<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
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
Commission File Number 1-9319 Commission File Number 1-9320
PATRIOT AMERICAN HOSPITALITY, INC. WYNDHAM INTERNATIONAL, INC.
- -------------------------------------- --------------------------------------
(Exact name of registrant as (Exact name of registrant as
specified in its charter) specified in its charter)
Delaware Delaware
- -------------------------------------- --------------------------------------
(State or other jurisdiction of (State or other jurisdiction of
incorporation or organization) incorporation or 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 (Address of principal executive
offices)(Zip Code) offices)(Zip Code)
(214) 863-1000 (214) 863-1000
- -------------------------------------- --------------------------------------
(Registrant's telephone number, (Registrant's telephone number,
including area code) including area code)
- -------------------------------------- --------------------------------------
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC. AND
WYNDHAM INTERNATIONAL, INC.
ITEM 5. OTHER EVENTS
The pro forma financial information for the year ended December 31, 1998 is
being filed in accordance with Article 11 of Regulation S-X.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements
None.
(b) Pro Forma Financial Information
The index to the separate and combined pro forma financial information for
Patriot American Hospitality, Inc. and Wyndham International, Inc. is included
on page F-1 of this report.
(c) Exhibits
None.
2
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrants have duly caused the report to be signed on their behalf by the
undersigned thereunto duly authorized.
DATED: May 7, 1999
PATRIOT AMERICAN HOSPITALITY, INC.
/s/ Lawrence S. Jones
By: _________________________________
Lawrence S. Jones
Executive Vice President and
Treasurer
(Principal Financial and
Accounting Officer)
WYNDHAM INTERNATIONAL, INC.
/s/ Lawrence S. Jones
By: _________________________________
Lawrence S. Jones
Executive Vice President and
Treasurer
(Principal Financial and
Accounting Officer)
3
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC. AND
WYNDHAM INTERNATIONAL, INC.
INDEX TO FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Page
----
<S> <C>
Patriot American Hospitality, Inc. and Wyndham International, Inc--
Adjusted for the Investment, Restructuring, New Debt Financing and
Interstate Spin-off:
Pro Forma Condensed Combined Balance Sheet as of
December 31, 1998 (unaudited).......................................... F-8
Pro Forma Condensed Combined Statement of Operations for the year ended
December 31, 1998 (unaudited).......................................... F-13
Patriot American Hospitality Inc.:
Pro Forma Condensed Consolidated Balance Sheet as of December 31, 1998
(unaudited)............................................................ F-18
Pro Forma Condensed Consolidated Statement of Operations for the year
ended
December 31, 1998 (unaudited).......................................... F-20
Wyndham International, Inc.:
Pro Forma Condensed Consolidated Balance Sheet as of December 31, 1998
(unaudited)............................................................ F-23
Pro Forma Condensed Consolidated Statement of Operations for the year
ended
December 31, 1998 (unaudited).......................................... F-25
</TABLE>
F-1
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC. AND
WYNDHAM INTERNATIONAL, INC.
INTRODUCTION TO PRO FORMA FINANCIAL STATEMENTS
(unaudited)
(dollars in thousands)
Background
Patriot American Hospitality, Inc. ("Old Patriot") was formed April 17, 1995
as a self-administered real estate investment trust ("REIT") for the purpose
of acquiring equity interests in hotel properties. On October 2, 1995, Patriot
completed an initial public offering of shares of common stock and commenced
operations.
On July 1, 1997, Old Patriot merged with and into California Jockey Club
("Cal Jockey"), with Cal Jockey being the surviving legal entity. Cal Jockey's
shares of common stock are paired and trade together with the shares of common
stock of Bay Meadows Operating Company. In connection with the Cal Jockey
merger, Cal Jockey changed its name to "Patriot American Hospitality, Inc."
("Patriot") and Bay Meadows changed its name to "Patriot American Hospitality
Operating Company". As a result of the merger with Wyndham Hotel Company in
January, 1998, the operating company subsequently changed its name to "Wyndham
International, Inc." ("Wyndham"). Patriot and Wyndham are now collectively
referred to as the companies. Patriot and Wyndham are both Delaware
corporations.
The shares of common stock of Patriot are paired and trade together with the
shares of common stock of Wyndham as a single unit pursuant to a stock pairing
arrangement. The single unit comprised of one share of common stock of Patriot
and one share of common stock of Wyndham is referred to as a paired share.
Patriot and Wyndham conduct substantially all of their operations through
Patriot American Hospitality Partnership, L.P. ("Patriot Partnership") and
Wyndham International Operating Partnership, L.P. ("Wyndham Partnership"),
respectively. Patriot Partnership and Wyndham Partnership are collectively
referred to as the operating partnerships. As of December 31, 1998, Patriot
owns an approximate 89% interest in the Patriot Partnership and Wyndham owns
an approximate 87.8% in the Wyndham Partnership.
At December 31, 1998, Patriot and Wyndham, through the operating
partnerships and other subsidiaries, including hotels owned through
unconsolidated subsidiaries, owned interests in 178 hotels with an aggregate
of over 43,800 guest rooms and leased 121 hotels from third parties with over
15,800 guest rooms. In addition, Wyndham manages 161 hotels for third party
owners with over 38,500 guest rooms and franchises 12 hotels with over 2,900
guest rooms.
Patriot leases substantially all of the owned and leased hotels to Wyndham.
Generally, the participating leases provide for the payment of the greater of
base or participating rent, plus certain additional charges, as applicable.
1998 Business Transactions
Wyndham Hotel Corporation
On January 5, 1998, Wyndham Hotel Corporation merged with and into Patriot,
with Patriot being the surviving corporation. As a result, its financial
position and substantially all of its operations have been recognized in the
Patriot and Wyndham combined financial statements as of and for the year ended
December 31, 1998.
Recent transactions
On January 16, 1998, a subsidiary of Wyndham merged with and into WHG
Casinos & Resorts, Inc., with WHG being the surviving corporation.
Additionally during 1998, Patriot acquired the minority partners' interests in
WHG Casinos and Resorts, Inc.'s subsidiaries. Patriot, acquired the Buena
Vista Hotel located in Orlando, Florida and the Golden Door Spa located in
Escondiado, California. These transactions are collectively referred to as the
Recent Transactions.
F-2
<PAGE>
Arcadian International Limited
In April 1998, Patriot completed its acquisition of Arcadian International
Limited (the "Arcadian acquisition"). The transaction included the exercise of
all outstanding options to purchase shares, the assumption of debt and the
acquisition of the remaining shares in the Malmaison Group.
Interstate Hotels Company
On June 2, 1998 Interstate Hotels Company merged with and into Patriot with
Patriot being the surviving company ("Interstate merger").
SF Hotel Company, L.P.
On June 5, 1998, Patriot, through the Patriot operating partnership,
acquired all of the partnership interests in SF Hotel Company, L.P.
("Summerfield acquisition").
CHC International, Inc
On June 30, 1998 the hospitality-related businesses of CHCI merged (the
"CHCI merger") with and into Wyndham with Wyndham being the surviving company.
Financing Transactions
Credit Facility
In connection with the Interstate merger, the companies closed on the
commitment from The Chase Manhattan Bank and Chase Securities, Inc. and
PaineWebber Real Estate Securities, Inc. to increase Patriot's existing
unsecured credit facilities to an aggregate of $2,700,000. The increased
credit facilities include the $900,000 revolving credit facility ("Revolving
Credit Facility") and a series of unsecured term loans in the aggregate amount
of up to $1,800,000 (the "Term Loans"). Proceeds from the increased credit
facilities were used to fund the cash portion of the Interstate merger
consideration, as well as to refinance certain outstanding indebtedness of
Patriot. Interest rates are based on the companies' leverage ratio and may
vary from 1.5% to 2.5% over LIBOR.
Under the original terms of the Patriot's credit facility, two of the term
loans were scheduled to mature on January 31, 1999 ($350,000) and March 31,
1999 ($400,000), respectively. All of the lenders under the credit facility
have agreed to extend the maturity of these two terms loans to June 30, 1999,
subject to Patriot and Wyndham consummating the $1 billion equity investment
by that date. If the $1 billion equity investment is not consummated by June
30, 1999, or the companies' agreement with the investors otherwise terminates,
the maturity on these two term loans will be extended to March 31, 2000 and
Patriot will be required to make a $300,000 amortization payment by
December 31, 1999. Additionally, the Companies will be required to secure the
credit facility with mortgages and other security interests. Patriot paid fees
of approximately $11,700 to the lenders under the credit facility in
connection with the agreement to extend the maturities of the term loans to
June 30, 1999.
Forward Equity Contracts Subject to Price Adjustments
Patriot is party to transactions with three counterparties (UBS Limited and
Union Bank of Switzerland London Branch (collectively, "UBS"), NationsBank
Corporation ("Nations") and PaineWebber Financial Products, Inc.
("PaineWebber") involving the sale of an aggregate of 13.3 million paired
shares, with related price adjustment mechanisms.
F-3
<PAGE>
As of December 31, 1998, Patriot has issued the paired shares and paid cash
to each of the counterparties as follows (in millions):
<TABLE>
<CAPTION>
Settlement
----------------
Original Shares
Shares Held As
Sold Cash Collateral
-------- ----- ----------
<S> <C> <C> <C>
UBS.............................................. 3.25 $53.9 5.6
Nations.......................................... 4.9 0.2 22.6
PaineWebber...................................... 5.15 0.2 25.8
---- ----- ----
13.3 $54.3 54.0
==== ===== ====
</TABLE>
The total obligation to settle these forward equity contracts are currently
estimated to be approximately $333,600 including fees and other costs.
Planned Transaction
Investment
On February 18, 1999, Patriot, Wyndham, Patriot Partnership, Wyndham
Partnership and affiliates of each of Apollo Real Estate Management III, L.P.,
Apollo Management IV, L.P., Thomas H. Lee Equity Fund IV, L.P., Beacon Capital
Partners, L.P. and Rosen Consulting Group, entered into a purchase agreement
under which the investors will purchase $1 billion of a new series B preferred
stock of Wyndham. Patriot and Wyndham currently plan to use the proceeds from
the investment to settle their forward equity contracts, as described above,
to repay indebtedness, and for working capital and growth purposes.
