UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(MARK ONE)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarter ended June 30, 1994
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. 1-9311
PRIME MOTOR INNS LIMITED PARTNERSHIP
(Exact name of registrant as specified in its charter)
Delaware 22-2754689
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
c/o Winegardner & Hammons, Inc.
4243 Hunt Road
Cincinnati, OH 45242
(Address of principal offices, including zip code)
(513) 891-2920
(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 ____
Page 1 of 16
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
INDEX
PAGE
NUMBER
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets -
June 30, 1994 and December 31, 1993.................. 3
Consolidated Statements of Operations - Three and Six
Months Ended June 30, 1994 and 1993...................5
Consolidated Statements of Partners' Deficit -
Six Months Ended June 30, 1994....................... 6
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 1994 and 1993.............. 7
Notes to Consolidated Financial Statements ............ 9
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations ..........................................12
PART II. OTHER INFORMATION AND SIGNATURES:
Item 6. Exhibits and Reports on From 8-K.......................15
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
<TABLE>
CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
<CAPTION>
June 30,
1994 December 31,
ASSETS (Unaudited) 1993
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,280 $ 1,724
Accounts receivable, net of
allowance for doubtful
accounts in 1994 and 1993
of $16 and $10, respectively 1,152 869
Prepaid expenses 169 949
Other current assets 209 274
Total current assets 2,810 3,816
Property and equipment
net of accumulated depreciation
and amortization 56,304 57,234
Cash and cash equivalents restricted for:
Acquisition of property &
equipment 1,475 915
Interest and taxes 516 453
Total restricted cash & cash
equivalents 1,991 1,368
Other assets, net 1,338 1,591
$62,443 $64,009
====== ======
</TABLE>
Continued
The accompanying notes are an integral part
of the consolidated financial statements.
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
<TABLE>
CONSOLIDATED BALANCE SHEETS
(Dollars In Thousands)
<CAPTION>
June 30,
1994 December 31,
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) (Unaudited) 1993
<S> <C> <C>
Current liabilities:
Trade accounts payable $ 708 $ 608
Accrued payroll 359 590
Accrued payroll taxes 352 219
Accrued vacation 380 377
Accrued utilities 295 314
Sales tax payable 520 212
Other current liabilities 728 561
Total current liabilities 3,342 2,881
Long term liabilities:
Long-term debt 66,607 65,912
Deferred interest 4,130 3,846
Other liabilities 150 150
Total long term liabilities 70,887 69,908
Total liabilities 74,229 72,789
Commitments and contingencies
Partners' capital (deficit):
General partner ( 689) ( 659)
Limited partners (11,097) ( 8,121)
Total partners' deficit (11,786) ( 8,780)
$ 62,443 $ 64,009
====== ======
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
<TABLE>
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per unit amounts)
Unaudited
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Revenues:
Direct operating revenues:
Lodging $ 10,069 $ 8,940 $ 16,474 $ 15,104
Food and beverage 2,311 2,243 3,977 4,076
Other income (principally interest) 100 102 188 185
Lease settlement proceeds --- --- --- 709
Total revenues 12,480 11,285 20,639 20,074
Expenses:
Direct operating expenses:
Lodging 2,121 1,904 3,759 3,494
Food and beverage 2,002 2,039 3,603 3,797
Utilities 629 611 1,496 1,469
Repairs and maintenance 884 762 1,681 1,479
Rent 318 327 642 659
Insurance 179 175 358 350
Property taxes 451 351 872 718
Advertising and marketing 867 855 1,559 1,636
Other 2,013 1,831 3,540 3,243
Other general and administrative 89 151 294 341
Depreciation and amortization 1,403 1,361 2,800 2,682
Interest expense 1,530 1,575 3,041 3,107
Total expenses 12,486 11,942 23,645 22,975
Net loss ( 6) ( 657) ( 3,006) ( 2,901)
Net loss allocable to general partner ( ---) ( 7) ( 30) ( 29)
Net loss allocable to limited partners $( 6) $( 650) $( 2,976) $( 2,872)
====== ====== ====== ======
Number of limited partner units
outstanding 4,000 4,000 4,000 4,000
====== ====== ====== ======
