<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED) FEBRUARY 7, 1997 (OCTOBER 1,
1996)
CHARTWELL LEISURE INC.
- --------------------------------------------------------------------------------
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 0-24794 22-3326054
- --------------------------------------------------------------------------------
(STATE OR OTHER (COMMISSION (I.R.S. EMPLOYER
JURISDICTION OF FILE NUMBER) IDENTIFICATION NO.)
INCORPORATION)
605 THIRD AVENUE, NEW YORK, NEW YORK10158
- --------------------------------------------------------------------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
(ZIP CODE)
(212) 692-1400
- --------------------------------------------------------------------------------
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
NATIONAL LODGING CORP.
- --------------------------------------------------------------------------------
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT.)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS.
The information called for by this Item 2 is incorporated herein by reference
to the Registrant's Current Report on Form 8-K (File No. 0-24794) filed with
the Commission on October 15, 1996.
ITEM 5. OTHER EVENTS.
The information called for by this Item 5 is incorporated herein by reference
to the Registrant's Current Report on Form 8-K/A (File No. 0-24794) filed with
the Commission on December 12, 1996.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED.
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Capital Properties Limited Partnership
Audited Financial Statements as at September 30, 1996 and 1995 and for each
of the Three Years in the Period Ended September 30, 1996, and Independent
Auditors' Report.......................................................... 5
Independent Auditors' Report of Deloitte & Touche, Canada................ 6
Balance Sheets........................................................... 7
Statement of Operations.................................................. 8
Statement of Cash Flow................................................... 9
Notes to the Financial Statements........................................ 10
(b) PRO FORMA FINANCIAL INFORMATION.
INDEX TO PRO FORMA FINANCIAL STATEMENTS
Chartwell Leisure Inc. and Subsidiaries
Pro Forma Condensed Consolidated Financial Statements (Unaudited).......... 17
Pro Forma Condensed Consolidated Balance Sheet as of September 30, 1996
(Unaudited)............................................................. 19
Pro Forma Condensed Consolidated Statement of Operations for the Nine
Months Ended September 30, 1996 (Unaudited)............................. 20
Pro Forma Condensed Consolidated Statement of Operations for the Nine
Months Ended September 30, 1995 (Unaudited)............................. 21
Pro Forma Condensed Consolidated Statement of Operations for the Year
Ended
December 31, 1995 (Unaudited)........................................... 22
Notes to the Pro Forma Condensed Consolidated Financial Statements
(Unaudited)............................................................. 23
</TABLE>
2
<PAGE>
(c) EXHIBITS.
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
2.1* Contract of Sale, dated as of July 17, 1996, by and among Capital
Properties Limited Partnership, Syndicated Capital Properties,
Inc., Syncap Properties Inc., Tegrad Properties (Winnipeg) Inc.,
Tegrad Montreal I Inc., 1002370 Ontario, Inc. and Chartwell Canada
Corp.
10.1* Form of Future Payments Agreement, by and between Chartwell Canada
Corp. and Syndicated Capital Properties Inc., as agent for Capital
Properties Limited Partnership.
10.2** Credit Agreement, dated as of August 28, 1996, among the
Registrant, Chartwell Canada Corp., The Bank of Nova Scotia, The
Chase Manhattan Bank and the various banks named therein.
10.3* Development Agreement, dated as of October 1, 1996, by and between
NRG Management Services Inc. and the Registrant.
10.4* Form of Indemnification Agreement, by and among Chartwell Canada
Corp., the Registrant, NL Hotels, Inc., Capital Properties Limited
Partnership, Syndicated Capital Properties Inc., Royco Hotels &
Resorts Ltd. and NRG Management Services Inc.
10.5* Guaranty Letter, dated as of October 1, 1996, by Royco Hotels &
Resorts Ltd., Peter P. Sikora, Terrence Royer, Randy Royer and
Gregory Royer.
10.6* Non-Competition Agreement, dated as of October 1, 1996, by and
among Royco Hotels & Resorts Ltd., Peter P. Sikora, Terrence
Royer, Randy Royer, Gregory Royer, NL Hotels, Inc. and the
Registrant.
10.7* Debt Restructuring Letter Agreement, dated as of August 15, 1996,
by and among the Registrant, Bank of Montreal, Scotia Mortgage
Corporation, Canadian Imperial Bank of Commerce and Province of
Alberta Treasury Branches.
10.8** First Amendment, dated as of September 30, 1996, to the Credit
Agreement, dated as of August 28, 1996, among Chartwell Leisure
Inc., Chartwell Canada Corp., The Bank of Nova Scotia, The Chase
Manhattan Bank and the various banks named therein.
10.9** Hotel Management Agreement dated October 1, 1996, among Chartwell
Canada Corp., Chartwell Canada Nominee Corp., Tegrad Montreal
Inc., Edmonton South Nominee Corp., Calgary North Nominee Corp.
and Chartwell Lodging Corp.
10.10** Amended and Restated Management Services and Franchise Development
Agreement, dated as of October 1, 1996, among Chartwell Canada
Hospitality Corp., Chartwell Lodging Inc., Royco Hotels and
Resorts Ltd. and Chartwell Leisure Inc.
10.11** Master License Agreement for the Territory of the Dominion of
Canada, dated September 30, 1996, between Travelodge Hotel, Inc.
and Chartwell Canada Hospitality Corp.
10.12** Master License Agreement for the Territory of The United Mexican
States, dated September 18, 1996, between Travelodge Hotels, Inc.
and Chartwell Mexico, S.A. de C.V.
10.13** Termination Letter Agreement, dated as of November 20, 1996, by
and between the Registrant and HFS Incorporated.
10.14** Unsecured Note, dated as of November 20, 1996, for the principal
amount of $7,000,000, by the Registrant, in favor of HFS
Incorporated.
10.15** Development Advance Agreement, dated as of October 15, 1996,
between the Registrant and HFS Incorporated.
</TABLE>
- --------
* Filed as an exhibit to the Registrant's Current Report on Form 8-K (File No.
0-24794) filed with the Commission on October 15, 1996.
** Filed as an exhibit to the Registrant's Current Report on Form 8-K/A (File
No. 0-24794) filed with the Commission on December 12, 1996.
+ Filed herewith.
3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
10.16** Second Amended and Restated Financing Agreement, dated as of July
24, 1996, between the Registrant and HFS Incorporated.
10.17** Amendment No. 1 to Second Amended and Restated Financing
Agreement, dated as of August 1996, between the Registrant and HFS
Incorporated.
23.1+ Consent of Deloitte & Touche.
99.1* Press release of the Registrant, dated October 4, 1996.
99.2** Press release of the Registrant, dated November 25, 1996.
</TABLE>
- --------
* Filed as an exhibit to the Registrant's Current Report on Form 8-K (File No.
0-24794) filed with the Commission on October 15, 1996.
** Filed as an exhibit to the Registrant's Current Report on Form 8-K/A (File
No. 0-24794) filed with the Commission on December 12, 1996.
+ Filed herewith.
