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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 Quarter ended March 22, 1996
OR
[ ] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number: 0-14381
MARRIOTT HOTEL PROPERTIES LIMITED PARTNERSHIP
---------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
<S> <C>
Delaware 52-1436985
- ------------------------------------------------------ -------------------------------------------
(State or other jurisdiction of incorporation or (I.R.S. Employer Identification No.)
organization)
10400 Fernwood Road
Bethesda, Maryland 20817
- ------------------------------------------------------ -------------------------------------------
(Address of principal executive offices) (Zip Code)
</TABLE>
Registrant's telephone number, including area code: 301-380-2070
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 and (2) has been subject to such
filing requirements for the past 90 days. Yes ____ No ____ (Not
Applicable). On August 25, 1992, the Registrant filed an application for
relief from the reporting requirements of the Securities Exchange Act of
1934 pursuant to Section 12(h) thereof. Because of the pendency of such
application, the Registrant was not required to, and did not, make any
filings pursuant to the Securities Exchange Act of 1934 from October 23,
1989 until the application was voluntarily withdrawn on November 18, 1996.
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Marriott Hotel Properties Limited Partnership
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TABLE OF CONTENTS
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PAGE NO.
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PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements
Condensed Consolidated Statement of Operations
Twelve Weeks Ended March 22, 1996 and March 24, 1995...............1
Condensed Consolidated Balance Sheet
March 22, 1996 and December 31, 1995...............................2
Condensed Consolidated Statement of Cash Flows
Twelve Weeks ended March 22, 1996 and March 24, 1995...............3
Notes to Condensed Consolidated Financial Statements................4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations................................6
PART II - OTHER INFORMATION
Item 1. Legal Proceedings...................................................8
Item 6. Exhibits and Reports on Form 8-K....................................8
</TABLE>
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MARRIOTT HOTEL PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(in thousands, except per unit amounts)
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<CAPTION>
Twelve Weeks Ended
March 22, March 24,
1996 1995
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REVENUES
Hotel................................................$ 15,439 $ 15,345
Rental income........................................ 8,539 8,278
Interest............................................. 63 54
----------- -----------
24,041 23,677
----------- -----------
OPERATING COSTS AND EXPENSES
Interest............................................. 5,202 4,970
Depreciation and amortization........................ 2,693 2,705
Incentive management fee............................. 2,387 2,448
Base management fee.................................. 985 963
Ground rent, property taxes and other................ 2,030 1,990
----------- -----------
13,297 13,076
----------- -----------
INCOME BEFORE MINORITY INTEREST....................... 10,744 10,601
MINORITY INTEREST..................................... 2,285 2,239
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NET INCOME............................................$ 8,459 $ 8,362
=========== ===========
ALLOCATION OF NET INCOME
General Partner......................................$ 85 $ 84
Limited Partners..................................... 8,374 8,278
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$ 8,459 $ 8,362
=========== ===========
NET INCOME PER LIMITED PARTNER UNIT (1,000 Units).....$ 8,374 $ 8,278
=========== ===========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
1
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MARRIOTT HOTEL PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
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<CAPTION>
March 22, December 31,
1996 1995
----------- ------------
(Unaudited)
<S> <C> <C>
ASSETS
Property and equipment, net...................................................$ 220,370 $ 222,458
Due from Marriott International, Inc. and affiliates.......................... 12,137 7,136
Minority interest............................................................. 8,900 11,185
Other assets.................................................................. 8,706 6,888
Cash and cash equivalents..................................................... 9,511 3,550
----------- ------------
$ 259,624 $ 251,217
=========== ============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Mortgage debt.................................................................$ 239,635 $ 239,860
Note payable and amounts due to Host Marriott Corporation..................... 6,485 6,484
Note payable and amounts due to Marriott International, Inc. and affiliates... 5,934 6,052
Accounts payable and accrued interest......................................... 1,377 1,087
----------- ------------
Total Liabilities............................................................ 253,431 253,483
----------- ------------
PARTNERS' CAPITAL (DEFICIT)
General Partner............................................................... 172 87
Limited Partners.............................................................. 6,021 (2,353)
----------- ------------
Total Partners' Capital (Deficit)............................................ 6,193 (2,266)
----------- ------------
$ 259,624 $ 251,217
=========== ============
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
2
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MARRIOTT HOTEL PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
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<CAPTION>
Twelve Weeks Ended
