<PAGE> 1
FORM 10-Q
SECURITIES EXCHANGE COMMISSION
Washington, D.C. 20549
(MARK ONE)
(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD
ENDED SEPTEMBER 30, 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 No. 1-6869
PRIME HOSPITALITY CORP.
(Exact name of registrant as specified in its charter)
Delaware 22-2640625
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
700 Route 46 East, Fairfield, New Jersey 07004
(Address of principal executive offices)
(973) 882-1010
(Registrant's telephone number, including area code)
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 by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes x No
The registrant had 53,756,410 shares of common stock outstanding $.01 par value,
as of November 4, 1998.
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PRIME HOSPITALITY CORP. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
PART I. FINANCIAL INFORMATION NUMBER
<S> <C> <C>
Item 1. Financial Statements
Consolidated Balance Sheets
December 31, 1997 and September 30, 1998........................................... 1
Consolidated Statements of Income
Three and Nine Months Ended September 30, 1997
and September 30, 1998............................................................. 2
Consolidated Statements of Cash Flows
Nine Months Ended September 30, 1997
and September 30, 1998............................................................. 3
Notes to Interim Consolidated Financial Statements..................................... 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......................................... 8
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote Security Holders ......................................20
Item 6. Exhibits and Reports on Form 8-K.......................................................20
Signatures ............................................................................21
</TABLE>
<PAGE> 3
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
1997 1998
----------- -----------
ASSETS (UNAUDITED)
<S> <C> <C>
Current assets:
Cash and cash equivalents .................................................. $ 5,013 $ 1,242
Marketable securities available for sale ................................... 8,697 14,581
Accounts receivable, net of reserves ....................................... 16,318 22,380
Current portion of mortgages and
notes receivable ........................................................ 2,271 795
Other current assets ....................................................... 28,780 18,795
----------- -----------
Total current assets .................................................... 61,079 57,793
Property, equipment and leasehold improvements,
net of accumulated depreciation and amortization ........................... 1,079,591 1,214,571
Mortgages and notes receivable, net of
current portion ............................................................ 19,698 14,999
Other assets ................................................................... 36,298 39,769
----------- -----------
TOTAL ASSETS ............................................................ $ 1,196,666 $ 1,327,132
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of debt .................................................... $ 3,871 $ 14,540
Other current liabilities .................................................. 76,921 87,779
----------- -----------
Total current liabilities ............................................... 80,792 102,319
Long-term debt, net of current portion ......................................... 554,500 502,036
Deferred income ................................................................ 18,558 83,361
Other liabilities .............................................................. 18,403 10,207
----------- -----------
Total liabilities ....................................................... 672,253 697,923
----------- -----------
Commitments and contingencies
Stockholders' equity:
Preferred stock, par value $.10 per share;
20,000,000 shares authorized; none issued ............................... -- --
Common stock, par value $.01 per share;
75,000,000 shares authorized; 47,182,972 and 53,742,458 shares issued and
outstanding at December 31, 1997 and September 30, 1998,
respectively ............................................................ 472 552
Capital in excess of par value ............................................. 419,242 511,825
Unrealized loss on marketable securities, net of taxes ..................... -- (5,631)
Retained earnings .......................................................... 105,737 148,542
Treasury stock (50,039 shares at December 31, 1997
and 1,470,439 shares at September 30, 1998) ............................. (1,038) (26,079)
----------- -----------
Total stockholders' equity .............................................. 524,413 629,209
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .............................. $ 1,196,666 $ 1,327,132
=========== ===========
</TABLE>
See Accompanying Notes to Interim Consolidated Financial Statements.
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<PAGE> 4
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1998
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1997 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
Lodging ............................ $ 73,429 $ 105,008 $ 202,057 $ 292,003
Food and beverage .................. 8,617 11,297 29,323 37,622
Management, franchise and other .... 3,974 4,185 14,950 14,175
Interest on mortgages and
notes receivable ................ 1,787 555 5,090 3,479
--------- --------- --------- ---------
Total revenues ................... 87,807 121,045 251,420 347,279
--------- --------- --------- ---------
Costs and expenses:
Direct hotel operating expenses:
Lodging ......................... 18,294 26,505 49,600 71,128
Food and beverage ............... 6,801 9,094 22,457 28,980
Selling and general ............. 17,911 26,773 51,912 72,976
Occupancy and other operating ...... 5,636 16,551 17,364 42,564
General and administrative ......... 5,734 6,705 17,255 19,687
Depreciation and amortization ...... 8,633 10,109 24,357 40,871
Other charges ...................... -- 6,400 -- 6,400
--------- --------- --------- ---------
Total costs and expenses ......... 63,009 102,137 182,945 282,606
--------- --------- --------- ---------
Operating income ....................... 24,798 18,908 68,475 64,673
Investment income ...................... 795 887 3,026 2,874
Interest expense ....................... (7,456) (5,557) (20,097) (17,045)
Other income ........................... 23 -- 1,881 18,353
--------- --------- --------- ---------
Income before income taxes
and extraordinary items ............ 18,160 14,238 53,285 68,855
Provision for income taxes ............. 7,598 5,295 22,008 26,049
--------- --------- --------- ---------
Income before extraordinary items ...... 10,562 8,943 31,277 42,806
Extraordinary items,
Net of Income Taxes................. -- -- 75 --
--------- --------- --------- ---------
Net income ............................. $ 10,562 $ 8,943 $ 31,352 $ 42,806
========= ========= ========= =========
Earnings per common share:
Basic:
Income before extraordinary items .. $ 0.23 $ 0.17 $ 0.68 $ 0.84
Extraordinary items ................ -- -- -- --
--------- --------- --------- ---------
Net earnings ........................... $ 0.23 $ 0.17 $ 0.68 $ 0.84
========= ========= ========= =========
Diluted:
Income before extraordinary items .. $ 0.22 $ 0.17 $ 0.65 $ 0.80
Extraordinary items ................ -- -- -- --
--------- --------- --------- ---------
Net earnings ........................... $ 0.22 $ 0.17 $ 0.65 $ 0.80
========= ========= ========= =========
</TABLE>
See Accompanying Notes to Interim Consolidated Financial Statements.
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<PAGE> 5
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
1997 1998
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income ................................................ $ 31,352 $ 42,805
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization .......................... 24,357 40,871
Amortization of deferred financing costs ............... 2,115 2,330
Deferred income taxes .................................. -- (5,226)
Business interruption insurance revenue ................ (7,971) --
Utilization of net operating loss carryforwards ........ 2,736 4,841
Gains on settlements of notes receivable ............... -- (18,353)
Gains on discharges of indebtedness .................... (125) --
Gain on disposal of assets ............................. (1,881) --
Amortization of deferred gain .......................... -- (6,875)
Reserve for contract termination ....................... -- 574
Reserve for hurricane damage ........................... -- 1,000
Reserve for employee severance ......................... -- 300
Increase (decrease) from changes in other
operating assets and liabilities:
Accounts receivable ............................... (2,493) (6,062)
Other current assets .............................. (6,122) (2,893)
Other liabilities ................................. 20,107 18,508
--------- ---------
Net cash provided by operating activities ............. 62,075 71,820
--------- ---------
Cash flows from investing activities:
Net proceeds from mortgages and notes receivable .......... 744 26,011
Disbursements for mortgages and notes receivable .......... (23,245) (1,541)
Proceeds from sales of property, equipment
and leasehold improvements ............................. 26,762 211,747
Construction of new hotels ................................ (251,421) (309,749)
Purchases of property, equipment and leasehold
improvements ........................................... (66,920) (27,222)
Net proceeds from insurance settlement .................... 2,034 3,782
Decrease (increase) in restricted cash .................... 2,915 (5,805)
Decrease (increase) in marketable securities .............. 238 (350)
Proceeds from retirement of debt securities ............... 800 --
Other ..................................................... (1,160) (3,858)
--------- ---------
Net cash used in investing activities ................. (309,253) (106,985)
--------- ---------
Cash flows from financing activities:
Net proceeds from issuance of debt ........................ 332,265 119,932
Payments of debt .......................................... (109,623) (67,088)
Purchases of treasury stock ............................... -- (25,041)
Proceeds from the exercise of stock options and warrants .. 1,448 3,591
--------- ---------
Net cash provided by financing activities ............. 224,090 31,394
--------- ---------
Net increase in cash and cash equivalents ................. (23,088) (3,771)
Cash and cash equivalents at beginning of period .......... 47,473 5,013
--------- ---------
Cash and cash equivalents at end of period ................ $ 24,385 $ 1,242
========= =========
</TABLE>
See Accompanying Notes to Interim Consolidated Financial Statements.
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<PAGE> 6
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - BASIS OF PRESENTATION
In the opinion of management, the accompanying interim unaudited
consolidated financial statements of Prime Hospitality Corp. and subsidiaries
(the "Company" or "Prime") contain all material adjustments, consisting of
normal recurring adjustments, necessary to present fairly the financial position
of the Company as of September 30, 1998 and the results of its operations for
the three and nine months ended September 30, 1997 and 1998 and cash flows for
the nine months ended September 30, 1997 and 1998.
