interstate Management shares and Patriot/Wyndham will own four percent of
Interstate Management shares. This ownership structure was a negotiated part of
the settlement agreement reached with Marriott and will allow each of
Patriot/Wyndham and Marriott to maintain an equal interest in Interstate
Management. This structure, in addition to certain rights to elect directors
held by Wyndham and Marriott, will allow both Patriot/Wyndham and Marriott to
have an influence on the management of Interstate Management affairs.
OUR CORPORATE STRUCTURE
After the spin-off, Interstate Management will initially have two principal
subsidiaries, Interstate Hotels, LLC and IHC II, LLC. Interstate Management will
own a 45% managing member interest in Interstate Hotels, LLC and a 99.99%
interest in IHC II, LLC. Patriot will retain a 55% non-controlling ownership
interest in Interstate Hotels, LLC and Marriott will own the remaining .01%
interest in IHC II, LLC. Interstate Hotels, LLC is the entity that will operate
the third-party hotel management business that Patriot/Wyndham acquired from
IHC, as well as own equity interests representing in the aggregate an
approximate 50.3% interest in The Charles Hotel Complex, a hotel, retail and
office complex located in Cambridge, Massachusetts. IHC II, LLC will enter into
arrangements under which Marriott will submanage eleven Marriott hotels acquired
by Patriot/Wyndham from IHC. IHC II, LLC is not expected to make a profit on
these arrangements, but rather will serve to insulate Patriot/Wyndham and
Marriott from having a direct operational relationship with each other.
1
<PAGE> 3
Included here in the printed version of this Form 8-K are two graphics which
depict, using boxes to represent entities and arrows to represent ownership
interests, the ownership structure of Interstate Management immediately prior
to and immediately following the spin-off.
The first graphic, which depicts the ownership structure of Interstate
Management immediately prior to the spin-off, shows that:
o Patriot will own 99% of Interstate Management and PAH-Interstate
Holdings, Inc., a subsidiary owned 99% by Patriot and 1% by Wyndham
Operating Partnership (itself a subsidiary of which Wyndham owns
at least 85%), will own 1% of Interstate Management.
o Interstate Management will own 100% of IHC II, LLC.
o Interstate Management will own 45% of Interstate Hotels, LLC and
PAH-Interstate Holdings, Inc. will own 55% of Interstate Hotels,
LLC;
o Interstate Hotels, LLC will own 99% of both Crossroads Hospitality
Company, L.L.C. and Hilltop Equipment Leasing Company, L.P., and
PAH-Interstate Member, Inc., a wholly-owned subsidiary of
Interstate Hotels, LLC, will own 1% of both Crossroads Hospitality
Company, L.L.C. and Hilltop Equipment Leasing Company, L.P.;
o Interstate Hotels, LLC will own 100% of Colony Hotels and Resorts,
Company, Northridge Insurance Company, Continental Design &
Supplies Company, L.L.C., and several entities owning interests
in leaseholds; and
o Interstate Hotels, LLC will own 50.3% in the aggregate of several
entities owning equity interests in The Charles Hotel Complex.
2
<PAGE> 4
The second graphic, which depicts the ownership structure of Interstate
Management immediately following the spin-off, shows that:
o Marriott will own 4% of Interstate Management, the holders of
Patriot/Wyndham securities will own 92% of Interstate Management,
Wyndham will own three percent of Interstate Management and
PAH-Interstate Holdings, Inc., a subsidiary owned 99% by Patriot and
1% by Wyndham Operating Partnership (itself a subsidiary of which
Wyndham owns at least 85%), will own 1% of Interstate Management;
o Interstate Management will own 99.99% of IHC II, LLC and Marriott will
own .01% of IHC II, LLC;
o Interstate Management will own 45% of Interstate Hotels, LLC and
PAH-Interstate Holdings, Inc. will own 55% of Interstate Hotels,
LLC;
o Interstate Hotels, LLC will own 99% of both Crossroads Hospitality
Company, L.L.C. and Hilltop Equipment Leasing Company, L.P., and
PAH-Interstate Member, Inc., a wholly-owned subsidiary of Interstate
Hotels, LLC, will own 1% of both Crossroads Hospitality Company,
L.L.C. and Hilltop Equipment Leasing Company, L.P.;
o Interstate Hotels, LLC will own 100% of Colony Hotels and Resorts,
Company, Northridge Insurance Company, Continental Design &
Supplies Company, L.L.C., and several entities owning interests
in leaseholds; and
o Interstate Hotels, LLC will own 50.3% in the aggregate of several
entities owning equity interests in The Charles Hotel Complex.
