<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K A
CURRENT REPORT PURSUANT TO
SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
Date of Report: August 05, 1998
Commission File Number: 0-25060
HUMPHREY HOSPITALITY TRUST, INC.
(Exact name of registrant as specified in its charter)
Virginia 0-25060 52-1889548
(State of Incorporation) (Commission File (I.R.S. employer
Number) identification no.)
12301 Old Columbia Pike, Silver Spring MD 20904 (301) 680-4343
(Address of principal executive offices) (Registrant's telephone number)
N/A
(Former Name or Former Address, if Changed Since Last Report)
1
<PAGE> 2
Item 2. Acquisitions or Disposition of Assets
On June 25, 1998, Humphrey Hospitality Trust, Inc. (the "Company"),
through its 87.57% interest in Humphrey Hospitality L.P. (the "Partnership"),
completed the acquisition of a 73-room Best Western hotel in Ellenton,
Florida and a 63-room Shoney's Inn hotel in Ellenton, Florida from Allen
Investments Inc.. On June 26, 1998, the Company completed the acquisition of
an 80-room Hampton Inn hotel in Brandon, Florida from Allen Investments, Inc..
The Partnership leased the properties to Humphrey Hospitality
Management, Inc., the lessor of the Partnership's other hotel properties,
pursuant to percentage leases which provide for rent based, in part, on the
room revenues from the hotels. The lease for the Best Western and Shoney's
Inn hotels located in Ellenton, Florida went into effect on June 25, 1998,
the lease for the Hampton Inn hotel located in Brandon, Florida went into
effect on June 26, 1998.
2
<PAGE> 3
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits
(a) The following financial statement of the properties acquired and
described in Item 2 is contained at pages 4 through 14.
Allen Acquisition Hotels
Independent Auditors Report;
Combined Balance Sheets as of December 31, 1997 and March 31, 1998
(Unaudited);
Combined Statements of Income for the year ended December 31, 1997
and the three months ended March 31, 1997 and 1998(Unaudited);
Combined Statements of Equity for the year ended December 31, 1997
and the three months ended March 31, 1998 (Unaudited);
Combined Statements of Cash Flows for the year ended December 31,
1997 and the three months ended March 31, 1997 and 1998
(Unaudited);
Notes to Combined Financial Statements
(b) The following pro forma financial statements required by Article
11 of Regulation S-X for Humphrey Hospitality Trust, Inc. and
Humphrey Hospitality, Management, Inc. are contained at pages 14
through 31.
Pro Forma Condensed Consolidated Balance Sheet as March 31, 1998
for Humphrey Hospitality Trust, Inc.;
Pro Forma Condensed Consolidated Statement of Income for the year
ended December 31, 1997 for Humphrey Hospitality Trust, Inc.;
Pro Forma Condensed Consolidated Statement of Income for the three
months ended March 31, 1998 for Humphrey Hospitality Trust, Inc.;
Pro Forma Condensed Statement of Income for the year ended
December 31, 1997 for Humphrey Hospitality Management, Inc.
Pro Forma Condensed Statement of Operations for the three months
ended March 31, 1998 for Humphrey Hospitality Management, Inc.
3
<PAGE> 4
INDEPENDENT AUDITORS' REPORT
To the Shareholders and Board of Directors
Humphrey Hospitality Trust, Inc.
We have audited the accompanying combined balance sheet of the Allen
Acquisition Hotels as of December 31, 1997, and the related combined statements
of income, equity and cash flows for the year then ended. These financial
statements are the responsibility of the management of the Allen 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 combined financial statements referred to above
present fairly, in all material respects, the combined financial position of the
Allen Acquisition Hotels as of December 31, 1997, the combined results of its
operations and its combined cash flows for the year then ended in conformity
with generally accepted accounting principles.