The consolidated financial statements for the three and nine months
ended September 30, 1997 and 1998 were prepared on a consistent basis with the
audited consolidated financial statements for the year ended December 31, 1997.
Certain reclassifications have been made to the September 30, 1997 consolidated
financial statements to conform them to the September 30, 1998 presentation.
The consolidated results of operations for the three and nine months
ended September 30, 1998 are not necessarily indicative of the results to be
expected for the full year. These interim unaudited consolidated financial
statements should be read in conjunction with the audited consolidated financial
statements included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1997.
NOTE 2 - ACCOUNTING POLICIES
In April 1998, the Accounting Standards Executive Committee issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up Activities" (SOP
98-5) which is required to be adopted in 1999. At that time, the Company will be
required to record a cumulative effect of a change in accounting principle to
write off any unamortized pre-opening costs that remain on the balance sheet at
the date of adoption. Additionally, on a prospective basis subsequent to the
adoption of this new standard, all future pre-opening costs will be expensed as
incurred. The Company believes that the adoption of SOP 98-5 will not have a
material effect on its financial condition or the results of its operations.
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133) which is effective for fiscal
years beginning after June 15, 1999. SFAS 133 establishes accounting and
reporting standards requiring that every derivative instrument (including
certain derivative instruments embedded in other contracts) be recorded on the
balance sheet as either an asset or liability measured at its fair value. SFAS
133 requires that changes in the
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<PAGE> 7
derivative's fair value be recognized currently in earnings unless specific
hedge accounting criteria are met. The Company has not yet quantified the impact
of adopting SFAS 133 on its financial statements, however, the Company expects
the impact to be immaterial due to its limited derivative activity.
NOTE 3 - MERGER
On December 1, 1997, the Company merged with HomeGate Hospitality, Inc.
("HomeGate"), a provider of mid-price extended-stay hotels. The transaction was
accounted for as a pooling of interests, which required that the historical
consolidated statements of operations of the companies be restated on a combined
basis without giving effect to operating synergies.
NOTE 4 - DEBT
On April 17, 1998, the Company's $86.3 million 7% Convertible Notes due
2002 were converted into 7.2 million shares of common stock of the Company at a
conversion price of $12 per share. The notes were transferred to stockholders'
equity in April 1998.
NOTE 5 - SALE/LEASEBACK TRANSACTIONS
In January 1998, the Company completed the sale/leaseback of eight
full-service hotels to MeriStar Hospitality Corp. ("MeriStar"), formally known
as American General Hospitality, Inc., for $138.4 million. The purchase price
consisted of $114.4 million in cash, $10.2 million in assumed debt and $13.8
million in MeriStar limited partnership operating units. The Company is
operating the hotels under a lease agreement which has a term of 10 years. The
transaction generated a net gain of approximately $65.0 million which will be
recognized as a reduction of rent expense over the life of the lease. The
Company is also under contract to sell and lease back nine additional
full-service hotels to MeriStar not later than March 31, 1999. Recent changes in
the capital markets have affected the ability of hotel real estate investment
trusts ("REITs") such as MeriStar to raise both debt and equity capital to
finance acquisitions. In the event this transaction is not consummated, the
Company would be entitled to receive a $4 million contract termination fee.
In June 1998, the Company sold nine AmeriSuites hotels to Equity Inns,
Inc. ("Equity Inns") for $97.0 million in cash. The Company is operating the
hotels under a lease agreement between Equity Inns and a subsidiary of the
Company for a ten-year term with certain renewal options. The transaction
generated a net gain of $15.0 million, which will be recognized as a reduction
of rent expense over the life of the lease. The Company is also generating
franchise fees under a ten-year franchise agreement. The sale is part of an
ongoing strategic relationship between the Company and Equity Inns whereby
Equity Inns has the right of first refusal on the sale of the first 20
AmeriSuites hotels per year.
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<PAGE> 8
NOTE 6 - EARNINGS PER COMMON SHARE
In 1997, the Company adopted SFAS No. 128, "Earnings per Share," (SFAS
128). Under SFAS 128, primary earnings per share has been replaced by basic
earnings per share which excludes any dilutive effects of options, warrants and
convertible securities. Fully diluted earnings per share is now called diluted
earnings per share and includes a change in applying the treasury stock method.
Earnings per share amounts for all prior periods have been restated to conform
to the SFAS 128 requirements.
Basic earnings per common share was computed based on the weighted
average number of common shares outstanding during each period. The weighted
average number of common shares used in computing basic earnings per share was
46.9 million and 53.7 million for the three months ended September 30, 1997 and
1998, respectively, and 46.6 million and 51.1 million for the nine months ended
September 30, 1997 and 1998, respectively.
Diluted earnings per share reflects adjustments to basic earnings per
share for the dilutive effect of stock options and warrants and the elimination
of interest expense and the issuance of additional common shares from the
assumed conversion of the 7% convertible subordinated notes. The weighted
average number of common shares used in computing diluted earnings per share was
48.7 million and 54.2 million for the three months ended September 30, 1997 and
1998, respectively, and 48.6 million and 54.9 million for the nine months ended
September 30, 1997 and 1998, respectively.
NOTE 7 - INTEREST EXPENSE
The Company capitalized interest related to borrowings used to finance
hotel construction of $4.6 million and $6.4 million for the three months ended
September 30, 1997 and 1998, respectively, and $12.4 million and $20.3 million
for the nine months ended September 30, 1997 and 1998, respectively. Also
included in interest expense is the amortization of deferred financing fees of
$726,000 and $763,000 for the three months ended September 30, 1997 and 1998,
respectively, and $2.1 million and $2.3 million for the nine months ended
September 30, 1997 and 1998, respectively.
NOTE 8 - TREASURY STOCK
In June 1998, the Company completed the purchase of one million shares
of its common stock at an average price of $17.78 per share under a program
authorized in December 1997. In July 1998, the Company authorized the repurchase
of an additional two million shares of stock. Under the terms of its $200
million revolving credit facility ("Revolving Credit Facility"), the Company may
purchase additional shares in an aggregate amount not to exceed $50 million
through December 1999.
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NOTE 9 - COMPREHENSIVE INCOME
In 1998, the Company adopted SFAS No. 130 "Reporting Comprehensive
Income," (SFAS 130). Under SFAS 130, the Company is required to report all
changes in equity of an enterprise that result from transactions and other
economic events of the period other than transactions with owners in their
capacity as owners.
For the three and nine months ended September 30, 1998, comprehensive
income consisted of the following (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net income $ 10,562 $ 8,943 $ 31,352 $ 42,806
Unrealized loss on marketable
securities, net of taxes -- (3,019) -- (5,631)
-------- -------- -------- --------
Total $ 10,562 $ 5,924 $ 31,352 $ 37,175
======== ======== ======== ========
</TABLE>
NOTE 10- DEPRECIATION AND AMORTIZATION
In June 1998, the Company established a $10 million valuation reserve
recorded as part of depreciation and amortization expense related to the
expected sale of seven non-prototype HomeGate hotels. In accordance with SFAS
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of," the Company has reduced the carrying value of the
assets to reflect current market conditions.
NOTE 11- OTHER INCOME
Other income consists of property transactions and other asset sales
and retirements. For the nine months ended September 30, 1997, other income
consisted of net gains on property transactions of $1.9 million. For the nine
months ended September 30, 1998 other income consisted of gains on settlements
of notes receivable of $18.4 million.
NOTE 12 - OTHER CHARGES
Other charges for the three and nine months ended September 30, 1998
consisted of $4.0 million associated with the cost of terminating hotel
development projects under contract, $1.4 million for severance charges related
primarily to the resignation of the Company's CEO and $1.0 million for hurricane
damages at the Frenchman's Reef Marriott hotel in St. Thomas U.S.V.I.
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<PAGE> 10
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
GENERAL
The Company is an owner, manager and franchisor of hotels throughout
the United States and the U.S. Virgin Islands. The Company operates three
proprietary brands, AmeriSuites (all-suites), HomeGate Studios & Suites
(extended-stay) and Wellesley Inns (limited-service). Also within its portfolio
are owned and/or managed hotels operated under franchise agreements with
national hotel chains. As of October 31, 1998, the Company owned 136 hotels (the
"Owned Hotels"), operated 28 hotels under lease agreements with REITs (the
"Leased Hotels") and managed 10 hotels for third parties (the "Managed Hotels").
The Company has significant equity interests in the Owned Hotels and has
economic interests limited to a percentage of revenues (generally between 2.5%
to 5.0%) on the Leased Hotels and the Managed Hotels. The Company consolidates
the results of operations of its Owned Hotels and Leased Hotels and records
management fees (including incentive management fees) on the Managed Hotels.
Effective September 30, 1998, A.F. Petrocelli was appointed to the
position of Chairman and CEO replacing David Simon. Mr. Petrocelli had
previously served on Prime's board of directors since 1992, and is also chairman
and CEO of United Capital Corp. (ASE:AFP), a diversified real estate and
manufacturing company. Prime also recently announced the resignation of John
Elwood, its president and COO, effective October 23, 1998. Mr. Petrocelli will
also serve as president of Prime.
