001-13957 91-1032187
------------------------ -------------------
(Commission File Number) (I.R.S. Employer
Identification No.)
|
ITEM 7. Financial Statements, Pro Forma Financial Information and
Exhibits
99.1 Audited financial statements of Olympus Hotel and Conference Center ("Olympus" or "Olympus Hotel") as of and for the year ended December 31, 1997.
99.2 Unaudited condensed pro forma combined balance sheet of Cavanaughs Hospitality Corporation ("Cavanaughs" or "CHC") and Olympus as of October 31, 1997 and March 31, 1998 and condensed pro forma combined statements of income for the year ended October 31, 1997 and three months ended March 31, 1998.
99.3 Unaudited condensed financial statements of Olympus as of and for the three months ended March 31, 1998.
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 hereunder duly authorized.
Dated: August 12, 1998 CAVANAUGHS HOSPITALITY CORPORATION
-----------------------
By /s/ Art Coffey
------------------------------
Executive Vice President/Chief
Financial Officer
|
[PricewaterhouseCoopers LLP - Spokane, Washington letterhead]
To the Members of
Stellar Lone Star Limited Liability Company:
In our opinion, the accompanying balance sheet and the related statements of income, changes in members' equity, and cash flows present fairly, in all material respects, the financial position of The Olympus Hotel and Conference Center ("The Olympus Hotel") as of December 31, 1997, and the results of its operations and its cash flows for the year ended December 31, 1997, in conformity with generally accepted accounting principles. These financial statements are the responsibility of the Company's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above.
/s/PricewaterhouseCoopers LLP |
Current assets:
Cash and cash equivalents $ 275,583
Accounts receivable, less allowance for doubtful
accounts of $12,500 389,146
Inventories 63,818
Prepaid expenses 175,117
-----------
Total current assets 903,664
Property and equipment, net 19,747,631
Deferred loan fees, net 86,628
-----------
Total assets $20,737,923
===========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable $ 173,604
Accrued payroll and related benefits 195,493
Accrued interest payable 175,000
Other accrued expenses 72,667
Note payable, current portion 102,114
-----------
Total current liabilities 718,878
Note payable, long-term portion 16,977,886
-----------
Total liabilities 17,696,764
Commitments (Note 6)
Members' equity 3,041,159
-----------
Total liabilities and members' equity $20,737,923
===========
|
The accompanying notes are an integral part of the financial
statements.
Revenues:
Hotel and restaurant:
Rooms $ 6,998,977
Food and beverage 1,883,091
Other 54,649
-----------
Total hotel and restaurant 8,936,717
Rental operations 131,391
-----------
Total revenues 9,068,108
-----------
Operating expenses:
Direct:
Rooms 1,293,475
Food and beverage 1,430,366
-----------
Total direct 2,723,841
-----------
Indirect:
Selling, general and administrative 1,632,041
Property operating costs 1,483,956
Depreciation and amortization 847,966
-----------
Total indirect 3,963,963
-----------
Total operating expenses 6,687,804
-----------
Operating income 2,380,304
Other expense:
Interest (1,643,298)
-----------
Net income $ 737,006
===========
|
The accompanying notes are an integral part of the financial
statements.
Balance, January 1, 1997 $ 3,054,153
Net income 737,006
Distributions to members (750,000)
-----------
Balance, December 31, 1997 $ 3,041,159
===========
|
The accompanying notes are an integral part of the financial
statements.
Operating activities:
Net income $ 737,006
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 847,966
Change in:
Accounts receivable (31,101)
Inventories (3,453)
Prepaid expenses 101,561
Accounts payable 187,012
Accrued payroll and related benefits 32,079
Other accrued expenses 19,369
-----------
Net cash provided by operating activities 1,890,439
-----------
Investing activities:
Additions to property and equipment (1,113,574)
-----------
Net cash used in investing activities (1,113,574)
-----------
Financing activities:
Distributions to members (750,000)
-----------
Net cash used in financing activities (750,000)
-----------
Change in cash and cash equivalents:
Net increase in cash and cash equivalents 26,865
Cash and cash equivalents at beginning of year 248,718
-----------
Cash and cash equivalents at end of year $ 275,583
===========
Supplemental disclosure of cash flow information:
Cash paid during year for:
Interest $ 1,639,721
|
The accompanying notes are an integral part of the financial
statements.
