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
MARCH 31, 2000
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 44,862,691 shares of common stock, $.01 par value
outstanding, as of May 9, 2000.
<PAGE>
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
INDEX
PAGE
PART I. FINANCIAL INFORMATION NUMBER
------
Item 1. Financial Statements
Consolidated Balance Sheets
December 31, 1999 and March 31, 2000........................... 1
Consolidated Statements of Income
Three Months Ended March 31, 1999 and March 31, 2000........... 2
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1999 and March 31, 2000........... 3
Notes to Interim Consolidated Financial Statements................. 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations...................... 9
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders................ 18
Item 6. Exhibits and Reports on Form 8-K................................... 18
Signatures ................................................................ 19
<PAGE>
<TABLE>
<CAPTION>
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Share Data)
December 31, March 31,
1999 2000
-------------- --------------
ASSETS (unaudited)
------
<S> <C> <C>
Current assets:
Cash and cash equivalents ............................................ $ 7,240 $ 12,623
Marketable securities available for sale.............................. 8,262 5,217
Accounts receivable, net of reserves.................................. 21,379 25,114
Current portion of mortgages and notes receivable..................... 1,920 1,918
Other current assets.................................................. 16,879 18,162
-------------- -------------
Total current assets.......................................... 55,680 63,034
Property, equipment and leasehold improvements,
net of accumulated depreciation and amortization...................... 1,093,123 1,060,996
Properties held for sale................................................... 134,596 67,647
Mortgages and notes receivable, net of current portion..................... 11,750 12,337
Other assets............................................................... 33,630 32,142
-------------- -------------
TOTAL ASSETS.................................................. $ 1,328,779 $ 1,236,156
============== =============
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities:
Current portion of debt............................................... $ 5,547 $ 2,429
Current portion of deferred income.................................... 10,322 10,322
Other current liabilities............................................. 61,225 62,607
-------------- -------------
Total current liabilities..................................... 77,094 75,358
Long-term debt, net of current portion..................................... 543,485 453,353
Deferred income, net of current portion.................................... 70,977 68,458
Other liabilities.......................................................... 5,223 7,278
-------------- -------------
Total liabilities............................................. 696,779 604,447
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;
55,747,340 and 55,755,026 shares issued and outstanding at
December 31, 1999 and March 31, 2000, respectively................ 557 557
Capital in excess of par value........................................ 519,834 520,641
Retained earnings..................................................... 194,466 204,922
Accumulated other comprehensive loss, net of taxes.................... (2,694) (2,692)
Treasury stock (7,263,578 shares at December 31, 1999
and 8,690,978 shares at March 31, 2000)........................... (80,163) (91,719)
-------------- -------------
Total stockholders' equity.................................... 632,000 631,709
-------------- -------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.................... $ 1,328,779 $ 1,236,156
============== =============
</TABLE>
See accompanying notes to Interim Consolidated Financial Statements.
- 1 -
<PAGE>
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1999 AND 2000
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 2000
--------- ---------
<S> <C> <C>
Revenues:
Lodging........................................................... $116,313 $121,025
Food and beverage................................................. 13,225 13,107
Management, franchise and other fees.............................. 3,025 3,458
Interest on mortgages and notes receivables....................... 737 301
--------- ---------
Total revenues............................................... 133,300 137,891
Costs and expenses:
Direct hotel operating expenses:
Lodging......................................................... 28,388 31,184
Food and beverage............................................... 9,442 9,250
Selling and general............................................. 29,530 30,253
Occupancy and other operating..................................... 17,897 18,587
General and administrative........................................ 8,186 8,146
Depreciation and amortization..................................... 12,680 10,699
Valuations and other charges...................................... 2,500 -
-------- ---------
Total costs and expenses..................................... 108,623 108,119
Operating income....................................................... 24,677 29,772
Investment income...................................................... 522 240
Interest expense....................................................... (8,642) (12,730)
Other income, net...................................................... 2,321 353
-------- ---------
Income before income taxes and cumulative effect of a change in
accounting principle and extraordinary items...................... 18,878 17,635
Provision for income taxes............................................. 7,362 6,878
-------- ---------
Income before cumulative effect of a change in accounting principle
and extraordinary items........................................... 11,516 10,757
Cumulative effect of a change in accounting principle (net of
income taxes of $3,398)........................................... (5,315) -
-------- ---------
Income before extraordinary items...................................... 6,201 10,757
Extraordinary items - loss on discharge of indebtedness (net of
income taxes of $193)............................................. - (302)
-------- ---------
Net income............................................................. $ 6,201 $ 10,455
======== =========
Earnings per common share:
Basic:
Income before the cumulative effect of a change in
accounting principle and extraordinary items.................... $ 0.22 $ 0.22
Cumulative effect of a change in accounting principle............. (0.10) -
Extraordinary items - loss on discharge of indebtedness........... - -
-------- ---------
Net income per common share............................................ $ 0.12 $ 0.22
======== =========
Diluted:
Income before the cumulative effect of a change in
accounting principle and extraordinary items.................... $ 0.22 $ 0.22
Cumulative effect of a change in accounting principle............. (0.10) -
Extraordinary items - loss on discharge of indebtedness........... - -
-------- ---------
Net income per common share $ 0.12 $ 0.22
======== =========
</TABLE>
SEE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS.
- 2 -
<PAGE>
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 1999 AND 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 2000
----------- ------------
<S> <C> <C>
Cash flows from operating activities:
Net income................................................................... $ 6,201 $ 10,455
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization............................................ 12,680 10,699
Valuation adjustments on the properties held for sale.................... 2,500 -
Amortization of deferred financing costs................................. 764 865
Utilization of net operating loss carryforwards.......................... 830 764
Cumulative effect of accounting change................................... 8,713 -
Net loss (gain) on asset disposals....................................... 1,677 (353)
Deferred income taxes.................................................... 978 973
Amortization of deferred gain (2,507) (2,496)
Increase (decrease) from changes in other operating assets and liabilities:
Accounts receivable.................................................. (3,613) (3,734)
Other current assets................................................. 645 (348)
Other liabilities.................................................... 147 1,748
----------- ------------
Net cash provided by operating activities............................ 29,015 18,573
Cash flows from investing activities:
Net proceeds from mortgages and notes receivable............................. 190 95
Disbursements for mortgages and notes receivable............................. - (356)
Proceeds from sales of property, equipment and leasehold improvements........ 26,650 81,496
Construction of new hotels................................................... (44,799) (4,993)
Purchases of property, equipment and leasehold improvements.................. (4,385) (5,051)
(Increase) decrease in restricted cash....................................... 5,187 -
Proceeds from sales of marketable securities................................. 7,725 -
Purchases of marketable securities........................................... (1,652) -
Proceeds from former officer's life insurance................................ 4,706 -
Other........................................................................ 433 41
----------- ------------
Net cash (used in) provided by investing activities.................. (5,945) 71,232
Cash flows from financing activities:
Net proceeds from issuance of debt........................................... 9,326 10,926
Payments of debt............................................................. (1,409) (83,834)
Proceeds from the exercise of stock options and warrant...................... 233 42
Treasury stock purchases..................................................... (25,798) (11,556)
----------- ------------
Net cash used in financing activities................................ (17,648) (84,422)
----------- ------------
Net increase in cash and cash equivalents.................................... 5,422 5,383
Cash and cash equivalents at beginning of period............................. 12,534 7,240
----------- ------------
Cash and cash equivalents at end of period................................... $ 17,956 $ 12,623
=========== ============
SUPPLEMENTAL CASH FLOW DISCLOSURES OF NON-CASH ACTIVITIES:
----------- ------------
Hotels sold in exchange for assumption of debt............................... $ - $ 17,364
=========== ============
</TABLE>
SEE ACCOMPANYING NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS.
