<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K/A
(Amendment No. 1)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) May 7, 1996
WINSTON HOTELS, INC.
(Exact name of registrant as specified in its charter)
NORTH CAROLINA 0-23732 56-1872141
(State or other jurisdiction (Commission File No.) (I.R.S. Employer
of incorporation) Identification Number)
2209 CENTURY DRIVE, SUITE 300, RALEIGH, NORTH CAROLINA 27612
(Address of principal executive offices)
(919) 510-6010
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
================================================================================
<PAGE> 2
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(a)(i) The following audited financial statements of properties
acquired and described in Item 2 are incorporated by reference
to pages F-33 through F-41 of Amendment No. 1 to the Company's
Registration Statement on Form S-3 (Registration No. 333-3986)
filed with the Securities and Exchange Commission on May 31,
1996. Copies of the financial statements are contained in
Exhibit 99.1 attached hereto.
Impac Acquisition Hotels
------------------------
Report of Independent Accountants
Combined Balance Sheet as of December 31, 1995;
Combined Statement of Income for the Year Ended December 31,
1995; Combined Statement of Equity for the Year Ended December
31, 1995; Combined Statement of Cash Flows for the Year Ended
December 31, 1995; Notes to Combined Financial Statements
(ii) The following unaudited financial statements of properties
acquired and described in Item 2 are incorporated by reference
to pages F-33 through F-41 of Amendment No. 1 to the Company's
Registration Statement on Form S-3 (Registration No. 333-3986)
filed with the Securities and Exchange Commission on May 31,
1996. Copies of the financial statements are contained in
Exhibit 99.1 attached hereto.
Impac Acquisition Hotels
------------------------
Report of Independent Accountants
Combined Balance Sheet as of March 31, 1996;
Combined Statement of Income for the Three Months Ended March
31, 1996; Combined Statement of Equity for the Three Months
Ended March 31, 1996; Combined Statement of Cash Flows for the
Three Months Ended March 31, 1996; Notes to Combined Financial
Statements
(b) The following unaudited pro forma financial statements
prescribed by Article 11 of Regulation S-X for both Winston
Hotels, Inc. and Winston Hospitality, Inc. are included with
this report.
Pro Forma Consolidated Statements of Income For the Year Ended
December 31, 1995 and the Three Months Ended March 31, 1996;
Pro Forma Consolidated Balance Sheet as of March 31, 1996
(Winston Hotels, Inc. only)
(c) The following exhibits required by Item 601 of Regulation S-K
are listed below:
Exhibit 10.6 Agreement of Purchase and Sale, dated
February 1, 1996, among WINN Limited
Partnership, Dallas Lodging Associates, Inc.,
A.B. Lodging Associates, Inc., London Lodging
Associates and Duncanville Lodging
Associates, I, Ltd. incorporated by
reference to Exhibit 10.6 filed with the
Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996 as filed
with the Securities and Exchange Commission
on May 14, 1996
Exhibit 23.1 Consent of Coopers & Lybrand LLP
Exhibit 99.1 Copies of the audited financial statements of
properties acquired and described in Item 2
hereof as of and for the year ended December
31, 1995 and the unaudited financial
statements as of and for the three months
ended March 31, 1996 incorporated by reference
to pages F-33 through F-41 of the Company's
Amendment No. 1 to the Registration Statement
on Form S-3 (Registration No. 333-3986) filed
with the Securities and Exchange Commission on
May 31, 1996.
-2-
<PAGE> 3
WINSTON HOTELS, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
AND THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
(in thousands except per share data)
These unaudited pro forma Consolidated Statements of Income are
presented as if (i) the acquisition of the Current Hotels (as defined in
Amendment No. 1 to the Registration Statement on Form S-3 filed on May 31,
1996) not owned on January 1, 1995, (ii) the acquisition of the Operating
Hotels (as defined in footnote (B)) which include the five hotel properties
consummated on May 6, 1996 and May 7, 1996 (described in Item 2 and Item 5 of
Form 8-K filed on May 22, 1996) and the acquisition of Homewood Suites, Cary,
NC consummated on July 9, 1996, (iii) the acquisition of the Other Hotels (as
described in footnote (B)) which include four hotel properties expected to be
consummated in the third quarter of 1996, (iv) the consummation of the
Follow-on Offering (the Company's 2,700,000 share second primary public
offering of Common Stock), the Private Placement (the unregistered sale of $3.0
million in Common Stock from the Company to Promus Hotels, Inc.) and the
Offering (the Company's 5,000,000 share public offering of Common Stock,
including the 750,000 shares sold under the Underwriters' overallotment
option), (v) the application of the proceeds therefrom and (vi) the effective
date for the Percentage Leases and the proposed Percentage Leases for such
hotels had occurred as of the beginning of each of the periods presented.
These unaudited pro forma Consolidated Statements of Income are not
necessarily indicative of what actual results of operations of the Company
would have been assuming such transactions had been completed as of the
beginning of each of the periods presented, nor does it purport to represent
the results of operations for future periods.
If the acquisition of the Other Hotels does not occur, the maximum
variance in these unaudited pro forma Consolidated Statements of Income for the
year ended December 31, 1995 and the three months ended March 31, 1996 would be
(i) a decrease in total revenue of $2,164 and $668, respectively, to $25,734
and $6,104, respectively, (ii) an increase in net income applicable to common
shareholders of $1,659 and $310, respectively, to $13,861 and $2,906,
respectively, and (iii) an increase in net income per common share of $0.10 and
$0.02, respectively, to $0.87 and $0.18, respectively.