The Company's strategy is to develop proprietary brands in growing
market segments. Through the development of its proprietary brands, the Company
is transforming itself from an owner/operator into a franchisor and manager of
its brands. The Company's growth focuses on the new construction of AmeriSuites
and HomeGate hotels both directly by the Company and by franchisees. Due to the
uncertainty in the capital markets, during the third quarter Prime reduced its
hotel development to levels which can be funded by internal cash sources.
On December 1, 1997, the Company completed its merger with HomeGate
Hospitality, Inc. ("HomeGate"), a provider of mid-price extended-stay hotels.
The transaction was accounted for as a pooling of interests which required that
the historical consolidated statements of operations of the companies be
restated on a combined basis without giving effect to operating synergies before
asset transactions and other charges.
For the three and nine months ended September 30, 1998, earnings before
asset transactions and other charges increased by 22% and 38%, respectively,
over the same periods in 1997. The earnings gains resulted from growth in
revenue per available room ("REVPAR") of 4.6% and 5.7%,
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<PAGE> 11
respectively, for the three and nine month periods at comparable Owned Hotels,
and significant new AmeriSuites unit growth.
Earnings before interest, taxes, depreciation and amortization (EBITDA)
increased by 6.0% to $35.3 million for the three months ended September 30, 1998
and by 20.6 % to $111.9 million for the nine months ended September 30, 1998.
Hotel EBITDA remained stable at $34.3 million for the three month period and
increased by 11.4% to $108.6 million for the nine month period. Hotel EBITDA
represents EBITDA generated from the operations of Owned Hotels and excludes
management fee income, interest income from mortgages and notes receivable,
general and administrative expenses and other revenues and expenses which do not
directly relate to the operations of Owned Hotels. The changes in EBITDA and
Hotel EBITDA are attributable to the growth at comparable hotels and the
addition of new hotels offset by rent expense associated with the sale/leaseback
of hotels.
The Company's hotels operate in four segments of the industry: the
upscale all-suites segment, under the Company's proprietary AmeriSuites brand;
the mid-price extended-stay segment, under the Company's proprietary HomeGate
Studios & Suites brand; the upscale full-service segment, under major national
franchises; and the midprice limited-service segment, primarily under the
Company's proprietary Wellesley Inns brand. The following table illustrates the
Hotel EBITDA contribution from each segment (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1997 1998
---- ---- ---- ----
Amount % of Total Amount % of Total Amount % of Total Amount % of Total
-------- ----- -------- ----- -------- ----- -------- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
All-suites ....... $ 15,854 46.2% $ 17,994 52.5% $ 38,819 39.8% $ 56,148 51.7%
Full-service ..... 13,009 37.9% 8,922 26.0% 39,788 40.8% 29,530 27.2%
Limited-service... 4,966 14.5% 4,583 13.4% 17,026 17.5% 16,528 15.2%
Extended-Stay .... 492 1.4% 2,805 8.1% 1,804 1.9% 6,375 5.9%
-------- ----- -------- ----- -------- ----- -------- -----
Total $ 34,321 100.0% $ 34,304 100.0% $ 97,437 100.0% $108,581 100.0%
======== ===== ======== ===== ======== ===== ======== =====
</TABLE>
Hotel EBITDA for the three and nine months ended September 30, 1998 reflects
the shifting mix in the Company's hotel portfolio toward its proprietary
AmeriSuites brand. Based on the Company's development plans, Prime expects the
relative contribution from its all-suites AmeriSuites hotels and extended-stay
HomeGate hotels to increase in 1999.
EBITDA and Hotel EBITDA are not measures of financial performance under
generally accepted accounting principles and should not be considered as
alternatives to net income as an indicator of the Company's operating
performance or as alternatives to cash flows as a measure of liquidity.
Certain statements in this Form 10-Q constitute "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995. Such
forward-looking statements involve known and unknown risks, uncertainties and
other important factors that could cause the actual results, performance or
achievements of the Company, or industry results, to differ materially from any
future results, performance or achievements expressed or implied by such
forward-looking statements.
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<PAGE> 12
RESULTS OF OPERATIONS FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1998
COMPARED TO THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1997
The following table presents the components of operating income,
operating expense margins and other data for the Company and the Company's
comparable Owned Hotels for the three and nine months ended September 30, 1997
and 1998. The results of the seven hotels divested during 1997 and 1998 are not
material to an understanding of the results of the Company's operations in such
periods and, therefore, are not separately discussed.
<TABLE>
<CAPTION>
TOTAL COMPARABLE OWNED HOTELS(2)
THREE MONTHS ENDED THREE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
(IN THOUSANDS, EXCEPT ADR AND REVPAR) 1997 1998 1997 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Lodging...................................... $ 73,429 $105,008 $51,158 $53,376
Food and beverage............................ 8,617 11,297 5,429 6,219
Management, franchise and other.............. 3,974 4,185
Interest on mortgages and notes
receivable ............................. 1,787 555
------ -------
Total revenues....................... 87,807 121,045
------ -------
Direct hotel operating expenses:
Lodging...................................... 18,294 26,505 12,750 13,189
Food and beverage............................ 6,801 9,094 4,406 4,849
Selling and general.......................... 17,911 26,773 12,138 12,756
Occupancy and other operating.................. 5,636 16,551
General and administrative..................... 5,734 6,705
Depreciation and amortization.................. 8,633 10,109
Other charges ................................. -- 6,400
------ -------
Total costs and expenses............. 63,009 102,137
------ -------
Operating income............................... 24,798 18,908
OPERATING EXPENSE MARGINS:
Direct hotel operating expenses:
Lodging, as a percentage of lodging
revenue .................................. 24.9% 25.2% 24.9% 24.7%
Food and beverage, as a percentage
of food and beverage revenue.............. 78.9% 80.5% 81.2% 78.0%
Selling and general, as a percentage of
lodging and food and beverage revenue..... 21.8% 23.0% 21.5% 21.4%
Occupancy and other operating, as a percentage
of lodging and food and beverage revenue..... 6.9% 14.2%
General and administrative, as a percentage
of total revenue............................. 6.5% 5.5%
Other Data((1)):
Occupancy...................................... 71.4% 67.0% 75.0% 73.0%
Average daily rate ("ADR")..................... $72.27 $75.97 $75.03 $80.67
Revenue per available room ("REVPAR").......... $51.59 $50.91 $56.31 $58.90
Gross operating profit......................... $39,041 $53,933 $36,147 $39,134
</TABLE>
(1) For purposes of showing operating trends, the seven hotels
divested in 1997 have been excluded from the other data section
of the tables.
(2) Comparable Owned Hotels refers to the 73 Owned Hotels which were
open for the full period in both 1997 and 1998 excluding the
Frenchman's Reef, which was impacted by hurricane damage.
- 10 -
<PAGE> 13
<TABLE>
<CAPTION>
COMPARABLE OWNED
TOTAL HOTELS(2)
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1997 1998
------- ------- -------- --------
(IN THOUSANDS, EXCEPT ADR AND REVPAR)
<S> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues:
Lodging................................... $ 202,057 $292,003 $116,777 $122,999
Food and beverage......................... 29,323 37,622 15,452 16,886
Management, franchise and other .......... 14,950 14,175
Interest on mortgages and notes
receivable............................. 5,090 3,479
------- -------
Total revenues.................... 251,420 347,279
------- -------
Direct hotel operating expenses:
Lodging................................... 49,600 71,128 28,894 30,093
Food and beverage......................... 22,457 28,980 12,156 13,267
Selling and general....................... 51,912 72,976 29,129 29,724
Occupancy and other operating............... 17,364 42,564
General and administrative.................. 17,255 19,687
Depreciation and amortization............... 24,357 40,871
Other charges .............................. -- 6,400
------- -------
Total costs and expenses.......... 182,945 282,606
------- -------
Operating income............................ 68,475 64,673
OPERATING EXPENSE MARGINS:
Direct hotel operating expenses:
Lodging, as a percentage of lodging
revenue................................ 24.5% 24.4% 24.7% 24.5%
Food and beverage, as a percentage of
food and beverage revenue.............. 76.6% 77.0% 78.7% 78.6%
Selling and general, as a percentage of
lodging and food and beverage revenue.. 22.4% 22.1% 22.0% 21.2%
Occupancy and other operating, as a
percentage of lodging and food and
beverage revenue......................... 7.5% 12.9%
General and administrative, as a percentage
of total revenue.......................... 6.9% 5.7%
Other Data (1):
Occupancy................................... 71.4% 67.0% 72.0% 70.8%
Average daily rate ("ADR").................. $72.27 $75.97 $73.84 $79.40
Revenue per available room ("REVPAR")....... $51.59 $50.91 $53.13 $56.18
Gross operating profit...................... $107,411 $156,541 $62,050 $66,783
</TABLE>
(1) For purposes of showing operating trends, the seven hotels
divested in 1997 have been excluded from the other data section
of the tables.