- 3 -
<PAGE>
PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1999 AND 2000
(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") contain all material adjustments, consisting of normal recurring
adjustments, necessary to present fairly the financial position of the Company
as of March 31, 2000 and the results of its operations for the three months
ended March 31, 1999 and 2000 and cash flows for the three months ended March
31, 1999 and 2000.
The consolidated financial statements for the three months ended March
31, 1999 and 2000 were prepared on a consistent basis with the audited
consolidated financial statements for the year ended December 31, 1999. Certain
reclassifications have been made to the March 31, 1999 consolidated financial
statements to conform them to the March 31, 2000 presentation.
The consolidated results of operations for the three months ended March
31, 2000 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,
1999.
NOTE 2 - ACCOUNTING POLICIES
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, 2000. 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 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.
In January 1999, the Company adopted Statement of Position 98-5,
"Reporting on the Costs of Start-Up Activities" (SOP 98-5). The Company recorded
a $5.3 million charge, net of taxes, for the cumulative effect of a change in
accounting principle to write off any unamortized pre-opening costs that
remained on the balance sheet at the date of adoption. Additionally, subsequent
to the adoption of this new standard, all future pre-opening costs are expensed
as incurred.
- 4 -
<PAGE>
NOTE 3 - HOTEL DISPOSITIONS
In February 2000, the Company's five remaining Homegate hotels and the
Company's rights to the HomeGate brand name were sold for approximately $17.7
million, including the assumption of debt by the purchaser of approximately
$17.4 million related to these properties.
In March 2000, the Company sold its Frenchman's Reef hotel in St.
Thomas, U.S.V.I. ("Frenchman's Reef") for $73.0 million. The Company utilitized
$40.0 million of the proceeds to retire debt encumbering the hotel and the
remainder was used for the repayment of other debt and the repurchase of the
Company's common stock. Upon repayment of the debt associated with this hotel,
the Company also expensed unamortized deferred financing costs of approximately
$546,000 which is included in extraordinary items, net of income taxes, in the
accompanying consolidated statements of income.
In March 2000, the Company also sold an AmeriSuites hotel for $10.8
million. The transaction generated a net gain of approximately $1.1 million and
provides for the Company to receive franchise fees under a twenty-year franchise
agreement.
NOTE 4 - PENDING ACQUISITIONS
In March 2000, the Company signed an agreement with Sholodge, Inc.
("Sholodge") to acquire its leasehold interests in 27 Sumner Suites hotels for
net consideration of $2.0 million. Pursuant to the agreement, the Company will
convert these hotels to its AmeriSuites brand and will operate the hotels under
lease agreements with Hospitality Properties Trust ("HPT") and Sholodge.
Sholodge has also agreed to finance and construct two additional AmeriSuites
hotels on sites it already owns. The proposed transaction is subject to the
completion of due diligence and the consent of HPT on 20 of the hotels.
NOTE 5 - DEBT
During the quarter the Company retired $11.7 million of its $120
million First Mortgage Notes due 2006 ("First Mortgage Notes"). Included in the
accompanying financial statements is an extraordinary gain on the discharge of
indebtedness of approximately $51,000 related to this retirement.
NOTE 6 - EARNINGS PER COMMON SHARE
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 common
share was 52.3 million and 48.0 million for the three months ended March 31,
1999 and 2000, respectively.
- 5 -
<PAGE>
Diluted earnings per common share reflects adjustments to basic
earnings per common share for the dilutive effect of stock options. The weighted
average number of common shares used in computing diluted earnings per common
share was 53.6 million and 48.6 million for the three months ended March 31,
1999 and 2000, respectively.
NOTE 7 - TREASURY STOCK
Under its stock repurchase program, the Company purchased approximately
1.4 million shares of its common stock during the three months ended March 31,
2000 for $11.6 million and has repurchased an additional 2.3 million shares of
its common stock from April 1, 2000 through May 15, 2000 for $17.8 million for a
total average cost of $7.86 per share. The Company's $200 Million Revolving
Credit Facility (the "Revolving Credit Facility"), allows for stock repurchases
equal to 50% of net proceeds from asset sales with repurchases not to exceed
$100.0 million. As of May 15, 2000, the Company has repurchased $32.1 million of
its shares under this covenant and has $22.5 million of availability based on
the proceeds from asset sales.
NOTE 8 - INTEREST EXPENSE
The Company capitalizes interest related to borrowings used to finance
hotel construction. Capitalized interest was approximately $5.4 million and
$500,000 for the three months ended March 31, 1999 and 2000, respectively. Also
included in interest expense is the amortization of deferred financing fees of
$764,000 and $865,000 for the three months ended March 31, 1999 and 2000,
respectively.
NOTE 9 - VALUATIONS AND OTHER CHARGES
Valuations and other charges for the three months ended March 31, 1999
consisted of a $2.5 million valuation reserve related to certain 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," in 1999, the
Company reduced the carrying value of the assets to reflect the estimated fair
value of the hotels and subsequently sold the assets by March 31, 2000.
NOTE 10 - OTHER INCOME, NET
Other income, net, consists of income and losses from property
transactions and other asset sales and retirements. For the three months ended
March 31, 2000, other income, net consisted of $353,000 related to net gains on
property transactions. For the three months ended March 31, 1999, other income,
net consisted of net gains on property transactions of $3.1 million, losses on
the sales of marketable securities of $4.8 million and income from a contract
termination fee of $4.0 million.