4
<PAGE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
FINANCIAL STATEMENTS
AS AT SEPTEMBER 30, 1996 AND 1995
AND FOR EACH OF THE THREE YEARS IN THE PERIOD
ENDED SEPTEMBER 30, 1996
5
<PAGE>
[LETTERHEAD]
AUDITORS' REPORT
TO: SYNDICATED CAPITAL PROPERTIES INC.,
THE GENERAL PARTNER OF CAPITAL PROPERTIES LIMITED PARTNERSHIP
We have audited the balance sheets of Capital Properties Limited Partnership
as at September 30, 1996 and 1995, and the statements of operations and cash
flows for each of the three years in the period ended September 30, 1996.
These financial statements are the responsibility of the General Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audits in accordance with auditing standards generally
accepted in Canada. Those standards require that we plan and perform an audit
to obtain reasonable assurance 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.
In our opinion, these financial statements present fairly, in all material
respects, the financial position of the Partnership as at September 30, 1996
and the results of its operations and the changes in its financial position
for each of the three years in the period then ended in accordance with
accounting principles generally accepted in Canada which differ in certain
material respects with accounting principles generally accepted in the United
States as described in Note 10.
(ART)
Chartered Accountants
Calgary, Alberta
October 30, 1996
6
<PAGE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
BALANCE SHEETS
AS AT SEPTEMBER 30
<TABLE>
<CAPTION>
CANADIAN DOLLARS
-----------------
1996 1995
-------- --------
$ $
(000S) (000S)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and term deposits...................................... 1,494 527
Cash held in trust.......................................... 389 0
Accounts receivable......................................... 2,488 2,435
Supplies and prepaids....................................... 1,401 1,536
-------- --------
5,772 4,498
PROPERTY AND EQUIPMENT (NOTE 4)............................... 129,134 162,568
-------- --------
134,906 167,066
======== ========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued liabilities.................... 6,175 5,918
Property taxes payable...................................... 711 776
Current portion of long term debt (Note 6).................. 124,141 122,665
-------- --------
131,027 129,359
LONG TERM DEBT (NOTE 6)....................................... 2,690 9,779
-------- --------
133,717 139,138
MINORITY INTEREST............................................. 389 405
PARTNERS' EQUITY (NOTE 7)..................................... 800 27,523
-------- --------
134,906 167,066
======== ========
</TABLE>
Approved on behalf of the Capital Properties Limited Partnership by its
general partner, Syndicated Capital Properties Inc.
/s/ Peter P. Sikora /s/ Randy B. Royer
_____________________________________ _____________________________________
PETER P. SIKORA, DIRECTOR RANDY B. ROYER, DIRECTOR
7
<PAGE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
STATEMENT OF OPERATIONS
FOR THE YEARS ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
CANADIAN DOLLARS
--------------------
1996 1995 1994
------ ------ ------
$ $ $
(000S) (000S) (000S)
<S> <C> <C> <C>
REVENUES
Rooms................................................... 45,175 43,529 38,930
Other................................................... 5,114 5,166 5,116
------ ------ ------
50,289 48,695 44,046
------ ------ ------
OPERATING EXPENSES
Wages and benefits...................................... 11,907 11,611 10,686
Direct costs............................................ 5,085 5,186 4,905
Administration.......................................... 2,707 2,682 2,386
Marketing............................................... 3,325 3,080 2,555
Maintenance and energy.................................. 3,911 3,816 3,758
Taxes and insurance..................................... 5,271 5,641 5,266
Management, royalty and franchise fees.................. 3,125 2,676 2,423
------ ------ ------
35,331 34,692 31,979
------ ------ ------
GENERAL AND ADMINISTRATION EXPENSES
Non-operating administration............................ 721 1,292 1,027
Depreciation and amortization........................... 3,448 3,628 3,553
Write-down of assets.................................... -- 708 --
Interest expense........................................ 11,102 11,359 11,085
Minority interest....................................... -- 21 5
------ ------ ------
15,271 17,008 15,670
------ ------ ------
LOSS BEFORE PROVISION FOR LOSS............................ 313 3,005 3,603
------ ------ ------
Provision for loss on disposal of properties (Note 1)..... 26,410 -- --
------ ------ ------
NET LOSS.................................................. 26,723 3,005 3,603
====== ====== ======
</TABLE>
8
<PAGE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
STATEMENT OF CASH FLOW
FOR THE YEARS ENDED SEPTEMBER 30
<TABLE>
<CAPTION>
CANADIAN DOLLARS
-----------------------
1996 1995 1994
------- ------ ------
$ $ $
(000S) (000S) (000S)
<S> <C> <C> <C>
NET INFLOW (OUTFLOW) OF CASH RELATED TO THE FOLLOWING
ACTIVITIES:
OPERATING
Net loss........................................... (26,723) (3,005) (3,603)
Non-cash items
Minority interest................................ -- 21 5
Depreciation and amortization.................... 3,448 3,628 3,553
Write-down of property........................... 24,946 708 --
------- ------ ------
1,671 1,352 (45)
Changes in non-cash working capital................ 274 (850) 1,704
------- ------ ------
1,945 502 1,659
------- ------ ------
FINANCING
Debt issued........................................ -- -- 1,906
Repayment of debt.................................. (771) (571) (1,111)
Partnership units issued........................... -- 30 6
Minority interest.................................. (16) (80) --
Property disposed.................................. 5,397 -- --
Mortgage debt on property disposed................. (4,842) -- --
------- ------ ------
(232) (621) 801
------- ------ ------
INVESTING
Additions to furnishings and equipment............. (357) (313) (2,535)
------- ------ ------
(357) (313) (2,535)
------- ------ ------
INCREASE IN CASH..................................... 1,356 (432) (75)
CASH, BEGINNING OF PERIOD............................ 527 959 1,034
------- ------ ------
CASH AND CASH HELD IN TRUST, END OF PERIOD........... 1,883 527 959
======= ====== ======
</TABLE>
9
<PAGE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
These financial statements have been prepared for purposes of inclusion in a
Registration Statement of Chartwell Leisure Inc. under the Securities Act of
1933, as amended, and a Current Report of Chartwell Leisure Inc. on Form 8-K
under the Securities Exchange Act of 1934, as amended. They reflect the
operations of the Capital Properties Limited Partnership ("CPLP") for its year
ended September 30, 1996 and its financial position immediately prior to the
acquisition of all its properties by Chartwell Canada Corp. ("Chartwell
Canada") on October 1, 1996 as follows:
<TABLE>
<CAPTION>
$
(000S)
-------
<S> <C>
Purchase price consideration:
--Assumption of mortgages and all bank debt...................... 126,831
--Assumption of working capital deficiency, except trust
accounts........................................................ 1,503
--Funds on closing............................................... 200
--Minimum future payments for 1997 and 1998...................... 600
-------
129,134
-------
Net book value of property and equipment prior to write down..... 154,080
-------
Write down of property........................................... 24,946
Transaction costs................................................ 1,464
-------
Provision for loss on disposal of properties..................... 26,410
=======
</TABLE>
In addition, pursuant to a participatory agreement CPLP is entitled to
additional participation that is determined based on cash flow generated by
the properties. Except for the minimum amounts for the years ended December
31, 1997 and 1998, such additional payments, if any, are not known at this
time. The participation has no expiry date but may be terminated by Chartwell
Canada any time after December 31, 2000 but before December 31, 2008.
