UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
| (Mark One) | |
ý |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the Three Month Period Ended September 30, 2003 |
|
OR |
|
o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to |
|
Commission file number 0-24097
CNL Hospitality Properties, Inc.
(Exact name of registrant as specified in its charter)
| Maryland (State or other jurisdiction of incorporation or organization) |
59-3396369 (I.R.S. Employer Identification No.) |
|
450 South Orange Avenue Orlando, Florida (Address of principal executive offices) |
32801 (Zip Code) |
|
(407) 650-1000 Registrant's telephone number (including area code) |
||
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 ý No o
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act). Yes ý No o
The number of Shares of common stock outstanding as of November 3, 2003, was 214,201,828.
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
INDEX
| |
|
|
Page |
|
|---|---|---|---|---|
| Part I. | Financial Information | |||
Item 1. |
Financial Statements |
|||
Condensed Consolidated Balance Sheets |
1 |
|||
Condensed Consolidated Statements of Operations |
2 |
|||
Condensed Consolidated Statements of Stockholders' Equity |
3 |
|||
Condensed Consolidated Statements of Cash Flows |
5 |
|||
Notes to Condensed Consolidated Financial Statements |
7 |
|||
Item 2. |
Management's Discussion and Analysis of Financial Condition and Results of Operations |
24 |
||
Item 3. |
Quantitative and Qualitative Disclosures about Market Risk |
49 |
||
Item 4. |
Controls and Procedures |
49 |
||
Part II. |
Other Information and Signatures |
|||
Item 1. |
Legal Proceedings |
50 |
||
Item 2. |
Changes in Securities and Use of Proceeds |
50 |
||
Item 3. |
Defaults Upon Senior Securities |
50 |
||
Item 4. |
Submission of Matters to a Vote of Security Holders |
50 |
||
Item 5. |
Other Information |
50 |
||
Item 6. |
Exhibits and Reports on Form 8-K |
50 |
||
Signatures |
62 |
|||
Exhibits |
||||
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
(in thousands)
| |
September 30, 2003 |
December 31, 2002 |
||||||
|---|---|---|---|---|---|---|---|---|
| ASSETS | ||||||||
Hotel properties, less accumulated depreciation of $91,212 and $56,408, respectively |
$ |
1,980,135 |
$ |
988,646 |
||||
| Investment in unconsolidated subsidiaries | 344,006 | 202,554 | ||||||
| Real estate held for sale | 36,796 | — | ||||||
| Cash and cash equivalents | 33,524 | 48,993 | ||||||
| Restricted cash | 40,100 | 18,822 | ||||||
| Receivables | 26,540 | 11,382 | ||||||
| Due from related parties | 5,300 | 3,164 | ||||||
| Prepaid expenses and other assets | 58,215 | 25,177 | ||||||
| Loan costs, less accumulated amortization of $3,566 and $2,180, respectively | 10,373 | 5,122 | ||||||
| Deferred income taxes, less valuation allowance of $4,566 in 2003 | 26,575 | — | ||||||
| $ | 2,561,564 | $ | 1,303,860 | |||||
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||||||||
Mortgages payable and accrued interest |
$ |
574,342 |
$ |
207,206 |
||||
| Other notes payable | 225,237 | 29,739 | ||||||
| Line of credit | 96,994 | 24,079 | ||||||
| Accounts payable and accrued expenses | 48,242 | 9,256 | ||||||
| Other liabilities | 9,553 | 5,632 | ||||||
| Distributions payable | 95 | 106 | ||||||
| Due to related parties | 2,072 | 2,460 | ||||||
| Security deposits | 12,166 | 12,883 | ||||||
| Total liabilities | 968,701 | 291,361 | ||||||
Commitments and contingencies |
||||||||
| Stockholders' equity: | ||||||||
| Preferred stock, without par value. Authorized and unissued 3,000 shares | — | — | ||||||
| Excess shares, $.01 par value per share. Authorized and unissued 63,000 shares | — | — | ||||||
| Common stock, $.01 par value per share. Authorized 450,000 shares; issued 201,322 and 126,802 shares, respectively; outstanding 199,918 and 126,030 shares, respectively | 2,000 | 1,260 | ||||||
| Capital in excess of par value | 1,781,203 | 1,115,745 | ||||||
| Accumulated distributions in excess of net earnings | (184,819 | ) | (98,366 | ) | ||||
| Accumulated other comprehensive loss | (4,008 | ) | (4,316 | ) | ||||
| Minority interest distributions in excess of contributions and accumulated earnings | (1,513 | ) | (1,824 | ) | ||||
| Total stockholders' equity | 1,592,863 | 1,012,499 | ||||||
| $ | 2,561,564 | $ | 1,303,860 | |||||
See accompanying notes to condensed consolidated financial statements.
