Back to GetFilings.com
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2001
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the transition period from ______________ to ______________
Commission File Number 1-9320
Wyndham International, Inc.
(Exact name of registrant as specified in its charter)
Delaware 94-2878485
(State or other (I.R.S.
jurisdiction Employer Identification
of incorporation or No.)
organization)
1950 Stemmons Freeway,
Suite 6001 Dallas, Texas 75207
(Address of principal (Zip Code)
executive offices)
(214) 863-1000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Class A Common Stock, par New York Stock Exchange
value $0.01 per share
Preferred Stock Purchase
Rights New York Stock Exchange
(Title of each class) (Name of each exchange on
which registered)
Securities registered pursuant to Section 12(g) of the Act:
Series A Convertible Preferred Stock, par value $0.01 per share
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [_]
The aggregate market value of the voting stock held by non-affiliates of
Wyndham International, Inc. as of March 19, 2002 was $125 million, based upon a
price of $.82 per share.
As of March 19, 2002, there were 167,847,940 shares of Wyndham class A
common stock issued and outstanding.
DOCUMENTS INCORPORATED BY REFERENCE
Certain information called for by Part III is incorporated by reference to
the definitive proxy statement for the 2002 annual meeting of the stockholders
of Wyndham, which will be filed with the Securities and Exchange Commission not
later than April 30, 2002.
================================================================================
WYNDHAM INTERNATIONAL, INC.
Form 10-K Annual Report
Index
Form 10-K
Item No. Report Page
- -------- -----------
PART I
1. Business............................................................................. 1
2. Properties........................................................................... 1
3. Legal Proceedings.................................................................... 17
4. Submission of Matters to a Vote of Security Holders.................................. 18
PART II
5. Market for Registrant's Common Equity and Related Stockholder Matters................ 19
6. Selected Financial Information....................................................... 21
7. Management's Discussion and Analysis of Financial Condition and Results of Operations 23
7a. Qualitative and Quantitative Disclosures about Market Risks.......................... 39
8. Financial Statements and Supplementary Data.......................................... 40
9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. 40
PART III................................................................................. 40
PART IV
14. Exhibits, Financial Statements and Schedules, and Reports on Form 8-K................ 41
SIGNATURES............................................................................... 44
i
PART I
ITEMS 1 AND 2. BUSINESS AND PROPERTIES
Overview
We are a fully-integrated and multi-branded hotel enterprise operating
primarily in the upper upscale and luxury segments of the hotel and resorts
industry. We are one of the largest United States based hotel owner/operators
with a portfolio consisting of 220 hotels with over 56,600 guest rooms as of
December 31, 2001. We are a Delaware corporation and our principal executive
office is located at 1950 Stemmons Freeway, Suite 6001, Dallas, Texas 75207.
Our History
Through a series of mergers and acquisitions, we have grown substantially
since our inception in 1995. Patriot American Hospitality, Inc., or Patriot,
was formed on April 17, 1995 as a self-administered real estate investment
trust, or REIT, to acquire equity interests in hotel properties. On October 2,
1995, Patriot completed an initial public offering of its common stock and
commenced its operations. Between October 2, 1995 and July 1, 1997, Patriot
acquired interests in 56 hotel properties and leased them to various third
party lessees.
On July 1, 1997, Patriot merged into California Jockey Club, or Cal Jockey,
which we will refer to as the "Cal Jockey merger" in this Form 10-K. As part of
this merger, Cal Jockey and Bay Meadows Operating Company, or Bay Meadows,
entered into a paired share arrangement under which both of their common stocks
were paired and traded together. Also, Cal Jockey changed its name to Patriot,
and Bay Meadows changed its name to "Patriot American Hospitality Operating
Company."
In January 1998, Wyndham Hotel Corporation merged into Patriot and, as part
of that merger, Patriot American Hospitality Operating Company changed its name
to "Wyndham International, Inc." We will refer to Wyndham International, Inc.
as it existed before June 30, 1999 as "old Wyndham."
During 1998, Patriot and old Wyndham grew primarily by acquiring hotels and
other related businesses using proceeds of over $4.5 billion. They financed
these acquisitions with funds drawn on their revolving credit facilities and
capital raised by issuing paired shares and by having their two operating
partnerships issue limited partnership interests. These acquisitions included:
. the acquisition of Wyndham Hotel Corporation in January 1998 referred to
above, as a result of which Patriot acquired 10 Wyndham hotels, 14
Clubhouse hotels, 52 management and franchise contracts, the Wyndham and
Clubhouse proprietary brand names, and the Wyndham hotel management
company;
. three resort hotels in Puerto Rico and a majority interest in a related
hotel company;
. Arcadian International Limited, which owned 10 hotels in England, one
hotel in Jersey, five owned and managed Malmaison hotels, two European
resorts under development, the Malmaison proprietary brand name, and a
50% interest in a property being developed in London;
. Interstate Hotels Company, or Interstate, which owned or had controlling
interests in 42 hotels, leases for 84 hotels, and management or service
agreements for 82 hotels;
. SF Hotel Company, L.P., which owned four Summerfield Suites(R) hotels,
leasehold and management interests in 24 Summerfield Suites(R), Sierra
Suites(R) and Sunrise Suites hotels, and management contracts and
franchise interests for 12 additional hotels; and
. the hospitality related business of CHC International, Inc., or CHCI,
which included the acquisition of 17 leases and 16 of the related
management contracts related to Patriot hotels, eight third party
management contracts, two third party asset management contracts, the
Grand Bay proprietary brand name, and certain other assets.
1
On June 30, 1999, we restructured our organization. As part of this
restructuring:
. Patriot became a wholly-owned subsidiary of ours;
. we and Patriot terminated the paired share arrangement;
. each outstanding paired share was converted into one share of our class A
common stock; and
. Patriot terminated its status as a REIT effective January 1, 1999 and
became a taxable corporation as of that date.
Also on June 30, 1999, we completed a $1 billion series B preferred stock
equity investment and closed a new credit facility (comprised of a senior
credit facility and an increasing rate loan facility), which was amended and
restated as of January 24, 2002, and closed on additional mortgage debt.
Holders of our series B preferred stock are entitled to a quarterly dividend on
a cumulative basis at a rate of 9.75% per year, and our series B preferred
stock is convertible, at the holders' option, into shares of our class B common
stock. Also in 1999, we completed an offering of our series A preferred stock,
which, except for voting rights, has substantially similar terms to our series
B preferred stock. We used the proceeds of our series A preferred stock
offering to redeem some of our series B preferred stock. On September 30, 2001,
we issued approximately 1,120 shares of series A preferred stock and 205,736
shares of series B preferred stock.
Under the terms of our preferred stock, if cash dividends are in arrears and
unpaid for a period of 60 days or more, then an additional amount of dividends
accrue at a rate per annum of 2.0% of the stated amount of each share of
preferred stock then outstanding from the last payment date on which cash
dividends were to be paid in full until all cash dividends in arrears have been
paid in full. Such additional dividends are cumulative and payable in
additional shares of preferred stock. As of December 31, 2001, we had accrued
$11.6 million at a rate of 2.0% per annum as an additional dividend because
cash dividends totaling $14.6 million on the preferred stock had been in
arrears and unpaid for a period of more than 60 days. In addition, in our
amended and restated credit facilities, we agreed not to pay the cash portion
of the regular quarterly dividend on our preferred stock.
Also during 1999, we sold a racecourse, land adjacent to the racecourse, and
21 hotels for net cash proceeds of approximately $123.4 million. We also
distributed approximately 92% of the shares of Interstate in the form of a
dividend to our stockholders, which we will refer to as the "Interstate
spin-off".
During 2000, we agreed to the redemption of our aggregate 55% non-voting
economic interest in Interstate Hotels, LLC, a principal operating subsidiary
of Interstate. Interstate Hotels, LLC transferred to us a management agreement
for one hotel owned by us and amended management agreements with respect to six
other hotels owned by us to reduce the management fees and to permit
termination by the owner upon 30 days notice. In addition, approximately 9% of
our interest was redeemed by Interstate Hotels, LLC and substantially all of
the remainder was converted into a preferred membership interest in Interstate
Hotels, LLC. As additional consideration for the redemption and conversion of
our interest, we caused our representative on Interstate's board of directors
to resign and relinquished our right to appoint a member to Interstate's board
of directors in the future. In addition, we granted Interstate an option
exercisable within 90 days of October 20, 2000, to acquire all of Interstate's
stock owned by us at a weighted average trading price per share, provided that
the purchase price not be less than $3.00 per share nor more than $4.00 per
share. On December 3, 2000, the common stock was acquired for approximately
$597,000. On July 12, 2001, Interstate Hotels, LLC, pursuant to a redemption
agreement, called for the redemption of our preferred interest in Interstate
Hotels, LLC. In consideration for the redemption, we received $8.25 million in
cash and two promissory notes in the amounts of $750,000 and $3.68 million,
respectively. The notes bear interest at 9.75% and mature on July 1, 2002 and
July 1, 2004, respectively. We recorded a gain of $2 million, net of previously
recorded impairment of $16.5 million. The portion of our interest that was not
converted into a preferred membership interest will remain outstanding.
Thereafter, at any time on or after July 1, 2004, both we and Interstate
Hotels, LLC have the right to require Interstate Hotels, LLC to redeem the
remaining common interest at an amount that is the lesser of (a) the product
2
of (i) five times Interstate Hotels, LLC's EBITDA as of December 31, 2003 and
(ii) the percentage of total equity interest in Interstate Hotels, LLC which is
represented by the remaining interest, or (b) approximately $433,000.
In 2000, we sold the following assets:
. the Sierra Suites(R) hotel brand, one owned and three leased properties,
17 franchise and management contracts for Sierra Suites(R), and nine
management contracts for Summerfield Suites(R) for net cash proceeds of
approximately $53.0 million, $29.8 million of which was used to relieve
future payment obligations related to the SF Hotel Company, L.P.
acquisitions in 1998 discussed above;
. 26 hotels (two of which were leased back to us) and the Clubhouse Inn
proprietary brand for net cash proceeds of approximately $175.0 million,
after we repaid approximately $70.4 million of mortgage debt; and
. investments in three hotels, two parcels of land, retail space, and a
garage for net cash proceeds of approximately $61.4 million, after we
repaid approximately $7.8 million of debt and a note receivable of $4.3
million.
In 2001, we sold the following assets:
. two hotels and a sewer company, in separate transactions for aggregate
net cash proceeds of approximately $8.6 million, after we repaid
approximately $21.8 million of debt;
. one hotel in which we retained a preferred equity interest for net cash
proceeds of approximately $19.7 million;
. three hotels and investments in four additional hotels in a single
transaction for net cash proceeds of approximately $58.7 million; and
. six hotels, which were exchanged for one hotel.
General Description of Our Business
We classify our business into two groups: (1) proprietary branded hotels and
(2) non-proprietary branded hotels, under which we manage our business. Our
proprietary branded hotels are Wyndham Hotels & Resorts(R), Wyndham Luxury
Resorts, Wyndham Garden Hotels(R), and Summerfield Suites by Wyndham consisting
of 156 owned, leased, managed, or franchised hotels with over 38,200 guest
rooms as of December 31, 2001. Wyndham Hotels & Resorts is our principal
proprietary branded group of assets. Through both our Wyndham Hotels &
Resorts(R) brand and our Wyndham Garden Hotels(R) brand, we offer upper
upscale, full-service accommodations to business and leisure travelers. Through
our Wyndham Luxury Resorts brand, we offer five-star luxury accommodations,
such as the Boulders and Carmel Valley Ranch. Through our Summerfield Suites by
Wyndham(TM) brand, we offer upper upscale, all-suite accommodations to business
and leisure travelers.
Our primary growth strategy for our proprietary brand has been to expand
through new management and franchise contracts, rebrand our nonproprietary
hotels to the Wyndham flag, operate efficiently through revenue generation and
cost containment programs and build the brand through innovative programs.
