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): October 8, 2003
ASHFORD HOSPITALITY TRUST, INC.
(Exact name of registrant as specified in its charter)
MARYLAND 001-31775 86-1062192
(State of Incorporation) (Commission File Number) (I.R.S. Employer
Identification
Number)
14180 Dallas Parkway, 9th Floor
Dallas, Texas 75254
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code: (972) 490-9600
EXPLANATORY NOTE: Pursuant to Item 7(a) (4) of Form 8-K, this Current Report on
Form 8-K/A amends the Registrant's Current Report on Form 8-K for the event
dated September 16, 2003, as filed on September 23, 2003, to include the
historical financial statements and pro forma financial information required by
Item 7(a) and (b).
FORM 8-K/A
INDEX
Item 2. Acquisition or Disposition of Assets 3
Item 7. Financial Statements, Pro Forma Financial Information,
and Exhibits 4
a. Financial Statements
Report of Independent Auditors 4
Combined Historical Summaries of Revenue and Direct Operating
Expenses for the six months ended June 30, 2003 (unaudited) and
year ended December 31, 2002 5
Notes to Combined Historical Summaries of Revenue and Direct
Operating Expenses for the six months ended June 30, 2003
(unaudited) and year ended December 31, 2002 6
b. Pro Forma Financial Information (Unaudited) 8
Pro Forma Consolidated Balance Sheet
as of June 30, 2003 9
Pro Forma Consolidated Statement of Operations
for the six months ended June 30, 2003 11
Pro Forma Consolidated Statement of Operations
for the year ended December 31, 2002 13
c. Exhibits 15
23.1 Consent of Independent Auditors
99.3 Press Release
SIGNATURE 16
2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On October 8, 2003, Ashford Hospitality Trust, Inc. (the "Company") acquired
five hotel properties from FelCor Lodging Limited Partnership (the "FelCor
Properties") for $50 million in cash. The purchase price was the result of an
arms' length negotiation. The Company used a portion of the proceeds from its
initial public offering of common stock as the source of funds for the
acquisition of these properties. A copy of the related press release, dated
October 9, 2003, is attached hereto as Exhibit 99.3 and is incorporated herein
by reference.
3
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION, AND EXHIBITS
REPORT OF INDEPENDENT AUDITORS
BOARD OF TRUSTEES AND SHAREHOLDERS
ASHFORD HOSPITALITY TRUST, INC.
We have audited the accompanying Combined Historical Summary of Revenue and
Direct Operating Expenses (the Combined Historical Summary) of the FelCor
Properties (as described in Note 1) for the year ended December 31, 2002. The
Combined Historical Summary is the responsibility of FelCor Lodging Limited
Partnership's management. Our responsibility is to express an opinion on the
Combined Historical Summary based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the Combined Historical Summary is
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the Combined Historical
Summary. An audit also includes assessing the basis of accounting used and
significant estimates made by management, as well as evaluating the overall
presentation of the Combined Historical Summary. We believe that our audit
provides a reasonable basis for our opinion.
The accompanying Combined Historical Summary was prepared for the purpose of
complying with the rules and regulations of the Securities and Exchange
Commission for inclusion in the filing of a Form 8-K/A of Ashford Hospitality
Trust, Inc. as described in Note 1, and are not intended to be a complete
presentation of the FelCor Properties' revenue and expenses.
In our opinion, the Combined Historical Summary referred to above presents
fairly, in all material respects, the revenue and direct operating expenses
described in Note 1 of the FelCor Properties for year ended December 31, 2002,
in conformity with accounting principles generally accepted in the United
States.
/s/ Ernst & Young LLP
Dallas, Texas
November 6, 2003
4
FELCOR PROPERTIES
COMBINED HISTORICAL SUMMARIES OF REVENUE AND DIRECT OPERATING EXPENSES
FOR THE SIX MONTHS ENDED JUNE 30, 2003
AND YEAR ENDED DECEMBER 31, 2002
SIX MONTHS
ENDED YEAR
JUNE 30, 2003 ENDED
(UNAUDITED) DECEMBER 31, 2002
------------- -----------------
REVENUE
Rooms $ 11,269,210 $ 22,085,533
Food and beverage 1,333,588 2,574,917
Other 601,910 1,296,961
------------- -----------------
TOTAL REVENUE 13,204,708 25,957,411
DIRECT OPERATING EXPENSES
Rooms 2,673,276 5,627,969
Food and beverage 1,242,277 2,360,119
Other direct 535,809 1,296,233
Indirect 4,579,425 8,884,323
Property taxes and insurance 791,304 1,565,158
Management fees 298,104 583,879
------------- -----------------
TOTAL DIRECT OPERATING EXPENSES 10,120,195 20,317,681
------------- -----------------
EXCESS REVENUE OVER DIRECT
OPERATING EXPENSES $ 3,084,513 $ 5,639,730
============= =================
The accompanying notes are an integral part of these financial statements.
