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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
AMENDMENT NO. 1
TO CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) NOVEMBER 6, 1995
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HOST MARRIOTT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 1-5664 53-0085950
(STATE OR OTHER JURISDICTION (COMMISSION FILE NUMBER) (I.R.S. EMPLOYER
OF INCORPORATION) IDENTIFICATION NUMBER)
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10400 FERNWOOD ROAD, BETHESDA, MARYLAND 20817
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (301) 380-9000
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT.)
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<PAGE>
FORM 8-K/A
ITEM 5. OTHER EVENTS
The Registrant hereby amends its Current Report on Form 8-K dated August 22,
1995 by filing financial statements of an acquired business, the Dallas/Fort
Worth Airport Marriott (the "Hotel"). Pro Forma financial information of the
Registrant incorporating the acquisition of the Hotel was previously filed in
the Registrant's Form 8-K/A dated August 29, 1995.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS PAGE
Financial statements of Dallas/Fort Worth Airport Marriott
. As of and for the Year Ended December 30, 1994. 3 - 11
. As of and for the Thirty-two Weeks Ended August 11, 1995. 12 - 15
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Host Marriott Corporation
By: /s/ Jeffrey P. Mayer
---------------------------------
Jeffrey P. Mayer
Senior Vice President
Finance and Corporate Controller
(Chief Accounting Officer)
Date: November 6, 1995
2
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REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE OWNERS OF THE DALLAS/FORT WORTH AIRPORT MARRIOTT:
We have audited the accompanying statement of assets, liabilities and net
advances from PHLP of the Dallas/Fort Worth Airport Marriott, as defined in Note
1, as of December 30, 1994, and the related statements of operations and cash
flows for the year ended December 30, 1994. These financial statements are the
responsibility of the management of the PHLP, as defined in Note 1. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform an audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of the Dallas/Fort Worth Airport
Marriott (as defined in Note 1) as of December 30, 1994, and the results of its
operations and its cash flows for the year then ended, in conformity with
generally accepted accounting principles.
Washington, D.C.,
November 3, 1995
3
<PAGE>
DALLAS/FORT WORTH AIRPORT MARRIOTT
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 30, 1994
(IN THOUSANDS)
<TABLE>
<S> <C>
REVENUE................................................................ $ 8,163
-------
OPERATING COSTS AND EXPENSES
Depreciation and amortization........................................ 740
Base and incentive management fees................................... 3,455
Property taxes....................................................... 1,008
Insurance and other.................................................. 54
-------
Total operating costs and expenses................................. 5,257
-------
OPERATING PROFIT BEFORE INTEREST....................................... 2,906
Interest expense....................................................... 5,310
-------
NET LOSS............................................................... $(2,404)
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
DALLAS/FORT WORTH AIRPORT MARRIOTT
STATEMENT OF ASSETS, LIABILITIES
AND NET ADVANCES FROM PHLP
AS OF DECEMBER 30, 1994
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
Property and equipment, net........................................... $ 19,164
Due from Marriott International....................................... 1,601
Property improvement fund............................................. 3
--------
$ 20,768
========
<CAPTION>
LIABILITIES AND NET ADVANCES FROM PHLP
--------------------------------------
<S> <C>
Mortgage debt......................................................... $ 51,462
Due to Host Marriott Corporation...................................... 897
Due to Marriott International, Inc.................................... 26,941
Accrued interest...................................................... 104
--------
Total liabilities................................................... 79,404
Net advances from PHLP................................................ (58,636)
--------
$ 20,768
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
DALLAS/FORT WORTH AIRPORT MARRIOTT
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 30, 1994
(IN THOUSANDS)
<TABLE>
<S> <C>
OPERATING ACTIVITIES
Net loss............................................................. $(2,404)
