<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark one)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- -------- EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
-----------------------
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 0-15097.
WESTIN HOTELS LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charters)
<TABLE>
<S> <C>
Delaware 91-1328985
- -------------------------------------------------------------- ------------------------------------
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
2001 Sixth Avenue, Seattle, Washington 98121
- -------------------------------------------------------------- ------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (206) 443-5000
------------------------------------
</TABLE>
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 X No
----- -----
Indicate the number of shares (units) outstanding of each of the issuer's
classes of common stock (units), as of the latest practicable date (applicable
only to corporate issuers).
135,600 limited partnership units issued and outstanding
<PAGE> 2
WESTIN HOTELS LIMITED PARTNERSHIP
AND SUBSIDIARIES
REPORT ON FORM 10-Q
For the Quarter Ended March 31, 1996
INDEX
<TABLE>
<CAPTION>
Part I. FINANCIAL INFORMATION Page No.
- ------------------------------ --------
<S> <C>
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheets 3
Consolidated Statements of Operations 4
Consolidated Statements of Partners' Equity 5
Consolidated Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8-10
Part II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11-12
SIGNATURES 12
</TABLE>
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<PAGE> 3
PART I. FINANCIAL INFORMATION
WESTIN HOTELS LIMITED PARTNERSHIP
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands of Dollars)
ASSETS
<TABLE>
<CAPTION>
March 31, 1996 December 31, 1995
-------------- -----------------
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 6,961 $ 10,345
Guest and trade accounts receivable, less allowance for
doubtful accounts of $219 in 1996 and $213 in 1995 5,083 4,745
Other receivables 45 109
Inventories 504 516
Prepaid expenses and other current assets 1,472 1,677
-------- --------
TOTAL CURRENT ASSETS 14,065 17,392
PROPERTY AND EQUIPMENT, at cost, net of accumulated
depreciation of $91,377 in 1996 and $89,412 in 1995 227,244 225,355
RESTRICTED CASH 4,537 3,555
OTHER ASSETS 389 396
-------- --------
TOTAL ASSETS $246,235 $246,698
======== ========
LIABILITIES AND PARTNERS' EQUITY
CURRENT LIABILITIES:
Accounts payable:
Trade and other $ 1,848 $ 2,491
Westin and affiliates 809 613
-------- --------
Total accounts payable 2,657 3,104
Accrued expenses 8,035 7,859
Current maturities of long-term obligations 167 172
Other current liabilities 956 715
-------- --------
TOTAL CURRENT LIABILITIES 11,815 11,850
LONG-TERM OBLIGATIONS 126,009 125,662
LONG-TERM OBLIGATION TO GENERAL PARTNER 28,745 28,098
DEFERRED INCENTIVE MANAGEMENT FEES PAYABLE TO WESTIN
16,882 16,249
-------- --------
TOTAL LIABILITIES 183,451 181,859
MINORITY INTERESTS 3,431 3,436
PARTNERS' EQUITY (DEFICIT):
General Partner (1,888) (1,795)
Limited Partners (135,600 Units issued and outstanding) 61,241 63,198
-------- --------
TOTAL PARTNERS' EQUITY 59,353 61,403
-------- --------
TOTAL LIABILITIES AND PARTNERS' EQUITY $246,235 $246,698
======== ========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
-3-
<PAGE> 4
WESTIN HOTELS LIMITED PARTNERSHIP
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands of Dollars Except per Unit Data)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1996 1995
------- -------
<S> <C> <C>
OPERATING REVENUES:
Rooms $13,882 $12,022
Food and beverage 5,542 5,936
Other operating departments 2,330 1,973
------- -------
TOTAL OPERATING REVENUES 21,754 19,931
------- -------
OPERATING EXPENSES:
Rooms 4,305 4,276
Food and beverage 4,694 5,866
Other operating departments 664 652
Administrative and general 2,389 2,169
Management fees 1,122 449
Advertising and business promotion 1,777 1,810
Property maintenance and energy 1,994 1,917
Local taxes and insurance 1,533 1,290
Rent 192 170
Depreciation and amortization 1,968 1,540
------- -------
TOTAL OPERATING EXPENSES 20,638 20,139
------- -------
OPERATING PROFIT (LOSS) 1,116 (208)
------- -------
OTHER INCOME (EXPENSE):
Interest income 166 282
Interest expense (2,690) (2,645)
Interest expense on long-term obligation
to General Partner (647) (503)
