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 March 31, 1995
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 WHI
4243 Hunt Road
Cincinnati, Ohio 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 ___
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
INDEX
PAGE
NUMBER
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets -
March 31, 1995 and December 31, 1994 3
Consolidated Statements of Operations - Three
Months Ended March 31, 1995 and 1994 5
Consolidated Statements of Partners' Deficit -
Three Months Ended March 31, 1995 6
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1995 and 1994 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 Form 8-K 15
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
1995 December 31,
ASSETS (Unaudited) 1994
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 661 $ 1,368
Accounts receivable, net of
allowance for doubtful
accounts in 1995 and 1994
of $15 and $19, respectively 814 881
Prepaid expenses 654 986
Other current assets 361 391
Total current assets 2,490 3,626
Property and equipment
net of accumulated depreciation
and amortization 53,916 54,881
Cash and cash equivalents restricted for:
Accusition of property & equipment 628 610
Interest and taxes 501 467
Total restricted cash & cash
equivalents 1,129 1,077
Other assets, net 1,002 1,089
$ 58,537 $ 60,673
</TABLE>
Continued
The accompanying notes are an integral part
of the consolidated financial statements.
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
March 31,
1995 December 31,
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) (Unaudited) 1994
<S> <C> <C>
Current liabilities:
Revolving credit facility $ 1,200 $ -
Trade accounts payable 350 402
Accrued payroll 321 714
Accrued payroll taxes 181 258
Accrued vacation 438 436
Accrued utilities 240 249
Sales tax payable 332 221
Other current liabilities 648 643
Total current liabilities 3,710 2,923
Long-term debt 65,613 66,627
Deferred interest 4,234 4,426
Other liabilities 150 150
Total long term liabilities 69,997 71,203
Total liabilities 73,707 74,126
Commitments and contingencies
Partners' capital (deficit):
General partner (723) (706)
Limited partners (14,447) (12,747)
Total partners' deficit (15,170) (13,453)
$ 58,537 $ 60,673
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars in thousands, except per unit amounts)
Unaudited
<TABLE>
<CAPTION>
Three months ended
March 31,
1995 1994
<S> <C> <C>
Revenues:
Direct operating revenues:
Lodging $ 6,812 $ 6,405
Food and beverage 1,669 1,666
Other income (principally interest) 94 88
Lease settlement proceeds 1,025 -
Total Revenues 9,600 8,159
Expenses:
Direct operating expenses
Lodging 1,712 1,638
Food and beverage 1,669 1,666
Utilities 777 867
Repairs and maintenance 818 797
Rent 331 324
Insurance 193 179
Property taxes 383 421
Marketing 747 692
Other 1,658 1,525
Other general and administrative 115 205
Depreciation and amortization 1,376 1,399
Interest expense 1,516 1,511
Total expenses 11,317 11,159
Net loss (1,717) (3,000)
Net loss allocable to general partner (17) (30)
Net loss allocable to limited $ (1,700) $ (2,970)
Number of limited partner
units outstanding 4,000 4,000
Net loss allocable to limited partners
per unit $ (0.43) $ (0.74)
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF PARTNERS' DEFICIT
(Dollars in thousands)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended March 31, 1995
General Limited
Partner Partners Total
<S> <C> <C> <C>
Balance at January 1, 1995 $ (706) $(12,747) $(13,453)
Net loss for the three
months ended March 31, 1995 (17) (1,700) (1,717)
Balance at March 31, 1995 $ (723) $(14,447) $(15,170)
</TABLE>
The accompanying notes are an integral part
of the consolidated financial statements.
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,717) $(3,000)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization
of property and equipment 1,289 1,274
Lease settlement proceeds (1,025) -
Amortization of other assets 87 125
Amortization of debt discount
Increase (decrease) from changes in:
Accounts receivable 67 56
Prepaid expenses 332 272
Lease and utility deposits - 3
Other current assets 30 67
Trade accounts payable (52) (174)
Accrued payroll and payroll taxes (470) (366)
Accrued vacation 2 -
Accrued utilities (9) (20)
Sales tax payable 111 129
Other current liabilities 5 181
Deferred interest (192) 147
Net cash used in
operating activities
Cash flows from investing activities:
Additions to property and equipment (324) (628)
Increase in restricted cash (52) (266)
Net cash used in investing activities (376) (894)
</TABLE>
Continued
The accompanying notes are an integral part
of the consolidated financial statements.