-3-
<PAGE> 4
WINSTON HOTELS, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME -- (CONTINUED)
<TABLE>
<CAPTION>
PRO FORMA FOR THE YEAR ENDED DECEMBER 31, 1995
---------------------------------------------------------------------------
REVISED
HISTORICAL ACQUISITION HOTELS CURRENT
YEAR ENDED REVISED ---------------------- HOTELS AND
DECEMBER 31, CURRENT PRO FORMA CURRENT OPERATING OTHER ACQUISITION
1995 HOTELS(A) ADJUSTMENTS(A) HOTELS(A) HOTELS(B) HOTELS(B) HOTELS
------------ --------- -------------- --------- --------- --------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Percentage lease
revenue................. $ 17,148 $19,060 $19,060 $ 6,232(C) $ 2,164(C) $27,456
Interest and other
income.................. 442 442 442 442
------------ --------- --------- --------- --------- -----------
Total revenue......... 17,590 19,502 19,502 6,232 2,164 27,898
------------ --------- --------- --------- --------- -----------
Real estate taxes and
property and casualty
insurance............... 1,054 1,180 1,180 476(D) 374(D) 2,030
General and
administrative.......... 1,208 1,098 $ (57)(E) 1,041 (E) 11(E) 1,052
Interest expense.......... 2,555 2,723 500(F) 3,223 312(F) 219(F) 3,754
Depreciation.............. 3,854 4,552 4,552 1,860(G) 1,197(G) 7,609
Amortization.............. 117 126 126 29(H) 5(H) 160
------------ --------- ------ --------- --------- --------- -----------
Total expenses........ 8,788 9,679 443 10,122 2,677 1,806 14,605
------------ --------- ------ --------- --------- --------- -----------
Income before allocation
to minority interest.... 8,802 9,823 $ (443) $ 9,380 $ 3,555 $ 358 13,293
================ ========== ========== ==========
Income allocation to
minority interest....... 417 414 1,092
------------ --------- -----------
Net income applicable to
common shareholders..... $ 8,385 $ 9,409 $12,201
============= ========== ===========
Net income per common
share(I)................ $ 0.96 $ 0.95 $ 0.77
Weighted average number of
common shares and common
share equivalents....... 9,211 10,339 17,371
</TABLE>
<TABLE>
<CAPTION>
PRO FORMA FOR THE THREE MONTHS ENDED MARCH 31, 1996
----------------------------------------------------------------
HISTORICAL REVISED
THREE MONTHS ACQUISITION HOTELS CURRENT
ENDED REVISED ---------------------- HOTELS AND
MARCH 31, PRO FORMA CURRENT OPERATING OTHER ACQUISITION
1996 ADJUSTMENTS(A) HOTELS(A) HOTELS(B) HOTELS(B) HOTELS
------------- -------------- --------- --------- --------- -----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Percentage lease revenue............ $ 4,540 $ 4,540 $ 1,548(C) $ 668(C) $ 6,756
Interest and other income........... 16 16 16
------------- --------- --------- --------- -----------
Total revenue................... 4,556 4,556 1,548 668 6,772
------------- --------- --------- --------- -----------
Real estate taxes and property and
casualty insurance................ 320 320 127(D) 133(D) 580
General and administrative.......... 424 424 18(E) 12(E) 454
Interest expense.................... 674 $ 119(F) 793 89(F) 57(F) 939
Depreciation........................ 1,167 1,167 465(G) 299(G) 1,931
Amortization........................ 31 31 7(H) 1(H) 39
------------- ------ --------- --------- --------- -----------
Total expenses.................. 2,616 119 2,735 707 502 3,943
------------- ------ --------- --------- --------- -----------
Income before allocation to minority
interest.......................... 1,940 $ (119) $ 1,821 $ 842 $ 166 2,829
================ ========== ========== ==========
Income allocation to minority
interest.......................... 80 232
------------- -----------
Net income applicable to common
shareholders...................... $ 1,860 $ 2,597
============== ===========
Net income per common share(I)...... $ 0.19 $ 0.16
Weighted average number of common
shares and common share
equivalents....................... 10,383 17,361
</TABLE>
-4-
<PAGE> 5
WINSTON HOTELS, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME -- (CONTINUED)
- ---------------
(A) The pro forma Current Hotels information for the year ended December 31,
1995 represents the Current Hotels as if all such hotels had been owned by
the Company and the Partnership since January 1, 1995 as assumed in Note 8
of the Notes to the Consolidated Financial Statements of Winston Hotels,
Inc., which are included in the Prospectus of the Company dated June 21,
1996 as filed with the SEC. The pro forma adjustments reflect the terms of
the New Line for each period presented and the related impact on amounts
payable to Winston Advisors, Inc. for the year ended December 31, 1995.
(B) The Operating Hotels information includes the Acquisition Hotels that had
room revenues for twelve months in 1995 (the four Impac Acquisition Hotels,
the Comfort Inn -- Greenville, South Carolina, and the Homewood Suites,
Cary, North Carolina). The Other Hotels information includes the three
Acquisition Hotels that were not in operation during 1995 and one
Acquisition Hotel that was in operation since September 1995. The Other
Hotels include the Hampton Inn -- Perimeter (Atlanta), Georgia, the Hampton
Inn and Suites -- Gwinnett, Georgia, the Courtyard by Marriott --
Wilmington, North Carolina, and the Homewood Suites -- Clear Lake, Texas.
(C) Represents lease payments calculated on a pro forma basis using the rent
provisions in the proposed Percentage Leases and the historical revenue of
the Operating Hotels for each period presented and one of the Other Hotels
for the three months ended March 31, 1996. Percentage Lease revenue in 1995
for the four Other Hotels represents the Base Rent required under the
proposed Percentage Leases since three hotels had no revenue during 1995
and one hotel had approximately three months of revenue during 1995.