Other, net - 1
------- -------
NET OTHER EXPENSE (3,171) (2,865)
------- -------
LOSS BEFORE MINORITY INTERESTS (2,055) (3,073)
MINORITY INTERESTS 5 17
------- -------
NET LOSS $(2,050) $(3,056)
======= =======
NET LOSS PER UNIT (135,600 Units issued and outstanding) $(15.12) $(22.54)
======= =======
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
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<PAGE> 5
WESTIN HOTELS LIMITED PARTNERSHIP
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF PARTNERS' EQUITY
(In Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31, 1996
---------------------------------
General Limited
Partner Partners
------- --------
<S> <C> <C>
BALANCE AT DECEMBER 31, 1995 $(1,795) $63,198
Net loss (93) (1,957)
------- -------
BALANCE AT MARCH 31, 1996 $(1,888) $61,241
======= =======
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
-5-
<PAGE> 6
WESTIN HOTELS LIMITED PARTNERSHIP
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended March 31,
--------------------------------
1996 1995
------- -------
<S> <C> <C>
OPERATING ACTIVITIES:
Funds provided by (used in) operations $ 1,532 $ (719)
Net change in receivables, inventories,
prepaid expenses and other current assets,
net of accounts payable, accrued expenses
and other current liabilities (87) (444)
------- -------
Net cash provided by (used in) operating activities 1,445 (1,163)
------- -------
INVESTING ACTIVITIES:
Acquisition of property and equipment, net of sales (3,857) (8,193)
Increase in restricted cash (4,733) (6,873)
Decrease in restricted cash to fund acquisition of
property and equipment 3,797 7,977
Decrease in other assets 7 -
------- -------
Net cash used in investing activities (4,786) (7,089)
-------- -------
FINANCING ACTIVITIES:
Increase in long-term obligation to General Partner - 5,000
Repayment of long-term obligations (43) (71)
-------- -------
Net cash (used in) provided by financing activities (43) 4,929
-------- -------
NET DECREASE IN CASH AND CASH EQUIVALENTS (3,384) (3,323)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF YEAR 10,345 7,602
------- -------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 6,961 $ 4,279
======= =======
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
-6-
<PAGE> 7
WESTIN HOTELS LIMITED PARTNERSHIP
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(1) BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of
Westin Hotels Limited Partnership, a Delaware limited partnership (the
"Partnership"), and its subsidiary limited partnerships, The Westin St. Francis
Limited Partnership and The Westin Chicago Limited Partnership (the "Hotel
Partnerships"). The Westin St. Francis Limited Partnership owns and operates The
Westin St. Francis in downtown San Francisco, California, and The Westin Chicago
Limited Partnership owns and operates The Westin Hotel, Chicago in downtown
Chicago, Illinois (individually a "Hotel", collectively the "Hotels"). All
significant intercompany transactions and accounts have been eliminated. Certain
of the prior year's amounts have been reclassified to conform with the 1996
presentation.
The consolidated financial statements and related information for the
periods ended March 31, 1996 and March 31, 1995 are unaudited. In the opinion of
management, all adjustments necessary for a fair statement of the results of
these interim periods have been included. All such interim adjustments are of a
normal recurring nature. The results of operations for the periods ending March
31, 1996 and March 31, 1995 should not be regarded as indicative of the results
that may be expected for the full year.
(2) FURTHER INFORMATION
Reference is made to "Notes to Consolidated Financial Statements"
contained in the Partnership's Annual Report on Form 10-K filed for 1995 for
information regarding significant accounting policies, Partnership organization,
restricted cash, accrued expenses, long-term obligations, operating leases,
commitments and related party transactions.
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<PAGE> 8
WESTIN HOTELS LIMITED PARTNERSHIP
AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
GENERAL
The primary market focus of The Westin St. Francis and The Westin Hotel,
Chicago (individually a "Hotel", collectively the "Hotels") is on business
travelers, tourists, conventions and other groups. The Hotels' business
activities continue to follow national economic trends. Both The Westin St.