REZNICK FEDDER & SILVERMAN
Baltimore, Maryland
May 18, 1998
4
<PAGE> 5
COMBINED BALANCE SHEETS
December 31, 1997 and March 31, 1998 (Unaudited)
<TABLE>
<CAPTION>
December 31, March 31,
1997 1998
-------------- ---------------
(Unaudited)
<S> <C> <C>
ASSETS
INVESTMENT IN HOTEL PROPERTIES
Land $ 1,200,000 $ 1,200,000
Land improvements 205,000 205,000
Buildings and improvements 7,992,804 7,992,804
Furniture and equipment 803,427 803,427
------------- -------------
10,201,231 10,201,231
Less accumulated depreciation 550,659 655,056
------------- -------------
Net investment in hotel properties 9,650,572 9,546,175
OTHER
Cash 211,594 329,817
Accounts receivable 66,300 75,558
Deposits 23,756 23,756
Mortgage costs, net of accumulated amortization of
$27,000 and $32,788 186,820 181,032
Franchise fees, net of accumulated amortization of
$4,800 and $5,671 60,200 59,329
------------- -------------
$ 10,199,242 $ 10,215,667
============= =============
LIABILITIES AND EQUITY
LIABILITIES
Long-term debt $ 6,601,042 $ 6,561,629
Accounts payable and accrued expenses 86,103 138,804
Accrued interest payable 48,094 48,094
------------- -------------
6,735,239 6,748,527
EQUITY 3,464,003 3,467,140
------------- -------------
$ 10,199,242 $ 10,215,667
============= =============
</TABLE>
See notes to combined financial statements
5
<PAGE> 6
COMBINED STATEMENTS OF INCOME
Year ended December 31, 1997 and the three months ended
March 31, 1997 and 1998 (Unaudited)
<TABLE>
<CAPTION>
March 31,
December 31, ----------------------------
1997 1997 1998
------------ ------------ ------------
(Unaudited)
<S> <C> <C> <C>
Revenue
Room revenue $ 3,148,341 $ 836,734 $ 1,157,336
Telephone revenue 57,869 11,109 18,107
Other revenue 61,819 19,166 9,056
------------ ------------ ------------
Total revenue 3,268,029 867,009 1,184,499
------------ ------------ ------------
Expenses
Salaries and wages 657,446 141,203 178,044
Room expense 109,349 54,425 14,657
Restaurant expense 75,101 - 22,724
Telephone 47,238 13,494 12,372
General and administrative 113,259 23,544 53,434
Marketing and promotion 86,596 4,011 9,196
Security 16,103 - 265
Utilities 193,520 34,956 47,302
Repairs and maintenance 108,824 24,252 24,274
Taxes and insurance 127,570 34,339 25,946
Real estate taxes 116,614 28,676 41,000
Franchise fees 190,320 43,967 41,617
Interest expense 554,872 110,322 144,475
Depreciation and amortization 355,572 68,958 111,056
------------ ------------ ------------
Total expenses 2,752,384 582,147 726,362
------------ ------------ ------------
NET INCOME $ 515,645 $ 284,862 $ 458,137
============ ============ ============
</TABLE>
See notes to combined financial statements
6
<PAGE> 7
COMBINED STATEMENTS OF EQUITY
Year ended December 31, 1997 and the three months ended March 31, 1998
(Unaudited)
<TABLE>
<S> <C>
Balance, December 31, 1996 $ 3,427,739
Distributions (479,381)
Net income 515,645
--------------
Balance, December 31, 1997 3,464,003
Distributions (455,000)
Net income 458,137
--------------
Balance, March 31, 1998 (Unaudited) $ 3,467,140
==============
</TABLE>
See notes to combined financial statements
7
<PAGE> 8
COMBINED STATEMENT OF CASH FLOWS
Year ended December 31, 1997 and the three months ended
March 31, 1997 and1998 (Unaudited)
<TABLE>
<CAPTION>
March 31,
December 31, -----------------------------
1997 1997 1998
------------- ------------- ------------
(Unaudited)
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 515,645 $ 284,862 $ 458,137
Adjustments to reconcile net income to net cash
provided by operating activities
Depreciation 330,989 64,213 104,397
Amortization 24,583 4,745 6,659
Changes in assets and liabilities
Increase in accounts receivable (24,080) - (9,258)
Increase in deposits (3,000) - -
(Decrease) increase in accounts payable
and accrued expenses (21,405) 28,676 52,701
Increase in accrued interest payable 11,246 - -
------------- ------------- ------------
Net cash provided by operating activities 833,978 382,496 612,636
------------- ------------- ------------
Cash flow from investing activities
Investment in hotel property (1,722,924) (29,460) -
------------- ------------- ------------
Net cash used in investing activities (1,722,924) (29,460) -
------------- ------------- ------------
Cash flow from financing activities
Proceeds from mortgages payable 1,474,795 - -
Principal payments on long-term debt (136,925) (30,133) (39,413)
Distributions (479,381) (211,831) (455,000)
------------- ------------- ------------
Net cash provided by (used in)
financing activities 858,489 (241,964) (494,413)
------------- ------------- ------------
NET (DECREASE) INCREASE IN CASH (30,457) 111,072 118,223
Cash, beginning 242,051 221,807 211,594
------------- ------------- ------------
Cash, ending $ 211,594 $ 332,879 $ 329,817
============= ============= ============
Supplemental disclosures of cash flow information
Cash paid during the year for interest $ 554,872 $ 110,322 $ 144,475
