e8vkza
Table of Contents

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): November 24, 2003

ASHFORD HOSPITALITY TRUST, INC.

(Exact name of registrant as specified in its charter)
         
MARYLAND
(State of Incorporation)
  001-31775
(Commission File Number)
  86-1062192
(I.R.S. Employer
Identification Number)
     
14180 Dallas Parkway, 9th Floor
Dallas, Texas
(Address of principal executive offices)
  75254
(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 October 31, 2003, as filed on October 31, 2003, to include the historical financial statements and pro forma financial information required by Item 7(a) and (b).

 


TABLE OF CONTENTS

ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION, AND EXHIBITS
REPORT OF INDEPENDENT AUDITORS
COMBINED HISTORICAL SUMMARIES OF REVENUE AND DIRECT OPERATING EXPENSES
NOTES TO COMBINED HISTORICAL SUMMARIES OF REVENUE AND DIRECT OPERATING EXPENSES
CONSOLIDATED PRO FORMA FINANCIAL STATEMENTS
Consolidated Pro Forma Balance Sheet
Consolidated Pro Forma Statement of Operations For the Nine Months Ended September 30, 2003
Consolidated Pro Forma Statement of Operations For the Year Ended December 31, 2002
EXHIBITS
SIGNATURE
EX-23.2 Consent of Independent Auditors
EX-99.6 Press Release


Table of Contents

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 nine months ended September 30, 2003 (unaudited) and year ended December 31, 2002  
5

        Notes to Combined Historical Summaries of Revenue and Direct Operating Expenses for the nine months ended September 30, 2003 (unaudited) and year ended December 31, 2002  
6

    b.   Pro Forma Financial Information (Unaudited)  
8

        Pro Forma Consolidated Balance Sheet as of September 30, 2003  
9

        Pro Forma Consolidated Statement of Operations for the nine months ended September 30, 2003  
11

        Pro Forma Consolidated Statement of Operations for the year ended December 31, 2002  
13

    c.   Exhibits  
15

        23.2                    Consent of Independent Auditors        
        99.6                    Press Release        
    SIGNATURE  
16

2


Table of Contents

ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS

On November 24, 2003, Ashford Hospitality Trust, Inc. (the “Company”) acquired four hotel properties from Noble Investment Group (the “Noble Properties”) for approximately $33.9 million. 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 November 25, 2003, is attached hereto as Exhibit 99.6 and is incorporated herein by reference.

3


Table of Contents

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 Noble Properties (as described in Note 1) for the year ended December 31, 2002. The Combined Historical Summary is the responsibility of Ashford Hospitality Trust, Inc.’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 Noble 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 Noble Properties for year ended December 31, 2002, in conformity with accounting principles generally accepted in the United States.

/s/ Ernst & Young LLP

Dallas, Texas
January 9, 2004

4


Table of Contents

NOBLE PROPERTIES
COMBINED HISTORICAL SUMMARIES OF REVENUE AND DIRECT OPERATING EXPENSES
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2003
AND YEAR ENDED DECEMBER 31, 2002

                     
        Nine Months    
        Ended   Year
        September 30, 2003   Ended
        (unaudited)   December 31, 2002
       
 
Revenue
               
   
Rooms
  $ 6,939,671     $ 8,729,578  
   
Food and beverage
    158,243       193,399  
   
Other
    138,476       197,258  
   
 
   
     
 
 
Total Revenue
    7,236,390       9,120,235  
Direct Operating Expenses
               
   
Rooms
    1,559,994       1,982,815  
   
Food and beverage
    131,463       169,827  
   
Other direct
    76,257       103,394  
   
Indirect
    2,149,041       2,589,701  
   
Property taxes and insurance
    393,232       454,892  
   
Management fees
    291,396       370,906  
   
 
   
     
 
 
Total Direct Operating Expenses
    4,601,383       5,671,535  
   
 
   
     
 
 
Excess Revenue Over Direct Operating Expenses
  $ 2,635,007     $ 3,448,700  
   
 
   
     
 

The accompanying notes are an integral part of these financial statements.