5
FELCOR PROPERTIES
NOTES TO COMBINED HISTORICAL SUMMARIES OF REVENUE
AND DIRECT OPERATING EXPENSES
1. ORGANIZATION AND BASIS FOR PRESENTATION
The accompanying Combined Historical Summaries of Revenue and Direct Operating
Expenses ("the Combined Historical Summaries") are comprised of the revenue and
direct operating expenses of five hotel properties owned by FelCor Lodging
Limited Partnership (the "FelCor Properties") during the year ended December 31,
2002 and the six month period ended June 30, 2003 as follows:
o Embassy Suites Hotel, East Syracuse, New York
o Embassy Suites Hotel, Phoenix Airport, Arizona
o Embassy Suites Hotel, Flagstaff, Arizona
o Doubletree Guest Suites, Columbus, Ohio
o Doubletree Guest Suites, Dayton, Ohio
On October 8, 2003, Ashford Hospitality Trust, Inc. acquired the FelCor
Properties for approximately $50 million in cash. The Combined Historical
Summaries were prepared for the purpose of assisting management of Ashford
Hospitality Trust, Inc. in complying with Rule 3-14 of Regulation S-X of the
Securities and Exchange Commission. Accordingly, the Combined Historical
Summaries exclude certain items not comparable to the proposed future operations
of the FelCor Properties such as mortgage interest expense, depreciation
expense, corporate expenses, and interest income. Consequently, the Combined
Historical Summaries are not representative of the actual operations of the
FelCor Properties for the periods presented nor is it necessarily indicative of
future operations.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue and Direct Operating Expenses -- Revenue is recognized as the related
service is performed. Expenses are recognized when incurred. Other revenue
consists primarily of revenue from telephone and in-house movie services.
Indirect expenses primarily consist of general and administrative, sales and
marketing, property operations, and energy expenses.
Advertising and Promotion Costs -- Advertising and promotion costs are expensed
as incurred.
Repairs and Maintenance Costs -- Repairs and maintenance costs that do not
extend the life of the property are expensed as incurred.
Use of Estimates -- The preparation of the Combined Historical Summaries in
conformity with accounting principles generally accepted in the United States of
America requires management to make estimates and assumptions that affect the
amounts reported in the Combined Historical Summaries and accompanying notes.
Actual results could differ from those estimates.
6
FELCOR PROPERTIES
NOTES TO COMBINED HISTORICAL SUMMARIES OF REVENUE
AND DIRECT OPERATING EXPENSES
3. LEASES
The FelCor Properties have entered into certain noncancelable operating leases
for certain equipment. Additionally, one of the FelCor Properties has entered
into a land lease. The land lease is subject to a base rent plus contingent rent
based on the related property's net operating income. For the six months ended
June 30, 2003 and year ended December 31, 2002, total rent expense was
approximately $220,000 (unaudited) and $524,000, respectively. Future minimum
lease payments under these leases as of June 30, 2003 and December 31, 2002 are
as follows:
As of
June 30, 2003 As of
(unaudited) December 31, 2002
------------- -----------------
2003-2004 $ 100,832 2003 $ 98,904
2004-2005 79,277 2004 95,541
2005-2006 63,732 2005 65,488
2006-2007 51,780 2006 57,756
2007-2008 51,780 2007 51,780
Thereafter 2,302,495 Thereafter 2,328,385
------------- -----------------
Total $ 2,649,896 Total $ 2,697,854
============= =================
4. MANAGEMENT AND FRANCHISE AGREEMENTS
All of the FelCor Properties are operated under management agreements. In
general, management fees are based on a percentage (ranging from 2% to 3%) of
total revenue. These management agreements expire beginning in 2005 through 2012
and generally have renewal options.