Our non-proprietary branded hotels consist of 64 owned, leased, managed or
franchised hotels with over 18,400 guest rooms as of December 31, 2001. All of
these hotels are operated under franchise or brand affiliations with nationally
recognized hotel companies, including Crowne Plaza(R), Hilton(R), Hyatt(R),
Radisson(R), Holiday Inn(R), Doubletree(R), Embassy Suites(R), Ramada(R),
Marriott(R) and Courtyard by Marriott(R). We manage all but 25 of these hotels.
Our non-proprietary branded hotels are operated primarily by Performance
Hospitality Management, or PHM, one of our management divisions. In addition to
our owned and leased assets, PHM manages 5 non-proprietary branded hotels for
third parties. We intend to continue to selectively dispose of our
non-proprietary branded hotels through asset sales and exchanges to create a
source of capital for us to (1) continue expanding the Wyndham proprietary
brand and (2) repay debt.
3
Our Business Strengths
. Strong Brand Name. Our proprietary brands all have at least a 17-year
history and our Wyndham brand is highly recognized in our industry. Our
Wyndham brand, including Summerfield Suites by Wyndham(TM), serves to
identify high quality assets with a consistent and high level of customer
service and reliability.
. Geographically Diverse Portfolio. To help mitigate the effects of
regional downturns in the hotel industry, we have assembled a
geographically diverse portfolio of hotels and resorts.
. Control over Property Execution. We own or operate approximately 86% of
our proprietary branded portfolio. As a result, we can more efficiently
and effectively implement brand-enhancing programs, such as the Wyndham
Brand Standards, the program we implemented in 2000 to standardize the
stay experience in all of our hotels, and Wyndham ByRequest(R), our
innovative guest recognition program which builds brand loyalty by
allowing our guests to customize their stay at any of our properties. We
were able to implement both of these programs in our proprietary branded
properties in less than one year. In addition, through economies of
scale, we benefit from greater purchasing and negotiating power when
addressing company-wide marketing, insurance, and other hotel services.
Furthermore, in markets where we have multiple hotels, we are able to
create more consistent operating performance and reduce costs by
combining certain operating functions.
. Personalized Guest Experience. Through our innovative brand-enhancing
program Wyndham ByRequest, we are able to provide each ByRequest member a
personalized stay experience. Based on the member's personal ByRequest
profile, we arrange their guest room amenities before check-in. In
addition, Wyndham ByRequest allows us to customize on-going
communications with members and tailor future travel benefits to our
members ByRequest profile. As a result of this program, the number of our
repeat guests has more than doubled compared to 18 months ago.
. Captured Market Share. We have continued to capture market share versus
our competitors since our June 30, 1999 reorganization with programs such
as our Women on Their Way, which is designed to serve the needs of the
female traveler. Our Women on Their Way program and our on-going
commitment to diversity have enabled us to capture a substantial share of
the emerging market segment of the young, female business traveler, the
fastest growing segment of all business travelers.
Our Business Strategy
Since our June 30, 1999 reorganization, we have been singularly focused on
increasing our proprietary branded assets by either disposing of or rebranding
our non-strategic assets. We have been building our brand by growing our
management and franchise business and implementing innovative programs.
Additionally, we have created brand operating efficiencies with revenue
generation and cost containment programs.
. Dispose of non-strategic assets. We intend to sell all our
non-strategic, non-convertible assets. These are properties that do not
fit our proprietary brand profile because of the quality of the asset or
the fact that it is encumbered by a long-term licensing agreement with a
non-Wyndham brand. By disposing of these assets, we are able to focus
solely on being a branded operating company, as well as reduce our debt
with the net proceeds from these asset sales. Since implementing this
plan in June of 1999, we have sold 82 assets with gross proceeds of
approximately $895 million. We have 56 non-strategic assets remaining to
be sold. These assets will be held until such time as the sales price
meets or exceeds management's assessment of fair value.
. Rebrand existing hotels. Where opportunities exist, we continue to
rebrand eligible non-proprietary assets that fit our Wyndham brand.
Rebranded properties benefit from our global distribution system and our
brand defining programs. By rebranding these hotels, we benefit by
increasing the geographical distribution of our Wyndham properties, which
enables us to offer our guests a consistent Wyndham experience in more
locations. We also benefit by eliminating the need to pay franchise and
related fees to our competitors. We have converted 16 assets from other
brands to the Wyndham brand. We also
4
have converted 12 Wyndham Garden hotels to full Wyndham Hotels, which
enable us to offer more services to our customers.
. Grow our management and franchise business. We have and will continue to
focus our growth efforts in the area of new management and franchise
contracts. This growth will enable us to expand our brand distribution
and increase our EBITDA through the fee income associated with these
contracts. During the past three years, we have signed 16 management
contracts and 14 franchise agreements. We are aggressively pursuing new
management and franchise opportunities and will continue to
geographically target major metropolitan areas and resort destinations.
We have extensive experience in the lodging industry and we believe our
industry knowledge, relationships and access to market information
provide us a competitive edge with respect to identifying, evaluating and
signing new hotel assets to the Wyndham brand.
. Build the Wyndham brand. We continue to support and implement programs
to build Wyndham brand.
. Our Women on Their Way program has been successful in capturing
substantial market share in the emerging market segment of young,
female business traveler and has helped create an advantage in
attracting more guests to our hotels.
. We have implemented consistent brand standards in all of our Wyndham
branded assets by including Herman Miller Aeron chairs and Golden
Door Amenities, both of which are exclusive to Wyndham, in our rooms.
This helps ensure a consistent stay experience in all Wyndham branded
properties.
. Our innovative guest recognition program, Wyndham ByRequest, allows
our guests to personalize their stay at any of our branded
properties. We customize on-going communication and future travel
benefits to our members' profiles, which we believe builds loyalty to
the Wyndham brand.
. Operate efficiently. From a revenue generation standpoint, we have
continued to streamline our sales and booking efforts. After our June 30,
1999 reorganization, we brought all of our branded assets under one
global distribution chain code "WY". This has enabled our central
reservations office to efficiently cross sell our properties and, thus,
achieve a greater maximization of revenues.
Beginning with our June 30, 1999 reorganization and continuing throughout
2001, we have continued to implement cost containment programs. We have
closed eight satellite offices and have relocated all corporate
operations to Dallas, Texas. We implemented three rounds of cost
reduction programs during 2001 to counteract the economic recession and
implemented additional cuts in response to the tragic events of September
11th. The programs include, among other things, a permanent reduction in
our workforce at both our corporate office and our properties; a
temporary furloughing of employees at our properties; reduced restaurant
hours and closed floors and wings of hotels commensurate with occupancy
levels; and the renegotiation of service agreements and trade contracts.
We have continued to maintain the two-to-one ratio between revenue per
available room changes and EBITDA changes, as well as achieve benchmark
flow through on revenue changes to EBITDA changes.
Our Proprietary Brands
We market all of our proprietary products under the Wyndham brand umbrella,
which includes four-star, upper upscale hotels that offer full-service
accommodations to business and leisure travelers, and a five-star luxury resort
brand. With hotels in major urban, suburban and resort markets, our Wyndham
brand offers products geared to the specific needs of travelers based on their
location, facilities and travel purpose.
Wyndham Hotels & Resorts(R). This brand includes our principal proprietary
brand of hotels and resorts. Our hotel brand features upper upscale,
full-service hotels that contain an average of 300 hotel rooms, generally
between 15,000 and 250,000 square feet of meeting space and a full range of
guest services and amenities for business and leisure travelers as well as
conferences and conventions. These hotels, which are located primarily
5
in the central business districts and dominant suburbs of major metropolitan
markets, target business groups, meetings and individual business and leisure
travelers. These hotels offer elegantly appointed facilities and high levels of
quality guest service.
Our distinctive, full-service Wyndham Resorts feature owned, leased or
managed resorts that contain an average of 410 rooms and a full range of guest
services for leisure travelers and business groups. We are the largest
owner/operator of resorts in the Carribean and Florida.
Wyndham Luxury Resorts. This brand includes five-star, luxury hotel
properties featuring between 50 and 200 rooms, numerous fine dining options and
other luxury and recreational amenities. These luxury resorts distinguish
themselves by focusing on incorporating the local environment into every aspect
of the property, from decor to cuisine to recreation. Our luxury resort
collection includes the Golden Door(R), one of the world's preeminent spas
based in Escondido, California. Our luxury resorts are also located in Arizona,
California, Massachusetts and Mexico.
Wyndham Garden Hotels. This brand includes hotels that are located
principally near major airports and suburban business districts and serve
individual business travelers and small business groups. These full-service
hotels feature between 150 and 230 guest rooms, and include up to 5,000 square
feet of meeting space. Their amenities and services generally include a
three-meal restaurant, signature Wyndham Garden(R) libraries and laundry and
room service.
Summerfield Suites by Wyndham(TM). This brand offers guests one of the
highest quality lodging experiences in the upper upscale, all-suites segment.
Each suite contains a fully equipped kitchen, a spacious living room and a
private bedroom. Many of the suites feature two bedroom, two bath units. Each
hotel also has a swimming pool, exercise room and other amenities to serve
business and leisure travelers. Each hotel features 90 to 280 suites in either
interior or exterior corridor design.
Our Non-Proprietary Brands
Among our non-proprietary branded hotels, we own and operate 31 hotels
aggregating over 8,700 rooms under franchise or brand affiliations with
nationally recognized hotel companies, including Crowne Plaza(R), Hilton(R),
Hyatt(R), Radisson(R), Holiday Inn(R), Doubletree(R), Embassy Suites(R),
Ramada(R), Marriott(R) and Courtyard by Marriott(R). The majority of our
non-proprietary branded hotels are full-service hotels that operate in the
upscale and upper upscale segments of the hotel industry. Our full-service
hotels generally offer a range of conference facilities and banquet space, food
and beverage accommodations, gift shops and recreational areas, including
swimming pools. These hotels target both business and leisure travelers,
including meetings, groups and individuals.
Lodging Information
The following table sets forth, for each of our owned and leased hotels as
of December 31, 2001, the hotels and number of rooms and, for the year ended
December 31, 2001, total revenue, average daily rate, average occupancy rate,
and revenue per available room.
