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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of report (Date of earliest event reported): October 9, 1997
DOUBLETREE CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 0-24392 860762415
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(State of (Commission File Number) (IRS Employer
Incorporation) Identification No.)
410 North 44th Street, Suite 700, Phoenix, Arizona
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(Address of principal executive offices) (Zip Code)
(602) 220-6666
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(Registrant's telephone number, including area code)
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(former name or former address, if changed since last report)
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Item 5. Other Events.
In response to several comments from the Securities and Exchange
Commission with respect to the Annual Report on Form 10-K for the year ended
December 31, 1996 ("Form 10-K") of Doubletree Corporation (the "Company"), the
Company hereby amends the Form 10-K as follows:
Under "Formation of Joint Venture Strategic Alliance With Patriot
American Hospitality, Inc" at Page 3, the Form 10-K describes the strategic
alliance between the Company and Patriot American Hospitality, Inc. ("Patriot")
whereby the Company and Patriot have agreed to invest an aggregate of
approximately $20.0 million and $180.0 million, respectively, into the purchase
of hotels as part of such alliance. As of December 31, 1996, the joint venture
had successfully completed the acquisition of six hotels that are Doubletree
brand hotels and as of December 31, 1996, the Company had funded approximately
$10.7 million of the $20.0 million commitment to the strategic alliance. The
source of the Company's $10.7 million in funds was supplied through cash flow.
The Unaudited Pro Forma Consolidated Statements of Operations for the
years ended December 31, 1995 and December 31, 1996 set forth at pages 26 and 27
of the Form 10-K is replaced in its entirety with the following pro forma
financial information, which has been revised to not include the removal of the
1995 Red Lion formation expenses (including restructuring charges) and RFS
business combination expenses at Note 3, Pro Forma Adjustments. The 1995 pro
forma net income and pro forma earnings per share impact of removing the pro
forma adjustments related to the Red Lion formation was to reduce net income by
$97,000 and had no effect on earnings per share. The impact of removing the pro
forma adjustment which had removed the RFS, Inc. business combination expenses
was to reduce 1995 pro forma net income by $1.5 million and pro forma earnings
per share by $0.04. The 1996 pro forma financial information was not affected.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
The following Unaudited Pro Forma Consolidated Statements of Operations
for the years ended December 31, 1995 and 1996 present the consolidated results
of operations of the Company (including RFS Management) as if Red Lion had been
acquired at the beginning of 1995. The following information is not necessarily
indicative of the results of operations of the Company as they may be in the
future or as they might have been had the Red Lion Acquisition been
consummated at the beginning of the period shown. The Unaudited Pro Forma
Consolidated Statements of Operations should be read in conjunction with the
audited historical Consolidated Financial Statements of the Company and notes
thereto.
<TABLE>
<CAPTION>
Year Ended December 31, 1995 Year Ended December 31, 1996
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Doubletree, Doubletree
As Pro Forma As Pro Forma
Reported Red Lion Adjustments Total Reported(1) Red Lion(2) Adjustments Total
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<S> <C> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED
STATEMENT OF
OPERATIONS DATA:
Revenues:
Management and franchise
fees................... $ 30,082 $ 11,388 $ (299)(a) $ 41,171 $ 38,621 $ 10,910 $ (190)(a) $ 49,341
Owned hotel revenues..... 7,081 185,414 27,074 (a) 219,569 38,350 175,432 14,580 228,362
Leased hotel revenues.... 141,942 132,212 -- 274,154 205,163 121,431 -- 326,594
Purchasing and service
fees................... 16,487 45,124 -- 61,611 19,848 43,517 -- 63,365
Other fees and income.... 994 241 1,235 2,953 207 3,160
-------- -------- -------- -------- -------- -------- -------- --------
Total revenues...... 196,586 374,379 26,775 597,740 304,935 351,497 14,390 670,822
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Operating costs and
expenses:
Corporate general and
administrative......... 14,901 10,910 25,811 18,079 6,803 24,882
Owned hotel expenses..... 6,049 121,913 20,538 (a) 148,500 27,889 111,033 11,454 (a) 150,376
Leased hotel expenses.... 132,644 109,750 242,394 190,797 96,787 287,584
Purchasing and service
expenses............... 13,437 42,644 -- 56,081 14,796 41,270 -- 56,066
Depreciation and
amortization........... 4,686 19,328 23,141 (b) 47,155 12,018 17,001 19,339 (b) 48,358
Business combination
expenses............... 2,565 14,662 -- 17,227 -- 8,369 (8,369)(e) --