3
<PAGE> 5
Item 7. Financial Statements and Exhibits.
(a) Financial Statements
None.
(b) Pro Forma Financial Information
The separate and combined pro forma financial information for
Interstate Hotels Management, Inc. is included on pages F-1--F-7
of this report.
(c) Exhibits
None.
4
<PAGE> 6
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be filed on its behalf by the
undersigned thereunto duly authorized.
PATRIOT AMERICAN HOSPITALITY, INC.
Dated: March 26, 1999 By: /s/ Lawrence S. Jones
---------------------------------
Name: Lawrence S. Jones
Title:Executive Vice President and Treasurer
WYNDHAM INTERNATIONAL, INC.
By: /s/ Lawrence S. Jones
---------------------------------
Name: Lawrence S. Jones
Title:Executive Vice President and Treasurer
5
<PAGE> 7
Pro Forma Financial Information.
The following unaudited pro forma financial information of Interstate Management
assumes that Patriot/Wyndham has separated the third-party hotel management
business they acquired through the merger of IHC into Patriot to create
Interstate Management. The Unaudited Pro Forma Combined Balance Sheet as of
December 31, 1998, is presented as if this spin-off had occurred on that date.
The Unaudited Pro Forma Combined Statement of Operations for the year ended
December 31, 1998 is presented as if the spin-off had occurred on January 1,
1998. The adjustments required to reflect the spin-off and related transactions
are discussed in the accompanying notes. In management's opinion, all material
adjustments necessary to reflect the effect of these transactions have been
made.
The historical combined financial statements of Interstate Management have been
carved out of IHC and Patriot/Wyndham and principally include those historical
assets, liabilities, revenues and expenses directly attributable to the
third-party hotel management business of IHC that will succeed to Interstate
Management. The unaudited pro forma financial data is presented for
informational purposes only and may not reflect the future results of operations
and financial position, or be necessarily indicative of what the actual results
of operations and financial position of Interstate Management would have been
had the spin-off occurred as of the dates indicated.
F-1
<PAGE> 8
INTERSTATE HOTELS MANAGEMENT, INC.
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA
HISTORICAL (A) ADJUSTMENTS PRO FORMA
-------------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents.......................... $ 1,652 $ 28,290(B) $ 29,942
Accounts receivable, net........................... 16,816 -- 16,816
Deferred income taxes.............................. 615 -- 615
Net investment in direct financing leases.......... 827 -- 827
Prepaid expenses and other assets.................. 741 -- 741
Related party receivables -- management
contracts....................................... 1,085 (1,085)(C) --
-------- -------- --------
Total current assets....................... 21,736 27,205 48,941
Restricted cash...................................... 2,201 -- 2,201
Marketable securities................................ 2,609 -- 2,609
Property and equipment, net.......................... 4,076 -- 4,076
Officers and employees notes receivable.............. 2,803 -- 2,803
Affiliate receivables................................ 3,381 -- 3,381
Net investment in direct financing leases............ 1,680 -- 1,680
Investment in hotel real estate...................... 22,150 -- 22,150
Intangibles and other assets......................... 100,521 -- 100,521
-------- -------- --------
Total assets............................... $161,157 $ 27,205 $188,362
======== ======== ========
LIABILITIES AND OWNERS' EQUITY
Current liabilities:
Accounts payable -- trade.......................... 2,413 -- 2,413
Accounts payable -- health trust................... 1,785 -- 1,785
Accounts payable -- related parties................ 18,597 (18,597)(B) --
Accrued payroll and related benefits............... 6,120 -- 6,120
Accrued rent....................................... 5,043 -- 5,043
Accrued merger costs............................... 9,344 -- 9,344
Other accrued liabilities.......................... 9,236 -- 9,236
-------- -------- --------
Total current liabilities.................. 52,538 (18,597) 33,941
Deferred income taxes................................ 11,053 -- 11,053
Deferred compensation................................ 2,609 -- 2,609
-------- -------- --------
Total liabilities.......................... 66,200 (18,597) 47,603
-------- -------- --------
Minority interest.................................... 2,350 67,875(D) 70,225
Commitments and contingencies........................ -- -- --
Owners' equity:
Common stock, $0.01 par value...................... -- 100(E) 100
Paid-in capital.................................... -- 70,434(E) 70,434
Owners' equity..................................... 92,607 (92,607)(E) --
-------- -------- --------
Total owners' equity....................... 92,607 (22,073) 70,534
-------- -------- --------
Total liabilities and owners' equity....... $161,157 $ 27,205 $188,362
======== ======== ========
</TABLE>
The accompanying notes are an integral part of this Pro Forma Combined Balance
Sheet.