Revenue
Number Average per
of Total Daily Available
Property Name City State Rooms Revenue Rate Occupancy Room
------------- --------- ----- ------ ------- ------- --------- ---------
(Total Revenue in thousands)
Wyndham Hotels & Resorts
Wyndham Andover................. Andover MA 293 $11,643 $104.19 61.7% $ 64.33
Wyndham Arlington............... Arlington TX 310 $12,729 $ 94.24 70.2% $ 66.11
Wyndham Atlanta................. Atlanta GA 312 $13,538 $134.77 58.6% $ 79.03
Wyndham Baltimor-e--Inner Harbor Baltimore MD 707 $30,618 $119.99 66.0% $ 79.20
Wyndham Bel Age................. Hollywood CA 200 $13,803 $154.63 73.7% $114.03
Wyndham Billerica............... Billerica MA 210 $ 7,656 $126.28 55.4% $ 69.96
6
Revenue
Number Average per
of Total Daily Available
Property Name City State Rooms Revenue Rate Occupancy Room
------------- ---------------- ------- ------ ------- ------- --------- ---------
Wyndham Bloomington..................... Bloomington MN 209 $ 7,369 $ 87.54 73.4% $ 64.26
Wyndham Boston.......................... Boston MA 362 $23,900 $188.17 71.2% $133.98
Wyndham Bristol Place--Toronto
Airport................................ Toronto Ontario 287 $12,749 $ 84.31 78.3% $ 66.05
Wyndham Buttes Resort................... Tempe AZ 353 $24,178 $134.91 68.8% $ 92.83
Wyndham Casa Marina Resort & Beach House Key West FL 311 $26,779 $199.34 80.6% $160.57
Wyndham Chicago......................... Chicago IL 417 $21,488 $156.82 58.5% $ 91.80
Wyndham City Center..................... Washington DC 352 $14,622 $109.13 70.8% $ 77.28
Wyndham Colorado Springs................ Colorado Springs CO 311 $10,281 $ 87.01 60.2% $ 52.34
Wyndham Commerce........................ Commerce CA 201 $ 7,058 $ 92.67 64.6% $ 59.86
Wyndham Dallas Market Center............ Dallas TX 228 $ 5,671 $ 92.47 50.4% $ 46.60
Wyndham Denver Tech Center.............. Denver CO 180 $ 4,677 $ 97.53 49.8% $ 48.55
Wyndham El Conquistador Resort & Country
Club................................... Fajardo PR 750 $95,307 $225.51 66.6% $150.10
Wyndham El San Juan Hotel & Casino...... San Juan PR 382 $63,364 $224.01 78.3% $175.51
Wyndham Emerald Plaza................... San Diego CA 436 $23,818 $132.47 78.5% $103.99
Wyndham Grand Bay--Coconut Grove........ Miami FL 177 $11,854 $200.03 54.0% $108.05
Wyndham Greenspoint..................... Houston TX 472 $22,418 $ 95.22 73.8% $ 70.24
Wyndham Harbour Island.................. Tampa FL 299 $15,571 $132.63 68.2% $ 90.42
Wyndham Indianapolis.................... Indianapolis IN 171 $ 4,470 $ 85.70 56.5% $ 48.43
Wyndham Lisle........................... Lisle IL 242 $10,293 $ 98.84 56.5% $ 55.87
Wyndham Miami Airport................... Miami FL 408 $11,367 $ 78.41 66.9% $ 52.48
Wyndham Miami Beach Resort.............. Miami FL 424 $23,048 $133.12 70.5% $ 93.83
Wyndham Midtown Atlanta................. Atlanta GA 191 $ 7,539 $112.95 72.5% $ 81.83
Wyndham Myrtle Beach Resort and Arcadian
Shores Golf Club....................... Myrtle Beach SC 385 $16,261 $ 99.59 66.9% $ 66.60
Wyndham Nashville....................... Nashville TN 180 $ 4,451 $ 69.12 69.0% $ 47.72
Wyndham New Orleans..................... New Orleans LA 438 $29,766 $171.76 75.7% $130.00
Wyndham Newark.......................... Newark NJ 396 $ 24 $ 44.40 10.5% $ 4.65
Wyndham Northwest Chicago............... Itasca IL 408 $24,000 $113.63 56.9% $ 64.64
Wyndham Palace Resort & Spa............. Lake Buena Vista FL 1,013 $69,033 $153.28 70.0% $107.35
Wyndham Peachtree Conference Center..... Peachtree City GA 250 $12,845 $111.63 53.1% $ 59.23
Wyndham Peaks Resort & Golden
Door Spa............................... Telluride CO 174 $18,349 $323.33 49.6% $160.22
Wyndham Philadelphia at Franklin Plaza.. Philadelphia PA 758 $34,373 $110.32 63.4% $ 69.95
Wyndham Phoenix Airport................. Phoenix AZ 210 $ 6,110 $ 89.21 63.2% $ 56.35
Wyndham Pickwick Hotel.................. San Francisco CA 188 $ 5,886 $112.31 66.5% $ 74.68
Wyndham Pittsburgh Airport.............. Corapolis PA 314 $14,418 $106.61 65.4% $ 69.73
Wyndham Reach Resort.................... Key West FL 150 $11,500 $180.25 79.2% $142.68
Wyndham Resort & Spa.................... Fort Lauderdale FL 496 $19,777 $115.50 48.4% $ 55.91
Wyndham Richmond Airport................ Richmond VA 155 $ 4,227 $ 64.61 73.2% $ 47.26
Wyndham Riverfront...................... New Orleans LA 202 $ 8,911 $142.37 69.6% $ 99.11
Wyndham Roanoke Airport................. Roanoke VA 320 $ 8,625 $ 69.99 67.9% $ 47.50
Wyndham Rose Hall & Resort
Country Club........................... Montego Bay Jamaica 488 $25,795 $105.63 72.8% $ 76.91
Wyndham Salt Lake City.................. Salt Lake City UT 381 $11,641 $ 77.12 72.4% $ 55.87
Wyndham San Diego....................... San Diego CA 180 $ 7,371 $122.53 70.2% $ 86.07
Wyndham Santa Maria..................... Key West FL 51 $ 640 $ 74.79 45.4% $ 33.95
Wyndham Seattle--Tacoma Airport......... Seattle WA 204 $ 7,025 $ 87.00 79.5% $ 69.17
Wyndham Sunnyvale....................... Sunnyvale CA 180 $ 8,060 $136.72 74.3% $101.54
Wyndham Syracuse........................ Syracuse NY 250 $10,773 $ 87.85 64.8% $ 56.91
Wyndham Toledo.......................... Toledo OH 241 $ 8,090 $ 80.96 67.0% $ 54.26
Wyndham Valley Forge.................... Wayne PA 229 $ 9,929 $125.62 66.7% $ 83.77
Wyndham Vinings......................... Atlanta GA 159 $ 4,667 $ 95.80 61.3% $ 58.71
Wyndham Washington, D.C................. Washington DC 400 $19,819 $127.11 72.1% $ 91.61
Wyndham Westborough..................... Westborough MA 223 $11,308 $115.64 67.6% $ 78.15
Wyndham Westshore--Tampa................ Tampa FL 324 $17,410 $103.37 72.8% $ 75.26
Wyndham Windwatch....................... Haupauge NY 360 $21,001 $133.03 73.1% $ 97.22
7
Revenue
Number Average per
of Total Daily Available
Property Name City State Rooms Revenue Rate Occupancy Room
------------- ------------- ----- ------ ------- ------- --------- ---------
Bourbon Orleans--A Wyndham
Historic Hotel.............................. New Orleans LA 216 $ 9,820 $142.51 74.4% $106.04
The Fairmount Hotel--A Wyndham Historic Hotel San Antonio TX 37 $ 2,004 $127.01 68.2% $ 86.61
The Mayfair--A Wyndham
Historic Hotel.............................. St Louis MO 182 $ 4,695 $ 87.59 60.0% $ 52.51
The Tremont Boston--A Wyndham
Historic Hotel.............................. Boston MA 322 $16,466 $133.52 79.7% $106.42
The Tutwiler--A Wyndham
Historic Hotel.............................. Birmingham AL 147 $ 5,328 $ 99.82 63.9% $ 63.77
Wyndham Grand Heritage U.S. Grant............ San Diego CA 284 $16,263 $130.78 69.7% $ 91.10
The Union Station--A Wyndham
Historic Hotel.............................. Nashville TN 124 $ 5,304 $103.11 68.8% $ 70.95
Wyndham Luxury Resorts
Carmel Valley Ranch--A Wyndham Luxury Resort. Carmel Valley CA 144 $18,611 $234.11 70.8% $165.79
The Boulders--A Wyndham Luxury Resort........ Carefree AZ 160 $41,546 $326.65 66.0% $215.71
The Lodge at Ventana Canyon--A Wyndham Luxury
Resort...................................... Tucson AZ 50 $13,798 $190.94 66.5% $127.05
Wyndham Garden Hotels
Wyndham Garden Hotel--Bothell................ Bothell WA 166 $ 5,023 $ 96.14 62.6% $ 60.20
Wyndham Garden Hotel--Brookfield............. Brookfield WI 178 $ 4,530 $ 73.57 63.7% $ 46.84
Wyndham Garden Hotel--Chandler............... Chandler AZ 159 $ 3,520 $ 79.41 57.1% $ 45.36
Wyndham Garden Hotel--Charlotte.............. Charlotte NC 173 $ 3,254 $ 65.44 53.1% $ 34.74
Wyndham Garden Hotel--Dallas Park Central.... Dallas TX 197 $ 3,137 $ 65.59 44.4% $ 29.09
Wyndham Garden Hotel--LaGuardia.............. East Elmhurst NY 229 $10,934 $134.35 86.0% $115.61
Wyndham Garden Hotel--Las Colinas............ Irving TX 168 $ 4,691 $ 99.30 58.3% $ 57.86
Wyndham Garden Hotel--Naperville............. Naperville IL 143 $ 3,960 $ 87.45 63.6% $ 55.62
Wyndham Garden Hotel--Novi................... Novi MI 148 $ 4,040 $ 86.59 62.3% $ 53.93
Wyndham Garden Hotel--Overland Park.......... Overland Park KS 180 $ 3,242 $ 72.43 48.1% $ 34.81
Wyndham Garden Hotel--Perimeter.............. Atlanta GA 143 $ 2,846 $ 81.18 50.4% $ 40.87
Wyndham Garden Hotel--Pleasanton............. Pleasanton CA 171 $ 4,285 $ 94.61 58.9% $ 55.76
Wyndham Garden Hotel--Schaumburg............. Schaumburg IL 188 $ 3,697 $ 88.07 48.0% $ 42.23
Wyndham Garden Hotel--Wood Dale.............. Wood Dale IL 162 $ 4,490 $ 96.91 55.9% $ 54.17
Wyndham Garden Hotel--North Phoenix.......... Phoenix AZ 166 $ 2,926 $ 70.82 53.0% $ 37.51
Summerfield Suites by Wyndham
Summerfield by Wyndham--Addison.............. Addison TX 132 $ 3,614 $ 91.46 77.1% $ 70.50
Summerfield by Wyndham--Belmont.............. Belmont CA 132 $ 6,646 $159.55 81.8% $130.46
Summerfield by Wyndham--Buckhead............. Atlanta GA 88 $ 2,482 $103.06 71.7% $ 73.93
Summerfield by Wyndham--Chatsworth........... Chatsworth CA 114 $ 3,968 $107.98 85.5% $ 92.36
Summerfield by Wyndham--Denver............... Englewood CO 136 $ 3,174 $ 84.48 72.3% $ 61.04
Summerfield by Wyndham--Dulles............... Herndon VA 112 $ 3,507 $124.77 66.8% $ 83.32
Summerfield by Wyndham--El Segundo........... El Segundo CA 122 $ 4,568 $119.53 81.5% $ 97.37
Summerfield by Wyndham--Lake Buena Vista..... Orlando FL 150 $ 5,638 $118.02 80.1% $ 94.59
Summerfield by Wyndham--Las Colinas.......... Irving TX 148 $ 4,802 $105.36 80.5% $ 84.83
Summerfield by Wyndham--Malvern.............. Malvern PA 120 $ 4,286 $123.31 73.5% $ 90.61
Summerfield by Wyndham--Miami................ Miami FL 156 $ 4,850 $ 91.82 84.5% $ 77.57
Summerfield by Wyndham--Morristown........... Morristown NJ 133 $ 6,640 $157.35 82.3% $129.54
Summerfield by Wyndham--Mt. Laurel........... Mt Laurel NJ 116 $ 3,643 $ 93.09 86.0% $ 80.03
Summerfield by Wyndham--Orlando.............. Orlando FL 146 $ 5,218 $114.46 77.8% $ 89.09
Summerfield by Wyndham--Parisppany/Whippany.. Whippany NJ 136 $ 5,746 $137.42 79.3% $108.98
Summerfield by Wyndham--Perimeter............ Atlanta GA 122 $ 2,936 $ 91.54 69.2% $ 63.34
Summerfield by Wyndham--Princeton............ Princeton NJ 124 $ 5,117 $135.32 79.4% $107.40
Summerfield by Wyndham--San Francisco Airport San Bruno CA 92 $ 4,244 $131.89 88.0% $116.02
Summerfield by Wyndham--San Jose............. San Jose CA 114 $ 4,409 $149.37 68.4% $102.12
Summerfield by Wyndham--Schaumburg........... Schaumburg IL 112 $ 3,052 $107.99 64.9% $ 70.08
Summerfield by Wyndham--Seattle.............. Seattle WA 193 $ 6,669 $119.68 73.0% $ 87.35
Summerfield by Wyndham--Somerset............. Somerset NJ 140 $ 5,817 $140.97 76.1% $107.31
Summerfield by Wyndham--Sunnyvale............ Sunnyvale CA 138 $ 6,128 $162.86 72.3% $117.72
8
Revenue
Number Average per
of Total Daily Available
Property Name City State Rooms Revenue Rate Occupancy Room
------------- ----------------- ----- ------ ------- ------- --------- ---------
Summerfield by Wyndham--Sunrise Suites. Tinton Falls NJ 96 $ 2,993 $106.15 75.8% $ 80.49
