ITEM 1. BUSINESS
(a) General Development of Business: The Company is engaged in the operation of hotels in Boston (Cambridge), Massachusetts and New Orleans, Louisiana. It also operates, under management agreements, hotels in Southampton, Bermuda; Curacao, Netherlands Antilles; Key Biscayne, Florida; and Cairo, Hurghada, El Gouna, Port Said and Sharm el Sheikh, Egypt; and two Nile River cruise vessels. The Company has paid $2 million for a 22% ownership interest in the hotel and casino it operates in Curacao, Netherlands Antilles under a management contract. The Company has entered into a management agreement to operate a new hotel being created in New Orleans, Louisiana, which is scheduled to open in April 1995. The Company also licenses the use of the Sonesta name to four operating hotels. The Company had a fifty percent ownership and operating interest in a casino on the island of Aruba and operated a hotel adjacent to the casino under a management contract; in early 1992, the Company sold its casino interests to its joint venture partner and converted its management contract to a license arrangement.
(b) Financial Information about Industry Segments: The Company is engaged principally in one business segment -- hotel operations -- which represents over 90% of consolidated revenue. The Company's fifty percent ownership interest in a casino in Aruba, described in Item 1.(a), did not constitute involvement in another industry segment for purposes of this Form 10-K. The Financial Data and Consolidated Statements of Operations and Retained Earnings, pages 4 and 5 of the 1994 Annual Report to Shareholders, respectively, which is incorporated herein.
(c) Narrative Description of Business: The Company's business is to a great extent dependent upon a high level of economic activity.
The hotel business is highly competitive. The facilities of competitors are often affiliated with national or regional chains having more room accommodations and greater financial resources than the Company. The Company follows the practice of refurnishing and redecorating the hotels which it operates in order to keep the properties attractive and competitive with new
ITEM 1. BUSINESS
(c) (cont'd)
hotel properties, and this requires the Company to make substantial capital expenditures. During the two years ended December 31, 1994, the Company made capital expenditures for its hotels totalling approximately $3,700,000.
The Company endeavors to create individual and distinctive features for each hotel property while utilizing common corporate identification in order to obtain the benefits of chain operation. The Company is using the name "Sonesta" for all of its hotels, except Paradisio Hotel in El Gouna, Egypt, which is identified by the words: "Managed by Sonesta Hotels".
The Company has approximately 1,348 employees. Approximately 290 of these employees are covered by a collective bargaining agreement. The Company considers its relations with its employees to be satisfactory.
For revenues by class of service for the three years ended December 31, 1994, reference is made to the Consolidated Statements of Operations and Retained Earnings which appears on page 5 of the 1994 Annual Report to Shareholders.
(d) Financial Information about Foreign and Domestic Operations: This information is incorporated by reference to Note 2 on pages 9, 10 and 11 of the 1994 Annual Report to Shareholders.
ITEM 2.
ITEM 2. PROPERTIES
The Company's hotels are primarily metropolitan and resort hotels in popular vacation areas which emphasize luxury accommodations and personal service.
The Company has fee ownership in one hotel: Royal Sonesta Hotel, Boston (Cambridge), Massachusetts. Reference is made to Note 6 of the Notes to the Consolidated Financial Statements of the Registrant which appears on page 12 of the Company's 1994 Annual Report to Shareholders for details of the mortgage lien on the Boston (Cambridge), Massachusetts property.
The Company operates the Royal Sonesta Hotel, New Orleans, Louisiana, under a long-term lease which expires, subject to options to extend for up to twenty years, on September 30, 2004. The initial term of this lease expired in October, 1994, but the Company exercised the first of three ten-year options.
ITEM 2. PROPERTIES (cont'd)
Until January, 1992, the Company owned fifty percent of the shares of an Aruban company which was formed under a joint venture agreement to own and operate a casino on the island of Aruba.
The Company also operates under management agreements hotels in Southampton, Bermuda; Curacao, Netherlands Antilles; Key Biscayne, Florida; and Cairo, Hurghada, El Gouna, Port Said and Sharm el Sheikh, Egypt; and two Nile River cruise vessels. The Company's hotel and casino on the island of Curacao is operated under a management contract, and the Company has invested $2 million for a 22% ownership interest in that property. The Company's management contract to operate a hotel in Aruba was converted to a license agreement in January, 1992 in connection with the sale of its casino interests. The Company has granted licenses for the use of its name to hotels in Aruba (2); Jerusalem, Israel; and Santiago, Chile.
In December 1994, the Company entered into two partnerships: one of the partnerships was formed to acquire, and now owns, a building in the SoHo district of New York and intends to develop the building as a 78-room deluxe hotel, including retail space; the other partnership was formed to acquire, and now owns, a beach-front hotel site in Guanacaste, Costa Rica on which the partnership intends to develop a 320-room resort and casino. Company subsidiaries are 50% partners in both partnerships, but the partnerships are otherwise unrelated. Both projects are contingent on obtaining satisfactory financing.