Percentage Lease revenue for three of the Other Hotels in the three months
ended March 31, 1996 represents Base Rent required under the proposed
Percentage Leases for those hotels since two of those hotels had no revenue
during the three months ended March 31, 1996 and one of those hotels had
approximately one month of revenue during the three months ended March 31,
1996. See "Business and Properties -- The Percentage Leases".
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1995
-------------------------------------------------------------
HISTORICAL ROOM PRO FORMA PRO FORMA
AND FOOD AND BASE PERCENTAGE TOTAL
BEVERAGE REVENUE LEASE PAYMENT LEASE PAYMENT LEASE PAYMENT
---------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATING HOTELS:
Hampton Inn, Duncanville (Dallas),
TX.................................. $ 1,370 $ 221 $ 276 $ 497
Comfort Inn, Greenville, SC........... 1,989 309 347 656
Homewood Suites, Cary, NC............. 3,281 1,010 967 1,977
Comfort Suites, London, KY............ 1,050 165 318 483
Holiday Inn Select, Garland (Dallas),
TX.................................. 6,352 1,036 1,048 2,084
Holiday Inn Express,
Abingdon, VA........................ 1,181 187 348 535
---------------- ------------- ------------- -------------
Total Operating Hotels................ 15,223 2,928 3,304 6,232
---------------- ------------- ------------- -------------
OTHER HOTELS:
Homewood Suites,
Clear Lake (Houston), TX............ 320 484 484
Hampton Inn, Perimeter (Atlanta),
GA.................................. 574 574
Hampton Inn & Suites,
Duluth (Atlanta), GA................ 581 581
Courtyard by Marriott,
Wilmington, NC...................... 525 525
---------------- ------------- -------------
Total Other Hotels.................... 320 2,164 2,164
---------------- ------------- -------------
Total Acquisition Hotels.............. $ 15,543 $ 5,092 $ 3,304 $ 8,396
=============== ============ ============ ============
</TABLE>
-5-
<PAGE> 6
WINSTON HOTELS, INC.
PRO FORMA CONSOLIDATED STATEMENTS OF INCOME -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1996
-------------------------------------------------------------
HISTORICAL ROOM PRO FORMA PRO FORMA
AND FOOD AND BASE PERCENTAGE TOTAL
BEVERAGE REVENUE LEASE PAYMENT LEASE PAYMENT LEASE PAYMENT
---------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATING HOTELS:
Hampton Inn, Duncanville (Dallas),
TX.................................. $ 285 $ 55 $ 39 $ 94
Comfort Inn, Greenville, SC........... 484 77 78 155
Homewood Suites, Cary, NC............. 855 252 267 519
Comfort Suites, London, KY............ 219 41 49 90
Holiday Inn Select, Garland (Dallas),
TX.................................. 1,691 259 329 588
Holiday Inn Express,
Abingdon, VA........................ 250 47 55 102
-------- ------------- ------ -------------
Total Operating Hotels................ 3,784 731 817 1,548
-------- ------------- ------ -------------
OTHER HOTELS:
Homewood Suites,
Clear Lake (Houston), TX............ 564 121 127 248
Hampton Inn, Perimeter (Atlanta),
GA.................................. 154 144 144
Hampton Inn & Suites,
Duluth (Atlanta), GA................ 145 145
Courtyard by Marriott,
Wilmington, NC...................... 131 131
-------- ------------- ------ -------------
Total Other Hotels.................... 718 541 127 668
-------- ------------- ------ -------------
Total Acquisition Hotels.............. $4,502 $ 1,272 $ 944 $ 2,216
=============== ============ ============ ============
</TABLE>
(D) Represents real estate taxes and property and casualty insurance to be paid
by the Partnership and the Company.
(E) Represents an estimate for incremental franchise taxes, legal, accounting,
printing and other expenses for each period presented and amounts payable
to Winston Advisors, Inc. under an Advisory Agreement for the year ended
December 31, 1995. The Company became self-advised and self-administered,
and terminated the Advisory Agreement as of December 31, 1995.
(F) Represents interest expense on amounts drawn on the line of credit at 7.5%
applied to the pro forma debt balance assuming this balance remained
constant for each entire period. In addition, pro forma interest expense
includes unused line of credit fees of 0.25%, plus $314 and $78 of
amortization of loan cost and fees, which are amortized over the term of
the New Line, and $145 and $29 of amortization of interest rate cap fees,
for the year ended December 31, 1995 and the three months ended March 31,
1996, respectively.
(G) Represents depreciation of the Acquisition Hotels and renovations thereto,
which is computed based upon useful lives of 30 years for buildings and
improvements and five years for furniture and equipment. These estimated
useful lives are based on management's knowledge of the properties and the
hotel industry in general.
(H) Represents amortization of capitalized franchise fees, which is computed
over a 10 year period.
(I) Net income per common share is computed by dividing income before
allocation to minority interest by the weighted average number of shares of
Common Stock and Common Stock equivalents outstanding for the period.
-6-
<PAGE> 7
WINSTON HOTELS, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1996
(UNAUDITED, IN THOUSANDS)
This unaudited pro forma Consolidated Balance Sheet is presented as if
(i) the acquisition of the five hotel properties consummated on May 6, 1996 and
May 7, 1996 (described in Item 2 and Item 5 of Form 8-K filed on May 22, 1996),
the acquisition of Homewood Suites, Cary, NC consummated on July 9, 1996 and
the acquisition of four hotel properties expected to be consummated in the
third quarter of 1996, (ii) the consummation of the Private Placement (the
unregistered sale of $3.0 million in Common Stock from the Company to Promus
Hotels, Inc.) and the Offering (the Company's 5,000,000 share public offering
of Common Stock, including the 750,000 shares sold under the Underwriters'
overallotment option) and (iii) the application of the proceeds therefrom had
occurred on March 31, 1996.
This unaudited pro forma Consolidated Balance Sheet is not necessarily
indicative of what the actual financial position of the Company would have been
assuming such transactions had been completed as of March 31, 1996, nor does it
purport to represent the future financial position of the Company.
If the acquisition of the Other Hotels does not occur, the maximum
variance in this unaudited pro forma Consolidated Balance Sheet as of March 31,
1996 would be (i) a decrease in net investment in hotel properties of $31,225
to $167,238, (ii) a decrease in due to banks of $28,245 to $13,345, (iii) a
decrease in minority interest in partnership of $2,499 to $10,437 and (iv) a
decrease in additional paid-in capital of $481 to $145,887.