============= ============= ============
</TABLE>
See notes to combined financial statements
8
<PAGE> 9
NOTES TO COMBINED FINANCIAL STATEMENTS
December 31, 1997 and March 31, 1998
(Amounts and disclosures as of March 31, 1997 and 1998
and for the three months then ended are unaudited)
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The Allen Acquisition Hotels combined financial statements are a combination
of the balance sheets and statements of income, equity and cash flows of
three hotel properties owned and operated by Allen Investments Inc. (the
Company), a sub-chapter S corporation. In May 1998, the Company entered into
an agreement to sell its hotel properties to Humphrey Hospitality Limited
Partnership. The sales agreement does not extend to any other assets or
liabilities of the Company. The hotel properties combined in these financial
statements consist of the following:
<TABLE>
<CAPTION>
Date
Hotel Opened/Acquired Rooms Location
- --------------- -------------------- ---------- -----------------
<S> <C> <C> <C>
Shoney's Inn May 1997 63 Ellenton, Florida
Hampton Inn November 1996 80 Brandon, Florida
Best Western December 1994 73 Ellenton, Florida
</TABLE>
Use of Estimates
----------------
The preparation of 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 disclosures of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenue and expenses during the reporting period.
Actual results could differ from those estimates.
Investment in Hotel Properties
------------------------------
The hotel property is stated at cost. Depreciation is provided for in amounts
sufficient to relate the cost of depreciable assets to operations by use of
the straight-line method over estimated useful lives:
<TABLE>
<S> <C>
Building and improvement 15-40 years
Land improvements 15 years
Furniture and equipment 5-7 years
</TABLE>
9
<PAGE> 10
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
December 31, 1997 and March 31, 1998
(Amounts and disclosures as of March 31, 1997 and 1998
and for the three months then ended are unaudited)
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued)
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 properties and
considering any other events and circumstances which might indicate potential
impairment.
Mortgage Costs
--------------
Mortgage costs are amortized over the term of the debt using the
straight-line method.
Franchise Fees
--------------
The Shoney's Inn Hotel is operated under a franchise agreement with Sholodge
Franchise Systems, Inc. The Best Western Hotel is operated under a franchise
agreement with Best Western. The Hampton Inn Hotel is operated under a
franchise agreement with Promuse Hotels, Inc. Franchise fees are amortized
over the term of the franchise agreement using the straight-line method.
Revenue Recognition
-------------------
Room and other revenue is recognized as earned. Ongoing credit evaluations
are performed and accounts deemed uncollectible are charged to operations.
Income Taxes
------------
No provision or benefit for income taxes has been included in the financial
combined statements for the Company since taxable income or loss passes
through to, and is reportable by, the owners individually.
Concentration of Credit Risk
----------------------------
The Company maintains its deposits with major banks. At December 31, 1997 and
March 31, 1998, the balances reported by the banks exceeded the Federal
depository insurance limits, however management believes that no significant
concentration of credit risk exists with respect
10
<PAGE> 11
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
December 31, 1997 and March 31, 1998
(Amounts and disclosures as of March 31, 1997 and 1998
and for the three months then ended are unaudited)
to these uninsured cash balances.
11
<PAGE> 12
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
December 31, 1997 and March 31, 1998
(Amounts and disclosures as of March 31, 1997 and 1998
and for the three months then ended are unaudited)
NOTE B - LONG-TERM DEBT
Long-term debt at December 31, 1997 and March 31, 1997 and 1998, consisted of
the following:
<TABLE>
<CAPTION>
March 31,
December 31, ---------------------------------
1997 1997 1998
------------ ------------- ----------------
(Unaudited)
<S> <C> <C> <C>
Shoney's Inn
- ------------
Mortgage payable in equal monthly
installments of principal and interest of
$17,317 bearing interest at 8.75% per
annum. On May 11, 2002, the interest rate
will be adjusted to a rate equal to the Current
Index, as defined plus 275 basis points. The
mortgage matures on May 1, 2007. $ 1,988,495 $ - $ 1,983,975
Best Western
- ------------
Mortgage payable in equal monthly
installments of $16,465 bearing interest at
8.98% per annum through March 28, 2003. 1,453,920 1,502,353 1,437,039
Hampton Inn
- -----------
Mortgage payable in equal monthly
installments of $30,353 bearing interest at
9.50% per annum through October 31, 2001.
