<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
AMENDMENT NO. 2
TO CURRENT REPORT PURSUANT TO SECTION 13 OR 15(D) OF
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) MARCH 7, 1996
-------------------------
HOST MARRIOTT CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 1-5664 53-0085950
(STATE OR OTHER JURISDICTION (COMMISSION FILE (I.R.S. EMPLOYER
OF INCORPORATION) NUMBER) IDENTIFICATION NUMBER)
10400 FERNWOOD ROAD, BETHESDA, MARYLAND 20817
(ADDRESS OF PRINCIPLE EXECUTIVE OFFICES) (ZIP CODE)
-------------------------
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (301) 380-9000
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT.)
================================================================================
<PAGE>
FORM 8-K/A
ITEM 5. OTHER EVENTS
The Registrant hereby amends its Current Report on Form 8-K/A dated
January 17, 1996 by filing updated financial statements of the acquired
business, the New York Vista (renamed the Marriott World Trade Center subsequent
to the Registrant's acquisition). Pro Forma financial information of the
Registrant was previously filed in the Registrant's Form 8-K dated February 29,
1996.
ITEM 7. FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
FINANCIAL STATEMENTS OF THE NEW YORK VISTA (renamed Marriott World Trade
Center subsequent to acquisition by the Registrant)
Report of Independent Auditors........................................... 3
Statements of Assets and Liabilities as of December 31, 1994 and 1993 ... 4
Statements of Revenues and Expenses for the Years Ended December 31,
1994, 1993 and 1992..................................................... 5
Statements of Cash Flows for the Years Ended December 31, 1994 and 1993.. 6
Notes to Financial Statements............................................ 7
Statements of Revenues and Expenses for the Period From January 1, 1995
Through December 22, 1995 and the Period From January 1, 1994 Through
December 22, 1994 (unaudited)........................................... 13
Statements of Cash Flows for the Period From January 1, 1995 Through
December 22, 1995 and the Period From January 1, 1994 Through December
22, 1994 (unaudited).................................................... 14
Notes to Financial Statements (unaudited)................................ 15
</TABLE>
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/ DONALD D. OLINGER
----------------------------------------
Donald D. Olinger
Vice President and Corporate Controller
Date: March 7, 1996
2
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors
Hilton International Co.
We have audited the accompanying statements of assets and liabilities of New
York Vista (a facility of The Port Authority of New York and New Jersey) as of
December 31, 1994, 1993 and 1992, and the related statements of revenues and
expenses and cash flows for the years then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the 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 audits provide a reasonable basis
for our opinion.
In our report dated January 20, 1995 and January 21, 1994, we expressed an
opinion that the 1994, 1993 and 1992 financial statements did not fairly
present financial position, results of operations, and cash flows in
conformity with generally accepted accounting principles because the Company
had not obtained actuarial information regarding pension expense and minimum
liability for the unfunded accumulated benefit obligation over plan assets. As
described in Note 6, the Company obtained the requisite actuarial information
in January 1996. Such actuarial information indicated that the minimum
liability for unfunded accumulated benefit obligations over plan assets was
not understated and accordingly, no adjustments were necessary in 1994, 1993
and 1992 for the financial statements to conform with generally accepted
accounting principles. Accordingly, our present opinion on the 1994, 1993 and
1992 financial statements, as presented herein, is unqualified rather than
qualified.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the assets and liabilities of New York Vista at
December 31, 1994, 1993 and 1992, and its revenues and expenses and cash flows
for the years then ended, in conformity with generally accepted accounting
principles.