- 6 -
<PAGE>
NOTE 11 - COMPREHENSIVE INCOME
For the three month period ended March 31, 1999 and 2000, comprehensive
income consisted of the following (in thousands):
THREE MONTHS ENDED MARCH 31,
---------------------------------
1999 2000
----------- ----------
Net income $ 6,201 $10,455
Unrealized gain (loss) on
marketable securities, net of
income taxes (2,758) 2
----------- ----------
Total $ 3,443 $10,457
=========== ==========
NOTE 12 - GEOGRAPHIC AND BUSINESS INFORMATION
The Company's hotels currently service three major lodging industry
segments: the all-suites segment, under its AmeriSuites brand; the
limited-service segment, primarily under its Wellesley Inn & Suites brand and
the full-service segment under major national franchises. The Company's 100
AmeriSuites are upscale hotels located in 30 states throughout the United
States. The 66 Wellesley Inn & Suites ("Wellesley Inn") hotels compete in the
mid-price segment, and are primarily located in the Northeast, Texas and Florida
regions of the United States. The Company's full-service hotels are primarily
located in the northeastern region of the United States. On November 1, 1999,
the Company converted 38 of its 43 extended-stay HomeGate hotels into its
limited-service Wellesley Inn & Suites brand. The conversion changed the
customer base from extended-stay to transient. In March 2000, the Company sold
the remaining five HomeGate hotels and its rights to the HomeGate brand name and
no longer operates in the extended-stay segment. As a result, segment
information for the prior period has been restated to conform to this change.
The Company evaluates the performance of its segments based primarily
on earnings before interest, taxes and depreciation and amortization ("Hotel
EBITDA") generated by the operations of its owned hotels. Interest expense is
primarily related to debt incurred by the Company through its corporate
obligations and collateralized by certain of its hotel properties. The Company
files a consolidated Federal income tax return and therefore taxes are allocated
based upon the relative contribution to the Company's consolidated taxable
income/losses and changes in temporary differences. The allocation of interest
expense and taxes is not evaluated at the segment level and is not believed to
be material to these consolidated statements.
- 7 -
<PAGE>
The following table presents revenues and other financial information by
business segment for the three months ended March 31, 1999 and 2000 (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31, 1999 ALL-SUITES LIMITED SERVICE FULL SERVICE CONSOLIDATED
- --------------------------------- ---------- --------------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues (1). . . . . . . . . . . $57,182 $26,573 $45,783 $129,538
Hotel EBITDA (2). . . . . . . . . 20,216 11,800 9,903 41,919
Depreciation and amortization. . 5,750 3,412 3,305 12,467
Capital expenditures. . . . . . . 27,853 19,262 1,808 48,923
Total Assets. . . . . . . . . . . 622,916 401,453 230,214 1,254,583
- -------------------------------------------------------------------------------------------------
THREE MONTHS ENDED MARCH 31, 2000 ALL-SUITES LIMITED SERVICE FULL SERVICE CONSOLIDATED
- --------------------------------- ---------- --------------- ------------ ------------
Revenues (1). . . . . . . . . . . $57,857 $29,950 $46,325 $134,132
Hotel EBITDA (2). . . . . . . . . 20,256 12,284 9,959 42,499
Depreciation and amortization. . 4,946 3,251 2,233 10,430
Capital expenditures. . . . . . . 5,277 2,314 2,064 9,655
Total Assets. . . . . . . . . . . 579,732 412,536 122,899 1,115,167
</TABLE>
(1))Revenues represent lodging and food & beverage related revenues, only.
(2))Hotel EBITDA represents earnings before interest, income taxes,
depreciation and amortization from the hotels.
NOTE 13 - SUBSEQUENT EVENTS
Subsequent to the end of the first quarter of 2000, the Company sold
two of its AmeriSuites hotels under separate sales agreements for $27.9 million,
which is comprised of $25.2 million in cash and a $2.7 million note receivable.
The transactions generated gains of approximately $5.7 million and provide for
the Company to receive franchise fees under twenty-year franchise agreements.
The Company will also retain management of one of the hotels.
Subsequent to the end of the first quarter of 2000, the Company also
sold five of its Wellesley Inn hotels under various sales agreements for $25.3
million. The Company received $24.3 million in cash and retained a $1.0 million,
or 15%, equity interest in three of the hotels. The transactions generated gains
of approximately $9.9 million and provide for the Company to receive franchise
fees under twenty-year franchise agreements. The Company will also retain
management of three of the hotels.
In April 2000, the Company sold a land parcel in Springettsbury, PA for
$750,000. The transaction generated a gain of $610,000.
- 8 -
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
GENERAL
Prime Hospitality Corp. ("Prime" or "the Company") is an owner,
operator, manager and franchisor of hotels, with 205 hotels in operation
containing 27,067 rooms located in 32 states (the "Portfolio") as of May 15,
2000. Prime controls two hotel brands -- AmeriSuites (R) and Wellesley Inn &
Suites (R) -- as well as a portfolio of upscale, full-service hotels operated
under franchise agreements with national hotel chains. As of May 15, 2000, the
Company owned and operated 142 hotels (the "Owned Hotels"), operated 28 hotels
under lease agreements with real estate investment trusts (the "Leased Hotels"),
managed 21 hotels for third parties (the "Managed Hotels"), and franchised 14
hotels which it does not operate (the "Franchised Hotels"). Included in the
Portfolio are 34 AmeriSuites and 5 Wellesley Inn & Suites hotels owned by third
parties, operated pursuant to franchise agreements, 25 of which are operated by
Prime under lease or management agreements. Prime's portfolio consists primarily
of new, well-maintained hotels, with an average age of approximately 7 years.
The Company's strategy is to develop its proprietary AmeriSuites and
Wellesley Inn & Suites brands primarily through franchising. The Company
currently has 100 AmeriSuites and 66 Wellesley Inn & Suites in operation.
Through the development of its proprietary brands, the Company is transforming
itself from an owner/operator into a franchisor and manager and has positioned
itself to generate additional revenues with minimal capital investment. In
addition to the current 34 franchised AmeriSuites and 5 franchised Wellesley Inn
& Suites, the Company currently has 56 executed franchise agreements for new
AmeriSuites to be built. In 2000, the first three franchisee constructed
AmeriSuites were opened. All other franchise agreements related to opened hotels
were generated pursuant to asset sales.
Prime's strategy is also focused on growing the operating profits of
its Portfolio. With over 200 hotels in operation, Prime believes it possesses
the hotel management expertise to maximize the profitability and value of its
hotel assets.