Net loss allocable to limited partners
per unit $( ---) $( .16) $( .74) $( .72)
====== ====== ===== ======
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
<TABLE>
CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIT
(Dollars in thousands)
Unaudited
<CAPTION>
Six Months Ended June 30, 1994
General Limited
Partner Partners Total
<S> <C> <C> <C>
Balance at January 1, 1994 $( 659) $( 8,121) $( 8,780)
Net loss for the six
months ended June 30, 1994 ( 30) ( 2,976) ( 3,006)
Balance at June 30, 1994 $( 689) $(11,097) $(11,786)
==== ====== ======
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Unaudited
<CAPTION>
Six Months Ended
June 30,
1994 1993
<S> <C> <C>
Cash flows from operating activities:
Net loss $(3,006) $(2,901)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization
of property 2,550 2,433
Lease settlement proceeds --- ( 703)
Amortization of other assets 250 250
Amortization of debt discount 20 18
Increase (decrease) from changes in:
Accounts receivable ( 283) 169
Prepaid expenses 780 416
Other current assets 65 162
Lease and utility deposits 3 ---
Trade accounts payable 100 ( 321)
Accrued payroll and payroll taxes ( 98) ( 73)
Accrued vacation 3 5
Accrued utilities ( 19) ( 25)
Sales tax payable 308 166
Other current liabilities 167 ( 125)
Deferred interest 284 547
Net cash provided by
operating activities 1,124 18
Cash flows from investing activities:
Additions to property and equipment (1,620) (2,127)
Increase in restricted cash ( 623) ( 36)
Net cash used in investing activities (2,243) (2,163)
</TABLE>
Continued
The accompanying notes are an integral part
of the consolidated financial statements.
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Unaudited
<CAPTION>
Six Months Ended
June 30,
1994 1993
<S> <C> <C>
Cash flows from financing activities:
Long-term borrowings $ 675 $ 2,620
Revolving credit facility
borrowings 1,763 815
Revolving credit facility repayments (1,763) ( 455)
Net cash provided by
financing activities 675 2,980
Net increase (decrease) in cash
and cash equivalents ( 444) 835
Cash and cash equivalents,
beginning of period 1,724 1,658
Cash and cash equivalents, end
of period $ 1,280 $ 2,493
===== =====
Supplementary cash flow data:
Interest paid $ 2,737 $ 2,542
===== =====
Noncash activities:
Lease settlement proceeds received
from former affiliate in the form
of stock and notes receivable used
to reduce long-term debt $ --- $ 703
===== =====
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION:
In the opinion of the General Partner, the accompanying interim
unaudited financial statements of Prime Motor Inns Limited Partner-
ship (the "Partnership") and its 99% owned subsidiary, AMI Operating
Partners, L.P. ("Operating Partners"), referred to collectively as
the "Partnerships", contain all adjustments, consisting only of
normal recurring adjustments, necessary to present fairly the finan-
cial position of the Partnerships as of June 30, 1994, their results
of operations for the three and six months ended June 30, 1994 and
1993, and their cash flows for the six months ended June 30, 1994
and 1993.
The results of operations for the six months ended June 30, 1994,
are not necessarily indicative of the results to be expected for the
full year. Unless cash flows from operations are sufficient to pay
operating expenses and debt service, and create required reserves,
the Partnerships may not be able to continue as going concerns.
Information included in the consolidated balance sheet as of Decem-
ber 31, 1993 has been derived from the audited balance sheet in the
Partnerships' Annual Report on Form 10-K for the year ended December
31, 1993 filed with the Securities and Exchange Commission (the
"1993 Form 10-K"). These interim unaudited financial statements
should be read in conjunction with the audited consolidated finan-
cial statements and other information included in the 1993 Form
10-K.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Principles of Consolidation
The consolidated financial statements include the accounts of the
Partnership and Operating Partners. Operating Partners operates
under a 52/53 week fiscal year. Operating results for the Partner-
ship are reflected in the consolidated statements of operations as
other general and administrative expenses. All material intercompa-
ny accounts and transactions have been eliminated.