1. ORGANIZATION:
On December 27, 1994, The Olympus Hotel ("Olympus Hotel" or "Company"), which is located in Salt Lake City, Utah, was purchased by Stellar Lone Star Limited Liability Company ("Stellar") from Olympus Hotel, L.C., a Utah limited liability company.
Stellar is a commercial real estate development and management company located in the state of Washington. Stellar owns properties other than Olympus Hotel. However, these financial statements only reflect the operations and activities of Olympus Hotel.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Cash equivalents consist of short-term, highly liquid
investments with remaining maturities at the time of purchase
of three months or less. The Company places its cash and
cash equivalents with high credit quality institutions. At
times, cash balances may be in excess of federal insurance
limits.
Inventories consist primarily of room linens, food and
beverage products, which are valued at the lower of average
cost or market.
Property and equipment are stated at cost. Depreciation is
provided using the straight-line method over the estimated
useful lives of the related assets or the lease term as
follows:
Buildings 39 years Equipment, furniture and fixtures 7 years
Major additions and betterments are capitalized. Costs of maintenance and repairs which do not improve or extend the lives of the respective assets are expensed currently. When items are disposed of, the related costs and accumulated depreciation are removed from the accounts and any gain or loss is recognized in operations. Management of the Company periodically reviews the aggregate net carrying value of property and equipment to determine whether there has been a permanent impairment in carrying value. At December 31, 1997, no such impairment was deemed to exist.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
Deferred loan fees are amortized using the interest method over
the 20-year term of the related loan agreement.
Olympus Hotel is wholly owned by Stellar Lone Star Limited
Liability Company. Accordingly, Stellar's members are
responsible for federal and state income taxes on Olympus
Hotel's earnings. Therefore, no provision for income taxes is
recorded in these financial statements.
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Advertising is expensed as incurred. The total amount of
advertising expense was approximately $221,000 in 1997.
Approximately $1.44 million of room revenues in 1997 was
generated from contracts with airlines, which are renewed every
1-2 years.
In June 1997, SFAS No. 130, "Reporting Comprehensive Income",
(SFAS No. 130) was issued. SFAS No. 130 requires that
comprehensive income be reported in a financial statement that
is displayed with the same prominence as other financial
statements. SFAS No. 130 does not require a specific format
for the financial statement, but requires that an enterprise
display net income as a component of comprehensive income in
the financial statement. Comprehensive income is defined as
the change in equity of a business enterprise arising from non-
owner sources. The classifications of comprehensive income
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, CONTINUED:
under current accounting standards include foreign currency items, minimum pension liability adjustments, and unrealized gains and losses on certain investments in debt and equity securities. SFAS No. 130 is effective for fiscal years beginning after December 15, 1997. Management does not believe that the implementation of SFAS No. 130 will have a material impact on the presentation of its financial statements.
3. PROPERTY AND EQUIPMENT:
Property and equipment as of December 31, 1997 is as follows:
Land $ 824,634
Buildings and equipment 18,914,184
Furniture and fixtures 2,386,475
-----------
22,125,293
Less accumulated depreciation (2,377,662)
-----------
$19,747,631
===========
|
4. LONG-TERM DEBT:
Long-term debt as of December 31, 1997 is as follows:
Mortgage note payable with interest at 9.25%, payable in monthly installments of $140,589 beginning February 1998 through November 2014, with the remaining unpaid principal due in December 2014, collateralized by real property. The fair value of the note approximates its carrying value. $17,080,000
4. LONG-TERM DEBT, CONTINUED:
Contractual maturities for long-term debt outstanding at December 31, 1997, are summarized by year as follows:
Year Ending
December 31,
------------
1998 $ 102,114
1999 121,688
2000 133,434
2001 146,314
2002 160,436
Thereafter 16,416,014
-----------
$17,080,000
===========
|
5. OPERATING LEASE INCOME:
Operating lease income is generated from non-related businesses which rent space on the hotel property. The cost and accumulated depreciation of these rental properties at December 31, 1997 are approximately $165,000 and $22,000, respectively. The income for one of these leases is based on a minimum fixed rate per month or a percentage of the business' gross sales, whichever is greater. During the year ended December 31, 1997, the Company recognized approximately $131,000 of rental income which included $28,000 of rent, which was contingent upon the amount of gross sales.