Wyndham will pay dividends on its series B preferred stock quarterly, on a
cumulative basis, at a rate of 9.75% per year. For the first six years,
dividends will be payable partly in cash and partly in additional shares of
preferred stock, with the cash component initially equal to 30% for the first
dividend payment and declining over the period to approximately 19.8% for the
final dividend payment. Each share of series B preferred stock may be
converted, at the option of its holder, into that number of shares of Wyndham
common stock equal to $100.00 divided by the conversion price of the series B
preferred stock. Initially the conversion price will be $8.59, but is subject
to adjustment under certain circumstances.
Restructuring
Under the terms of the purchase agreement, relating to the $1 billion equity
investment, Patriot and Wyndham are required to complete a restructuring of
their existing paired share REIT structure prior to the investment. Under the
terms of the restructuring, the following events will occur:
. A reverse stock split of the common stock of Wyndham and Patriot.
. A wholly-owned subsidiary of Wyndham will merge with and into Patriot
with Patriot surviving.
. The pairing agreement between Patriot and Wyndham will terminate.
. Patriot will terminate its status as a real estate investment trust
effective January 1, 1999.
. The non-voting stock of specified corporate subsidiaries held by the
Patriot Partnership will be transferred so that it will be owned
directly by Patriot and/or Wyndham, rather than through the Patriot
Partnership.
F-4
<PAGE>
. The third party partners in both the Patriot Partnership and the
Wyndham Partnership will be offered an opportunity to exchange their
limited partner interests for Wyndham common stock.
. The preferred stockholders of Wyndham will be offered an opportunity
to exchange their preferred stock for Wyndham common stock, and
preferred stock not exchanged will be redeemed by Wyndham.
Reverse Stock Split
Prior to the merger of a subsidiary of Wyndham into Patriot, both Wyndham
and Patriot will implement a one-for-twenty reverse stock split of their
common stock.
Redemption Option
For a period of 170 days following the completion of the $1 billion equity
investment, Wyndham may redeem up to $300 million of the series B preferred
stock at a redemption price of $102.00 per share (102% of the stated amount
$100.00) plus all accrued dividends. Wyndham currently plans to fund this
redemption through the issuance of $300 million of series A preferred stock to
its stockholders. The series A preferred stock has the same economic terms as
the series B preferred stock.
New Debt Financing
New Credit Facility. Patriot has recently signed a commitment letter with
Chase Securities Inc. and The Chase Manhattan Bank for new senior credit
facilities for Wyndham in the amount of $1.8 billion, comprised of a term loan
facility and a revolving loan facility. Definitive agreements relating to the
new credit facility are expected to be finalized at the same time that the
$1 billion equity investment is completed. The commitment letter provided that
the Chase Manhattan Bank will act as the administrative agent and Chase
Securities Inc. will act as the lead arranger for a syndicate of lenders which
will provide Wyndham with $1 billion in term loans and up to $800 million
under the revolving loan facility, of which a maximum of $560 million may be
drawn at the closing of the investment. The term loan facility has a seven
year term and the revolving facility has a five year term. The commitment
letter based interest rates for the new credit facility upon LIBOR spreads
varying from 1.25% to 3.00% per annum for the revolving loan facility and
2.75% to 3.75% per annum for the term loan facility, based both on Wyndham's
leverage ratio and on whether any increasing rate loans are outstanding.
However, at Wyndham's election or under other specified circumstances, the
term loans and revolving loans may instead bear interest at an alternative
base rate plus the applicable spread. The alternative base rate is equal to
the greater of The Chase Manhattan Bank's prime rate or federal funds rate
plus 0.5%, and the alternative spread is 1.0% below the applicable LIBOR
spread. Subject to limited agreed-upon exceptions, the new credit facility
will be guaranteed by the domestic subsidiaries of Wyndham, and will be
secured by pledges of equity interests held by Wyndham and its subsidiaries.
The proceeds from the term loan facility will be used to finance the
restructuring of Wyndham and Patriot. The proceeds from the revolving loan
facility will be used for working capital and general corporate purposes.
Increasing Rate Loans. Wyndham and Patriot have signed a commitment letter
with The Chase Manhattan Bank, Chase Securities Inc., Bear, Stearns & Co.
Inc., and The Bear Stearns Companies Inc. providing that The Chase Manhattan
Bank, The Bear, Stearns Companies Inc. and a possible syndicate of other
lenders will provide an increasing rate loan facility in the amount of up to
$650 million. The increasing rate loan carries a term of five years. Interest
rates for the increasing rate loan are based on LIBOR spreads and are
initially set at 0.25% below the initial LIBOR spread on the term loan
facility, but increase by 0.50% every three months, with a cap of LIBOR plus
4.75%. However, under other specified circumstances, interest accrues at an
alternate rate equal to the rate borne by three-month treasury securities plus
1.0%, plus the applicable spread. The lenders under the increasing rate loan
receive the benefit of the same guarantees and pledges of security provided
under the new credit facility. The proceeds from the increasing rate loan will
be used to finance the restructuring of Wyndham and Patriot.
F-5
<PAGE>
After the six month anniversary of the closing of the investment, lenders
transferring increasing rate loans may exchange the increasing rate loans for
exchange notes carrying identical terms to the increasing rate loans. To the
extent any increasing rate loans or exchange notes are outstanding 180 days
after the closing of the $1 billion equity investment, Wyndham must by such
date file and maintain a shelf registration statement with the Securities and
Exchange Commission allowing the resale of any exchange notes outstanding
thereafter. Wyndham may also offer registered substitute notes in exchange for
all outstanding IRLs and exchange notes.
Wyndham's ability to borrow under its revolving facility is subject to
Wyndham's compliance with a number of customary financial and other covenants,
including total leverage and interest coverage ratios, limitations on
additional indebtedness, and limitations on investments and stockholder
dividends.
Wyndham and Patriot have agreed to pay the agents and the lenders customary
fees for a facility of this nature.
In April 1999, the Chase Manhattan Bank and Chase Securities Inc. notified
the companies that they were exercising their rights under the "market flex"
provisions of the commitment letters to change the terms of the senior credit
facilities and the increasing rate loan facility. The total amount of the
senior credit facilities was reduced by $200 million to $1.6 billion and the
amount of the increasing rate loans was increased by $200 million to
$850 million. The revolving credit facility has been reduced from $800 million
to $600 million and the maximum that may be drawn at the closing has been
reduced from $560 million to $400 million. Interest rates for the new credit
facility remain based upon LIBOR with the varying spreads changed to 1.50% to
3.00% per annum for the revolving loan facility and 3.00% to 3.75% per annum
for the term loan facility.
For purposes of the pro forma financial statements the New Credit Facility
and increasing rate loans are collectively referred to as new debt financing.
Interstate Spin-off
Interstate's Third-Party Hotel Management Business
In May, 1998, Patriot along, with Interstate Hotels Company ("Interstate")
entered into a settlement agreement with Marriott International, Inc. which
addressed certain claims asserted by Marriott concerning Patriot's then
proposed merger with Interstate. The settlement agreement provided for the
dismissal of litigation brought by Marriott, and allowed Patriot's merger with
Interstate to close.
. In addition to dismissal of the Marriott litigation, the settlement
agreement provides for the re-branding of ten Marriott hotels under the
Wyndham name, Marriott's assumption of the management of ten Marriott
hotels formerly managed by Interstate for the remaining term of the
Marriott franchise agreement, and the divesture of the third-party
management business which was operated by Interstate.
. Patriot must complete the spinoff of third-party management business
which was operated by Interstate no later than May 14, 1999.
If Patriot does not complete the spin-off or the sale transaction by the
final divestiture date, Marriott will be entitled to receive 110% of the fees
otherwise due under the management contracts that they assume in the
settlement. Patriot will also be subject to additional penalties including
Marriott's right to purchase, subject to third-party consents, the hotels to
be submanaged by Marriott and six additional Marriott hotels owned by Patriot
at their then appraised values.
Additionally, subject to any defenses Patriot may have, Patriot would owe
Marriott liquidated damages with respect to the hotels converted to the
Wyndham brand, those to be submanaged by Marriott, and the six additional
Marriott hotels Marriott would have the option to purchase. Patriot also
anticipates that Marriott would require third-party owners of Marriott-branded
hotels that we manages to replace Patriot as manager of their hotels. As a
result, each respective hotel would either: (1) lose the Marriott brand, at
which time Patriot would have to compensate Marriott for any lost franchise
fees or (2) terminate the management contract with Wyndham and enter into a
contract with another manager. Patriot would owe liquidated damages on any
third-party Marriott-franchised hotel which chooses to convert its brand.
F-6
<PAGE>
Summary
The following unaudited Pro Forma Condensed Consolidated Balance Sheet is
presented as if the $1 billion equity investment, the restructuring of Wyndham
and Patriot, the new debt financing and the Interstate spin-off prior to the
final divestiture date had occurred on December 31, 1998. In addition, the pro
forma financial statements assume that all but 1.7 million units of limited
partnership interests tender their units for shares of common stock. It is
also assumed that the amendments to the operating partnership agreements being
sought and the consents of solicitation will be approved. These amendments
will allow for the distribution of the non-voting stock of specified corporate
subsidiaries so that it will be owned directly by Patriot.
Additionally, the Pro Forma Condensed Consolidated Statements of Operations
of the companies for the year ended December 31, 1998 assumes these
transactions as described above and the effects of the business transactions
completed in 1998 as detailed on pages F-2 through F-3 had occurred on January
1, 1998.
The following unaudited Pro Forma Condensed Combined Statements of
Operations was derived from the Combined Statements of Operations of Patriot
and Wyndham (together with their respective subsidiaries) filed with the
Companies' Annual Report on Form 10-K for the year ended December 31, 1998.
The unaudited Pro Forma Condensed Combined Statement of Operations was also
derived in part from Interstate Hotels Management, Inc.'s unaudited Pro Forma
Combined Statements of Operations and Owners' Equity filed on Form 8K, dated
March 26, 1999. In management's opinion all the material adjustments necessary
to reflect the effects of the planned transaction have been made.
The following unaudited Pro Forma Condensed Combined Balance Sheet is not
necessarily indicative of what the actual financial position would have been
assuming such transaction had been completed as of December 31, 1998, nor does
it purport to present the future financial position of Wyndham and Patriot.