(2) Comparable Owned Hotels refers to the 60 Owned Hotels which were
open for the full period in both 1997 and 1998 excluding the
Frenchman's Reef, which was impacted by hurricane damage.
- 11 -
<PAGE> 14
Lodging revenues, which include room revenues and other related
revenues such as telephone and vending, increased by $31.8 and $89.9 million, or
43.0% and 44.5%, respectively, for the three and nine months ended September 30,
1998, as compared to the same periods in 1997. Lodging revenues for the three
months ended September 30, 1998 increased due to incremental revenues of $15.8
million from new hotels and higher revenues for comparable Owned Hotels, which
increased by $2.2 million, or 4.3%. Lodging revenues for the nine months ended
September 30, 1998 increased due to incremental revenues of $65.1 million from
new hotels and higher revenues for comparable Owned Hotels, which increased by
$6.2 million or 5.3%. The reopening of the Frenchman's Reef, which was closed
for renovations from April 1997 to December 1997, accounted for $2.8 million and
$14.0 million, respectively, of the incremental revenues from new hotels for the
three and nine months ended September 30, 1998.
The following table sets forth hotel operating data for the comparable
Owned Hotels for the three and nine months ended September 30, 1998 as compared
to the same periods in 1997, by product type:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1998 %CHANGE 1997 1998 %CHANGE
---- ---- ------- ---- ---- -------
<S> <C> <C> <C> <C> <C> <C>
AMERISUITES
OCCUPANCY 71.4% 72.2% 69.0% 70.2%
ADR $75.91 $79.59 $74.80 $78.43
REVPAR $54.17 $57.45 6.0% $51.57 $55.04 6.7%
FULL-SERVICE
OCCUPANCY 79.6% 76.9% 72.6% 71.4%
ADR $96.45 $107.53 $91.97 $101.73
REVPAR $76.75 $82.72 7.8% $66.72 $72.65 8.9%
WELLESLEY INNS
OCCUPANCY 77.0% 71.2% 74.5% 71.3%
ADR $54.92 $57.69 $59.05 $62.45
REVPAR $42.31 $41.06 (2.9)% $44.02 $44.50 1.1%
TOTAL
OCCUPANCY 75.0% 73.0% 72.0% 70.8%
ADR $75.03 $80.67 $73.84 $79.40
REVPAR $56.31 $58.90 4.6% $53.13 $56.18 5.7%
</TABLE>
- 12 -
<PAGE> 15
The REVPAR increases at comparable hotels reflect the growing
recognition of AmeriSuites as a leading brand in the fast-growing all-suites
segment and favorable industry trends in the full service segment which is
concentrated in the Northeast. Wellesley Inns were adversely impacted by new
supply and weather-related problems in Florida, where half of the chain's hotels
are located. The improvements in REVPAR at comparable Owned Hotels were
generated by increases in ADR, which rose by 7.5%, for both the three and nine
month periods. Occupancy dropped by two percentage points to 73% for the three
month period and slightly more than one percentage point to 70.8% for the nine
month period.
Food and beverage revenues increased by $2.7 million and $8.3 million,
or 31.1% and 28.3%, respectively, for the three and nine months ended September
30, 1998 as compared to the same periods in 1997 primarily attributable to the
reopening of the Frenchman's Reef. Food and beverage revenues for comparable
Owned Hotels increased by $790,000 and $1.4 million, or 14.6% and 9.3%,
respectively, for the three and nine months periods, due to concept changes at
the Company's restaurants and lounges.
Management, franchise and other revenue consists primarily of base,
incentive and other fees earned under management agreements, royalty fees earned
under franchise agreements, business interruption insurance revenue related to
hurricane damage at the Frenchman's Reef, and rental income. Management,
franchise and other revenue increased by $211,000, or 5.3%, for the three months
ended September 30, 1998 as compared to the same period in 1997 due to increased
fees associated with the Managed Hotels, franchise royalty fees derived from the
sale of hotels and increased business interruption insurance revenue.
Management, franchise and other revenue decreased by $1.2 million, or 7.7%, for
the nine months ended September 30, 1998 as compared to the same period in 1997
primarily due to lower business interruption insurance revenue. Business
interruption insurance revenue is based on the settlement in March 1998 of the
Company's claim related to the damage at the Frenchman's Reef caused by
Hurricane Bertha in July 1996. The Company expects franchise revenues to
increase as the Company received the necessary statutory approvals to franchise
its brands during the quarter. To date, the Company has signed four new
AmeriSuites franchise agreements with 12 AmeriSuites applications pending.
Additionally, Prime recently received its first Wellesley Inn franchise
applications.
Interest on mortgages and notes receivable primarily relate to
mortgages secured by certain Managed Hotels. Interest on mortgages and notes
receivable decreased by $1.2 million for each of the three and nine months ended
September 30, 1998, or 68.9% and 25.6%, respectively, as compared to the same
periods in 1997 primarily due to conversions of notes receivable into operating
hotel assets.
Direct lodging expenses increased by $8.2 million and $21.5 million, or
44.9% and 43.4%, respectively, for the three and nine months ended September 30,
1998 as compared to the same periods in 1997 due primarily to the addition of
new hotels. Direct lodging expenses, as a percentage of lodging revenue were
relatively even, increasing from 24.9% to 25.2% for the three month period and
decreasing from 24.5% to 24.4% for the nine month period. For comparable Owned
Hotels,
- 13 -
<PAGE> 16
direct lodging expenses as a percentage of lodging revenues decreased from 24.9%
to 24.7% for the three month period and from 24.7% to 24.5% for the nine month
period.
Direct food and beverage expenses for the three and nine months ended
September 30, 1998 increased by $2.2 million and $6.5 million, or 33.7% and
29.0% respectively, as compared to the same periods in 1997 primarily due to the
Frenchman's Reef reopening. As a percentage of food and beverage revenues,
direct food and beverage expenses increased from 78.9% to 80.5% for the three
month period and from 76.6% to 77.0% for the nine month period, primarily due to
the impact of the Frenchman's Reef reopening. For comparable Owned Hotels, food
and beverage expenses as a percentage of food and beverage revenues decreased
from 81.2% to 78.0% for the three month period and 78.7% to 78.6% for the nine
month period.
Direct hotel selling and general expenses consist primarily of hotel
expenses for Owned Hotels which are not specifically allocated to rooms or food
and beverage activities, such as administration, selling and advertising,
utilities, repairs and maintenance. Direct hotel selling and general expenses
increased by $8.9 million and $21.1 million, or 49.5% and 40.6%, respectively,
for the three and nine months ended September 30, 1998 as compared to the same
periods in 1997 primarily due to the addition of new hotels. As a percentage of
hotel revenues (defined as lodging and food and beverage revenues), direct hotel
selling and general expenses increased from 21.8% to 23.0% for the three month
period due to increased expenses at the Frenchmen's Reef. For the nine month
period, direct hotel selling and general expenses as a percentage of hotel
revenue decreased from 22.4% to 22.1%. For the comparable Owned Hotels, direct
hotel selling and general as a percentage of hotel revenues decreased from 21.5%
to 21.4% for the three month period and from 22.0% to 21.2% for the nine month
period.
Occupancy and other operating expenses consist primarily of insurance,
real estate and other taxes and rent expense. Occupancy and other operating
expenses increased by $10.9 million and $25.2 million, or 193.5% and 145.1%,
respectively, for the three and nine months ended September 30, 1998, as
compared to the same periods in 1997 due to the rent expense associated with the
sale/leaseback of hotels to MeriStar and Equity Inns and the addition of new
hotels. Occupancy and other operating expenses as a percentage of hotel revenues
increased from 6.9% to 14.2% for the three month period and from 7.5% to 12.9%
for the nine month period due to rent expense associated with the sale/leaseback
of hotels.
General and administrative expenses consist primarily of centralized
management expenses such as operations management, sales and marketing, finance
and hotel support services associated with operating both the Owned Hotels and
Managed Hotels and general corporate expenses. General and administrative
expenses increased by $972,000 and $2.4 million, or 17.0% and 14.1%,
respectively, for the three and nine months ended September 30, 1998 as compared
to the same periods in 1997 due to increased advertising, personnel and training
costs associated with opening the new AmeriSuites and HomeGate hotels and costs
associated with the Company's franchising efforts. As a percentage of total
revenues, general and administrative expenses decreased from 6.5%
- 14 -
<PAGE> 17
to 5.5% for the three month period and from 6.9% to 5.7% for the nine month
period due to increased operating leverage.
Depreciation and amortization expense increased by $1.5 million and
$16.5 million, or 17.1% and 67.8%, respectively, for the three and nine months
ended September 30, 1998 as compared to the same periods in 1997 due to the
impact of new hotel properties. For the nine months ended September 30, 1998,
depreciation and amortization expense also includes a valuation reserve of $10
million related to the intended disposition of seven non-prototype HomeGate
hotels.