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
---------- ----------- ---------
<S> <C> <C> <C>
ASSETS
Investment in hotel properties..................... $ 124,283 $80,380(A) $ 204,663
Less accumulated depreciation...................... (6,200) -- (6,200)
---------- ----------- ---------
Net investment in hotel properties................. 118,083 80,380 198,463
Cash and cash equivalents.......................... 220 (B) 220
Lease revenue receivable........................... 3,027 3,027
Deferred expenses, net............................. 1,172 351(C) 1,523
Prepaid expenses and other assets.................. 1,471 (1,062)(D) 409
---------- ----------- ---------
$ 123,973 $79,669 $ 203,642
========= ========== =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Due to banks....................................... $ 34,500 $ 7,090(E) $ 41,590
Accounts payable and accrued expenses.............. 1,634 (270)(F) 1,364
Distributions payable.............................. 2,475 2,475
Amounts due to Lessee.............................. 1,457 1,457
Minority interest in Partnership................... 3,527 9,409(G) 12,936
Shareholders' equity:
Common stock..................................... 99 60(H) 159
Additional paid-in capital....................... 82,988 63,380(I) 146,368
Unearned directors' compensation................. (238) (238)
Accumulated deficit.............................. (2,469) (2,469)
---------- ----------- ---------
Total shareholders' equity............... 80,380 63,440 143,820
---------- ----------- ---------
$ 123,973 $79,669 $ 203,642
========= ========== =========
</TABLE>
-7-
<PAGE> 8
WINSTON HOTELS, INC.
PRO FORMA CONSOLIDATED BALANCE SHEET -- (CONTINUED)
- ---------------
(A) Increase reflects purchase prices of the Acquisition Hotels ($72,751), cost
of renovations of the Acquisition Hotels ($6,275), capitalization of
estimated closing costs of the Acquisition Hotels ($734) and acquisition of
vacant land ($620).
(B) Represents assumed net proceeds from the Offering ($58,949 increased by $5
of offering costs paid as of March 31, 1996) and the Private Placement
($3,000) and assumed proceeds from borrowings under the line of credit
($7,090), less cash paid for the Acquisition Hotels ($61,046), less cash
paid for the acquisition of vacant land ($620), less cash paid for
franchise agreements ($75), less the costs of renovations of the Hotels
($6,275), less cash paid for closing costs of the Acquisition Hotels ($623)
and less cash paid for loan fees and costs anticipated to be incurred upon
obtaining an increase in the line of credit from $50 million to $125
million ($400).
(C) Change reflects an increase for the capitalization of franchise fees on the
Hotels ($337) and capitalization of loan fees and costs ($400) and
decreases for the capitalization of deferred acquisition costs ($371) and
deferred registration costs ($15).
(D) Represents a decrease for the capitalization of prepaid escrow against the
purchase prices of the Acquisition Hotels ($800) and franchise fees paid as
of March 31, 1996 ($262).
(E) Represents proceeds from assumed borrowings under the line of credit
($7,090).
(F) Decrease reflects payments of deferred acquisition costs ($260) and
deferred registration costs ($10).
(G) Represents value assigned to Partnership Units exchanged for investment in
hotel properties ($10,905) as adjusted to reflect dilution to the minority
interest in relation to the Company's interest in the Partnership ($1,496).
(H) Increase reflects the par value of Common Stock expected to be sold in the
Offering and Private Placement.
(I) Net increase reflects the gross proceeds from the Offering and the Private
Placement ($66,250) as adjusted to reflect dilution to the minority
interest in relation to the Company's interest in the Partnership ($1,496)
less the par value of the Common Stock issued ($60) and the estimated
expenses of the Offering ($4,306).
-8-
<PAGE> 9
WINSTON HOSPITALITY, INC.
PRO FORMA STATEMENTS OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1995
AND THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED, IN THOUSANDS)
These unaudited pro forma Statements of Income are presented as if (i)
the acquisition by the Partnership of the Current Hotels not owned on January 1,
1995 (as defined in Amendment No. 1 to the Registration Statement on Form S-3
filed on May 31, 1996), the acquisition of the five hotel properties consummated
on May 6, 1996 and May 7, 1996 (described in Item 2 and Item 5 of Form 8-K filed
on May 22, 1996), the acquisition of Homewood Suites, Cary, NC consummated on
July 9, 1996 and the acquisition of four hotel properties expected to be
consummated in the third quarter of 1996, and (ii) the effective date for the
Percentage Leases and the proposed Percentage Leases for such Hotels had
occurred as of the beginning of each of the periods presented. In management's
opinion, all adjustments necessary to reflect the effects of these transactions
have been made.
These unaudited pro forma Statements of Income are not necessarily
indicative of what actual results of operations of the Lessee would have been
assuming such transactions had been completed as of the beginning of each of
the periods presented, nor does it purport to represent the results of
operations for future periods.
If the acquisition of the Other Hotels does not occur, the maximum
variance in these unaudited pro forma Statements of Income for the year ended
December 31, 1995 and the three months ended March 31, 1996 would be (i) a
decrease in total revenue of $328 and $740, respectively, to $61,026 and
$14,907, respectively, and (ii) an increase in net income of $2,169 and $350,
respectively, to $2,012 and $331, respectively.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1995
---------------------------------------------------------------------------------------------------------------
ACQUISITION HOTELS
---------------------------------------------------------------------------------- CURRENT AND
CURRENT OPERATING OPERATING OTHER OTHER ACQUISITION
HOTELS HOTELS PRO FORMA HOTELS HOTELS PRO FORMA HOTELS HOTELS
PRO FORMA(A) HISTORICAL(B) ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA PRO FORMA
------------ ------------- ----------- --------- ---------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Room revenue..... $ 44,131 $13,159 $13,159 $ 320 $ 320 $57,610
Food and beverage
revenue........ 2,064 2,064 2,064
Other revenue,
net............ 1,208 476 $ (12)(C) 464 8 8 1,680
------------ ------------- ----------- --------- ---------- --------- -----------
45,339 15,699 (12) 15,687 328 328 61,354
------------ ------------- ----------- --------- ---------- --------- -----------
EXPENSES
Property and
operating
expenses....... 16,181 7,291 (141)(D) 7,150 179 179 23,510
Repairs and
maintenance.... 1,870 669 669 25 25 2,564
General and
administrative... 1,526 150(E) 150 100(E) 100 1,776
Franchise
costs.......... 3,967 917 917 10 16(F) 26 4,910
Real estate taxes
and property
and casualty
insurance...... 476 (476)(G) 80 (80)(G)
Management
fees........... 960 388 (56)(H) 332 3(H) 3 1,295
Interest
expense........ 1,724 (1,724)(I)
Depreciation and
amortization... 1,675 (1,675)(J) 474 (474)(J)
Percentage lease
payments....... 19,060 6,232(K) 6,232 2,164(K) 2,164 27,456
------------ ------------- ----------- --------- ---------- ----------- --------- -----------
Total expenses... 43,564 13,140 2,310 15,450 768 1,729 2,497 61,511
------------ ------------- ----------- --------- ---------- ----------- --------- -----------
Net income (loss)
(L)............ $ 1,775 $ 2,559 $(2,322) $ 237 $ (440) $(1,729) $(2,169) $ (157)
============ =========== =========== ========= ======== =========== ========= ==========
</TABLE>
-9-
<PAGE> 10
WINSTON HOSPITALITY, INC.