Additionally, the following unaudited Pro Forma Condensed Combined
Statements of Operations are not necessarily indicative of what the actual
results of operations of Wyndham and of Patriot would have been assuming such
transactions had been completed at the beginning of the period presented, nor
do they purport to present the results of operations for future periods.
F-7
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC.
and
WYNDHAM INTERNATIONAL, INC.
Pro Forma Condensed Combined Balance Sheet
As of December 31, 1998
(unaudited)
<TABLE>
<CAPTION>
Patriot Wyndham
Pro Forma Pro Forma Combined Exchange Equity Pro Forma
(A) (B) Eliminations Pro Forma Offer Investment Total
---------- ---------- ------------ ---------- --------- ---------- -----------
(in thousands, except share amounts)
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents............. $ 72,360 $ 35,840 -- $ 108,200 -- $ -- $ 108,200
Restricted Cash......... 17,525 13,534 -- 31,059 -- -- 31,059
Accounts and lease
revenue receivable,
net..................... 8,589 169,178 -- 177,767 -- -- 177,767
Notes and other
receivables from
Patriot................. -- 19,109 (19,109)(C) -- -- -- --
Notes and other amounts
receivable from
Wyndham................. 187,572 -- (187,572)(D) -- -- -- --
Inventories............. -- 23,583 -- 23,583 -- -- 23,583
Prepaid expense and
other assets............ 22,594 51,887 -- 74,481 -- -- 74,481
---------- ---------- ----------- ---------- --------- ---------- -----------
Total current assets... 308,640 313,131 (206,681) 415,090 -- 415,090
Investment in real
estate and related
improvements and land
held for development,
net of accumulated
depreciation............ 4,960,429 622,027 (916)(E) 5,581,540 (119,863)(H) -- 5,461,677
Investment in
unconsolidated
subsidiaries............ 975,591 125,006 (915,491)(F) 185,106 (2,786)(H) -- 182,320
Subscription notes
receivable.............. 133,669 91,020 (224,689)(G) -- -- -- --
Mortgage notes and other
receivables from
unconsolidated
subsidiaries............ 78,403 -- -- 78,403 -- -- 78,403
Mortgage notes and other
receivables............. 20,079 15,071 -- 35,150 -- -- 35,150
Management contracts,
net of accumulated
amortization............ -- 128,644 -- 128,644 -- -- 128,644
Leaseholds, net of
accumulated
amortization............ 94,668 50,103 -- 144,771 -- -- 144,771
Trade names and
franchise costs, net of
accumulated
amortization............ -- 125,974 -- 125,974 -- -- 125,974
Goodwill and
intangibles, net of
accumulated
amortization............ 139,240 414,649 -- 553,889 (12,265)(H) (84,190)(I) 457,434
Deferred expenses, net
of accumulated
amortization............ 36,900 1,098 -- 37,998 -- 54,589 (J) 92,587
Deferred acquisition
costs................... 1,587 14,557 -- 16,144 -- -- 16,144
---------- ---------- ----------- ---------- --------- ---------- -----------
Total assets........... $6,749,206 $1,901,280 $(1,347,777) $7,302,709 $(134,914) $ (29,601) $ 7,138,194
========== ========== =========== ========== ========= ========== ===========
LIABILITIES &
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued expenses........ $ 63,850 $ 218,825 -- $ 282,675 -- $ -- $ 282,675
Dividends and
distributions payable... -- -- -- -- -- -- --
Participating lease
payments payable to
Patriot................. -- 40,996 (40,996)(D) -- -- -- --
Deposits................ -- 25,998 -- 25,998 -- -- 25,998
Notes and other amounts
payable to Patriot...... -- 146,576 (146,576)(D) -- -- -- --
Notes and other amounts
payable to Wyndham...... 19,109 -- (19,109)(C) -- -- -- --
Current portion of
borrowings under the
credit facility, term
loans, mortgage notes
and capital leases...... 1,128,949 145,969 -- 1,274,918 -- (1,097,255)(K) 177,663
---------- ---------- ----------- ---------- --------- ---------- -----------
Total current
liabilities............ 1,211,908 578,364 (206,681) 1,583,591 -- (1,097,255) 486,336
Subscription notes
payable................. 91,020 133,669 (224,689)(G) -- -- -- --
Borrowings under the
credit facility, term
loans, mortgage notes
and capital leases...... 2,483,127 99,476 2,582,603 -- 604,906 (K) 3,187,509
Due to unconsolidated
subsidiaries............ 7,919 -- -- 7,919 -- -- 7,919
Deferred income taxes... 38,912 72,940 -- 111,852 -- 750,000 (L) 861,852
Minority interest in the
Operating partnerships.. 217,924 36,046 253,970 (217,876)(H) -- 36,094
Minority interest in
consolidated
subsidiaries............ 229,537 913,141 (915,491)(F) 227,187 -- -- 227,187
Stockholders' equity:
Preferred Stock......... 54 36 -- 90 -- 1,074 (M) 1,164
Excess stock............ -- -- -- -- -- -- --
Common Stock............ 2,135 2,135 -- 4,270 8 (H) (4,195)(M) 83
Additional Paid in
Capital................. 2,775,722 248,818 -- 3,024,540 82,954 (H) 912,161 (M) 4,019,655
Treasury Stock.......... -- -- -- -- -- (341,091)(N) (341,091)
Notes receivable from
shareholders and
affiliates.............. (15,254) (1,110) -- (16,364) -- -- (16,364)
Unearned stock
compensation, net of
accumulated
amortization............ (5,494) -- (5,494) -- -- (5,494)
Unrealized loss on
securities available for
sale.................... -- (1,245) -- (1,245) -- -- (1,245)
Unrealized foreign
exchange gain........... 1,142 1,607 -- 2,749 -- -- 2,749
Distribution of
Interstate Management at
book value.............. -- (62,315) -- (62,315) -- -- (62,315)
Accumulated deficit and
dividend distributions.. (289,446) (120,282) (916)(E) (410,644) -- (855,201)(O) (1,265,845)
---------- ---------- ----------- ---------- --------- ---------- -----------
Total shareholders'
equity................. 2,468,859 67,644 (916) 2,535,587 82,962 (287,252) 2,331,297
---------- ---------- ----------- ---------- --------- ---------- -----------
Total liabilities and
shareholders' equity... $6,749,206 $1,901,280 $(1,347,777) $7,302,709 $(134,914) $ (29,601) $ 7,138,194
========== ========== =========== ========== ========= ========== ===========
</TABLE>
See notes on following pages.
F-8
<PAGE>
Notes to Pro Forma Condensed Consolidated Balance Sheet;
(A) Represents the pro forma balance sheet of Patriot as of December 31, 1998
as adjusted for the Interstate Spin-off transaction. See page F-18.
(B) Represents the pro forma balance sheet of Wyndham as of December 31, 1998
as adjusted for the Interstate Spin-off transaction. See page F-23.
(C) Represents the intercompany elimination of notes and other receivable from
Patriot and notes and other amounts payable to Wyndham
<TABLE>
<S> <C>
Notes and other receivables from Patriot....................... $ (19,109)
Notes and other amounts payable to Wyndham..................... 19,109
---------
$ --
=========
</TABLE>
(D) Represents the intercompany elimination of notes and other amounts
receivable from Wyndham and participating lease payments payable to
Patriot and notes and other amounts payable to Patriot.
<TABLE>
<S> <C>
Notes and other amounts receivable from Wyndham............... $ (187,572)
Participating lease payments payable to Patriot............... 40,996
Notes and other amounts payable to Wyndham.................... 146,576
----------
$ --
==========
</TABLE>
(E) Represents the intercompany elimination of design and construction fees
capitalized by Patriot for hotels leased by Patriot to Wyndham.
<TABLE>
<S> <C>
Investment in real estate and related improvements and land held
for development, net of accumulated depreciation................. $(916)
Accumulated deficit and dividend distributions.................... 916
-----
$ --
=====
</TABLE>
(F) Represents the intercompany elimination of Patriot's investment of certain
non-controlled subsidiaries, which are controlled by Wyndham, that were
formed in connection with various mergers and acquisitions in 1998, and
Wyndham's minority interest in these subsidiaries.
<TABLE>
<S> <C>
Investment in unconsolidated subsidiaries..................... $ (915,491)
Minority interest in consolidated subsidiaries................ 915,491
----------
$ --
==========
</TABLE>
(G) In order to effect the issuance of the paired shares of common stock and
OP Units which were issued in connection with certain of the Companies'
mergers, other acquisition transactions and equity transactions, Patriot
and Wyndham have issued promissory notes to fund the issuance of paired
shares and OP Units. These promissory notes are referred to as
subscription notes. The adjustment represents the elimination of these
notes receivables and payables.
<TABLE>
<S> <C>
Subscription notes receivable.................................. $(224,689)
Subscription notes payable..................................... 224,689
---------
$ --
=========
</TABLE>
F-9
<PAGE>
(H) Represents the adjustment in the basis of the related asset, liability, or
shareholders' equity as a result of the use of the purchase method of
accounting for the exchange of certain partners' common and preferred OP
Units for the Companies' common stock.
Step-Down in Basis of the Asset:
<TABLE>
<S> <C>
Investment in real estate, and related improvements and land
held for development, net of accumulated depreciation........ $(119,863)
Investment in unconsolidated subsidiaries..................... (2,786)
Goodwill and intangibles, net of accumulated amortization..... (12,265)
---------
Total Step-down in basis of assets.......................... (134,914)
=========
Reduction of Minority Interest:
Minority interest in the Operating Partnership................ 217,876
=========
</TABLE>
Adjustment to par value of common stock:
<TABLE>
<S> <C>
Par value of common stock for shares issued in exchange for common
and preferred units of limited partnership interests in the
Operating Partnership (based on 13,529,998 issued at $.0005 per
share)............................................................. 8
===
</TABLE>
Adjustments to additional paid in capital:
<TABLE>
<S> <C>
Estimated Book Value of Sponsor's interest.......................... 22,835
Estimated Fair Market Value of Non Sponsor's interest............... 60,119
------
Total adjustments to additional paid in capital................... 82,954
======
</TABLE>
(I) Represents the write-off of net book value of the intangible asset related
to the structure recorded, as a result of the Cal Jockey merger. In
connection with the change in tax legislation, the paired share REIT
structures have been limited in their ability to expand their business
through the limitation, set by Congress regarding business transactions
between the REIT and its related operating company. As a result of this
legislation, Patriot and Wyndham have revised their on going business
strategy. Pursuant to the restructuring, Patriot and Wyndham will
terminate their pairing agreement and no longer maintain the paired share
REIT structure. Wyndham has recognized the write-off of this intangible as
an adjustment to retained earnings in the pro forma condensed consolidated
balance sheet.