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Dollars in thousands)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1994
<S> <C> <C>
Cash flows from financing activities:
Long-term borrowings $ - $ 218
Revolving credit facility borrowings 1,200 1,763
Net cash provided by
financing activities 1,200 1,981
Net decrease in cash and
cash equivalents (707) (210)
Cash and cash equivalents,
beginning of period 1,368 1,724
Cash and cash equivalents,
end of period $ 661 $ 1,514
Supplementary cash flow data:
Interest paid $ 1,697 $ 1,355
Noncash activities:
Lease settlement proceeds received
from former affiliate in the form of
stock used to reduce long-term debt $ 1,025 $ -
</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 Partnership (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 financial position of the Partnerships as of March 31, 1995,
their results of operations for the three months ended March 31, 1995 and 1994,
and their cash flows for the three months ended March 31, 1995 and 1994.
The results of operations for the three months ended March 31, 1995, 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 December 31, 1994
has been derived from the audited balance sheet in the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1994 filed with the
Securities and Exchange Commission (the "1994 Form 10-K"). These interim
unaudited financial statements should be read in conjunction with the audited
consolidated financial statements and other information included in the 1994
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 costs of the Partnership are reflected in the consolidated
statements of operations as other general and administrative expenses. All
material intercompany 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. 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.
3. OPERATIONS OF THE INNS:
Winegardner & Hammons, Inc. ("W&H") continues to manage the operations of the
Inns (the "Inns") pursuant to its management agreement with Operating Partners.
At March 31, 1995 and December 31, 1994, the Partnerships had approximately
$70,000 and $97,000, respectively, in receivables from an entity controlled by
W&H which manages certain of the lounges at the Inns.
4. OTHER ASSETS:
The components of other assets are as follows(dollar amounts in thousands):
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
<S> <C> <C>
Deferred lease costs $ 21 $ 21
Debt acquisition costs 2,839 2,839
Franchise acquisition costs 820 820
Other 4 4
3,684 3,684
Less accumulated amortization 2,682 2,595
$ 1,002 $ 1,089
</TABLE>
Amortization of debt acquisition costs charged to expense was $52,000 and
$90,000 in the three months ended March 31, 1995 and 1994, respectively.
Amortization of franchise acquisition costs charged to expense was $35,000
in each of the three months ended March 31, 1995 and 1994.
5. DEBT:
For the quarter ended March 31, 1995, no additional debt was incurred
by Operating Partners for capital improvements under the Tranche A Loan
portion of the Priming Loan by Operating Partners. All capital
improvements and refurbishments made during the quarter ended March 31,
1995 were funded from the FF&E Reserve.
For the quarter ended March 31, 1995, Operating Partners borrowed
$1,200,000 of the revolving credit portion of the Priming Loan, defined as
the Tranche B Loan, based upon insufficient working capital during the first
quarter of 1995. As of March 31, 1995 the balance of the Tranche B Loan is
$1,200,000.
<TABLE>
Long-term debt consists of the following:
<CAPTION>
March 31, 1995 December 31, 1994
<S> <C> <C>
Mortgage Notes, net of
unamortized discount $ 54,113,000 $ 55,127,000
Priming loan 12,700,000 11,500,000
66,813,000 66,627,000
Less revolving credit portion
of Priming Loan, due currently 1,200,000 -
$ 65,613,000 $ 66,627,000
</TABLE>
Unamortized discount on the Mortgage Notes was $236,000 and $247,000 at
March 31, 1995 and December 31, 1994, respectively.
6. COMMITMENTS AND CONTINGENCIES:
In November, 1994 the Mortgage Lenders received 127,924 shares of New
Common Stock in Prime Hospitality Corp. as further recovery from the Prime
Hospitality Corp. Settlement. These shares were sold by the Mortgage
Lenders, and the proceeds of $1,025,000 were utilized by the Mortgage
Lenders to reduce the principal balance of the Mortgage Notes and were
recognized by the Partnerships as lease settlement proceeds, in the first
quarter of 1995.
No further recovery from the Settlement is expected by the Partnerships.
Should any further recovery be received by the Mortgage Lenders, the proceeds
would be utilized to reduce the principal balance of the Mortgage Notes, upon
valuation in accordance with the Omnibus Agreement. At the time the principal
reduction of the Mortgage Notes occurs, the Partnerships will recognize lease
settlement proceeds.
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 the Inns. As part of
its 1992 plan of reorganization, Operating Partners restructured its Mortgage
Notes under 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 sufficient, the Partnerships may not be able to continue as going concerns.
It is the intention of the Partnerships to continue to operate the Inns as going
concerns.
Historically, occupancies at the Inns and cash flows from their operations are
lowest during the winter months. Operating Partners were required to borrow
$1,200,000 from the Tranche B Loan to supplement cash flows from operations
during the first quarter of 1995.