On November 1, 1999, the Company converted 38 of its 43 extended-stay
HomeGate hotels into its limited-service Wellesley Inn & Suites brand. In 2000,
the Company sold the remaining five HomeGate hotels and the Company's rights to
the HomeGate brand name. The conversion changed the hotels' customer base from
extended-stay to transient. The Company believes this will enhance the value of
its existing hotels, create efficiencies by adding critical mass to the chain
and improve its franchising prospects for the Wellesley Inn & Suites brand.
- 9 -
<PAGE>
For the three months ended March 31, 2000, earnings before asset
transactions and other charges decreased from $11.6 million for the three month
period in 1999 to $10.5 million for the same period in 2000. The results were
impacted by the effect of hotel divestitures and capitalized interest, which was
$4.9 million less during the period than the same period in 1999, due to the
lower levels of construction activity in 2000.
The Company's EBITDA increased by $614,000, or 1.5%, from $39.9
million for the three months ended March 31, 1999 as compared to $40.5 million
for the three months ended March 31, 2000. Hotel EBITDA for the three-month
period increased by $600,000, or 1.3%, from $41.9 million in 1999 to $42.5
million in 2000. Excluding the impact of hotels divested in the past year,
revenues rose by 9.7% and EBITDA grew by 10.8%. EBITDA represents earnings
before extraordinary items, interest, taxes, depreciation and amortization.
Hotel EBITDA represents EBITDA generated from the operations of Owned Hotels.
Hotel EBITDA 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
Company's hotels operate in three segments of the industry: the upscale
all-suites segment, under the Company's proprietary AmeriSuites brand; the
upscale full-service segment, under major national franchises; and the mid-price
limited-service segment, primarily under the Company's proprietary Wellesley Inn
& Suites brand. The following table illustrates the Hotel EBITDA contribution
from each segment (in thousands) for the three months ended March 31, 1999 and
2000:
<TABLE>
<CAPTION>
Three Months Ended Three Months Ended
March 31, 1999 March 31, 2000
------------------------------------ --------------------------------
$ Amount % OF TOTAL $ Amount % OF TOTAL
---------------- --------------- -------------- --------------
<S> <C> <C> <C> <C>
ALL-SUITES $ 20,216 48.3% $ 20,256 47.7%
LIMITED-SERVICE 11,800 28.1% 12,284 28.9%
FULL-SERVICE 9,903 23.6% 9,959 23.4%
--------------- --------------- -------------- --------------
TOTAL $ 41,919 100.0% $ 42,499 100.0%
================ =============== ============== ==============
</TABLE>
Hotel EBITDA reflects the growth of the Company's proprietary brands.
The Company expects the relative contribution from its proprietary brands to
continue to increase.
The Company evaluates the performance of its segments based primarily
on EBITDA generated by the operations of its hotels. EBITDA and Hotel EBITDA are
not measures of financial performance under accounting principles generally
accepted in the United States 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.
- 10 -
<PAGE>
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.
Forward-looking statements include the information about Prime's
possible or assumed future results of operations and statements preceded by,
followed by or that include the words "believe," "except," "anticipate,"
"intend," "plan," "estimate," or similar expressions, or the negative thereof.
Actual results may differ materially from those expressed in these
forward-looking statements. Readers of this Form 10-Q are cautioned not to
unduly rely on any forward-looking statements.
The following important factors, in addition to those discussed
elsewhere in this Form 10-Q or incorporated herein by reference, could cause
results to differ materially from those expressed in such forward-looking
statements: competition within each of the Company's business segments in areas
such as access, location, quality or accommodations and room rate structures;
the balance between supply of and demand for hotel rooms and accommodations; the
Company's continued ability to obtain new operating contracts and franchise
agreements; the Company's ability to develop and maintain positive relations
with current and potential hotel owners and other industry participants; the
level of rates and occupancy that can be achieved by such properties and the
availability and terms of financing; changes in travel patterns, taxes and
government regulations which influence or determine wages, prices, construction
procedures and costs; the effect of national and regional economic conditions
that will affect, among other things, demand for products and services at the
Company's hotels; government approvals, actions and initiatives including the
need for compliance with environmental and safety requirements, and change in
laws and regulations or the interpretation thereof and the potential effects of
tax legislative action; and other risks described from time to time in the
Company's filings with the SEC.
Although the Company believes the expectations reflected in these
forward-looking statements are based upon reasonable assumptions, no assurance
can be given that Prime will attain these expectations or that any deviations
will not be material. Except as otherwise required by the federal securities
laws, the Company disclaims any obligation or undertaking to disseminate any
updates or revisions to any forward-looking statement contained herein to
reflect any change in its expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is based.
- 11 -
<PAGE>
RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 1999 COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 2000
Lodging revenues, which include room revenues and other related
revenues such as telephone and vending, increased by $4.7 million, or 4.1%, for
the three months ended March 31, 2000, as compared to the same period in 1999.
Lodging revenues for the three months ended March 31, 2000 increased due to
incremental revenues of $5.3 million from new hotels and higher revenues for
comparable Owned Hotels, which increased by $3.0 million, or 4.7%. Revenues
associated with hotels sold subsequent to March 31, 1999 offset these increases.
The following table sets forth hotel operating data for the 101
comparable Owned Hotels for the three months ended March 31, 2000 as compared to
the same period in 1999, by product type:
Three Months Ended March 31,
----------------------------
1999 2000 %Change
---- ---- -------
AmeriSuites
- -----------
Occupancy 62.6% 66.2%
ADR $83.56 $82.21
REVPAR $52.28 $54.45 4.2%
Full-Service
- ------------
Occupancy 59.1% 62.1%
ADR $102.92 $104.48
REVPAR $60.78 $64.89 6.8%
Wellesley Inn
- -------------
Occupancy 72.5% 70.4%
ADR $68.53 $69.97
REVPAR $49.65 $49.29 (0.7)%
Total
- -----
Occupancy 63.9% 66.2%
ADR $83.14 $83.21
REVPAR $53.10 $55.09 3.8%
The improvements in REVPAR at comparable Owned Hotels were generated
primarily by higher occupancy percentages, which rose by approximately 3.7%, for
the three-month period, while ADR remained relatively stable for the three-month
period. The REVPAR increases reflect the growing recognition of the AmeriSuites
brand and favorable industry trends in the Northeast where the full-service
hotels are located. The Wellesley Inn REVPAR change is due to decreased travel
in Florida attributed to Y2K concerns.
- 12 -
<PAGE>
The Company's 38 Wellesley Inn & Suites, which were converted from the
HomeGate brand and are classified as non-comparable, achieved a 58.8% occupancy
rate and a $60.15 ADR for the three months ended March 31, 2000, which reflects
a 25% increase from the fourth quarter of 1999, the period in which the
conversion occurred.
