<PAGE>
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
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: March 26, 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 Consolidated Balance Sheet as of
December 31, 1998 (unaudited).......................................... F-8
Pro Forma Condensed Consolidated Statement of Operations for the year
ended December 31, 1998 (unaudited).................................... F-11
Patriot American Hospitality Inc.:
Pro Forma Condensed Consolidated Statement of Operations for the year
ended December 31, 1998 (unaudited).................................... F-16
Wyndham International, Inc.:
Pro Forma Condensed Consolidated Statement of Operations for the year
ended December 31, 1998 (unaudited).................................... F-19
</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 matured 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 secure the credit facility with mortgages and
other security interests. Patriot paid fees of approximately $11,7000 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.
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 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 consummated. 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 and the revolving facility carry terms of 7 years and 5
years, respectively. Interest rates for the new credit facility are based 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
(described below) 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 IRL carries a term of 5 years. Interest rates for the IRL
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 IRL receive the benefit of the same guarantees and pledges
of security provided under the New Credit Facility. The proceeds from the IRL
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 IRLs may exchange the IRLs for exchange notes carrying identical
terms to the IRLs. To the extent any IRLs or exchange notes are outstanding
180 days after the closing of the 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 to the agents and the lenders
customary fees for a facility of this nature.
For purposes of the pro forma financial statements the New Credit Facility
and IRLs 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 in connection with 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 three principal transactions: (1) the re-branding
of ten Marriott hotels under the Wyndham name, (2) Marriott's assumption
of the management of ten Marriott hotels formerly managed by Interstate
for the remaining term of the Marriott franchise agreement, and (3) the
divesture, either through a sale or a spin-off of assets, of the third-
party management business which was operated by Interstate.
. For Patriot to sell the third-party management business which was
operated by Interstate to a third party, Patriot must (1) sign a non-
binding letter of intent for the sale transaction on or before March 31,
1999, (2) sign a final binding contract for the sale transaction no
later than midnight on April 14, 1999, and (3) consummate the sale
transaction no later than June 14, 1999. If Patriot does not complete a
sale transaction, it must consummate the spin-off of the third-party
management business which was operated by Interstate no later than the
earliest of (1) June 14, 1999, (2) April 30, 1999 (if Patriot does not
enter into a letter of intent for a sale transaction by March 31, 1999,
(3) thirty days after the date Marriott disapproves the letter of intent
for a sale transaction, (4) April 14, 1999 (if Patriot does not enter
into a final binding contract for a sale transaction by the date), or
(5) thirty days after the date of Marriott disapproves of the final
binding contract for a sale transaction. The last date on which either
the sale transaction or the spin-off may be complete is the "final
divestiture date."
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.
Moreover, 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
F-6
<PAGE>
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.
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.
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-11 through F-15 had occurred on
January 1, 1998.
The following unaudited Pro Forma Condensed Consolidated 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 Consolidated 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 Consolidated 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 Consolidated
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 Consolidated Balance Sheet
As of December 31, 1998
(unaudited)
<TABLE>
<CAPTION>
Interstate
Historical Spin- Equity Pro Forma
12/31/98 (A) off (B) Investment (H) 12/31/98
------------ ---------- -------------- ----------
(in thousands, except share amounts)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash
equivalents........... $ 123,085 $ (27,628)(C) $ -- $ 95,457
Restricted Cash........ 35,869 (4,810) -- 31,059
Accounts and lease
revenue receivable,
net................... 194,583 (16,816) -- 177,767
Inventories............ 23,583 -- -- 23,583
Prepaid expense and
other assets.......... 78,344 (3,863) -- 74,481
---------- --------- ----------- ----------
Total current
assets.............. 455,464 (53,117) -- 402,347
Investment in real
estate and related
improvements and land
held for development,
net of accumulated
depreciation........... 5,585,616 (4,076) -- 5,581,540
Investment in
unconsolidated
subsidiaries........... 146,912 45,725 (D) -- 192,637
Mortgage notes and other
receivables from
unconsolidated