On November 1, 2001, the interest rate will
be adjusted to an amount equal to 300 basis
points added to the weekly average yield of
United States Treasury Securities equivalent
adjusted to a constant maturity of five years
rounded up to the nearest one-eighth of one
percent, and this rate shall be effective until
maturity on November 1, 2006. 3,158,627 3,205,481 3,140,615
----------- ----------- -----------
$ 6,601,042 $ 4,707,834 $ 6,561,629
========== =========== ===========
</TABLE>
12
<PAGE> 13
NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED
December 31, 1997 and March 31, 1998
(Amounts and disclosures as of March 31, 1997 and 1998
and for the three months then ended are unaudited)
NOTE B - LONG-TERM DEBT - (Continued)
The mortgages are secured by the hotel property and guaranteed by the owners
of Allen Investments, Inc.
Annual principal payments on the mortgages for the five years following
December 31, 1997 and March 31, 1998, are as follows:
<TABLE>
<CAPTION>
December 31, March 31,
-------------- -------------
(Unaudited)
<S> <C> <C>
1998 $ 170,837 $ -
1999 $ 180,331 $ 172,942
2000 $ 202,707 $ 185,936
2001 $ 216,792 $ 205,945
2002 $ 240,779 $ 222,765
2003 $ - $ 245,368
</TABLE>
NOTE C - COMMITMENTS
Franchise fees represent the annual expense for franchise royalties,
reservation and advertising services under the terms of the hotel franchise
agreements. The payments are based upon percentages of gross room revenue.
13
<PAGE> 14
Humphrey Hospitality Trust, Inc. and Subsidiaries
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
March 31, 1998
This unaudited Pro Forma Condensed Consolidated Balance Sheet of
Humphrey Hospitality Trust, Inc. and Subsidiaries (the Company) is presented as
if the consummation of the April 1998 Offering and the acquisition of the Allen
Acquisition Hotels had occurred on March 31, 1998. Such pro forma information is
based upon the consolidated balance sheet of the Company as of March 31, 1998.
It should be read in conjunction with the consolidated financial statements of
the Company as of March 31, 1998, previously filed with the Securities and
Exchange Commission in Form 10-Q. In management's opinion all adjustments
necessary to reflect the effects of the above transactions have been made. This
unaudited Pro Forma Condensed Consolidated Balance Sheet is not necessarily
indicative of what the actual financial position would have been assuming such
transactions had been completed as of March 31, 1998, nor does it purport to
represent the future financial position of the Company.
14
<PAGE> 15
Humphrey Hospitality Trust, Inc. and Subsidiaries
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET - CONTINUED
March 31, 1998
(Unaudited, in thousands)
<TABLE>
<CAPTION>
The Proceeds
Company of Pro Forma Pro Forma
Consolidated Offering Company Use of Company (C)
Historical (a) (b) Proceeds
------------- ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
ASSETS
Net investment in hotel properties $ 50,334 $ - $ 50,334 $ 10,975 (d) $ 61,309
Cash and cash equivalents 14 11,013 11,027 (11,013)(e) 14
Accounts receivable from leasee 1,215 - 1,215 - 1,215
Reserve for replacements 33 - 33 - 33
Deferred expenses, net 857 - 857 - 857
Other assets 271 - 271 - 271
----------- -------- --------- ---------- ----------
Total assets $ 52,724 $ 11,013 $ 63,737 $ (38) $ 63,699
=========== ======== ========= ========== ==========
LIABILITIES AND
SHAREHOLDERS' EQUITY
LIABILITIES
Mortgages and bonds payable $ 31,021 $ - $ 31,021 $ (38)(f) 30,983
Dividends payable 559 - 559 - 559
Accounts payable and accrued
expenses 400 - 400 - 400
----------- -------- --------- ---------- ----------
Total liabilities 31,980 - 31,980 (38) 31,942
----------- -------- --------- ---------- ----------
MINORITY INTEREST 3,303 - 3,303 635 (g) 3,938
----------- -------- --------- ---------- ----------
SHAREHOLDERS' EQUITY
Common stock 35 12 47 - 47
Additional paid-in capital 17,984 11,001 28,985 (635)(h) 28,350
Distributions in excess of earnings (578) - (578) - (578)
----------- -------- --------- ---------- ----------
17,441 11,013 28,454 (635) 27,819
----------- -------- --------- ---------- ----------
</TABLE>
15
<PAGE> 16
Humphrey Hospitality Trust, Inc. and Subsidiaries
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET - CONTINUED
March 31, 1998
(Unaudited, in thousands)
<TABLE>
<CAPTION>
The Proceeds
Company of Pro Forma Pro Forma
Consolidated Offering Company Use of Company (C)
Historical (a) (b) Proceeds
------------- ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C> <C>
$ 52,724 $ 11,013 $ 63,737 $ (38) $ 63,699
=========== ======== ========= ========== ==========
</TABLE>
16
<PAGE> 17
Humphrey Hospitality Trust, Inc. and Subsidiaries
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET - CONTINUED
March 31, 1998
(Unaudited, in thousands)
- -------------
(a) Represents proceeds of the April 1998 Offering ($12,075) less expenses
of the Offering ($1,062).