Food and beverage revenues for the three months ended March 31, 2000
decreased by $118,000, or .9%, as compared to the same period in the prior year
due to decreased revenues at the Frenchman's Reef Marriott hotel, which was sold
on March 15, 2000. Food and beverage revenues at comparable hotels were up
$442,000, or 7.8%, to $6.1 million for the three months ended March 31, 2000 as
compared to $5.7 million for the same period in 1999, primarily due to increased
banquet business.
Management, franchise and other fees consists primarily of base,
incentive and other fees earned under management agreements, royalty fees earned
under franchise agreements, sales commissions earned by the Company's national
sales group and rental income. Management, franchise and other fees increased by
$433,000, or 14.3%, for the three months ended March 31, 2000 as compared to the
same period in 1999 due to additional Managed and Franchised Hotels.
Interest on mortgages and notes receivable primarily relates to
mortgages secured by certain Managed Hotels. Interest on mortgages and notes
receivable decreased by $436,000 for the three months ended March 31, 2000 as
compared to the same period in 1999, due to the settlement of various cash flow
notes during 1999.
Direct lodging expenses increased by $2.8 million, or 9.8%, for the
three months ended March 31, 2000, as compared to the same period in 1999, due
primarily to the addition of new hotels. Direct lodging expenses, as a
percentage of lodging revenue, increased from 24.4% to 25.8% for the three-month
period. The increase was primarily due to higher travel agent commissions and
hotel payroll costs, particularly at the staff level.
Direct food and beverage expenses for the three months ended March 31,
2000 decreased by approximately $192,000, or 2.0%, as compared to the same
period in 1999, due primarily to the sale of the Frenchman's Reef. As a
percentage of food and beverage revenues, direct food and beverage expenses
decreased from 71.4% to 70.6% for the three-month period. The decrease was
attributed to higher margins associated with increased banquet business.
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 $723,000, or 2.4%, for the three months ended March 31, 2000, as
compared to the same period in 1999, due primarily 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 decreased slightly
from 22.8% to 22.6% for the three-month period.
- 13 -
<PAGE>
Occupancy and other operating expenses consist primarily of property
insurance, real estate and other taxes and rent expense. Occupancy and other
operating expenses for the three months ended March 31, 2000 increased by
$690,000 or 3.9%, as compared to the same period in 1999, due the addition of
new hotels. Occupancy and other operating expenses as a percentage of hotel
revenues increased slightly from 13.8% to 13.9% for the three-month period due
to rent expense associated with the Leased 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 the Owned, Leased and
Managed Hotels and general corporate expenses. General and administrative
expenses decreased by $40,000, or 0.5%, for the three months ended March 31,
2000 as compared to the same period in 1999, primarily due to a restructuring of
the Company's corporate and regional hotel operations, offset by increased
advertising and other costs associated with the Company's franchising efforts.
As a percentage of total revenues, general and administrative expenses decreased
from 6.1% to 5.9% for the three-month period.
Depreciation and amortization expense decreased by $2.0 million, or
15.6%, for the three months ended March 31, 2000 as compared to the same period
in 1999 due to the disposal of several properties.
Valuations and other charges for the three months ended March 31, 1999
consisted of a $2.5 million valuation reserve related to certain 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
reduced the carrying value of the assets to reflect current market conditions
and subsequently sold the assets during the three months ended March 31, 2000.
There were no similar charges in 2000.
Investment income decreased by $282,000, or 54.0%, for the three months
ended March 31, 2000 as compared to the same period in 1999, due to an overall
decrease in the Company's weighted average cash balances.
Interest expense increased by $4.1 million, or 47.3%, for the three
months ended March 31, 2000 as compared to the same period in 1999, primarily
due to a reduction in the amount of interest capitalized. Capitalized interest
decreased from $5.4 million to $500,000 for the three-month period ended March
31, 1999 and 2000, respectively, due to the lower levels of construction
activity in 2000.
Other income, net consists of income and losses from property
transactions and other asset sales and retirements. For the three months ended
March 31, 2000, other income, net consisted of $353,000 related to net gains on
property transactions. For the three months ended March 31, 1999, other income,
net consisted of net gains on property transactions of $3.1 million, losses on
the sales of marketable securities of $4.8 million and income from a contract
termination fee of $4.0 million.
- 14 -
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At March 31, 2000, the Company had cash, cash equivalents and current
marketable securities of $17.8 million. In addition, at March 31, 2000, the
Company had $71.9 million available under the Revolving Credit Facility.
The Company's major sources of cash for the three months ended March
31, 2000 were net proceeds from the sales of hotels, of $81.5 million,
borrowings of $10.9 million and cash flow from operations of $18.6 million. The
Company's principal uses of cash during the period were capital expenditures of
$10.0 million, repurchases of its common stock totaling $11.6 million and $83.8
million of debt repayments, primarily related to the Revolving Credit Facility
and the retirement of debt related to the Frenchman's Reef.
For the three months ended March 31, 1999 and 2000, cash flow from
operations was positively impacted by the utilization of net operating loss
carry forwards ("NOLs") of $830,000 and $764,000, respectively. At March 31,
2000, the Company had federal NOLs relating primarily to its predecessor, Prime
Motor Inns, Inc., of approximately $59.0 million, which are subject to annual
utilization limitations and will expire in 2006.
SOURCES OF CAPITAL. The Company has undertaken a strategic initiative to dispose
of certain hotel real estate while retaining the franchise rights and to invest
the proceeds in the growth of its proprietary brands, the repurchase of the
Company's common stock or the reduction of debt.
During the quarter, the Company sold the Frenchman's Reef hotel for
$73.0 million, the remaining five HomeGate hotels and all rights to the HomeGate
brand name for $17.7 million and one AmeriSuites for $10.8 million.
Subsequent to March 31, 2000, the Company sold two AmeriSuites for
$27.9 million and five Wellesley Inn and Suites for $25.3 million.
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. The aggregate amount of the Revolving Credit
Facility will be reduced to $175.0 million in December 2000 and to $125.0
million in December 2001. Borrowings under the facility are secured by first
liens on 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. During the quarter, the Company had borrowings of $11.0 million
related to this facility. At March 31, 2000, the Company had outstanding
borrowings of $102.0 million under the facility with further availability of
$71.9 million.
- 15 -
<PAGE>
The Revolving Credit Facility contains covenants requiring the Company
to maintain certain financial ratios and limitations on the incurrence of debt,
liens, dividend payments, stock repurchases, certain investments, transactions
with affiliates, asset sales, mergers and consolidations and any change of
control of the Company. In October 1999, the Revolving Credit Facility was
amended to allow an additional $100.0 million of share repurchases to be funded
by 50% of the proceeds from asset sales. In April 2000, the Revolving Credit
Facility was amended to allow for additional retirements of other debt owed by
the Company.