Depreciation and amortization........................................ 740
Deferred incentive and base management fees.......................... 2,263
Loss on fixed asset disposition...................................... 6
Changes in other operating accounts:
Due from Marriott International, Inc. ............................. 302
Accrued interest................................................... (28)
-------
Cash provided by operations.......................................... 879
-------
FINANCING ACTIVITIES
Change in net investment and advances from PHLP...................... (1,338)
Decrease in amounts due from Marriott International, Inc. ........... 499
Repayments to Host Marriott Corporation.............................. (105)
Change in escrow fund cash........................................... 65
-------
Cash used in financing activities.................................... (879)
-------
CHANGE IN CASH AND CASH EQUIVALENTS.................................... --
CASH AND CASH EQUIVALENTS, beginning of year........................... --
-------
CASH AND CASH EQUIVALENTS, end of year................................. $ --
=======
SUPPLEMENTAL INFORMATION
Cash paid for interest............................................... $ 5,451
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
DALLAS/FORT WORTH AIRPORT MARRIOTT
NOTES TO FINANCIAL STATEMENTS
NOTE 1. THE HOTEL
Basis of Presentation
On August 22, 1995 ("Sale Date"), HMC Acquisitions Properties, Inc., a wholly-
owned indirect subsidiary of Host Marriott Corporation, purchased the building,
leasehold improvements and furniture, fixtures and equipment related to the
Dallas/Fort Worth Airport Marriott located in Irving, Texas (the "Hotel") from
Potomac Hotel Limited Partnership ("PHLP"), a Delaware limited partnership, for
approximately $45 million. The Hotel was part of a portfolio of properties owned
by PHLP. The Hotel, with approximately 500 rooms, is operated by Marriott
International, Inc. as part of the Marriott Hotels, Resorts and Suites full-
service hotel system.
The Hotel's purchase price at the Sale Date was in excess of its carrying
value. No adjustments related to the resultant sale are reflected in the
accompanying statements.
These financial statements present the assets, liabilities and net advances to
PHLP, results of operations and cash flows related to the business of the
Dallas/Fort Worth Airport Marriott which is a lesser component of PHLP for all
periods presented. PHLP's historical basis in assets and liabilities of the
Hotel have been carried over. Changes in Net Advances from PHLP represent the
operating results of the Hotel adjusted for net cash transferred between PHLP
and the Hotel.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The Hotel's records are maintained on the accrual basis of accounting and
its fiscal year ends on the Friday nearest to December 31.
Revenues
Revenues represent house profit, which is the Hotel's sales less property-
level expenses excluding depreciation, management fees, real and personal
property taxes, insurance and certain other costs which are classified as
operating costs and expenses.
Property and Equipment
Property and equipment is recorded at cost. Replacements and improvements
are capitalized as incurred. Depreciation is computed using the straight-line
method over the estimated useful lives of the assets, generally 30 years for
buildings and five to six years for furniture and equipment.
Working Capital and Supplies
Pursuant to the terms of the Hotel's management agreement discussed in Note 6,
the Hotel is required to provide the respective manager with working capital and
supplies to meet its operating needs. The manager converts cash advanced by PHLP
into other forms of working capital consisting primarily of operating cash,
inventories, and trade receivables and payables which are maintained and
controlled by the manager. Upon the termination of the agreements, it is
expected that the working capital and supplies will be partially reconverted
into cash and returned to PHLP or transferred to a subsequent owner or operator
for consideration. Such working capital and supplies are also pledged as
security for the Hotel's share of PHLP's debt as described in Note 5. As a
result of these conditions, the individual components of working capital and
supplies controlled by the manager is not reflected in the accompanying
statement of assets, liabilities and net advances from PHLP.
7
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DALLAS/FORT WORTH AIRPORT MARRIOTT
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Income Taxes
Provision for Federal or state income taxes has not been made in the
accompanying financial statements since PHLP does not pay income taxes but,
rather, allocates its profits and losses to individual partners.