In addition to the properties listed above, the Company leases space for its executive offices at 200 Clarendon Street, Boston, Massachusetts 02116.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS
Neither the Company nor its subsidaries is engaged in any material legal proceedings.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of shareholders of the Company in the fourth quarter of 1994.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Common stock market prices and dividends and the number of shareholders of record are incorporated by reference to page 4 of the 1994 Annual Report to Shareholders.
A dividend of $.15 per share was paid on the Company's common stock in July 1993 and a dividend of $.15 per share was declared on the Company's common stock in December 1993, but was paid in January 1994. A dividend of $.15 per share was paid on the Company's common stock in July 1994 and a dividend of $.15 per share was declared on the Company's common stock in December 1994, but was paid in January 1995. Other information required by this item is incorporated by reference to the Consolidated Statements of Operations and Retained Earnings which appears on page 5 of the 1994 Annual Report to Shareholders.
No dividends may be declared or paid on the Company's common stock or common stock purchased or redeemed unless (a) preferred stock dividend and sinking fund requirements are met; and (b) the total of dividends paid does not exceed the maximum amount permitted by one of the Company's bank loan agreements.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA
Selected Financial Data on page 4 of the 1994 Annual Report to Shareholders is incorporated herein by reference.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
This information is incorporated by reference to pages 2 and 3 of the 1994 Annual Report to Shareholders.
ITEM 8.
ITEM 8. CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The financial statements listed in the Index to the Consolidated Financial Statements filed as part of this Annual Report on Form 10-K, together with the report of Ernst & Young LLP dated March 7, 1995, are incorporated herein by reference to the 1994 Annual Report to Shareholders.
Selected Quarterly Financial Data, on page 3 of the 1994 Annual Report to Shareholders, is incorporated by reference.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH AUDITORS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There were no disagreements with auditors on accounting principles or practices or financial statement disclosures.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
A. DIRECTORS OF THE COMPANY AND COMPLIANCE WITH SECTION 16(A)
The information required by this item is incorporated herein by reference to the proxy statement for the 1995 Annual Meeting of Stockholders.
B. THE EXECUTIVE OFFICERS OF THE COMPANY ARE AS FOLLOWS
Employment History Name Present Position Age 1990 to Present ---- ---------------- --- -------------------
Roger P. Sonnabend Chairman of the Board 69 Chairman and Chief and Chief Executive Executive Officer. Officer
Paul Sonnabend President 67 President.
Stephen Sonnabend Senior Vice President 63 Senior Vice President.
Stephanie Sonnabend Executive Vice President 42 Vice President - Marketing until November, 1993, then Executive Vice President.
Boy van Riel Vice President and 36 Controller until Treasurer March, 1993, then Vice President & Treasurer.
Peter J. Sonnabend Vice President and 41 Vice President and Secretary Secretary.
Christopher Baum Vice President - Sales 41 Director of & Marketing Advertising and Communications Public Relations, Westin Hotels & Resorts, until 1991; Corporate Director of Marketing,
Resorts, Hilton Hotels, 1991-1992; Vice President - Sales & Marketing Communications, 1992 to present.
Felix Madera Vice President - 46 Vice President & International General Manager, Sonesta Beach Resort, Key Biscayne, Florida.
Mary Jane Rosa Vice President - 46 Director of Design Design until January, 1993, then Vice President - Design.
Jacqueline Sonnabend Vice President - 40 Vice President - Human Resources Human Resources.
Hans Wandfluh Vice President 60 President & General Manager, Royal Sonesta Hotel, New Orleans, Louisiana.
Roger, Paul and Stephen Sonnabend are brothers. Stephanie Sonnabend and Jacqueline Sonnabend are the daughters of Roger Sonnabend. Peter J. Sonnabend is the son of Paul Sonnabend.
The Board of Directors elects Officers of the Company on an annual basis.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION
and
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
and
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by these items is incorporated by reference to the proxy statement for the 1995 Annual Meeting of Stockholders.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) 1. Financial Statements: The financial statements listed in the accompanying Index to Consolidated Financial Statements is filed as part of this Annual Report.
2. Financial Statement Schedules: The schedule listed in the accompanying Index to Consolidated Financial Statements is filed as part of this Annual Report.
3. Financial Statements of significant subsidiary, RIF Resort Hotel, N.V. shall be provided by amendment to this Form 10-K by June 30, 1995, as allowed under Regulation S-X, Rule 3-09.
4. Exhibits: The exhibits listed on the accompanying Index to Exhibits are filed as part of this Annual Report.
(b) No reports on Form 8-K were filed during the last quarter of 1994.