USES OF CAPITAL. The Company utilized the proceeds from asset sales, along with
its cash flow from operations, to reduce its debt balance by $93.2 million to
$455.8 million as of March 31, 2000. The reduction of debt was primarily
comprised of the payment or transfer of $57.4 million of mortgage debt on assets
sold, the reduction in outstanding Revolving Credit Facility debt of $23.0
million and the retirement of $11.7 million of the Company's $120 million First
Mortgage Notes due 2006 ("First Mortgage Notes").
The Company also purchased approximately 1.4 million shares of its
common stock during the three months ended March 31, 2000 for $11.6 million and
has repurchased an additional 2.3 million of its common stock from April 1, 2000
to May 15, 2000 for $17.8 million at a total average cost of $7.86 per share.
The purchases of these additional shares are limited to 50% of the proceeds from
asset sales. As of May 15, 2000, the Company has repurchased $32.1 million of
its shares under this covenant and has $22.5 million of availability based on
the proceeds from asset sales.
The Company intends to continue the growth of its brands primarily
through franchising and therefore, its corporate development will be limited.
The Company spent $5.0 million during the quarter ended March 31, 2000 on
development spending and plans to spend an additional $30.0 million on these and
other new AmeriSuites during 2000. In addition, during the quarter, the Company
spent approximately $5.1 million on capital improvements at its Owned Hotels and
expects to spend an additional $15.0 million on its Owned Hotels during the
remainder of the year. This spending will include the conversion of three
limited-service hotels to Wellesley Inn & Suites. The Company plans to fund its
corporate development and capital improvements with internally generated cash
flow.
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 March 31, 2000, the Company had advances of
approximately $213.0 million to such third party, which advances are classified
as property, equipment and leasehold improvements in the Company's accompanying
financial statements.
YEAR 2000 READINESS. In prior years, the Company discussed the nature and
progress of its plans to become Year 2000 ready. In late 1999, the Company
completed its remediation and testing of systems. As a result of those planning
and implementation efforts, the Company experienced no
- 16 -
<PAGE>
significant disruptions in mission critical information technology and
non-information technology systems and believes those systems successfully
responded to the Year 2000 date change. The Company expensed approximately $1.0
million during 1999 in connection with remediating its systems. The Company is
not aware of any material problems resulting from year 2000 issues, either with
its products, its internal systems, or the products and services of third
parties. The Company will continue to monitor its mission critical computer
applications and those of its suppliers and vendors throughout the year 2000,
and will work to promptly address any latent Year 2000 matters that may arise.
- 17 -
<PAGE>
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 Fourth Amendment to Senior Secured Revolving Credit
Agreement, Dated April 5, 2000, 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
None
- 18 -
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PRIME HOSPITALITY CORP.
Date: May 15, 2000 By: /S/ A.F. PETROCELLI
-------------------
A. F. Petrocelli
President and Chief Executive
Officer
Date: May 15, 2000 By: /S/ DOUGLAS VICARI
------------------
Douglas Vicari
Senior Vice President and Chief
Financial Officer
- 19 -
FOURTH AMENDMENT
TO CREDIT AGREEMENT
This FOURTH AMENDMENT TO CREDIT AGREEMENT (this "FOURTH AMENDMENT") is
dated as of April 5, 2000 and entered into by and among PRIME HOSPITALITY CORP.,
a Delaware corporation ("COMPANY"), the financial institutions listed on the
signature pages hereof ("LENDERS"), SOCIETE GENERALE, SOUTHWEST AGENCY, as
Documentation Agent, CREDIT LYONNAIS NEW YORK BRANCH, as Syndication Agent and
BANKERS TRUST COMPANY, as agent for Lenders ("AGENT"), and, for purposes of
Section 4 hereof, the Credit Support Party named 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 or otherwise
modified by that certain First Amendment to Credit Agreement dated as of
February 23, 1998, that certain Limited Waiver to Credit Agreement dated as of
August 5, 1998, that certain Second Amendment to Credit Agreement dated as of
September 24, 1998 and that certain Third Amendment to Credit Agreement dated as
of October 27, 1999 (collectively, the "CREDIT AGREEMENT"). Capitalized terms
used herein without definition shall have the same meanings herein as set forth
in the Credit Agreement.
R E C I T A L S
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 adding
thereto the following definitions, which shall be inserted in proper
alphabetical order:
"INDEBTEDNESS PREPAYMENT" has the meaning assigned to that term in
subsection 6.5(vii).
"INDEBTEDNESS PREPAYMENT CERTIFICATE" means a Compliance Certificate or
such other evidence reasonably satisfactory to Agent showing that both
immediately prior to and immediately after any Indebtedness Prepayment to be
made on the date thereof (or, if no Indebtedness Prepayment is to be made on
such date, then showing that as of the date of such Indebtedness Prepayment
Certificate) the Company is in compliance with the Indebtedness Prepayment
Financial Covenants after taking into account any changes in the aggregate
Indebtedness of Company and its Subsidiaries that have been made in the time
period between
<PAGE>
the last day of the most recently reported quarter and the date of such
Indebtedness Prepayment Certificate.
"INDEBTEDNESS PREPAYMENT DATE" has the meaning assigned to that term in
subsection 6.5(vii).
"INDEBTEDNESS PREPAYMENT FINANCIAL COVENANTS" means the financial
covenants contained in subsection 6.6F.
1.2 AMENDMENTS TO SECTION 6: COMPANY'S NEGATIVE COVENANTS
Subsection 6.5 of the Credit Agreement is hereby amended by adding the
following subparagraphs (vi) and (vii) to the end thereof:
"(vi) Company may pay, prepay, redeem, retire, purchase, buy-back,
defease or make similar payment in respect of the Mortgage Notes; and
(vii) Company may pay, prepay, redeem, retire, purchase, buy-back,
defease or make similar payment in respect of any Indebtedness permitted
under this Agreement (any such payment excluding payments made pursuant to
subsection 6.5(vi), an "INDEBTEDNESS PREPAYMENT"), PROVIDED that
(A) the aggregate amount of Indebtedness Prepayments shall not
exceed $80,000,000,
(B) if, on the date any Indebtedness Prepayment is scheduled to be
made (any such date, an "INDEBTEDNESS PREPAYMENT DATE"), the
aggregate amount of all Indebtedness Prepayments theretofore
made in accordance with this subsection 6.5(vii) plus such
scheduled Indebtedness Prepayment shall exceed $20,000,000,
Company shall deliver to Agent on the Indebtedness Prepayment
Date an Indebtedness Prepayment Certificate dated as of such
Indebtedness Prepayment Date, and
(C) if, on any Indebtedness Prepayment Date, the aggregate amount of
all Indebtedness Prepayments theretofore made in accordance with
this subsection 6.5(vii) plus the corresponding Indebtedness
Prepayment shall also exceed $40,000,000, from and after such
Indebtedness Prepayment Date, Company shall at all times comply
with the Indebtedness Prepayment Financial Covenants and shall
deliver to Agent within one (1) Business Day after request
therefor an Indebtedness Prepayment Certificate dated as of the
date of such request or any other date specified by Agent."