Following the transaction on October 1, 1996, CPLP ceased active operations.
The pro-forma balance sheet at October 1, 1996 after the above transaction and
settlement of the minority interest is as follows:
<TABLE>
<CAPTION>
$
(000S)
------
<S> <C>
Pro-forma balance sheet as at October 1, 1996
ASSETS
Cash............................................................... 200
Due from Chartwell--minimum future payments........................ 600
---
800
===
LIMITED PARTNERS' EQUITY........................................... 800
===
</TABLE>
2. ORGANIZATION AND OPERATION OF THE PARTNERSHIP
(a) BUSINESS OF CAPITAL PROPERTIES LIMITED PARTNERSHIP
Capital Properties Limited Partnership ("Capital Properties" or "The
Partnership") was established in 1991 as a limited partnership in the Province
of Ontario.
Syndicated Capital Properties Inc. ("Syndicated GP") is the sole general
partner of Capital Properties. Capital Properties was formed for the purpose
of purchasing, developing, selling, renovating, managing and owning equity
interests in hotel properties and other real estate investments located or to
be located throughout Canada. At the present time Capital Properties owns a
100% interest in twenty-one hotels (subject to small minority interests) and a
50% interest in one hotel.
10
<PAGE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(b) MANAGEMENT, LICENSE AND MARKETING AGREEMENTS
Capital Properties has entered into management and license agreements with
Forte Hotels, Inc. and Forte Hotels Management, Inc. (collectively the
"Manager", represented by Royco Hotels & Resorts Ltd. in Canada) whereby the
Manager will manage each of the hotels owned by Capital Properties.
The agreements are for terms of 20 years with three renewal terms of 10
years each. The Manager is entitled to the following fees:
<TABLE>
<CAPTION>
% OF
"GROSS REVENUE"
AS DEFINED
---------------
<S> <C>
Management fee.......................................... 3.5
Royalty fee (for use of trademarks and management
systems to December 31, 1995).......................... 2.0
</TABLE>
The royalty fee was increased by an additional 1% as of January 1, 1996.
During the year Capital Properties incurred management fees of $2,221,000
($1,810,000 in 1995) and royalty fees of $904,000 ($866,000 in 1995).
The agreements also provide for the Manager to receive a management
incentive fee which will be noncumulative. The annual management incentive fee
will be calculated by multiplying the "MIF percentage" (defined below) by the
net operating income before debt service ("NOI") but payable out of net
operating income after debt service (the "Cash Available for Distribution") on
the basis of one dollar of management incentive fee to be paid to the Manager
for every three dollars of Cash Available for Distribution. The MIF percentage
shall be equal to 3% based on a ten million dollar NOI. The MIF percentage
will be increased or decreased proportionately based on increases or decreases
in the NOI, on the basis that a one million dollar increase or decrease in the
NOI results in a one half of one percent increase or decrease in the MIF
percentage, provided that the MIF percentage shall not increase for increases
in NOI beyond twenty-six million dollars. No management incentive fees have
been incurred to September 30, 1996.
Capital Properties also has an agreement with Travelodge International
Marketing Agency (TIMA) whereby each hotel will contribute 4% of room revenue
to a separate fund out of which the cost of the central reservation system and
national advertising and promotion will be paid. During the year fees under
this agreement were $1,796,000 ($1,741,000 in 1995).
Each hotel is responsible for its pro-rata cost of accounting services and
its local advertising and promotion expenses. With respect to the acquisition
of third party supplies and services, the Manager may charge an administrative
and handling fee, provided the price and terms of such supplies and services
including such fees are competitive with non-affiliated sources of supply.
Fees so charged amounted to $701,000 ($667,000 in 1995).
(c) ASSET MANAGEMENT FEE
Capital Properties has entered into an agreement with its general partner,
Syndicated GP, to manage the assets and provide investor services as long as
Syndicated GP remains as general partner. Syndicated GP will be entitled to be
reimbursed for its actual operating costs and out of pocket expenses and will
earn an annual management incentive fee, calculated and payable based on
3/16ths of the amount earned annually by the Manager as a management incentive
fee. Syndicated GP will receive a fee in connection with the acquisition, sale
or financing of the assets of Capital Properties and a fee based on equity
raised. No fees under this agreement were incurred to September 30, 1996.
11
<PAGE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. SIGNIFICANT ACCOUNTING POLICIES
These financial statements have been prepared in accordance with accounting
policies generally accepted in Canada. Significant accounting policies are
outlined below.
(a) BASIS OF PRESENTATION
These financial statements reflect only the assets, liabilities, revenues
and expenses of the partnership and do not include any other assets,
liabilities, revenues and expenses of the partners or the liability of the
partners for taxes on income earned by the partnership. The statement of
operations does not include a charge for interest on invested capital.
(b) PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and are depreciated over their
estimated useful lives. Hotel properties were valued on September 30, 1992,
the date of formation of the partnership, at amounts based on independent
third party appraisals. Depreciation on the hotel buildings will be provided
by the sinking fund method over forty years in amounts that increase annually
at 5%. Depreciation on renovations is provided using the straight line method
at the rate of 15% per annum. Depreciation on furnishings and equipment is
provided using the straight line method at rates ranging from 8% to 33% per
annum.
(c) MINORITY INTEREST
Certain owners of individual interests related to condominium hotels in
London, Sudbury and Kitchener did not accept Capital Properties' offer to
purchase their respective units at September 30, 1992. The interests of these
unit holders are treated as a minority interest in these financial statements.
4. PROPERTY AND EQUIPMENT
<TABLE>
<CAPTION>
SEPTEMBER 30
--------------------------------------
1996 1996 1995
1996 ACCUMULATED NET BOOK NET BOOK
COST DEPRECIATION VALUE VALUE
------- ------------ -------- --------
$ $ $ $
(000S) (000S) (000S) (000S)
<S> <C> <C> <C> <C>
Land.................................. 33,702 -- 33,702 35,957
Buildings............................. 111,735 29,288 82,447 111,158
Furnishings and equipment............. 21,468 8,483 12,985 15,453
------- ------ ------- -------
166,905 37,771 129,134 162,568
======= ====== ======= =======
</TABLE>
5. JOINT VENTURE
The following amounts are included in these financial statements and
represent Capital Properties' proportionate share of assets, liabilities,
revenues, and expenses of an unincorporated joint venture related to the
Edmonton South hotel.