(b) Represents the combined interests of the Company after the proceeds of
the April 1998 Offering, but before the use of proceeds.
(c) Represents the combined interests of the Company after the use of the
proceeds of the April 1998 Offering and the acquisition of the Allen
Acquisition Hotels.
(d) Represents the purchase price of the Allen Acquisition Hotels, including
related closing costs.
(e) Net decrease reflects the use of cash for the repayment of a portion of
the Credit Facility.
(f) Net decrease reflects the repayment of a portion of the Credit Facility
from the net proceeds ($11,013) of the April 1998 Offering and
borrowings from the Company's Credit Facility in connection with the
acquisition of the Allen Acquisition Hotels ($10,975).
(g) Represents an adjustment to minority interest to arrive at the interest
in Humphrey Hospitality Limited Partnership (the Partnership) that will
not be owned by the Company, determined as follows:
<TABLE>
<S> <C>
Net proceeds of the April 1998 Offering $ 11,013
Shareholders' equity as of March 31, 1998 17,441
Minority interest in the Partnership as of March 31, 1998 3,303
-----------
31,757
Minority interest percentage subsequent to the April 1998
Offering x 12.4%
-----------
Minority interest after the April 1998 Offering $ 3,938
===========
</TABLE>
(h) Net decrease reflects the adjustment to the minority interest in the
Partnership as follows:
<TABLE>
<S> <C>
Minority interest after the April 1998 Offering $ 3,938
Less minority interest prior to the April 1998 Offering 3,303
-----------
Adjustment to minority interest $ 635
===========
</TABLE>
17
<PAGE> 18
Humphrey Hospitality Trust, Inc. and Subsidiaries
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
Year ended December 31, 1997
This unaudited Pro Forma Condensed Consolidated Statement of Income of
Humphrey Hospitality Trust, Inc. and Subsidiaries (the Company) is presented as
if the consummation of the April 1998 Offering, the application of the proceeds
of the Offerings, and the acquisition of the Allen Acquisition Hotels had
occurred on January 1, 1997. It should be read in conjunction with the
consolidated financial statements of Humphrey Hospitality Trust, Inc. for the
year ended December 31, 1997 previously filed with the Securities and Exchange
Commission in Form 10-K and the financial statements of the Allen Acquisition
Hotels for the year ended December 31, 1997, at pages 5 through 14. In
management's opinion, all adjustments necessary to reflect the effects of the
above transactions have been made. This unaudited Pro Forma Condensed
Consolidated Statement of Income is not necessarily indicative of what actual
results of operations of the Company would have been assuming such transactions
had been completed as of January 1, 1997, nor does it purport to represent the
results of operations for future periods.
18
<PAGE> 19
Humphrey Hospitality Trust, Inc. and Subsidiaries
PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF INCOME - CONTINUED
Year ended December 31, 1997
(Unaudited, in thousands)
<TABLE>
<CAPTION>
The
Company Pro Forma
Consolidated Pro Forma Consolidated
Historical Adjustments Total (a)
------------- ------------ ------------
<S> <C> <C> <C>
Operating data
Percentage lease revenue $ 7,326 $ 1,493 (b) $ 8,819
Other revenue 106 - 106
----------- ---------- ----------
Total revenue 7,432 1,493 8,925
Depreciation and amortization 1,634 386 (C) 2,020
Real estate and personal property taxes and
property insurance 476 160 (d) 636
Interest expense 1,764 (223)(e) 1,541
General and administrative 484 - 484
Ground rent 52 - 52
Minority interest 465 56 (f) 521
----------- ---------- ----------
Net income applicable to common shares $ 2,557 $ 1,114 $ 3,671
=========== ========== ==========
Basic earnings per common share $ 0.73 $ - $ 0.79
Diluted earnings per common share $ 0.73 $ - $ 0.79
Weighted average share:
Basic 3,481,700 - 4,631,700(g)
Diluted 4,139,073 - 5,289,073(h)
</TABLE>
- --------------
(a) Represents results of operations for the Current Hotels and the Allen
Acquisition Hotels on a pro forma basis as if the Allen Acquisition
Hotels were owned by the Company and leased under the Percentage Leases,
and reflecting the reduction in debt resulting from the April 1998
Offering as of the beginning of the period presented.