NOTE 3. REVENUES
House profit for the year ended December 30, 1994 consists of (in
thousands):
<TABLE>
<S> <C>
HOTEL SALES
Rooms............................................................ $14,516
Food & Beverage.................................................. 7,029
Other............................................................ 1,383
-------
Total Hotel Sales.............................................. 22,928
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DEPARTMENT COSTS
Rooms............................................................ 3,648
Food & Beverage.................................................. 5,066
Other............................................................ 799
-------
Total Department Costs......................................... 9,513
-------
DEPARTMENT PROFIT.................................................. 13,415
Other Deductions................................................. (5,252)
-------
HOUSE PROFIT....................................................... $ 8,163
=======
</TABLE>
NOTE 4. PROPERTY AND EQUIPMENT
Property and equipment consists of the following at December 30, 1994 (in
thousands):
<TABLE>
<S> <C>
Land............................................................. $ 1,407
Building and improvements........................................ 25,576
Furniture and equipment.......................................... 4,527
--------
31,510
Less accumulated depreciation and amortization................... (12,346)
--------
Property and equipment, net...................................... $ 19,164
========
</TABLE>
All property and equipment is pledged as security against the Hotel's portion
of PHLP's indebtedness and in the case of rental payments from the Hotel's
portion of FF&E leases the loans related to FF&E of the Hotel. The amounts above
reflect PHLP's historical basis in the Hotel's property and equipment and do not
reflect the impact of the Sale to HMC Acquisition Properties Inc. on
August 22, 1995.
NOTE 5. DEBT
Bank Loan
On December 22, 1987, PHLP borrowed $245 million (the "Bank Loan") from The
Mitsui Trust and Banking Company (the "Bank Lender") secured by seven of PHLP
hotels (the "Bank Hotels"). The Bank Loan bore interest at an effective fixed
rate of 10.37% and required monthly, interest-only payments.
The Bank Loan matured on December 22, 1994, and was not repaid because PHLP
had insufficient funds to do so. At December 22, 1994, the principal balance of
the Bank Loan was $245 million.
8
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DALLAS/FORT WORTH AIRPORT MARRIOTT
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
PHLP entered into a forbearance agreement with the Bank Lender under which
the Lender agreed not to exercise its rights and remedies for nonpayment of the
Bank Loan. PHLP subsequently refinanced (the "Refinancing") the Bank Loan. Under
the Refinancing, PHLP was required to repay $44 million in principal and Host
Marriott Corporation advanced $10 million under an existing Bank Loan guaranty.
In exchange for the lender's agreement to forbear, PHLP agreed to continue to
make monthly interest payments at a rate equal to the one-month LIBOR plus two
percentage points for the period December 22, 1994 through June 21, 1995 and the
one-month LIBOR plus two and one quarter percentage points for the period June
22, 1995 through the end of the extended forebearance period.
Approximately $51.4 million of the $245 million Bank Loan principal has been
allocated to the Hotel based on the relative amounts of title insurance
specified by the lender to be required for the Hotel as compared to the total
title insurance for the seven hotels when the Bank Loan originated in 1987.
Other Loans
As of December 30, 1994, $897,000 was outstanding to Host Marriott for an
FF&E loan related to the Hotel. The FF&E loan is nonrecourse to the Parent and
is effectively secured by payments from Marriott International, Inc. under the
FF&E Lease, as defined in Note 6 below. As of December 30, 1994, Marriott
International, Inc. owed $980,000, including related interest costs, for the
Hotel FF&E capital lease.
NOTE 6. MANAGEMENT AGREEMENT
Marriott International, Inc. (the "Manager") operates the Hotel pursuant to
a long-term management agreement (the "Management Agreement") for a term of 25
years from the opening of the Hotel with renewal terms, at the option of the
Manager, of up to an additional 50 years. The Management Agreement provides
for payment of base management fees equal to 8% of gross hotel sales and
incentive management fees equal to 20% of hotel operating profits (as defined,
calculated before debt service on total Parent debt), and additional incentive
fees, after certain returns to the Parent, ranging from 10% to 70% depending
on the level of returns made to the partners. Payment of the incentive
management fees is dependent upon the availability of cash flow after debt
service, and payable only after repayment of certain debt service guaranty
advances and certain priority returns to the Parent expressed as a percentage
of limited partner invested equity. Through December 30, 1994, no incentive
fees have been paid since inception. Deferred base fees were $7,360,000 as of
December 30, 1994. Deferred incentive management fees were $19,523,000 as of
December 30, 1994. In the event of early termination of the Management
Agreement, the Manager will be owed additional fees based on the unexpired
term and expected future base and incentive management fees.