5


Table of Contents

NOBLE 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 four hotel properties owned by Noble Investment Group (the “Noble Properties”) during the year ended December 31, 2002 and the nine month period ended September 30, 2003 as follows:

    Hilton Garden Inn, Jacksonville, Florida

    SpringHill Suites by Marriott, Jacksonville, Florida

    Homewood Suites, Mobile, Alabama

    Hampton Inn, Atlanta/Lawrenceville, Georgia

On November 24, 2003, Ashford Hospitality Trust, Inc. acquired the Noble Properties for approximately $33.9 million, which included approximately $27.5 million in cash and approximately $6.4 million in assumed mortgage debt. The mortgage debt bears interest at 7.08% and matures December 31, 2005. 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 Noble 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 Noble 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


Table of Contents

NOBLE PROPERTIES
NOTES TO COMBINED HISTORICAL SUMMARIES OF REVENUE
AND DIRECT OPERATING EXPENSES

3. LEASES

The Noble Properties have entered into certain noncancelable operating leases for certain equipment. For the nine months ended September 30, 2003 and year ended December 31, 2002, total rent expense was approximately $27,242 (unaudited) and $53,915, respectively. Future minimum lease payments under these leases as of September 30, 2003 and December 31, 2002 are as follows:

                         
    As of            
    September 30, 2003           As of
    (unaudited)           December 31, 2002
   
         
2003-2004
  $ 21,056       2003     $ 24,959  
2004-2005
    8,606       2004       9,386  
2005-2006
    8,606       2005        
2006-2007
    4,303       2006        
Thereafter           Thereafter        
 
   
             
 
Total   $ 42,571       Total     $ 34,345  
 
   
             
 

4. MANAGEMENT AND FRANCHISE AGREEMENTS

All of the Noble Properties are operated under management and franchise agreements. In general, management fees are based on 4% of total revenue. These management agreements expire beginning in 2003 through 2005 and generally have renewal options.

In general, franchise fees are based on 4% to 5% 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 2017 through 2019.

7


Table of Contents

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, 2) the acquisition of five hotel properties from FelCor Lodging Limited Partnership (the “FelCor Properties”) on October 8, 2003, and 3) the acquisition of the Noble Properties on November 24, 2003.

The Unaudited Pro Forma Consolidated Balance Sheet at September 30, 2003 has been prepared to reflect the acquisition of the FelCor Properties and the subsequent acquisition of the Noble Properties as if such transactions had occurred on September 30, 2003. The Unaudited Pro Forma Consolidated Statements of Operations for the year ended December 31, 2002 and the nine-month period ended September 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 acquisitions of the Felcor Properties and Noble 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 October 31, 2003 which announced the acquisition of the Noble Properties, 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 26, 2003, the Company’s Form 8-K/A filed with the Securities and Exchange Commission on November 12, 2003 which provided required financial statements and related pro forma financial information associated with the acquisition of the FelCor Properties, 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 acquisitions have been made.

8


Table of Contents

Ashford Hospitality Trust, Inc.
Consolidated Pro Forma Balance Sheet
As of September 30, 2003
(Unaudited)

                                           
                      Unadjusted           Adjusted
      Historical   (a)   Pro Forma   (b)   Pro Forma
      September 30,   Pro Forma   September 30,   Pro Forma   September 30,
      2003   Adjustments   2003   Adjustments   2003
     
 
 
 
 
Assets
                                       
Investment in hotel properties
  $ 109,698,551       50,680,465 (1)   $ 160,379,016       34,171,943 (1)   $ 194,550,959  
 
Accumulated depreciation
    (19,089,836 )             (19,089,836 )             (19,089,836 )
 
   
     
     
     
     
 
Investment in hotel properties, net
    90,608,715       50,680,465       141,289,180       34,171,943       175,461,123  
Cash
    134,862,057       (49,931,598 ) (2)     84,930,459       (28,087,780 ) (2)     56,842,679  
Restricted cash
    442,860               442,860               442,860  
Accounts receivable, net of allowance for doubtful accounts of $21,742
    1,497,210       180,426 (3)     1,677,636               1,677,636  
Inventories
    178,514       39,572 (3)     218,086               218,086  
Deferred costs, net
    908,445               908,445               908,445  
Prepaid expenses
    496,639       285,456 (3)     782,095       187,195 (3)     969,290  
Other assets
    2,962,798               2,962,798       279,908 (3)     3,242,706  
Due from affiliates
    211,969               211,969               211,969  
 