<TABLE>
<CAPTION>
SEPTEMBER 30
-------------
1996 1995
------ ------
$ $
(000S) (000S)
<S> <C> <C>
Assets....................................................... 4,929 4,999
Liabilities.................................................. 908 1,067
Revenues..................................................... 1,002 962
Expenses..................................................... 919 964
</TABLE>
12
<PAGE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
6. LONG TERM DEBT
(a) MAJOR LENDERS
<TABLE>
<CAPTION>
SEPTEMBER 30
---------------
1996 1995
------- -------
$ $
(000S) (000S)
<S> <C> <C>
8.5% loan from Scotia Mortgage Corporation secured by five
hotels....................................................... 29,138 29,563
8.5% loan from Canadian Imperial Bank of Commerce (CIBC)
secured by five hotels....................................... 33,405 33,405
8.5% loan from the Province of Alberta Treasury Branch secured
by three and one half hotels (subject to existing
mortgages)................................................... 20,728 20,717
8.5% loan from Bank of Montreal secured by six hotels......... 28,288 28,353
------- -------
Total Major Lenders......................................... 111,559 112,038
======= =======
The above loans from major lenders are all due on September
30, 1997 and are secured by separate first fixed and
floating charge demand debentures related to their specific
hotels. Blended monthly interest and principal payments on
the above loans are $906,000. In addition Capital Properties
has granted the major lenders a blanket demand debenture on
all but two hotels. This debenture ranks after the
renovation loan security and other first mortgages and the
first charge debentures referred to below. During the year
Capital Properties was in violation of certain debt
covenants related to debt owed to the major lenders.
(b) 10.05% mortgage from the Hong Kong Bank Trust, due
November 1, 2000, secured by a hotel property and related
assets located at Edmonton South, with blended monthly
interest and principal payments of $11,078................ 796 858
(c) Bank prime + 1/2% mortgage from Adelaide Capital
Corporation due April 1, 2000, secured by a hotel property
and related assets located at Regina, Saskatchewan, with
monthly principal payments of $10,000 plus interest....... 2,119 2,239
(d) 8.5% mortgage from Canadian Western Bank, due September
30, 1997, secured by a hotel property and related assets
located at Toronto Woodbine, Ontario, with blended monthly
interest and principal payments of $39,560. The property
securing the mortgage was sold in July 1996 and the
outstanding mortgage was eliminated at that time.......... -- 4,842
(e) 9% mortgage from Hong Kong Bank Trust, due July 1, 1997,
secured by a hotel property and related assets located at
Calgary, Alberta, with blended interest and principal
payments of $60,095....................................... 6,857 6,967
(f) Bank prime + 2% renovation loan from the Province of
Alberta Treasury Branches with maturity date not yet
established, secured by a second fixed charge with respect
to all hotels (excluding C.I.B.C. hotels) and a third
fixed charge with respect to the C.I.B.C. hotels. During
the year, Capital Properties was in violation of certain
debt covenants related to debt owed to the lender......... 5,500 5,500
------- -------
126,831 132,444
Less principal amounts due within one year.................... 7,082 285
Less principal amounts due within one year due to violation of
financial covenants.......................................... 117,059 122,380
------- -------
2,690 9,779
======= =======
</TABLE>
13
<PAGE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
7. PARTNERS' EQUITY
(a) PARTNERSHIP UNITS AUTHORIZED
Authorized Units--The General Partner is authorized to issue the following
class of units:
an unlimited number of Class A units
an unlimited number of Class B units
an unlimited number of Class C units
The following are the attributes of the Class A, Class B and Class C
partnership units.
Class A Units
Fully voting, participating, redeemable units. Each Class A unit will
initially represent a contribution to capital of $1.00. Subject to any
preferred return payable on any other class of unit. Class A units are
entitled to an initial 7%, noncumulative, annual return and will thereafter
participate equally with all other participating units.
Class B Units
Class B units are fully voting, participating, redeemable units and
initially represent a contribution to capital of $1.00 per Class B unit. Class
B units are entitled to a 7%, noncumulative, preferred annual return from the
1st day of the month following the month of issuance until the fifth
anniversary of such date or such earlier or later date as may be determined by
the general partner at the time of issuance. Thereafter, the Class B units
participate equally with all other participating units, after payment of any
preferred annual return on any other Class or Classes of units and the 7%
annual return on the Class A units. A Class B unit will be deemed to be a
Class A unit on January 1st of the year following expiry of its preferred
return.
Class C Units
Class C units are fully voting, participating, redeemable units and
initially represent a contribution to capital of $1.00 per Class C unit. Class
C units are entitled to a 9%, noncumulative, preferred annual return in
priority to any preferred return on the Class B units, from the 1st day of the
month following the month of issuance until the fifth anniversary of such
date, or such earlier or later date as may be determined by the general
partner at the time of issuance. Thereafter, the Class C units participate
equally with all other participating units after payment of any preferred
return on any other Class or Classes of units and the 7% annual return on the
Class A units. A Class C unit will be deemed to be a Class A unit on January
1st of the year following the expiry of its preferred return.
The annual return of unit holders is based on distributable cash (as defined
in the partnership agreement). No distributions are payable for 1995.
(b) UNITS
<TABLE>
<CAPTION>
SEPTEMBER 30
---------------------
1996 1995
---------- ----------
<S> <C> <C>
A breakdown, by class of units issued, is as
follows:
Class A units................................... 31,892,150 31,892,150
Class B units................................... 12,580,527 12,580,527
Class C units................................... -- --
---------- ----------
44,472,677 44,472,677
========== ==========
</TABLE>
14
<PAGE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
(c) EQUITY
<TABLE>
<CAPTION>
$ $
(000S) (000S)
------- ------
<S> <C> <C>
Opening equity balance.................................... 27,523 30,498
Partnership units issued.................................. -- 30
Net loss.................................................. (26,723) (3,005)
------- ------
Closing equity balance.................................... 800 27,523
======= ======
</TABLE>
8. LEASE COMMITMENTS
Capital Properties is committed to lease payments aggregating $312,000 over
the next five years for certain operating equipment and one land lease
expiring in 2023. These leases were assumed by Chartwell Canada effective
October 1, 1996 (see note 1).
9. COMPARATIVE FIGURES
Certain of the prior years' numbers have been reclassified to conform to the
current year's presentation.
10. SUPPLEMENTAL INFORMATION
The following supplemental information is provided in accordance with the
Securities Exchange Act of 1934 as required for entities included in filings
with the United States Securities and Exchange Commission ("SEC").
RECONCILIATION WITH UNITED STATES GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
CPLP follows Canadian generally accepted accounting principles ("GAAP")
which are different in some respects from those applicable in the United
States and from practices prescribed by the SEC. A summary of these
differences is as follows:
(i) Depreciation Expense:
Capital Properties calculates depreciation expense on its buildings using
the sinking fund method. Under United States accounting principles, this
method is specifically disallowed and another systematic method must be
chosen. The straight line method was chosen using a period of 40 years
representing the estimated useful life of the buildings. The adjustment
results in an increase in depreciation expense of $1,566,000 (1995--
$1,371,000) and accumulated depreciation of $22,419,000 (1995--
$20,853,000).
(ii) Investment:
Capital Properties has recorded a 50% investment in a hotel property
under the proportionate consolidation method for Canadian GAAP. United
States accounting principles would require equity accounting disclosure.
Such accounting would result in no adjustment to net loss in the Statement
of Operations; a reduction in the individual assets and liabilities of
$4,929,000 (1995--$4,999,000) and $908,000 (1995--$1,067,000) respectively;
and the recognition of an investment account in the net amount of
$4,021,000 (1995--$3,932,000).
(iii) Property and Equipment:
Under Canadian GAAP, a reorganization can result in the comprehensive
revaluation of the assets brought into the new equity. Effective September
30, 1992, several limited partnerships rolled into Capital Properties
whereby the assets were revalued, resulting in an increase to the carrying
value of the properties.