Future minimum lease income under existing noncancellable leases at December 31, 1997 is as follows:
Year Ending
December 31,
------------
1998 $ 89,449
1999 90,291
2000 68,604
2001 68,604
2002 68,604
-----------
$ 385,552
===========
|
THE OLYMPUS HOTEL NOTES TO FINANCIAL STATEMENTS, CONTINUED |
6. COMMITMENTS:
The Company leases billboards and equipment under operating lease agreements. The leases are generally on a month-to-month or year-to-year basis. These leases generally contain provisions for automatic renewal at the end of each specified period unless written notice is given in advance in accordance with the agreement. Future minimum lease payments at December 31, 1997 are approximately $13,000 due in 1998.
The Company also pays approximately $20,000 per month to a management company to manage Olympus Hotel. The agreement is renewed annually. At December 31, 1997, this agreement was renewed on a month-to-month basis. In connection with the sale of Olympus Hotel in 1998 (see Note 9), this management agreement was terminated.
7. RELATED-PARTY TRANSACTIONS:
The Company has agreed to pay Stellar an annual fee of $96,000 for consulting. This agreement was terminated in connection with the sale of Olympus Hotel in 1998 (see Note 9).
8. EMPLOYEE BENEFITS:
The Company sponsors a self-insured health benefit plan which provides comprehensive medical, dental and prescription coverage for the employees of the Company and their covered family members. The Company carries an excess reimbursement policy which covers 100 percent of payments exceeding $20,000 during a 12-month period per individual. Total expense incurred by the Company for this plan was approximately $176,000 in 1997.
The Company has established a flexible reimbursement plan intended to constitute a "Cafeteria plan" within Section 125 of the Internal Revenue Code. The Company made no contribution to this plan in 1997.
The Company sponsors a 401(k) retirement plan for substantially
all of its employees. The Company matches 15% of all eligible
employee contributions. Company contributions to this plan were
$3,300 in 1997.
The Company provides no benefits and incurs no costs associated
with postemployment or postretirement benefits or pensions.
9. SUBSEQUENT EVENT:
Effective July 1, 1998, Cavanaughs Hospitality Corporation ("CHC"), located in the state of Washington, acquired all the Company's property and equipment, including the rental property of the Company. CHC also acquired the rights, title and interest in all hotel contracts, space leases, permits, equipment leases and inventories of the Company. CHC is a hotel operating company that owns, operates, acquires, develops, renovates and repositions full service hotels located in the Northwest.
The following condensed pro forma combined balance sheets and condensed pro forma combined statements of operations, collectively, the "Pro Forma Financial Statements", were prepared by Cavanaughs to illustrate the estimated effects of the business combination to be accounted for as a purchase under generally accepted accounting principles. Accordingly, the financial information of Cavanaughs and Olympus has been combined as if the acquisition occurred as of the beginning of the period presented for purposes of the condensed pro forma combined statements of income, and as of the balance sheet date, for purposes of the condensed pro forma combined balance sheets. There are no differences between Cavanaughs' and Olympus' accounting policies which are expected to have a material impact on the pro forma combined financial statements. The Pro Forma Financial Statements do not purport to represent what the combined financial position or results of operations would have been if the combination had occurred at the beginning of the period or to project the combined financial position or results of operations for any future date or period.
The Pro Forma Financial Statements should be read in conjunction with the historical consolidated financial statements, including the notes thereto, of Cavanaughs, which are included in Cavanaughs' Form S-1 (File No. 333-44491), Cavanaughs' Form 10-Q for the three months ended March 31, 1998 and of Olympus, which are included elsewhere in this document.
The Pro Forma Financial Statements are presented utilizing the
purchase method of accounting whereby the excess of the total purchase
price over the fair value of the assets acquired is recorded as
property and equipment. The consolidated pro forma results of
operations presented herein are not necessarily indicative of the
future results of operations.