March 22, March 24,
1996 1995
---------- -----------
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES
Net income............................................................. $ 8,459 $ 8,362
Noncash items.......................................................... 5,096 5,328
Changes in operating accounts.......................................... (4,739) (7,759)
---------- ----------
Cash provided by operations.......................................... 8,816 5,931
---------- ----------
INVESTING ACTIVITIES
Changes in property improvement funds and capital reserve escrow....... (1,893) 54
Additions to property and equipment.................................... (605) (2,374)
---------- ----------
Cash used in investing activities.................................... (2,498) (2,320)
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FINANCING ACTIVITIES
Principal repayments of mortgage debt.................................. (225) --
Repayments to Marriott International, Inc. and affiliates.............. (118) (108)
Payment of financing costs............................................. (14) --
---------- ----------
Cash used in financing activities.................................... (357) (108)
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INCREASE IN CASH AND CASH EQUIVALENTS................................... 5,961 3,503
CASH AND CASH EQUIVALENTS at beginning of period........................ 3,550 2,743
---------- ----------
CASH AND CASH EQUIVALENTS at end of period.............................. $ 9,511 $ 6,246
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for mortgage and other interest.............................. $ 4,751 $ 4,271
========== ==========
</TABLE>
See Notes to Condensed Consolidated Financial Statements.
3
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MARRIOTT HOTEL PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying condensed consolidated financial statements have been
prepared by Marriott Hotel Properties Limited Partnership (the
"Partnership") without audit. Certain information and footnote
disclosures normally included in financial statements presented in
accordance with generally accepted accounting principles have been
condensed or omitted from the accompanying statements. The Partnership
believes the disclosures made are adequate to make the information
presented not misleading. However, the condensed consolidated financial
statements should be read in conjunction with the Partnership's
financial statements and notes thereto included in the Partnership's
Form 10-K for the fiscal year ended December 31, 1995. In the opinion
of the Partnership, the accompanying unaudited condensed consolidated
financial statements reflect all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial
position of the Partnership as of March 22, 1996, and December 31,
1995, and the results of operations for the twelve weeks ended
March 22, 1996 and March 24, 1995. Interim results are not necessarily
indicative of fiscal year performance because of seasonal and short-
term variations.
The Partnership owns Marriott's Orlando World Center and a 50.5%
interest in a partnership owning Marriott's Harbor Beach Resort (the
"Harbor Beach Partnership"), whose financial statements are
consolidated herein. The remaining 49.5% general partnership interest
in the Harbor Beach Partnership is reported as minority interest. All
significant intercompany balances and transactions have been
eliminated.
For financial reporting purposes, net profits and net losses of the
Partnership are allocated 99% to the limited partners and 1% to the
General Partner. Significant differences exist between the net profits
and net losses for financial reporting purposes and the net profits and
net losses reported for Federal income tax purposes. These differences
are due primarily to the use, for income tax purposes, of accelerated
depreciation methods, shorter depreciable lives of the assets,
differences in the timing of the recognition of management fee expense
and the deduction of certain costs incurred during construction which
have been capitalized in the accompanying condensed consolidated
financial statements.
2. Hotel revenues represent house profit from the Orlando Hotel since the
Partnership has delegated substantially all of the operating decisions
related to the generation of house profit of the Orlando Hotel to
Marriott International, Inc. (the "Manager"). House profit reflects
hotel operating results which flow to the Partnership as property owner
and represents gross hotel sales less property-level expenses,
excluding depreciation and amortization, base and incentive management
fees, property taxes and certain other costs, which are disclosed
separately in the condensed consolidated statement of operations.
Hotel revenues consist of hotel operating results for the Orlando Hotel
for the twelve weeks ended (in thousands):
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March 22, March 24,
1996 1995
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HOTEL SALES
Rooms...............................................$ 16,450 $ 16,139
Food and beverage................................... 12,684 12,804
Other............................................... 3,713 3,157
----------- -----------
32,847 32,100
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HOTEL EXPENSES
Departmental Direct Costs
Rooms............................................ 3,148 2,851
Food and beverage................................ 7,590 7,363
Other hotel operating expenses...................... 6,670 6,541
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17,408 16,755
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HOTEL REVENUES.......................................$ 15,439 $ 15,345
=========== ===========
</TABLE>
4
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3. In the first quarter of 1996, the Partnership adopted Statement of
Financial Accounting Standards ("SFAS") No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be
Disposed Of." Adoption of SFAS No. 121 did not have an effect on its
condensed consolidated financial statements.
