SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 10-Q/A
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from ____ to ____
Commission File Number 0-24794
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NATIONAL LODGING CORP.
(Exact name of Registrant as specified in its charter)
DELAWARE 22-332654
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
605 Third Avenue
23rd Floor
New York, New York 10158
(Address of principal executive offices, including zip code)
(212) 692-1400
(Telephone number, including area code)
Securities registered pursuant to Section 12(b)of the Act:
None
Securities registered pursuant to Section 12(g) of the Act:
Title of Class
Common Stock, par value $.01 per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No
As of June 30, 1996, there were 5,452,320 shares of the Registrant's Common
Stock issued and outstanding
<PAGE>
NATIONAL LODGING CORP.
Part I. Financial Information
Item 1. Financial Statements
<TABLE>
NATIONAL LODGING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
- --------------------------------------------------------------------------------------------
<CAPTION>
June 30, December 31,
ASSETS 1996 1995
CURRENT ASSETS:
<S> <C> <C>
Cash and cash equivalents $ 14,472 $ 51,470
Accounts receivable - net 4,172 -
Loans receivable 5,846 10,481
Receivable from joint ventures 2,624 -
Prepaid and other current assets 1,635 837
--------- --------
Total current assets 28,749 62,788
INVESTMENTS 7,205 16,700
LOANS RECEIVABLE 10,865 7,166
JOINT VENTURE INTERESTS 15,999 -
PROPERTY AND EQUIPMENT - Net 77,295 -
MANAGEMENT CONTRACTS - Net 8,660 -
OTHER ASSETS 2,895 420
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TOTAL ASSETS $ 151,668 $ 87,074
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY:
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 6,938 $ 552
Current portion of long-term debt 1,022 -
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Total current liabilities 7,960 552
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LONG-TERM DEBT 64,602 -
OTHER LIABILITIES 107 -
---------- --------
Total liabilities 72,669 552
MINORITY INTEREST 3,543 -
STOCKHOLDERS' EQUITY:
Common stock 55 55
Paid-in capital 106,617 106,697
Accumulated deficit (31,150) (20,280)
Foreign currency translation adjustment (66) -
Unrealized gain on securities available for sale - 50
-------- --------
Total stockholders' equity 75,456 86,522
-------- --------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $151,668 87,074
======== ========
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
<TABLE>
NATIONAL LODGING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
- ------------------------------------------------------------------------------------------ -----------------------------------
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------------------- -----------------------------------
1996 1995 1996 1995
REVENUE:
<S> <C> <C> <C> <C>
Hotel and motel revenue $ 19,029 $ - $ 31,497 $ -
Management fee and other income 1,050 - 1,633 -
Equity in earnings of unconsolidated hotel and
motel joint ventures 1,696 - 2,510 -
------- -------- ------- --------
Total revenue 21,775 - 35,640 -
------- -------- ------- --------
OPERATING EXPENSES:
Hotel and motel operating expense 8,015 - 13,406 -
Selling, general and administrative 5,349 692 9,688 1,486
Depreciation and amortization 2,467 - 4,250 -
Gaming development costs - 3,778 - 5,174
Provision for losses on gaming assets 9,069 - 9,447 -
Other 3,871 - 6,568 -
Minority interest 350 - 447 -
General and administrative related party 375 782 772 1,565
------- ------- ------- -------
Total operating expenses 29,496 5,252 44,578 8,225
------- ------- ------- -------
OPERATING LOSS (7,721) (5,252) (8,938) (8,225)
INTEREST INCOME (EXPENSE) - NET (1,219) 1,011 (1,933) 2,151
-------- ------- ------- -------
LOSS BEFORE INCOME TAX EXPENSE (8,940) (4,241) (10,871) (6,074)
INCOME TAX EXPENSE - 1,759 - 1,008
-------- -------- --------- --------
NET LOSS $ 8,940) $(6,000) $(10,871) $(7,082)
======== ======== ========= ========
PER SHARE INFORMATION:
Net loss $ (1.52) $ (1.17) $ (1.85) $ (1.38)
======== ======== ========= ========
Weighted average common shares outstanding 5,868 5,117 5,868 5,117
======== ======== ========= ========
</TABLE>
See notes to condensed consolidated financial statements.