15
<PAGE>
CAPITAL PROPERTIES LIMITED PARTNERSHIP
NOTES TO FINANCIAL STATEMENTS--(CONCLUDED)
Under United States Emerging Issues Task Force 87-21, a new basis of
accounting is not appropriate on the roll-in of limited partnership assets
into a Master Limited Partnership, which Capital Properties is deemed to
be. Historical costs of the assets should be carried forward. The
adjustment upon adoption of EITF 87-21 in 1992 was a decrease to property
and equipment and Partners' equity of $29,525,000 which is reflected in the
1996 Balance Sheet and Partners' Equity reconciliation.
(iv) Reversal of Write Down of Properties
The increased depreciation under US GAAP has reduced the property below
fair market value. Therefore, no provision is required under US GAAP.
Statement of Operations
The application of United States accounting principles would have affected
net loss as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30
---------------------------
1996 1995 1994
--------- ------- -------
$ $ $
(000S) (000S) (000S)
<S> <C> <C> <C>
Net loss based on Canadian GAAP............... 26,723 3,005 3,603
Depreciation and amortization expense(i)...... 1,566 1,371 1,419
Reversal of write-down of assets(iv).......... (24,946) -- --
--------- ------- -------
Net loss based on United States GAAP.......... 3,343 4,376 5,022
========= ======= =======
</TABLE>
Balance Sheet
The cumulative effect of the application of United States accounting
principles would have resulted in an increase (decrease) to the following
balance sheet accounts:
<TABLE>
<CAPTION>
SEPTEMBER 30
----------------
1996 1995
------- -------
$ $
(000S) (000S)
<S> <C> <C>
Accumulated depreciation(i).............................. 22,419 20,853
Property and equipment(iii).............................. (29,525) (29,525)
Reversal of write down of assets(iv)..................... 24,946 --
------- -------
Net property and equipment............................... (26,998) (50,378)
======= =======
Investment in 50% owned property(ii)..................... 4,021 3,932
======= =======
Partners' Equity......................................... (26,998) (50,378)
======= =======
</TABLE>
The cumulative effect on Partners' Equity is comprised of the following
items:
<TABLE>
<CAPTION>
SEPTEMBER 30
----------------
1996 1995
------- -------
$ $
(000S) (000S)
<S> <C> <C>
Partners' Equity based on Canadian GAAP.................. 800 27,523
------- -------
Depreciation and amortization expense(i)................. (22,419) (20,853)
Property and equipment(iii).............................. (29,525) (29,525)
Reversal of write down of assets(iv)..................... 24,946 --
------- -------
Cumulative change........................................ (26,998) (50,378)
------- -------
Partners' Deficiency based on United States GAAP......... (26,198) (22,855)
======= =======
</TABLE>
16
<PAGE>
CHARTWELL LEISURE INC. AND
SUBSIDIARIES
PRO FORMA CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
17
<PAGE>
CHARTWELL LEISURE INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following Pro Forma Condensed Consolidated Balance Sheet as of September
30, 1996 is presented as if the acquisition from Capital Properties Limited
Partnership ("CPLP") of 20 hotels and a one-half interest in an additional
hotel for approximately $77 million (the "Canadian Acquisition") had occurred
on September 30, 1996. The Pro Forma Condensed Consolidated Statements of
Operations for the year ended December 31, 1995 and the nine months ended
September 30, 1996 and September 30, 1995 are presented as if the acquisition
of all of the outstanding stock of Forte Hotels, Inc. ("Forte Hotels") for
approximately $98 million (the "Travelodge Acquisition"), the assets of which
consisted of 18 hotel properties (one of which was subsequently sold) and
interests in 97 joint venture properties, the Canadian Acquisition and the
sale of four million newly issued shares of the Company's Common Stock for an
aggregate purchase price of $57 million to an investment group (the "CL
Associates/FSNL Investment") had occurred on January 1, 1995. The Travelodge
Acquisition and the Canadian Acquisition have been accounted for using the
purchase method of accounting. Accordingly, assets acquired and liabilities
assumed will be recorded at their estimated fair values that are subject to
further refinement. Management does not expect that the final allocation of
the purchase prices for the Travelodge Acquisition and the Canadian
Acquisition will differ materially from the preliminary allocations.
The Pro Forma Condensed Consolidated Financial Statements should be read in
conjunction with the historical audited financial statements and related notes
thereto of Chartwell Leisure Inc. (formerly National Lodging Corp.),
Travelodge and CPLP. These Pro Forma Condensed Consolidated Financial
Statements are not necessarily indicative of the results that would actually
have occurred had the transactions been consummated at the dates indicated,
nor are they necessarily indicative of future operating results or financial
position of the Company.
The Pro Forma Condensed Consolidated Statements of Operations do not reflect
the effect of certain cost savings and revenue enhancements that management
believes may be realized following the Travelodge Acquisition and the Canadian
Acquisition. These savings are expected to be realized primarily through the
cessation of pursuing gaming development ventures, elimination of duplicative
corporate overhead and changes to the Company's corporate structures.
Reference in the Company's historical financial statements to the
"Travelodge/Thriftlodge" results of operation are referred to herein as
Travelodge.