Summerfield by Wyndham--Torrance....... Torrance CA 144 $ 4,616 $ 99.61 83.0% $ 82.70
Summerfield by Wyndham--Waltham........ Waltham MA 136 $ 5,357 $141.08 73.3% $103.40
Summerfield by Wyndham--Westport....... St Louis MO 106 $ 2,967 $ 92.31 78.9% $ 72.86
Non-Proprietary Brand Properties
Condado Plaza.......................... San Juan PR 570 $69,986 $157.71 74.2% $116.97
Courtyard by Marriott--Beachwood....... Beachwood OH 113 $ 1,343 $ 96.89 61.9% $ 59.98
Crowne Plaza Ravinia................... Atlanta GA 495 $24,207 $119.84 63.1% $ 75.61
Doubletree--Allen Center............... Houston TX 350 $20,185 $136.24 76.8% $104.64
Doubletree--Anaheim.................... Orange CA 454 $16,073 $ 91.96 68.6% $ 63.10
Doubletree--Des Plaines................ Des Plaines IL 246 $ 5,386 $ 85.48 54.9% $ 46.93
Doubletree Glenview.................... Glenview IL 252 $ 8,841 $101.76 58.8% $ 59.83
Doubletree--Miami...................... Miami FL 266 $ 5,151 $ 67.87 63.1% $ 42.86
Doubletree--Minneapolis................ Minneapolis MN 230 $ 6,256 $107.47 57.2% $ 61.50
Doubletree--Overland Park.............. Overland Park KS 356 $13,947 $ 95.85 65.8% $ 63.10
Doubletree--Park Place................. Minneapolis MN 297 $10,885 $ 95.05 57.9% $ 55.06
Doubletree--Post Oak................... Houston TX 449 $25,017 $115.26 76.5% $ 88.20
Doubletree--St. Louis.................. Chesterfield MO 223 $10,750 $ 95.52 56.7% $ 54.14
Doubletree--Tallahassee................ Tallahassee FL 244 $ 7,192 $ 90.91 62.6% $ 56.92
Doubletree--Tulsa...................... Tulsa OK 417 $10,430 $ 74.97 56.6% $ 42.42
Embassy Suites Chicago................. Chicago IL 358 $20,274 $174.64 77.4% $135.11
Hilton Cleveland....................... Independence OH 191 $10,267 $ 90.92 65.0% $ 59.06
Hilton Columbus........................ Columbus GA 177 $ 4,670 $ 81.60 61.7% $ 50.39
Hilton DelMar.......................... San Diego CA 245 $11,192 $115.58 72.6% $ 83.90
Hilton Denver.......................... Greenwood Village CO 305 $ 9,242 $ 99.59 51.7% $ 51.51
Hilton Ft. Lauderdale.................. Dania FL 383 $14,877 $ 86.10 79.6% $ 68.55
Hilton Hunnington...................... Melville NY 302 $21,587 $158.11 72.3% $114.33
Hilton Parsippany...................... Parsippany NJ 510 $26,798 $147.72 63.5% $ 93.74
Hilton Newark.......................... Newark NJ 253 $14,047 $139.93 78.1% $109.31
Holiday Inn Aristocrat................. Dallas TX 172 $ 3,796 $ 97.74 50.7% $ 49.52
Holiday Inn Dallas..................... Dallas TX 377 $ 8,109 $ 72.55 52.6% $ 38.20
Holiday Inn Houston.................... Houston TX 193 $ 3,685 $ 68.96 57.4% $ 39.57
Holiday Inn San Angelo................. San Angelo TX 148 $ 2,982 $ 68.72 64.6% $ 44.42
Holiday Inn San Francisco.............. San Francisco CA 224 $ 7,999 $106.28 68.7% $ 72.99
Holiday Inn Westlake................... Westlake OH 266 $ 5,153 $ 76.07 41.7% $ 31.71
Hyatt Lexington........................ Lexington KY 365 $11,421 $ 92.06 51.8% $ 47.69
Hyatt Newporter........................ Newport Beach CA 405 $21,522 $138.62 56.9% $ 78.87
Marriott Atlanta North Central......... Atlanta GA 287 $10,086 $ 94.96 60.1% $ 57.09
Marriott Harrisburg.................... Harrisburg PA 348 $14,798 $104.25 68.6% $ 71.51
Marriott Houston North at Greenspoint.. Houston TX 391 $13,932 $ 92.86 69.3% $ 64.32
Marriott Indian River Plantation Resort Stuart FL 297 $18,043 $127.18 64.8% $ 82.42
Marriott Philadelphia West............. Conshohocken PA 286 $17,867 $152.59 72.6% $110.81
Marriott St. Louis West................ St Louis MO 300 $13,284 $106.77 64.1% $ 68.44
Marriott Troy.......................... Troy MI 350 $22,787 $143.24 70.5% $100.98
Marriott Tyson's Corner................ Vienna VA 390 $20,560 $141.20 66.2% $ 93.51
Marriott Warner Center................. Woodland Hills CA 463 $27,065 $121.96 80.2% $ 97.77
Park Shore............................. Honolulu HI 226 $ 3,978 $ 73.21 50.1% $ 36.69
Radisson Akron......................... Akron OH 128 $ 1,814 $ 68.41 45.5% $ 31.11
Radisson Burlington.................... Burlington VT 256 $12,412 $116.46 78.2% $ 91.10
Radisson Dallas........................ Dallas TX 199 $ 4,476 $ 69.68 65.2% $ 45.41
Radisson Englewood..................... Englewood NJ 194 $ 6,775 $105.73 67.6% $ 71.46
Radisson Ft. Magruder.................. Williamsburg VA 303 $ 8,697 $ 79.18 64.9% $ 51.40
Radisson New Orleans................... New Orleans LA 759 $22,893 $107.07 57.1% $ 61.14
Radisson Town & Country................ Houston TX 173 $ 4,082 $ 87.75 67.0% $ 58.82
Ramada Beachwood....................... Beachwood OH 196 $ 3,559 $ 67.68 50.2% $ 34.00
Ramada Nashville Downtown.............. Nashville TN 285 $ 4,175 $ 64.47 51.1% $ 32.96
Ramada San Francisco................... San Francisco CA 323 $ 6,138 $ 69.58 57.3% $ 39.89
Regency................................ San Juan PR 127 $ 3,514 $113.49 56.3% $ 63.86
9
Revenue
Number Average per
of Total Daily Available
Property Name City State Rooms Revenue Rate Occupancy Room
------------- ------- ----- ------ ------- ------- --------- ---------
Sheraton Saginaw Saginaw MI 156 $ 2,818 $62.44 70.9% $44.28
Valley River Inn Eugene OR 257 $10,766 $93.86 65.4% $61.35
Total Portfolio
Owned Leased Managed Franchised Total
----- ------ ------- ---------- -----
Wyndham Hotel & Resorts........... 55 11 17 6 89
Wyndham Luxury Resorts............ 3 -- 3 -- 6
Wyndham Garden Hotels............. 10 5 3 6 24
Summerfield Suites by Wyndham..... 6 21 -- 10 37
--- -- -- -- ---
Proprietary Brand Hotels--subtotal 74 37 23 22 156
Non-Proprietary Brand Hotels...... 56 -- 8 -- 64
--- -- -- -- ---
Total............................. 130 37 31 22 220
=== == == == ===
Franchise and Brand Affiliations
As of December 31, 2001, all but five of our owned hotels operated under
franchise or brand affiliations with nationally recognized hotel companies.
Franchisors and brand operators provide a variety of benefits for our hotels,
including national advertising, publicity and other marketing programs designed
to increase brand awareness, training of personnel, continuous review of
quality standards and centralized reservation systems. We generally are the
licensee under the franchise agreements related to such hotels. Under these
franchise agreements, franchise royalties and fees generally range up to
approximately 10% of room revenue. The duration of these franchise agreements
vary, but generally may be terminated upon prior notice or upon payment of
certain specified fees.
Management of Hotels
As of December 31, 2001, we managed 31 hotels for third parties that owned
these hotels pursuant to management agreements under which we are responsible
for the day-to-day operations of these hotels. Of these managed hotels, we
managed 23 hotels under our proprietary brands and 8 hotels under our
non-proprietary brands. The day-to-day operations of these hotels include
managing hotel accommodations, meeting rooms and food and beverage services as
well as hiring and training staff, planning and providing sales and marketing
services, purchasing operating supplies, inventories and furniture, fixtures
and equipment, providing routine repairs and maintenance, and performing hotel
accounting functions, including the preparation of monthly financial
statements. Management fees generally range up to approximately 5% of total
revenue per managed hotel. The terms of the management agreements vary from
hotel to hotel, but range from 1 to 20 years. As of December 31, 2001, the
average remaining term for the management agreements was approximately six
years.
Employees
As of December 31, 2001, we employed approximately 25,000 employees. In our
opinion, we have good relationships with our employees and we retain
appropriate support personnel to manage our operations.
Certain Risk Factors
Set forth below are important risks and uncertainties that could cause our
actual results to differ materially from those expressed in forward-looking
statements made by us.
General Business Risks
We may fail to compete effectively and lose business. The profitability of
our hotels is subject to general economic conditions, competition, the
desirability of particular locations, the relationship between supply of and
10
demand for hotel rooms, and other factors. We generally operate in markets that
contain numerous competitors and our continued success will depend, in large
part, upon our ability to compete in areas such as access, location, quality of
accommodations, amenities, specialized services, cost containment, and, to a
lesser extent, the quality and scope of food and beverage services and
facilities. Our operational and growth prospects also depend on the strength
and desirability of our brands and our ability to maintain positive relations
with our employees.
Changes in supply and demand, and other conditions, in our industry may
adversely affect our revenues and profits. Our revenues and profitability may
be adversely affected by (1) supply additions, (2) international, national and
regional economic conditions, (3) changes in travel patterns, (4) taxes and
government regulations that influence or determine wages, prices, interest
rates, construction procedures and costs, and (5) the availability of capital
to allow us and potential hotel owners to fund investments. In particular,
over-building in one or more sectors of our industry and/or in one or more
geographic regions could lead to excess supply compared to demand and a
decrease in hotel occupancy and/or room rates.
The aftermath of the September 11, 2001 attacks may continue to adversely
impact our financial results and growth. The terrorist attacks of September
11, 2001, their immediate aftermath and other subsequent national and world
events have created a significant amount of uncertainty about future prospects
and national and world economies. The overall long-term effect on us and the
lodging industry is also uncertain. Domestic and international business and
leisure travel, which already had been adversely affected by the recent
economic downturn in the United States and internationally, have decreased
further and are likely to remain depressed over the near term as potential
travelers reduce or avoid discretionary air and other travel in light of the
increased safety concerns and anticipated travel delays. The attacks also have
decreased consumer confidence, and a resulting further decline in the U.S. and
global economies could further reduce travel. In the face of uncertainty, we
have developed and implemented a contingency plan focused particularly on cost
management. At the present time, however, it is not possible to predict either
the severity or duration of such declines, but weaker hotel performance will,
in turn, have an adverse impact on our business, financial condition, and
results of operations.