PRO FORMA STATEMENTS OF INCOME -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1996
-------------------------------------------------------------------------------------------------------------
ACQUISITION HOTELS
---------------------------------------------------------------------------------- CURRENT AND
CURRENT OPERATING OPERATING OTHER OTHER ACQUISITION
HOTELS HOTELS PRO FORMA HOTELS HOTELS PRO FORMA HOTELS HOTELS
HISTORICAL HISTORICAL(B) ADJUSTMENTS PRO FORMA HISTORICAL ADJUSTMENTS PRO FORMA PRO FORMA
---------- ------------- ----------- --------- ---------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
REVENUES
Room revenue....... $ 10,709 $ 3,260 $ 3,260 $718 $ 718 $14,687
Food and beverage
revenue.......... 308 524 524 832
Other revenue,
net.............. 19 87 87 22 22 128
---------- ------------- --------- ----- --------- -----------
11,036 3,871 3,871 740 740 15,647
---------- ------------- --------- ----- --------- -----------
EXPENSES
Property and
operating
expenses......... 4,015 1,815 $ (70)(D) 1,745 260 260 6,020
Repairs and
maintenance...... 524 153 153 29 29 706
General and
administrative... 484 36(E) 36 $ 24(E) 24 544
Franchise costs.... 905 223 223 34 25(F) 59 1,187
Real estate taxes
and property and
casualty
insurance........ 127 (127)(G) 64 (64)(G)
Management fees.... 316 92 (5)(H) 87 50(H) 50 453
Interest expense... 401 (401)(I) 50 (50)(I)
Depreciation and
amortization..... 429 (429)(J) 129 (129)(J)
Percentage lease
payments......... 4,540 1,548(K) 1,548 668(K) 668 6,756
---------- ------------- ----------- --------- ----- ----------- --------- -----------
Total expenses..... 10,784 3,240 552 3,792 566 524 1,090 15,666
---------- ------------- ----------- --------- ----- ----------- --------- -----------
Net income (loss)
(L).............. $ 252 $ 631 $ (552) $ 79 $174 $(524) $ (350) $ (19)
======== =========== =========== ========= ======== =========== ========= ==========
</TABLE>
-10-
<PAGE> 11
WINSTON HOSPITALITY, INC.
PRO FORMA STATEMENTS OF INCOME -- (CONTINUED)
- ---------------
(A) Represents the Current Hotels as if they had been leased by the Lessee
since January 1, 1995. See Note 4 to the financial statements of Winston
Hospitality, Inc. in the Prospectus dated June 21, 1996 as filed with the
SEC.
(B) Represents the historical operations for the year ended December 31, 1995
and the three months ended March 31, 1996 for the Impac Acquisition Hotels
and Cary Suites, Inc. which have been derived from the historical financial
statements included elsewhere in the Prospectus, and Comfort Inn,
Greenville, SC which have been derived from unaudited historical financial
statements provided by management of the hotel.
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 31, 1995
-------------------------------------------------------
IMPAC
ACQUISITION CARY OPERATING
HOTELS SUITES, INC. COMFORT INN HOTELS
----------- ------------ GREENVILLE, SC HISTORICAL
-------------- ---------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE
Room revenue............................ $ 8,006 $3,164 $1,989 $13,159
Food and beverage revenue............... 1,947 117 0 2,064
Other revenue, net...................... 411 24 41 476
----------- ------------ -------------- ---------
Total revenue 10,364 3,305 2,030 15,699
----------- ------------ -------------- ---------
EXPENSES
Property operating expenses............. 5,372 959 960 7,291
Repairs and maintenance................. 415 143 111 669
Franchise costs......................... 659 118 140 917
Real estate taxes and property and
casualty insurance.................... 299 98 79 476
Management fees......................... 303 0 85 388
Interest expense........................ 1,089 629 6 1,724
Depreciation and amortization........... 1,131 423 121 1,675
----------- ------------ -------------- ---------
Total expenses.......................... 9,268 2,370 1,502 13,140
----------- ------------ -------------- ---------
Net income.............................. $ 1,096 $ 935 $ 528 $ 2,559
========= ========= =========== ========
</TABLE>
-11-
<PAGE> 12
WINSTON HOSPITALITY, INC.
PRO FORMA STATEMENTS OF INCOME -- (CONTINUED)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31, 1996
-------------------------------------------------------
IMPAC OPERATING
ACQUISITION CARY COMFORT INN HOTELS
HOTELS SUITES, INC. GREENVILLE, SC HISTORICAL
----------- ------------ -------------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
REVENUE
Room revenue............................ $ 1,955 $ 821 $ 484 $ 3,260
Food and beverage revenue............... 490 34 524
Other revenue, net...................... 76 11 87
----------- ------------ -------------- ---------
Total revenue 2,521 855 495 3,871
----------- ------------ -------------- ---------
EXPENSES
Property operating expenses............. 1,294 269 252 1,815
Repairs and maintenance................. 96 37 20 153
Franchise costs......................... 164 30 29 223
Real estate taxes and property and
casualty insurance.................... 81 24 22 127
Management fees......................... 71 21 92
Interest expense........................ 261 139 1 401
Depreciation and amortization........... 292 107 30 429
----------- ------------ -------------- ---------
Total expenses.......................... 2,259 606 375 3,240
----------- ------------ -------------- ---------
Net income.............................. $ 262 $ 249 $ 120 $ 631
========= ========= =========== ========
</TABLE>
(C) Represents elimination of the Acquisition Hotels interest income on loans
to affiliated companies.