Ernst & Young LLP
January 20, 1995 (except for Notes 6, 7 and 8, which the date is February 22,
1996)
3
<PAGE>
NEW YORK VISTA
STATEMENTS OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
DECEMBER 31
--------------------------
1994 1993*
------------ ------------
<S> <C> <C>
ASSETS
Current assets:
Cash............................................. $ 313,403 $ 3,216,248
Receivables--trade (less allowance for doubtful
accounts of $8,505 in 1994 and $140,276 in
1993)........................................... 1,386,395 364,718
Business interruption insurance claim receivable
(Note 7)........................................ 10,405,062 6,525,610
Inventories:
Food and beverage.............................. 359,298 287,419
Operating supplies............................. 221,826 48,913
Prepaid expenses................................. 6,165 3,437
------------ ------------
Total current assets............................... 12,692,149 10,446,345
Restricted cash (Notes 2 and 4).................... 321,646 2,781,953
Other assets....................................... 16,395 3,945
------------ ------------
Total assets....................................... $ 13,030,190 $ 13,232,243
============ ============
LIABILITIES
Current liabilities:
Accounts payable--trade.......................... $ 2,994,581 $ 1,332,549
Accrued liabilities:
Payroll and related taxes...................... 1,086,344 634,244
Sales and occupancy taxes...................... 538,460 273,280
Hotel renovation............................... 1,200,184 29,605
Other.......................................... 341,559 235,032
Due to Inhil Co., Inc............................ 1,243,950 1,304,510
Due to other affiliated companies................ 377,989 83,021
Deferred revenue................................. 2,367,211 --
------------ ------------
Total current liabilities.......................... 10,150,278 3,892,241
Reserve for replacement of furniture, fixtures and
equipment and for capital expenditures (Notes 2
and 4)............................................ 3,368,254 5,117,370
Loan payable, Inhil Co., Inc. (Note 2)............. 16,837,050 14,565,987
Difference between assets and liabilities repre-
senting amount due from the Port Authority of New
York and New Jersey (Note 3)...................... (17,325,392) (10,343,355)
------------ ------------
Total liabilities.................................. $ 13,030,190 $ 13,232,243
============ ============
</TABLE>
- --------
* Reclassified and restated to conform with 1994 presentation. (See Note 1)
See accompanying notes.
4
<PAGE>
NEW YORK VISTA
STATEMENTS OF REVENUES AND EXPENSES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------
1994 1993* 1992*
------------ ----------- -----------
<S> <C> <C> <C>
OPERATING REVENUES:
Rooms................................. $ 2,692,164 $ 3,492,775 $27,469,251
Food.................................. 854,246 814,255 6,078,045
Beverage.............................. 342,000 261,429 1,829,381
Other operated departments............ 110,523 166,528 1,238,985
Other income (Note 7)................. 5,930,582 15,946,482 696,694
------------ ----------- -----------
9,929,515 20,681,469 37,312,356
------------ ----------- -----------
OPERATING EXPENSES:
Cost of sales:
Food................................ 243,100 197,952 1,349,674
Beverage............................ 52,920 61,060 448,900
Other operated departments.......... 117,816 111,360 319,256
------------ ----------- -----------
Total cost of sales................... 413,836 370,372 2,117,830
Payroll and related expenses.......... 4,649,422 5,249,580 14,610,109
Provision for operating equipment..... 53,872 11,442 200,194
Other operating expenses.............. 628,666 660,027 3,107,957
------------ ----------- -----------
5,745,796 6,291,421 20,036,090
------------ ----------- -----------
Gross operating income.................. 4,183,719 14,390,048 17,276,266
------------ ----------- -----------
DEDUCTIONS FROM GROSS OPERATING INCOME:
General and administrative expenses... 2,384,134 2,620,586 3,209,525
Marketing expenses.................... 912,620 915,555 1,511,754
Property operation, maintenance and
energy costs......................... 6,111,606 2,896,632 4,683,992
Basic management fee (Note 2)......... -- -- 363,731
------------ ----------- -----------
9,408,360 6,432,773 9,769,002
------------ ----------- -----------
Gross operating (loss)/profit........... (5,224,641) 7,957,275 7,507,264
------------ ----------- -----------
OTHER DEDUCTIONS/(INCOME):
Real estate taxes (Note 5)............ 1,707,696 2,620,758 2,981,785
(Credit)/provision for replacement of
furniture,
fixtures and equipment (Note 4)....... (809,005) 1,843,078 1,865,618
(Credit)/provision for capital
expenditures (Note 4)................ (207,022) 413,837 373,124
Insurance............................. 319,332 41,694 49,888
Pre-opening and other business
restoration costs.................... 5,234,869 -- --
Interest expense...................... 1,447,900 1,094,213 300,000
Other................................. 317,935 360,785 452,150
------------ ----------- -----------
8,011,705 6,374,365 6,022,565
------------ ----------- -----------
Excess of (expenses over
revenues)/revenues over expenses....... $(13,236,346) $ 1,582,910 $ 1,484,699
============ =========== ===========
</TABLE>
- --------
* Reclassified and restated to conform with 1994 presentation. (See Note 1)
See accompanying notes.