(J) Represents the pro forma adjustment for the write-off of net deferred
financing costs associated with the existing $2.7 billion credit facility
and the addition of deferred financing costs to be incurred in connection
with the new debt financing. The write-off of deferred loan costs have
been reflected as a pro forma adjustment to retained earnings in the pro
forma condensed consolidated balance sheet.
<TABLE>
<S> <C>
Write-off of net deferred financing cost associated with the
credit facility............................................. $(14,536)
Addition of deferred financing costs associated with the new
debt financing.............................................. 69,125
--------
$ 54,589
========
</TABLE>
F-10
<PAGE>
(K) Represents the pro forma adjustments to the current portion and long term
portion of debt obligations as a result of the investment, the
restructuring and new debt financing.
<TABLE>
<CAPTION>
Balance
-----------
<S> <C>
Pro forma adjustments to debt as a result of New Debt
Financing:
New revolving loan facility bearing interest at a rate of
8.00% per annum (LIBOR plus 2.75%)........................... $ 400,000
New term loan facility bearing interest at a rate of 8.75%
per annum (LIBOR plus 3.00%)................................. 1,000,000
Increasing rate loans bearing interest at a rate of .25%
below the initial new term loan facility increasing .50%
every three months........................................... 850,000
Other mortgage financing bearing interest at a rate of 8.75%
per annum.................................................... 279,993
-----------
2,529,993
Reduction of debt for the assumed repayment of the following
long-term obligations:
Existing credit facility..................................... (875,587)
Tranche III and B term loans................................. (1,049,500)
-----------
(1,925,087)
-----------
Pro Forma adjustment to long-term debt obligations....... $ 604,906
===========
Current portion of long term debt to be repaid:
Tranche I and II term loans.................................. (750,000)
Promissory note payable to Chase Securities, Inc. ........... (49,255)
Unsecured note payable to PaineWebber Real Estate, Inc. ..... (160,000)
Mortgage note payable to PaineWebber Real Estate, Inc. ...... (103,000)
Mortgage note payable to PaineWebber Real Estate, Inc. ...... (35,000)
-----------
Pro Forma adjustment to current portion of debt
obligations.............................................. $(1,097,255)
===========
</TABLE>
(L) The restructuring will be reflected for as a reorganization of two
companies under common control and will be accounted for in a manner
similar to that used in pooling of interest accounting. There will be no
revaluation of the assets and liabilities of the combining companies.
Wyndham will take a one-time charge of approximately $750,000 related to a
deferred tax liability that will result from the change in tax status from
a REIT to a C Corporation, as required by SFAS No. 109. After the
restructuring, Wyndham's financial statements will be presented on a
consolidated basis representing the operations of the corporation
(Wyndham) and its subsidiaries, including Patriot.
(M) Represents the adjustments to shareholders' equity as follows:
<TABLE>
<S> <C>
Adjustment to par value of preferred stock:
Par value of series B preferred (based on 116,414,000 preferred
shares issued at a par value of $0.01 per share)................ $1,164
Historical par value of preferred stock to be converted or
retired
as a result of the Investment and Restructuring................. (90)
------
$1,074
======
</TABLE>
F-11
<PAGE>
<TABLE>
<S> <C>
Adjustment to par value of common stock:
Par value of common stock after reverse stock split and
preferred
shares converted pursuant to the restructuring (based on
164,898,000
shares at a par value of $0.0005 per share)................. $ 83
Pro forma par value of shares exchanged for units of limited
partnership interests in the operating partnership.......... (8)
Historical par value of common stock......................... (4,270)
----------
$ (4,195)
==========
Adjustment to additional paid in capital:
Investment................................................... $1,000,000
Historical par value of preferred stock...................... 90
Historical par value of common stock......................... 4,270
Pro forma par value of shares exchanged for units of limited
partnership interest in the Operating Partnerships.......... 8
Par value adjustment for series B preferred (1,164)
Par value adjustment for reverse stock split................. (83)
Cost of the Investment (including advisory fees, legal and
accounting
and costs of the transaction)............................... (90,960)
----------
$ 912,161
==========
</TABLE>
The total number of series B preferred shares issued is based on a
conversion price of $8.59 per share.
The amount by which the conversion price can be adjusted relating to
indemnification for breaches by Wyndham and Patriot of general
representations and warranties and for special costs related to the
consummation of the restructuring of Wyndham and Patriot and related to
shareholder litigation is subject to a maximum amount of approximately
$2.27 per share. In order for the total conversion price adjustments
relating to the indemnification to equal $2.27, Wyndham and Patriot would
generally have to incur approximately $380,000 in losses, pursuant to the
purchase agreement. There is no maximum amount on conversion price
adjustments relating to breaches of covenants. Neither is there a maximum
amount on the separate indemnity relating to sales by the counterparties to
the companies' forward equity contracts of paired shares of Wyndham and
Patriot common stock issued as collateral under the forward equity
contracts.
If the conversion price was adjusted by the maximum amount to $6.32, an
additional 41,808,000 shares of common stock would be issuable upon
conversion of the series B preferred stock. See Note (P) page F-14 for
discussion of earnings per share.
(N) Represents the recognition of treasury stock as a result of the cash
settlement of the forward equity contracts for the return of approximately
13.3 million shares, shares held as collateral for the obligations and the
retirement of Patriot B preferred stock returned for cash of $25.00 per
share. The treasury stock will be recorded at cost and as a reduction of
stockholders' equity.
<TABLE>
<S> <C>
Forward equity shares.......................................... $327,125
Patriot B preferred stock...................................... 13,966
--------
$341,091
========
</TABLE>
(O) Pro forma adjustments to retained earnings are as follows:
<TABLE>
<S> <C>
Write-off of intangibles related to structure................. $ 84,190
Write-off of deferred financing costs......................... 14,536
Estimated deferred tax liability.............................. 750,000
Transaction costs to settle forward equity contracts.......... 6,475
---------
$ 855,201
=========
</TABLE>
F-12
<PAGE>
Patriot American Hospitality, Inc. and
Wyndham International Inc.
Pro Forma Condensed Combined Statements of Operations
for the year ended December 31, 1998
(unaudited)
<TABLE>
<CAPTION>
Patriot Wyndham Elimination Combined Exchange Equity Pro Forma
Pro Forma(A) Pro Forma(B) Entries Pro Forma (G) Offer Investment Total
------------ ------------ ----------- ------------- -------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Hotel revenue.......... -- $2,153,954 -- $2,153,954 $ -- $ -- $2,153,954
Participating lease
revenue................ $704,937 -- $(667,242)(C) 37,695 -- -- 37,695
Racecourse facility
and land lease
revenue................ -- 51,259 -- 51,259 -- -- 51,259
Management fee and
service fee income..... -- 56,012 (916)(D) 55,096 -- -- 55,096
Interest and other
income................. 17,853 23,522 (21,620)(E) 19,755 -- -- 19,755
-------- ---------- --------- ---------- ------- -------- ----------
Total revenue........ 722,790 2,284,747 (689,778) 2,317,759 -- -- 2,317,759
Expenses:
Hotel expenses......... 127,253 1,419,999 -- 1,547,252 -- -- 1,547,252
Racecourse facility
operations............. -- 43,198 -- 43,198 -- -- 43,198
General and
administrative......... 31,157 76,612 -- 107,769 -- 7,550 (J) 115,319
Interest expense....... 319,520 39,240 (21,620)(E) 337,140 -- (34,500)(K) 302,640
Cost of acquiring
leaseholds and license
agreements............. 11,686 52,721 -- 64,407 -- -- 64,407
Treasury lock
settlement............. 49,334 -- -- 49,334 -- -- 49,334
Loss on sale of
assets................. 9,453 -- -- 9,453 -- -- 9,453
Impairment loss on
assets held for sale... 27,897 23,184 -- 51,081 -- -- 51,081
Depreciation and
amortization........... 195,678 66,658 -- 262,336 (4,651)(H) (2,193)(L) 255,492
Lease payments......... -- 667,242 (667,242)(C) -- -- -- --
-------- ---------- --------- ---------- ------- -------- ----------
771,978 2,388,854 (688,862) 2,471,970 (4,651) (29,143) 2,438,176
-------- ---------- --------- ---------- ------- -------- ----------
Operating loss.......... (49,188) (104,107) (916) (154,211) 4,651 29,143 (120,417)
Equity in earnings of
unconsolidated
subsidiaries........... 45,495 3,330 (36,502)(F) 12,323 -- -- 12,323
-------- ---------- --------- ---------- ------- -------- ----------
Loss before income tax
provision, and minority
interests............... (3,693) (100,777) (37,418) (141,888) 4,651 29,143 (108,094)
Income tax
(provision)/benefit.... (2,777) (13,043) -- (15,820) -- 22,261 (M) 6,441
-------- ---------- --------- ---------- ------- -------- ----------
Loss before minority
interests............... (6,470) (113,820) (37,418) (157,708) 4,651 51,404 (101,653)
Minority interest in
the operating
partnership............ 352 12,523 -- 12,875 (10,993)(I) -- 1,882
Minority interest in
consolidated
subsidiaries........... (8,057) (41,067) 36,502 (F) (12,622) -- -- (12,622)
-------- ---------- --------- ---------- ------- -------- ----------
Net loss................ $(14,175) $ (142,364) $ (916) $ (157,455) $(6,342) $ 51,404 $ (112,393)
======== ========== ========= ========== ======= ======== ==========
Basic loss per common
share(N)................ $ (0.27) $ (0.96) -- $ (1.23) -- -- $ (1.29)
======== ========== ========== ==========
Dilutive loss per common
share(N)................ $ (1.37) $ (0.96) -- $ (2.34) -- -- $ (1.29)
======== ========== ========== ==========
</TABLE>
See notes on following pages.