(D) Represents elimination of expenses of the Acquisition Hotels which are not
expected to be incurred by the Lessee including certain professional fees,
corporate expenses and operating lease expenses for leased assets acquired
by the Partnership.
(E) Represents an estimate for the increase in general and administrative
expenses due to the increase in the number of hotels under management.
(F) Represents an increase in certain franchise fees of certain of the
Acquisition Hotels.
(G) Decrease reflects real estate taxes, personal property taxes and property
and casualty insurance to be paid by the Company and the Partnership.
(H) Change represents removing historical management fees for the Acquisition
Hotels, eight of which will be managed by the Lessee and reflecting
estimated management fees of the Holiday Inn Select, Garland (Dallas), TX
and the Homewood Suites, Houston/Clear Lake in accordance with the
provisions of the new management agreements for these hotels.
(I) Decrease reflects reduction of interest cost due to the repayment of
long-term debt, capital lease obligations and other indebtedness of the
Acquisition Hotels.
(J) Decrease reflects elimination of historical depreciation and amortization
expense. Depreciation and amortization are expenses of the Company and the
Partnership based on their cost basis.
(K) Pro forma amounts represent lease payments from the Lessee to the
Company and the Partnership and are calculated on a pro forma basis by
applying the rent provisions in the proposed Percentage Leases: (i) for
the Operating Hotels to their historical room revenues as if the
beginning of the period presented was the beginning of the lease year,
and (ii) for the Other Hotels by assuming Base Rents were paid by the
Lessee as if these hotels had been acquired and leases had commenced at
the beginning of the period presented (See footnote C to the Winston
Hotels, Inc. pro forma Statements of Income.
(L) The Lessee has made an election under Subchapter S of the Internal Revenue
Code. Any taxable income or loss is recognized by the stockholders.
-12-
<PAGE> 13
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.
WINSTON HOTELS, INC.
July 18, 1996 /s/ Robert W. Winston, III
- ------------- ----------------------------------------
Date Robert W. Winston, III
Chief Executive Officer and President
July 18, 1996 /s/ Philip R. Alfano
- ------------- ----------------------------------------
Date Philip R. Alfano
Senior Vice President and Chief Financial Officer
-13-
<PAGE> 14
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description Sequential Page No.
- ------- ----------- -------------------
<S> <C>
23.1 Consent of Coopers & Lybrand LLP
99.1 Copies of the audited financial statements of properties
acquired and described in Item 2 hereof as of and for the
year ended December 31, 1995 and the unaudited financial
statements as of and for the three months ended March 31,
1996 incorporated by reference to pages F-33 through F-41
of the Company's Amendment No. 1 to the Registration
Statement on Form S-3 (Registration No. 333-3986) filed
with the Securities and Exchange Commission on May 31, 1996
</TABLE>
<PAGE> 1
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in this Form 8-K/A (Amendment
No. 1) of our report dated February 21, 1996, on our audit of the combined
financial statements of the Impac Acquisition Hotels as of December 31, 1995,
and for the year ended December 31, 1995, appearing in the registration
statement on Form S-3 (File No. 333-3986) of Winston Hotels, Inc. filed with
the Securities and Exchange Commission pursuant to the Securities Act of 1933.
/s/ Coopers & Lybrand LLP
Raleigh, North Carolina
July 18, 1996
<PAGE> 1
EXHIBIT 99.1
REPORT OF INDEPENDENT ACCOUNTANTS
Board of Directors and Shareholders
Winston Hotels, Inc.
We have audited the accompanying combined balance sheet of the Impac
Acquisition Hotels (described in Note 1) as of December 31, 1995, and the
related combined statements of income, equity and cash flows for the year then
ended. These combined financial statements are the responsibility of the
management of the Impac Acquisition Hotels. 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 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 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 Impac Acquisition Hotels
as of December 31, 1995 and the combined results of their operations and their
cash flows for the year then ended, in conformity with generally accepted
accounting principles.
COOPERS & LYBRAND L.L.P.