CHC Olympus
Historical Historical
(at (at
October 31, December 31, Pro Forma Pro Forma
1997) 1997) Adjustments Combined
----------- ------------ ----------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 6,440 $ -- $ -- $ 6,440
Accounts receivable 2,806 -- -- 2,806
Inventories 376 -- -- 376
Prepaid expenses and deposits 1,128 -- -- 1,128
--------- --------- --------- ---------
Total current assets 10,750 -- -- 10,750
Property and equipment, net 109,954 19,748 11,852(A) 141,554
Other assets, net 3,400 -- -- 3,400
--------- --------- --------- ---------
Total assets $ 124,104 $ 19,748 $ 11,852 $ 155,704
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS' AND
PARTNERS EQUITY
Current liabilities:
Payable to affiliates $ 1,333 $ -- $ -- $ 1,333
Accounts payable 2,263 -- -- 2,263
Accrued payroll and related benefits 843 -- -- 843
Accrued interest payable 741 -- -- 741
Other accrued expenses 3,618 -- -- 3,618
Long-term debt, due within one year 4,285 -- -- 4,285
Capital lease obligations, due within
one year 499 -- -- 499
--------- --------- --------- ---------
Total current liabilities 13,582 -- -- 13,582
Long-term debt, due after one year 93,771 -- 31,600(B) 125,371
Capital lease obligations, due after
one year 2,255 -- -- 2,255
Deferred income taxes 5,417 -- -- 5,417
Minority interest 553 -- -- 553
--------- --------- --------- ---------
Total liabilities 115,578 -- 31,600 147,178
--------- --------- --------- ---------
|
CHC Olympus
Historical Historical
(at (at
October 31, December 31, Pro Forma Pro Forma
1997) 1997) Adjustments Combined
----------- ------------ ----------- ----------
LIABILITIES AND STOCKHOLDERS' AND
PARTNERS EQUITY, CONTINUED
Stockholders and partners equity:
Preferred stock, $.01 par value,
5,000,000 shares authorized; no
shares issued and outstanding $ -- $ -- $ -- $ --
Common stock, $.01 par value,
50,000,000 shares authorized;
7,072,025 shares issued and
outstanding 71 -- -- 71
Partners' deficit (897) -- -- (897)
Additional paid-in capital 3,935 -- -- 3,935
Retained earnings 5,417 19,748 (19,748) 5,417
--------- --------- --------- ---------
Total stockholders' and
partners equity 8,526 19,748 (19,748) 8,526
--------- --------- --------- ---------
Total liabilities and stock-
holders' and partners
equity $ 124,104 $ 19,748 $ 11,852 $ 155,704
========= ========= ========= =========
|
See notes to condensed pro forma combined balance sheets and
statements of income.
CHC Olympus
Historical Historical
(at (at
March 31, March 31, Pro Forma Pro Forma
1998) 1998) Adjustments Combined
---------- ---------- ----------- ----------
ASSETS
Current assets:
Cash and cash equivalents $ 8,206 $ -- $ -- $ 8,206
Accounts receivable 2,652 -- -- 2,652
Inventories 483 -- -- 483
Prepaid expenses and deposits 2,160 -- -- 2,160
--------- --------- --------- ---------
Total current assets 13,501 -- -- 13,501
Property and equipment, net 137,559 19,645 11,955(A) 169,159
Other assets, net 3,726 -- -- 3,726
--------- --------- --------- ---------
Total assets $ 154,786 $ 19,645 $ 11,955 $ 186,386
========= ========= ========= =========
LIABILITIES AND STOCKHOLDERS EQUITY
Current liabilities:
Payable to affiliates $ 933 $ -- $ -- $ 933
Note payable to bank 3,000 -- -- 3,000
Accounts payable 3,235 -- -- 3,235
Accrued payroll and related benefits 1,039 -- -- 1,039
Accrued interest payable 832 -- -- 832
Other accrued expenses 4,378 -- -- 4,378
Long-term debt, due within one year 1,241 -- -- 1,241
Capital lease obligations, due within
one year 508 -- -- 508
--------- --------- --------- ---------
Total current liabilities 15,166 -- -- 15,166
Long-term debt, due after one year 123,253 -- 31,600(B) 154,853