subsidiaries........... 78,403 -- -- 78,403
Other mortgage notes and
other receivables...... 41,334 (6,184) -- 35,150
Management contracts,
net of accumulated
amortization........... 194,014 (65,370) -- 128,644
Leaseholds, net of
accumulated
amortization........... 179,922 (35,151) -- 144,771
Trade names and
franchise costs, net of
accumulated
amortization........... 125,974 -- -- 125,974
Goodwill and
intangibles, net of
accumulated
amortization........... 553,889 -- (84,190)(G) 469,699
Deferred expenses, net
of accumulated
amortization........... 37,998 -- 54,589 (H) 92,587
Deferred acquisition
costs.................. 16,144 -- -- 16,144
---------- --------- ----------- ----------
Total assets......... $7,415,670 $(118,173) $ (29,601) $7,267,896
========== ========= =========== ==========
LIABILITIES &
SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and
accrued expenses...... $ 313,831 $ (31,156)(E) $ -- $ 282,675
Deposits............... 26,392 (394) -- 25,998
Current portion of
borrowings under line
of credit facility,
term loans, mortgage
notes and capital
leases................ 1,274,918 -- (1,097,255)(I) 177,663
---------- --------- ----------- ----------
Total current
liabilities......... 1,615,141 (31,550) (1,097,255) 486,336
Borrowings under line of
credit facility, term
loans, mortgage notes
and capital leases..... 2,582,603 -- 604,906 (I) 3,187,509
Due to unconsolidated
subsidiaries........... 7,919 -- -- 7,919
Deferred income taxes... 123,463 (11,053) 701,537 (J) 813,947
Minority interest in the
Operating
partnerships........... 253,970 -- -- 253,970
Minority interest in
consolidated
subsidiaries........... 229,537 (2,350) -- 227,187
Stockholders' equity:
Preferred Stock....... 90 -- 1,074 (K) 1,164
Excess stock.......... -- -- -- --
Common Stock.......... 4,270 -- (4,194)(K) 76
Additional Paid in
Capital................ 3,024,540 -- 912,160 (K) 3,936,700
Treasury Stock.......... -- -- (341,091)(L) (341,091)
Receivable from
shareholders and
affiliates............. (16,364) -- -- (16,364)
Unearned stock
compensation, net of
accumulated
amortization........... (5,494) -- -- (5,494)
Unrealized loss on
securities available
for sale............... (1,245) -- -- (1,245)
Unrealized foreign
exchange gain.......... 2,749 -- -- 2,749
Distribution of
Interstate Management
at book value......... -- (68,220)(F) -- (68,220)
Distributions in
excess of retained
earnings.............. (405,509) (5,000)(E) (806,738)(M) (1,217,247)
---------- --------- ----------- ----------
Total shareholders'
equity.............. 2,603,037 (73,220) (238,789) 2,291,028
---------- --------- ----------- ----------
Total liabilities and
shareholders'
equity.............. $7,415,670 $(118,173) $ (29,601) $7,267,896
========== ========= =========== ==========
</TABLE>
F-8
<PAGE>
Notes to Pro Forma Condensed Consolidated Balance Sheet;
(A) Represents the combined balance sheet of Patriot and 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 89 hotels (the "Leased Hotels')
and certain assets and liabilities of Patriot and 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.............. 44,573
--------
$ 27,628
========
</TABLE>
(D) Represents the pro forma adjustments to reduce investments in
unconsolidated subsidiaries for the transfer of the investment in the
Charles Hotel Complex to Interstate Management in connection with the
Spin-off of $22,150 and the recognition of Wyndham's 55% non-controlling
interest in the Interstate Management of $67,875, based on 55% of the
historical recorded carrying amount.
(E) Represents a reduction of the pro forma accounts payable and accrued
expenses of Interstate Management of $36,156 and an increase for the
estimated accrued tax liability as a result of the anticipated Spin-off of
approximately $5,000. 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.
(F) Represents the pro forma adjustment to reflect the distribution of
Interstate Management at book value to the shareholders.
(G) 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.
(H) Represents the pro forma adjustment for the write-off of net deferred
financing costs associated with the existing $2.7 billion credit facility
of $14,536 plus the addition of an approximate $69,125 of deferred
financing costs to be incurred in connection with the new debt financing.
The deferred loan costs have been reflected as a pro forma adjustment to
retained earnings in the pro forma condensed consolidated balance sheet.
(I) 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. See Note L on page F-13 for details.
(J) 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 $701,537 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.
F-9
<PAGE>
(K) 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
==========
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
151,368,000
shares at a par value of $0.0005 per share)................. $ 76
Historical par value of common stock......................... (4,270)
----------
$ (4,194)
==========
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
Par value adjustment for series B preferred (1,164)
Par value adjustment for reverse stock split................. (76)
Cost of the Investment (including advisory fees, legal and
accounting
and costs of the transaction)............................... (90,960)
----------
$ 912,160
==========
</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.
(L) 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 or approximately $13,966. The treasury stock will be recorded at
cost and as a reduction of stockholders' equity.