5
<PAGE>
NEW YORK VISTA
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------------
1994 1993* 1992*
------------ ----------- ----------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Excess of (expenses over
revenues)/revenues over expenses...... $(13,236,346) $ 1,582,910 $1,484,699
Adjustments to reconcile excess of
(expenses over revenues)/revenues over
expenses to net cash (used
in)/provided by operating activities:
(Credit)/provision for replacement of
furniture, fixtures and equipment
and capital expenditures............ (1,016,027) 2,256,915 2,238,742
Expenses payable to Port Authority... 2,187,767 2,838,202 --
Interest expense..................... 1,447,900 1,094,213 300,000
Changes in operating assets and lia-
bilities:
Accounts receivable, net........... (1,021,677) 2,975,216 (676,810)
Insurance claim receivable......... (4,089,804) (6,525,610) --
Inventories........................ (244,792) (42,377) (49,254)
Prepaid expenses and other assets.. (15,178) 28,764 (7,664)
Accounts payable................... 1,662,032 87,340 (919,814)
Accrued liabilities................ 823,807 (1,277,350) (111,191)
Due to other affiliated companies.. 294,968 -- --
------------ ----------- ----------
Net cash (used in)/provided by operat-
ing activities........................ (13,207,350) 3,018,223 2,258,708
------------ ----------- ----------
INVESTING ACTIVITIES
Transfer of funds from/(to) restricted
cash.................................. 1,790,218 (609,362) (2,207,972)
------------ ----------- ----------
FINANCING ACTIVITIES
Advances from Port Authority, net...... 13,761,490 -- --
Hotel renovation payments.............. (3,892,608) (1,028,327) --
Other payments on behalf of Port Au-
thority............................... (1,294,035) (60,272) (909,764)
(Payments to)/advances from Inhil Co.,
Inc................................... (60,560) 1,028,327 --
------------ ----------- ----------
Net cash provided by/(used in) financ-
ing activities........................ 8,514,287 (60,272) (909,764)
------------ ----------- ----------
Net (decrease)/increase in cash........ (2,902,845) 2,348,589 (859,028)
Cash at beginning of year.............. 3,216,248 867,659 1,726,687
------------ ----------- ----------
Cash at end of year.................... $ 313,403 $ 3,216,248 $ 867,659
============ =========== ==========
</TABLE>
- --------
* Reclassified and restated to conform with 1994 presentation. (See Note 1)
See accompanying notes.
6
<PAGE>
NEW YORK VISTA
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1994
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization
New York Vista ("Vista"), the hotel located in the World Trade Center in New
York City, is a facility of The Port Authority of New York and New Jersey (the
"Port Authority"). Significant asset and liability accounts related to Vista
are recorded on the books of the Port Authority and, accordingly, are not
reflected on Vista's financial statements (such amounts relate principally to
property, furnishings and mortgage). Vista is operated by Inhil Co., Inc.
("Inhilco"), a wholly owned subsidiary of Hilton International Co. ("Hilton"),
under a management agreement ("Management Agreement").
Vista has no separate legal status or existence. Vista's assets are legally
available for the satisfaction of debts of the Port Authority and not solely
those appearing on the accompanying statements of assets and liabilities, as
its debts may result in claims against assets not appearing thereon.
On February 26, 1993, an explosion caused damage to the structure and
interior of the Vista, as well as the adjoining World Trade Center complex. As
a result of the damage, all hotel operations were suspended as of that date.
Certain limited hotel operations resumed on November 1, 1994.
Inventories
Inventories are stated at the lower of cost (first-in, first-out basis) or
market.