F-13
<PAGE>
Notes to Pro Forma Condensed Combined Statement of Operations;
(A) Represents the Pro Forma Condensed Consolidated Statements of Operations
for Patriot for the year ended December 31, 1998. See page F-20.
(B) Represents the Pro Forma Condensed Consolidated Statements of Operations
for Wyndham for the year ended December 31, 1998. See page F-25.
(C) Represents elimination of lease revenue and expense related to the hotels
and the Racecourse facility leased by Patriot to Wyndham.
(D) Represents elimination of design and construction fees related to the
hotels leased by Patriot to Wyndham.
(E) In connection with the mergers and other transactions, Patriot (including
the Patriot Partnership) subscribed for shares of Wyndham common stock or
units of limited partnership interest in the Wyndham Partnership and
Wyndham subscribed for shares of Patriot common stock in order to effect
the exchange of paired shares or pairs of units of limited partnership
interest in the operating partnerships in consummation of the
transactions. These subscriptions for shares of common stock and units of
limited partnership interest were funded through the issuance of
promissory notes referred to as "subscription notes" payable to Wyndham or
Patriot, as the case may be. The subscription notes accrue interest at
rates ranging from LIBOR plus 1% to a fixed rate of 8.7% per annum and
mature on various dates through January 2001. The pro forma elimination
entry relating to interest income and expense consists of:
<TABLE>
<S> <C>
Interest income and expense related to the Subscription Notes.. $ 18,293
Interest income and expense related to the participating note
held by Wyndham related to the Buena Vista Palace Hotel....... 1,852
Interest income and expense related to a note receivable issued
to
Old Patriot in connection with the sale of certain assets to
PAH RSI, L.L.C., which assets were acquired by Wyndham........ 1,186
Other intercompany income and expense items.................... 289
--------
$ 21,620
========
</TABLE>
(F) Represents elimination of Patriot's equity in the earnings of certain non-
controlled subsidiaries that were formed in connection with various
mergers and acquisitions in 1998. The entities are controlled by Wyndham,
and as a result, the operating results of these entities have been
combined with those of Wyndham for pro forma financial reporting purposes.
(G) Represents the pro forma results of operations for Patriot and Wyndham
combined for the year ended December 31, adjusted for the 1998
Transactions and the Interstate Spin off Transaction, as if they had be
consummated on January 1, 1998. See pages F-20 and F-25.
(H) Represents the pro forma adjustment to reduce depreciation and
amortization for the step-down in basis as a result of the use of the
purchase method of accounting for the exchange of certain partners' common
and preferred OP units for the Companies' common stock.
(I) Represents the reduction in minority interest due to a reduction in
minority interest percentage as a result of the exchange of the minimum of
amount of limited partners' common and preferred OP units for the
Companies' common stock. The impact to the results of operations if all
the remaining partners were to elect to exchange their interest would be
to reduce minority interest in the operating partnership by $1,882 and
increase the Companies' net loss from $110,163 to $112,045. The net loss
applicable to the common shareholder would increase to $212,081, with a
net loss per share of $1.27 based on the weighted average shares of
166,598 (including the exchange of 1,700 of remaining units exchanged for
shares).
(J) Represents the pro forma adjustment for incremental administrative fees of
approximately $1,075 in fees related to the new credit facilities and
approximately $6,475 in fees related to settlement of the forward equity
contracts.
F-14
<PAGE>
(K) Represents the pro forma adjustment to debt and interest expense as a
result of the investment and new credit facilities as follows:
<TABLE>
<CAPTION>
Balance Interest
----------- ---------
<S> <C> <C>
Pro forma adjustments to debt as a result of New
Debt Financing:
New revolving loan facility bearing interest at a
rate of 8.00% per annum (LIBOR plus 2.75%)....... $ 400,000 $ 32,444
New term loan facility bearing interest at a rate
of 8.75% per annum (LIBOR plus 3.00%)............ 1,000,000 88,715
Increasing rate loans bearing interest at a rate
of .25% below the initial new term loan facility
increasing .50% every three months............... 850,000 79,717
Other mortgage financing bearing interest at a
rate of 8.75% per annum.......................... 279,993 24,839
Additional deferred loan costs of approximately
$69,125 amortized over periods of 5 to 7 years... -- 11,382
----------- ---------
2,529,993 237,097
Reduction of debt for the assumed repayment of the
following long-term obligations:
Existing credit facility......................... (875,587) (72,968)
Tranche III and B term loans..................... (1,049,500) (97,160)
Amortization of deferred loan costs related to
the existing credit facility for the year ended
December 31, 1998................................ -- (31,661)
----------- ---------
(1,925,087) (201,789)
----------- ---------
Pro Forma adjustment to long-term debt
obligations.................................. $ 604,906
===========
Current portion of long term debt to be repaid:
Tranche I and II term loans...................... (750,000) (46,386)
Promissory note payable to Chase Securities,
Inc. ............................................ (49,255) (606)
Unsecured note payable to PaineWebber Real
Estate, Inc. .................................... (160,000) (12,113)
Mortgage note payable to PaineWebber Real Estate,
Inc. ............................................ (103,000) (8,044)
Mortgage note payable to PaineWebber Real Estate,
Inc. ............................................ (35,000) (2,659)
----------- ---------
Pro Forma adjustment to current portion of
debt obligations............................. $(1,097,255) $ (69,808)
=========== =========
Pro Forma adjustments to interest expense:
Pro forma adjustments to interest as a result of
new debt financing............................... $ 237,097
Reduction of interest expense for the assumed
repayment of
long-term debt obligations....................... (201,789)
Interest expense related to current portion of
debt obligations to be repaid.................... (69,808)
---------
Pro Forma adjustment to interest expense..... $ (34,500)
=========
</TABLE>
An increase of 0.125% in the interest rate would increase pro forma
interest expense to $304,845, increasing net loss to $114,585. Net loss
applicable to common shareholders would increase to $214,621, loss per
common share would increase to $1.30 based on 164,898 weighted average
number of common shares and common share equivalents outstanding.
(L) Represents the adjustment to reduce depreciation and amortization for the
goodwill to be written off in connection with the restructuring.
(M) Represents the tax benefit to Wyndham as a result of the restructuring of
Wyndham and Patriot. The restructuring of Wyndham and Patriot results in
Wyndham, Patriot and certain corporate subsidiaries of Patriot reporting
and filing on a consolidated basis for federal income tax purposes. The tax
benefit is derived from the reversal of certain timing differences between
financial and income tax reporting methods and does not represent the
amount of cash taxes for which Wyndham would be liable.
F-15
<PAGE>
(N) As a result of the $1 billion equity investment and the restructuring of
Patriot and Wyndham, Wyndham will issue 116,414,000 shares of series B
preferred stock to the investors at $8.59 per share for a total investment
of $1 billion. Proceeds from the investment will be used to repay the
obligations in connection with the forward equity contracts of
approximately $333,600. Based upon the number of paired shares issued at
December 31, 1998, a total of 67,300,000 shares of common stock will be
retired to treasury stock in connection with the repayment of the forward
equity transactions. Additionally, the holders of Wyndham Series A and B
Preferred Stock will be offered the opportunity to exchange their
securities for Wyndham common stock. For purposes of the calculation,
Wyndham Series A and B Preferred Stock will be assumed to be converted to
Wyndham common stock. Holders of Patriot preferred stock will have the
right to receive $25.00 for each of their paired shares. For purposes of
the pro forma statement, the Patriot B preferred holders are assumed to
receive total cash of approximately $13,966 (based on 558,700 shares at
$25.00 per share). As a result, the total number of common shares
outstanding on a pro forma basis would be 164,898,000. Pro forma basic and
dilutive earnings per share are as follows:
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Basic Dilutive
---------- ----------
<S> <C> <C>
Earnings per common share:
Net loss attributable to common shareholders..... $ (112,393) $ (112,393)
Investor Preferred Dividends..................... (100,036) (100,036)
---------- ----------
Net loss available to common shareholders........ (212,429) (212,429)
========== ==========
Weighted average shares.......................... 164,898 164,898
========== ==========
Net loss per common share........................ $ (1.29) $ (1.29)
========== ==========
</TABLE>
For the pro forma calculation, the dilutive effect of the series B
preferred shares of 124,654,000, unvested stock grants of 880,000 and the
option to purchase 733,000 common shares were excluded from the computation
of dilutive earnings per share for the year ended December 31, 1998 because
they are anti-dilutive.
F-16
<PAGE>
The combined Companies are in a loss position for the twelve months ended
December 31, 1998. Basic and dilutive earnings per share, on a pro forma
basis, before the effects of the Exchange Offer and restructuring are as
follows:
<TABLE>
<CAPTION>
Basic Diluted
--------- ---------
<S> <C> <C>
Combined net loss................................. $(157,455) $(157,455)
Preferred stock dividends......................... (7,956) (7,956)
Adjustment for equity forwards (1)................ (21,151) (188,592)
--------- ---------
Net loss to common shareholders.................. $(186,562) $(354,003)
========= =========
Weighted average number of paired shares and
paired share equivalents outstanding:
Basic........................................... 151,313 151,313
========= =========
Diluted......................................... 151,313 151,313
========= =========
</TABLE>
- --------
(1) The adjustment relates to the mark-to-market adjustment for the UBS and
Nations forward equity contracts which can be settled in cash or stock, at
the Companies' option. At December 31, 1998, the PaineWebber Transaction
can be settled only in stock, only the guaranteed return portion as
adjusted in the earnings per share calculations. There is no mark-to-
market adjustment for the PaineWebber transaction which is accounted for
by the Reverse Treasury Method.
