United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarterly Period Ended March 31, 1998
or
[ ] 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 0-23616
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Prime Retail, Inc. (Formerly known as Sky Merger Corp.)
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(Exact name of registrant as specified in its charter)
Maryland 38-2559212
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
5000 Hakes Drive
Norton Shores, Michigan 49441
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(Address of principal executive offices) (Zip Code)
(616) 798-9100
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(Registrants telephone number, including area code)
NOT APPLICABLE
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(Former name, former address, or former fiscal year, if changed since last
report)
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 periods that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes No X
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Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practical date.
As of June 23, 1998, the issuer had outstanding 41,915,728 shares of
Common Stock, $.01 par value per share.
<PAGE>
Prime Retail, Inc. (Formerly known as Sky Merger Corp.)
Form 10-Q
INDEX
PART I: FINANCIAL INFORMATION PAGE
Item 1. Financial Statements (Unaudited)
Balance Sheets as of March 31, 1998 and
December 31, 1997 1
Note to the Balance Sheets 2
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 3
PART II: OTHER INFORMATION
Item 1. Legal Proceedings 3
Item 2. Changes in Securities 3
Item 3. Defaults Upon Senior Securities 3
Item 4. Submission of Matters to a Vote of Security Holders 3
Item 5. Other Information 3
Item 6. Exhibits or Reports on Form 8-K 3
Signatures 4
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
<TABLE>
Prime Retail, Inc. (Formerly known as Sky Merger Corp.)
Balance Sheets
<CAPTION>
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Assets March 31, 1998 December 31, 1997
<S> <C> <C>
- ------------------------------------------------------------------------------------------------------------------------------------
Cash $ 1,000 $ 1,000
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Total assets $ 1,000 $ 1,000
========== ==========
Stockholder's Equity
Common stock, $.01 par value, 50,000,000 shares authorized, 100
shares issued and outstanding $ 1 $ 1
Additional paid-in capital 999 999
---------- ----------
Total shareholder's equity $ 1,000 $ 1,000
========== ==========
====================================================================================================================================
See note to balance sheets.
</TABLE>
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<PAGE>
Prime Retail, Inc. (Formerly known as Sky Merger Corp.)
Note to Balance Sheets
Note 1 Organization
Sky Merger Corporation ("New Prime") was organized on November 12, 1997 solely
for purposes of effectuating the Mergers(as defined below). On November 12, 1997
and as amended on February 1, 1998, New Prime entered into a definitive merger
agreement with Prime Retail, Inc. (File No. 0-23616) and Horizon Group, Inc.
(File No. 1-12424) which contemplates the mergers (the "Mergers") of each of
Prime Retail, Inc. and Horizon Group, Inc. with and into New Prime. Upon
consummation of the Mergers, New Prime will change its name to Prime Retail,
Inc. and become the sole general partner of Prime Retail, L.P. which was formed
to acquire ownership interests in certain factory outlet centers and community
shopping centers and to continue the related construction, development,
acquisition, leasing and management operations. Pending completion of the
Mergers, New Prime will not conduct any operations. New Prime intends to qualify
as a real estate investment trust ("REIT") under the Internal Revenue Code of
1986, as amended, for federal income tax purposes commencing with the tax year
ending December 31, 1998. If New Prime qualifies for taxation as a REIT, New
Prime generally will not be subject to federal income tax to the extent it
distributes its REIT taxable income to its stockholders. If the Company fails to
qualify as a REIT in any taxable year, the Company will be subject to federal
income tax on its taxable income at regular federal corporate tax rates. Even if
New Prime qualifies for taxation as a REIT, New Prime may be subject to certain
state and local taxes on its income and property and federal income and excise
taxes on its undistributed income.
Note 2 Subsequent Event
On June 15, 1998, Prime Retail, Inc. ("Old Prime") completed its merger with
Horizon Group, Inc. ("Horizon") pursuant to an Amended and Restated Agreement
and Plan of Merger, dated as of February 1, 1998 (the "Merger Agreement"), among
Old Prime, Horizon, Prime Retail, L.P. ("Prime Partnership"), Horizon Group
Properties, Inc. ("HGP"), Horizon Group Properties, L.P., and Horizon/Glen
Outlet Centers Limite Partnership("Horizon Partnership"). The merger and the
other transactions contemplated by the Merger Agreement (the "Transactions")
were consummated through the mergers of (i) Horizon Partnership with and into
Prime Partnership and (ii)Horizon with and into New Prime, a wholly owned
subsidiary of Horizon, and the subsequent merger of Old Prime with and into New
Prime. Following the mergers, New Prime was renamed Prime Retail, Inc. On June
12, 1998, the Transactions and certain other related matters were approved by
shareholders of Old Prime and Horizon at shareholder meetings and by the limited
partners of Prime Partnership and Horizon Partnership.