Furniture, Fixtures and Equipment
In accordance with the Management Agreement, annual charges to operations
are made for the replacement of furniture, fixtures and equipment.
Expenditures for the replacement of furniture, fixtures and equipment are
charged to the related reserve (see Note 4).
Operating Equipment
The cost of operating equipment, consisting primarily of linen, silverware
and other utensils, is charged in full to operating expenses when purchased.
Income Taxes
Provisions for Federal, state or local income taxes are not reflected in the
accompanying financial statements since the Port Authority is a nontaxable
entity.
Preopening and Other Business Restoration Costs
Preopening and other business restoration costs, which primarily consists of
contract labor and other clean-up costs as well as employee payroll, employee
training expense and marketing expenses incurred in connection with Vista's
resumption of operations, were charged to expense as incurred.
Pension Plans
Certain nonunion employees of Vista are covered by a noncontributory defined
benefit pension plan of Hilton, which provides for normal retirement at age 65
after a minimum of five years' service. Hilton may
7
<PAGE>
NEW YORK VISTA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
terminate the plan at any time. Union employees are covered by a
noncontributory pension plan under their union contract.
Reclassification and Restatement
Certain December 31, 1993 and 1992 amounts have been reclassified to conform
to the December 31, 1994 presentation. The statement of revenues and expenses
for the year ended December 31, 1993 and 1992 has been restated to remove rent
of $1,349,276 and $2,278,696, respectively, which was previously indicated as
to be received from the Port Authority and to include interest expense of
$1,094,213 and $300,000, respectively, in connection with the loan payable,
Inhil Co., Inc. Such amounts were previously included in the difference
between assets and liabilities representing amount due from The Port Authority
of New York and New Jersey on the statement of assets and liabilities as of
December 31, 1993 and 1992 and, accordingly, such amount does not change as a
result of the restatement:
<TABLE>
<CAPTION>
1993 1992
----------- -----------
<S> <C> <C>
Excess of revenues over expenses for the years
ended December 31, 1993 and 1992 as originally
reported......................................... $ 4,026,399 $ 4,063,395
Removal of rent credit from Port Authority........ (1,349,276) (2,278,696)
Inclusion of interest expense..................... (1,094,213) (300,000)
----------- -----------
Excess of revenues over expenses for the years
ended December 31, 1993 and 1992 as restated..... $ 1,582,910 $ 1,484,699
=========== ===========
</TABLE>
2. MANAGEMENT AGREEMENT
Vista is managed by Inhilco under the terms of an amended Management
Agreement which, among other matters, provides (i) for payment to Inhilco,
under certain circumstances, of a management fee equal to 3% of revenues, as
defined, and an incentive fee based on a formula, as provided, and (ii) for
the refurbishment of the guest rooms over a three-year period which commenced
in May 1992 at a cost not to exceed $17,600,000. Under the agreement, Inhilco
is required to finance the first $15,000,000 of refurbishment costs.
Refurbishment costs in excess of $15,000,000 are to be funded by the reserves
for capital expenditures and replacement of furniture, fixtures and equipment
to the extent such funds are available. Interest expense on amounts advanced
by Inhilco accrues at 10% per annum. The amount payable to Inhilco in
connection with the refurbishment, including accrued interest with respect
thereto, which is reflected as loan payable, Inhil Co., Inc. in the
accompanying balance sheet, includes the following:
Loan payable, Inhil Co., Inc.
<TABLE>
<CAPTION>
AGGREGATE
YEAR ENDED DECEMBER 31 THROUGH
------------------------ DECEMBER 31,
1994 1993 1994
----------- ----------- ------------
<S> <C> <C> <C>
Balance at beginning of year.... $14,565,987 $ 8,558,123 $ --
Expenditures by Inhil Co., Inc.