Capital lease obligations, due after
one year 2,023 -- -- 2,023
Deferred income taxes 5,415 -- -- 5,415
Minority interest 484 -- -- 484
--------- --------- --------- ---------
Total liabilities 146,341 -- 31,600 177,941
--------- --------- --------- ---------
|
CHC Olympus
Historical Historical
(at (at
March 31, March 31, Pro Forma Pro Forma
1998) 1998) Adjustments Combined
---------- ---------- ----------- ----------
LIABILITIES AND STOCKHOLDERS EQUITY,
CONTINUED
Stockholders equity:
Preferred stock, $.01 par value,
5,000,000 shares authorized; no
shares issued and outstanding $ -- $ -- $ -- $ --
Common stock, $.01 par value,
50,000,000 shares authorized;
7,084,253 shares issued and
outstanding 71 -- -- 71
Additional paid-in capital 3,056 -- -- 3,056
Retained earnings 5,318 19,645 (19,645) 5,318
--------- --------- --------- ---------
Total stockholders equity 8,445 19,645 (19,645) 8,445
--------- --------- --------- ---------
Total liabilities and stock-
holders equity $ 154,786 $ 19,645 $ 11,955 $ 186,386
========= ========= ========= =========
|
See notes to condensed pro forma combined balance sheets and
statements of income.
CHC Olympus
Historical Historical
(for the (for the
year ended year ended
October 31, December 31, Pro Forma Pro Forma
1997) 1997) Adjustments Combined
----------- ------------ ----------- ----------
Revenues:
Hotels and restaurants:
Rooms $ 25,147 $ 6,999 $ -- $ 32,146
Food and beverage 13,926 1,883 -- 15,809
Other 2,589 55 -- 2,644
--------- --------- --------- ---------
Total hotels and restaurants 41,662 8,937 -- 50,599
Entertainment, management and services 3,842 -- -- 3,842
Rental operations 6,539 131 -- 6,670
--------- --------- --------- ---------
Total revenues 52,043 9,068 -- 61,111
--------- --------- --------- ---------
Operating expenses:
Direct:
Hotels and restaurants:
Rooms 6,820 1,294 -- 8,114
Food and beverage 11,483 1,430 -- 12,913
Other 1,066 -- -- 1,066
--------- --------- --------- ---------
Total hotels and restaurants 19,369 2,724 -- 22,093
Entertainment, management and
services 2,052 -- -- 2,052
Rental operations 1,506 -- -- 1,506
--------- --------- --------- ---------
Total direct expenses 22,927 2,724 -- 25,651
--------- --------- --------- ---------
Undistributed operating expenses:
Selling, general and administrative 8,188 1,632 -- 9,820
Property operating costs 5,518 1,484 (306)(C) 6,696
Depreciation and amortization 4,775 848 (121)(D) 5,502
--------- --------- --------- ---------
Total undistributed operating
expenses 18,481 3,964 (427) 22,018
--------- --------- --------- ---------
Total expenses 41,408 6,688 (427) 47,669
--------- --------- --------- ---------
Operating income 10,635 2,380 427 13,442
Other income (expense):
Interest expense, net of amounts
capitalized (8,817) (1,643) (739)(E) (11,199)
Interest income 416 -- -- 416
Other income 348 -- -- 348
Minority interest in partnerships 59 -- -- 59
--------- --------- --------- ---------
Income (loss) before income taxes 2,641 737 (312) 3,066
Income tax provision 932 141 (F) 1,073
--------- --------- --------- ---------
Net income $ 1,709 $ 737 $ (453) $ 1,993
========= ========= ========= =========
|
CHC Olympus
Historical Historical
(for the (for the
year ended year ended
October 31, December 31, Pro Forma Pro Forma
1997) 1997) Adjustments Combined
----------- ------------ ----------- ----------
Pro forma net income per share $ 0.24 $ 0.28
========= =========
Number of shares used in the pro
forma computation 7,072 7,072
========= =========
|
See notes to condensed pro forma combined balance sheets and
statements of income.