Raleigh, North Carolina
February 21, 1996
F-33
<PAGE> 2
IMPAC ACQUISITION HOTELS
COMBINED BALANCE SHEETS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1995 1996
------------ -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Investment in hotel property, at cost:
Land........................................................ $ 945 $ 945
Buildings and improvements.................................. 8,862 8,862
Furniture and equipment..................................... 4,665 4,735
------------ -----------
14,472 14,542
Less accumulated depreciation............................... 3,267 3,536
------------ -----------
Net investment in hotel properties............................ 11,205 11,006
Cash and cash equivalents..................................... 378 306
Accounts receivable........................................... 354 356
Notes receivable from affiliates.............................. 395 664
Accrued interest receivable................................... 12 6
Deferred expenses, net........................................ 175 154
Prepaid expenses and other assets............................. 74 130
------------ -----------
$ 12,593 $12,622
=========== ==========
LIABILITIES AND EQUITY
Long-term debt................................................ $ 9,894 $ 9,833
Accounts payable, trade....................................... 531 812
Accrued expenses and other liabilities........................ 242 202
Notes payable to affiliates................................... 552 575
Distributions payable......................................... 61
------------ -----------
11,280 11,422
------------ -----------
Commitments
Shareholders' equity:
Common stock; no par value.................................. 741 741
Accumulated deficit......................................... (708) (849)
Partners' equity:
General partners............................................ 16 18
Limited partners............................................ 1,264 1,290
------------ -----------
1,313 1,200
------------ -----------
$ 12,593 $12,622
=========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-34
<PAGE> 3
IMPAC ACQUISITION HOTELS
COMBINED STATEMENTS OF INCOME
($ IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, -------------------
1995 1995 1996
------------ ------ ------
(UNAUDITED)
<S> <C> <C> <C>
Revenue:
Room revenue......................................... $ 8,006 $1,851 $1,955
Food and beverage revenue............................ 1,947 442 490
Other revenue, net................................... 411 85 76
------------ ------ ------
Total revenue................................ 10,364 2,378 2,521
------------ ------ ------
Expenses:
Property operating expenses.......................... 5,371 1,261 1,293
Repairs and maintenance.............................. 416 94 97
Franchise costs...................................... 659 156 164
Real estate taxes and property and casualty
insurance......................................... 299 79 81
Management fees, related party....................... 303 70 71
Interest expense..................................... 1,089 266 261
Depreciation and amortization........................ 1,131 325 292
------------ ------ ------
Total expenses............................... 9,268 2,251 2,259
------------ ------ ------
Net income................................... $ 1,096 $ 127 $ 262
=========== ====== ======
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-35
<PAGE> 4
IMPAC ACQUISITION HOTELS
COMBINED STATEMENTS OF EQUITY
($ IN THOUSANDS)
<TABLE>
<CAPTION>
PARTNERS' EQUITY
--------------------
COMMON ACCUMULATED GENERAL LIMITED
STOCK DEFICIT PARTNERS PARTNERS EQUITY
------ ----------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1994............... $741 $(516) $ 11 $1,516 $ 1,752
Net income............................. 468 6 622 1,096
Distributions.......................... (660) (1) (874) (1,535)
------ ----------- -------- -------- -------
Balance, December 31, 1995............... 741 (708) 16 1,264 1,313
Net income (unaudited)................. 34 2 226 262
Distributions (unaudited).............. (175) (200) (375)
------ ----------- -------- -------- -------
Balance, March 31, 1996 (unaudited)...... $741 $(849) $ 18 $1,290 $ 1,200
======= ========== ======= ======= ========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-36
<PAGE> 5
IMPAC ACQUISITION HOTELS
COMBINED STATEMENTS OF CASH FLOWS
($ IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED MARCH 31,
DECEMBER 31, -----------------
1995 1995 1996
------------ ----- -----
(UNAUDITED)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income............................................ $ 1,096 $ 127 $ 262
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization...................... 1,131 325 292
Recognition of deferred management fees............ 17 4
Changes in assets and liabilities:
Accounts receivable.............................. 20 (71) (2)
Accrued interest receivable...................... (12) (2) 6
Prepaid expenses and other assets................ (40) 40 (56)
Accounts payable, trade, accrued expenses and
other liabilities............................. 26 (181) 241
------------ ----- -----
Net cash provided by operating activities..... 2,238 242 743
------------ ----- -----
Cash flows from investing activities:
Additions to hotel properties......................... (608) (108) (72)
Increase in notes receivable from affiliates.......... (411) (162) (449)
Payments received on notes receivable from
affiliates......................................... 261 130 180
------------ ----- -----
Net cash used in investing activities......... (758) (140) (341)
------------ ----- -----
Cash flows from financing activities:
Proceeds from issuance of notes payable to
affiliates......................................... 108 80 26
Principal payments on long-term debt.................. (292) (72) (61)
Payment on notes payable to affiliates................ (75) (43) (3)
Distributions to partners............................. (1,474) (366) (436)
------------ ----- -----
Net cash used in financing activities......... (1,733) (401) (474)
------------ ----- -----
Net change in cash and cash equivalents................. (253) (299) (72)
Cash and cash equivalents at beginning of year.......... 631 631 378
------------ ----- -----
Cash and cash equivalents at end of year................ $ 378 $ 332 $ 306
=========== ====== ======
Supplemental disclosures of cash flow information --
Cash paid during the year for interest................ $ 1,042 $ 268 $ 267
=========== ====== ======
Schedule of noncash financing and investing activities:
The Companies declared $61 of distributions in 1995
that were paid in January 1996.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-37
<PAGE> 6
IMPAC ACQUISITION HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS
($ IN THOUSANDS)
1. ORGANIZATION
The Impac Acquisition Hotels are a combination of the balance sheets and
statements of income, equity and cash flows of two limited partnerships and two
"sub-chapter S" corporations (collectively the "Companies") presented on a
historical basis. The Companies are related through common control. Each company
owns one hotel property.
The Companies combined in these financial statements consist of the
following hotel properties:
<TABLE>
<CAPTION>
COMPANY HOTEL LOCATION
-------------------------- --------------------------------------------------------
<S> <C> <C>
Dallas Lodging Associates Holiday Inn Select Dallas, Texas
I, Ltd.
A.B. Lodging, Inc. Holiday Inn Express Abingdon, Virginia
London Lodging Associates, Comfort Suites London, Kentucky
Inc.
Duncanville Lodging Hampton Inn Duncanville, Texas
Associates I, Ltd.
</TABLE>
The Holiday Inn Select and the Holiday Inn Express are operated under
franchise agreements with Holiday Inns Franchising, Inc. The Comfort Suites is
operated under a franchise agreement with Choice Hotels International. The
Hampton Inn is operated under a franchise agreement with Hampton Inn Hotel
Division of Embassy Suites, Inc.
On May 7, 1996, the Companies sold their investment in hotel properties to
WINN Limited Partnership. The sales agreements did not extend to any other
assets or liabilities of the Companies. The Companies plan to liquidate their
remaining assets, satisfy their liabilities and make final distributions to
their owners.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cash Equivalents. All highly liquid investments with a maturity of three
months or less when purchased are considered to be cash equivalents.