SONESTA INTERNATIONAL HOTELS CORPORATION INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Item 14(a) (1) and (2) References (Page) ---------------------- -----------------
1994 Annual Report to Form 10-K Shareholders* --------- ------------- Consolidated Balance Sheets at December 31, 1994 and 1993 . . . 6 - 7
For the years ended December 31, 1994, 1993 and 1992:
Consolidated Statements of Operations and Retained Earnings. . . . . . . . . . . . . . 5
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . 8
Notes to Consolidated Financial Statements. . . . . . . . . . . . . 9 - 15
Consolidated Financial Statement Schedules for the year ended December 31, 1994:
II. Consolidated Valuation and Qualifying Accounts. . . . . . 10
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and therefore have been omitted.
____________________ *Incorporated by Reference
SONESTA INTERNATIONAL HOTELS CORPORATION SCHEDULE II - CONSOLIDATED VALUATION AND QUALIFYING ACCOUNTS THREE YEARS ENDED DECEMBER 31, 1994
Sonesta International Hotels Corporation
INDEX TO EXHIBITS
Items l4(a) (3) ---------------
NUMBER DESCRIPTION PAGE NOS. ------ ----------- ---------
3.1 The most recent amendments to the Company's Certificate of Incorporation were filed as part of the Registrant's Form 10-K for 1992.
3.2 Company By-laws, including all 14-30 amendments through March 29, 1995.
10.1(a) "Third Amendment of Mortgage and 31-35 Security Agreement and Second Amendment of Note" Between Key Biscayne Limited Partnership, Mortgagor ("KBLP") and Florida Sonesta Corporation, Mortgagee (FSC"), dated February 4, 1994.
10.1(b) "Operating Deficit Loan Mortgage Note" 36-40 ($2,194,005.00) from KBLP to FSC, dated as of December 31, 1993.
10.1(c) "Operating Deficit Loan Mortgage and 41-60 Security Agreement" between KBLP and FSC, dated February 4, 1994.
10.1(d) "Promissory Note" ($1,576,600.00) from 61-64 KBLP to FSC, dated February 4, 1994.
10.1(e) "Second Amendment to Management Agreement" 65-69 dated as of December 31, 1993 between KBLP and FSC.
10.2 "Second Amendment to Lease" between John 70-77 Hancock Mutual Life Insurance Company ("John Hancock") and Sonesta International Hotels Corporation ("Sonesta"), dated March 22, 1994.
10.3 "Third Amendment to Lease" between John 78-80 Hancock and Sonesta, dated June, 1994.
10.4(a) "1995 Loan Agreement" between Hibernia 81-111 National Bank ("Hibernia") and Royal
Sonesta, Inc. ("Royal Sonesta"), as of PAGE NOS. January 1, 1995). ---------
10.4(b) "Promissory Note" ($5,000,000) from Royal 112-115 Sonesta to Hibernia, dated "Effective January 1, 1995".
10.4(c) "First Amendment to 1995 Loan Agreement" 116-117 Between Hibernia and Royal Sonesta, dated December 12, 1994.
10.5 "Commercial Promissory Note" ($2,000,000) 118-121 from Sonesta International Hotesl Corporation to USTrust, dated November 1, 1994.
10.6 "Shareholders Agreement of C.R. Resort 122-167 Associates Limited", dated December 8, 1994.
10.7 "Amended and Restated Agreement of 168-232 Limited Partnership of The Soho Hotel Company, L.P.", dated December 13, 1994.
13. Annual Report to Security Holders for the 233-249 calendar year ended December 31, 1994.
21. Subsidiaries of the Registrant. 250
23. Consent of Ernst & Young LLP filed herewith. 251
SIGNATURES
Pursuant to the requirements of Section 13 or l5(d) of the Securities and Exchange Act of l934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SONESTA INTERNATIONAL HOTELS CORPORATION (Registrant)
By: /s/ Boy van Riel Date: March 13, 1995 ------------------------------- Boy van Riel Vice President and Treasurer
Pursuant to the requirements of the Securities Exchange Act of l934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By: /s/ R.P. Sonnabend Date: March 13, 1995 ------------------------------- Roger P. Sonnabend Chairman of the Board and Chief Executive Officer
By: /s/ Boy van Riel Date: March 13, 1995 ------------------------------- Boy van Riel Vice President and Treasurer, Principal Financial and Accounting Officer
By: /s/ Paul Sonnabend Date: March 13, 1995 ------------------------------- Paul Sonnabend Director
By: /s/ Stephen Sonnabend Date: March 13, 1995 ------------------------------- Stephen Sonnabend Director
By: /s/ Vernon R. Alden Date: March 13, 1995 ------------------------------- Vernon R. Alden Director
By: /s/ Joseph L. Bower Date: March 13, 1995 ------------------------------- Joseph L. Bower Director
By: /s/ L.M. Levinson Date: March 13, 1995 ------------------------------- Lawrence M. Levinson Director