(b) Represents lease payments from the Lessee to the Partnership calculated
on a pro forma basis using the rent provisions in the Percentage Leases
and the historical revenue of the
19
<PAGE> 20
Humphrey Hospitality Trust, Inc. and Subsidiaries
PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF INCOME - CONTINUED
Year ended December 31, 1997
(Unaudited, in thousands)
Allen Acquisition Hotels.
20
<PAGE> 21
Humphrey Hospitality Trust, Inc. and Subsidiaries
PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF INCOME - CONTINUED
Year ended December 31, 1997
(Unaudited, in thousands)
(c) Represents depreciation on the Allen Acquisition Hotels. Depreciation is
computed using the straight-line method based upon estimated useful
lives of 30-40 years for building and 5 years for furniture and
equipment and the purchase prices of the Allen Acquisition Hotels. The
estimated useful lives are based on management's knowledge of the
properties and the hotel industry in general.
(d) Represents estimated real estate and personal property taxes and
property insurance for the Allen Acquisition Hotels to be paid by the
Partnership.
(e) Represents interest computed on approximately $25.3 million of debt
remaining outstanding during the period after giving affect to the April
1998 Offering and the proposed use of proceeds from that Offering to
retire existing debt and the borrowings from the Credit Facility to fund
the purchase of the Allen Acquisition Hotels.
(f) Calculated at 12.4% of total revenue minus depreciation and
amortization, real estate and personal property taxes, property
insurance, interest expense, general and administrative expenses, and
ground rent.
(g) Represents 3,481,700 common shares outstanding during the period
presented plus 1,150,000 common shares issued in connection with the
April 1998 Offering.
(h) Assumes the conversion of the Units in the Partnership held by the
minority interest, consisting of 657,373 Units outstanding during the
period presented.
21
<PAGE> 22
Humphrey Hospitality Trust, Inc. and Subsidiaries
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
Three months ended March 31, 1998
This unaudited Pro forma Condensed Consolidated Statement of Income of
Humphrey Hospitality Trust. Inc. and Subsidiaries (the Company) is presented as
if the consummation of the April 1998 Offering, the application of the proceeds
of the Offering, and the acquisition of the Allen Acquisition Hotels had
occurred on January 1, 1997. It should be read in conjunction with the
consolidated financial statements of Humphrey Hospitality Trust, Inc. for the
year ended December 31, 1997 previously filed with the Securities and Exchange
Commission in Form 10-K and the financial statements of the Allen Acquisition
Hotels for the year ended December 31, 1997, at pages 5 through 14. In
management's opinion, all adjustments necessary to reflect the effects of the
above transactions have been made. This unaudited Pro Forma Condensed
Consolidated Statement of Income is not necessarily indicative of what actual
results of operations of the Company would have been assuming such transactions
had been completed as of January 1, 1997, nor does it purport to represent the
results of operations for future periods.
22
<PAGE> 23
Humphrey Hospitality Trust, Inc. and Subsidiaries
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME -
CONTINUED
Three months ended March 31, 1998
(Unaudited, in thousands)
<TABLE>
<CAPTION>
The
Company Pro Forma
Consolidated Pro Forma Consolidated
Historical Adjustments Total (a)
------------ ------------ ------------
<S> <C> <C> <C>
Operating data
Percentage lease revenue $ 1,904 $ 482 (b) $ 2,386
Other revenue 4 - 4
---------- ---------- ----------
Total revenue 1,908 482 2,390
Depreciation and amortization 552 96 (C) 648
Real estate and personal property taxes and
property insurance 139 50 (d) 189
Interest expense 659 (10)(e) 649
General and administrative 125 - 125
Ground rent 16 - 16
Minority interest 66 29 (f) 95
---------- ---------- ----------
Net income applicable to common shareholders $ 351 $ 317 $ 668
========== ========== ==========
Basic earnings per common share $ 0.10 - $ 0.14
Diluted earnings per common share $ 0.10 - $ 0.14
Weighted average shares
Basic 3,481,700 - 4,631,700(g)
Diluted 4,139,073 - 5,289,073(h)
</TABLE>
- --------------
(a) Represents results of operations for the Current Hotels and the Allen
Acquisition Hotels on a pro forma basis as if the Allen Acquisition
Hotels were owned by the Company and leased under the Percentage Leases,
and reflecting the reduction in debt resulting from the April 1998
Offering as of the beginning of the period presented.