(M) 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.............................. 701,537
Transaction costs to settle forward equity contracts.......... 6,475
---------
$ 806,738
=========
</TABLE>
F-10
<PAGE>
Patriot American Hospitality, Inc. and
Wyndham International Inc.
Pro Forma Condensed Consolidated Statements of Operations
for the year ended December 31, 1998
(unaudited)
<TABLE>
<CAPTION>
Total Wyndham
Adjustments Interstate Adjusted
Patriot Wyndham Elimination For 1998 Spin-off Equity Pro Forma
Pro Forma(A) Pro Forma(B) Entries Transactions(G) Transaction(H) Investment Total
------------ ------------ ----------- --------------- -------------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Hotel revenue.......... -- $2,347,876 -- $2,347,876 $(193,922) $ -- $2,154,954
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..... -- 108,427 (916)(D) 107,511 (64,442)(I) -- 43,069
Interest and other
income................. 17,853 24,116 (21,620)(E) 20,349 (594) -- 19,755
-------- ---------- --------- ---------- --------- -------- ----------
Total revenue........ 722,790 2,531,678 (689,778) 2,564,690 (258,958) -- 2,305,732
Expenses:
Hotel expenses......... 127,253 1,594,276 -- 1,721,529 (186,304) -- 1,535,225
Racecourse facility
operations............. -- 43,198 -- 43,198 -- -- 43,198
General and
administrative......... 31,157 109,970 -- 141,127 (33,358) 7,550 (K) 115,319
Interest expense....... 319,520 39,240 (21,620)(E) 337,140 -- (36,730)(L) 300,410
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 84,842 -- 280,520 (18,184) (2,193)(M) 260,143
Lease payments......... -- 667,242 (667,242)(C) -- -- -- --
-------- ---------- --------- ---------- --------- -------- ----------
771,978 2,614,673 (688,862) 2,697,789 (237,846) (31,373) 2,428,570
-------- ---------- --------- ---------- --------- -------- ----------
Operating loss.......... (49,188) (82,995) (916) (133,099) (21,112) 31,373 (122,838)
Equity in earnings of
unconsolidated
subsidiaries........... 45,495 1,457 (36,502)(F) 10,450 2,714 (J) -- 13,164
-------- ---------- --------- ---------- --------- -------- ----------
Loss before income tax
provision, and minority
interests............... (3,693) (81,538) (37,418) (122,649) (18,398) (31,373) (109,674)
Income tax provision... (2,777) (23,007) -- (25,784) 9,964 22,261 (N) 6,441
-------- ---------- --------- ---------- --------- -------- ----------
Loss before minority
interests............... (6,470) (104,545) (37,418) (148,433) (8,434) 53,634 (103,233)
Minority interest in
the operating
partnership............ 352 12,523 -- 12,875 -- -- (O) 12,875
Minority interest in
consolidated
subsidiaries........... (8,057) (40,834) 36,502 (F) (12,389) (233) -- (12,622)
-------- ---------- --------- ---------- --------- -------- ----------
-------- ---------- --------- ---------- --------- -------- ----------
Net loss................ $(14,175) $ (132,856) $ (916) $ (147,947) $ (8,667) $ 53,634 $ (102,980)
======== ========== ========= ========== ========= ======== ==========
Basic loss per common
share(P)................ $ (0.27) $ (0.90) -- (1.17) -- -- (1.33)
======== ========== ========== ==========
Dilutive loss per common
share(P)................ $ (1.37) $ (0.90) -- (2.28) -- -- (1.33)
======== ========== ========== ==========
</TABLE>
See notes on following page.
F-11
<PAGE>
Notes to Pro Forma Condensed Consolidated 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-16.
(B) Represents the Pro Forma Condensed Consolidated Statements of Wyndham for
the year ended December 31, 1998. See page F-19.
(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
Transaction, as if they had be consummated on January 1, 1998. See pages
F-1 and F-2.
(H) 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.
(I) 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
--------
$ 64,442
========
</TABLE>
(J) 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 $4,865.
F-12
<PAGE>
Notes to Pro Forma Condensed Consolidated Statement of Operations;
(K) 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.
(L) 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%).......... $ 560,000 $ 45,422
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.................. 650,000 60,960
Other mortgage financing bearing interest at a rate
of 8.75% per annum.................................. 319,993 28,388
Additional deferred loan costs of approximately
$69,125 amortized over periods of 5 to 7 years...... -- 11,382
----------- ---------
2,529,993 234,867
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...................................... $ 234,867
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........... $ (36,730)
=========
</TABLE>
(M) Represents the adjustment to reduce depreciation and amortization for the
goodwill to be written off in connection with the restructuring.