F-17
<PAGE>
PATRIOT AMERICAN HOSPITALITY INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of December 31, 1998
(unaudited)
<TABLE>
<CAPTION>
Historical Interstate Pro Forma
12/31/1998(A) Spin-off 12/31/98
------------- ---------- ----------
(in thousands, except share
amounts)
<S> <C> <C> <C>
ASSETS
Investment in real estate and related
improvements and land held for
development, net of accumulated
amortization........................... $4,960,429 -- $4,960,429
Cash and Cash Equivalents............... 72,360 -- 72,360
Restricted Cash......................... 17,525 -- 17,525
Accounts receivable..................... 8,589 -- 8,589
Investment in unconsolidated
subsidiaries........................... 975,591 -- 975,591
Mortgage notes and other receivables
from unconsolidated subsidiaries....... 78,403 -- 78,403
Subscription Notes receivable from
Wyndham................................ 133,669 -- 133,669
Notes and other amounts receivable from
Wyndham................................ 180,152 7,420 187,572
Other notes receivable.................. 20,079 -- 20,079
Leaseholds, net of accumulated
amortization........................... 102,088 (7,420)(B) 94,668
Goodwill and intangibles, net of
accumulated amortization............... 139,240 -- 139,240
Deferred expenses, net of accumulated
amortization........................... 36,900 -- 36,900
Deferred acquisition costs.............. 1,587 -- 1,587
Inventories............................. -- -- --
Other assets............................ 22,594 -- 22,594
---------- ------- ----------
Total assets........................ $6,749,206 $ -- $6,749,206
========== ======= ==========
LIABILITIES & SHAREHOLDERS' EQUITY
Borrowings under credit facility, term
loans, mortgage notes and capital
leases................................. $3,612,076 $ -- $3,612,076
Subscription Notes payable to Wyndham... 91,020 -- 91,020
Notes and other amounts payable to
Wyndham................................ 19,109 -- 19,109
Accounts payable and accrued expenses... 63,850 -- 63,850
Dividends and distributions payable..... -- -- --
Deferred income taxes................... 38,912 -- 38,912
Due to unconsolidated subsidiaries...... 7,919 -- 7,919
Minority interest in the Patriot
Partnerships........................... 217,924 -- 217,924
Minority interest in consolidated
subsidiaries........................... 229,537 -- 229,537
Shareholders' equity:
Preferred stock....................... 54 -- 54
Excess stock.......................... -- -- --
Common stock.......................... 2,135 -- 2,135
Additional paid in capital.............. 2,775,722 -- 2,775,722
Notes receivable from shareholders...... (15,254) -- (15,254)
Unearned stock compensation, net of
accumulated amortization............... (5,494) -- (5,494)
Unrealized foreign exchange gain........ 1,142 -- 1,142
Accumulated deficit and dividend
distributions.......................... (289,446) -- (289,446)
---------- ------- ----------
Total shareholders' equity.......... 2,468,859 -- 2,468,859
---------- ------- ----------
Total liabilities and shareholders'
equity............................. $6,749,206 $ -- $6,749,206
========== ======= ==========
</TABLE>
See notes on following page.
F-18
<PAGE>
Notes to Pro Forma Condensed Consolidated Balance Sheet:
(A) Represents the consolidated balance sheets of Patriot as presented in the
Companies' Annual Report on Form 10-K as of December 31, 1998.
(B) Represents the pro forma adjustment to reduce investments in leaseholds for
the transfer of certain leases held by Patriot to Interstate Management in
connection with the Spin-off.
<TABLE>
<S> <C>
Notes and other amounts receivable from Wyndham.................. $ 7,420
Leaseholds, net of accumulated amortization...................... (7,420)
-------
$ --
=======
</TABLE>
F-19
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
(unaudited)
(in thousands, except for per share amounts)
<TABLE>
<CAPTION>
Patriot Recent Arcadian Summerfield Interstate Pro
Historical Transactions Acquisition Acquisition Merger Forma
(A) (B) (C) (D) (E) Total
---------- ------------ ----------- ----------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Revenue:
Participating lease
revenue.............. $578,029 $1,335 (F) $ 3,803 (F) $ 23,194 (F) $98,576 (F) $704,937
Interest and other
income............... 17,381 472 -- -- -- 17,853
-------- ------ ------- -------- ------- --------
Total revenue....... 595,410 1,807 3,803 23,194 98,576 722,790
-------- ------ ------- -------- ------- --------
Expenses:
Hotel expenses........ 100,324 362 (G) 468 17,174 (G) 8,925 (G) 127,253
General and
administrative....... 29,784 -- -- -- 1,373 31,157
Interest expense...... 245,205 601 (H) 6,708 (H) 7,488 (H) 59,518 (H) 319,520
Cost of acquiring
leaseholds and
license agreements... 11,686 -- -- -- -- 11,686
Treasury lock
settlement........... 49,334 -- -- -- -- 49,334
Loss on sale of
assets............... 9,453 -- -- -- -- 9,453
Impairment loss on
assets held for
sale................. 27,897 -- -- -- -- 27,897
Depreciation and
amortization......... 161,857 877 (I) 2,120 (I) 3,769 (I) 27,055 (I) 195,678
-------- ------ ------- -------- ------- --------
Total expenses...... 635,540 1,840 9,296 28,431 96,871 771,978
-------- ------ ------- -------- ------- --------
Operating (loss)
income................. (40,130) (33) (5,493) (5,237) 1,705 (49,188)
Equity in earnings
(loss) of
unconsolidated
subsidiaries......... 36,726 7,805 (J) (128)(K) (6,293)(L) 7,385 (M) 45,495
-------- ------ ------- -------- ------- --------
(Loss) income before
income tax provision,
minority interests and
extraordinary item..... (3,404) 7,772 (5,621) (11,530) 9,090 (3,693)
Income tax provision.. (2,742) (35)(N) -- -- -- (2,777)
-------- ------ ------- -------- ------- --------
(Loss) income before
minority interest and
extraordinary item..... (6,146) 7,737 (5,621) (11,530) 9,090 (6,470)
Minority interest in
operating
partnership.......... (98) (931)(O) -- 1,381 (O) -- 352
Minority interest in
consolidated
subsidiaries......... (8,084) 27 (P) -- -- -- (8,057)
-------- ------ ------- -------- ------- --------
Net (loss) income before
extraordinary item..... $(14,328) $6,833 $(5,621) $(10,149) $ 9,090 $(14,175)
======== ====== ======= ======== ======= ========
Basic loss per common
share before
extraordinary item
(Q):................... $ (0.30) $ (0.27)
======== ========
Diluted loss per common
share before
extraordinary item
(Q):................... $ (1.51) $ (1.37)
======== ========
</TABLE>
See notes on following page.
F-20
<PAGE>
Notes to Pro Forma Condensed Consolidated Statement of Operations:
(A) Represents Patriot's historical results of operations before extraordinary
items for the twelve months ended December 31, 1998 as reported in the
Companies' Annual Report on Form 10K.
(B) Represents adjustments to Patriot's results of operations assuming recent
transactions, including the acquisition of the Buena Vista Hotel, the
merger with WHG and related acquisition of minority interests and the
Golden Door Spa completed by Patriot during the twelve months ended
December 31, 1998 had been consummated on January 1, 1998.
(C) Represents adjustments to Patriot's results of operations assuming the
Arcadian Acquisition had been consummated as of January 1, 1998.
(D) Represents adjustments to Patriot's results of operations assuming the
Summerfield Acquisition had been consummated as of January 1, 1998.
(E) Represents adjustments to Patriot's results of operations assuming the
Interstate Merger and the related financing transactions had been
consummated as of January 1, 1998.
(F) Represents adjustments to lease revenue assuming the hotels and leasehold
interests currently owned by Patriot and its subsidiaries had been leased
to the Lessees or Wyndham as of January 1, 1998. No lease income is
included in the pro forma statement of operations for time periods prior
to completion of construction or commencement of operations.
(G) Represents pro forma ground lease payments to be made with respect to
certain of the hotels, and hotel lease expense related to the hotels
leased by Patriot from third-party owners, which Patriot sub-leases to
Wyndham.
(H) Interest expense consists of the following components:
<TABLE>
<CAPTION>
Recent Arcadian Summerfield Interstate
Transactions Acquisition Acquisition Merger
------------ ----------- ----------- ----------
<S> <C> <C> <C> <C>
Related to acquisition of
hotels and hotel
management businesses.... $601 $6,308 $7,256 $51,573
Related to subscription
notes payable to
Wyndham.................. -- -- 232 1,254
Related to amortization of
deferred loan costs...... -- 400 -- 6,691
---- ------ ------ -------
$601 $6,708 $7,488 $59,518
==== ====== ====== =======
</TABLE>
The Pro Forma amounts presented assume an average interest rate of 7.39%
per annum (assuming LIBOR plus 2.25%) on the amounts outstanding on the
Revolving Credit Facility. Amortization of deferred loan costs is computed
using the straight-line method (which approximates the interest method)
over the term of the related loans. As a result of the closing of the
repayment of debt assumed in connection with the Wyndham merger, deferred
loan costs related to the debt repaid were written off. In addition,
Patriot incurred certain prepayment penalties related to the early
repayment of certain debt. These amounts, net of the minority interest
share, were reported as an extraordinary item in Patriot's historical
results of operations and has been eliminated for pro forma presentation
purposes. In addition, as a result of the increase in Patriot's existing
credit facilities, additional deferred loan costs totaling approximately
$27,405 have been included in the borrowings under the credit facility and
mortgage notes in the pro forma financial statements.
An increase of 0.125% in the interest rate would increase pro forma
interest expense to $320,461, increasing net loss to $15,103. Net loss
applicable to common shareholders would increase to $41,504, however, loss
per common share would remain at $0.27 based on 151,313 weighted average
number of common shares and common share equivalents outstanding.
(I) Represents adjustments to depreciation and amortization in accordance with
Patriot policy.
Depreciation is computed using the straight-line method and is based upon
the estimated useful lives of 30 to 40 years for the hotel buildings and
improvements, 7 years for the Racecourse facility and 3 to 10 years for
furniture, fixtures and equipment ("FF&E"). These estimated useful lives
are based on management's
F-21
<PAGE>
knowledge of the properties and the industry in general. Amortization of
goodwill related to mergers and other acquisitions of businesses is
computed using the straight-line method over estimated useful lives ranging
from 5 to 40 years.
(J) Represents Patriot's pro forma equity in earnings of the non-controlled
subsidiaries that own the Wyndham trade names and franchise related
assets, the management and franchising contracts and the hotel management
company and which are controlled by Wyndham. In addition, represents
equity in losses of the partnerships that own the El San Juan Hotel &
Casino and the El Conquistador and the WHG management company. These
entities are also controlled by Wyndham.