Other charges for the three and nine months ended September 30, 1998
consisted of a reserve of $4.0 million associated with the cost of terminating
hotel development projects under contract, $1.4 million for severance charges
related primarily to the resignation of the Company's former CEO and $1.0
million for hurricane damage at the Frenchman's Reef Marriott hotel. The Company
will record another charge for severance of approximately $1 million related to
the resignation of its president in the fourth quarter of 1998.
Investment income increased by $91,000, or 11.4%, and decreased by
$153,000, or 5.1%, respectively, for the three and nine months ended September
30, 1998 as compared to the same periods in 1997 due to changes in the weighted
average cash balances.
Interest expense decreased by $1.9 million and $3.1 million, or 25.5%
and 15.2%, respectively, for the three and nine months ended September 30, 1998
as compared to the same periods in 1997 primarily due to capitalized interest
related to new hotels. The Company capitalized interest of $4.7 million and $6.5
million for the three months ended September 30, 1997 and 1998, and $12.4
million and $20.3 million for the nine months ended September 30, 1997 and 1998.
The Company expects capitalized interest to decrease in 1999 due to planned
reductions in development spending.
Other income consisted of property transactions and other asset sales
and retirements. For the nine months ended September 30, 1997, other
income/charges consisted of net gains on property transactions of $1.9 million.
For the nine months ended September 30, 1998 other income consisted of gains on
settlements of notes receivable of $18.4 million.
LIQUIDITY AND CAPITAL RESOURCES
Prime's external growth focuses on the expansion of its proprietary
AmeriSuites and HomeGate brands through new construction both directly by the
Company and by franchisees. As of October 31, 1998, Prime had 79 AmeriSuites and
34 HomeGates in operation, excluding seven HomeGate hotels the Company intends
to divest.
During the quarter, Prime announced plans to reduce its hotel
development from prior levels. The Company's previous development plans were to
be financed primarily through the sale and
- 15 -
<PAGE> 18
leaseback of hotels to REITs. Recent changes in the capital markets have
affected the ability of hotel REITs such as MeriStar and Equity Inns to raise
both debt and equity capital to finance acquisitions. Due to this uncertainty
regarding hotel divestitures, Prime is developing hotels only to the extent of
funding being available from internal cash sources. Under its revised plans,
Prime plans to spend a total of $180 million (including capitalized interest)
for the fourth quarter of 1998 and all of 1999 to complete 32 AmeriSuites and
HomeGate hotels under construction as of September 30. Upon completion of the
development program, Prime expects to have 97 AmeriSuites and 44 HomeGates in
operation. Prime believes that borrowing availability under the Company's
Revolving Credit Facility and internally generated cash flow will be sufficient
to fund its revised development plan.
At September 30, 1998, the Company had cash, cash equivalents and
current marketable securities of $15.8 million. In addition, at September 30,
1998, the Company had $119.0 million available under the Revolving Credit
Facility.
The Company's major sources of cash for the nine months ended September
30, 1998 were net proceeds from the sale/leaseback of hotels of $211.8 million,
borrowings under the Revolving Credit Facility of $97.9 million and cash flow
from operations of $71.8 million. The Company's major uses of cash during the
period were capital expenditures of $337.0 million relating primarily to the
development of new hotels and debt repayments of $67.1 million.
For the nine months ended September 30, 1997 and 1998, cash flow from
operations was positively impacted by the utilization of net operating loss
carryforwards ("NOLs") and other tax basis differences of $2.7 million and $4.8
million, respectively. At September 30, 1998, the Company had federal NOLs
relating primarily to its predecessor, Prime Motor Inns, Inc. ("PMI"), of
approximately $72.5 million which are subject to annual utilization limitations
and expire beginning in 2005 and continuing through 2006.
Sources of Capital. The Company has undertaken a strategic initiative
to dispose of significant hotel real estate and to invest the proceeds in the
growth of its proprietary brands. Through sale/leasebacks to REITs, the Company
generated approximately $211.8 million in cash in 1998 which was used to finance
hotel development. Due to the uncertainty in the hotel divestiture markets, the
Company's business plan does not anticipate any material proceeds from asset
sales through 1999.
In January 1998, the Company completed the sale/leaseback of eight
full-service hotels to MeriStar Hospitality Corp. ("MeriStar"), formally known
as American General Hospitality, Inc., for $138.4 million. The purchase price
consisted of $114.4 million in cash, $10.2 million in assumed debt and $13.8
million in MeriStar limited partnership operating units. The Company is
operating the hotels under a lease agreement which has a term of 10 years. The
transaction generated a net gain of approximately $65.0 million which will be
recognized as a reduction of rent expense over the life of the lease. The
Company is also under contract to sell and lease back nine additional
full-service hotels to MeriStar not later than March 31, 1999. In the event that
MeriStar is unable to
- 16 -
<PAGE> 19
generate capital to finance this transaction, the Company would be entitled to
receive a $4 million contract termination fee.
In June 1998, the Company sold nine AmeriSuites hotels to Equity Inns,
Inc. ("Equity Inns") for $97.0 million in cash. The Company is operating the
hotels under a lease agreement between Equity Inns and a subsidiary of the
Company for a ten-year term with certain renewal options. The transaction
generated a net gain of $15.0 million, which will be recognized as a reduction
of rent expense over the life of the lease. The Company is also generating
franchise fees under a ten-year franchise agreement. The sale is part of an
ongoing strategic relationship between the Company and Equity Inns whereby
Equity Inns has the right of first refusal on the sale of the first 20
AmeriSuites hotels per year.
The Company has a $200.0 million Revolving Credit Facility which bears
interest at LIBOR plus 2%. The facility is available through 2001 and may be
extended for an additional year. Borrowings under the facility are secured by
certain of the Company's hotels with recourse to the Company. Additional
properties may be added subject to the approval of the lenders. Availability
under the facility is subject to a borrowing base test and certain other
covenants. As of October 31, 1998, the Company had outstanding borrowings of
$120.0 million under the facility and further availability of $80.0 million.
On September 30, 1998, the Company's Revolving Credit Facility was
amended to provide for the elimination of a market capitalization test, a
revision of the key man employee covenant and limitations on hotel development
and stock repurchases. Pursuant to such amendment, development of new hotels is
limited to the existing development plan plus $50 million through 1999. Stock
repurchases are limited to an aggregate of $50 million through December 1999 to
the extent of new cash sources (i.e asset sales, equity offerings) and are not
permitted for the remainder of 1998.
On March 12, 1998, the Company settled its insurance claim for
$16.4 million related to damage at the Frenchman's Reef caused by Hurricane
Bertha in July 1996. The Company had previously received $2.5 million in 1997
and received the remaining amount, net of deductibles, in April 1998.
Uses of Capital. The Company's capital spending is focused on
completing the development of its AmeriSuites and HomeGate hotels currently
under construction. For the nine months ended September 30, 1998, the Company
spent $175.2 million on new construction of AmeriSuites and $134.5 million on
new construction of HomeGates. The Company expects to spend a total of
approximately $110 million on development of new hotels in the fourth quarter of
1998 and $70 million in 1999 (including capitalized interest) to be funded by
borrowings under the Revolving Credit Facility and internally generated cash
flow.
For the nine months ended September 30, 1998, the Company spent
approximately $29.8 million on capital improvements at its Owned Hotels of which
approximately $10.7 million related to the refurbishment of the Frenchman's
Reef.
- 17 -
<PAGE> 20
In June 1998, the Company completed the purchase of one million shares
of its common stock at an average price of $17.78 per share under a program
authorized in December 1997. In July 1998, the Company authorized the repurchase
of an additional two million shares of stock. Under the terms of the Revolving
Credit Facility, the Company may purchase additional shares in an aggregate
amount not to exceed $50 million through December 1999.
On April 17, 1998, the Company's $86.3 million 7% Convertible Notes due
2002 were converted into 7.2 million shares of common stock of the Company at a
conversion price of $12 per share.
In order to facilitate future tax-deferred exchanges of hotel
properties, the Company from time to time enters into arrangements with an
unaffiliated third party under Section 1031 of the Internal Revenue Code of
1986, as amended. As of September 30, 1998, the Company had advances of
approximately $167.4 million to such third party which advances are classified
as property, equipment and leasehold improvements.
Year 2000 Readiness. The Company has initiated a program to prepare the
Company's computer systems and applications for the year 2000. This is necessary
because computer programs have been written using two digits rather than four to
define the applicable year. Any of the Company's computer programs that have
time-sensitive software may recognize a date using "00" as the year 1900 rather
than the year 2000. This could result in a system failure or miscalculation
causing disruptions of operations, including, among other things, a temporary
inability to process normal business transactions. In addition, many of the
Company's vendors and service providers are also faced with similar issues
related to the year 2000.