(N) 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.
(O) In connection with the $1 billion equity investment and restructuring of
Wyndham and Patriot, the third party partners in both the Patriot
Partnership and the Wyndham Partnership will be offered the opportunity to
exchange their limited partner interests for Wyndham common stock. At this
time, it is uncertain as to
F-13
<PAGE>
the number of third party partners who may elect to exchange their limited
partnership interests for Wyndham common stock therefore no adjustment has
been made. The impact to the results of operations if all partners were to
elect to exchange their interests would be to reduce minority interest in
the operating partnerships by $12,875 and to increase the Companies' net
loss from ($102,980) to ($115,855) on a pro forma basis. Assuming all third
party limited partners received one share of Wyndham common stock for each
unit of limited partnership interest, a total of 15,230,000 additional
common shares would be issued.
As a result of the pro forma net loss position for the twelve months ended
December 31, 1998, basic and dilutive weighted average shares outstanding
will be identical. The impact to basic and dilutive loss per share would be
to reduce both from a loss of $1.33 per share to $1.21 per common share.
(P) 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 to
date, a total of 54,035,000 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 559,000 shares at
$25.00 per share). As a result, the total number of common shares
outstanding on a pro forma basis would be 152,009,000. 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..... $ (102,980) $ (102,980)
Investor Preferred Dividends..................... (100,036) (100,036)
---------- ----------
Net loss available to common shareholders........ (203,016) (203,016)
========== ==========
Weighted average shares.......................... 152,009 152,009
========== ==========
Net loss per common share........................ $ (1.33) $ (1.33)
========== ==========
</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-14
<PAGE>
The combined Companies are in a loss position for the twelve months ended
December 31, 1998. Basic and dilutive earnings on a pro forma basis areas
before the effects of the investment and restructuring follows:
<TABLE>
<CAPTION>
Basic Diluted
--------- ---------
<S> <C> <C>
Combined net loss................................. $(147,947) $(147,947)
Preferred stock dividends......................... (7,956) (7,956)
Adjustment for equity forwards (1)................ (21,151) (188,592)
--------- ---------
Net loss to common shareholders.................. $(177,054) $(344,495)
========= =========
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-15
<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>
Pro
Patriot Recent Arcadian Summerfield Interstate Forma
Historical Transactions Acquisition Acquisition Merger Total
(A) (B) (C) (D) (E) Other (U)
---------- ------------ ----------- ----------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
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)
-------- ------ ------- -------- ------- ------- --------
Loss (income) before
extraordinary item..... (14,328) 6,833 (5,621) (10,149) 9,090 -- (14,175)
Extraordinary loss
from early
extinguishment of
debt................. (30,560) -- -- -- -- 30,560 (H) --
-------- ------ ------- -------- ------- ------- --------
Net (loss) income....... $(44,888) $6,833 $(5,621) $(10,149) $ 9,090 $30,560 $(14,175)
======== ====== ======= ======== ======= ======= ========
Basic loss per common
share (Q):
Loss before
extraordinary item... $ (0.30) (0.27)
Extraordinary loss ... $ (0.22) --
-------- --------
Net loss per common
share................ $ (0.52) $ (0.27)
======== ========
Diluted loss per common
share (Q):
Loss before
extraordinary item... $ (1.51) $ (1.37)
Extraordinary loss ... (0.22) --
-------- --------
Net loss per common
share................ $ (1.73) $ (1.37)
======== ========
</TABLE>
See notes on following page.
F-16
<PAGE>
Notes to Condensed Consolidated Pro Forma Statement of Operations:
(A) Represents Patriot's historical results of operations 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.
(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.