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<PAGE>
<TABLE>
NATIONAL LODGING CORP. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(In Thousands)
- ---------------------------------------------------------------------------------------------------------------------
<CAPTION>
1996 1995
<S> <C> <C>
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES $ 1,553 $ (4,820)
-------- ---------
INVESTING ACTIVITIES:
Issuance of loans receivable (263) (970)
Joint venture interests and investments in casino projects - (1,951)
Principal payments received on loans 6,276 651
Travelodge acquisition, net of cash acquired (99,175) -
Other acquisitions and additions to property and equipment (2,781) -
-------- -------
Net cash used in investing activities (95,943) (2,270)
-------- -------
FINANCING ACTIVITIES:
Purchase of treasury stock - (3)
Proceeds on borrowings 70,000 -
Loan closing costs (1,622) -
Repayment on borrowings (10,986) -
-------- --------
Net cash provided by (used in) financing activities 57,392 (3)
-------- --------
NET DECREASE IN CASH AND CASH EQUIVALENTS 36,998) (7,093)
-------- --------
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 51,470 44,233
-------- --------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 14,472 $ 37,140
======== ========
</TABLE>
See notes to condensed consolidated financial statements
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<PAGE>
NATIONAL LODGING CORP. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
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1. BASIS OF PRESENTATION
The condensed consolidated balance sheet of National Lodging Corp. and
subsidiaries (the "Company") as of June 30, 1996, and the related
condensed consolidated statements of operations and cash flows for the
three and six month periods ended June 30, 1996 and 1995 are unaudited.
In the opinion of management, all adjustments necessary for a fair
presentation of such financial statements have been included. Such
adjustments consisted only of normal recurring items. Interim results are
not necessarily indicative of results for a full year.
The condensed consolidated financial statements and notes are presented
as required by Form 10-Q and do not contain certain information included
in the Company's annual consolidated financial statements. The year-end
condensed consolidated balance sheet was derived from the Company's
audited financial statements. This Form 10-Q should be read in
conjunction with the Company's consolidated financial statements and
notes incorporated by reference in the 1995 Annual Report on Form 10-K.
2. TRAVELODGE ACQUISITION
On January 23, 1996, the Company acquired the outstanding common stock of
Forte Hotels, Inc. ("FHI") for $98.4 million plus expenses, less certain
working capital adjustments totaling approximately $3.1 million. In
related transactions on January 23, 1996, prior to consummation of the
FHI acquisition, HFS Incorporated ("HFS") and Motels of America, Inc.
acquired from FHI the Travelodge franchise system and 19 motel
properties, respectively, for an aggregate purchase price of $71.6
million. The principal assets of FHI acquired by the Company include 17
wholly-owned hotels and motels and joint venture interests in 97 other
lodging facilities. The Company financed $60 million of the purchase
price with proceeds from a bank revolving credit facility ("Credit
Facility") and $38.4 million with existing cash. HFS provided advisory
services in connection with the acquisition for which the Company paid a
$2.0 million fee.
The acquisition described above was accounted for by the purchase method.
The operating results of the acquired company are included in the
consolidated statements of operations from its acquisition date, January
23, 1996.
The following presents the unaudited pro forma consolidated results of
operations for the six months ended June 30, 1996 and 1995 as if the
transactions described above occurred on January 1, 1995; giving effect
to the financing costs associated with the acquisition.
Six Months Ended
June 30,
----------------------------------
1996 1995
(In Thousands Except per Share Amounts)
(Unaudited)
Revenue $ 39,529 $ 34,950
Net Loss $ (11,610) $ (10,751)
Net loss per share $ (1.98) $ (2.10)
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<PAGE>
The pro forma results are not necessarily indicative of the actual
results of operations that would have occurred had the transactions been
consummated as indicated nor are they intended to indicate results that
may occur in the future.
3. CREDIT FACILITY
The Credit Facility provides up to $125 million of unsecured borrowings
through January 23, 2002. Revolving loans under the Credit Facility may
be borrowed, at the Company's option, as Base Rate Loans or Eurodollar
Loans. Interest on the outstanding principal amount of each Base Rate
Loan is payable at an annual rate equal to the highest of i) the
administrative agent's Prime Lending Rate, ii) the Adjusted Certificate
of Deposit Rate plus 0.50%, or iii) the Federal Funds Rate plus 0.50%.
The interest on the outstanding principal amount of each Eurodollar Loan
is payable at an annual rate of the Eurodollar Rate plus a margin not to
exceed 0.75%. The Company incurred $1.6 million of costs related to
execution of the Credit Facility and is required to pay an annual
administration fee of $150,000. The Company is obligated to pay a
commitment fee at an annual rate equal to 0.2% of the amount of the
Unutilized Revolving Loan Commitment. Total borrowings and Letters of
Credit outstanding as of June 30, 1996 under the agreement were $59.4
million and $15.0 million, respectively. The Company is also obligated to
pay a fee in respect of each outstanding letter of credit equal to the
applicable margin on the stated amount of the letter of credit, plus an
additional fee equal to the higher of $500 per year or an amount of 0.5%
of the stated amount of the letter of credit. The Credit Facility
contains covenants including restrictions on indebtedness, maintenance of
net worth, minimum interest coverage, minimum fixed charge, maximum
leverage coverages and others. The Company was not in compliance with
certain covenants as of June 30, 1996. The Company has received a waiver
from the lender pursuant to which the lender has agreed to waive the
Company's noncompliance with such covenants so long as the Company's
borrowings under the Credit Facility do not exceed $75,000,000. The
Company is in the process of refinancing this credit facility (see Note
11).