Cash Equivalents
Cash equivalents are highly liquid investments with a maturity of
three months or less when acquired.
Property and Equipment
Property and equipment are stated at the lower of cost or fair
market value. Expenditures for improvements and major renewals are
capitalized. Expenditures for maintenance and repairs are expensed
as incurred. For financial statement purposes, provision is made
for depreciation and amortization using the straight-line method
over the lesser of the estimated useful lives of the assets or the
terms of the related leases as follows: buildings - 30 years;
leasehold improvements - 22 to 30 years; and furniture and equipment
- 3 to 10 years. For federal income tax purposes, accelerated
methods are used in calculating depreciation.
Other Assets
Franchise fees, deferred lease costs and deferred debt acquisition
costs are amortized on a straight-line basis over the estimated
lives of the assets or the specific term of the related agreement,
lease or mortgage loan.
Net Loss Per Unit
Net loss per Unit is calculated based on net loss allocable to
limited partners divided by the 4,000,000 units outstanding.
Reclassifications
Certain amounts in the 1993 consolidated financial statements have
been reclassified to conform to the 1994 presentation.
3. OPERATIONS OF THE INNS:
Winegardner & Hammons, Inc. ("W&H") continues to manage the opera-
tions of the Inns (the "Inns") pursuant to its management agreement
with Operating Partners. At June 30, 1994 and December 31, 1993,
the Partnerships had approximately $116,000 and $118,000, respec-
tively, in receivables from an entity controlled by W&H which manag-
es certain of the lounges at the Inns.
4. OTHER ASSETS:
<TABLE>
The components of other assets are as follows (in thousands):
<CAPTION>
June 30, December 31, Amortization
1994 1993 Period
<S> <C> <C> <C>
Deferred lease costs $ 21 $ 21 20 years
Debt acquisition
costs 2,839 2,839 8 years
Franchise acquisition
costs 820 820 Various
Other 13 16
3,693 3,696
Less accumulated
amortization 2,355 2,105
$1,338 $1,591
===== =====
</TABLE>
Amortization of debt acquisition costs charged to expense was
$180,000 in each of the six months ended June 30, 1994 and 1993, re-
spectively. Amortization of franchise acquisition costs charged to
expense was $70,000 in each of the six months ended June 30, 1994
and 1993, respectively. In the first half of 1994, other assets
(consisting of required lease and utility deposits) were reduced by
$3,000.
5. DEBT:
For the quarter ended June 30, 1994, Operating Partners borrowed
$457,000 for capital improvements and refurbishments made under the
Capital Improvement Plan (the "Capital Improvement Plan") financed
from the Tranche A Loan (the "Tranche A Loan") portion of the Prim-
ing Loan (the "Priming Loan"). As of June 30, 1994, the outstanding
balance of the Tranche A Loan is $11,500,000.
For the quarter ended June 30, 1994, Operating Partners repaid the
$1,763,000 of the revolving credit portion of the Priming Loan,
referred to as the Tranche B Loan (the "Tranche B Loan"), borrowed
in the first quarter of 1994. As of June 30, 1994 there is no
balance in the Tranche B Loan.
<TABLE>
Long-term debt consists of the following:
<CAPTION>
June 30, 1994 December 31, 1993
<S> <C> <C>
Mortgage Notes, net of
unamortized discount $55,107,000 $55,087,000
Priming Loan 11,500,000 10,825,000
$66,607,000 $65,912,000
========== ==========
</TABLE>
Unamortized discount on the Mortgage Notes were $267,000 and
$287,000 at June 30, 1994 and December 31, 1993, respectively.