   
     
     
     
     
 
 
Total assets
  $ 232,169,207     $ 1,254,321     $ 233,423,528     $ 6,551,266     $ 239,974,794  
 
   
     
     
     
     
 
Liabilities and Owners’ Equity
                                       
Mortgage notes payable
  $ 16,000,000             $ 16,000,000       6,418,634 (4)   $ 22,418,634  
Capital leases payable
    494,862               494,862               494,862  
Accounts payable
    1,008,242       291,405 (3)     1,299,647       7,632 (3)     1,307,279  
Accrued payroll expense
    736,515               736,515               736,515  
Accrued vacation expense
    210,432               210,432               210,432  
Accrued sales and occupancy taxes
    301,382               301,382               301,382  
Accrued real estate taxes
    594,068       822,916 (3)     1,416,984               1,416,984  
Accrued expenses
    1,797,788       140,000 (3)     1,937,788       125,000 (3)     2,062,788  
Accrued interest
    160,000               160,000               160,000  
Due to affiliates
    216,000               216,000               216,000  
 
   
     
     
     
     
 
 
Total liabilities
  $ 21,519,289     $ 1,254,321     $ 22,773,610     $ 6,551,266     $ 29,324,876  
 
                                       
Minority interest
    37,939,033               37,939,033               37,939,033  
Commitments & contingencies
                                       
 
                                       
Common stock
    257,340               257,340               257,340  
Additional paid-in capital
    178,952,341               178,952,341               178,952,341  
Unearned compensation
    (6,200,638 )             (6,200,638 )             (6,200,638 )
Accumulated deficit
    (298,158 )             (298,158 )             (298,158 )
 
   
     
     
     
     
 
 
Total owners’ equity
  $ 172,710,885     $     $ 172,710,885     $     $ 172,710,885  
 
   
     
     
     
     
 
 
Total liabilities and owners’ equity
  $ 232,169,207     $ 1,254,321     $ 233,423,528     $ 6,551,266     $ 239,974,794  
 
   
     
     
     
     
 

The accompanying notes and management’s assumptions are an integral part of this consolidated pro forma balance sheet.

9


Table of Contents

Explanation of pro forma adjustments:

(a)   Represents pro forma adjustments to reflect the acquisition of FelCor Properties on October 8, 2003, as described in the Company’s Form 8-K/A, filed November 12, 2003.

(b)   Represents pro forma adjustments to reflect the acquisition of Noble Properties on November 24, 2003.

(1)   Represents management’s estimate of the allocation of the purchase price and closing costs.

(2)   Represents payment of the purchase price, closing costs, and related costs of acquiring the properties.

(3)   Represents the historical balance sheet of the acquired properties plus other closing costs paid or accrued.

(4)   Represents notes payable assumed in the Noble Properties acquisition.

10


Table of Contents

Ashford Hospitality Trust, Inc.
Consolidated Pro Forma Statement of Operations
For the Nine Months Ended September 30, 2003
(Unaudited)

                                                                     
                                                                Adjusted
        Historical   (a)           (b)           (c)           Pro Forma
        September 30,   Pro Forma           Pro Forma           Pro Forma           September 30,
        2003   Adjustments           Adjustments           Adjustments           2003
       
 
         
         
         
Revenue
                                                               
 
Rooms
  $ 22,453,205                       16,903,815       (10 )     6,939,671       (10 )   $ 46,296,691  
 
Food and beverage
    4,092,932                       2,000,382       (10 )     158,243       (10 )     6,251,557  
 
Other
    752,228                       902,865       (10 )     138,476       (10 )     1,793,569  
 
 
   
     
             
             
             
 
   
Total hotel revenue
    27,298,365                       19,807,062               7,236,390               54,341,817  
 
Asset management fees
    110,591                                                     110,591  
 
 
   
     
             
             
             
 
 
Total Revenue
    27,408,956                     19,807,062               7,236,390               54,452,408  
Expenses
                                                               
 
Hotel operating expenses
                                                               
   
Rooms
    5,144,372                       4,009,914       (10 )     1,559,994       (10 )     10,714,280  
   