F-2
<PAGE> 9
INTERSTATE HOTELS MANAGEMENT, INC.
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
PERIOD FROM
----------------------------
JAN. 1, 1998 JUNE 2, 1998 COMBINED PRO FORMA
TO TO YEAR ENDED YEAR ENDED
JUNE 1, 1998 DEC. 31, 1998 DECEMBER 31, PRO FORMA DECEMBER 31,
(A) (A) 1998 ADJUSTMENTS 1998
------------ ------------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
Lodging revenues:
Rooms.................... $ 74,265 $108,698 $182,963 -- $182,963
Other departmental....... 4,504 6,455 10,959 -- 10,959
Net management fees........ 18,018 22,763 40,781 $(10,794)(B) 29,987
Other fees................. 9,976 10,478 20,454 (3,725)(C) 16,729
-------- -------- -------- -------- --------
106,763 148,394 255,157 (14,519) 240,638
Lodging expenses:
Rooms.................... 17,173 26,567 43,740 -- 43,740
Other departmental....... 2,674 3,962 6,636 -- 6,636
Property costs........... 19,987 30,261 50,248 -- 50,248
General and
administrative........... 6,115 5,822 11,937 500(D) 12,437
Payroll and related
benefits................. 10,982 10,439 21,421 (3,971)(E) 17,450
Lease expense.............. 34,515 51,165 85,680 -- 85,680
Depreciation and
amortization............. 2,152 10,659 12,811 5,373(F) 18,184
-------- -------- -------- -------- --------
Operating income........... 13,165 9,519 22,684 (16,421) 6,263
Other income:
Interest, net............ 204 390 594 -- 594
Other, net............... 474 1,391 1,865 286(G) 2,151
-------- -------- -------- -------- --------
Income before income tax
expense.................. 13,843 11,300 25,143 (16,135) 9,008
Income tax expense......... 5,528 4,436 9,964 (8,400)(H) 1,564
-------- -------- -------- -------- --------
Income before minority
interest................. 8,315 6,864 15,179 (7,735) 7,444
Minority interest.......... 24 209 233 4,865(I) 5,098
-------- -------- -------- -------- --------
Net income................. $ 8,291 $ 6,655 $ 14,946 $(12,600) $ 2,346
======== ======== ======== ======== ========
Basic net income per common
share.................... $ 0.23(J)
========
Diluted net income per
common share............. $ 0.23(J)
========
</TABLE>
- -------------------------
The accompanying notes are an integral part of this Pro Forma Combined Statement
of Operations.
F-3
<PAGE> 10
INTERSTATE HOTELS MANAGEMENT, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL DATA
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
------------------
NOTE 1 -- PRO FORMA BALANCE SHEET ADJUSTMENTS:
(A) Reflects the historical combined balance sheet of Interstate Management as
of December 31, 1998. The historical balance sheet reflects the historical
carrying amounts recorded on the books of Patriot.