6. COMMITMENTS AND CONTINGENCIES:
During the quarter ended June 30, 1993, the Mortgage Lenders (the
"Mortgage Lenders") received 237,987 shares of New Common Stock
("Prime Stock") in Prime Hospitality Corp. ("Prime") as recovery of
the Prime Hospitality Corp. Settlement (the "Settlement"). These
shares were subsequently sold in July, 1993, and the proceeds of
approximately $763,000 was recognized as lease settlement income in
July. All of the proceeds were used to reduce the principal balance
of the Mortgage Notes in accordance with the Priming Loan.
Any further recovery from the Settlement will be recognized as lease
settlement proceeds and will be applied to reduce the principal
balance of the Mortgage Notes.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
The Partnership derives its income from its interest in Operating
Partners, whose income currently is derived from the operations of
its Inns. As part of its 1992 plan of reorganization (the "Plan"),
Operating Partners restructured its Mortgage Notes under the Restat-
ed Loan Agreement (the "Restated Loan Agreement") and arranged a
Priming Loan to fund necessary capital improvements and to finance
operating deficiencies. The ability of the Partnership to pay
operating expenses and debt service, and to create required reserves
depends upon the ability of the Partnership to increase future cash
flows from operations. Unless cash flows from operations are suffi-
cient, the Partnerships may not be able to continue as going con-
cerns. It is the intention of the Partnerships to continue to
operate the Inns as going concerns.
The second quarter of 1994 saw the completion of the $13,000,000
Capital Improvement Plan that began in 1992. These improvements
have enabled the Inns to become competitive in their respective
markets. The rebounding economy and increase in certain market
segments, such as Individual and Group Business and Leisure Travel
has contributed to the Inns increased revenues in the second quar-
ter, which has partially offset the loss in occupancies due to the
harsh winter weather in the first quarter of 1994.
The Partnerships' investment in the Inns continues to be subject to
the risks generally incident to the ownership of real estate, in-
cluding those relating to the uncertainty of cash flow to meet fixed
obligations, adverse changes in national economic conditions, ad-
verse changes in local market conditions, construction of new hotels
and/or the franchising by Holiday Inn of competitor hotels, changes
in interest rates, the availability of financing for operating or
capital needs, changes in real estate tax rates and other operating
expenses, adverse changes in governmental rules and fiscal policies,
acts of God (which may result in uninsured losses), condemnation and
other factors that are beyond the control of the General Partner,
the Partnership, Operating Partners or W&H. In addition, a major
league baseball strike could negatively impact some of the Inns.
Results of Operations
Total revenues increased for the six months ended June 30, from
$20,074,000 in 1993 to $20,639,000 in 1994. Total revenues for the
quarter ended June 30, increased from $11,285,000 in 1993 to
$12,480,000 in 1994. This increase is attributable to the increase
in room revenue, which is due to the achievement of higher average
Daily Room Rates (ADR) at the Inns, and increased occupancies, in
the quarter ended June 30, 1994. This is reflected in the following
table, which compares room revenues, occupancy percentage levels and
ADR, for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Room Revenues $10,069,000 $8,940,000 $16,474,000 $15,104,000
Occupancy 69.4% 66.3% 58.7% 58.4%
ADR $61.79 $57.69 $59.56 $55.06
</TABLE>
The increase in ADR's and occupancies at the Inns can be
attributable to the improved condition of the Inns from the
Capital Improvement Plan. The Inns' improved conditions have enabled
them to attract market segments with higher ADR's, such as
individual business, corporate group, leisure and transient guests,
and association/convention guests. Also, the Inns have seen an
increase in business and leisure guests in the second quarter of
1994, in part the result of travel plans which had been postponed
during the first quarter of 1994 due to the severe winter weather
conditions. Attracting these market segments with higher ADR's
has also been accomplished through effective marketing and sales
promotions. In attracting the market segments with higher ADR's,
the Inns have had to remove some of their lower ADR market
segments (such as airline crews, government and tour groups).