Francis and The Westin Hotel, Chicago experience seasonal trends with their
lowest occupancy levels occurring in the first quarter and relatively steady
increases throughout the remainder of the year.
Westin Hotel Company owns 100% of Westin Realty Corp., the sole General
Partner of Westin Hotels Limited Partnership (the "Partnership"), as well as
100% of the St. Francis Hotel Corporation and 909 North Michigan Avenue
Corporation, the respective general partners (the "Hotel General Partners") of
the subsidiary limited partnerships, The Westin St. Francis Limited Partnership
and The Westin Chicago Limited Partnership (the "Hotel Partnerships"), that
directly own and operate the Hotels.
RESULTS OF OPERATIONS
This section analyzes the fluctuations between the three month periods
ended March 31, 1996 and 1995. References made to the results for the period
ended March 31, 1995 are taken from the historical financial statements of the
Partnership for that period. The term Restructuring Agreement refers to the
restructuring of the Hotels' mortgage loans completed in 1994. The table below
presents key statistics used in the analysis:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
Combined 1996 1995
----------------------------- ------- -------
<S> <C> <C>
Average Room Rate (ARR) $129.19 $121.30
Occupancy Rate 61.1% 56.8%
Profit Margin as a Percentage
of Revenues:
Rooms 69.0% 64.4%
Food and Beverage 15.3% 1.2%
</TABLE>
Three Months Ended 1996 Compared With 1995
During the first quarter of 1996, the Partnership realized an operating
profit of $1,116,000, a $1,324,000 improvement over the prior year's $208,000
loss. Total operating revenues improved $1,823,000 over last year's level, to
$21,754,000, reflecting the higher occupancy and room rates achieved by the
Partnership's Hotels. These gains resulted from the renovated rooms (the last of
which will be completed by The Westin St. Francis this May), and from improving
demand throughout the industry and particularly within the Hotels' markets.
Despite declines in food and beverage revenues due to closure of restaurant
facilities at The Westin St. Francis, profitability in this division improved
significantly and will be discussed in greater detail below. The Partnership's
net loss of $2,050,000, $1,006,000 lower than last year's loss of $3,056,000,
reflected increased profitability in all operating areas as previously
mentioned.
-8-
<PAGE> 9
Combined rooms revenues increased significantly reflecting higher
occupancies, particularly at The Westin St. Francis, and higher room rates, most
notably at The Westin Hotel, Chicago. Combined rooms revenues improved 15.5%
over the 1995 levels of $12,022,000, to $13,882,000. The greatest improvement
was experienced by The Westin St. Francis where both individual and group
business segments improved. Occupancy rates increased 5.6 percentage points and
the average room rate improved 3.9%, driving the improvement in this Hotel's
rooms revenues to $10,168,000, up $1,196,000 from last year's level. The Westin
Hotel, Chicago, experiencing stronger group business, achieved a 2.5 percentage
point improvement in the occupancies and a 14% higher average room rate. These
factors combined to drive the $664,000 improvement in this Hotel's rooms revenue
to $3,714,000.
Combined profits from food and beverage operations improved $778,000 to
$848,000 despite revenue declines of $394,000 as The Westin St. Francis closed
several restaurant outlets in order to convert them into more profitable banquet
facilities and the Westin Hotel, Chicago benefited from its renovated banquet
facilities which were closed for renovations during this same period last year.
On a year over year basis, The Westin St. Francis experienced revenue declines
totaling $706,000 and effected cost reductions totaling $1,048,000 to achieve a
$342,000 improved profitability in this operating division.
Combined rooms profits of $9,577,000 were 23.6%, or $1,831,000, higher
than those for the first quarter of last year. The 4.6 percentage point
improvement in the combined profit margin reflected revenue growth and the cost
containment measures practiced by the Hotels.
Combined profits from other operating departments improved 26.1% to
$1,666,000 primarily due to higher rental income generated from subtenant
leases. Management fees increased $673,000 to $1,122,000. This increase reflects
stronger gross revenues, which impacted base management fees, and stronger net
cash flows, which impacted incentive management fee accruals. The incentive
management fee currently accrues at 20% of net operating cash flows, as
stipulated in the management agreement.