5
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Total consolidated Partnership revenues for first quarter 1996 increased 2%
over the comparable period in 1995 due to strong operating results at the
Hotels. REVPAR, or revenue per available room, represents the combination
of the average daily room rate charged and the average daily occupancy
achieved and is a commonly used indicator of hotel performance (although it
is not a GAAP measure of revenue). The combined REVPAR for the Hotels for
the twelve-week period ended March 22, 1996 improved 2%, to $147, over the
comparable period in 1995 due to a slight increase in combined average
occupancy to 86% along with a 1% increase in combined average room rate to
$171.
Hotel Revenues. For the twelve weeks ended March 22, 1996, Hotel
revenues increased slightly over the comparable period in 1995 to $15.4
million primarily through an increase in higher-rated leisure transient
business. REVPAR at the Orlando Hotel increased 2% over the same period in
1995 to $130 due to a 2% increase in average room rate to $152 while
average occupancy remained stable at 86%. As a result of an overall
decline in group business, food and beverage sales and profit decreased
slightly for the twelve weeks ended March 22, 1996 when compared to the
same period in 1995. The Orlando Hotel's operating results benefited from
improved profit in ancillary activity such as telephone operations, which
improved due to increased international business, and golf course
operations. Marketing efforts at the Orlando Hotel are focused on
attracting short-term group demand, as well as leisure transient demand for
the summer months. Demand is expected to remain strong in the leisure
transient segment, especially from international markets.
Rental Income. For the twelve weeks ended March 22, 1996, rental
income from the Harbor Beach Hotel increased by approximately $0.3 million,
or 3%, when compared to the same period in 1995 due to increased transient
demand offset by a slight decrease in group business. REVPAR for first
quarter 1996 increased 2% over the prior year due to a 1.5 percentage point
increase in average occupancy to 86%, while average room rate remained
consistent with prior year at $218. Heavy banquet volume during the first
quarter 1996 resulted in a $0.7 million, or 13%, increase in food and
beverage sales and a $0.4 million, or 20% increase in food and beverage
profit over 1995. The Harbor Beach Hotel is expecting group business to
strengthen throughout the remainder of the year as advance bookings in this
segment for the full year are approximately 9,300 room nights ahead of the
prior year. Demand is expected to remain strong in the leisure transient
segment, especially from international markets.
Indirect hotel operating costs and expenses. Indirect hotel operating
costs and expenses remained consistent at $8.1 million for the twelve weeks
ended March 22, 1996 when compared to the same period in 1995. The
principal components of this category are discussed below:
Incentive management fees. Incentive management fees decreased
--------------------------
approximately $61,000, or 2.5%, for first quarter 1996 as compared to the
same quarter in 1995. The decrease was primarily a result of an increase
in the required contribution amount to the Orlando Hotel property
improvement fund, which increased from 4% of total sales to 5% of total
sales upon maturity of the Orlando Mortgage Debt in June 1995.
Base management fees. Base management fees increased approximately
---------------------
$22,000, or 2.3%, over the same period in 1995 due to improvement in total
sales at the Orlando Hotel.
Ground rent, property taxes and other. Ground rent, property taxes
--------------------------------------
and other expense increased approximately $40,000, or 2.0%, for first
quarter 1996 when compared to the same period in 1995 due to a $22,000, or
2.8%, increase in property taxes for the Orlando Hotel combined with a
$44,000, or 16.4%, increase in utilities expense at the Harbor Beach Hotel,
offset by a $26,000 decrease in administrative expenses of the Partnership.
Interest expense. Consolidated interest expense for first quarter
1996 increased 4.7% to $5.2 million due to an increase in the interest rate
on the Orlando Mortgage Debt from 6.7% to 8.4% in connection with
6
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the June 1995 modification and extension, offset by reduced principal
balances on the mortgage debt of the Hotels resulting from required
principal amortization during 1995.
Minority interest in income. Based upon its 50.5% ownership interest,
the Partnership controls the Harbor Beach Partnership, and as a result, the
condensed consolidated financial statements of the Partnership include the
accounts of the Harbor Beach Partnership. Minority interest in income
represents the net income from the Harbor Beach Partnership allocable to
the co-General Partner. Minority interest in income increased from $2.2
million in first quarter 1995 to $2.3 million in first quarter 1996
primarily due to the increase in rental income from the Harbor Beach Hotel,
as discussed above.