2
<PAGE>
Subsection 6.6 of the Credit Agreement is hereby amended by adding
thereto the following new subsection 6.6F:
6.6 FINANCIAL COVENANTS.
F. INDEBTEDNESS PREPAYMENT FINANCIAL COVENANTS.
(i) TIMING. Without limitation of any of the foregoing covenants in
this subsection 6.6, Company covenants and agrees that Company shall
perform and comply with all covenants in this subsection 6.6F at the
times and during the periods more specifically set forth in subsection
6.5(vii) above.
(ii) MINIMUM INTEREST COVERAGE RATIOS.
(A) As of the last day of the most recent quarter ending
during any of the periods set forth below, the Company shall not
permit the ratio of (1) Consolidated EBITDA to (2) the sum of (x)
Consolidated Interest Expense PLUS (y) all capitalized interest
expense to be less than the correlative ratio indicated (such
amounts to be determined with reference to the preceding 12-month
period ending on such last day):
================================================================================
PERIOD MINIMUM INTEREST
COVERAGE RATIO
================================================================================
from and including December 17, 1999
to but excluding December 17, 2000 2.625 to 1.00
- --------------------------------------------------------------------------------
from and including December 17, 200
and thereafter 2.875 to 1.00
================================================================================
(B) As of the last day of the most recent quarter ending
during any of the periods set forth below, the Company shall not
permit the ratio of (1) Adjusted Consolidated EBITDA to (2) the sum
of (x) Consolidated Interest Expense PLUS (y) all capitalized
interest expense to be less than the correlative ratio indicated
(such amounts to be determined with reference to the preceding
12-month period ending on such last day):
3
<PAGE>
================================================================================
PERIOD MINIMUM INTEREST
COVERAGE RATIO
================================================================================
from and including December 17, 1999
to but excluding December 17, 2000 2.375 to 1.00
- --------------------------------------------------------------------------------
from and including December 17, 2000
to but excluding December 17, 2001 2.625 to 1.00
- --------------------------------------------------------------------------------
from and including December 17, 2001
and thereafter 2.875 to 1.00
================================================================================
(iii) MAXIMUM TOTAL DEBT LEVERAGE RATIO. As of the last day of the
most recent quarter ending during any of the periods set forth below,
the Company shall not permit the ratio of (A) Consolidated Total
Indebtedness reduced by the amount of (1) unrestricted cash on the
balance sheet and (2) the 7% Convertible Subordinated Notes due 2002
issued by the Company pursuant to the Convertible Note Indenture (the
"7% NOTES") (provided that the market price of the Common Stock exceeds
the conversion price of the 7% Notes) to (B) Adjusted Consolidated
EBITDA to exceed the correlative ratio indicated (the Consolidated
Total Indebtedness and unrestricted cash calculations to be determined
as of such last day and Adjusted Consolidated EBITDA to be determined
with reference to the preceding 12-month period ending on such day):
================================================================================
PERIOD MAXIMUM TOTAL
DEBT LEVERAGE RATIO
================================================================================
from and including January 1, 2000 - to 4.25 to 1.00
and including December 31, 2000
- --------------------------------------------------------------------------------
from and including January 1, 2001 and 4.00 to 1.00
thereafter
================================================================================
(iv) MAXIMUM TOTAL DEBT/BOOK CAPITALIZATION. As of the last day of
the most recent quarter ending, the Company shall not permit the
quotient of (A) Consolidated Total Indebtedness of the Company and its
Subsidiaries DIVIDED by (B) the sum of (1) Consolidated Total
Indebtedness PLUS (2) Consolidated Net Worth to exceed fifty-two and
one-half percent (52.5%)."
4
<PAGE>
SECTION 2. CONDITIONS TO EFFECTIVENESS
Section 1 of this Fourth 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 "FOURTH
AMENDMENT EFFECTIVE DATE"):
A. On or before the Fourth Amendment Effective Date, Company
shall deliver to Agent executed copies of this Fourth Amendment (with sufficient
originally executed copies for each Lender and its counsel) dated the Fourth
Amendment Effective Date.
B. On or before the Fourth 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 Fourth 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 Guarantor has all requisite corporate power and authority to enter
into this Fourth Amendment and to carry out the transactions contemplated by,
and perform its respective obligations under, the Credit Agreement as amended by
this Fourth Amendment (the "AMENDED AGREEMENT").
B. AUTHORIZATION OF AGREEMENTS. The execution and delivery of
this Fourth 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 Guarantor, as the case may be.
C. NO CONFLICT. The execution and delivery by each of Company
and the Subsidiary Guarantor of this Fourth Amendment and the performance by
Company of the Amended Agreement 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
5
<PAGE>
of its Subsidiaries, except for such approvals or consents which have been
obtained on or before the Fourth Amendment Effective Date and disclosed in
writing to Agent and Lenders.
D. GOVERNMENTAL CONSENTS. The execution and delivery by each
of Company and the Subsidiary Guarantor of this Fourth Amendment and any other
operative document delivered pursuant to this Fourth Amendment and the
performance by Company of the Amended Agreement 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 Fourth Amendment and the Amended
Agreement have been duly executed and delivered by each of Company and the
Subsidiary Guarantor and will be legally valid and binding obligations of
Company and the Subsidiary Guarantor, enforceable against Company and the
Subsidiary Guarantor 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 this Fourth Amendment or 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 Fourth 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
Fourth Amendment that would constitute an Event of Default or a Potential Event
of Default.
SECTION 4. ACKNOWLEDGEMENT AND CONSENT
The Credit Support Party hereby acknowledges that it has
reviewed the terms and provisions of the Credit Agreement and this Fourth
Amendment and consents to the amendment of the Credit Agreement effected
pursuant to this Fourth Amendment. The 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
6
<PAGE>
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.
The Credit Support Party acknowledges and agrees that any of the Loan
Documents and 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 (which obligations on the date hereof remain absolute and
unconditional and are not subject to any defenses, set-offs or counterclaims)
shall be valid and enforceable and shall not be impaired or limited by the
execution or effectiveness of this Fourth Amendment. The 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 Fourth 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.