CHC Olympus Pro Forma Pro Forma
Historical Historical Adjustments Combined
---------- ---------- ----------- ----------
Revenues:
Hotels and restaurants:
Rooms $ 6,884 $ 1,820 $ -- $ 8,704
Food and beverage 4,175 524 -- 4,699
Other 782 43 -- 825
--------- --------- --------- ---------
Total hotels and restaurants 11,841 2,387 -- 14,228
Entertainment, management and services 1,018 -- -- 1,018
Rental operations 1,776 32 -- 1,808
--------- --------- --------- ---------
Total revenues 14,635 2,419 -- 17,054
--------- --------- --------- ---------
Operating expenses:
Direct:
Hotels and restaurants:
Rooms 2,091 384 -- 2,475
Food and beverage 3,558 430 -- 3,988
Other 337 -- -- 337
--------- --------- --------- ---------
Total hotels and restaurants 5,986 814 -- 6,800
Entertainment, management and
services 697 -- -- 697
Rental operations 385 -- -- 385
--------- --------- --------- ---------
Total direct expenses 7,068 814 -- 7,882
--------- --------- --------- ---------
Undistributed operating expenses:
Selling, general and administrative 1,996 260 -- 2,256
Property operating costs 1,796 390 (89)(C) 2,097
Depreciation and amortization 1,338 211 (30)(D) 1,519
--------- --------- --------- ---------
Total undistributed operating
expenses 5,130 861 (119) 5,872
--------- --------- --------- ---------
Total expenses 12,198 1,675 (119) 13,754
--------- --------- --------- ---------
Operating income 2,437 744 119 3,300
Other income (expense):
Interest expense, net of amounts
capitalized (2,679) (407) (189)(E) (3,275)
Interest income 70 -- -- 70
Minority interest in partnerships 40 -- -- 40
--------- --------- --------- ---------
Income (loss) before income taxes (132) 337 (70) 135
Income tax provision (benefit) (45) -- 91 (F) 46
--------- --------- --------- ---------
Net income (loss) and comprehensive
income (loss) $ (87) $ 337 $ (161) $ 89
========= ========= ========= =========
|
CHC Olympus Pro Forma Pro Forma
Historical Historical Adjustments Combined
---------- ---------- ----------- ----------
Net income (loss) per share - basic
and diluted $ (0.01) $ 0.01
========= =========
Weighted average shares outstanding -
basic and diluted 7,084 7,084
========= =========
|
See notes to condensed pro forma combined balance sheet and statement
of income.
The following balance sheet adjustments were made to reflect the combination of Cavanaughs and Olympus as if it occurred October 31, 1997 and March 31, 1998:
(A) Represents the purchase price in excess of the historical carrying value of the property and equipment of Olympus. The total purchase price and the amount in excess of the historical carrying value of the property and equipment are calculated as follows (in thousands):
October 31, March 31,
1997 1998
----------- -----------
Total purchase price $ 31,600 $ 31,600
Historical carrying value of
assets acquired (19,748) (19,645)
-------- --------
Excess purchase price $ 11,852 $ 11,955
======== ========
|
The purchase price has been allocated to the acquired land, building, furniture and fixtures as follows based upon the estimated fair value of the components (in thousands):
Depreciable
Amount Life
---------- ------------
Land $ 10,876
Buildings 18,840 35 years
Furniture and fixtures 1,884 10 years
--------
$ 31,600
========
|
(B) Represents the amount of the purchase price of Olympus which will be financed by the Company's revolving line-of-credit agreement.
The following income statement adjustments were made to reflect the combination of Cavanaughs and Olympus as if it occurred at the beginning of the period presented. The combined pro forma results of operations presented herein are not necessarily indicative of the future results of operations of the combined companies.
(C) Represents the elimination of management fees associated with the management agreement between Olympus and an affiliated entity which will be terminated upon the acquisition by Cavanaughs.
(D) Represents the increase (decrease) in depreciation and amortization expense from the historical amounts based on the depreciation of the purchase price over the estimated remaining lives of the acquired assets (see Note A).