Interim Unaudited Financial Information. The accompanying interim combined
financial statements have been prepared pursuant to the rules and regulations of
the Securities and Exchange Commission and generally accepted accounting
principles applicable to interim financial statements. In the opinion of
management, all adjustments and eliminations, consisting only of normal
recurring adjustments, necessary to present fairly the combined financial
position of the Impac Acquisition Hotels as of March 31, 1996 and the combined
results of their operations and cash flows for the three month periods ended
March 31, 1995 and 1996, have been included. The results of operations for such
interim periods are not necessarily indicative of the results for the full year.
Fair Value of Financial Instruments. Statement of Financial Accounting No.
107, "Disclosure About Fair Value of Financial Instruments" requires the
Companies to disclose estimated fair values of its financial instruments. The
Companies' financial instruments consist of cash and cash equivalents, long-term
debt, notes receivable from affiliates, and notes payable to affiliates, whose
carrying value approximates fair value. The Companies' remaining assets and
liabilities are not considered financial instruments.
Concentration of Credit Risk. The Companies place cash deposits with
federally insured financial institutions. At times, deposits have exceeded the
amounts insured by the Federal Deposit Insurance Corporation. In addition,
amounts due from affiliates represent concentrations of credit risk.
F-38
<PAGE> 7
IMPAC ACQUISITION HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
($ IN THOUSANDS)
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Revenue Recognition. Revenue is recognized as earned. Ongoing credit
evaluations are performed and accounts deemed uncollectible are charged to
operations.
Investment in Hotel Properties. The hotel properties are stated at cost.
Depreciation is computed using straight-line and accelerated methods at rates
based upon the following estimated useful lives:
<TABLE>
<S> <C>
Buildings and improvements....... 31.5-39.5 years
Furniture and equipment.......... 5-7 years
</TABLE>
Maintenance and repairs are charged to operations as incurred. Additions
and major improvements are capitalized. Upon sale or disposition, both the asset
and related accumulated depreciation are relieved and the related gain or loss
is included in operations.
The Company evaluates long-lived assets for potential impairment by
analyzing the operating results, trends and prospects for the Company and
considering any other events and circumstances which might indicate potential
impairment.
Advertising Costs. Advertising costs of $497 were expensed as incurred.
Deferred Expenses. Deferred expenses consist primarily of franchise fees
and loan costs which are recorded at cost. Amortization is computed using the
straight-line method over the terms of the franchise and loan agreements.
Income Taxes. Each of the four companies are not tax paying entities for
income tax purposes, and thus no income tax expense has been recorded in the
combined financial statements. Income or loss is taxed to the owners in their
individual income tax returns.
Use of Estimates in the Preparation of Financial Statements. The
preparation of the combined financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities as of December 31, 1995 and the
reported amounts of revenues and expenses during the year ended December 31,
1995. Actual results could differ from those estimates.
3. LONG-TERM DEBT
At December 31, 1995 long-term debt consists of the following:
<TABLE>
<S> <C>
Note payable in equal monthly installments of principal and interest
of $24, bearing interest at 9%, due January 1, 2000............... $2,543
Note payable in monthly installments of principal and interest at
30-day LIBOR plus 4.75% (10.47% at December 31, 1995), due June 1,
1997.............................................................. 4,300
Note payable in equal monthly installments of principal and interest
of $14, bearing interest at WSJ prime plus 2% (10.25% at December
31, 1995), due September 24, 1996................................. 1,375
Notes payable in monthly installments of principal and interest
based on a 20 year amortization and interest at the bank's prime
plus 2% (9.75% at December 31, 1995), due November 8, 1996........ 1,676
------
$9,894
======
</TABLE>
The debt is collateralized by the investments in hotel properties and
rents. A majority of the notes are guaranteed by certain partners and
shareholders.
F-39
<PAGE> 8
IMPAC ACQUISITION HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
($ IN THOUSANDS)
3. LONG-TERM DEBT (CONTINUED)
Aggregate annual principal payments for long-term debt at December 31, 1995
are as follows:
<TABLE>
<S> <C>
1996...................................................... $3,293
1997...................................................... 4,170
1998...................................................... 64
1999...................................................... 71
2000...................................................... 2,296
------
$9,894
======
</TABLE>
4. RELATED PARTY TRANSACTIONS
Management services were provided to the Companies by an entity related
through common ownership under the terms of management contracts expiring at
various dates through May 2003. Management fees expensed were $304 during 1995.
Included in accounts payable are $10 of unpaid management fees as of December
31, 1995.
The Companies receive all services related to the renovation of the hotel
properties from Impac Design and Construction ("IDC"), a Company related to the
Companies through common ownership. Included in accounts payable are amounts due
to affiliates of $93 related to these services. Payments to IDC for renovation
services during the year ended December 31, 1995 amounted to $561.
The Companies make loans to other companies related to the Companies
through common ownership. Included in notes receivable from affiliates at
December 31, 1995 is $321 of notes that bear interest at 7% and are due upon
demand. Interest income on these notes was approximately $15 during the year
ended December 31, 1995. The remaining notes receivable from affiliates of $74
at December 31, 1995, do not bear interest and are due upon demand.
At December 31, 1995, notes payable to affiliates consists of the
following:
<TABLE>
<S> <C>
Note payable to former shareholder in equal monthly installments of
$5, including interest at 7%, due September 19, 1996............. $507
Notes payable on demand to affiliates bearing interest at 7%....... 45
----
$552
=====
</TABLE>
Interest expense on these notes for the year ended December 31, 1995 was
approximately $53.
F-40
<PAGE> 9
IMPAC ACQUISITION HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS -- (CONTINUED)
($ IN THOUSANDS)
5. COMMITMENTS
Franchise costs represent the annual expense for franchise royalties,
reservation and advertising services under the terms of hotel franchise
agreements expiring at various dates through October 2011. Fees are computed
based upon percentages (generally 8% of gross room revenue).
Certain equipment is leased under noncancelable operating lease agreements
expiring at varying intervals through April 1998. Following is a schedule for
the future minimum rental payments required under these leases as of December
31, 1995:
<TABLE>
<S> <C>
1996........................................................ $33
1997........................................................ 25
1998........................................................ 2
---
$60
====
</TABLE>
Rental expense was approximately $36 for the year ended December 31, 1995.
F-41