Food and beverage
    3,174,315                       1,863,416       (10 )     131,463       (10 )     5,169,194  
   
Other direct
    574,215                       803,714       (10 )     76,257       (10 )     1,454,186  
   
Indirect
    9,772,262                       7,182,638       (12 )     2,149,041       (12 )     19,103,941  
   
Management fees
    817,405                       447,156       (10 )     291,396       (10 )     1,555,957  
 
Property taxes, insurance, and other
    1,848,982                       1,186,956       (10 )     393,232       (10 )     3,429,170  
 
Depreciation & amortization
    3,243,829       157,820       (6 )     1,383,821       (11 )     777,721       (11 )     5,563,191  
 
Corporate general and administrative
    945,291       5,335,500       (5 )                                     8,056,791  
 
            1,551,000       (4 )                                        
 
            225,000       (8 )                                        
 
 
   
     
             
             
             
 
 
Total Operating Expenses
    25,520,671       7,269,320               16,877,615               5,379,104               55,046,710  
 
 
   
     
             
             
             
 
 
Operating Income (Loss)
    1,888,285       (7,269,320 )             2,929,447               1,857,286               (594,302 )
 
 
   
     
             
             
             
 
 
Interest income
    (123,287 )                                                     (123,287 )
 
Interest expense
    4,668,195       (3,459,075 )     (1 )                     343,000       (13 )     1,531,773  
 
            (20,347 )     (2 )                                        
 
 
   
     
             
             
             
 
 
Net Income (Loss) before Minority Interest and Income Taxes
    (2,656,623 )     (3,789,898 )             2,929,447               1,514,286               (2,002,788 )
 
 
   
     
             
             
             
 
 
Income tax expense
                (3 )           (3 )           (3 )      
 
Minority interest
    (65,583 )     (1,096,725 )     (9 )     528,179       (9 )     273,026       (9 )     (361,103 )
 
 
   
     
             
             
             
 
 
Net Income (Loss)
  $ (2,591,040 )     (2,693,173 )             2,401,268               1,241,260             $ (1,641,685 )
 
 
   
     
             
             
             
 
Earnings (Loss) Per Share:
                                                               
 
Basic and diluted
                                                          $ (0.06 )
 
 
                                                           
 
Weighted Average Shares Outstanding:
                                                               
 
Basic and diluted
                                                    (7 )     25,733,949  
 
 
                                                           
 

The accompanying notes and management’s assumptions are an integral part of this consolidated pro forma statement of operations.

11


Table of Contents

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 26, 2003.

(b)   Represents pro forma adjustments to reflect the acquisition of FelCor Properties on October 8, 2003, as described in the Company’s. Form 8-K/A, filed November 12, 2003.

(c)   Represents pro forma adjustments to reflect the acquisition of Noble Properties on November 24, 2003.

(1)   Represents the interest expense reduction due to payoff of mortgage notes.

(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 nine-month pro forma cost of $1,551,000.

(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 or Noble Properties estimated unaudited combined historical summary of revenue and direct operating expenses for the nine months ended September 30, 2003. For FelCor Properties, the amounts represent actual results through June 2003 and estimated amounts for July, August, and September of 2003.

(11)   Represents estimated depreciation expense associated with the acquired FelCor or Noble Properties based on preliminary purchase price allocations.

(12)   Represents FelCor or Noble Properties estimated unaudited combined historical summary of revenue and direct operating expenses for the nine months ended September 30, 2003 plus additional franchise fees of $313,500 related to FelCor.

(13)   Represents estimated interest expense associated with the mortgage debt assumed from Noble Properties.

12


Table of Contents

Ashford Hospitality Trust, Inc.
Consolidated Pro Forma Statement of Operations
For the Year Ended December 31, 2002
(Unaudited)

                                                                     
                                                                Adjusted
        Historical   (a)           (b)           (c)           Pro Forma
        December 31,   Pro Forma           Pro Forma           Pro Forma           December 31,
        2002   Adjustments           Adjustments           Adjustments           2002
       
 
         
         
         
Revenue
                                                               
 
Rooms
  $ 28,529,640                       22,085,533       (10 )     8,729,578       (10 )   $ 59,344,751  
 