(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 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
F-17
<PAGE>
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-18
<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
(A) (B) (C) (D) (E) (F) Other
---------- ------------ ----------- ----------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Revenue:
Hotel revenue............ $1,842,682 $51,770 $16,426 $53,746 $324,467 $58,785 $ --
Racecourse facility
revenue.................. 51,259 -- -- -- -- -- --
Management fee and
service fee income....... 89,983 (1,833) -- 1,814 17,817 646 --
Interest and other
income................... 18,303 193 690 550 2,536 1,844 --
---------- ------- ------- ------- -------- ------- -------
Total revenue.......... 2,002,227 50,130 17,116 56,110 344,820 61,275 --
---------- ------- ------- ------- -------- ------- -------
Expenses:
Hotel expenses........... 1,251,548 41,235 13,278 25,738 227,822 34,655 --
Racecourse facility
operations............... 43,198 -- -- -- -- -- --
General and
administrative........... 87,882 -- -- 4,964 16,627 497 --
Interest expense......... 35,690 2,872 (G) -- -- -- 678 (H) --
Cost of acquiring
leaseholds and license
agreements............... 52,721 -- -- -- -- -- --
Loss on asset held for
sale..................... 23,184 -- -- -- -- -- --
Depreciation and
amortization............. 69,375 1,758 (I) 118 (I) 1,649 (I) 11,323 (I) 619 (I) --
Lease payments........... 519,589 1,335 (J) 3,803 (J) 23,194 (J) 98,576 (J) 20,745 (J) --
---------- ------- ------- ------- -------- ------- -------
Total expenses......... 2,083,187 47,200 17,199 55,545 354,348 57,194 --
---------- ------- ------- ------- -------- ------- -------
Operating (loss) income... (80,960) 2,930 (83) 565 (9,528) 4,081 --
Equity in earnings of
unconsolidated
subsidiaries............. 3,134 (1,677) (K) -- -- -- -- --
---------- ------- ------- ------- -------- ------- -------
Income (loss) before
income tax provision and
minority interest......... (77,826) 1,253 (83) 565 (9,528) 4,081 --
Income tax provision..... (14,381) -- -- -- -- -- (8,626)(L)
---------- ------- ------- ------- -------- ------- -------
Income (loss) before
minority interest......... (92,207) 1,253 (83) 565 (9,528) 4,081 (8,626)
Minority interest in
Wyndham partnership...... 12,750 (175)(M) (5)(M) -- (M) -- (M) (47)(M) --
Minority interest in
consolidated
subsidiaries............. (31,705) (6,155)(N) 128 (N) 6,293 (N) (9,934)(N) -- 539 (O)
---------- ------- ------- ------- -------- ------- -------
Income (loss) before
extraordinary item........ (111,162) (5,077) 40 6,858 (19,462) (4,034) (8,087)
Extraordinary item, net of
applicable taxes.......... (1,257) -- -- -- -- -- 1,257
---------- ------- ------- ------- -------- ------- -------
Net loss.................. $ (112,419) $(5,077) $ 40 $ 6,858 $(19,462) $(4,034) $(6,830)
========== ======= ======= ======= ======== ======= =======
Basic earnings (loss) per
common share (P).......... $ (0.83)
Loss before extraordinary
item (P)................. (0.01)
----------
Extraordinary loss....... $ (0.84)
==========
Diluted earnings (loss)
per common share (P)
Loss before extraordinary
item..................... $ (0.83)
Extraordinary loss....... (0.01)
----------
Net loss per common
share.................... $ (0.84)
==========
<CAPTION>
Pro Forma
Total
-----------
<S> <C>
Revenue:
Hotel revenue............ $2,347,876
Racecourse facility
revenue.................. 51,259
Management fee and
service fee income....... 108,427
Interest and other
income................... 24,116
-----------
Total revenue.......... 2,531,678
-----------
Expenses:
Hotel expenses........... 1,594,276
Racecourse facility
operations............... 43,198
General and
administrative........... 109,970
Interest expense......... 39,240
Cost of acquiring
leaseholds and license
agreements............... 52,721
Loss on asset held for
sale..................... 23,184
Depreciation and
amortization............. 84,842
Lease payments........... 667,242
-----------
Total expenses......... 2,614,673
-----------
Operating (loss) income... (82,995)
Equity in earnings of
unconsolidated
subsidiaries............. 1,457
-----------
Income (loss) before
income tax provision and
minority interest......... (81,538)
Income tax provision..... (23,007)
-----------
Income (loss) before
minority interest......... (104,545)
Minority interest in
Wyndham partnership...... 12,523
Minority interest in
consolidated
subsidiaries............. (40,834)
-----------
Income (loss) before
extraordinary item........ (132,856)
Extraordinary item, net of
applicable taxes.......... --
-----------
Net loss.................. $(132,856)
===========
Basic earnings (loss) per
common share (P).......... $ (0.90)
Loss before extraordinary
item (P)................. --
-----------
Extraordinary loss....... $ (0.90)
===========
Diluted earnings (loss)
per common share (P)
Loss before extraordinary
item..................... $ (0.90)
Extraordinary loss....... --
-----------
Net loss per common
share.................... $ (0.90)
===========
</TABLE>
See notes on following page
F-19
<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.
(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.
(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.
(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.
(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.
(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.
(H) Represents pro forma interest expense on debt obligations assumed in
connection with the CHCI merger.
(I) Represents the following 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%.
(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.
F-20
<PAGE>
(P) 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..................................................... $(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-21