(B) Adjustments to reflect the net increase in cash and cash equivalents as
follows:
<TABLE>
<S> <C>
Cash contribution from Patriot to Interstate Hotels, LLC to
fund working capital...................................... $ 31,887
Repayment of amounts owed to Wyndham to meet Interstate
Management's short-term cash requirements................. (18,597)
Cash proceeds of Marriott's purchase of a 4% ownership
interest in Interstate Management......................... 2,314
Cash contribution from Patriot to Interstate Management to
provide $15.0 million of working capital at the spin-off
date...................................................... 12,686
--------
$ 28,290
========
</TABLE>
(C) Represents adjustments to eliminate management fees and other fee income
receivables related to management contracts for the hotels formerly owned by
IHC. Interstate Management will not hold the management contracts for these
hotels subsequent to the spin-off.
(D) Represents Patriot's 55% non-controlling ownership interest in Interstate
Hotels, LLC, based on 55% of the historical recorded carrying amount of
Interstate Management on the books of Patriot. Subsequent to the spin-off,
Interstate Management will have two principal subsidiaries. Interstate
Hotels, LLC, the successor to the third-party hotel management business
conducted by IHC prior to its merger into Patriot, will own substantially
all of the assets of Interstate Management immediately after the spin-off.
Interstate Management will own a 45% managing member interest in Interstate
Hotels, LLC, and therefore will control Interstate Hotels, LLC. Interstate
Management's second subsidiary, IHC II, LLC, will contract with Wyndham to
manage ten Marriott franchise hotels that were owned and managed by IHC, and
one hotel that was owned by IHC and managed by Marriott, prior to the merger
with Patriot. Marriott will submanage these hotels for IHC II, LLC.
<TABLE>
<S> <C>
Historical book value of owners' equity..................... $ 92,607
Adjustment to eliminate management fees and other fee income
receivable related to management contracts formerly owned
by IHC that will not be held by Interstate Hotels, LLC,
(as discussed in Note (C) above).......................... (1,085)
Funding of working capital by Patriot....................... 31,887
--------
123,409
Minority interest ownership percentage...................... 55%
--------
Minority interest........................................... $ 67,875
========
</TABLE>
F-4
<PAGE> 11
INTERSTATE HOTELS MANAGEMENT, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL DATA--(CONTINUED)
------------------
NOTE 1 -- PRO FORMA BALANCE SHEET ADJUSTMENTS--(CONTINUED)
(E) Represents adjustments to reflect the issuance of shares of common stock,
par value $0.01, of Interstate Management in connection with the spin-off as
follows:
<TABLE>
<CAPTION>
NUMBER OF COMMON PAID-IN OWNERS'
SHARES STOCK CAPITAL EQUITY
---------- ------ -------- --------
<S> <C> <C> <C> <C>
Shares distributed to
Patriot's shareholders... 9,221,743 $ 92 $ 65,286 $ --
Shares retained by
Patriot.................. 390,146 4 2,838 --
Shares purchased by
Marriott................. 390,146 4 2,310 --
Eliminate historical
owners' equity........... -- -- -- (92,607)
---------- ---- -------- --------
Total............ 10,002,035 $100 $ 70,434 $(92,607)
========== ==== ======== ========
</TABLE>
In connection with the merger of IHC into Patriot, certain operations,
principally, the third-party hotel management business, along with certain
assets and liabilities will be transferred to Interstate Management.
Ninety-two percent of the shares of Interstate Management will be
distributed to Patriot's shareholders. Patriot will retain a 4% ownership
interest in Interstate Management's common stock after the redemption
discussed in Note 2.
In connection with the spin-off of Interstate Management from Patriot,
Marriott will purchase a 4% ownership interest in Interstate Management's
common stock, after the redemption discussed in Note 2, for $2,314 in cash.
NOTE 2 -- STOCK REDEMPTION:
Following the spin-off, Interstate Management will redeem the 248,385 Interstate
Management shares which are to be distributed in the spin-off to the holders of
Series A Preferred Stock of Patriot. The purchase price for the shares to be
redeemed will be the average trading price of Interstate Management shares over
their first five trading days. Since this transaction will occur subsequent to
the spin-off, it has been excluded from the Unaudited Pro Forma Combined Balance
Sheet. If this transaction had been included in the Unaudited Pro Forma Combined
Balance Sheet, assuming a $5.23 per share redemption price, the effect would
have been to decrease the pro forma amounts to the following balances:
<TABLE>
<S> <C>
Cash........................................................ $17,283
Total current assets........................................ 47,642
Total assets................................................ 187,063
Paid-in capital............................................. 69,135
Total owners' equity........................................ 69,235
Total liabilities and owners' equity........................ 187,063
</TABLE>
F-5
<PAGE> 12
INTERSTATE HOTELS MANAGEMENT, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL DATA--(CONTINUED)
------------------
NOTE 3 -- PRO FORMA STATEMENTS OF OPERATIONS ADJUSTMENTS:
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1998
------------
<S> <C>
(A) Reflects the historical combined statements of
operations of Interstate Management for the indicated
period.