18
<PAGE>
CHARTWELL LEISURE INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS CONSOLIDATED
HISTORICAL HISTORICAL COMPLETED COMPLETED
CHARTWELL CPLP TRANSACTIONS TRANSACTIONS
---------- ---------- ------------ ------------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash
equivalents.............. $ 17,802 $ 1,051 $(67,405)(1) $ 17,319
65,871 (2)
Accounts receivable--net.. 5,689 1,982 -- 7,671
Loan receivable--net...... 1,314 -- -- 1,314
Receivable from joint
ventures--net............ 1,999 -- -- 1,999
Prepaid and other current
assets................... 984 964 -- 1,948
-------- ------- -------- --------
Total Current Assets.... 27,788 3,997 (1,534) 30,251
INVESTMENTS............... 2,225 -- -- 2,225
LOANS RECEIVABLE--Net..... 11,310 -- -- 11,310
JOINT VENTURE INTERESTS... 16,934 2,931 (1,064)(1) 18,801
PROPERTY AND EQUIPMENT--
Net...................... 83,710 72,251 7,072 (1) 163,033
MANAGEMENT CONTRACTS...... 9,101 -- (6,000)(1) 3,101
OTHER ASSETS.............. 7,161 -- -- 7,161
-------- ------- -------- --------
TOTAL ASSETS................ $158,229 $79,179 $ (1,526) $235,882
======== ======= ======== ========
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and
accrued expenses......... $ 10,426 $ 4,945 $ -- $ 15,371
Current portion of long-
term debt................ 880 90,543 (85,395)(1) 6,028
-------- ------- -------- --------
Total current
liabilities............ 11,306 95,488 (85,395) 21,399
LONG-TERM DEBT.............. 17,379 1,463 (58)(1) 84,655
65,871 (2)
OTHER LIABILITIES........... 107 -- -- 107
-------- ------- -------- --------
Total liabilities....... 28,792 96,951 (19,582) 106,161
MINORITY INTEREST........... 3,609 284 -- 3,893
STOCKHOLDERS' EQUITY
Common stock.............. 95 -- -- 95
Paid-in-capital........... 161,521 -- -- 161,521
Accumulated deficit....... (35,874) -- -- (35,874)
Foreign currency
translation adjustment... 86 -- -- 86
CPLP net deficit.......... -- (18,056) 18,056 (1) --
-------- ------- -------- --------
Total stockholders'
equity................. 125,828 (18,056) 18,056 125,828
-------- ------- -------- --------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY....... $158,229 $79,179 $ (1,526) $235,882
======== ======= ======== ========
</TABLE>
19
<PAGE>
CHARTWELL LEISURE INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1996 (UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
CONSOLIDATED CONSOLIDATED
HISTORICAL HISTORICAL COMPLETED COMPLETED
CHARTWELL CPLP TRANSACTIONS TRANSACTIONS
---------- ---------- ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
REVENUE:
Hotel revenue......... $ 54,111 $25,688 $ (916)(3) $82,562
3,679 (9)
Management fee and
other income......... 2,942 2,847 (80)(3) 4,491
(1,352)(4)
134 (9)
Equity in earnings for
unconsolidated hotel
joint ventures....... 5,104 50 76 (9) 5,230
-------- ------- ------- -------
Total revenue....... 62,157 28,585 1,541 92,283
-------- ------- ------- -------
OPERATING EXPENSES:
Hotel operating ex-
pense................ 22,451 11,921 (349)(3) 35,802
1,779 (9)
General and adminis-
trative.............. 10,936 2,249 (4)(3) 13,922
(27)(4)
768 (9)
Marketing, franchise
and reservation
fees................. 5,619 2,689 (105)(3) 8,772
414 (9)
155 (10)
Maintenance and prop-
erty taxes........... 4,296 2,846 (164)(3) 7,365
387 (9)
Rent.................. 3,842 277 (9) 4,119
Depreciation and amor-
tization............. 6,615 2,505 (53)(3) 7,509
2,232 (5)
(2,505)(5)
560 (9)
(1,845)(11)
Other................. 3,219 950 (70)(3) 2,966
(1,325)(4)
192 (9)
Minority interest..... 978 -- 27 (9) 1,005
General and
administrative-
related party........ 1,147 -- -- 1,147
Provision for losses
on gaming assets..... 14,240 -- -- 14,240
-------- ------- ------- -------
Total operating ex-
penses............. 73,343 23,160 344 96,847
-------- ------- ------- -------
OPERATING INCOME
(LOSS)................. (11,186) 5,425 1,197 (4,564)
INTEREST EXPENSE........ (4,631) (5,998) 266 (3) (5,941)
(873)(6)
5,556 (7)
(19)(8)
(53)(9)
(189)(12)
INTEREST INCOME......... 1,912 -- (121)(13) 1,791
-------- ------- -------
INCOME (LOSS) BEFORE TAX
EXPENSE................ (13,905) (573) 5,764 (8,714)
INCOME TAX EXPENSE...... 213 -- -- 213
-------- ------- ------- -------
NET INCOME (LOSS)....... $(14,118) $ (573) $ 5,764 $(8,927)
======== ======= ======= =======
PER SHARE INFORMATION:
NET LOSS.............. $ (2.12) -- -- $ (.90)
======== ======= ======= =======
WEIGHTED AVERAGE SHARE
OUTSTANDING.......... 6,651 -- 3,217 (6) 9,868
</TABLE>
20
<PAGE>
CHARTWELL LEISURE INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS CONSOLIDATED
HISTORICAL HISTORICAL HISTORICAL COMPLETED COMPLETED
CHARTWELL TRAVELODGE CPLP TRANSACTIONS TRANSACTIONS
---------- ---------- ---------- ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
REVENUE:
Hotel revenue......... $ -- $51,391 $24,609 $(1,412)(3) $ 74,588
Management fee and
other income......... -- 2,356 2,878 (145)(3) 4,057
(1,032)(4)
Equity in earnings of
unconsolidated hotel
joint ventures....... -- 4,684 4 -- 4,688
-------- ------- ------- ------- --------
Total revenue....... -- 58,431 27,491 (2,589) 83,333
-------- ------- ------- ------- --------
OPERATING EXPENSES:
Hotel operating
expense.............. -- 22,364 11,514 (423)(3) 33,455
General and
administrative....... 2,062 9,951 2,172 (222)(3) 13,974
11 (4)
Marketing, franchise
and reservation
fees................. -- 3,525 2,597 (148)(3) 8,390
2,416 (10)
Maintenance and
property taxes....... -- 4,358 2,749 (339)(3) 6,768
Rent.................. -- 3,425 3,425
Depreciation and
amortization......... -- 6,563 2,665 (67)(3) 7,129
2,246 (5)
(2,665)(5)
(1,613)(11)
Other................. -- 2,386 1,433 (1,043)(4) 2,162
(614)(3)
Minority interest..... -- 850 -- -- 850
General and
administrative-
related party........ 2,464 -- -- (1,125)(14) 1,339
Gaming development
costs................ 14,953 -- -- -- 14,953
-------- ------- ------- ------- --------
Total operating
expenses........... 19,479 53,422 23,130 (3,586) 92,445
-------- ------- ------- ------- --------
OPERATING INCOME
(LOSS)................. (19,479) 5,009 4,361 997 (9,112)
INTEREST EXPENSE........ -- (649) (6,146) 227 (3) (5,231)
(487)(6)
5,703 (7)
(212)(8)
(2,542)(12)
(1,125)(14)
INTEREST INCOME......... 3,138 631 -- (1,627)(13) 2,142
-------- ------- ------- ------- --------
INCOME (LOSS) BEFORE TAX
EXPENSE................ (16,341) 4,991 (1,785) 1,060 (12,201)
INCOME TAX EXPENSE...... 709 -- -- -- 709
-------- ------- ------- ------- --------
NET INCOME (LOSS)....... $(17,050) $ 4,991 $(1,785) $ 1,060 $(12,910)
======== ======= ======= ======= ========
PER SHARE INFORMATION:
NET LOSS.............. $ (3.34) -- -- -- $ (1.64)
======== ======= ======= ======= ========
WEIGHTED AVERAGE SHARE
OUTSTANDING.......... 5,112 -- -- 4,000 (6) 9,112
</TABLE>
21
<PAGE>
CHARTWELL LEISURE INC. AND SUBSIDIARIES
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
ADJUSTMENTS CONSOLIDATED
HISTORICAL HISTORICAL HISTORICAL COMPLETED COMPLETED
CHARTWELL TRAVELODGE CPLP TRANSACTIONS TRANSACTIONS
---------- ---------- ---------- ------------ ------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
REVENUE:
Hotel revenue......... $ -- $65,790 $31,067 $(1,605)(3) $ 95,252
Management fee and
other income......... -- 3,351 3,706 (118)(3) 5,623
(1,316)(4)
Equity in earnings of
unconsolidated hotel
joint ventures....... -- 5,338 12 -- 5,350