The Embassy Suite Hotels included in the FelCor Properties also operate under
franchise agreements. In general, franchise fees are based on 4% of room
revenue, and are included in indirect operating expenses in the accompanying
Combined Historical Summaries of Revenue and Direct Operating Expenses. These
franchise agreements expire beginning in 2015 through 2017.
7
ASHFORD HOSPITALITY TRUST, INC.
CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
Management has prepared the following pro forma financial statements, which are
based on the historical consolidated financial statements of Ashford Hospitality
Trust, Inc. (the "Company") and adjusted to give effect to 1) the completion of
the Company's formation transactions and its initial public offering on August
28, 2003, and 2) the acquisition of the FelCor Properties on October 8, 2003.
The Unaudited Pro Forma Consolidated Balance Sheet at June 30, 2003 has been
prepared to reflect the formation transactions and initial public offering as
well as the subsequent acquisition of the Felcor Properties as if such
transactions had occurred on June 30, 2003. The Unaudited Pro Forma Consolidated
Statements of Operations for the year ended December 31, 2002 and the six-month
period ended June 30, 2003 have been prepared to present the results of
operations of the Company as if the formation transactions and initial public
offering as well as the acquisition of the Felcor Properties occurred at the
beginning of each period presented.
The following consolidated pro forma financial statements should be read in
conjunction with the Company's Form 8-K filed with the Securities and Exchange
Commission on September 23, 2003, the Company's consolidated financial
statements and notes thereto for the year ended December 31, 2002, that are
incorporated by reference in the Company's Post-Effective Amendment No. 1 to
Form S-11, filed August 28, 2003, and the Combined Historical Summaries of
Revenue and Direct Operating Expenses and Notes included elsewhere in this Form
8-K/A. In the Company's opinion, all significant adjustments necessary to
reflect the acquisition have been made.
8
ASHFORD HOSPITALITY TRUST, INC.
CONSOLIDATED PRO FORMA BALANCE SHEET
AS OF JUNE 30, 2003
(UNAUDITED)
UNADJUSTED ADJUSTED
HISTORICAL (a) PRO FORMA (b) PRO FORMA
JUNE 30, PRO FORMA JUNE 30, PRO FORMA JUNE 30,
2003 ADJUSTMENTS 2003 ADJUSTMENTS 2003
--------------- ------------ ------------- ------------- -------------
ASSETS
Investment in hotel properties $ 101,187,622 $ 8,107,973 (15) $ 109,295,595 50,680,465 (19) 159,976,060
Accumulated depreciation (18,069,539) (18,069,539) (18,069,539)
--------------- ------------ ------------- ------------- -------------
Investment in hotel properties, net 83,118,083 8,107,973 91,226,056 50,680,465 141,906,521
Cash 3,927,720 216,911,164 (1) 136,826,461 (49,931,598)(20) 86,894,863
4,185,000 (2)
(3,598,738) (3)
(17,374,411) (4)
(3,000,000) (9)
(62,821,155) (11)
2,554,984 (12)
(2,933,333) (14)
(550,000) (16)
(474,770) (18)
Restricted cash 2,899,810 (2,554,984) (12) 344,826 344,826
Accounts receivable, net of
allowance for doubtful
accounts of $13,263 1,070,296 1,070,296 180,426 (21) 1,250,722
Inventories 191,112 191,112 39,572 (21) 230,684
Deferred costs, net 1,001,045 (169,528) (13) 831,517 831,517
Prepaid expenses 416,369 416,369 285,456 (21) 701,825
Other assets 44,830 44,830 44,830
--------------- ------------ ------------- ------------- -------------
Total assets $ 92,669,265 $138,282,202 $ 230,951,467 $ 1,254,321 $ 232,205,788
=============== ============ ============= ============= =============
LIABILITIES AND OWNERS' EQUITY
Mortgage notes payable $ 82,096,150 $(66,096,150) (11) $ 16,000,000 16,000,000
Capital lease payable 528,919 528,919 528,919
Accounts payable 1,240,448 1,240,448 291,405 (21) 1,531,853
Accrued payroll expense 531,111 531,111 531,111
Accrued vacation expense 228,209 228,209 228,209
Accrued sales and occupancy taxes 361,846 361,846 361,846
Accrued real estate taxes 426,379 426,379 822,916 (21) 1,249,295
Accrued expenses 452,610 452,610 140,000 (21) 592,610