for hotel renovation........... 858,348 5,223,637 13,740,124
Increase/(decrease) in year-end
accrual........................ (35,185) (309,986) 265,551
Interest........................ 1,447,900 1,094,213 2,831,375
----------- ----------- -----------
$16,837,050 $14,565,987 $16,837,050
=========== =========== ===========
</TABLE>
For the period subsequent to the commencement of refurbishment (May 1992),
Vista is required to expend revenue proceeds, as defined, in the following
priority: (i) the payment of operating expenses, as defined, (ii) the funding
of the reserves for furniture, fixtures and equipment and capital
expenditures, (iii) the payment of current
8
<PAGE>
NEW YORK VISTA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
and past due debt service on a certain mortgage payable, (iv) the payment of
current and past due interest on amounts advanced by Inhilco during the
refurbishment period and, after the refurbishment period, the payment of
current and past due principal and interest on amounts advanced by Inhilco
amortized at 10% per annum over 7 years, (v) the payment of past due and
current management fees and (vi) the payment of the incentive fee.
The repayment period with respect to principal and interest on amounts
advanced by Inhilco is based on a 7 year amortization period, but it will be
extended for as long as necessary for Inhilco to recover such amounts.
However, if the repayment period extends beyond 7 years, additional interest
will not accrue. With respect to the management fee, any portion of a
management fee not payable to Inhilco from revenue proceeds in the current or
four subsequent years is forfeited. With respect to the incentive fee, such
fee will commence the later of May 1, 2002 or the date of final repayment of
amounts advanced by Inhilco. There is no carryforward of unpaid incentive fee.
The management fee commenced January 1, 1992. For the period prior to the
commencement of refurbishment, January 1, 1992 through April 30, 1992,
management fee expense approximated $364,000. However, since any portion of a
management fee not payable to Inhilco from revenue proceeds in the current or
four subsequent years is forfeited, no management fee expense was recognized
for any periods between May 1, 1992 through December 31, 1994 as during such
periods revenue proceeds were insufficient to require payment of such fee. The
management fee attributable to such periods, approximately $300,000 (1994),
$620,000 (1993) and $800,000 (1992), will be recognized as expense at such
time as payment is probable.
The Management Agreement expires in March 2021. The Port Authority is
required to either extend the Management Agreement for a single 20-year period
or offer a certain lease agreement to Inhilco for such 20-year period in lieu
of the Management Agreement.
In addition, Vista has agreed to perform and finance certain additional
hotel construction. Vista shall be reimbursed the cost of such additional
construction by the Port Authority upon its completion. Amounts due Vista in
connection with such additional construction, which are included in the
difference between assets and liabilities representing the amount due from the
Port Authority, are as follows:
<TABLE>
<CAPTION>
AGGREGATE
YEAR ENDED DECEMBER 31 THROUGH
----------------------- DECEMBER
1994 1993 31, 1994
----------- ----------- ----------
<S> <C> <C> <C>
Balance at beginning of year............ $ 1,057,932 $ -- $ --
Expenditures for hotel renovation (Port
Authority)............................. 3,892,608 1,028,327 4,920,935
Increase/(decrease) in year-end accru-
al..................................... 1,170,579 29,605 1,200,184
----------- ----------- ----------
5,063,187 1,057,932 6,121,119
----------- ----------- ----------
$ 6,121,119 $1,057,932 $6,121,119
=========== =========== ==========
</TABLE>
3. RELATED PARTY TRANSACTIONS
Hilton
Hilton and various of its subsidiaries charge Vista for certain advertising,
promotion, purchasing and other services which they perform on behalf of
Vista. Such charges, which are billed as agreed upon by the various parties,
totaled approximately $200,000, $355,000 and $1,245,000 for the years ended
December 31, 1994, 1993 and 1992, respectively.