In connection with the Company program related to year 2000, the
Company's management has assessed the Company's information systems, including
its hardware and software systems and embedded systems contained in the
Company's hotels and corporate headquarters. Based on the findings of this
assessment, the Company has commenced a plan to upgrade or replace the Company's
hardware or software for year 2000 readiness as well as to assess the year 2000
readiness of the Company's vendors and service providers. In addition, the
Company's management is currently formulating contingency plans, which, in the
event that the Company is unable to fully achieve year 2000 readiness in a
timely manner, or any of the Company's vendors or service providers fails to
achieve year 2000 readiness, may be implemented to minimize the risks of
interruptions of the Company's business.
Based on its assessment to date of the year 2000 readiness of the
Company's vendors, service providers and other third parties on which the
Company relies for business operations, the Company believes that its principal
vendors, service providers and other third parties are taking action for year
2000 compliance. However, the Company has limited ability to test and control
such third parties' year 2000 readiness, and the Company cannot provide
assurance that failure of such third parties to address the year 2000 issue will
not cause an interruption of the Company's business.
- 18 -
<PAGE> 21
As of September 30, 1998, the Company believes that approximately 33%
of its information systems are year 2000 ready. The Company estimates that the
total costs associated with implementing year 2000 readiness since the project's
commencement will be in the range of $1 million. The Company anticipates that it
will finance the cost of its year 2000 remediation using its existing sources of
liquidity.
The Company expects to complete its year 2000 remediation by October
1999. However, the Company's ability to execute its plan in a timely manner may
be adversely affected by a variety of factors, some of which are beyond the
Company's control including turnover of key employees, availability and
continuity of consultants and the potential for unforeseen implementation
problems. The Company's business could be interrupted if the year 2000 plan is
not implemented in a timely manner, if the Company's vendors, service providers
or other third parties are not year 2000 ready or if the Company's contingency
plans are not successful. Based on currently available information, and although
no assurance can be given, the Company does not believe that any such
interruptions are likely to have a material adverse effect on the Company's
results of operations, liquidity or financial condition.
- 19 -
<PAGE> 22
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits
Exhibit 10.1 The Second Amendment to the Credit
Agreement dated as of September 30, 1998,
among Prime Hospitality Corp., Societe
Generale Southwest Agency, as Documentation
Agent, Credit Lyonnais New York Bank, as
Syndication Agent and Bankers Trust Company,
as Agent for Lenders.
Exhibit 11 Computation of Earnings Per Share
Exhibit 27 Financial Data Schedule
(b) Reports on Form 8-K
On November 2, 1998, a report on Form 8-K was filed for
purposes of announcing the appointment of A.F. Petrocelli as
CEO and chairman of the board replacing David Simon who
resigned both positions.
- 20 -
<PAGE> 23
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 HOSPITALITY CORP.
Date: November 6, 1998 By: /s/ A.F. Petrocelli
-----------------------------------
A.F. Petrocelli
President and Chief Executive
Officer
Date: November 6, 1998 By: /s/ Douglas Vicari
-----------------------------------
Douglas Vicari
Senior Vice President and Chief
Financial Officer
- 21 -
<PAGE> 1
SECOND AMENDMENT
TO CREDIT AGREEMENT
This SECOND AMENDMENT TO CREDIT AGREEMENT (this "SECOND
AMENDMENT") is dated as of September 30, 1998 and entered into by and among
PRIME HOSPITALITY CORP., a Delaware corporation ("COMPANY"), the financial
institutions listed on the signature pages hereof ("LENDERS"), SOCIITI GINIRALE,
SOUTHWEST AGENCY, as Documentation Agent, CRIDIT LYONNAIS NEW YORK BANK, as
Syndication Agent and BANKERS TRUST COMPANY, as agent for Lenders ("AGENT"),
and, for purposes of Section 4 hereof, the Credit Support Parties listed on the
signature pages hereof, and is made with reference to that certain Amended and
Restated Senior Secured Credit Agreement dated as of December 17, 1997, by and
among Company, Lenders, Documentation Agent, Syndication Agent and Agent, as
amended by that certain First Amendment to Credit Agreement dated as of February
23, 1998 (collectively, the "CREDIT AGREEMENT"). Capitalized terms used herein
without definition shall have the same meanings herein as set forth in the
Credit Agreement.
RECITALS
WHEREAS, Company and Lenders desire to amend the Credit
Agreement in the manner set forth below,
NOW, THEREFORE, in consideration of the premises and the
agreements, provisions and covenants herein contained, the parties hereto agree
as follows:
SECTION 1. AMENDMENTS TO THE CREDIT AGREEMENT
1.1 AMENDMENTS TO SECTION 1: PROVISIONS RELATING TO
DEFINED TERMS
Subsection 1.1 of the Credit Agreement is hereby amended by
deleting the definition of "Market Equity Capitalization" therefrom in its
entirety and adding thereto the following definition, which shall be inserted in
proper alphabetical order:
"BASE AMOUNT" means in connection with the Development Plan,
$225,000,000 in the aggregate.
"DEVELOPMENT PLAN" means the development plan delivered by
Company to Agent, setting forth (a) the Capital Items to be expended and (b) the
Investments to be made by Company in Joint Ventures during the period September
1, 1998 through December 31, 1999, with such changes as are acceptable to Agent
(approval of such changes not to be unreasonably withheld or delayed), a copy of
which is annexed hereto as Exhibit XVI.
<PAGE> 2
"NET EQUITY PROCEEDS" means, the aggregate cash proceeds
(including any cash received by way of deferred payment pursuant to, or by
monetization of, a note receivable or otherwise, but only as and when so
received) received by Company or any of its Subsidiaries from any sale of Equity
Interests in Company less the sum, without duplication, of the direct costs
relating to such sale (including, without limitation, legal and accounting fees,
expenses and similar costs).
"NEW SOURCES" means, as of any date of determination, the sum,
without duplication, of (a) Net Equity Proceeds and (b) Net Cash Proceeds
derived from any Asset Sale, less (i) any and all Supplemental Amounts expended
from New Sources pursuant to subsection 5.19 and (ii) any and all amounts
expended from New Sources pursuant to subsection 6.5 in connection with any
Stock Repurchase, provided that Net Cash Proceeds shall exclude any and all
amounts procured through an Asset Sale with respect to (x) any beneficial
interests in MeriStar Hospitality Operating Partnership L.P., (y) any beneficial
interests in Equity Inns Partnership L.P. and (z) any Property listed on Exhibit
XVII annexed hereto.
"SECOND AMENDMENT EFFECTIVE DATE" shall have the meaning
assigned to such term in the Second Amendment to Credit Agreement dated as of
September 30, 1998.
"STOCK REPURCHASE" means the purchase, redemption,
acquisition, cancellation or otherwise retiring for value shares of Capital
Stock of Company and/or options on any such shares or related stock appreciation
rights or similar securities held by officers and employees or former officers
and employees (or their estates or beneficiaries under their estates), upon
death, disability, retirement, severance or termination of employment.
"SUPPLEMENTAL AMOUNTS" shall have the meaning assigned to such
term in subsection 5.19.
1.2 AMENDMENTS TO SECTION 3: CONDITIONS PRECEDENT
A. CONDITIONS TO ALL LOANS. Subsection 3.2C(viii) of the
Credit Agreement is hereby amended by deleting it in its entirety and
substituting the following therefor:
"(viii) after giving effect to the proposed borrowing, Company
will be in compliance, on a pro forma basis, with the provisions of
subsection 6.6E."
1.3 AMENDMENTS TO SECTION 5: COMPANY'S AFFIRMATIVE COVENANTS
A. Section 5 of the Credit Agreement is hereby amended by
adding a new subsection 5.19 at the end thereof as follows:
2
<PAGE> 3
"5.19 DEVELOPMENT PLAN.
On or before the Second Amendment Effective Date (as
hereinafter defined), Company shall deliver to Agent the Development Plan, which
plan shall include Capital Items to be expended in respect of the HomeGate and
AmeriSuites Properties. Company agrees that during the period September 1, 1998
through December 31, 1999, it shall expend all Capital Items and make
Investments in Joint Ventures (to the extent permitted under subsection 6.3)
subject to the monetary limits specified in the Development Plan and in an
aggregate amount not to exceed the Base Amount; provided that Company may make
capital expenditures, Renovations, Restorations, acquisitions and Investments,
to the extent otherwise permitted in the Credit Agreement, in amounts over and
above the Base Amount (collectively, "SUPPLEMENTAL AMOUNTS") so long as such
Supplemental Amounts do not in the aggregate exceed the correlative amount
indicated for each period below (inclusive of all amounts expended during any
prior period pursuant to this proviso); provided further that each of the
amounts referenced below may be increased by the amount of available New
Sources, but in no event shall the aggregate of all Supplemental Amounts exceed
$50,000,000:
<TABLE>
<CAPTION>
MAXIMUM PERMITTED
SUPPLEMENTAL AMOUNTS
PERIOD (IN AGGREGATE)
<S> <C>
9/1/98 - 3/31/99 $15,000,000
4/1/99 - 6/30/99 $30,000,000
7/1/99 - 12/31/99 $50,000,000
</TABLE>
"
1.4 AMENDMENTS TO SECTION 6: FINANCIAL COVENANTS
A. RESTRICTED PAYMENTS. Subsection 6.5 of the Credit Agreement
is hereby amended by deleting it in its entirety and substituting the following
therefor:
"6.5 RESTRICTED PAYMENTS.