Accrued interest 273,000 273,000 273,000
Due to affiliates 123,502 123,502 123,502
--------------- ------------ ------------- ------------- -------------
Total liabilities $ 86,262,174 $(66,096,150) $ 20,166,024 $ 1,254,321 $ 21,420,345
Commitments & contingencies
Minority interest -- 38,004,615 (17) 38,004,615 38,004,615
Owners' equity 6,407,091 (4,455,764) (3) -- --
3,997,875 (8)
(4,754,904) (10)
(550,000) (16)
(169,528) (13)
(474,770) (18)
Common stock -- 242,341 (1) 257,339 257,339
5,000 (2)
250 (5)
6,893 (6)
689 (7)
2,166 (10)
Additional paid-in capital -- 216,668,823 (1) 178,952,342 178,952,342
4,180,000 (2)
857,026 (3)
(17,374,411) (4)
224,750 (5)
6,196,960 (6)
(689) (7)
(3,997,875) (8)
(3,000,000) (9)
4,754,904 (10)
(2,166) (10)
3,274,995 (11)
(2,933,333) (14)
8,107,973 (15)
(38,004,615) (17)
Unearned compensation -- (225,000) (5) (6,428,853) (6,428,853)
(6,203,853) (6)
--------------- ------------ ------------- ------------- -------------
Total owners' equity $ 6,407,091 $166,373,737 $ 172,780,828 $ -- $ 172,780,828
--------------- ------------ ------------- ------------- -------------
Total liabilities and owners'
equity $ 92,669,265 $138,282,202 $ 230,951,467 $ 1,254,321 $ 232,205,788
=============== ============ ============= ============= =============
The accompanying notes and management's assumptions are an integral part of
this consolidated pro forma balance sheet.
9
Explanation of pro forma adjustments:
(a) Represents pro forma adjustments to reflect the completion of the Company's
formation transactions and its initial public offering on August 28, 2003,
as described in the Company's Post-Effective Amendment No. 1 to Form S-11,
filed August 28, 2003.
(b) Represents pro forma adjustments to reflect the acquisition of FelCor
Properties.
(1) Represents the sale of 22,500,000 shares of common stock, par value of
$.01, at the initial price of approximately $9, plus an additional
1,734,072 shares of common stock, par value of $.01, related to the
underwriters' over-allotment option, at an initial price of $9 less fees.
(2) Represents the sale of 500,000 shares of common stock, par value of $.01,
to Messrs. Archie and Montgomery Bennett at the initial price of $9 less
the underwriters discount of 7%.
(3) Represents payment of net working capital to Messrs. Archie and Montgomery
Bennett of $3,598,738 (net of fixed asset commitments of $857,026).
(4) Represents payment of $17.3 million in offering costs, including $14.2 of
underwriters discount.
(5) Represents the issuance of 25,000 restricted shares of common stock, par
value of $.01, to Company directors.
(6) Represents the issuance of 689,317 restricted shares of common stock, par
value of $.01, to Company employees and employees of affiliates.
(7) Represents the issuance of 68,926 shares of common stock, par value of
$.01, to the underwriters of the offering.
(8) Represents the contribution of five hotel properties to the Company in
exchange for 4,632,917 limited partnership units.
(9) Represents additional consideration of $3,000,000 paid in cash for the Las
Vegas property.
(10) Represents the contribution of one hotel property to the Company in
exchange for 216,634 shares of common stock, par value of $.01.
(11) Represents mortgage loans payoffs and debt forgiveness as follows:
Austin Embassy $ 12,400,000
Dallas Embassy 12,560,000
Dulles Embassy 14,040,000
Covington 9,274,995 (includes debt forgiven of $3,274,995)
Holtsville 17,821,155
---------------
Total mortgage loans payoffs 66,096,150
Less Covington debt forgiven 3,274,995
---------------
Total cash paid $ 62,821,155
===============
(12) Represents adjustment to restricted cash balance due to mortgage loans
payoffs.
(13) Represents a write-down of deferred loan costs due to mortgage loans
payoffs.
(14) Represents payment of $2.9 million related to Special Limited Partner
interest associated with one of the contributed hotel properties.
(15) Represents the 15.5% partial step-up of the historical net carrying value
resulting from the acquisition of the minority partner interests.