Pursuant to the Transactions, each outstanding share of common stock, par value
$0.01 per share, of Horizon is entitled to receive 0.597 of a share of common
stock, $0.01 par value per share, of New Prime and 0.20 of a share of 8.5%
Series B Cumulative Participating Convertible Preferred Stock, $0.01 par value
per share, of New Prime. In addition, pursuant to the Transactions, each limited
partner of Horizon Partnership is entitled to receive 0.9193 of a common unit of
limited partnership interest in Prime Partnership for each unit of limited
partnership interest in Horizon Partnership. New Prime and Prime Partnership
have retained American Stock Transfer & Trust Company of New York to serve as
the Exchange Agent in connection with the exchanges.
Concurrent with the closing of the Transactions, a special cash distribution of
$0.50 per share/unit is being made to holders of Old Prime's Series C Preferred
Securities, Common Stock and common units of limited partnership interest, and a
special cash distribution of $0.60 per share is being made to holders of Old
Prime Series B Preferred Stock.
Also, in connection with the Transactions, the common equity of HGP, which
initially will own and operate 15 properties being spun-off from Old Prime and
Horizon, will be distributed to the convertible preferred and common
shareholders and unitholders of Old Prime and the shareholders and limited
partners of Horizon based on their ownership of New Prime immediately following
the merger. Pursuant to this distribution, one share of Common Stock of HGP will
be distributed for every 20 shares of Common Stock, Common Units or Series C
Preferred Stock of New Prime and 1.196 shares of Common Stock of HGP will be
distributed for every 20 shares of Series B Preferred Stock held in New Prime.
<PAGE>
In addition in connection with the Transactions, New Prime completed a $292.0
million debt financing with Nomura Asset Capital Corporation ("NACC"). The
financing consists of (i) a $180.0 million nonrecourse permanent loan (the
"Permanent Loan") and (ii) a $112.0 million full recourse bridge loan (the
"Bridge Loan"). The Permanent Loan is (i) collateralized by first mortgages on
four factory outlet centers, (ii) bears a fixed rate of interest equal to 6.99%
and (iii) requires monthly principal and interest payments pursuant to an
approximate 26-year amortization schedule. The Bridge Loan is (i) collateralized
by first mortgages on six factory outlet centers, (ii) bears a variable rate of
interest equal to 30-day LIBOR plus 1.35%, (iii) matures in three years, and
(iv) requires monthly interest-only payments.
Following the spin-off of HGP, New Prime will be a guarantor or otherwise
obligated with respect to approximately $42 million of HGP's indebtedness,
including $12.2 million of obligations under HGP's $108.2 million three-year
secured credit facility with NACC and $11.8 of mortgage debt that is scheduled
to mature August 14, 1998. New Prime and HGP are continuing to seek the consent
of certain parties to the assumption by HGP or its affiliates of $14.3 million
of indebtedness in connection with the spin-off.
As a result of the Transactions and pursuant to Rule 12g-3(a) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), New Prime is the
successor issuer to each of Horizon and Old Prime and New Prime's Common Stock,
$0.01 par value per share, its 10.5% Series A Senior Cumulative Preferred Stock,
$0.01 par value per share, and its 8.5% Series B Cumulative Participating
Convertible Preferred Stock, $0.01 par value per share, are deemed registered
under Section 12(b) of the Exchange Act.
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<PAGE>
PART I: FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations
The Company did not conduct any operations during the
three months ended March 31, 1998.
PART II: OTHER INFORMATION
Item 1. Legal Proceedings
None
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits or Reports on Form 8-K
(a) The following exhibits are included in this Form
10-Q:
Exhibit 27.1 Financial Data Schedule
(Edgar filing only)
(b) Reports on Form 8-K:
None
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Prime Retail, Inc. (Formerly known as Sky Merger Corp.)
Registrant
Date: June 23, 1998 /s/ Abraham Rosenthal
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Abraham Rosenthal
Chief Executive Officer
/s/ Robert P. Mulreaney
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Robert P. Mulreaney
Executive Vice President,
Chief Financial Officer
and Treasurer
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> Mar-31-1998
<EXCHANGE-RATE> 1
<CASH> 1,000
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
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<TOTAL-ASSETS> 1,000
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0
0
<COMMON> 1,000
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<TOTAL-LIABILITY-AND-EQUITY> 1,000
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