1
CNL HOSPITALITY PROPERTIES, INC
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(in thousands, except per share data)
| |
Quarter Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
2003 |
2002 |
2003 |
2002 |
|||||||||||
| Revenues: | |||||||||||||||
| Hotel revenues: | |||||||||||||||
| Room | $ | 74,568 | $ | 32,522 | $ | 141,909 | $ | 62,221 | |||||||
| Food and beverage | 9,948 | 3,765 | 20,828 | 5,235 | |||||||||||
| Other hotel operating departments | 2,978 | 1,361 | 5,282 | 2,719 | |||||||||||
| Rental income from operating leases | 9,350 | 7,249 | 25,078 | 29,289 | |||||||||||
| FF&E reserve income | 850 | 1,063 | 2,583 | 3,440 | |||||||||||
| Interest and other income | 9,638 | 316 | 17,169 | 2,825 | |||||||||||
| 107,332 | 46,276 | 212,849 | 105,729 | ||||||||||||
| Expenses: | |||||||||||||||
| Hotel expenses: | |||||||||||||||
| Room | 17,548 | 5,939 | 32,692 | 14,578 | |||||||||||
| Food and beverage | 8,588 | 2,937 | 17,006 | 4,080 | |||||||||||
| Other hotel operating departments | 1,490 | 833 | 2,785 | 1,279 | |||||||||||
| Property operations | 23,591 | 10,380 | 40,977 | 16,383 | |||||||||||
| Repairs and maintenance | 4,411 | 1,418 | 8,318 | 2,090 | |||||||||||
| Hotel management fees | 2,727 | 1,509 | 6,172 | 2,884 | |||||||||||
| Sales and marketing | 5,512 | 2,766 | 10,973 | 4,288 | |||||||||||
| Interest and loan cost amortization | 14,764 | 4,669 | 25,670 | 13,828 | |||||||||||
| General operating and administrative | 3,565 | 1,333 | 7,972 | 4,118 | |||||||||||
| Asset management fees to related party | 3,178 | 1,744 | 8,161 | 4,819 | |||||||||||
| Depreciation and amortization | 17,003 | 7,415 | 34,804 | 20,306 | |||||||||||
| 102,377 | 40,943 | 195,530 | 88,653 | ||||||||||||
| Income before equity in loss of unconsolidated subsidiaries interests and minority interests | 4,955 | 5,333 | 17,319 | 17,076 | |||||||||||
Equity in loss of unconsolidated subsidiaries |
(10,960 |
) |
(2,927 |
) |
(15,802 |
) |
(6,129 |
) |
|||||||
Minority interests |
(57 |
) |
(63 |
) |
(159 |
) |
(196 |
) |
|||||||
| Income (loss) from continuing operations | (6,062 | ) | 2,343 | 1,358 | 10,751 | ||||||||||
| Discontinued operations: | |||||||||||||||
| Income (loss) from discontinued operations, net | 774 | — | 774 | — | |||||||||||
| Net earnings (loss) | $ | (5,288 | ) | $ | 2,343 | $ | 2,132 | $ | 10,751 | ||||||
| Earnings (loss) per share of common stock (basic and diluted): | |||||||||||||||
| Continuing operations | $ | (0.03 | ) | $ | 0.02 | $ | 0.01 | $ | 0.12 | ||||||
| Discontinued operations | — | — | — | — | |||||||||||
| $ | (0.03 | ) | $ | 0.02 | $ | 0.01 | $ | 0.12 | |||||||
| Weighted average number of shares of common stock outstanding: | |||||||||||||||
| Basic and diluted | 181,941 | 100,749 | 156,647 | 90,622 | |||||||||||
See accompanying notes to condensed consolidated financial statements.
2
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Nine Months Ended September 30, 2003 and Year Ended December 31, 2002
(UNAUDITED) (in thousands, except per share data)
| |
Common Stock |
|
|
|
|
|
|
|||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
|
Accumulated distributions in excess of net earnings |
Accumulated other comprehensive loss |
Minority interest distributions in excess of contr. and accum. earnings |
|
|
||||||||||||||||||
| |
Number of shares |
Par value |
Capital in excess of par value |
Total |
Comprehensive income |
|||||||||||||||||||
| Balance at December 31, 2001 | 77,358 | $ | 773 | $ | 681,152 | $ | (39,959 | ) | $ | (1,190 | ) | $ | (2,900 | ) | $ | 637,876 | $ | — | ||||||
Subscriptions received for common stock through public offerings and distribution reinvestment plan |
48,911 |
489 |
488,622 |
— |
— |
— |
489,111 |
— |
||||||||||||||||
Retirement of common stock |
(239 |
) |
(2 |
) |
(2,389 |
) |
— |
— |
— |
(2,391 |
) |
— |
||||||||||||
Stock issuance costs |
— |
— |
(51,640 |
) |
— |
— |
(51,640 |
) |
||||||||||||||||
Net earnings |
— |
— |
— |
15,810 |
— |
15,810 |
15,810 |
|||||||||||||||||
Minority interest distributions in excess of contributions and accumulated earnings |
— |
— |
— |
— |
— |
1,076 |
1,076 |
— |
||||||||||||||||
Current period adjustments to recognize changes in value of cash flow hedges of equity investees |
— |
— |
— |
— |
(3,126 |
) |
— |
(3,126 |
) |
(3,126 |
) |
|||||||||||||
| Total comprehensive income | — | — | — | — | — | — | — | $ | 12,684 | |||||||||||||||
| Distributions declared and paid ($.78 per share) | — | — | — | (74,217 | ) | — | — | (74,217 | ) | |||||||||||||||
| Balance at December 30, 2002 | 126,030 | $ | 1,260 | $ | 1,115,745 | $ | (98,366 | ) | $ | (4,316 | ) | $ | (1,824 | ) | $ | 1,012,499 | ||||||||
See accompanying notes to condensed consolidated financial statements.