This repositioning of market segment business had caused a
decline in occupancies in the first quarter of 1994, which rebounded
in the second quarter of 1994. For the second quarter of 1994,
occupancies increased to 69.4% from 66.3% in the second quarter of
1993. In addition to the improved condition of the Inns, the
increase in occupancies in the second quarter of 1994 is partly
attributable to an increase in group business, which is a result of
increased direct sales efforts and, increases in reservations from
the Holiday Inn-Holidex Central Reservation System, in particular
because of an increase in airline reservation systems business. Due
to the intense competition in the areas where the Inns are located,
it will continue to be difficult to significantly increase their
respective occupancy levels. Contributing to future competition is
pending select competitor changes, most significantly, conversions
in franchise affiliation of competitor hotels to a Holiday
Inn franchise. However, it is anticipated that the Inns can
continue to improve their mix of market segments and thereby
increase average daily rates and improve profit margins.
Food and beverage revenues increased in the second quarter from
$2,243,000 in 1993 to $2,311,000 in 1994, which is primarily a
result of increased banquet sales, coupled with increased occupan-
cies in the second quarter of 1994 over the same quarter of 1993.
Overall, food and beverage revenues are down for the six months
ended June 30, from $4,076,000 in 1993 to $3,977,000 in 1994. The
decrease is a result of the low occupancies in the first quarter of
1994 due to the harsh winter weather, which offset the increase in
revenues in the second quarter of 1994.
Direct operating expenses increased from $8,855,000 for the quarter
ended June 30, 1993 to $9,464,000 in the corresponding quarter of
1994. Certain operating expenses vary with occupancies at the Inns.
The increase in lodging expenses and certain "Other" direct operat-
ing expenses in the second quarter of 1994 compared to the corre-
sponding quarter of 1993 are directly attributable to the increase
in occupancy at the Inns during the period. The increase in reve-
nues contribute to the increase in "Other" direct operating expenses
that are based upon earned revenues, such as certain administrative
and general expenses, inn management fees and franchise fees.
Depreciation and amortization expense increased to $1,403,000 for
the quarter ended June 30, 1994 from $1,361,000, due to the addi-
tions of property and equipment as part of the Capital Improvement
Plan.
Liquidity and Capital Resources
<TABLE>
<CAPTION>
The following table represents the changes in cash and cash equiva-
lents for the six months ended June 30, 1994:
<S> <C>
Net cash provided by operating activities $ 1,124
Net cash used in investing activities (2,243)
Net cash provided by financing activities 675
Net decrease in cash and cash equivalents $( 444)
=====
</TABLE>
Indicative of the seasonal nature of the business where the Inns are
located, operating revenues increased during the six months ended
June 30, 1994, providing for improved operating margins, which
resulted in a positive cash flow from operations for the six months
ended 30, 1994.
Net cash used in investing activities for the six months ended June
30, 1994 included $1,620,000 in additions to property and equipment.
Other cash used in investing activities includes restricted deposits
into the Tax Escrow Account and the Reserve for Acquisition of
Property and Equipment (the "Reserve"). Funding to the Reserve is
4% of revenues, as required under the Priming Loan.
Cash provided by financing activities was $675,000 for the six
months ended June 30, 1994. This $675,000 was borrowed from the
Priming Loan for capital improvements and refurbishments, to com-
plete the Capital Improvement Plan.
During the second quarter of 1994 the Partnership borrowed the
remaining balance of the Tranche A portion of the Priming Loan to
fund the Capital Improvement Plan. In accordance with the Priming
Loan, existing and future capital needs are to be funded from
the Reserve, which is funded at 4% of revenues in 1994 and 5%
of revenues thereafter. In the second quarter of 1994,
approximately $306,000 was funded from the Reserve for the
acquisition of property and equipment to complete the Capital
Improvement Plan.
PART II. OTHER INFORMATION AND SIGNATURES
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter
for which this report is filed.
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 MOTOR INNS LIMITED PARTNERSHIP
(REGISTRANT)
BY:Prime-American Realty Corp.
General Partner
Date: August 10, 1994 By: S. Leonard Okin
(Signature)
Vice President