(K) Represents Patriot's pro forma equity in losses of the non-controlled
subsidiaries that own certain management-related assets acquired in the
Arcadian acquisition. Subsidiaries of Wyndham own the controlling interest
in these entities.
(L) Represents Patriot's pro forma equity in earnings of the non-controlled
subsidiaries that own the management contracts and hotel management
business acquired in the Summerfield acquisition. Subsidiaries of Wyndham
own the controlling interest in these entities.
(M) Represents Patriot's pro forma equity in losses of the non-controlled
subsidiaries that own the management contracts and hotel management
business acquired in the Interstate merger. Subsidiaries of Wyndham own
the controlling interest in these entities.
(N) Represents an adjustment for estimated state income tax liabilities.
(O) Represents the adjustment to minority interest to reflect the estimated
minority interest percentage subsequent to the assumed transactions of
approximately 11%.
(P) Represents the minority interest related to partnerships and limited
liability companies that own certain of the hotels assuming such entities
had been formed and the hotels owned by such entities had been acquired at
January 1, 1998.
(Q) A reconciliation of net loss to common share holders is as follows:
<TABLE>
<CAPTION>
Basic Diluted
-------- ---------
<S> <C> <C>
Net loss........................................... $(14,175) $ (14,175)
Preferred stock dividends.......................... (5,250) (5,250)
Adjustment for equity forwards (/1/)............... (21,151) (188,592)
-------- ---------
Net loss to common shareholders.................. $(40,576) $(208,017)
======== =========
Weighted average number of paired shares and paired
share equivalents outstanding:
Basic.......................................... 151,313 151,313
======== =========
Diluted........................................ 151,313 151,313
======== =========
</TABLE>
- --------
(1) The adjustment relates to the mark-to-market adjustment for the UBS and
Nations forward equity contracts, which can be settled in cash or stock,
at the Companies' option. At December 31, 1998, PaineWebber can be settled
only in stock, on the guaranteed return portion as adjusted in the
earnings per share calculation. There is no mark-to-market adjustment for
PaineWebber which is accounted for by the Reverse Treasury Method.
F-22
<PAGE>
WYNDHAM INTERNATIONAL, INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
As of December 31, 1998
(unaudited)
<TABLE>
<CAPTION>
Historical Interstate Pro Forma
12/31/1998 (A) Spin-off (B) 12/31/98
-------------- ------------ ----------
(in thousands, except share amounts)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents........... $ 50,725 $ (14,885)(C) $ 35,840
Restricted cash..................... 18,344 (4,810) 13,534
Accounts receivable................. 185,994 (16,816) 169,178
Notes and other receivables from
Patriot............................ 19,109 -- 19,109
Inventories......................... 23,583 -- 23,583
Prepaid expense and other assets.... 28,195 (3,863) 24,332
---------- --------- ----------
Total current assets.............. 325,950 (40,374) 285,576
Investment in real estate and related
improvements and land held for
development, net of accumulated
depreciation........................ 626,103 (4,076) 622,027
Investment in unconsolidated
subsidiaries........................ 86,812 38,194 (D) 125,006
Subscription notes receivable from
Patriot............................. 91,020 -- 91,020
Mortgage notes and other
receivables......................... 21,255 (6,184) 15,071
Management contracts, net of
accumulated amortization............ 194,014 (65,370) 128,644
Leaseholds, net of accumulated
amortization........................ 77,834 (27,731) 50,103
Trade names and franchise costs, net
of accumulated amortization......... 125,974 -- 125,974
Deferred acquisition costs........... 14,557 -- 14,557
Goodwill, net of accumulated
amortization........................ 414,649 -- 414,649
Deferred expenses, net of accumulated
amortization........................ 1,098 -- 1,098
Other assets......................... 27,555 -- 27,555
---------- --------- ----------
Total assets...................... $2,006,821 $(105,541) $1,901,280
========== ========= ==========
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses........................... $ 249,981 $ (31,156)(E) $ 218,825
Dividends and distributions
payable............................ -- -- --
Participating lease payments payable
to Patriot......................... 40,996 -- 40,996
Deposits............................ 26,392 (394) 25,998
Notes and other amounts payable to
Patriot............................ 139,156 7,420 146,576
Current portion of mortgage notes
and capital leases................. 145,969 -- 145,969
---------- --------- ----------
Total current liabilities......... 602,494 (24,130) 578,364
Subscription notes payable to
Patriot............................ 133,669 -- 133,669
Mortgage notes payable and capital
leases............................. 99,476 -- 99,476
Due to unconsolidated subsidiaries.. -- -- --
Deferred income taxes............... 84,551 (11,611) 72,940
Minority interest in the Wyndham
Partnerships....................... 36,046 -- 36,046
Minority interest in consolidated
subsidiaries....................... 915,491 (2,350) 913,141
Shareholders' equity:
Preferred stock..................... 36 -- 36
Excess stock........................ -- -- --
Common stock........................ 2,135 -- 2,135
Additional paid in capital........... 248,818 -- 248,818
Notes receivable from affiliates..... (1,110) -- (1,110)
Unearned stock compensation, net of
accumulated amortization............ -- -- --
Unrealized loss on securities held
for sale............................ (1,245) -- (1,245)
Unrealized foreign exchange gain..... 1,607 -- 1,607
Distribution of Interstate Management
at book value....................... -- (62,315)(F) (62,315)
Accumulated deficit and dividend
distribution........................ (115,147) (5,135)(G) (120,282)
---------- --------- ----------
Total shareholders' equity........ 135,094 (67,450) 67,644
========== ========= ==========
Total liabilities and
shareholders' equity............. $2,006,821 $(105,541) $1,901,280
========== ========= ==========
</TABLE>
See notes on following page.
F-23
<PAGE>
Notes to Pro Forma Condensed Consolidated Balance Sheet:
(A) Represents the consolidated balance sheets of Wyndham as presented in the
Companies' Annual Report on Form 10-K as of December 31, 1998.
(B) Represents the pro forma adjustments to reflect the estimated effects of
the Spin-off to the Companies' financial position as of December 31, 1998.
The Spin-off includes the transfer of the third-party hotel management
business of Interstate, an ownership interest in the Charles Hotel Complex
and the long-term leasehold interests in certain hotels (the "Leased
Hotels') and certain assets and liabilities of Wyndham. After the Spin-
off, Wyndham will own an approximate 55% non-controlling interest in
Interstate Hotels LLC, a subsidiary of Interstate Management, which is
reflected in equity in earnings of unconsolidated subsidiaries.
(C) Represents the following pro forma adjustments;
<TABLE>
<S> <C>
Historical cash of Interstate Management as of December 31,
1998......................................................... $ 1,652
Repayment of amounts due to Wyndham........................... (18,597)
Additional working capital contribution to Interstate
Management by the Companies at date of Spin-off.............. 31,830
--------
$ 14,885
========
</TABLE>
(D) Represents the following pro forma adjustments:
<TABLE>
<S> <C>
Transfer of investment in the Charles Hotel Complex to
Interstate Management........................................ $(22,150)
Recognition of Wyndham's 55% non-controling interest in
Interstate Management........................................ 60,344
--------
$ 38,194
========
</TABLE>
(E) Represents the pro forma adjustments for accounts payable and accrued
expenses and the estimated accrued tax liability. The accrued tax
liability is calculated using an effective tax rate of 40% times the
excess of the fair market value of the assets being transferred over their
book value for federal income tax purposes.
<TABLE>
<S> <C>
Reduction of accounts payable and accrued expenses............... $36,156
Estimated accrued tax liability.................................. (5,000)
-------
$31,156
=======
</TABLE>
(F) Represents the pro forma adjustment to reflect the distribution of
Interstate Management at book value to the shareholders.
(G) Represents the pro forma adjustments for estimated accrued tax liability
and the loss on the sale of The Charles Hotel Complex. In connection with
the Spin-off, the Companies and Interstate Management have reached a
tentative agreement under which all of the equity interests in the Charles
Hotel Complex will be sold to an existing independent joint venture
partner. The pro forma net loss on the sale is $135.