(b) Represents lease payments from the Lessee to the Partnership calculated
on a pro forma basis using the rent provisions in the Percentage Leases
and the historical revenue of the Allen Acquisition Hotels.
23
<PAGE> 24
Humphrey Hospitality Trust, Inc. and Subsidiaries
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME -
CONTINUED
Three months ended March 31, 1998
(Unaudited, in thousands)
(c) Represents depreciation on the Allen Acquisition Hotels. Depreciation is
computed using the straight-line method based upon estimated useful
lives of 30-40 years for building and 5 years for furniture and
equipment and the purchase prices of the Allen Acquisition Hotels. The
estimated useful lives are based on management's knowledge of the
properties and the hotel industry in general.
(d) Represents estimated real estate and personal property taxes and
property insurance for the Allen Acquisition Hotels to be paid by the
Partnership.
(e) Represents interest computed on approximately $24.6 million of debt
remaining outstanding during the period after giving effect to the April
1998 Offering and the proposed use of proceeds from that Offering to
retire existing debt and the borrowings from the Credit Facility to fund
the purchase of the Allen Acquisition Hotels.
(f) Calculated at 12.4% of total revenue minus depreciation and
amortization, real estate and personal property taxes, property
insurance, interest expense, general and administrative expenses, and
ground rent.
(g) Represents 3,481,700 common shares outstanding during the period
presented plus 1,150,000 common shares issued in connection with the
April 1998 Offering.
(h) Assumes the conversion of the Units in the Partnership held by the
minority interest, consisting of 657,373 Units outstanding during the
period presented.
24
<PAGE> 25
Humphrey Hospitality Management, Inc.
PRO FORMA CONDENSED STATEMENT OF INCOME
Year ended December 31, 1997
This unaudited Pro Forma Condensed Statement of Income of Humphrey
Hospitality Management, Inc. is presented as if the consummation of the April
1998 Offering, (the Offering) and the acquisition of the Allen Acquisition
Hotels had occurred on January 1, 1997, and the percentage leases for the Allen
Acquisition Hotels were effective on January 1, 1997. Such estimated information
should be read in conjunction with the financial statements of Humphrey
Hospitality Management, Inc., previously filed with the Securities and Exchange
Commission in Form 10-K of Humphrey Hospitality Management, Inc., for the year
ended December 31, 1997, and the financial statements of the Allen Acquisition
Hotels for the year ended December 31, 1997, at pages 5 through 14. In
management's opinion, all adjustments necessary to reflect the effects of the
above transactions have been made. This unaudited Pro Forma Condensed Statement
of Income is not necessarily indicative of what actual results of operations of
Humphrey Hospitality Management, Inc. would have been assuming such transactions
had been completed as of January 1, 1997, nor does it purport to represent the
results of operations for future periods.
25
<PAGE> 26
Humphrey Hospitality Management, Inc.
PRO FORMA CONDENSED STATEMENT OF INCOME - CONTINUED
Year ended December 31, 1997
<TABLE>
<CAPTION>
Humphrey Allen
Hospitality Acquisition
Management, Hotels
Inc. Combined Pro Forma
Historical Historical Adjustments Total (a)
-------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Room revenue $ 15,581 $ 3,150 $ - $ 18,731
Other revenue 871 118 - 989
----------- ---------- ----------- ----------
Total revenue 16,452 3,268 - 19,720
----------- ---------- ----------- ----------
Expenses
Hotel operating costs 5,094 837 - 5,931
General and administrative 729 113 (5)(b) 837
Marketing and promotion 621 87 - 708
Utilities 768 194 - 962
Repairs and maintenance 384 109 - 493
Taxes and insurance 245 128 (43)(C) 330
Franchise fees 875 190 - 1,065
Interest - 555 (555)(d) -
Real estate taxes - 117 (117)(C) -
Depreciation and amortization - 356 (356)(d) -
Management fees - 68 - 68
Percentage lease payments 7,326 - 1,493 (e) 8,819
----------- ---------- ----------- ----------
16,042 2,754 417 19,213
----------- ---------- ----------- ----------
$ 410 $ 514 $ (417) $ 507
=========== ========== =========== ==========
</TABLE>
- -------------
(a) Represents results of operations for the Current Hotels and the Allen
Acquisition Hotels
26
<PAGE> 27
Humphrey Hospitality Management, Inc.