(16) Represents a reduction in purchased working capital from a 1% termination
fee on the payoff of the $39,000,000 loan for the Austin Embassy, Dallas
Embassy, and Dulles Embassy properties and the $16,000,000 loan for the Las
Vegas Embassy.
(17) Establish minority interest in accordance with EITF No. 94-2, Treatment of
Minority Interest in Certain Real Estate Investments.
(18) Represents net loss, distributions paid to owners, and contributions from
owners prior to the initial public offering.
(19) Represents management's estimate of the allocation of the purchase price
and closing costs.
(20) Represents payment of the purchase price, closing costs, and related costs
of acquiring the properties.
(21) Represents the historical balance sheet of the acquired properties plus
other closing costs paid or accrued.
10
ASHFORD HOSPITALITY TRUST, INC.
CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2003
(UNAUDITED)
UNADJUSTED ADJUSTED
HISTORICAL (a) PRO FORMA (b) PRO FORMA
JUNE 30, PRO FORMA JUNE 30, PRO FORMA JUNE 30,
2003 ADJUSTMENTS 2003 ADJUSTMENTS 2003
--------------- ------------ ------------- ------------- -------------
REVENUE
Rooms $ 14,590,287 $ 14,590,287 $ 11,269,210 (10) $ 25,859,497
Food and beverage 2,797,012 2,797,012 1,333,588 (10) 4,130,600
Other 471,102 471,102 601,910 (10) 1,073,012
--------------- ------------ ------------- ------------- -------------
TOTAL REVENUE 17,858,401 -- 17,858,401 13,204,708 31,063,109
EXPENSES
Hotel operating expenses
Rooms 3,366,255 3,366,255 2,673,276 (10) 6,039,531
Food and beverage 2,113,005 2,113,005 1,242,277 (10) 3,355,282
Other direct 370,117 370,117 535,809 (10) 905,926
Indirect 4,443,590 4,443,590 4,788,425 (12) 9,232,015
Management fees 535,730 535,730 298,104 (10) 833,834
Property taxes, insurance,
and other 1,224,659 1,224,659 791,304 (10) 2,015,963
Depreciation & amortization 2,192,332 105,213 (6) 2,297,545 922,547 (11) 3,220,092
Corporate general and
administrative 2,010,491 3,557,000 (5) 6,826,491 6,826,491
1,034,000 (4)
225,000 (8)
--------------- ------------ ------------- ------------- -------------
TOTAL OPERATING EXPENSES 16,256,179 4,921,213 21,177,392 11,251,742 32,429,134
--------------- ------------ ------------- ------------- -------------
OPERATING INCOME (LOSS) 1,602,222 (4,921,213) (3,318,991) 1,952,966 (1,366,025)
--------------- ------------ ------------- ------------- -------------
Interest income 16,849 16,849 16,849
Interest expense 3,015,866 (2,306,050 (1) 696,251 696,251
(13,565)(2)
--------------- ------------ ------------- ------------- -------------
NET INCOME (LOSS) BEFORE
MINORITY INTEREST AND
INCOME TAXES (1,396,795) (2,601,598) (3,998,393) 1,952,966 (2,045,427)
--------------- ------------ ------------- ------------- -------------
Income tax expense -- -- (3) -- --
Minority interest -- (720,910)(9) (720,910) 352,120 (9) (368,790)
--------------- ------------ ------------- ------------- -------------
NET INCOME (LOSS) $ (1,396,795) $ (1,880,688) $ (3,277,483) $ 1,600,846 $ (1,676,637)
=============== ============ ============= ============= =============
EARNINGS (LOSS) PER SHARE:
Basic and diluted $ (0.13) $ (0.07)
============= =============
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic and diluted (7) 25,733,949 25,733,949
============= =============
The accompanying notes and management's assumptions are an integral part of
this consolidated pro forma statement of operations.
11
Explanation of pro forma adjustments:
(a) Represents pro forma adjustments to reflect the completion of the Company's
formation transactions and its initial public offering on August 28, 2003,
as described in the Company's Post-Effective Amendment No. 1 to Form S-11,
filed August 28, 2003.
(b) Represents pro forma adjustments to reflect the acquisition of FelCor
Properties.
(1) Represents the interest expense reduction due to payoff of mortgage notes,
as follows:
Austin Embassy $ 523,694
Dallas Embassy 530,450
Dulles Embassy 592,956
Covington 224,994
Holtsville 433,956
-----------
$ 2,306,050
===========
(2) Represents elimination of deferred loan costs amortization due to payoff of
mortgage notes.