-------- ------- ------- ------- --------
Total revenue....... -- 74,479 34,785 (3,039) 106,225
-------- ------- ------- ------- --------
OPERATING EXPENSES:
Hotel operating
expense.............. -- 28,904 14,839 (552)(3) 43,191
General and
administrative....... 2,756 13,059 2,800 (276)(3) 17,023
(1,316)(4)
Marketing, franchise &
reservation fees..... -- 4,459 3,348 (181)(3) 10,737
3,111 (10)
Maintenance and
property taxes....... -- 5,537 3,542 (459)(3) 8,620
Rent.................. -- 4,700 -- -- 4,700
Depreciation and
amortization......... -- 8,385 3,537 (89)(3) 9,145
2,994 (5)
(3,537)(5)
(2,145)(11)
Other................. -- 2,693 1,696 (641)(3) 3,748
Minority interest..... -- 1,073 15 1,088
General and
administrative
related party........ 3,247 -- -- (1,500)(14) 1,747
Gaming development
costs................ 15,482 -- -- 15,482
-------- ------- ------- ------- --------
Total operating
expenses........... 21,485 68,810 29,777 (4,591) 115,481
-------- ------- ------- ------- --------
OPERATING INCOME
(LOSS)................. (21,485) 5,669 5,008 1,552 (9,256)
INTEREST EXPENSE........ -- (785) (8,195) 302 (3) (6,895)
(650)(6)
7,605 (7)
(282)(8)
(3,390)(12)
(1,500)(14)
INTEREST INCOME......... 4,012 838 -- (2,170)(13) 2,680
-------- ------- ------- ------- --------
INCOME (LOSS) BEFORE TAX
EXPENSE................ (17,473) 5,722 (3,187) 1,467 (13,471)
INCOME TAX EXPENSE...... 709 2,288 -- (2,288)(15) 709
-------- ------- ------- ------- --------
NET INCOME (LOSS)....... $(18,182) $ 3,434 $(3,755) $(1,106) $(14,180)
======== ======= ======= ======= ========
PER SHARE INFORMATION:
NET LOSS.............. $ (3.57) -- -- -- $ (1.56)
======== ======= ======= ======= ========
WEIGHTED AVERAGE SHARE
OUTSTANDING.......... 5,099 -- -- 4,000 (6) 9,099
</TABLE>
22
<PAGE>
CHARTWELL LEISURE INC. & SUBSIDIARIES
NOTES TO THE PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
PRO FORMA BALANCE SHEET ADJUSTMENTS
1. The acquisition costs of the Canadian Acquisition have been allocated as
follows:
<TABLE>
<S> <C>
Total cash consideration........................................ $64,207
Transaction fee................................................. 3,198
-------
67,405
Allocation of management contracts related to hotels acquired in
the Canadian Acquisition. Historical Travelodge management
contracts include management contracts relating to the
properties acquired in the Canadian Acquisition. As a result of
the acquisition of these properties, management contracts were
reduced by $6,000 and property and equipment increased by
$6,000.......................................................... 6,000
-------
73,405
Short-term historical debt not assumed in the acquisition....... (85,395)
Long term debt not assumed in the acquisition................... (58)
Canadian Acquisition net deficit eliminated..................... 18,056
-------
Excess of purchase price over book value of net assets acquired
allocated to hotel properties, joint venture interest, and
equipment based on relative fair value.......................... $ 6,008
=======
</TABLE>
The Company allocated $1,064 from joint venture interest to property and
equipment representing the fair value of the joint venture interest acquired.
The Company may be obligated to make certain payments to CPLP's constituent
partners, based on a formula which considers future earnings of the properties
acquired in the Canadian Acquisition. Such payments if and when such amounts
are determinable will be allocated to properties to the extent of fair value
and amortized over the remaining useful life of the properties. The Company
would not have been required to make any such payments on a pro forma basis
for the nine months ending September 30, 1996, September 30, 1995, and for the
year ended December 31, 1995.
2. The pro forma adjustment represents the cash amount of the loan proceeds
from borrowings under the Company's Credit Facility, among the Company,
Chartwell Canada, The Chase Manhattan Bank, as Administrative Agent, The Bank
of Nova Scotia, as Syndication Agent, and the Banks from time to time parties
thereto (the "Credit Facility") used to finance the Canadian Acquisition.
CPLP PRO FORMA STATEMENT OF OPERATIONS ADJUSTMENTS
3. The pro forma adjustment reflects the elimination of a hotel included in
the historical statements of the Canadian Acquisition that was not acquired by
the Company.
4. The pro forma adjustment reflects the elimination of management fee
income of historical Travelodge and the related management expense of
historical CPLP for the management of the Canadian Acquisition properties. The
income and related expense was $1,352 for the nine months ended September 30,
1996, $1,032 for the nine months ended September 30, 1995, and $1,316 for the
year ended December 31, 1995.
5. The pro forma adjustment represents the change in depreciation as a
result of the allocation of the purchase price to the CPLP property and
equipment. Hotel property and equipment are being depreciated on a straight-
line basis. Buildings are being depreciated over a 30-year life and furniture
and equipment over a five-year life.
23
<PAGE>
<TABLE>
<CAPTION>
FOR THE NINE-
MONTHS
ENDED FOR THE YEAR
SEPTEMBER 30, ENDED DECEMBER 31,
---------------- ------------------
1996 1995 1995
------- ------- ------------------
<S> <C> <C> <C>
Historical CPLP Depreciation......... $(2,505) $(2,665) $(3,537)
Pro Forma Depreciation based on
allocation of fair value............ 2,232 2,246 2,994
</TABLE>
6. The pro forma adjustment represents the increase in interest expense for
the net increase in the line of credit. The adjustment accounts for the
interest expense on the $67.4 million outstanding, less the $54.4 million net
proceeds of the stock issuance in connection with the CL Associates/FSNL
Investment. The additional interest expense was $873 for the nine months ended
September 30, 1996, $487 for the nine months ended September 30, 1995, and
$650 for the year ended December 31, 1995.
7. The pro forma adjustment represents elimination of historical interest
expense related to the historical CPLP debt that was not assumed in the
acquisition. The reduction in interest expense was $5,556 for the nine months
ended September 30, 1996, $5,703 for the nine months ended September 30, 1995,
and $7,605 for the year ended December 31, 1995.
8. The pro forma adjustment represents the amortization of deferred loan
costs incurred under the Credit Facility. Such costs are amortized over the
six-year life of the Credit Facility. The incremental amortization was $19 for
the 22 days included in the nine months ended September 30, 1996, $212 for the
nine months ended September 30, 1995, and $282 for the year ended December 31,
1995.
TRAVELODGE PRO FORMA STATEMENT OF OPERATIONS ADJUSTMENTS
9. The pro forma adjustment represents the addition of 22 days of operating
activity for the period ended September 30, 1996 for the Travelodge
Acquisition. The Travelodge Acquisition was consummated on January 23, 1996.
10. The pro forma adjustment represents royalty expense equal to 4% of gross
room revenues pursuant to a franchise agreement executed with the owner of the
Travelodge/Thriftlodge trademarks. Incremental royalty expense was $155 for
the 22 days included in the nine months ended September 30, 1996, $2,416 for
the nine months ended September 30, 1995, and $3,111 for the year ended
December 31, 1995.