Interest income earned by the Partnership declined by $116,000 due to two
offsetting factors: the decrease in interest resulting from declining balances
in the FF&E Reserve Accounts and the increase in interest earned on short term
investments of operating cash. The Partnership accrued interest expense on the
subordinated loan, which bears interest at an annual rate of prime plus 1% as
specified in the Partnership Agreement, totaling $647,000 during this
three-month period.
Liquidity and Capital Resources
The Partnership had cash and cash equivalents of $6,961,000 at March 31,
1996, down $3,384,000 from December 31, 1995. During this first quarter,
operating activities contributed $1,445,000. As stipulated in the Restructuring
Agreement, funding of available net cash flow into the FF&E Accounts totaled
$4,733,000. This amount was based on available net cash flows generated from
fourth quarter 1995 operations.
During the three months ended March 31, 1996, funds from these Reserve
Accounts, along with cash generated from operations, were used to acquire
property and equipment totaling $3,857,000. Most of these acquisitions occurred
at The Westin St. Francis where renovation work focused on the tower rooms.
Guest rooms are scheduled for completion by mid-May. Work has also commenced on
conversion of a restaurant to an upscale banquet facility to be located on the
32nd floor and completed by this fall. It is anticipated that during 1996 The
Westin St. Francis will expend a total of $15.5 million on capital. Of this
amount, $4.6 million will fund the facade restoration, $2.8 million the food and
beverage facilities (banquet space), $2.7 million the tower guest rooms, and
$5.4 million other projects including fire/life safety and systems upgrades and
ADA compliance. During 1996, the FF&E Reserve Accounts are funded by Available
Net Cash Flow as stipulated in the Restructuring Agreement, and are included in
restricted cash in the Consolidated Financial Statements. On or before May 15,
1996, net available cash flows generated during the first quarter of 1996,
totaling $1,214,000, will be deposited in the FF&E Accounts.
-9-
<PAGE> 10
This year, capital expenditures for The Westin Hotel, Chicago are
budgeted for $3.1 million. Renovations to the facade will utilize $0.8 million,
food and beverage projects $0.9 million, and miscellaneous projects including
systems and elevator upgrades and the final suite restoration $1.4 million.
All capital projects have either been approved by the lender or are
within the limits required by the Restructuring Agreement.
At this time, the General Partner anticipates that Available Net Cash
Flow from operations and funds deposited to the FF&E Reserve Accounts will
provide adequate funding for these expenditures. As in prior years, the General
Partner will continue to closely monitor the Partnership's cash flow and timing
of capital expenditures. The Westin St. Francis' facade restoration will
continue beyond 1996 with a current projected 1998 completion date.
The Partnership's liquidity is continuing to improve as capital projects
are completed and the Hotels realize stronger operating results. The Hotels did
not achieve sufficient cash flow in 1995 to provide for distributions in 1996.
Therefore, no distributions will be made to the limited partners prior to 1997.
Given current cash flow projections, barring any unforeseen circumstances, the
general partner anticipates that the Partnership will be in a position to resume
distributions during 1997 based on available cash flows generated in 1997, as
defined in the Partnership Agreement. However, there can be no assurance that
this will occur or that the Partnership will achieve sufficient cash flow.
In 1996, as in 1995, the general partner is focusing on the renovations
at both Hotels overseeing their completion so as to minimize any negative impact
on operations. The real estate market for luxury properties is continuing to
improve and the general partner continues monitoring these market conditions
with the goal of optimizing the value of the Partnership's properties to the
limited partners.
-10-
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS.