4. SALE OF STOCK
On February 14, 1996, the Company entered into an agreement with
Chartwell Leisure Associates L.P. II ("Chartwell") and FSNL LLC ("FSNL")
to sell 4 million newly issued shares of unregistered common Company
stock to Chartwell and FSNL for $57 million. This transaction is expected
to close on August 8, 1996 subject to shareholder approval. Upon
shareholder approval, Chartwell and FSNL will own approximately 52% of
the outstanding common stock of the Company. The Company's former
chairman and chief executive officer, who holds similar positions at HFS,
resigned on January 24, 1996 and was replaced by a principal of
Chartwell. HFS provided advisory services in connection with the
transaction for which the Company will pay a $1.14 million fee upon
completion of the sale.
5. PROPOSED CANADIAN ACQUISITION
The Company has agreed in principal to acquire from Capital Properties
Limited Partnership ("CPLP") 20 hotels and a one-half interest in an
additional hotel, which are hotels located throughout Canada and
franchised under the "Travelodge" brand name. The acquisition will be
accomplished by the Company paying approximately C$92 million in order to
purchase substantially all of CPLP's existing bank debt and pay certain
specified closing costs (including real estate taxes), as well as its
assumption of liability for identified trade payables and property
specific bank debt, aggregating approximately another C$12 million. In
addition, the Company will be obligated to make certain contingent
payments to CPLP's constituent partners following a preferred return to
the Company. The closing is subject to CPLP partner approval.
6. MEXICO JOINT VENTURE
On July 12, 1996, the Company entered into a joint venture with Grupo
Piasa, a Mexican hotel company, for the purpose of developing and
operating, or franchising others to operate, lodging facilities in Mexico
under the "Travelodge" and "Thriftlodge" tradenames. The joint venture
expects to document its agreement in principle with HFS and enter into a
master franchise agreement with HFS, pursuant to which the joint venture
will be entitled to develop and operate, or to franchise others to
develop and operate, lodging facilities in
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<PAGE>
Mexico under the "Travelodge" and "Thriftlodge" names. Although the terms
of the master franchise agreement have not yet been finalized, the
Company expects that they will require the joint venture to pay to HFS or
its affiliates certain fees, including development fees, franchise fees,
royalty fees based on gross room revenues, and certain other customary
fees, such as for travel agency, marketing and consulting services.
7. RELATED PARTY TRANSACTION
During March 1996, the Company entered into a lease with an affiliate of
Chartwell and an unaffiliated third party, as landlords, pursuant to
which the Company has leased approximately 18,700 square feet of office
space for a period of 10 years. Under this lease, the Company is
obligated to pay approximately $542,000 per year for each of the first
five years, and approximately $600,000 per year for each of the last five
years of the term of the lease for the use of such office space. The
terms of this lease are, in the opinion of the Company, substantially
similar to the market terms that would be available from a third party
for similar property.
8. STOCK OPTIONS
Options for 310,000 shares of common stock were granted under the
Company's 1994 Stock Option Plan on January 23, 1996 at an exercise price
of $10.625, representing fair market value on the date of grant.
Additional options were granted under the Company's 1994 Stock Option
Plan (i) for 900,000 shares of common stock on March 4, 1996 at an
exercise price of $13.25 and (ii) 75,000 shares of common stock on April
11, 1996 at an exercise price of $13.25. Such exercise prices represent
the fair market value on the dates of such grants.
9. INCOME TAXES
Deferred tax assets of $7.6 million at December 31, 1995 increased by
approximately $4.3 million during the six months ended June 30, 1996.
Such deferred tax assets are offset by a 100% valuation allowance. The
Company has approximately $17.5 million of loss carryforwards for federal
income tax purposes, expiring through 2010.
The amount of $17.5 million includes net operating loss carryforwards of
approximately $13.7 million and capital loss carryforwards of
approximately $3.8 million. The net operating loss carryforward available
to offset future taxable income will be restricted over several years as
result of future changes in ownership pursuant to Section 382 of the
Internal Revenue Code of 1986.