In accordance with the Management Agreement, the Manager is required to
lease all FF&E replacements from the Hotel (the "FF&E Lease") for terms of up
to six years. Lease payments represent an amount approximately equal to the
principal amortization, interest and fees associated with indebtedness
incurred by the Hotel to finance the FF&E replacements and any sales and use
taxes, personal property taxes, insurance premiums and additional costs
incurred by the Parent in connection with the acquisition and use of such
replacements. As of December 30, 1994, the Manager was obligated to pay
$980,000 (including related interest costs) to the Hotel during the term of
this agreement.
On February 24, 1995, the Parent, Bank Lender and the Manager entered into a
cash collateral agreement with terms effective January 1, 1995. Effective
January 1, 1995, 4% of gross hotel sales must be deposited in a
9
<PAGE>
DALLAS/FORT WORTH AIRPORT MARRIOTT
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
property improvement fund for the future furniture, fixtures and equipment
needs of the Hotel. Additionally, 1% of gross hotel sales must be deposited in
a restricted cash account and are subordinated to the payment of debt service
on the Bank Loan.
The cash collateral agreement also adjusted the base management fee earned by
the Manager under the management agreement from 8% to 3% of gross hotel sales
effective January 1, 1995. The payment of 1% of the 3% base fee earned is
subordinated to the payment of debt service on the Bank Loan. As a result, the
subordinated base management fees are set aside in a restricted cash account
where it will be held and made available for the payment of debt service.
In conjunction with the acquisition of the Hotel by HMC Acquisition
Properties, Inc., a new management agreement was entered into with the Manager.
The new agreement provides for payment of base management fees equal to three
percent of sales and a formula based incentive management fee limited to 20% of
fiscal year Hotel operating profit (as defined). Had these terms been in effect
for the year ended December 30, 1994, pro forma base and incentive management
fees would have been $688,000.
In connection with the Refinancing approximately $27 million of deferred
management fees related to the Hotel were forgiven by the Manager on
August 22, 1995.
Additionally, the Parent has advanced $946,000 to the manager for working
capital and supplies related to the Hotel which is included in Due from
Marriott International, Inc.
10
<PAGE>
DALLAS/FORT WORTH AIRPORT MARRIOTT
STATEMENT OF OPERATIONS
FOR THE THIRTY-TWO WEEKS ENDED AUGUST 12, 1994 AND AUGUST 11, 1995
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995
------- ------
<S> <C> <C>
REVENUE........................................................ $ 5,317 $6,192
------- ------
OPERATING COSTS AND EXPENSES
Depreciation and amortization................................ 395 396
Base and incentive management fees........................... 2,234 1,742
Property taxes............................................... 672 685
Insurance and other.......................................... (10) 114
------- ------
Total operating costs and expenses......................... 3,291 2,937
------- ------
OPERATING PROFIT BEFORE INTEREST............................... 2,026 3,255
Interest expense............................................... 3,276 2,597
------- ------
NET INCOME (LOSS).............................................. $(1,250) $ 658
======= ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
DALLAS/FORT WORTH AIRPORT MARRIOTT
STATEMENT OF ASSETS, LIABILITIES AND NET
ADVANCES FROM PHLP
(SEE NOTE 1)
AS OF AUGUST 11, 1995
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS
------
<S> <C>
Property and equipment, net........................................... $ 18,872
Due from Marriott International, Inc.................................. 2,312
Property improvement fund............................................. 515
Restricted cash....................................................... 155
--------
$ 21,854
========
<CAPTION>
LIABILITIES AND NET ADVANCES FROM PHLP
--------------------------------------
<S> <C>
Mortgage debt......................................................... $ 51,462
Due to Host Marriott Corporation...................................... 1,692
Due to Marriott International, Inc.................................... 28,374