<TABLE>
<S> <C>
Estimated accrued liability....................................... $5,000
Loss on sale...................................................... 135
------
$5,135
======
</TABLE>
F-24
<PAGE>
WYNDHAM INTERNATIONAL, INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended December 31, 1998
(unaudited)
(in thousands, except for per share amounts)
<TABLE>
<CAPTION>
Wyndham Recent Arcadian Summerfield Interstate CHCI
Historical Transactions Acquisition Acquisition Merger Merger Pro Forma
(A) (B) (C) (D) (E) (F) Other Total
---------- ------------ ----------- ----------- ---------- ------- ------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Hotel revenue..... $1,842,682 $51,770 $16,426 $53,746 $324,467 $58,785 $ -- $2,347,876
Racecourse
facility revenue.. 51,259 -- -- -- -- -- -- 51,259
Management fee and
service fee
income............ 89,983 (1,833) -- 1,814 17,817 646 -- 108,427
Interest and other
income............ 18,303 193 690 550 2,536 1,844 -- 24,116
---------- ------- ------- ------- -------- ------- ------- ----------
Total revenue... 2,002,227 50,130 17,116 56,110 344,820 61,275 -- 2,531,678
---------- ------- ------- ------- -------- ------- ------- ----------
Expenses:
Hotel expenses.... 1,251,548 41,235 13,278 25,738 227,822 34,655 -- 1,594,276
Racecourse
facility
operations........ 43,198 -- -- -- -- -- -- 43,198
General and
administrative.... 87,882 -- -- 4,964 16,627 497 -- 109,970
Interest expense.. 35,690 2,872 (G) -- -- -- 678 (H) -- 39,240
Cost of acquiring
leaseholds........ 52,721 -- -- -- -- -- -- 52,721
Impairment loss on
assets held for
sale.............. 23,184 -- -- -- -- -- -- 23,184
Depreciation and
amortization...... 69,375 1,758 (I) 118 (I) 1,649 (I) 11,323 (I) 619 (I) -- 84,842
Participating
lease payments.... 519,589 1,335 (J) 3,803 (J) 23,194 (J) 98,576 (J) 20,745 (J) -- 667,242
---------- ------- ------- ------- -------- ------- ------- ----------
Total expenses.. 2,083,187 47,200 17,199 55,545 354,348 57,194 -- 2,614,673
---------- ------- ------- ------- -------- ------- ------- ----------
Operating (loss)
income............. (80,960) 2,930 (83) 565 (9,528) 4,081 -- (82,995)
Equity in earnings
of unconsolidated
subsidiaries...... 3,134 (1,677) (K) -- -- -- -- -- 1,457
---------- ------- ------- ------- -------- ------- ------- ----------
(Loss) income
before income tax
provision, minority
interest and
extraordinary
item............... (77,826) 1,253 (83) 565 (9,528) 4,081 -- (81,538)
Income tax
provision......... (14,381) -- -- -- -- -- (8,626)(L) (23,007)
---------- ------- ------- ------- -------- ------- ------- ----------
(Loss) income
before minority
interest and
extraordinary
item............... (92,207) 1,253 (83) 565 (9,528) 4,081 (8,626) (104,545)
Minority interest
in Wyndham
partnership....... 12,750 (175)(M) (5)(M) -- (M) -- (M) (47)(M) -- 12,523
Minority interest
in consolidated
subsidiaries...... (31,705) (6,155)(N) 128 (N) 6,293 (N) (9,934)(N) -- 539 (O) (40,834)
---------- ------- ------- ------- -------- ------- ------- ----------
(Loss) income
before
extraordinary
item............... $ (111,162) $(5,077) $ 40 $ 6,858 $(19,462) $ 4,034 $(8,087) $ (132,856)
========== ======= ======= ======= ======== ======= ======= ==========
Basic loss per
common share before
extraordinary item
(S)................ $ (0.83) $ (0.90)
---------- ----------
Diluted loss per
common share before
extraordinary item
(S)................ $ (0.83) $ (0.90)
========== ==========
<CAPTION>
Interstate
Spin-off Pro Forma
Transaction(P) Total
--------------- ----------
<S> <C> <C>
Revenue:
Hotel revenue..... (193,922) 2,153,954
Racecourse
facility revenue.. -- 51,259
Management fee and
service fee
income............ (52,415)(Q) 56,012
Interest and other
income............ (594) 23,522
--------------- ----------
Total revenue... (246,931) 2,284,747
--------------- ----------
Expenses:
Hotel expenses.... (174,277) 1,419,999
Racecourse
facility
operations........ -- 43,198
General and
administrative.... (33,358) 76,612
Interest expense.. -- 39,240
Cost of acquiring
leaseholds........ -- 52,721
Impairment loss on
assets held for
sale.............. 23,184
Depreciation and
amortization...... (18,184) 66,658
Participating
lease payments.... -- 667,242
--------------- ----------
Total expenses.. (225,819) 2,388,854
--------------- ----------
Operating (loss)
income............. (21,112) (104,107)
Equity in earnings
of unconsolidated
subsidiaries...... 1,873(R) 3,330
--------------- ----------
(Loss) income
before income tax
provision, minority
interest and
extraordinary
item............... (19,239) (100,777)
Income tax
provision......... 9,964 (13,043)
--------------- ----------
(Loss) income
before minority
interest and
extraordinary
item............... (9,275) (113,820)
Minority interest
in Wyndham
partnership....... -- 12,523
Minority interest
in consolidated
subsidiaries...... (233) (41,067)
--------------- ----------
(Loss) income
before
extraordinary
item............... $ (9,508) $(142,364)
=============== ==========
Basic loss per
common share before
extraordinary item
(S)................ $ (0.96)
----------
Diluted loss per
common share before
extraordinary item
(S)................ $ (0.96)
==========
</TABLE>
See notes on following page
F-25
<PAGE>
Notes to Pro Forma Condensed Consolidated Statement of Operations:
(A) Represents the historical results of operations of Wyndham for the twelve
months ended December 31, 1998 as reported in the Companies' Annual Report
of Form 10-K.
(B) Represents adjustments to Wyndham's results of operations assuming that
Recent Transactions completed by the Companies during the twelve months
ended December 31, 1998 had occurred as of January 1 1998. No adjustment
is made to the results of operations for time periods prior to the
completion of construction or commencement of operations.
(C) Represents adjustments to Wyndham's results of operations for the hotel
leases and management contracts acquired as a result of the Arcadian
acquisition assuming such leases and management contracts had been
acquired as of January 1, 1998. No adjustment is made to the results of
operations for time periods prior to the completion of construction or
commencement of operations.
(D) Represents adjustments to Wyndham's results of operations for the hotel
investments and management operations acquired by Wyndham as a result of
the Summerfield acquisition assuming such investments had been acquired as
of January 1, 1998. No adjustment is made to the results of operations for
time periods prior to the completion of construction or commencement of
operations.
(E) Represents adjustments to Wyndham's results of operations for the hotel
leases and management contracts acquired as a result of the Interstate
merger, assuming such leases and management contracts had been acquired as
of January 1, 1998. No adjustment is made to the results of operations for
time periods prior to the completion of construction or commencement of
operations.
(F) Represents adjustments to Wyndham's results of operations for the hotel
leases and management contracts acquired by Wyndham as a result of the
CHCI merger assuming such leases and management contracts had been
acquired as of January 1, 1998. No adjustment is made to the results of
operations for time periods prior to the completion of construction or
commencement of operations.
(G) Represents pro forma interest expense on debt and capital lease
obligations related to the Condado Plaza Hotel, the El San Juan Hotel &
Casino and the El Conquistador. As a result of the WHG Transactions,
Wyndham acquired a controlling interest in the partnerships that own the
El San Juan Hotel & Casino and the El Conquistador. As a result, the
results of operations of these partnerships are included in Wyndham's
consolidated operating results. These debt and capital lease obligations
bear interest at rates ranging from LIBOR plus 0.9% (estimated as 6.589%)
to 12.0% per annum.
An increase of 0.125% in the interest rate would increase pro forma
interest expense to $39,258, increasing net loss to $142,382. Net loss
applicable to common shares holders would increase to $145,088, however,
loss per common share would remain at $0.96 based on 151,313 weighted
average number of common shares and common share equivalents outstanding.
(H) Represents pro forma interest expense on debt obligations assumed in
connection with the CHCI merger.
(I) Represents the following pro forma adjustments to depreciation and
amortization in accordance with Wyndham policy. Depreciation is computed
using the straight-line method and is based upon the estimated useful
lives of 30 to 40 years for buildings and improvements and 3 to 10 years
for FF&E. Amortization of goodwill related to the acquisition of the
management operations of entities acquired is computed using the straight-
line method over estimated useful lives of 5 to 40 years. Amortization of
management contracts tradenames and franchise costs is computed using the
straight-line method over estimated useful lives ranging from 6 to 30.
(J) Represents pro forma lease payments from Wyndham to Patriot calculated
based upon the historical operating results of the hotels for the twelve
months ended December 31, 1998.
(K) Represents adjustment to eliminate Wyndham's equity in earnings of
unconsolidated subsidiaries related to WHG. Subsequent to the WHG
Transactions, these entities are consolidated with Wyndham.
(L) Represents an adjustment to the estimated federal and state tax liability
as a result of the pro forma adjustments to the operating results for the
twelve months ended December 31, 1998.
(M) Represents the adjustment to minority interest to reflect the estimated
minority interest percentage in the Wyndham Partnership subsequent to the
assumed transactions of approximately 12.2%.
F-26
<PAGE>
(N) Represents adjustments for Patriot's minority interest in the non-
controlled subsidiaries. These entities are controlled by Wyndham.
(O) Represents the elimination of minority interest from the historical
financial statements of minority interests in WHG and CHCI.
(P) Represents the pro forma adjustments based on the Pro Forma Combined
Statement of Operations of Interstate Management for the year ended
December 31, 1998 pursuant to the Spin-off.
(Q) Represents the following pro forma adjustments related to the Spin-off:
<TABLE>
<S> <C>
Interstate Management historical management fees............... $ 40,781
Interstate Management historical other income.................. 20,454
Management and other fees from seven of the Companies'
hotels to be managed by Interstate Management................. 3,207
Hotels owned by Patriot and managed by Interstate Management... (12,207)
--------
$ 52,415
========
</TABLE>
(R) Represents the pro forma adjustment to historical operations to reflect
the reduction of equity in earnings of unconsolidated subsidiaries for the
transfer of the Charles Hotel Complex in the Spin-off. Currently the
Companies own an approximate 49% non-controlling interest in this complex.
Consequently, the results of operations for the complex are not
consolidated but are reflected through equity in earnings of
unconsolidated subsidiaries. The adjustment to reduce equity in earnings
of unconsolidated subsidiaries is $2,151. Additionally, as a result of the
Spin-off, Wyndham will own a non-controlling interest of approximately 55%
of Interstate Hotels LLC, a subsidiary of Interstate Management, the newly
formed entity. Wyndham will account for their ownership as a equity
investment and record their share of estimated earnings of Interstate
Hotels, LLC as equity in earning in unconsolidated subsidiaries. The pro
forma adjustment for the estimated earnings for the year ended December
31, 1998 is $4,024.
(S) Wyndham is in a loss position for the twelve months ended December 31,
1998. Therefore basic and diluted earnings per share are identical since
the securities which could have a dilutive impact on earnings per share
are anti-dilutive.
<TABLE>
<S> <C>
Net loss..................................................... $(142,364)
Preferred stock dividend..................................... (2,706)
---------
Net loss to common stockholders............................ $(145,070)
=========
Weighted average number of common shares outstanding:
Basic...................................................... 151,313
=========
Diluted.................................................... 151,313
=========
</TABLE>
Wyndham is in a loss position (prior to the Interstate Spin off
transaction) for the twelve months ended December 31, 1998. Therefore basic
and diluted earnings per share are identical since the securities which
could have a dilutive impact on earnings per share are anti-dilutive.
<TABLE>
<S> <C>
Net loss..................................................... $(132,856)
Preferred stock dividend..................................... (2,706)
---------
Net loss to common stockholders............................ $(135,562)
=========
Weighted average number of common shares outstanding:
Basic...................................................... 151,313
=========
Diluted.................................................... 151,313
=========
</TABLE>
F-27