The Loan Parties shall not, and shall not permit any of their
respective Subsidiaries to, directly or indirectly, declare, order, pay, make
give, or publish notice or fix a date in respect of or set apart any sum for any
Restricted Payment, enter into an agreement or make any commitment to effect any
of the foregoing or take any other similar action in furtherance of or otherwise
in connection with the foregoing; provided that, (i) if no Potential Event of
Default or Event of Default exists and Company would be able to incur $1 of
additional Indebtedness pursuant to the Mortgage Note Indenture (as in effect on
the Closing Date), Company may elect to make one or more Stock Repurchases and
pay dividends or make other distributions on shares or purchase share
3
<PAGE> 4
of Capital Stock of Company in an aggregate amount not to exceed $25,000,000,
except that subject to the terms and conditions set forth in that certain Prime
Hospitality Corp. Limited Waiver to Credit Agreement dated as of August 5, 1998
by and among Company and Agent, Company may at any time during the 1999 calendar
year elect to make one or more Stock Repurchases in an aggregate amount not to
exceed $50,000,000 over and above the $25,000,000 amount otherwise permitted
herein, provided that (a) no additional Stock Repurchases shall occur on or
before December 31, 1998, (b) each such Stock Repurchase shall be effected only
through the use of New Sources and (c) the Minimum Interest Coverage Ratio as
calculated pursuant to subsection 6.6B(2) hereof shall be the greater of (1)
2.20 to 1.00 or (2) the correlative ratio otherwise set forth in the Credit
Agreement for the applicable period; (ii) Company and its Subsidiaries may make
Restricted Payments (but not any voluntary prepayments) in respect of
Indebtedness permitted pursuant to subsection 6.1 in accordance with, and to the
extent required by, the terms and provisions of the applicable Indebtedness;
(iii) Company may prepay Indebtedness permitted pursuant to subsection 6.1 with
the proceeds of refinancing indebtedness permitted pursuant to subsection
6.1(c); (iv) Company may prepay Indebtedness permitted pursuant to subsection
6.1(d), provided that the aggregate amount of principal payments prior to the
Maturity Date in respect of such Indebtedness shall not exceed $20,000,000; and
(v) Company may prepay Indebtedness referred to in clause (i) of the definition
of the term "Net Cash Proceeds" contained in Section 1.1."
B. FINANCIAL COVENANTS. Subsection 6.6D of the Credit
Agreement is hereby amended by deleting it in its entirety.
1.5 AMENDMENTS TO SECTION 7: EVENTS OF DEFAULT; REMEDIES
A. EVENTS OF DEFAULT. Subsection 7.1O of the Credit Agreement
is hereby amended by deleting it in its entirety and substituting the following
therefor:
"O. EMPLOYMENT OF ELWOOD. John Elwood ceases to be employed in a senior
position by Company for any reason (including the voluntary termination of such
employment by John Elwood) and Company shall fail to replace John Elwood, within
one hundred twenty (120) days after such cessation, with any person acceptable
to Agent and any one Co-Agent, in their sole and absolute discretion; or"
SECTION 2. CONDITIONS TO EFFECTIVENESS
Section 1 of this Second Amendment shall become effective only
upon the satisfaction of all of the following conditions precedent (the date of
satisfaction of such conditions being referred to herein as the "SECOND
AMENDMENT EFFECTIVE DATE"):
A. On or before the Second Amendment Effective Date, Company
shall deliver to Agent executed copies of this Second Amendment (with sufficient
originally executed copies for each Lender and its counsel) dated the Second
Amendment Effective Date.
4
<PAGE> 5
B. On or before the Second Amendment Effective Date, all
corporate and other proceedings taken or to be taken in connection with the
transactions contemplated hereby and all documents incidental thereto not
previously found acceptable by Agent, acting on behalf of Lenders, and its
counsel shall be satisfactory in form and substance to Agent and such counsel,
and Agent and such counsel shall have received all such counterpart originals or
certified copies of such documents as Agent may reasonably request.
SECTION 3. COMPANY'S REPRESENTATIONS AND WARRANTIES
In order to induce Lenders to enter into this Second Amendment
and to amend the Credit Agreement in the manner provided herein, Company
represents and warrants to each Lender that the following statements are true,
correct and complete:
A. CORPORATE POWER AND AUTHORITY. Each of Company and the
Subsidiary Guarantors that are a party thereto have all requisite corporate
power and authority to enter into this Second Amendment and to carry out the
transactions contemplated by, and perform its obligations under, the Credit
Agreement as amended by this Second Amendment (the "AMENDED AGREEMENT").
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of
this Second Amendment and the performance of the Amended Agreement have been
duly authorized by all necessary corporate action on the part of Company and the
Subsidiary Guarantors, as the case may be.
C. NO CONFLICT. The execution and delivery by each of Company
and the Subsidiary Guarantors that are a party thereto of this Second Amendment
and the performance by Company and the Subsidiary Guarantors of the Amended
Agreement by Company do not and will not (i) violate any provision of any law or
any governmental rule or regulation applicable to Company or any of its
Subsidiaries, the Certificate or Articles of Incorporation or Bylaws of Company
or any of its Subsidiaries or any order, judgment or decree of any court or
other agency of government binding on Company or any of its Subsidiaries, (ii)
conflict with, result in a breach of or constitute (with due notice or lapse of
time or both) a default under any Contractual Obligation of Company or any of
its Subsidiaries, (iii) result in or require the creation or imposition of any
Lien upon any of the properties or assets of Company or any of its Subsidiaries
(other than Liens created under any of the Loan Documents in favor of Agent on
behalf of Lenders), or (iv) require any approval of stockholders or any approval
or consent of any Person under any Contractual Obligation of Company or any of
its Subsidiaries, except for such approvals or consents which have been obtained
on or before the Second Amendment Effective Date and disclosed in writing to
Lenders.
D. GOVERNMENTAL CONSENTS. The execution and delivery by each
of Company and the Subsidiary Guarantors that are a party thereto of this Second
Amendment and all other operative documents being delivered pursuant to the
Second Amendment and the performance by
5
<PAGE> 6
Company of the Amended Agreement by Company do not and will not require any
registration with, consent or approval of, or notice to, or other action to,
with or by, any federal, state or other governmental authority or regulatory
body.
E. BINDING OBLIGATION. This Second Amendment and the Amended
Agreement have been duly executed and delivered by each of Company and the
Subsidiary Guarantors that are a party thereto, and will be legally valid and
binding obligations of Company and the Subsidiary Guarantors that are a party
thereto, enforceable against Company and the Subsidiary Guarantors that are a
party thereto, in accordance with their respective terms, except as may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or limiting creditors' rights generally or by equitable principles
relating to enforceability.
F. GOVERNMENTAL REGULATION; SECURITIES ACTIVITIES. Neither the
making of the Loans pursuant to the Amended Agreement nor the granting of a
Security Interest in any Collateral (as defined in the Security Agreement)
pursuant to the Security Documents violates Regulations T, U or X of the Board
of Governors of the Federal Reserve System. It is not necessary in connection
with the execution and delivery of the Amended Agreement to register the Loans
under the Securities Act or to qualify any indenture under the Trust Indenture
Act of 1939, as amended.
G. INCORPORATION OF REPRESENTATIONS AND WARRANTIES FROM CREDIT
AGREEMENT. The representations and warranties contained in Section 4 of the
Credit Agreement are and will be true, correct and complete in all material
respects on and as of the Second Amendment Effective Date to the same extent as
though made on and as of that date, except to the extent such representations
and warranties specifically relate to an earlier date, in which case they were
true, correct and complete in all material respects on and as of such earlier
date.
H. ABSENCE OF DEFAULT. No event has occurred and is continuing
or will result from the consummation of the transactions contemplated by this
Second Amendment that would constitute an Event of Default or a Potential Event
of Default.
6
<PAGE> 7
SECTION 4. ACKNOWLEDGEMENT AND CONSENT
Each Credit Support Party hereby acknowledges that it has
reviewed the terms and provisions of the Credit Agreement and this Second
Amendment and consents to the amendment of the Credit Agreement effected
pursuant to this Second Amendment. Each Credit Support Party hereby confirms
that each Credit Support Document to which it is a party or otherwise bound and
all Collateral encumbered thereby will continue to guaranty or secure, as the
case may be, to the fullest extent possible the payment and performance of all
"Guarantied Obligations" and "Secured Obligations," as the case may be (in each
case as such terms are defined in the applicable Credit Support Document),
including without limitation the payment and performance of all such "Guarantied
Obligations" or "Secured Obligations," as the case may be, in respect of the
Obligations of Company now or hereafter existing under or in respect of the
Amended Agreement and the Notes defined therein.