Food and beverage
    5,698,029                       2,574,917       (10 )     193,399       (10 )     8,466,345  
 
Other
    1,130,112                       1,296,961       (10 )     197,258       (10 )     2,624,331  
   
 
   
     
             
             
             
 
 
Total Revenue
    35,357,781                     25,957,411               9,120,235               70,435,427  
Expenses
                                                               
 
Hotel operating expenses
                                                               
   
Rooms
    6,461,721                       5,627,969       (10 )     1,982,815       (10 )     14,072,505  
   
Food and beverage
    4,183,371                       2,360,119       (10 )     169,827       (10 )     6,713,317  
   
Other direct
    621,693                       1,296,233       (10 )     103,394       (10 )     2,021,320  
   
Indirect
    8,702,894                       9,301,323       (12 )     2,589,701       (12 )     20,593,918  
 
Management fees
    1,059,867                       583,879       (10 )     370,906       (10 )     2,014,652  
 
Property taxes, insurance, and other
    2,437,482                       1,565,158       (10 )     454,892       (10 )     4,457,532  
 
Depreciation & amortization
    4,833,551       210,426       (6 )     1,845,095       (11 )     1,038,962       (11 )     7,928,034  
 
Corporate general and administrative
    3,667,410       7,114,000       (5 )                                     13,074,410  
 
            2,068,000       (4 )                                        
 
            225,000       (8 )                                        
   
 
   
     
             
             
             
 
 
Total Operating Expenses
    31,967,989       9,617,426               22,579,776               6,710,497               70,875,688  
   
 
   
     
             
             
             
 
 
Operating Income (Loss)
    3,389,792       (9,617,426 )             3,377,635               2,409,738               (440,261 )
   
 
   
     
             
             
             
 
 
Interest income
    (53,485 )                                                     (53,485 )
 
Interest expense
    6,536,195       (4,759,515 )     (1 )                     457,000       (13 )     2,206,551  
 
            (27,129 )     (2 )                                        
   
 
   
     
             
             
             
 
 
Net Income (Loss) before Minority Interest and Income Taxes
    (3,092,918 )     (4,830,782 )             3,377,635               1,952,738               (2,593,327 )
   
 
   
     
             
             
             
 
 
Income tax expense
                (3 )           (3 )           (3 )      
 
Minority interest
          (1,428,643 )     (9 )     608,988       (9 )     352,079       (9 )     (467,576 )
   
 
   
     
             
             
             
 
 
Net Income (Loss)
  $ (3,092,918 )     (3,402,139 )             2,768,647               1,600,659             $ (2,125,751 )
   
 
   
     
             
             
             
 
Earnings (Loss) Per Share:
                                                               
 
Basic and diluted
                                                          $ (0.08 )
   
 
                                                           
 
Weighted Average Shares Outstanding:
                                                               
 
Basic and diluted
                                                    (7 )     25,733,949  
   
 
                                                           
 

The accompanying notes and management’s assumptions are an integral part of this consolidated pro forma statement of operations.

13


Table of Contents

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 26, 2003.

(b)   Represents pro forma adjustments to reflect the acquisition of FelCor Properties on October 8, 2003, as described in the Company’s Form 8-K/A, filed November 12, 2003.

(c)   Represents pro forma adjustments to reflect the acquisition of Noble Properties on November 24, 2003.

(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 or Noble Properties combined historical summary of revenue and direct operating expenses for the year ended December 31, 2002.

(11)   Represents estimated depreciation expense associated with the acquired FelCor or Noble Properties based on preliminary purchase price allocations.

(12)   Represents the FelCor or Noble Properties combined historical summary of revenue and direct operating expenses for the year ended December 31, 2003 plus additional franchise fees of $417,000 for FelCor.

(13)   Represents estimated interest expense associated with the mortgage debt assumed from Noble Properties.

14


Table of Contents

EXHIBITS

     
23.2   Consent of Independent Auditors
     
99.6   Press Release of the Company dated November 25, 2003, announcing the acquisition of the Noble Properties.

15


Table of Contents

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: January 14, 2004

     
    ASHFORD HOSPITALITY TRUST, INC.
     
    By: /s/ DAVID J. KIMICHIK
   
    David J. Kimichik
Chief Financial Officer

16