PRO FORMA CONDENSED STATEMENT OF INCOME - CONTINUED
Year ended December 31, 1997
on a pro forma basis as if the Allen Acquisition Hotels were owned by
the Company at the beginning of the periods presented and leased to the
Lessee under the Percentage Leases throughout the periods presented.
(b) Decrease reflects the elimination of certain nonrecurring charitable
contributions, professional fees and other general and administrative
expenses.
(c) Decrease reflects real estate and personal property taxes and an
allocation of property insurance to be paid by the Partnership.
(d) Decrease reflects the elimination of interest expense and depreciation
and amortization expense at the Lessee level.
(e) Represents lease payments calculated on a pro forma basis using the
proposed rent provisions in the Percentage Leases and the historical
revenue of the Allen Acquisition Hotels and the rent provisions in the
revised Percentage Leases.
27
<PAGE> 28
Humphrey Hospitality Management, Inc.
PRO FORMA CONDENSED STATEMENT OF OPERATIONS
Three months ended March 31, 1998
This unaudited Pro Forma Condensed Statement of Operations of Humphrey
Hospitality Management, Inc. is presented as if the consummation of the April
1998 Offering and acquisition of the Allen Acquisition Hotels had occurred on
January 1, 1998, and the percentage leases for the Allen Acquisition Hotels were
effective on January 1, 1998. Such estimated information should be read in
conjunction with the financial statements of Humphrey Hospitality Management,
Inc. previously filed with the Securities and Exchange Commission in Form 10-Q
of Humphrey Hospitality Management, Inc., for the three months ended March 31,
1998, and the financial statements of the Allen Acquisition Hotels for the three
months ended March 31, 1998, at pages 5 through 14. In management's opinion, all
adjustments necessary to reflect the effects of the above transactions have been
made. This unaudited Pro Forma Condensed Statement of Operations is not
necessarily indicative of what actual results of operations of Humphrey
Hospitality Management, Inc. would have been assuming such transactions had been
completed as of January 1, 1998, nor does it purport to represent the results of
operations for future periods.
28
<PAGE> 29
Humphrey Hospitality Management, Inc.
PRO FORMA CONDENSED
STATEMENT OF OPERATIONS - CONTINUED
Three months ended March 31, 1998
(Unaudited, in thousands)
<TABLE>
<CAPTION>
Humphrey Allen
Hospitality Acquisition
Management, Hotels
Inc. Combined Pro Forma
Historical Historical Adjustments Total (a)
-------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
Room revenue $ 3,662 $ 1,157 $ - $ 4,819
Other revenue 246 27 - 273
----------- ---------- ----------- ----------
Total revenue 3,908 1,184 - 5,092
----------- ---------- ----------- ----------
Expenses
Hotel operating costs 1,422 228 - 1,650
General and administrative 215 49 - 264
Marketing and promotion 174 9 - 183
Utilities 235 47 - 282
Repairs and maintenance 97 29 - 126
Taxes and insurance 72 26 (9)(b) 89
Franchise fees 189 42 - 231
Interest - 144 (144)(C) -
Real estate taxes - 41 (41)(b) -
Depreciation and amortization - 111 (111)(C) -
Percentage lease payments 1,904 - 482 (d) 2,386
----------- ---------- ----------- ----------
4,308 726 177 5,211
----------- ---------- ----------- ----------
$ (400) $ 458 $ (177) $ (119)
=========== ========== =========== ==========
</TABLE>
- -------------
(a) Represents results of operations for the Current Hotels and the Allen
Acquisition Hotels on a pro forma basis as if the Allen Acquisition
Hotels were owned by the Company at the beginning of the periods
presented and leased to the Lessee under the Percentage Leases
throughout the periods presented.
(b) Decrease reflects real estate and personal property taxes and an
allocation of property insurance to be paid by the Partnership.
29
<PAGE> 30
Humphrey Hospitality Management, Inc.
PRO FORMA CONDENSED
STATEMENT OF OPERATIONS - CONTINUED
Three months ended March 31, 1998
(Unaudited, in thousands)
(c) Decrease reflects the elimination of interest expense and depreciation
and amortization expense at the Lessee level.
(d) Represents lease payments calculated on a pro forma basis using the
proposed rent provisions in the percentage leases and the historical
revenue of the Allen Acquisition Hotels and the rent provisions in the
revised Percentage Leases.
30
<PAGE> 31
SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Humphrey Hospitality Trust, Inc.
--------------------------------
Date: 8/05/98 By: /s/ James I. Humphrey Jr
-------------------- ------------------------------------
James I. Humphrey Jr.
Chairman and President
31