3
| |
Common Stock |
|
|
|
Minority interest distributions in excess of contr. and accum. earnings |
|
|
||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| |
|
Accumulated distributions in excess of net earnings |
Accumulated other comprehensive loss |
|
|
||||||||||||||||||
| |
Number of Shares |
Par value |
Capital in excess of par value |
Total |
Comprehensive income |
||||||||||||||||||
| Balance at December 31, 2002 | 126,030 | $ | 1,260 | $ | 1,115,745 | $ | (98,366 | ) | $ | (4,316 | ) | $ | (1,824 | ) | $ | 1,012,499 | $ | — | |||||
Subscriptions received for common stock through public offerings and distribution reinvestment plan |
74,322 |
744 |
742,472 |
— |
— |
— |
743,216 |
— |
|||||||||||||||
Retirement of common stock |
(434 |
) |
(4 |
) |
(4,327 |
) |
— |
— |
— |
(4,331 |
) |
— |
|||||||||||
Stock issuance costs |
— |
— |
(72,687 |
) |
— |
— |
— |
(72,687 |
) |
— |
|||||||||||||
Net earnings |
— |
— |
— |
2,132 |
— |
— |
2,132 |
2,132 |
|||||||||||||||
Minority interest distributions in excess of contributions and accumulated earnings |
— |
— |
— |
— |
— |
311 |
311 |
— |
|||||||||||||||
Current period adjustments to recognize changes in value of cash flow hedges of equity investees |
— |
— |
— |
— |
308 |
— |
308 |
308 |
|||||||||||||||
| Total comprehensive income | — | — | — | — | — | — | — | $ | 2,440 | ||||||||||||||
| Distributions declared and paid ($.58 per share) | — | — | — | (88,585 | ) | — | — | (88,585 | ) | ||||||||||||||
| Balance at September 30, 2003 | 199,918 | $ | 2,000 | $ | 1,781,203 | $ | (184,819 | ) | $ | (4,008 | ) | $ | (1,513 | ) | $ | 1,592,863 | |||||||
See accompanying notes to condensed consolidated financial statements.
4
CNL HOSPITALITY PROPERTIES, INC.
AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(in thousands)
| |
Nine Months Ended September 30, |
||||||||
|---|---|---|---|---|---|---|---|---|---|
| |
2003 |
2002 |
|||||||
| Net cash provided by operating activities | $ | 72,833 | $ | 50,648 | |||||
| Cash flows from investing activities: | |||||||||
| Additions to land, buildings and equipment on operating leases | (347,856 | ) | (181,242 | ) | |||||
| RFS Merger | (464,160 | ) | — | ||||||
| Investment in unconsolidated subsidiaries | (90,292 | ) | (42,007 | ) | |||||
| Deposit on real estate assets and other investments | (30,977 | ) | (8,104 | ) | |||||
| Increase in restricted cash | (12,209 | ) | (5,554 | ) | |||||
| Decrease (increase) in other assets | 6,463 | (17,654 | ) | ||||||
| Net cash used in investing activities | (939,031 | ) | (254,561 | ) | |||||
| Cash flows from financing activities: | |||||||||
| Proceeds from mortgage loans | 131,630 | — | |||||||
| Principal payments on mortgage loans | (1,886 | ) | (1,093 | ) | |||||
| Net proceeds (reduction) of other notes payable | 71,837 | (31,519 | ) | ||||||
| Draw on line of credit | 72,915 | 16,652 | |||||||
| Subscriptions received from stockholders | 743,216 | 327,357 | |||||||
| Distributions to stockholders | (88,585 | ) | (51,812 | ) | |||||
| Distributions to minority interest | (287 | ) | (308 | ) | |||||
| Retirement of common stock | (4,331 | ) | (2,417 | ) | |||||
| Payment of stock issuance costs | (72,687 | ) | (33,294 | ) | |||||
| Payment of loan costs | (1,093 | ) | (804 | ) | |||||
| Net cash provided by financing activities | 850,729 | 222,762 | |||||||
| Net increase (decrease) in cash and cash equivalents | (15,469 | ) | 18,849 | ||||||
| Cash and cash equivalents at beginning of period | 48,993 | 44,825 | |||||||
| Cash and cash equivalents at end of period | $ | 33,524 | $ | 63,674 | |||||
See accompanying notes to condensed consolidated financial statements
5
| |
Nine Months Ended September 30, |
||||||||
|---|---|---|---|---|---|---|---|---|---|
| |
2003 |
2002 |
|||||||
| Supplemental schedule of non-cash investing activities: | |||||||||
| RFS Merger transaction (see Note 13, "RFS Merger"): | |||||||||
| Purchase accounting: | |||||||||
| Assets Acquired: | |||||||||