Net income. For first quarter 1996, the Partnership achieved net
income of $8.5 million, an increase of $0.1 million over the same period in
1995. This increase was primarily due to higher hotel revenues and rental
income offset by increased interest expense and an increase in minority
interest in income.
CAPITAL RESOURCES AND LIQUIDITY
General
The Partnership's financing needs have historically been funded through
loan agreements with independent financial institutions, Host Marriott
Corporation ("Host Marriott") and its affiliates or Marriott International,
Inc. ("MII") and its affiliates. The General Partner believes that the
Partnership will have sufficient capital resources and liquidity to
continue to conduct its business in the ordinary course.
Principal Sources and Uses of Cash
The Partnership's principal source of cash is from operations. Its
principal uses of cash are to fund the property improvement funds of the
Orlando World Center and the Harbor Beach Hotel (the "Hotels"), required
principal amortization of the mortgage debt and other debt incurred to fund
costs of the capital improvements at the Hotels and cash distributions to
the partners.
Total consolidated cash provided by operations for the twelve weeks ended
March 22, 1996, and March 24, 1995, was $8.8 million and $5.9 million,
respectively. The variance was primarily due to a decrease in the amount
due from MII from Hotel operations as of March 22, 1996, when compared to
the amount due as of March 24, 1995. See discussion of results of
operations below.
For the twelve weeks ended March 22, 1996 and March 24, 1995, cash utilized
in investing activities was $2.5 million and $2.3 million, respectively,
consisting primarily of cash contributed to the property and improvement
funds of the Hotel.
For the twelve weeks ended March 22, 1996 and March 24, 1995, cash utilized
in investing activities was $0.4 million and $0.1 million, respectively.
The variance was the result of an increase in required principal repayments
on the mortgage debt of the Harbor Beach Hotel.
Other
In the first quarter of 1996, the Partnership adopted Statement of
Financial Accounting Standards ("SFAS") No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of." Adoption of SFAS No. 121 did not have an effect on its condensed
consolidated financial statements.
SEASONALITY
Demand, and thus occupancy and room rates, is affected by normally
recurring seasonal patterns. Demand tends to be higher during the months
of November through April than during the remainder of the year. This
seasonality tends to affect the results of operations, increasing the
revenue and rental income during these months. In addition, this
seasonality may also increase the liquidity of the Partnership during these
months.
7
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Neither the Partnerships nor the Hotels are presently subject to any
material litigation nor, to the General Partner's knowledge, is any
material litigation threatened against the Partnerships or the Hotels,
other than routine litigation and administrative proceedings arising in the
ordinary course of business, some of which are expected to be covered by
liability insurance and which collectively are not expected to have a
material adverse effect on the business, financial condition or results of
operations of the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 27. Financial Data Schedule
8
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Form 10-Q to be signed on its behalf by the
undersigned, thereunto duly authorized.
MARRIOTT HOTEL PROPERTIES
LIMITED PARTNERSHIP
By: HOTEL PROPERTIES MANAGEMENT, INC.
General Partner
November 18, 1996 By: /s/ Bruce F. Stemerman
---------------------------------
Bruce F. Stemerman
President,
Chief Accounting Officer and Treasurer
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<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FIRST
QUARTER FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-22-1996
<CASH> 9,511
<SECURITIES> 8,706<F1>
<RECEIVABLES> 21,037
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 39,254
<PP&E> 325,816
<DEPRECIATION> (105,446)
<TOTAL-ASSETS> 259,624
<CURRENT-LIABILITIES> 1,377
<BONDS> 252,054
0
0
<COMMON> 0
<OTHER-SE> 6,193
<TOTAL-LIABILITY-AND-EQUITY> 259,624
<SALES> 0
<TOTAL-REVENUES> 24,041
<CGS> 0
<TOTAL-COSTS> 8,095
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,202
<INCOME-PRETAX> 10,744
<INCOME-TAX> 0
<INCOME-CONTINUING> 10,744
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> (2,285)<F2>
<NET-INCOME> 8,459
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>THIS IS OTHER ASSETS.
<F2>THIS IS MINORITY INTEREST IN INCOME.
</FN>
</TABLE>