9
<PAGE>
NEW YORK VISTA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
Port Authority
The amount indicated on the accompanying balance sheet as the difference
between assets and liabilities representing the amount due from the Port
Authority includes the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------
1994 1993
------------ ------------
<S> <C> <C>
Balance at beginning of year................... $(10,343,355) $ (8,773,349)
Excess of (expenses over revenues)/revenues
over expenses................................. (13,236,346) 1,582,910
Renovation costs incurred by Inhil Co., Inc. on
behalf of Port Authority...................... (823,163) (4,913,651)
Renovation costs incurred by Vista on behalf of
Port Authority................................ (5,063,187) (1,057,932)
Expenses payable to Port Authority............. 2,187,767 2,838,202
Advances from Port Authority, net.............. 13,761,490 --
Other payments on behalf of Port Authority..... (3,871,598) (60,272)
Interest earned on restricted cash account
payable to Port Authority..................... 63,000 40,737
------------ ------------
Balance at end of year......................... $(17,325,392) $(10,343,355)
============ ============
</TABLE>
4. RESERVES FOR REPLACEMENT OF FURNITURE, FIXTURES AND EQUIPMENT AND CAPITAL
EXPENDITURES
The Management Agreement requires annual charges to operations to provide
for the replacement of furniture, fixtures and equipment. The annual charge is
equivalent to 5% of gross revenues, to the extent revenues exceed expenses.
The Management Agreement also requires that beginning January 1, 1992 the
following percentages of gross revenue, to the extent revenues exceed
expenses, be charged to operations for capital expenditures: 1% for the first
three years; 1.5% for the next five years; and 2% for the following years
until termination of the agreement.
Due to the suspension of operations resulting from the explosion in February
1993, the above provisions for 1993 are based on actual revenue through
February 26, 1993 and, for the subsequent period, Vista's operating budget for
such period and related business interruption insurance claim. For 1994, the
credit reflects the reduction to the 1993 provisions to record the effect of
the reimbursement offered by the insurance carrier.
10
<PAGE>
NEW YORK VISTA
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
The Management Agreement requires that beginning January 1, 1992 cash from
the operating account equal to the above provisions be deposited by Vista into
a segregated interest bearing bank account. The funds, including interest
earned thereon, shall be used by Vista to pay for capital expenditures,
replacements of furniture, fixtures and equipment and certain refurbishment
costs (see Note 2). As of December 31, 1994 and 1993, unfunded restricted cash
was approximately $3,047,000 and $2,335,000, respectively. Interest earned on
the restricted cash account is reflected as a payable to the Port Authority
and is included with amounts due (from)/to the Port Authority (see Note 3).
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------
1994 1993
------------ -----------
<S> <C> <C>
RESTRICTED CASH
Balance at beginning of year.................... $ 2,781,953 $ 2,207,972
Purchases..................................... (733,089) (76,118)
Interest income............................... 63,000 40,737
Transfer (to)/from operating account, net..... (1,790,218) 609,362
------------ -----------
Balance at end of year.......................... $ 321,646 $ 2,781,953
============ ===========
RESERVE FOR REPLACEMENT FOR FURNITURE, FIXTURES
AND EQUIPMENT AND FOR CAPITAL EXPENDITURES
Balance at beginning of year.................... $ 5,117,370 $ 2,936,573
(Credit)/provision............................ (1,016,027) 2,256,915
Purchases..................................... (733,089) (76,118)
------------ -----------
Balance at end of year.......................... $ 3,368,254 $ 5,117,370
============ ===========
</TABLE>
5. REAL ESTATE TAXES
Vista accrues for payments in lieu of real estate taxes to the Port
Authority based upon space occupied by Vista in the World Trade Center. The
hotel is currently disputing the expense attributable to the years ended
December 31, 1994 and 1993.
6. PENSION PLANS
Certain nonunion employees of Vista are covered by a defined benefit
noncontributory pension plan of Hilton, which provides for normal retirement
at age 65 after a minimum of five years' service. Hilton may terminate the
Plan at any time. Unfunded past service costs are amortized over thirty years.
Vista's policy is to fund pension costs accrued, subject to full funding
limitations under the Employee Retirement Income Security Act of 1974. The
assets of the Plan are invested primarily in listed stocks and bonds.
Vista had not obtained actuarial information for the nonunion plan regarding
pension expense for the years ended December 31, 1994, 1993 and 1992 and the
minimum liability, if any, for the unfunded accumulated benefit obligation
over plan assets. Management estimated the minimum liability for unfunded
accumulated benefit obligations and pension costs but was unable to provide
the financial statement disclosure required under Financial Accounting
Standards Board Statement No. 87, "Employers' Accounting for Pensions."