Risk Related to Exchange Listing
The price and marketability of our class A common stock could be materially
adversely affected if we lose our New York Stock Exchange listing. Our class A
common stock is listed and traded on the New York Stock Exchange, or NYSE. We
received notice from the NYSE that we are not in compliance with their
continued listing standards because the average closing stock price of our
class A common stock was below $1.00 for a consecutive 30-day trading period
prior to the date of the notice. The NYSE rules require us to bring the average
share price of our class A common stock back above $1.00 for a consecutive
thirty-day trading period within the six months following our receipt of the
notification. Otherwise, our class A common stock will be subject to suspension
and de-listing in June 2002. The suspension of trading and de-listing of our
class A common stock could have a material adverse effect on the liquidity and
market price of our common stock. No assurance can be given that trading in our
class A common stock on the NYSE will not be suspended or that our class A
common stock will not be de-listed. We are exploring several options, including
a reverse stock split or seeking to list our class A common stock on another
exchange.
Industry Risks
Our business is subject to operating risks common to the hotel
industry. Our primary business is owning, leasing and managing hotels. This
business is subject to operating risks common to the hotel industry, including:
. competition for guests from other hotels, a number of which may have
greater marketing and financial resources and experience than us and our
hotel management companies;
. increases in operating costs due to inflation and other factors, which
may not be offset by increased room rates;
11
. dependence on business and commercial travelers and tourism, which may
fluctuate and be seasonal;
. increases in energy costs and other travel expenses, which may deter
travelers; and
. adverse effects of general and local economic conditions.
These factors could adversely affect our ability to generate revenues and our
business, financial condition and results of operations.
We may be unable to obtain or transfer necessary operating licenses in hotel
acquisitions. When we acquire hotels or hotel operating companies, we may be
unable to transfer certain operating licenses or obtain new licenses in a
timely manner, such as food and beverage licenses. Although hotels can sell
alcoholic beverages under interim licenses or licenses obtained before we
acquire them, there can be no assurance that these licenses will remain in
effect until we (or the hotel management companies) obtain new licenses. If a
hotel fails to have a food and beverage license or other operating licenses,
this failure would adversely affect the hotel's ability to generate revenues
and could adversely affect our business, financial condition and results of
operations.
Consumers could develop brand loyalties to Internet based hotel reservation
systems rather than to our lodging brands. A percentage of our hotel rooms are
booked through Internet travel intermediaries such as Expedia.com,
Travelocity.com, Hotwire.com, Priceline.com and Click-It weekends. As this
percentage increases, these intermediaries may be able to obtain higher
commissions, reduced room rates or other significant contract concessions from
us. Moreover, some of these Internet travel intermediaries are attempting to
commoditize hotel rooms by increasing the importance of price and general
indicators of quality at the expense of brand identification. These agencies
hope that consumers will eventually develop brand loyalties to their
reservation systems rather than to our lodging brands. If this occurs, it could
adversely affect our business, financial condition and results of operations.
Unexpected hotel renovation costs and capital expenditures could adversely
affect our business. In general, hotels have an ongoing need for renovations
and other capital improvements, particularly in older structures, including
periodically replacing or refurbishing furniture, fixtures and equipment. Under
the terms of our leases with third parties and mortgages on owned hotels, we
must establish a reserve to pay for certain capital expenditures and for
periodically replacing or refurbishing furniture, fixtures and equipment. If
capital expenditures exceed our expectations, this excess would have an adverse
effect on our available cash. In addition, we may acquire hotels that require
significant renovation. When we renovate hotels, we incur risks, including the
risk of environmental problems, construction cost overruns and delays,
uncertainties as to market demand after we renovate, market demand
deterioration after we begin renovating, and unanticipated competition emerging
from other hotels.
We face significant competition for hotel acquisition opportunities. We may
be competing for hotel acquisition opportunities with entities that have
substantially greater financial resources. These entities may generally be able
to accept more risk than we can prudently manage, including risks of a hotel
operator's creditworthiness or a target hotel's geographic location.
Competition may generally reduce the number of hotel acquisition opportunities
that we believe suitable.
Seasonality of the hotel industry could make it difficult to predict the
revenues of our various properties. The hotel industry is seasonal in nature;
however, the periods during which our hotel properties experience higher
revenues vary from property to property and depend predominantly on the
property's location. Our revenues typically have been higher in the first and
second quarters than in the third and fourth quarters.
Real Estate Risks
Changes in the real estate sector could adversely affect our
operations. Our ability to generate revenues from our hotels may be adversely
affected by risks common to the ownership, leasing or operation of real
property, including:
. changes in national economic conditions;
. changes in local market conditions due to changes in general or local
economic conditions and neighborhood characteristics;
12
. changes in interest rates;
. changes in the availability, cost and terms of mortgage funds;
. the impact of present or future environmental legislation and compliance
with environmental laws;
. the ongoing need for capital improvements, particularly in older
structures;
. changes in real estate tax rates and other operating expenses;
. adverse changes in governmental rules and fiscal policies;
. adverse changes in zoning laws;
. civil unrest;
. the impact of terrorist activity, threats of terrorist activity and
responses thereto;
. acts of God, including earthquakes and other natural disasters (which may
result in uninsured losses); and
. other factors that are beyond our control.
We may be unable to sell properties when appropriate because real estate
investments are illiquid. Real estate is a relatively illiquid asset.
Therefore, our ability to respond to changes in economic and other conditions
will be limited. If we must sell a property, there can be no assurance that we
will be able to dispose of it in the time period we desire or that the sales
price of any property will equal or exceed the amount of our initial investment
in the property.
We would be adversely affected if our property taxes increased. Our
properties are subject to real property taxes. The real property taxes on our
properties may increase or decrease as property tax rates change and as the
value of the properties are assessed or reassessed by taxing authorities.
Increases in property taxes may adversely affect our business, financial
condition and results of operations.
We may be unable to obtain consents of ground lessors required for sale of
certain hotels. Some of our properties are subject to ground leases with third
party lessors. In addition, we may acquire properties in the future that are
subject to ground leases. If we wish to sell a property that is subject to a
ground lease or wish to assign our leasehold interest in the ground lease, we
may need the consent of third party lessors. As a result, we may not be able to
sell or assign our interest in these properties without the consent of these
lessors.
Environmental problems are possible and can be costly. Our operating costs
may be affected by the cost of complying with existing and future environmental
laws, ordinances and regulations. Under various federal, state and local
environmental laws, ordinances and regulations, we may be liable for the costs
of removing or remediating hazardous or toxic substances on, under, or in real
property currently or previously owned or operated by us. These laws often
impose liability whether or not we knew of, or were responsible for, the
presence of hazardous or toxic substances. In addition, our ability to borrow
by using real property as collateral may be adversely affected by the presence
of hazardous or toxic substances, or the failure to remediate the property
properly. By arranging for the transportation, disposal or treatment of
hazardous or toxic substances, we may also be liable for the costs of removing
or remediating these substances at the disposal or treatment facility, even if
we never owned or operated the disposal or treatment facility. We could be held
liable under environmental laws used to impose liability for releases of
hazardous materials, including asbestos-containing materials, into the
environment. Third parties may seek recovery from us for personal injuries
associated with exposure to hazardous materials on real property owned or
operated by us. Environmental laws may also impose restrictions on the manner
in which we may use or transfer a property or in which we operate our business
on a property. In connection with our hotels, we may be potentially liable for
any environmental costs. The cost of defending against claims of liability or
remediating contaminated property and the cost of complying with environmental
laws could materially adversely affect our business, financial condition and
results of operations.
13
Also, there may be material environmental liabilities or compliance concerns of
which we are currently unaware. We have not been notified by any governmental
authority, and we have no other knowledge of, any material noncompliance,
liability or claim relating to hazardous or toxic substances or other
environmental substances in connection with any of our properties.
Some potential losses are not covered by insurance. Each of our leases with
third parties and mortgages on owned hotels specifies comprehensive insurance
to be maintained on each of the applicable hotels, including liability, fire
and extended coverage. We believe this specified coverage is of the type and
amount customarily obtained for hotels. Leases or mortgages for subsequently
acquired hotels will contain similar provisions. However, there are certain
types of losses, generally of a catastrophic nature such as earthquakes and
floods that may be uninsurable or not economically insurable. We will use our
discretion in determining amounts, coverage limits and deductibility provisions
of insurance, with a view to maintaining appropriate insurance coverage on our
investments at a reasonable cost and on suitable terms. This may result in
insurance coverage that, in the event of a substantial loss, would not be
sufficient to pay the full current market value or current replacement cost of
the lost investment. Inflation, changes in building codes and ordinances,
environmental considerations, and other factors also might make it impractical
to use insurance proceeds to replace the property after it has been damaged or
destroyed. Under these circumstances, the insurance proceeds received might not
be adequate to restore our economic position with respect to the damaged
property.
Hotels that we acquire or develop may fail to perform according to our
expectations. Under appropriate circumstances, we may pursue acquisitions of
additional hotels and hotel operating companies and, may pursue development
opportunities. Acquisitions entail risks that the acquired hotels or hotel
operating companies will fail to perform according to our expectations or that
our cost estimates to acquire, operate and market properties will prove
inaccurate. In addition, hotel development is subject to other risks, including
risks of construction delays or cost overruns that may increase project costs,
new project commencement risks such as receiving zoning, occupancy and other
required governmental approvals and permits, and incurring development costs
for projects that are not pursued to completion.
Third party owners may terminate our management contracts. We manage hotels
for third party owners pursuant to management contracts. These contracts may be
acquired, terminated, renegotiated or converted to franchise agreements in the
ordinary course of our business. However, the hotel property owner may
terminate these management contracts if we fail to meet certain performance
standards, if the property is sold to a third party, if the owner defaults on
indebtedness encumbering the property, upon a foreclosure of the property,
closing of the property and certain business combinations involving us in which
our name or current management team does not survive.
There can be no assurance that we will be able to replace terminated
management contracts, or that the terms of renegotiated or converted contracts
will be as favorable as the terms that existed before such renegotiations or
conversion. We also will be subject to the risk that a hotel property owner
will be unable to pay management fees to us. In addition, in certain
circumstances, we may be required to make loans to or capital investments in
hotel properties in connection with management contracts. If any of these hotel
properties suffers poor operating results or if we lose our management
contract, we may not recover our loan or capital investment.
Risks of Operating Hotels under Franchise or Brand Affiliations
We operate some of our hotels under franchise or brand affiliations. In
addition, we may acquire hotels in the future that are operated under franchise
or brand affiliations. Each franchised hotel must meet specified operating
standards and other terms and conditions to continue its franchise license. The
continued use of a brand generally depends upon the continuation of the
management agreement related to that hotel with the hotel's management entity.
Franchisors typically inspect licensed properties periodically to confirm
adherence to operating standards. Actions by us, our affiliates or the hotel
management entities could cause a breach of these standards or other terms and
conditions of a franchise license or the loss or cancellation of a franchise
license. It
14
is possible that a franchisor could condition the continuation of a franchise
license on the completion of capital improvements that we determine are too
expensive or otherwise unwarranted in light of general economic conditions or
the operating results or prospects of the affected hotel. In that event, we may
elect to allow the franchise license to lapse, which could result in our
incurring significant termination costs. If a franchise or brand affiliation is
terminated for any reason, we may try to obtain a suitable replacement
franchise or brand affiliation, or to operate the hotel independent of a
franchise or brand affiliation. If we lose a franchise or brand affiliation, we
will lose the associated name recognition, marketing support and centralized
reservation systems provided by the franchisor or brand owner. This loss could
adversely affect the value of the hotel and our results of operations.
Risks Relating to Gaming Operations
Our gaming operations depend on decisions by gaming authorities. We own and
operate several casino gaming facilities at some of our hotels, including El
San Juan, El Conquistador, Condado Plaza and Old San Juan in Puerto Rico. Each
of these gaming operations is subject to extensive licensing, permitting and
regulatory requirements administered by various governmental entities.