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Total operating costs
and expenses....... 174,282 319,207 43,679 537,168 263,579 281,263 22,424 567,266
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Operating income......... 22,304 55,172 (16,904) 60,572 41,356 70,234 (8,034) 103,556
Interest expense....... (227) (19,408) (22,906)(c) (42,541) (6,648) (15,118) (20,524)(c) (42,290)
Interest income........ 4,147 5,070 9,217 5,561 5,552 -- 11,113
-------- -------- -------- -------- -------- -------- -------- --------
Income before income
taxes and minority
interest............... 26,224 40,834 (39,810) 27,248 40,269 60,668 (28,558) 72,379
Minority interest
share of net
(income) loss........ 35 (759) (724) (373) (1,353) (1,726)
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Income before income
taxes.................. 26,259 40,075 (39,810) 26,524 39,896 59,315 (28,558) 70,653
Income tax expense..... (8,468) (7,325) 11,958 (d) (3,835) (13,962) (23,087) 7,656 (d) (29,393)
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Net income............... $ 17,791 $ 32,750 $(27,852) $ 22,689 $ 25,934 $ 36,228 $(20,902) $ 41,260
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Earnings per share....... $ 0.80 $ 0.59 $ 1.01 $ 1.04
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Weighted average shares
outstanding............ 22,219 38,669 25,776 39,834
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</TABLE>
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(1) Includes the results of operations of Red Lion for the period commencing
November 8, 1996 through December 31, 1996.
(2) Reflects the results of operations of Red Lion for the period January 1,
1996 through the date of acquisition by Doubletree on November 8, 1996.
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NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
1. ASSUMPTIONS
On November 8, 1996, the Company acquired all of the outstanding common
stock of Red Lion in a transaction valued at approximately $1.2 billion. The
Company paid $695 million in cash, repaid $124 million of existing Red Lion
indebtedness, issued 7.4 million shares of common stock to the shareholders of
Red Lion with a fair value at the date of closing of $292 million and assumed
net liabilities of $90 million. The acquisition has been accounted for as a
purchase and the results of operations of Red Lion have been included in the
consolidated financial statements since November 8. The purchase price was
allocated to the net assets acquired based upon their estimated fair market
values. The excess of the purchase price over the estimated fair value of the
net assets acquired of $365 million was recorded as goodwill to be amortized
over a 40 year life.
During 1995, Doubletree incurred $2.6 million of business combination
expenses related to the acquisition of RFS, Inc., a hotel operating company.
The 1995 pro forma operating results of Red Lion include non-recurring costs
associated with its formation and restructuring of $14.7 million and $9.7
million of deferred tax benefits. Excluding these items and adjusting income
taxes to Doubletree's effective tax rate and the statutory tax rate for Red
Lion, net income and earnings per share on a pro forma basis would have been
$24.3 million and $0.63, respectively.
2. RECLASSIFICATIONS
Reclassifications have been made to the previously issued financial
statements of Red Lion to conform with the financial statements presentation
used by Doubletree.
3. PRO FORMA ADJUSTMENTS
The following adjustments have been made to the Unaudited Pro Forma
Consolidated Statements of Operations:
(a) Red Lion acquired three hotels in April 1996, July 1996 and
September 1996. The pro forma results of operations include the
operating results of these hotels as if they were all acquired on
January 1, 1995. Hotel management fees from the hotels acquired in
September 1996 (which was previously managed) have been eliminated.
(b) To reflect the increase in depreciation and amortization
resulting from the application of purchase accounting.
(c) To reflect increased interest expense associated with the
New Credit Facility, including agency and commitment fees and the
amortization of loan fees. An interest rate of 7.05% was assumed for
all periods on borrowings under the New Credit Facility. The annual
effect of a 1/8 percent change in the interest rate would be
approximately $0.6 million.
(d) To reflect an effective tax rate of 40% on all pro forma
adjustments except for amortization of goodwill.
(e) To exclude $8.4 million of business combination expenses
(principally investment banking, accounting and legal fees) incurred by
Red Lion in connection with the acquisition by Doubletree.
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SIGNATURE PAGE
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.
Dated: October 9, 1997
DOUBLETREE CORPORATION,
a Delaware corporation
By: /s/ William L. Perocchi
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Name: William L. Perocchi
Title: Executive Vice President and Chief
Financial Officer
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