Because of the termination of the Management Agreement (see Note 8), Hilton
obtained the requisite actuarial information in January 1996. Such actuarial
information indicated that the minimum liability for unfunded accumulated
benefit obligations over plan assets was not understated and, accordingly, no
adjustments were necessary in 1994, 1993 and 1992 for the financial statements
to conform with generally accepted accounting principles. In January
11
<PAGE>
NEW YORK VISTA
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
1996, Hilton subsequently paid the participants and terminated the Company's
portion of the plan. The total pension expense for 1994, 1993 and 1992 was
approximately $75,000 and $19,000 and $125,000 respectively. Vista makes
annual contributions to the plan equal to the amount accrued for pension
expense. The pension liability approximated $0, $138,000 and $335,000 for the
years ended December 31, 1994, 1993 and 1992, respectively.
Vista, under a Collective Bargaining Agreement with the New York Hotel and
Motel Trade Council AFL-CIO, makes contributions into a multi-employer pension
plan. This plan provides defined benefits to union employees. Pension expense
for this plan for the years ended December 31, 1994, 1993 and 1992 was
approximately $77,000, $117,000 and $513,000, respectively.
7. CONTINGENCIES
During 1993 and 1994, Vista filed insurance claims with its business
interruption insurance carrier requesting reimbursement of damages incurred as
a result of an explosion in February 1993. Other income includes approximately
$5,800,000 (1994) and $15,800,000 (1993) in connection with such insurance
claims. The 1993 financial statements reflect as income the reimbursement
requested for 1993. The 1994 financial statements reflect as income the total
reimbursement offered by the insurance carrier net of the insurance claims
reflected as income in 1993 and amounts applicable to 1995. During 1995, the
claim was settled with the insurance carrier at the total reimbursement
previously offered.
Inhilco has filed a claim against a vendor alleging that damage to the glass
and aluminum facade of Vista resulted from cleaning work performed by such
vendor. The Port Authority has advised Inhilco that if Vista is unable to
recover sufficient amounts from such vendor or the insurer of the hotel to
make the necessary repairs, it would seek to hold Inhilco responsible for the
cost. Inhilco believes it has defenses available to it in the event that such
a claim would be asserted by the Port Authority. Under the terms of the
terminated Management Agreement (see Note 8), Inhilco was released from any
obligation and claims to the Port Authority if the Vista is unable to recover
sufficient amounts from the vendor.
Vista has been named as a defendant in a legal proceeding arising out of a
labor dispute. The management of Vista believes that the ultimate resolution
of such litigation will not have a material adverse effect on Vista's
financial condition.
8. SUBSEQUENT EVENTS
Inhilco terminated their Management Agreement of the Vista with the Port
Authority effective August 31, 1995. This termination also releases and
discharges Inhilco from any obligations and claims. Under the terms of the
terminated Management Agreement, the Port Authority has the right to be
reimbursed by Inhilco for losses sustained greater than $340,000, within six
months after the termination date, as a result of the breach of certain
representations made by Inhilco.