Each Credit Support Party acknowledges and agrees that any of
the Credit Support Documents to which it is a party or otherwise bound shall
continue in full force and effect and that all of its obligations thereunder
shall be valid and enforceable and shall not be impaired or limited by the
execution or effectiveness of this Second Amendment. Each Credit Support Party
represents and warrants that all representations and warranties contained in the
Amended Agreement and the Credit Support Documents to which it is a party or
otherwise bound are true, correct and complete in all material respects on and
as of the Second Amendment Effective Date to the same extent as though made on
and as of that date, except to the extent such representations and warranties
specifically relate to an earlier date, in which case they were true, correct
and complete in all material respects on and as of such earlier date.
Each Credit Support Party (other than Company) acknowledges
and agrees that (i) notwithstanding the conditions to effectiveness set forth in
this Second Amendment, such Credit Support Party is not required by the terms of
the Credit Agreement or any other Loan Document to consent to the amendments to
the Credit Agreement effected pursuant to this Second Amendment and (ii) nothing
in the Credit Agreement, this Second Amendment or any other Loan Document shall
be deemed to require the consent of such Credit Support Party to any future
amendments to the Credit Agreement.
SECTION 5. MISCELLANEOUS
A. REFERENCE TO AND EFFECT ON THE CREDIT AGREEMENT AND THE
OTHER LOAN DOCUMENTS.
(i) On and after the Second Amendment Effective Date, each
reference in the Credit Agreement to "this Agreement", "hereunder",
"hereof", "herein" or words of like import referring to the Credit
Agreement, and each reference in the other Loan Documents to the
"Credit Agreement", "thereunder", "thereof" or words of like import
7
<PAGE> 8
referring to the Credit Agreement shall mean and be a reference to the
Amended Agreement.
(ii) Except as specifically amended by this Second Amendment,
the Credit Agreement and the other Loan Documents shall remain in full
force and effect and are hereby ratified and confirmed.
(iii) The execution, delivery and performance of this Second
Amendment shall not, except as expressly provided herein, constitute a
waiver of any provision of, or operate as a waiver of any right, power
or remedy of Agent or any Lender under, the Credit Agreement or any of
the other Loan Documents.
B. FEES AND EXPENSES. Company acknowledges that all costs,
fees and expenses as described in subsection 8.2 of the Credit Agreement
incurred by Agent and its counsel with respect to this Second Amendment and the
documents and transactions contemplated hereby shall be for the account of
Company.
C. EXHIBITS. The Credit Agreement is hereby amended by
annexing thereto a new Exhibit XVI and a new Exhibit XVII in the forms of
Exhibit XVI and Exhibit XVII, respectively, attached to this Second Amendment.
D. HEADINGS. Section and subsection headings in this Second
Amendment are included herein for convenience of reference only and shall not
constitute a part of this Second Amendment for any other purpose or be given any
substantive effect.
E. APPLICABLE LAW. THIS SECOND AMENDMENT AND THE RIGHTS AND
OBLIGATIONS OF THE PARTIES HEREUNDER SHALL BE GOVERNED BY, AND SHALL BE
CONSTRUED AND ENFORCED IN ACCORDANCE WITH, THE INTERNAL LAWS OF THE STATE OF NEW
YORK (INCLUDING WITHOUT LIMITATION SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW
OF THE STATE OF NEW YORK), WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES.
F. COUNTERPARTS; EFFECTIVENESS. This Second Amendment may be
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed and delivered shall be
deemed an original, but all such counterparts together shall constitute but one
and the same instrument; signature pages may be detached from multiple separate
counterparts and attached to a single counterpart so that all signature pages
are physically attached to the same document. This Second Amendment shall become
effective upon the execution of a counterpart hereof by Company, and Lenders and
each of the Credit Support Parties and receipt by Company and Agent of written
or telephonic notification of such execution and authorization of delivery
thereof.
8
<PAGE> 9
[Remainder of page intentionally left blank]
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this Second
Amendment to be duly executed and delivered by their respective officers
thereunto duly authorized as of the date first written above.
PRIME HOSPITALITY CORP.
By: __________________
Name:
Title:
HOMEGATE AUSTIN, INC., (for purposes of
Section 4 only) as a Credit Support Party
By: __________________
Name:
Title:
HOMEGATE HOSPITALITY, INC., (for
purposes of Section 4 only) as a Credit Support
Party
By: __________________
Name:
Title:
S-1
<PAGE> 11
BANKERS TRUST COMPANY,
as Agent and as a Lender
By: __________________
Name:
Title:
S-2
<PAGE> 12
CRIDIT LYONNAIS NEW YORK
BRANCH,
as Syndication Agent and as a Lender
By: __________________
Name:
Title:
S-3
<PAGE> 13
SOCIETE GENERALE, SOUTHWEST
AGENCY,
as Documentation Agent and as a Lender
By: __________________
Name:
Title:
S-4
<PAGE> 14
BANK LEUMI USA,
as a Lender
By: __________________
Name:
Title:
S-5
<PAGE> 15
BANKBOSTON, N.A.,
as a Lender
By: __________________
Name:
Title:
S-6
<PAGE> 16
BANK ONE, TEXAS NATIONAL
ASSOCIATION,
as a Lender
By: __________________
Name:
Title:
S-7
<PAGE> 17
CIBC, INC.,
as a Lender
By: __________________
Name:
Title:
S-8
<PAGE> 18
FIRST NATIONAL BANK OF
COMMERCE,
as Lender
By: __________________
Name:
Title:
S-9
<PAGE> 19
IMPERIAL BANK,
as Lender
By: __________________
Name:
Title:
S-10
<PAGE> 20
NATIONSBANK, N.A.,
as Lender
By: __________________
Name:
Title:
S-11
<PAGE> 21
ORIX USA CORPORATION,
as Lender
By: __________________
Name:
Title:
S-12
<PAGE> 22
PNC BANK, N.A.,
as Lender
By: __________________
Name:
Title:
S-13
<PAGE> 23
SOUTHERN PACIFIC BANK,
as Lender
By: __________________
Name:
Title:
S-14
<PAGE> 24
EXHIBIT XVI
DEVELOPMENT PLAN
[See Attached Page(s)]
Exh. XVI-1
<PAGE> 25
EXHIBIT XVII
WESTAR PROPERTIES
[See Attached Page(s)]
Exh. XVII-1
<PAGE> 1
Exhibit 11
COMPUTATION OF EARNINGS PER COMMON SHARE
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
1997 1998 1997 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Basic Earnings
Income before extraordinary items ............. $10,562 $ 8,943 $31,277 $42,804
Extraordinary items ........................... -- -- 75 --
------- ------- ------- -------
Net earnings .............................. $10,562 $ 8,943 $31,352 $42,804
======= ======= ======= =======
Shares:
Weighted average number of common
shares outstanding ...................... 46,949 53,661 46,622 51,072
======= ======= ======= =======
Basic earnings per common share:
Income before extraordinary items ......... $ 0.23 $ 0.17 $ 0.68 $ 0.84
Extraordinary items ....................... -- -- -- --
------- ------- ------- -------
Net earnings ............................ $ 0.23 $ 0.17 $ 0.68 $ 0.84
======= ======= ======= =======
Diluted Earnings
Income before extraordinary items .............. $10,562 $ 8,943 $31,277 $42,804
Assumed conversion of convertible debt ......... -- -- -- 1,142
------- ------- ------- -------
Income before extraordinary items as adjusted... 10,562 8,943 31,277 43,946
Extraordinary items ........................... -- -- 75 --
------- ------- ------- -------
Net earnings as adjusted ................ $10,562 $ 8,943 $31,352 $43,946
======= ======= ======= =======
Shares:
Weighted average number of common
shares outstanding ...................... 46,949 53,661 46,622 51,072
Options and warrants issued ............... 1,767 532 1,978 990
Assumed conversion of convertible debt .... -- -- -- 2,817
------- ------- ------- -------
Weighted average number of common
shares outstanding as adjusted .......... 48,716 54,193 48,600 54,879
======= ======= ======= =======
Diluted earnings per common share:
Income before extraordinary items ......... $ 0.22 $ 0.17 $ 0.65 $ 0.80
Extraordinary items ....................... -- -- -- --
------- ------- ------- -------
Net earnings ............................ $ 0.22 $ 0.17 $ 0.65 $ 0.80
======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 1,242
<SECURITIES> 14,581
<RECEIVABLES> 22,795
<ALLOWANCES> 415
<INVENTORY> 0
<CURRENT-ASSETS> 57,793
<PP&E> 1,301,962
<DEPRECIATION> 87,391
<TOTAL-ASSETS> 1,327,132
<CURRENT-LIABILITIES> 102,319
<BONDS> 513,747
0
0
<COMMON> 552
<OTHER-SE> 628,657
<TOTAL-LIABILITY-AND-EQUITY> 1,327,132
<SALES> 347,279
<TOTAL-REVENUES> 347,279
<CGS> 0
<TOTAL-COSTS> 282,606
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,045
<INCOME-PRETAX> 68,855
<INCOME-TAX> 26,050
<INCOME-CONTINUING> 42,806
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 42,806
<EPS-PRIMARY> .84
<EPS-DILUTED> .80
</TABLE>
