Investments in Affiliates
The company's investments in and advances to less
than 50% owned affiliates include:
Hotel joint ventures
Sun Line Greece Special Shipping Company
Other joint ventures
The company has interests in seven joint ventures
that own hotels operated by the company under long-
term agreements. Payments by the company to the
ventures are based primarily on profits of the hotels.
At January 1,1982, combined assets and liabilities of
these hotel joint ventures were $316,774,000 and
$253,228,000, including mortgages of $220,074,000.
The mortgages are secured solely by venture assets without recourse to the company.
The company also has investments in seven other joint
ventures presently constructing hotels that will be
operated by the company.
At November 30,1981, Sun Line Greece Special
Shipping Company had total assets of $24,098,000 and
liabilities of $9,792,000, including $1,464,000 of debt.
The company has guaranteed 45% of this debt.
The excess of the company's investment over its equity
in the underlying net assets of less than 50% owned
affiliates is $2,205,000 and is being amortized over
periods up to 40 years.
The company has formed a limited partnership which
will own 11 hotel properties to be managed by a wholly
owned subsidiary of the company. Management fees
will be based primarily on available profits of the hotels.
The company will serve as sole general partner. During
1982, the company expects to sell limited partnership
interests in a public offering. The company will contribute its interest in certain existing hotels and work
to date with respect to other hotels under construction
A group of commercial banks has committed to lend
the partnership $365 million to provide financing for the
estimated cost of the 11 hotels. Upon closing of the sale
of the limited partnership interests and contribution of
the hotels to the partnership, the company will be reimbursed for its capital investment in the properties ($142
million as of January 1,1982). The partnership also has a
loan commitment for up to $91.25 million to pay certain
required interest payments on indebtedness related to
the completed hotels. Additionally, the company has
agreed to advance up to $45.6 million to cover shortfalls
in certain partnership debt service. Any such advances by
the company are recoverable from subsequent partnership cash flows after partnership debt service. The company has also agreed to advance up to $36.5 million to
cover construction cost overruns, if any, in excess of the
estimated property costs. To date, no advances have been
required under these guarantees.
Income tax expense consists of:
Investment tax credit
Salaried employee stock
Jobs tax credit
Income from investment tax
credit purchased under
"safe harbor" tax leases
Provision for income taxes
The deferred provision is primarily attributable to the
tax effect of excess tax over book depreciation equal to
$12,629,000 in 1981, $7,100,000 in 1980 and $9,529,000
in 1979 and the tax effect of capitalized interest equal to
$11,518,000 in 1981 and $5,526,000 in 1980. Tax credits
arising from the company's contributions to a salaried
employee stock ownership plan offset a corresponding
charge to corporate expenses.
Reconciliation of the United States statutory tax rate
and the company's consolidated income tax rate follows:
1981 1980 1979
United States statutory tax rate 46.0% 46.0% 46.0%
State income taxes, net of U.S. tax benefit 3.6 3.7 3.6
Foreign earnings and losses subject to
aggregate tax rate less than U.S. rate (1.6) (1.8) (3.3)
Other items, net 1.0 .8 1.5
Effective gross income tax rate 49.0 48.7 47.8
Tax credits and other (11.0) (8.7) (5.5)
Effective income tax rate 38.6% 40.0% 42.3%
Maturities of debt at January 1,1982 are:
1983 $ 17,214
to 2010 458,009
The company has debt of $390,908,000 as of January
1,1982 at interest rates which vary based on the prime
lending rate, London Euro-dollar interbank rate or negotiated rates based on the banks' cost of funds. Interest
rates on other debt range from 4.25% to 12.0%.
The company's loan agreements require it to meet
certain requirements including among other things,
maintaining minimum net worth and asset-to-debt and
debt-to-equity ratios. The loan agreements also have