4. Instruments defining the rights of security holders.
4.1 Amended and Restated Agreement of Limited Partnership of
Westin Hotels Limited Partnership. (1)
4.2 Amended and Restated Agreement of Limited Partnership of The
Westin St. Francis Limited Partnership. (1)
4.3 First Amendment to Amended and Restated Agreement of Limited
Partnership of The Westin St. Francis Limited Partnership. (3)
4.4 Amended and Restated Agreement of Limited Partnership of The
Westin Chicago Limited Partnership. (1)
4.5 First Amendment to Amended and Restated Agreement of Limited
Partnership of The Westin Chicago Limited Partnership. (3)
10. Material contracts
10.1 Restructuring Agreement dated as of June 2, 1994. (3)
10.2 Amended and Restated Management Agreements between The Westin
St. Francis Limited Partnership and Westin Hotel Company, and
between The Westin Chicago Limited Partnership and Westin
Hotel Company, for property management services. (2)
10.3 First Amendments to Amended and Restated Management Agreements
of The Westin St. Francis Limited Partnership and of The
Westin Chicago Limited Partnership. (3)
10.4 Contribution Agreement between St. Francis Hotel Corporation
and The Westin St. Francis Limited Partnership, and between
909 North Michigan Avenue Corporation and The Westin Chicago
Limited Partnership, for contribution of Hotel assets and the
transfer of limited partnership interests. (2)
10.5 Promissory Note of St. Francis Hotel Corporation dated August
21, 1986 to Teacher Retirement System of Texas. (1)
10.6 First Amendment to Promissory Note of St. Francis Hotel
Corporation dated as of June 2, 1994. (3)
10.7 Deed of Trust, Financing Statement, Security Agreement and
Fixture filing dated August 21, 1986 respecting The Westin St.
Francis. (1)
10.8 First Amendment to Deed of Trust, Financing Statement,
Security Agreement and Fixture Filing dated as of June 2,
1994. (3)
10.9 Promissory Note of 909 North Michigan Avenue Corporation dated
August 21, 1986 to Teacher Retirement System of Texas. (1)
10.10 First Amendment to Promissory Note of 909 North Michigan
Avenue Corporation dated as of June 2, 1994. (3)
10.11 Mortgage and Security Agreement dated August 21, 1986 for The
Westin Hotel, Chicago. (1)
10.12 First Amendment to Mortgage and Security Agreement dated as of
June 2, 1994. (3)
-11-
<PAGE> 12
10.13 St. Francis FF&E Escrow Agreement dated as of June 2, 1994.
(3)
10.14 Chicago FF&E Escrow Agreement dated as of June 2, 1994. (3)
10.15 Promissory Note dated June 2, 1994 in favor of Westin Realty
Corp. by Westin Hotels Limited Partnership. (3)
10.16 Loan Agreement dated as of June 2, 1994 between Westin Hotels
Limited Partnership and Westin Realty Corp. (3)
- --------------------
(1) Incorporated by reference to Exhibits 4.1, 4.2, 4.3, 10.3, 10.4, 10.5
and 10.6, respectively, to the Partnership's 1986 Annual Report on Form
10-K.
(2) Incorporated by reference to Exhibits 10.1 and 10.2, respectively, of
the Partnership's Registration Statement on Form S-11 (No. 33-3918).
(3) Incorporated by reference to Exhibits 4.3, 4.5, 10.1, 10.3, 10.6, 10.8,
10.10, 10.12, 10.13, 10.14, 10.15, and 10.16, respectively, to the
Partnership's Form 10-Q for the period ending June 30, 1994.
(b) REPORTS ON FORM 8-K.
None.
****
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 in the City of Seattle, State of
Washington, on the 6th day of May, 1996.
WESTIN HOTELS LIMITED PARTNERSHIP
(a Delaware limited partnership)
By: WESTIN REALTY CORP.,
Its sole General Partner
By: /s/ Richard Mahoney
-----------------------------------
Richard Mahoney, Director,
Vice President, Chief Financial
Officer and Treasurer
-12-
<PAGE> 13
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Description
------- -----------
<S> <C>
Exhibit 27 Financial Data Schedule
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 6,961
<SECURITIES> 0
<RECEIVABLES> 5,347
<ALLOWANCES> 219
<INVENTORY> 1,976
<CURRENT-ASSETS> 14,065
<PP&E> 318,621
<DEPRECIATION> 91,377
<TOTAL-ASSETS> 246,235
<CURRENT-LIABILITIES> 11,815
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 59,353
<TOTAL-LIABILITY-AND-EQUITY> 246,235
<SALES> 0
<TOTAL-REVENUES> 21,754
<CGS> 0
<TOTAL-COSTS> 9,663
<OTHER-EXPENSES> 10,975
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,171
<INCOME-PRETAX> (2,050)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2,050)
<EPS-PRIMARY> (15.12)
<EPS-DILUTED> 0
</TABLE>