12
<PAGE>
NEW YORK VISTA
STATEMENT OF REVENUES AND EXPENSES
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
JANUARY 1 THROUGH
DECEMBER 22,
-------------------------
1995 1994
----------- ------------
<S> <C> <C>
OPERATING REVENUES:
Rooms............................................. $27,420,727 $ 2,692,164
Food.............................................. 5,791,832 854,246
Beverage.......................................... 2,191,179 342,000
Other operated departments........................ 1,448,366 110,523
Other income...................................... 2,516,396 5,930,582
----------- ------------
39,368,500 9,929,515
----------- ------------
OPERATING EXPENSES:
Cost of sales:
Food............................................ 1,558,271 243,100
Beverage........................................ 447,141 52,920
Other operated departments...................... 470,169 117,816
----------- ------------
Total cost of sales............................... 2,475,581 413,836
Payroll and related expenses...................... 15,095,536 4,649,422
Provision for operating equipment................. 146,229 53,872
Other operating expenses.......................... 2,804,891 628,666
----------- ------------
20,522,237 5,745,796
----------- ------------
Gross operating income.............................. 18,846,263 4,183,719
----------- ------------
DEDUCTIONS FROM GROSS OPERATING INCOME:
General and administrative expenses............... 5,729,986 2,384,134
Marketing expenses................................ 2,587,313 912,620
Property operation, maintenance and energy costs.. 7,370,729 6,111,606
Basic Management Fee.............................. 201,577 --
----------- ------------
15,889,605 9,408,360
----------- ------------
Gross operating loss................................ 2,956,658 (5,224,641)
----------- ------------
OTHER DEDUCTIONS/(INCOME):
Real estate taxes ................................ 2,032,501 1,707,696
Credit for replacement of furniture, fixtures and
equipment........................................ -- (809,005)
Credit for capital expenditures................... (1,563,371) (207,022)
Insurance......................................... 282,053 319,332
Pre-opening and other business restoration costs.. 1,589,741 5,234,869
Interest expense.................................. 715,425 1,447,900
Other............................................. 381,520 317,935
----------- ------------
3,437,869 8,011,705
----------- ------------
Excess of expenses over revenues.................... $ (481,211) $(13,236,346)
=========== ============
</TABLE>
See accompanying notes.
13
<PAGE>
NEW YORK VISTA
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE PERIOD FROM
JANUARY 1 THROUGH
DECEMBER 22,
-------------------------
1995 1994
----------- ------------
<S> <C> <C>
OPERATING ACTIVITIES
Excess of (expenses over revenues)/revenues over ex-
penses............................................. $ (481,211) $(13,236,346)
Adjustments to reconcile excess of (expenses over
revenues)/revenues over expenses to net cash (used
in)/provided by operating activities:
(Credit)/provision for replacement of furniture,
fixtures and equipment and capital expenditures.. (1,563,371) (1,016,027)
Expenses payable to Port Authority................ 3,009,594 2,187,767
Interest expense.................................. -- 1,447,900
Changes in operating assets and liabilities:
Accounts receivable, net........................ (2,263,237) (1,021,677)
Insurance claim receivable...................... 10,405,062 (4,089,804)
Inventories..................................... 371,646 (244,792)
Prepaid expenses and other assets............... 15,410 (15,178)
Accounts payable................................ (2,889,176) 1,662,032
Accrued liabilities............................. (983,448) 823,807
Due to other affiliated companies............... (382,444) 294,968
Deferred revenue................................ (2,367,211) --
----------- ------------
Net cash (used in)/provided by operating activi-
ties............................................... 2,871,614 (13,207,350)
----------- ------------
INVESTING ACTIVITIES
Transfer of funds from/(to) restricted cash......... 103,355 1,790,218
----------- ------------
FINANCING ACTIVITIES
Advances from Port Authority, net................... 50,380,298 13,761,490
Hotel renovation payments........................... (5,781,322) (3,892,608)
Other payments on behalf of Port Authority.......... (22,336,381) (1,294,035)
(Payments to)/advances from Inhil Co., Inc.......... (24,308,708) (60,560)
----------- ------------
Net cash provided by/(used in) financing activi-
ties............................................... (2,046,113) 8,514,287
----------- ------------
Net (decrease)/increase in cash..................... 928,856 (2,902,845)
Cash at beginning of year........................... 313,403 3,216,248
----------- ------------
Cash at end of year................................. $ 1,242,259 $ 313,403
=========== ============
</TABLE>
- --------
See accompanying notes.
14
<PAGE>
NEW YORK VISTA
NOTES TO FINANCIAL STATEMENTS--(UNAUDITED)
1. The accompanying combined financial statements of the New York Vista
Hotel (the "Vista") 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 Vista 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 years ended December 31, 1994, 1993 and 1992 included elsewhere herein.
In the opinion of the Vista, the accompanying unaudited financial statements
reflect all adjustments (which include only normal recurring adjustments)
necessary to present fairly the results of operations and cash flows for the
period from January 1, 1995 through December 22, 1995 and the period from
January 1, 1994 through December 22, 1994. Interim results are not necessarily
indicative of fiscal year performance because of the impact of seasonal and
short-term variations.
15