(B) Adjustments to reflect the net decrease in net
management fees:
The elimination of management fee revenues related to
ten Patriot-owned hotels that will be submanaged by
Marriott pursuant to an arrangement with IHC II, LLC, to
ten hotels that will be leased to Wyndham, converted to
the Wyndham brand and managed by Wyndham, and to other
hotels that will be leased by Patriot to Wyndham and
will be managed by Wyndham. Prior to the merger of IHC
into Patriot, these hotels were owned and managed by
subsidiaries of IHC..................................... $(13,116)
The addition of management fee revenues related to seven
Patriot-owned hotels that will be managed by Interstate
Management.............................................. 2,322
--------
$(10,794)
========
(C) Adjustments to reflect the net decrease in other fees:
The elimination of fees for insurance services,
purchasing, leasing and other ancillary services that
Interstate Management provided to the hotels that were
owned and managed by subsidiaries of IHC and are
currently owned by Patriot, as discussed in Note (B)
above. Interstate Management will not provide such
services to these hotels subsequent to the spin-off..... $ (4,610)
The addition of fees for insurance services, purchasing,
leasing and other ancillary services that Interstate
Management will provide to seven Patriot-owned hotels,
as discussed in Note (B) above.......................... 885
--------
$ (3,725)
========
(D) Adjustment to general and administrative expense to
reflect costs related to managing and administering a
publicly held company................................... $ 500
========
(E) Adjustment to payroll and related benefits expense to
reflect the elimination of salaries and related benefits
of employees who were terminated subsequent to the
merger of IHC into Patriot and whose positions have been
eliminated. The reduction in employees relates
principally to the reduction in the size of Interstate
Management subsequent to the merger..................... $ (3,971)
========
(F) Adjustments to depreciation and amortization to reflect
the net increase in amortization of management and lease
contract costs associated with the step-up in basis
arising from the allocation of purchase price resulting
from the merger of IHC into Patriot. The management and
lease contract costs have been stated at their estimated
fair market values and are being amortized using the
straight-line method over five years for the management
contracts and 11 and 13.5 years for the lease contracts.
The management contracts' amortization period was
determined using the average remaining life of the
original contract terms, and the amortization period of
the lease contracts is based on the remaining original
lease life.............................................. $ 5,373
========
</TABLE>
F-6
<PAGE> 13
INTERSTATE HOTELS MANAGEMENT, INC.
NOTES TO UNAUDITED PRO FORMA FINANCIAL DATA--(CONTINUED)
------------------
NOTE 3 -- PRO FORMA STATEMENTS OF OPERATIONS ADJUSTMENTS--(CONTINUED)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1998
------------
<S> <C>
(G) Adjustment to other income to reflect the addition of
equity in earnings for The Charles Hotel Complex for the
period prior to Interstate Management's acquisition of
additional interests in 1998 in The Charles Hotel
Complex................................................. $ 286
========
(H) Adjustment reflects the provision for income tax expense
based on Interstate Management's estimated effective
income tax rate of 40% after reduction of minority
interests............................................... $ (8,400)
========
(I) Adjustment to minority interest to reflect Patriot's
55% non-controlling interest in Interstate Hotels,
LLC..................................................... $ 4,865
========
(J) Pro forma basic and diluted net income per common share
has been calculated using 10,002,035 shares of Common
Stock. The historical combined financial statements of
Interstate Management have been carved out of IHC and
Patriot, and principally include those historical
assets, liabilities, revenues and expenses directly
attributable to the third-party hotel management
business to be conducted by Interstate Management.
Historical earnings per share information for the carved
out company has not been presented because management
believes it is not meaningful.
</TABLE>
F-7