Accrued interest...................................................... 219
--------
Total liabilities................................................... 81,747
Net advances from PHLP................................................ (59,893)
--------
$ 21,854
========
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
DALLAS/FORT WORTH AIRPORT MARRIOTT
STATEMENT OF CASH FLOWS
FOR THE THIRTY-TWO WEEKS ENDED AUGUST 12, 1994 AND AUGUST 11, 1995
(UNAUDITED, IN THOUSANDS)
<TABLE>
<CAPTION>
1994 1995
------- -------
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss)........................................... $(1,250) $ 658
Noncash items:
Depreciation and amortization............................. 395 396
Deferred incentive and base management fees............... 1,738 1,433
Working capital changes:
Due from/to Marriott International, Inc. ................. (504) 58
Accrued interest.......................................... 175 115
------- -------
Cash provided by operations................................. 554 2,660
------- -------
INVESTING ACTIVITIES
Additions to property and equipment....................... -- (515)
Change in property improvement fund....................... (5) (104)
------- -------
Cash used in investing activities......................... (5) (619)
------- -------
FINANCING ACTIVITIES
Change in net advances from PHLP.......................... (2,011) (1,889)
Deposit in restricted cash account........................ -- (155)
Advances from Host Marriott Corporation................... 1,409 --
Change in escrow fund cash................................ 53 3
------- -------
Cash used in financing activities......................... (549) (2,041)
------- -------
INCREASE IN CASH AND CASH EQUIVALENTS......................... -- --
CASH AND CASH EQUIVALENTS, beginning of period................ -- --
------- -------
CASH AND CASH EQUIVALENTS, end of period...................... $ -- $ --
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
DALLAS/FORT WORTH AIRPORT MARRIOTT
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
1. The accompanying financial statements of the Dallas/Fort Worth Airport
Marriott (the "Hotel") have been prepared without audit. Certain information
and footnote disclosures normally included in financial statements presented
in accordance with generally accepted accounting principles have been omitted.
The Hotel believes the disclosures made are adequate to make the information
presented not misleading. However, the financial statements should be read in
conjunction with the audited financial statements and notes thereto for the
fiscal year ended December 30, 1994 included elsewhere in this Form 8-K.
In the opinion of the Hotel, the accompanying unaudited financial statements
reflect all adjustments (which include only normal recurring adjustments)
necessary to present fairly the financial position of the Hotel as of August
11, 1995 and the results of operations and cash flows for the thirty-two weeks
ended August 12, 1994 and August 11, 1995. Interim results are not necessarily
indicative of fiscal year performance because of the impact of seasonal and
short-term variations.
2. House profit represents hotel operating results less property-level
expenses excluding depreciation, management fees, real and personal property
taxes, insurance and certain other costs which are classified as operating
costs and expenses.
House profit generated by the Hotel for the thirty-two weeks ended August
12, 1994 and August 11, 1995 consists of:
<TABLE>
<CAPTION>
1994 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
SALES
Rooms................................................... $ 9,213 $ 9,983
Food & Beverage......................................... 4,331 4,706
Other................................................... 837 776
------- -------
Total Hotel Sales..................................... 14,381 15,465
------- -------
DEPARTMENT COSTS
Rooms................................................... 2,225 2,364
Food & Beverage......................................... 3,102 3,168
Other................................................... 469 511
------- -------
Total Department Costs................................ 5,796 6,043
------- -------
DEPARTMENT PROFIT......................................... 8,585 9,422
Other Deductions........................................ (3,268) (3,230)
------- -------
HOUSE PROFIT.............................................. $ 5,317 $ 6,192
======= =======
</TABLE>
14