(3) Income tax expense on a pro forma basis is zero.
(4) Represents restricted shares issued to officers, employees, and employees
of affiliates vesting one-third annually. Pro forma compensation expense is
calculated as follows: 689,317 shares valued at $9 per share offering price
for total compensation cost of $6,203,853, of which one third vests
annually to generate a six-month pro forma cost of $1,034,000.
(5) Represents additional general and administrative expenses associated with
the operations of the Company, which includes projected compensation and
benefit expenses, along with related overhead and administration expense
calculated on an historical basis, as well as property-level general and
administrative expenses.
(6) Represents additional depreciation expense resulting from step-up of net
carrying value due to acquisition of minority interests.
(7) Common shares issuable include:
Shares issued in the initial public offering 22,500,000
Shares issued upon exercise of underwriters' over-allotment 1,734,072
Shares sold to Archie and Montgomery Bennett 500,000
Shares conveyed to a limited partnership owned by Archie and
Montgomery Bennett 216,634
Restricted shares issuable to Company directors 25,000 assumed to be fully vested
Shares issued to Company underwriters 68,926
Restricted shares issued to executives and employees 689,317 assumed to be fully vested
------------
Total basic shares 25,733,949
============
Shares issuable upon conversion of 5,657,917 units of partnership interest
in the Company's operating partnership are excluded from the calculation of
diluted weighted average shares outstanding in periods reporting a net loss
as such units would be anti-dilutive.
(8) Represents restricted shares issued to directors that vest after three
months. Pro forma compensation expense is calculated as follows: 25,000
shares valued at $9 per share offering price for total compensation cost of
$225,000.
(9) Minority interest represents 18.03% of the net loss before minority
interest.
(10) Represents FelCor Properties unaudited combined historical summary of
revenue and direct operating expenses for the six months ended June 30,
2003.
(11) Represents the estimated depreciation expense associated with the acquired
properties based on the preliminary purchase price allocation.
(12) Represents FelCor Properties unaudited combined historical summary of
revenue and direct operating expenses for the six months ended June 30,
2003 plus additional franchise fees of $209,000.
12
ASHFORD HOSPITALITY TRUST, INC.
CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2002
(UNAUDITED)
UNADJUSTED ADJUSTED
HISTORICAL (a) PRO FORMA (b) PRO FORMA
DECEMBER 31, PRO FORMA DECEMBER 31, PRO FORMA DECEMBER 31,
2002 ADJUSTMENTS 2002 ADJUSTMENTS 2002
--------------- ------------ ------------- ------------- -------------
REVENUE
Rooms $ 28,529,640 $ 28,529,640 $ 22,085,533 (10) $ 50,615,173
Food and beverage 5,698,029 5,698,029 2,574,917 (10) 8,272,946
Other 1,130,112 1,130,112 1,296,961 (10) 2,427,073
--------------- ------------ ------------- ------------- -------------
TOTAL REVENUE 35,357,781 -- 35,357,781 25,957,411 61,315,192
EXPENSES
Hotel operating expenses
Rooms 6,461,721 6,461,721 5,627,969 (10) 12,089,690
Food and beverage 4,183,371 4,183,371 2,360,119 (10) 6,543,490
Other direct 621,693 621,693 1,296,233 (10) 1,917,926
Indirect 8,702,894 8,702,894 9,301,323 (12) 18,004,217
Management fees 1,059,867 1,059,867 583,879 (10) 1,643,746
Property taxes, insurance,
and other 2,437,482 2,437,482 1,565,158 (10) 4,002,640
Depreciation & amortization 4,833,551 210,426 (6) 5,043,977 1,845,095 (11) 6,889,072
Corporate general and
administrative 3,667,410 7,114,000 (5) 13,074,410 13,074,410
2,068,000 (4)
225,000 (8)
--------------- ------------ ------------- ------------- -------------
TOTAL OPERATING EXPENSES 31,967,989 9,617,426 41,585,415 22,579,776 64,165,191
--------------- ------------ ------------- ------------- -------------
OPERATING INCOME (LOSS) 3,389,792 (9,617,426) (6,227,634) 3,377,635 (2,849,999)
--------------- ------------ ------------- ------------- -------------
Interest income 53,485 53,485 53,485
Interest expense 6,536,195 (4,759,515) (1) 1,749,551 1,749,551
(27,129) (2)
--------------- ------------ ------------- ------------- -------------
NET INCOME (LOSS) BEFORE
MINORITY INTEREST AND
INCOME TAXES (3,092,918) (4,830,782) (7,923,700) 3,377,635 (4,546,065)
--------------- ------------ ------------- ------------- -------------
Income tax expense -- -- (3) -- --
Minority interest -- (1,428,643 (9) (1,428,643) 608,988 (9) (819,656)
--------------- ------------ ------------- ------------- -------------
NET INCOME (LOSS) $ (3,092,918) $ (3,402,139) $ (6,495,057) $ 2,768,647 $ (3,726,409)
=============== ============ ============= ============= =============
EARNINGS (LOSS) PER SHARE:
Basic and diluted $ (0.25) $ (0.14)
============= =============
WEIGHTED AVERAGE SHARES OUTSTANDING:
Basic and diluted (7) 25,733,949 25,733,949
============= =============
The accompanying notes and management's assumptions are an integral part of this
consolidated pro forma statement of operations.