The Credit Support Party acknowledges and agrees that (i)
notwithstanding the conditions to effectiveness set forth in this Fourth
Amendment, the 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 Fourth Amendment and (ii) nothing in the
Credit Agreement, this Fourth Amendment or any other Loan Document shall be
deemed to require the consent of the 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 Fourth 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 referring to the Credit
Agreement shall mean and be a reference to the Amended Agreement.
(ii) Except as specifically amended by this Fourth 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 Fourth 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.
7
<PAGE>
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 Fourth Amendment and the
documents and transactions contemplated hereby shall be for the account of
Company. Without limiting the generality of the foregoing, and in addition to
any other costs, fees and expenses required to be paid by Company hereunder or
under the Credit Agreement or the other Loan Documents, Company agrees that upon
the written consent of Majority Lenders to the Fourth Amendment, Company shall
pay to each such consenting Lender an amount equal to the product of (i) four
hundredths of one percent (0.04%) and (ii) such Lender's Pro Rata Share of the
aggregate amount of the Commitments, which payments shall be made within three
(3) Business Days after the date on which Agent notifies Company that Agent has
received such written consent of Majority Lenders and the names of the
consenting Lenders.
C. HEADINGS. Section and subsection headings in this Fourth Amendment
are included herein for convenience of reference only and shall not constitute a
part of this Fourth Amendment for any other purpose or be given any substantive
effect.
D. APPLICABLE LAW. THIS FOURTH 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.
E. COUNTERPARTS; EFFECTIVENESS. This Fourth 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 Fourth Amendment shall become
effective upon the execution of a counterpart hereof by Company, Lenders and the
Credit Support Party and receipt by Company and Agent of written or telephonic
notification of such execution and authorization of delivery thereof.
[REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]
8
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Fourth
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 HOSPITALITY, INC.,
(for purposes of Section 4 only) as the Credit
Support Party
By: ______________________________
Name:
Title:
S-1
<PAGE>
BANKERS TRUST COMPANY,
as Agent and as a Lender
By:
------------------------------------
Name:
Title:
S-2
<PAGE>
CREDIT LYONNAIS NEW YORK BRANCH,
as Syndication Agent and as a Lender
By:
------------------------------------
Name:
Title:
S-3
<PAGE>
SOCIETE GENERALE, SOUTHWEST AGENCY,
as Documentation Agent and as a Lender
By:
------------------------------------
Name:
Title:
S-4
<PAGE>
BANK LEUMI USA,
as a Lender
By:
------------------------------------
Name:
Title:
S-5
<PAGE>
BANKBOSTON, N.A.,
as a Lender
By:
------------------------------------
Name:
Title:
S-6
<PAGE>
BANK ONE, TEXAS NATIONAL ASSOCIATION,
as a Lender
By:
------------------------------------
Name:
Title:
S-7
<PAGE>
CIBC, INC.,
as a Lender
By:
------------------------------------
Name:
Title:
S-8
<PAGE>
IMPERIAL BANK,
as a Lender
By:
------------------------------------
Name:
Title:
S-9
<PAGE>
BANK OF AMERICA, N.A.,
F/K/A NATIONSBANK, N.A.,
as a Lender
By:
------------------------------------
Name:
Title:
S-10
<PAGE>
ORIX USA CORPORATION,
as a Lender
By:
------------------------------------
Name:
Title:
S-11
<PAGE>
PNC BANK, N.A.,
as a Lender
By:
------------------------------------
Name:
Title:
S-12
<PAGE>
SOUTHERN PACIFIC BANK,
as a Lender
By:
------------------------------------
Name:
Title:
S-13
EXHIBIT 11
COMPUTATION OF EARNINGS PER COMMON SHARE
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 2000
------------ -------------
<S> <C> <C>
BASIC EARNINGS PER COMMON SHARE:
Income before the cumulative effect of a change
in accounting principle......................................... $ 11,516 $ 10,757
Cumulative effect of a change in accounting principle.............. (5,315) -
Extraordinary items - loss on discharge of indebtedness............ - (302)
----------- -------------
Net income per common share................................... $6,201 $10,455
=========== =============
Shares:
Weighted average number of common shares outstanding............ 52,342 47,952
=========== =============
Basic earnings per common share:
Income before the cumulative effect of a change
in accounting principle........................................ $ 0.22 $ 0.22
Cumulative effect of a change in accounting principle............. (.10) -
Extraordinary items - loss on discharge of indebtedness........... - -
----------- -------------
Net income per common share.................................. $ 0.12 $ 0.22
=========== =============
DILUTED EARNINGS PER COMMON SHARE:
Income before the cumulative effect of a change
in accounting principle........................................ $ 11,516 $ 10,757
Cumulative effect of a change in accounting principle............. (5,315) -
Extraordinary items - loss on discharge of indebtedness........... - (302)
----------- -------------
Net income per common share $ 6,201 $ 10,455
=========== =============
Shares:
Weighted average number of common shares outstanding........... 52,342 47,952
Options and warrants issued.................................... 1,216 661
----------- -------------
Weighted average number of common
shares outstanding as adjusted............................... 53,558 48,613
=========== =============
Diluted earnings per common share:
Income before the cumulative effect of a change
in accounting principle........................................ $ 0.22 $ 0.22
Cumulative effect of a change in accounting principle............. (.10) -
Extraordinary items - loss on discharge of indebtedness........... - -
----------- -------------
Net income per common share.................................. $ 0.12 $ 0.22
=========== =============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000080293
<NAME> Prime Hospitality Corp.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollar
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<EXCHANGE-RATE> 1
<CASH> 12,623
<SECURITIES> 5,217
<RECEIVABLES> 26,114
<ALLOWANCES> 1,000
<INVENTORY> 0
<CURRENT-ASSETS> 63,034
<PP&E> 1,263,112
<DEPRECIATION> 134,469
<TOTAL-ASSETS> 1,236,156
<CURRENT-LIABILITIES> 75,358
<BONDS> 453,353
557
0
<COMMON> 0
<OTHER-SE> 631,152
<TOTAL-LIABILITY-AND-EQUITY> 1,236,156
<SALES> 137,891
<TOTAL-REVENUES> 137,891
<CGS> 0
<TOTAL-COSTS> 108,118
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 12,730
<INCOME-PRETAX> 17,636
<INCOME-TAX> 6,878
<INCOME-CONTINUING> 10,757
<DISCONTINUED> 0
<EXTRAORDINARY> (302)
<CHANGES> 0
<NET-INCOME> 10,455
<EPS-BASIC> .22
<EPS-DILUTED> .22
</TABLE>