10. INVESTMENTS
<TABLE>
Investments consists of the following ($000's):
<CAPTION>
June 30, 1996 December 31, 1995
<S> <C> <C>
Investment in Boomtown Biloxi (a) $ -0- $4,840
Investment in Prescott 4,767 4,767
Investment in common stock of Century Casinos, Inc. (b) 352 425
Investment in preferred stock of Odyssey Gaming Corporation (c) -0- 3,752
Investment in Funtricity 1,836 1,836
Alpha Hospitality Warrants (d) 250 1,080
------ -------
$7,205 $16,700
====== =======
</TABLE>
(a)The Company is leasing a casino and barge in Biloxi, Mississippi to an
unrelated third party under a 25 year lease. Rental income is equal to
16% of the facility's EBITDA net of marketing fees payable to HFS,
Inc. Historically, the Company has not received cash flow after the
marketing fees. The Company does not anticipate receiving cash flow
during the remaining term of the lease and believes that the value
after 25 years may be negligible. As a result the Company has fully
reserved for this investment as of June 30, 1996 through the provision
for losses on gaming assets.
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<PAGE>
(b)At June 30, 1996, the market value of the stock was $352,000. A
$75,500 writedown to market value was included in the provision for
losses on gaming assets in the second quarter.
(c)The investment in Odyssey Gaming Corporation ("Odyssey") approximates
$3.8 million prior to reserve and consists of non-voting preferred
stock convertible into common stock representing a 20% interest in
Odyssey. Odyssey's principal investment is a five percent profits
interest in a proposed casino in Massachusetts. As of June 30, 1996,
Odyssey has no assets and was automatically dissolved by the Delaware
Secretary of State for failure to pay its taxes and file annual
reports. It is highly unlikely this casino will open due to the
difficulties incurred to date in obtaining a gaming license. The
Company has fully reserved against this asset through the provision
for losses on gaming assets.
(d)These warrants were written down to fair value utilizing the
Black-Scholes option valuation model and a comparison to the fair
market value of similar marketable securities issued by Alpha
Hospitality Corp.
11. SUBSEQUENT EVENTS
On July 12, 1996, the Company received a commitment for a $150.0 million
revolving line of credit (the "New Credit Facility") from The Chase
Manhattan Bank and Bank of Nova Scotia with The Chase Manhattan Bank as
administrative agent and Bank of Nova Scotia as syndication agent.
Additional lenders may also participate in the loan. The Company intends
to use the New Credit Facility to refinance it's current credit facility.
The Company will be entitled to utilize the credit line for the revolving
credit loans or the issuance of letters of credit. $75.0 million of the
Company's obligations under the Credit Facility will be guaranteed by
HFS. All outstanding obligations under the New Credit Facility are
expected to mature on the sixth anniversary of the date of the initial
borrowing under the facility. The New Credit Facility is expected to
close on or about August 15, 1996.
Proceeds of borrowings under the New Credit Facility will be available to
the Company (1) to refinance in full the Company's indebtedness under the
existing credit facility, (2) to finance the acquisition and or
construction of hotel properties and (3) to finance the Company's working
capital and general corporate requirements. In addition, up to $55
million of the aggregate commitment will be available as a subfacility in
the form of Canadian Dollar denominated loans to a newly-formed
wholly-owned subsidiary of the Company to finance the proposed CPLP
acquisition.
Revolving loans under the New Credit Facility are expected to be
available as base rate loans or eurodollar loans. Interest on the
outstanding principal amount of each base rate loan is expected to be
payable at an annual rate equal to the highest of (A) the rate which is
1/2 of 1% in excess of the Federal Reserve reported certificate of
deposit rate, (B) 1/2 of 1% in excess of the federal funds rate or (C)
the prime lending rate of The Chase Manhattan Bank. Interest on the
outstanding principal amount of each eurodollar loan is expected to be
payable at an annual rate equal to the sum of the applicable margin
(which is within a range of 0.40% to 1.00% based on the principal amount
of revolving loans and letters of credit outstanding) plus the eurodollar
rate. The Company is expected to be obligated to pay a commitment fee on
the unutilized portion of the facility at an annual rate of 0.200% to
0.375% depending on the principal amount of revolving loans and letters
of credit outstanding. The Company also expects to be obligated to pay a
fee in respect of each outstanding letter of credit equal to the
applicable margin on the stated amount of the letter of credit, plus an
additional fee equal of 0.15% of the stated amount of the letter of
credit.
************
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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 thereunto duly authorized.
NATIONAL LODGING CORP.
Date: August 9, 1996 Kenneth J. Weber
--------------------------------------------
Kenneth J. Weber
Chief Financial Officer (Duly Authorized
Officer of the Registrant) (Principal
Financial Officer and Principal Accounting
Officer)