Typically, gaming regulatory authorities have broad powers related to the
gaming operations licenses. They may revoke, suspend, condition or limit our
gaming approvals and licenses, impose substantial fines and take other actions,
any of which could have a material adverse effect on our business and the value
of our hotel/casinos. Our directors, officers and some key employees are
subject to licensing or suitability determinations by various gaming
authorities. If any of those gaming authorities were to find someone
unsuitable, we would have to sever our relationship with that person.
Volatility in the high-end gaming business could adversely impact our
financial condition. The high-end gaming business is more volatile than other
forms of gaming. Fluctuations in customers' high-end gaming activities could
have an adverse impact on our business, financial condition and results of
operations. In addition, a significant portion of our table gaming is
attributable to a relatively small number of international customers. If the
most significant of these customers reduces or quits his or her gaming, it
could have an adverse effect on our business, financial condition and results
of operations.
Risks Relating to Our Indebtedness
We anticipated that as a result of the effects on our business of the events
of September 11, 2001, we would likely not be able to comply with certain of
the financial ratio covenants in our credit agreement and increasing rate loan
agreement. Accordingly, shortly after the events of September 11, 2001, the
lenders under the bank credit facilities granted us a waiver of certain
financial covenants through February 28, 2002. In an agreement dated as of
January 24, 2002, we amended and restated our bank credit facilities. Under the
terms of the amendment and restatement, all financial covenants, other than the
interest coverage ratio test, have been eliminated. The minimum interest
coverage ratio has been reduced from 1.75:1.00 to 1.05:1.00 through December
31, 2003, and to 1.25:1.00 thereafter. Pursuant to the amendment and
restatement, we provided additional collateral to the lenders, agreed to an
increase in the interest rates payable under the term loans and revolving
credit facility, and agreed to limit our capital expenditures to $125 million
per year, plus $25 million per year for emergency capital expenditures. We also
agreed that we would use 100% of the net cash proceeds from sales of the
lenders' collateral, 75% of the proceeds from other asset sales and proceeds
from mortgage refinancings and 100% of the proceeds from new debt issuances to
reduce debt outstanding under the bank credit facilities. We also agreed not to
pay the cash portion of the regular quarterly dividend on our series A and
series B convertible preferred stock.
Despite our successful efforts to amend our credit facilities and as a
result of the effects of September 11, 2001 and the current economic recession,
there can be no assurance that we will be able to meet our debt service
obligations and, to the extent that we cannot, we may lose some or all of our
assets, including hotel properties.
15
Continuing adverse economic conditions could cause the terms on which we borrow
to worsen. Those circumstances, if we are in need of funds to repay
indebtedness, could force us to liquidate one or more investments in properties
at times that may not permit realization of the maximum return on those
investments. The foregoing risks associated with our debt obligations may
inhibit our ability to raise capital in both the public and private markets and
may have a negative impact on our credit rating.
Our Executive Officers
Set forth below are the names, ages and certain other information concerning
our executive officers:
Fred J. Kleisner is the Chairman of the Board and Chief Executive Officer.
He has served as Chairman of the Board since October 13, 2000 and as Chief
Executive Officer since March 27, 2000. From August 1999 to October 2000, Mr.
Kleisner served as President. From August 1999 to March 2000, Mr. Kleisner also
served as Chief Operating Officer. From March 1998 to August 1999, he was
President and Chief Operating Officer of The Americas, for Starwood Hotels &
Resorts Worldwide, Inc. Hotel Group. His experience in the industry also
includes senior positions with Westin Hotels and Resorts, where he was
President and Chief Operating Officer from 1995 to 1998; Interstate, where he
was Executive Vice President and Group President of Operations from 1990 to
1995; The Sheraton Corporation, where he was Senior Vice President, Director of
Operations, North America Division-East from 1985 to 1990; and Hilton Hotels,
where for 16 years he served as General Manager of several landmark hotels,
including The Waldorf Astoria and The Waldorf Towers in New York, The Capital
Hilton in Washington, D.C., and The Hilton Hawaiian Village in Honolulu. Mr.
Kleisner, who holds a B.A. degree in Hotel Management from Michigan State
University, completed advanced studies at the University of Virginia and
Catholic University of America. Mr. Kleisner is 57 years old.
Ted Teng joined us in May 2000 as Chief Operating Officer. He assumed the
additional title of President in October 2000. He oversees our core branded
hotel products--Wyndham Hotels & Resorts, Wyndham Luxury Resorts and
Summerfield Suites by Wyndham Hotels--as well as the Performance Hospitality
Management division and the Asset Management division. His responsibilities
also include sales and marketing, human resources, information technology and
procurement. He previously served as President, Asia Pacific, for Starwood
Hotels & Resorts Worldwide, Inc. from April 1998 to May 2000, where he oversaw
the integration of that company's branded hotel operations in the region, and
the operating and financial performance of over 70 hotels and resorts in 17
countries. From July 1996 to April 1998, Mr. Teng served as the President of
Asia-Pacific for Westin Hotels. Prior to this time, he served for 14 years in a
variety of senior and strategic capacities with ITT Sheraton. Mr. Teng
graduated from the Cornell University School of Hotel Administration and holds
an M.B.A. from the University of Hawaii. Mr. Teng is 46 years old.
Rick Smith was named Executive Vice President and Chief Financial Officer in
April 2000 and is responsible for finance strategy and operations. Mr. Smith
joined us in September 1999 as Senior Vice President and Treasurer, overseeing
capital market activity, corporate banking relationships, cash management, risk
management and debt compliance. He came from Starwood Hotels & Resorts
Worldwide, Inc., where he served as Vice President, Corporate Finance from 1996
to 1999. He previously worked for Atlantic Richfield Company and Coopers &
Lybrand LLP. Mr. Smith is a certified public accountant. He graduated from the
University of Tennessee where he received a B.S. in accounting and business
law. Mr. Smith is 39 years old.
Michael A. Grossman has served as Executive Vice President and divisional
president of the management services division since January 1998. From 1977 to
1993, Mr. Grossman owned and operated Grossman and Associates, a hotel
management company. Mr. Grossman joined Patriot American Hospitality L.P. in
August 1993 as a Senior Vice President heading up its hotel division. Mr.
Grossman was subsequently appointed Chief Operating Officer of Gencom American
Hospitality, which initially served as a third party manager for Patriot and
was subsequently acquired by Patriot. Mr. Grossman holds a B.B.A. from the
University of Texas and a J.D. from Southern Methodist University. Mr. Grossman
is 49 years old.
16
Dave Johnson became our Executive Vice President, Chief Marketing Officer,
in March 2000. He previously served as president of the Wyndham hotel division
from August 1999 to March 2000, and president of the Wyndham Garden division
from January 1998 to August 1999. Prior to these positions, Mr. Johnson was
Senior Vice President of Operations for the Eastern United States. His career
began with Wyndham Hotels and Resorts in 1987 as Director of Sales & Marketing.
Dave Johnson holds a B.A. and M.A. from Northeastern Illinois University. Mr.
Johnson is 40 years old.
Joseph Champ became our Executive Vice President, Business Development and
Chief Investment Officer in March 2001. He previously served as Senior Vice
President, Acquisitions and Development with Starwood Hotels & Resorts from
1998 to 2001. Before these positions, Mr. Champ served as Vice President,
Development with Westin Hotels from 1997 to 1998. Mr. Champ obtained his B.A.
from Middlebury College and a M.B.A. from J. L. Kellogg School of Management at
Northwestern University. Mr. Champ is 44 years old.
ITEM 3. LEGAL PROCEEDINGS
On May 7, 1999, Doris Johnson and Charles Dougherty filed a lawsuit in the
Northern District of California against us, Patriot, our operating partnerships
and Paine Webber Group, Inc. This action, captioned Johnson v. Patriot American
Hospitality, Inc., et al., No. C-99-2153, was commenced on behalf of all former
holders of Bay Meadows stock during a class period from June 2, 1997 to the
date the lawsuit was filed. The action asserts securities fraud claims and
alleges that the purported class members were wrongfully induced to tender
their shares as part of the Cal Jockey merger based on a fraudulent prospectus.
The action further alleges that defendants continued to defraud shareholders
about their intentions to acquire numerous hotels and incur massive debt during
the class period. Three other actions against the same defendants subsequently
were filed in the Northern District of California: (i) Ansell v. Patriot
American Hospitality, Inc., et al., No. C-99-2239 (filed May 14, 1999), (ii)
Sola v. Paine Webber Group, Inc., et al., No. C-99-2770 (filed June 11, 1999),
and (iii) Gunderson v. Patriot American Hospitality, Inc., et al., No.
C-99-3040 (filed June 23, 1999). Another action with substantially identical
allegations, Susnow v. Patriot American Hospitality, Inc., et al., No.
3-99-CV1354-T (filed June 15, 1999), also subsequently was filed in the
Northern District of Texas. By order of the Judicial Panel on Multidistrict
Litigation, these actions along with certain actions identified in the
following paragraph have been consolidated in the Northern District of
California for consolidated pretrial purposes. On or about August 15, 2001, the
court granted the defendants' motions to dismiss the action, dismissing some of
the claims with prejudice and granting leave to replead certain other claims in
the complaint. On or about October 15, 2001, the plaintiffs filed an amended
complaint seeking monetary damages but did not specify the amount of damages
being sought. On December 20, 2001, the defendants moved to dismiss the amended
complaint. The defendants' motion has not yet been fully submitted to the
Court. We intend to defend the suits vigorously.
On or about June 22, 1999, a lawsuit captioned Levitch v. Patriot American
Hospitality, Inc., et al., No. 3-99-V1416-D, was filed in the Northern District
of Texas against us, Patriot, James D. Carreker and Paul A. Nussbaum. This
action asserts securities fraud claims and alleges that, during the period from
January 5, 1998 to December 17, 1998, the defendants defrauded shareholders by
issuing false statements about us and Patriot. The complaint was filed on
behalf of all shareholders who purchased shares of our capital stock and
Patriot's capital stock during that period. Three other actions, Gallagher v.
Patriot American Hospitality, Inc., et al., No. 3-99-CV-1429-L, filed on June
23, 1999, David Lee Meisenburg, et al., v. Patriot American Hospitality, Inc.,
Wyndham International, Inc., James D. Carreker, and Paul A. Nussbaum Case No.
3-99-CV1686-X, filed July 27, 1999 and Deborah Szekely v. Patriot American
Hospitality, Inc., et al., No. 3-99-CV1866-D, filed on or about August 27,
1999, allege substantially the same allegations. By orders of the Judicial
Panel on Multidistrict Litigation, these actions have been consolidated with
certain other shareholder actions discussed in the above paragraph and
transferred to the Northern District of California for consolidated pre-trial
purposes. On or about August 15, 2001, the court granted the defendants'
motions to dismiss the action, dismissing some of the claims with prejudice and
granting leave to replead certain other claims in the complaint. On or about
October 15, 2001, the plaintiffs filed an amended complaint seeking monetary
damages but did not specify the amount of damages being sought. On December 20,
2001, the defendants moved to dismiss the amended complaint. The defendants'
motion has not yet been fully submitted to the court. We intend to defend the
suits vigorously.
17
We have received a draft complaint which threatens to assert claims on
behalf of Golden Door, LLC, Golden Springs, LLC, Golden Door, Inc., Deer
Springs Ranch, LLC, Deborah Szekely and Sarah Livia Brightwood. The potential
plaintiffs appear to be the same as the plaintiffs who filed the action
discussed above, captioned Deborah Szekely v. Patriot American Hospitality,
Inc., etal., No. 3-99-CV1866-D. However, the draft complaint sets forth
different allegations. The draft complaint purports to assert claims against
us, Patriot and our operating partnerships for securities fraud under
California securities code, common law fraud, breach of fiduciary duty and
deceit in connection with the purchase by Patriot of the Golden Door Spa in
February 1998. The draft complaint seeks compensatory damages for the alleged
lost value of the potential plaintiff's stock and other unspecified damages.
Although we have received a draft complaint, to date no complaint has been
served on us.