11. The pro forma adjustment reflects the decrease in depreciation for the
Travelodge Acquisition as a result of the allocation of purchase price to the
acquired properties based on their relative fair market value. The allocation
of the purchase price resulted in an increase in value in the assets with a
longer life, resulting in an overall decrease in depreciation expense compared
to historical expense. Hotel property and equipment are depreciated on a
straight line basis over a blended life of 25 years. The decrease in
depreciation was $1,845 for the nine months ended September 30, 1996, $1,613
for the nine months ended September 30, 1995, and $2,145 for the year ended
December 31, 1995.
12. The pro forma adjustment represents the increase in interest expense due
to the increase in the line of credit of $60 million to finance the Travelodge
Acquisition. The increase in interest expense was $189 for the 22 days
included in the nine months ended September 30, 1996, $2,542 for the nine
months ended September 30, 1995, and $3,390 for the year ended December 31,
1995.
13. The pro forma adjustment represents the elimination of interest income
on the $38 million of the Company's cash used for the Travelodge Acquisition.
The decrease in interest income was $121 for the 22 days included in the nine
months ended September 30, 1996, $1,627 for the nine months ended September
30, 1995, and $2,170 for the year ended December 31, 1995.
14. The pro forma adjustment reflects the reclassification from general and
administrative related party to interest expense for the fee for HFS'
agreement to guarantee up to $75 million of the Company's borrowings under the
Credit Facility through February 2003 ("the HFS Guarantee"). The amount
reclassified was $1,125 for the nine months ended September 30, 1995, and
$1,500 for the year ending December 31, 1995.
15. The pro forma adjustment reflects the elimination of income tax expense
for historical Travelodge.
24
<PAGE>
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.
Chartwell Leisure Inc.
(Registrant)
Date: February 7, 1997 /s/ Martin L. Edelman
By __________________________________
Name:Martin L. Edelman
Title:President
25
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
----------- ----------- ----
<C> <S> <C>
2.1* Contract of Sale, dated as of July 17, 1996, by and among
Capital Properties Limited Partnership, Syndicated Capital
Properties, Inc., Syncap Properties Inc., Tegrad Properties
(Winnipeg) Inc., Tegrad Montreal I Inc., 1002370 Ontario,
Inc. and Chartwell Canada Corp.
10.1* Form of Future Payments Agreement, by and between Chartwell
Canada Corp. and Syndicated Capital Properties Inc., as
agent for Capital Properties Limited Partnership.
10.2** Credit Agreement, dated as of August 28, 1996, among the
Registrant, Chartwell Canada Corp., The Bank of Nova
Scotia, The Chase Manhattan Bank and the various banks
named therein.
10.3* Development Agreement, dated as of October 1, 1996, by and
between NRG Management Services Inc. and the Registrant.
10.4* Form of Indemnification Agreement, by and among Chartwell
Canada Corp., the Registrant, NL Hotels, Inc., Capital
Properties Limited Partnership, Syndicated Capital
Properties Inc., Royco Hotels & Resorts Ltd. and NRG
Management Services Inc.
10.5* Guaranty Letter, dated as of October 1, 1996, by Royco
Hotels & Resorts Ltd., Peter P. Sikora, Terrence Royer,
Randy Royer and Gregory Royer.
10.6* Non-Competition Agreement, dated as of October 1, 1996, by
and among Royco Hotels & Resorts Ltd., Peter P. Sikora,
Terrence Royer, Randy Royer, Gregory Royer, NL Hotels, Inc.
and the Registrant.
10.7* Debt Restructuring Letter Agreement, dated as of August 15,
1996, by and among the Registrant, Bank of Montreal, Scotia
Mortgage Corporation, Canadian Imperial Bank of Commerce
and Province of Alberta Treasury Branches.
10.8** First Amendment, dated as of September 30, 1996, to the
Credit Agreement, dated as of August 28, 1996, among
Chartwell Leisure Inc., Chartwell Canada Corp., The Bank of
Nova Scotia, The Chase Manhattan Bank and the various banks
named therein.
10.9** Hotel Management Agreement dated October 1, 1996, among
Chartwell Canada Corp., Chartwell Canada Nominee Corp.,
Tegrad Montreal Inc., Edmonton South Nominee Corp., Calgary
North Nominee Corp. and Chartwell Lodging Corp.
10.10** Amended and Restated Management Services and Franchise
Development Agreement, dated as of October 1, 1996, among
Chartwell Canada Hospitality Corp., Chartwell Lodging Inc.,
Royco Hotels and Resorts Ltd. and Chartwell Leisure Inc.
10.11** Master License Agreement for the Territory of the Dominion
of Canada, dated September 30, 1996, between Travelodge
Hotel, Inc. and Chartwell Canada Hospitality Corp.
10.12** Master License Agreement for the Territory of The United
Mexican States, dated September 18, 1996, between
Travelodge Hotels, Inc. and Chartwell Mexico, S.A. de C.V.
10.13** Termination Letter Agreement, dated as of November 20,
1996, by and between the Registrant and HFS Incorporated.
10.14** Unsecured Note, dated as of November 20, 1996, for the
principal amount of $7,000,000, by the Registrant, in favor
of HFS Incorporated.
10.15** Development Advance Agreement, dated as of October 15,
1996, between the Registrant and HFS Incorporated.
</TABLE>
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* Filed as an exhibit to the Registrant's Current Report on Form 8-K (File No.
0-24794) filed with the Commission on October 15, 1996.
** Filed as an exhibit to the Registrant's Current Report on Form 8-K/A (File
No. 0-24794) filed with the Commission on December 12, 1996.
+ Filed herewith.
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
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<C> <S> <C>
10.16** Second Amended and Restated Financing Agreement, dated as
of July 24, 1996, between the Registrant and HFS
Incorporated.
10.17** Amendment No. 1 to Second Amended and Restated Financing
Agreement, dated as of August 1996, between the Registrant
and HFS Incorporated.
23.1+ Consent of Deloitte & Touche.
99.1* Press release of the Registrant, dated October 4, 1996.
99.2** Press release of the Registrant, dated November 25, 1996.
</TABLE>
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* Filed as an exhibit to the Registrant's Current Report on Form 8-K (File No.
0-24794) filed with the Commission on October 15, 1996.
** Filed as an exhibit to the Registrant's Current Report on Form 8-K/A (File
No. 0-24794) filed with the Commission on December 12, 1996.
+ Filed herewith.
<PAGE>
EXHIBIT 23.1
[LETTERHEAD OF DELOITTE & TOUCHE]
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statement of
Chartwell Leisure Inc. (formerly National Lodging Corp.) on Form S-3 and Form
S-8 of our report dated October 30, 1996 appearing in the report on Form 8-KA of
Chartwell Leisure Inc. on the financial statements of Capital Properties Limited
Partnership for the year ended September 30, 1996 and 1995 and to the reference
to us under the heading "Experts" in the prospectus which is part of this
Registration Statement.
/s/ Deloitte & Touche
Chartered Accountants
Calgary, Alberta, Canada
February 7, 1997
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Deloitte Touche
Tohmatsu
International
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