(E) Represents the additional interest expense which would be incurred by Cavanaughs based on the purchase price of Olympus, which will be financed under Cavanaughs' revolving line-of-credit agreement. The interest rate used in the pro forma adjustments was 7.538% based upon the current borrowing rate under Cavanaughs' line-of-credit agreement. If the rate increased or decreased by 0.25%, the Company s pro forma interest expense, net income and earnings per share for the 1997 fiscal year would increase or decrease by approximately $79,000, $51,000 and $0.01, respectively. If the rate increased or decreased by 0.25%, the Company s pro forma interest expense, net income and earnings per share for the quarter ended March 31, 1998 would increase or decrease by approximately $18,000, $12,000 and $-0-, respectively.
(F) Represents estimated income taxes related to Olympus' historical
income before income taxes and the tax effects of pro forma
adjustments. As Olympus was not a tax-paying entity, there is no
income tax provision recorded on the historical Olympus financial
statements.
Current assets:
Cash and cash equivalents $ 129,932
Accounts receivable 650,907
Inventories 60,279
Prepaid expenses 168,396
-----------
Total current assets 1,009,514
Property and equipment, net 19,645,287
Deferred loan fees, net 85,627
-----------
Total assets $20,740,428
===========
LIABILITIES AND MEMBERS' EQUITY
Current liabilities:
Accounts payable $ 253,680
Accrued payroll and related benefits 181,400
Other accrued expenses 96,902
Note payable, current portion 102,114
-----------
Total current liabilities 634,096
Note payable, long-term portion 16,977,886
-----------
Total liabilities 17,611,982
Members' equity 3,128,446
-----------
Total liabilities and members' equity $20,740,428
===========
|
THE OLYMPUS HOTEL
STATEMENT OF INCOME
for the three months ended March 31, 1998 (Unaudited)
Revenues:
Hotel and restaurant:
Rooms $ 1,820,157
Food and beverage 524,496
Other 42,851
-----------
Total hotel and restaurant 2,387,504
Rental operations 31,663
-----------
Total revenues 2,419,167
-----------
Operating expenses:
Direct:
Rooms 384,179
Food and beverage 430,326
-----------
Total direct 814,505
-----------
Indirect:
Selling, general and administrative 259,405
Property operating costs 389,854
Depreciation and amortization 211,350
-----------
Total indirect 860,609
-----------
Total operating expenses 1,675,114
-----------
Operating income 744,053
Other expense:
Interest (406,766)
-----------
Net income and comprehensive income $ 337,287
===========
|
THE OLYMPUS HOTEL
STATEMENT OF CASH FLOWS
for the three months ended March 31, 1998 (Unaudited)
Operating activities:
Net income $ 337,287
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 211,350
Change in:
Accounts receivable (261,761)
Inventories 3,539
Prepaid expenses 6,721
Accounts payable (94,924)
Accrued payroll and related benefits (14,093)
Other accrued expenses 24,235
-----------
Net cash provided by operating activities 212,354
-----------
Investing activities:
Additions to property and equipment (108,005)
-----------
Net cash used in investing activities (108,005)
-----------
Financing activities:
Distributions to members (250,000)
-----------
Net cash used in financing activities (250,000)
-----------
Change in cash and cash equivalents:
Net decrease in cash and cash equivalents (145,651)
Cash and cash equivalents at beginning of period 275,583
-----------
Cash and cash equivalents at end of period $ 129,932
===========
|
THE OLYMPUS HOTEL NOTES TO UNAUDITED FINANCIAL STATEMENTS as of and for the three months ended March 31, 1998 |
1. QUARTERLY INFORMATION:
The unaudited financial statements included herein have been prepared by The Olympus Hotel ("Olympus Hotel" or "the Company") pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC"). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted as permitted by such rules and regulations. The Company believes that the disclosures included herein are adequate; however, these statements should be read in conjunction with the financial statements and the notes thereto for the year ended December 31, 1997 which are included elsewhere in this document.
In the opinion of management, these unaudited financial statements contain all of the adjustments normal and recurring in nature, necessary to present fairly the financial position of the Company at March 31, 1998 and the results of operations and cash flows for the three months ended March 31, 1998. The results of operations for the periods presented may not be indicative of those which may be expected for a full year.
2. INCOME TAXES:
Olympus Hotel is wholly owned by Stellar Lone Star Limited Liability Company. Accordingly, Stellar's members are responsible for federal and state income taxes on Olympus Hotel's earnings. Therefore, no provision for income taxes is recorded in these financial statements.