On or about May 8, 2001, a demand for arbitration was filed on behalf of
John W. Cullen, IV, William F. Burruss, Heritage Hotel Management & Investment
Ltd. and GH-Resco, L.L.C. naming one of our operating partnerships as a
respondent. A similar arbitration was originally filed on or about October 26,
2000 against us. The Supreme Court of the State of New York, however, ruled
that we did not agree to arbitrate any claims with the claimants and stayed the
arbitration with respect to us. The claimants then recommended an identical
arbitration, dropped us and named our operating partnership as a respondent.
The demand for arbitration claims that the claimants and our operating
partnership are parties to a contribution agreement dated February 28, 1997 and
that our operating partnership is in breach of that agreement. The claimants
assert that our operating partnership breached its agreement to pay respondents
additional consideration under the contribution agreement by, among other
things, allegedly denying the claimants compensation due to them in connection
with various transactions initiated by the claimants and provided to our
operating partnership, which allegedly provided our operating partnership with
growth and added revenue. In addition, the claimants assert that our operating
partnership failed to provide the claimants with various other amounts due
under the contribution agreement, failed to indemnify the claimants for certain
expenses and intentionally and negligently mismanaged our operating
partnership's business. The claimants do not specify the amount of damages
sought. We intend to defend the claims vigorously.
We were named as a defendant in four lawsuits stemming from hotels charging
energy surcharges in addition to room rates. The lawsuits were filed in
California (Bryant v. Wyndham International, Inc. and Judd v. Wyndham
International, Inc.), Illinois (Nicolloff v. Wyndham International, Inc.) and
Florida (Soper v. Wyndham International, Inc.). All of these cases are class
actions, with two being on behalf of purported nationwide classes. The basis
for each of the cases is that an energy surcharge was not disclosed at the time
the room rate was quoted, and the cases allege various causes of action for
breach of contract and unfair business practices under state law. Additionally,
the attorneys general of Florida, Texas, New Jersey and California are
investigating the issue of energy surcharges. We have received subpoenas in
Florida, Texas and New Jersey. Finally, the Office of Consumer Affairs of
Suffolk County, New York received a complaint related to an energy surcharge,
and has asked for our response. We have agreed to settle the two California
cases (Bryant and Judd) and plaintiffs' counsel have agreed to dismiss the
Illinois and Florida cases. The settlements and dismissals will resolve all of
the pending lawsuits. The basic terms of the settlement are that each person
who paid an energy surcharge will be entitled to a coupon for $15 off a future
night's stay. If the redemption rate of these coupons is less than 6%, we will
make up the difference by donating room nights, conference rooms, ballrooms or
the equivalent to charitable or governmental entities. However, in no event
will this amount exceed $1.5 million. Additionally, we have agreed to pay
plaintiff's attorneys' fees of up to $410,000. If the court preliminarily
approves the settlement and certifies settlement class, notice will be mailed
to the class members, who will have an opportunity to object or opt out of the
settlement. If more than 10% of the class members opt out of the settlement, we
can void the settlement. Then there will be a hearing for the court to finally
approve the settlement. We have not resolved any of the attorney general
actions.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
18
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
Market Information
The following table sets forth the quarterly high and low sale prices per
share of our class A common stock as reported on the NYSE (symbol "WYN").
Per Share
High Low Dividend
------- ------- ---------
2000:
First Quarter.. $2.9375 $ 1.75 $ --
Second Quarter. $ 2.625 $1.6875 $ --
Third Quarter.. $ 2.50 $1.6875 $ --
Fourth Quarter. $2.0625 $1.3125 $ --
2001:
First Quarter.. $ 2.50 $ 1.50 $ --
Second Quarter. $ 3.00 $ 1.73 $ --
Third Quarter.. $ 2.75 $ .60 $ --
Fourth Quarter. $ .77 $ .34 $ --
Holders
As of March 19, 2002, there were approximately 1,524 record holders of our
class A common stock, including shares held in "street name" by nominees who
are record holders, and approximately 19,600 shareholders.
Dividends
We do not anticipate paying a dividend to our common shareholders and we are
prohibited under the terms of our senior credit facility and increasing rate
loans facility from paying dividends on our class A common stock. For the six
year period beginning September 30, 1999, dividends on our series A and series
B preferred stock are payable partly in cash and partly in additional shares of
our series A and series B preferred stock, with the cash portion aggregating
$29.25 million per year, so long as there is no redemption or conversion of our
series A and series B preferred stock. For the following four years, dividends
are payable in cash or additional shares of our series A or series B preferred
stock, as the case may be, as determined by our board of directors. After year
ten, dividends are payable solely in cash.
We anticipated that we would not be in compliance at September 30, 2001 with
certain financial ratio covenants in our senior credit facility and increasing
rate loans facility due to the tragic events of September 11, 2001.
Accordingly, on September 28, 2001, we and our leaders entered into a waiver of
the financial covenants for the third and fourth quarters of 2001. The waiver
is effective through February 28, 2002. As a condition of the waiver, we agreed
to certain additional restrictions during the time period the waiver is in
effect, including requirements that cash dividends on our series A and B
preferred stock could be paid only if concurrently with the payment of these
dividends, the cash would be loaned back to us on a subordinated basis. Thus,
since July 1, 2001, we have not paid the cash portion of the regular quarterly
dividends on our series A and B preferred stock.
In an agreement dated as of January 24, 2002, we amended and restated our
bank credit facilities. We are prohibited under the terms of our recent waiver
and amendments to the senior credit facility and increasing rate loans facility
from paying cash dividends on our preferred stock. As of December 31, 2001, we
had deferred
19
payments of the cash portion of the preferred stock dividend totaling
approximately $14.6 million. This amount has been included in accounts payable
and accrued expenses as of December 31, 2001. In addition, according to the
terms of our series A and B preferred stock, if the cash dividends on the
preferred stock are in arrears and unpaid for at least 60 days, then an
additional amount of dividends will accrue at an annual rate of 2.0% of the
stated amount of each share of preferred stock then outstanding from the last
payment date on which cash dividends were to be paid in full until the cash
dividends in arrears have been paid in full. These additional dividends are
cumulative and payable in additional shares of preferred stock. As a result, an
additional dividend of $11.6 million, payable in preferred shares, has been
included in accounts payable and accrued expenses as of December 31, 2001.
Recent Sales of Unregistered Securities
None
20
ITEM 6. SELECTED FINANCIAL INFORMATION
The following tables set forth selected consolidated historical financial
information of ours. This financial information should be read in conjunction
with, and is qualified in its entirety by, our historical financial statements
and notes thereto included elsewhere in this Annual Report on Form 10-K. Our
selected financial and other data for 2001, 2000, 1999, 1998 and 1997 have been
derived from our consolidated financial statements.
WYNDHAM INTERNATIONAL
Selected Condensed Consolidated Historical Financial Data
Year Ended December 31,
-------------------------------------------------------------
2001 2000 1999 1998 1997
---------- ---------- ----------- ----------- -----------
(in thousands, except per share data)
Operating Data:
Total revenue....................................... $2,105,430 $2,498,595 $ 2,495,335 $ 2,056,341 $ 335,035
(Loss) income before income tax provision,
minority interests, accounting change
and extraordinary item............................. (213,116) (523,014) (491,335) (112,508) 4,142
(Loss) income before accounting change and
extraordinary item................................. (126,738) (324,671) (1,062,131) (126,406) 362
Net loss............................................ $ (138,940) $ (324,671) $(1,071,969) $ (158,223) $ (2,172)
Per Share Data (1):
Basic loss per common share:
(Loss) income before accounting change and
extraordinary item............................. $ (1.49) $ (2.56) $ (7.02) $ (1.13) $ 0.01
Accounting change............................... (.06) -- -- -- --
Extraordinary loss.............................. (.01) -- (0.06) (0.23) (0.04)
---------- ---------- ----------- ----------- -----------
Net loss per common share....................... $ (1.56) $ (2.56) $ (7.08) $ (1.36) $ (0.03)
========== ========== =========== =========== ===========
Diluted loss per common share (2), (3).......... $ (1.56) $ (2.56) $ (7.20) $ (2.57) $ (0.03)
========== ========== =========== =========== ===========
Dividends per share (4)......................... $ -- $ -- $ -- $ 1.0362 $ 1.0878
========== ========== =========== =========== ===========
Cash Flow Data:
Cash provided by operating activities............... $ 158,359 $ 246,838 $ 202,302 $ 244,493 $ 108,110
Cash (used in) provided by investing activities..... (63,427) 37,272 (356,564) (2,107,223) (1,202,124)
Cash (used in) provided by financing activities..... 18,134 (383,397) 181,889 1,940,635 1,134,846
As of December 31,
-------------------------------------------------------------
2001 2000 1999 1998 1997
---------- ---------- ----------- ----------- -----------
(in thousands)
Balance Sheet Data:
Investment in real estate and related improvements
and land held for development, at cost, net........ $4,496,039 $4,711,495 $ 5,413,178 $ 5,585,616 $ 2,044,649
Total assets........................................ 5,768,071 6,066,899 7,003,490 7,415,670 2,507,853
Total debt.......................................... 3,445,995 3,398,950 3,643,556 3,857,521 1,112,709
Minority interest in Operating Partnerships......... 21,416 21,416 22,435 253,970 220,177
Minority interest in other consolidated subsidiaries 91,657 164,906 166,483 229,537 49,694
Shareholders' equity................................ 1,588,221 1,794,187 2,137,662 2,603,037 989,892
Year Ended December 31,
-------------------------------------------------------------
2001 2000 1999 1998 1997
---------- ---------- ----------- ----------- -----------
(in thousands)
Other Data:
Weighted average number of common shares
outstanding........................................ 167,698 167,308 161,255 137,764 64,260
Ratio of (losses) earnings to fixed charges......... (.32) (0.39) (0.36) 0.59 1.08
Deficiency of earnings to fixed charges............. 213,116 523,014 491,335 112,508 --
21
Notes to Selected Financial Information
(1) When we refer to our basic earnings per share, diluted earnings per share,
dividends per share, and weighted average number of shares outstanding, we
have adjusted these amounts to reflect the following as though they
occurred on January 1, 1997:
. On January 30, 1997, Patriot declared a 2-for-1 stock split of its common
stock effected in the form of a stock dividend, which was paid on March
18, 1997;
. On July 1, 1997, in connection with the Cal Jockey merger, each share of
Patriot common stock was converted into .51895 paired shares pursuant to
the pairing arrangement between Cal Jockey and Bay Meadows;
. On July 10, 1997, Patriot and old Wyndham declared a 1.927-for-1 stock
split of Patriot and old Wyndham common stocks effected in the form of a
stock dividend, which was paid on July 25, 1997;
. On December 22, 1998, Patriot declared a stock dividend of $.44 per share
of Patriot common stock in the form of, at the option of each
stockholder, additional paired shares of Patriot and old Wyndham common
stocks or shares of Patriot Series B cumulative perpetual preferred
stock, which was paid on January 25, 1999; and
. Our June 30, 1999 restructuring pursuant to which, among other things,
each outstanding paired share was converted into one share of our class A
common stock.
In addition, in February 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 128 "Earnings Per
Share", which specifies computation, presentation and disclosure
requirements for basic earnings per share and diluted earnings per share.
We have restated our earnings per share amounts to reflect the impact of
this statement.
(2) For 2001, we did not include in our computation of diluted earnings per
share the dilutive effect of unvested stock grants of 4,613,000, the option
to purchase 52,000 shares of our class A common stock and 138,592,000
shares of our series A and B preferred stock because they are
anti-dilutive. For 2000, we did not include in our computation of diluted
earnings per share the dilutive effect of unvested stock grants of 645,000,
the option to purchase 104,000 shares of our class A common stock and
129,073,000 shares of our series A and B preferred stock because they are
anti-dilutive. For 1999, we did not include in our computation of diluted
earnings per share the dilutive effect of unvested stock grants of 825,000,
the option to purchase 59,000 shares of our class A common stock and
60,213,000 shares of our series A and B preferred stock because they are
anti-dilutive. For 1998, we did not include in our computation of diluted
earnings per share the dilutive effect of unvested stock grants of 880,000,
the option to purchase 753,000 shares of our class A common stock and
shares issued in connection with forward equity contracts of 2,507,000
because they are anti-dilutive.