13
Explanation of pro forma adjustments:
(a) Represents pro forma adjustments to reflect the completion of the Company's
formation transactions and its initial public offering on August 28, 2003,
as described in the Company's Post-Effective Amendment No. 1 to Form S-11,
filed August 28, 2003.
(b) Represents pro forma adjustments to reflect the acquisition of FelCor
Properties.
(1) Represents the interest expense reduction due to payoff of mortgage notes,
as follows:
Austin Embassy $ 1,056,067
Dallas Embassy 1,069,693
Dulles Embassy 1,195,740
Covington 499,849
Holtsville 938,166
-----------
$ 4,759,515
===========
(2) Represents elimination of deferred loan costs amortization due to payoff of
mortgage notes.
(3) Income tax expense on a pro forma basis is zero.
(4) Represents restricted shares issued to officers, employees, and employees of
affiliates vesting one-third annually. Pro forma compensation expense is
calculated as follows: 689,317 shares valued at $9 per share offering price
for total compensation cost of $6,203,853, of which one third vests annually
to generate an annual pro forma cost of $2,068,000.
(5) Represents additional general and administrative expenses associated with
the operations of the Company, which includes projected compensation and
benefit expenses, along with related overhead and administration expense
calculated on an historical basis, as well as property-level general and
administrative expenses.
(6) Represents additional depreciation expense resulting from step-up of net
carrying value due to the acquisition of minority interests.
(7) Common shares issuable include:
Shares issued in the initial public offering 22,500,000
Shares issued upon exercise of underwriters' over-allotment 1,734,072
Shares sold to Archie and Montgomery Bennett 500,000
Shares conveyed to a limited partnership owned by Archie and Montgomery Bennett 216,634
Restricted shares issuable to Company directors 25,000 assumed to be fully vested
Shares issued to Company underwriters 68,926
Restricted shares issued to executives and employees 689,317 assumed to be fully vested
----------
Total basic shares 25,733,949
==========
Shares issuable upon conversion of 5,657,917 units of partnership interest
in the Company's operating partnership are excluded from the calculation of
diluted weighted average shares outstanding in periods reporting a net loss
as such units would be anti-dilutive.
(8) Represents restricted shares issued to directors that vest after three
months. Pro forma compensation expense is calculated as follows: 25,000
shares valued at $9 per share offering price for total compensation cost of
$225,000.
(9) Minority interest represents 18.03% of the net loss before minority
interest.
(10) Represents FelCor Properties combined historical summary of revenue and
direct operating expenses for the year ended December 31, 2002.
(11) Represents the estimated depreciation expense associated with the acquired
properties based on the preliminary purchase price allocation.
(12) Represents FelCor Properties combined historical summary of revenue and
direct operating expenses for the year ended December 31, 2003 plus
additional franchise fees of $417,000.
14
EXHIBITS
23.1 Consent of Independent Auditors
99.3 Press Release of the Company dated October 9, 2003, announcing the
acquisition of the FelCor Properties.
15
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities and Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
Dated: November 12, 2003
ASHFORD HOSPITALITY TRUST, INC.
By: /s/ DAVID J. KIMICHIK
------------------------
David J. Kimichik
Chief Financial Officer
16