(3) For 2001, we did not include in our computation of diluted earnings per
share outstanding options to purchase 14,041,000 shares of our class A
common stock at prices ranging from $1.75 to $30.40 because the options'
exercise prices were greater than the average market price of our class A
common shares and, therefore, the effect would be anti-dilutive. For 2000,
we did not include in our computation of diluted earnings per share
outstanding options to purchase 12,157,000 shares of our class A common
stock at prices ranging from $2.0625 to $30.40 because the options'
exercise prices were greater than the average market price of our class A
common shares and, therefore, the effect would be anti-dilutive. For 1999,
we did not include in our computation of diluted earnings per share
outstanding options to purchase 9,702,000 shares of our class A common
stock at prices ranging from $4.75 to $30.40 because the options' exercise
prices were greater than the average market price of our class A common
shares and, therefore, the effect would be anti-dilutive. For 1998, we did
not include in our computation of diluted earnings per share outstanding
options to purchase 4,650,000 shares of our class A common stock at prices
ranging from $19.45 to $33.58 because the options' exercise price was
greater than the average market price of our class A common shares and,
therefore, the effect would be anti-dilutive.
22
(4) Dividends for the year ended December 31, 1998 include a $0.44 stock
dividend declared by Patriot. Dividends paid for the year ended December
31, 1997 include a special dividend of $0.06 per share paid by Patriot's
predecessor on June 30, 1997. To maintain its qualification as a REIT prior
to consummation of the Cal Jockey merger, Patriot was required to
distribute to its stockholders any undistributed "real estate investment
trust taxable income" for its short taxable year ended with the
consummation of the Cal Jockey merger. Old Wyndham did not pay any
dividends for the six months ended December 31, 1997.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Certain statements in this Form 10-K constitute "forward-looking statements"
as that term is defined under (S)21E of the Securities Exchange Act of 1934, as
amended, and the Private Securities Litigation Reform Act of 1995. We have
based these forward-looking statements on our current expectations and
projections about future events. Statements that are predictive in nature, that
depend upon or refer to future events or conditions, or that include words such
as "expects," "anticipates," "intends," "plans," "believes," "estimates,"
"thinks," and similar expressions, are forward-looking statements. These
statements involve known and unknown risks, uncertainties and other factors
that may cause our actual results and performance to be materially different
from any future results or performance expressed or implied by these
forward-looking statements. These factors include, among other things, those
matters discussed under the caption "Risk Factors," as well as the following:
. the impact of general economic conditions in the United States;
. industry conditions, including competition;
. our ability to effect sales of our assets on terms and conditions
favorable to us;
. our ability to integrate acquisitions into our operations and management;
. risks associated with the hotel industry and real estate markets in
general;
. the impact of terrorist activity, threats of terrorist activity and
responses to terrorist activity on the economy in general and the travel
and hotel industries in particular;
. capital expenditure requirements;
. legislative or regulatory requirements; and
. access to capital markets.
Although we believe that these statements are based upon reasonable
assumptions, we can give no assurance that our goals will be achieved. Given
these uncertainties, prospective investors are cautioned not to place undue
reliance on these forward-looking statements. These forward-looking statements
are made as of the date of this annual report. We assume no obligation to
update or revise them or provide reasons why actual results may differ.
Background
Organization
Through a series of mergers and acquisitions, we have grown substantially
since our inception in 1995. Patriot American Hospitality, Inc., or Patriot,
was formed on April 17, 1995 as a self-administered real estate investment
trust, or REIT, to acquire equity interests in hotel properties. On October 2,
1995, Patriot completed an initial public offering of its common stock and
commenced its operations. Between October 2, 1995 and July 1, 1997, Patriot
acquired interests in 56 hotel properties and leased them to various third
party lessees.
On July 1, 1997, Patriot merged into California Jockey Club, or Cal Jockey,
which we will refer to as the "Cal Jockey merger" in this Form 10-K. As part of
this merger, Cal Jockey and Bay Meadows Operating
23
Company, or Bay Meadows, entered into a paired share arrangement under which
both of their common stocks were paired and traded together. Also, Cal Jockey
changed its name to Patriot, and Bay Meadows changed its name to "Patriot
American Hospitality Operating Company."
In January 1998, Wyndham Hotel Corporation merged into Patriot and, as part
of that merger, Patriot American Hospitality Operating Company changed its name
to "Wyndham International, Inc." We will refer to Wyndham International, Inc.
as it existed before June 30, 1999 as "old Wyndham."
During 1998, Patriot and old Wyndham grew primarily by acquiring hotels and
other related businesses using proceeds of over $4.5 billion. They financed
these acquisitions with funds drawn on their revolving credit facilities and
capital raised by issuing paired shares and by having their two operating
partnerships issue limited partnership interests. These acquisitions included:
. the acquisition of Wyndham Hotel Corporation in January 1998 referred to
above, as a result of which Patriot acquired 10 Wyndham hotels, 14
Clubhouse hotels, 52 management and franchise contracts, the Wyndham and
Clubhouse proprietary brand names, and the Wyndham hotel management
company;
. three resort hotels in Puerto Rico and a majority interest in a related
hotel company;
. Arcadian International Limited, which owned 10 hotels in England, one
hotel in Jersey, five owned and managed Malmaison hotels, two European
resorts under development, the Malmaison proprietary brand name, and a
50% interest in a property being developed in London;
. Interstate Hotels Company, or Interstate, which owned or had controlling
interests in 42 hotels, leases for 84 hotels, and management or service
agreements for 82 hotels;
. SF Hotel Company, L.P., which owned four Summerfield Suites(R) hotels,
leasehold and management interests in 24 Summerfield Suites(R), Sierra
Suites(R) and Sunrise Suites hotels, and management contracts and
franchise interests for 12 additional hotels; and
. the hospitality related business of CHC International, Inc., or CHCI,
which included the acquisition of 17 leases and 16 of the related
management contracts related to Patriot hotels, eight third party
management contracts, two third party asset management contracts, the
Grand Bay proprietary brand name, and certain other assets.
On June 30, 1999, we restructured our organization. As part of this
restructuring:
. Patriot became a wholly-owned subsidiary of ours;
. we and Patriot terminated the paired share arrangement;
. each outstanding paired share was converted into one share of our class A
common stock; and
. Patriot terminated its status as a REIT effective January 1, 1999 and
became a taxable corporation as of that date.
Also on June 30, 1999, we completed a $1 billion series B preferred stock
equity investment and closed a new credit facility (comprised of a senior
credit facility and an increasing rate loan facility), which was amended and
restated as of January 24, 2002, and closed on additional mortgage debt.
Holders of our series B preferred stock are entitled to a quarterly dividend on
a cumulative basis at a rate of 9.75% per year, and our series B preferred
stock is convertible, at the holders' option, into shares of our class B common
stock. Also in 1999, we completed an offering of our series A preferred stock,
which, except for voting rights, has substantially similar terms to our series
B preferred stock. We used the proceeds of our series A preferred stock
offering to redeem some of our series B preferred stock.
Under the terms of our preferred stock, if cash dividends are in arrears and
unpaid for a period of 60 days or more, then an additional amount of dividends
accrue at a rate per annum of 2.0% of the stated amount of each
24
share of preferred stock then outstanding from the last payment date on which
cash dividends were to be paid in full until all cash dividends in arrears have
been paid in full. Such additional dividends are cumulative and payable in
additional shares of preferred stock. As of December 31, 2001, we had accrued
$11.6 million at a rate of 2.0% per annum as an additional dividend because
cash dividends totaling $14.6 million on the preferred stock had been in
arrears and unpaid for a period of more than 60 days. In addition, in our
amended and restated credit facilities, we agreed not to pay the cash portion
of the regular quarterly dividend on our preferred stock.
Also during 1999, we sold a racecourse, land adjacent to the racecourse, and
21 hotels for net cash proceeds of approximately $123.4 million. We also
distributed approximately 92% of the shares of Interstate in the form of a
dividend to our stockholders, which we will refer to as the "Interstate
spin-off".
During 2000, we agreed to the redemption of our aggregate 55% non-voting
economic interest in Interstate Hotels, LLC, a principal operating subsidiary
of Interstate. Interstate Hotels, LLC transferred to us a management agreement
for one hotel owned by us and amended management agreements with respect to six
other hotels owned by us to reduce the management fees and to permit
termination by the owner upon 30 days notice. In addition, approximately 9% of
our interest was redeemed by Interstate Hotels, LLC and substantially all of
the remainder was converted into a preferred membership interest in Interstate
Hotels, LLC. As additional consideration for the redemption and conversion of
our interest, we caused our representative on Interstate's board of directors
to resign and relinquished our right to appoint a member to Interstate's board
of directors in the future. In addition, we granted Interstate an option
exercisable within 90 days of October 20, 2000, to acquire all of Interstate's
stock owned by us at a weighted average trading price per share, provided that
the purchase price not be less than $3.00 per share nor more than $4.00 per
share. On December 3, 2000, the common stock was acquired for approximately
$597,000. On July 12, 2001, Interstate Hotels, LLC, pursuant to a redemption
agreement, called for the redemption of our preferred interest in Interstate
Hotels, LLC. In consideration for the redemption, we received $8.25 million in
cash and two promissory notes in the amounts of $750,000 and $3.68 million,
respectively. The notes bear interest at 9.75% and mature on July 1, 2002 and
July 1, 2004, respectively. We recorded a gain of $2 million, net of previously
recorded impairment of $16.5 million. The portion of our interest that was not
converted into a preferred membership interest will remain outstanding.
Thereafter, at any time on or after July 1, 2004, both we and Interstate
Hotels, LLC have the right to require Interstate Hotels, LLC to redeem the
remaining common interest at an amount that is the lesser of (a) the product of
(i) five times Interstate Hotels, LLC's EBITDA as of December 31, 2003 and (ii)
the percentage of total equity interest in Interstate Hotels, LLC which is
represented by the remaining interest, or (b) approximately $433,000.
In 2000, we sold the following assets:
. the Sierra Suites(R) hotel brand, one owned and three leased properties,
17 franchise and management contracts for Sierra Suites(R), and nine
management contracts for Summerfield Suites(R) for net cash proceeds of
approximately $53.0 million, $29.8 million of which was used to relieve
future payment obligations related to the SF Hotel Company, L.P.
acquisitions in 1998 discussed above;
. 26 hotels (two of which were leased back to us) and the Clubhouse Inn
proprietary brand for net cash proceeds of approximately $175.0 million,
after we repaid approximately $70.4 million of mortgage debt; and
. investments in three hotels, two parcels of land, retail space, and a
garage for net cash proceeds of approximately $61.4 million, after we
repaid approximately $7.8 million of debt and a note receivable of $4.3
million.
In 2001, we sold the following assets:
. two hotels and a sewer company, in separate transactions for aggregate
net cash proceeds of approximately $8.6 million, after we repaid
approximately $21.8 million of debt;
. one hotel in which we retained a preferred equity interest for net cash
proceeds of approximately $19.7 million;
25
. three hotels and investments in four additional hotels in a single
transaction for net cash proceeds of approximately $58.7 million; and
. six hotels, which were exchanged for one hotel.
At December 31, 2000, we had approximately $1.2 billion of assets classified
as held for sale, net of impairment. We classify certain assets as held for
sale based on our management having the authority and intent of entering into
commitments for sale transactions expected to close in the next twelve months.
Based on the estimated sale proceeds, we recorded a provision for loss on
assets held for sale of $361.6 million in operating expenses for the year ended
December 31, 2000. At December