The Partnerships' investment in the Inns continues to be subject to the risks
generally incident to the ownership of real estate, including those relating
to the uncertainty of cash flow to meet fixed obligations, adverse changes in
national economic conditions, adverse 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
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.
Results of Operations
The net loss for quarter ended March 31, 1995 decreased to $1,717,000 from
$3,000,000 in the first quarter of 1994. The decrease in net loss in the
first quarter of 1995 was attributable in part to the $1,025,000 of lease
settlement proceeds. Excluding the lease settlement proceeds and other non-
operating income (principally interest income), the net loss from operations
in the first quarter of 1995 decreased to $2,836,000 from $3,088,000 in the
corresponding quarter of 1994.
Total revenues for the three months ended March 31, increased to $9,600,000 in
1995 from $8,159,000 in 1994. Total revenues for the first quarter of 1995
included $1,025,000 of lease settlement proceeds from the Settlement with
Prime. Total revenues from operations increased for the three months ended
March 31, from $8,071,000 in 1994 to $8,481,000 in 1995. The 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.
The following table compares room revenues, occupancy percentage levels and
ADR, for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1995 1994
<S> <C> <C>
Room Revenues $6,812,000 $6,405,000
Occupancy 47.8% 48.0%
ADR $59.84 $56.33
</TABLE>
The increase in ADR in the first quarter of 1995 over the same period in 1994
can be attributed to the improved condition of the Inns from the improvements
completed in 1994 under the Capital Improvement Plan and the continued
additions to property and equipment made by Operating Partners to maintain the
competitive condition of the Inns. The Inns' improved conditions have enabled
them to attract market segments with higher ADR and become less dependent upon
the defense industry and recover business from the insurance, healthcare, and
and other government industries. Attracting the market segments with higher ADR
has also been accomplished through effective marketing and sales promotions.
The ADR increased $3.51, from a $56.33 ADR in the first quarter of 1994 to a
$59.84 ADR in the first quarter of 1995. In attracting the market segments
with higher ADR, the Inns have had to remove some of their lower ADR market
segments (such as airline crews). This caused a slight decline in occupancies
in the first quarter of 1995 to 47.8% as compared to 48.0% in the
corresponding quarter of 1994. Due to the intense competition in the areas
where the Inns are located, it will be difficult to significantly increase the
occupancy levels of the Inns. Contributing to future competition are certain
pending 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 ADR and improve profit margins.
Direct operating expenses increased to $8,310,000 for the quarter ended March
31, 1995 from $8,044,000 in the corresponding quarter of 1994. The increase in
direct operating expenses in the first quarter of 1995, compared to the first
quarter of 1994, resulted from increased lodging expenses, reflecting higher
labor costs and increased costs of lodging amenities (caused by the change in
market segment mix to higher ADR segments where certain additional guest
amenities are provided), marketing expenses and increases in other operating
expenses. The increase in revenues contributed to the increase in "Other:
direct operating expenses that are based upon revenues, such as certain
administrative and general expenses, Inn management fees and framchise fees.
Utility costs decreased from $867,000 for the quarter ended March 31, 1994 to
$777,000 in the corresponding quarter of 1995, which is attributable to the
milder weather conditions during the first quarter of 1995, than in the first
quarter of 1994.
Liquidity and Capital Resources
<TABLE>
The following table represents the changes in cash and cash equivalents for
the three months ended March 31, 1995:
<CAPTION>
<S> <C>
Net cash used in operating activities $(1,531)
Net cash used in investing activities (376)
Net cash provided by financing activities 1,200
Net decrease in cash and cash equivalents $ (707)
</TABLE>
For the quarter ended March 31, 1995, operating expenses exceeded cash
provided by operating revenues of the Inns and the Partnership. Historically,
cash flows from the operations of the Inns are lowest during the winter
months.
Net cash used in investing activities for the quarter ended March 31, 1995
included $324,000 in additions to property and equipment. Other cash used in
investing activities includes restricted deposits into the Tax Escrow Account,
and the FF&E Reserve. Funding to the FF&E Reserve increased to 5% of
revenues beginning in 1995, from 4% in 1994, as required under the Priming
Loan. For the three months ended March 31, 1995, funding to the FF&E Reserve
exceeded capital expenditures funded from the FF&E Reserve by $18,000.
Required funding to the Tax Escrow Account and interest earned in the Interest
Reserve Account increased by $34,000 during the three months ended March 31,
1995.
Cash provided by financing activities was $1,200,000, representing borrowings
under the Tranche B portion of the Priming Loan for operating cash
deficiencies during the quarter ended March 31, 1995.
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: May 8, 1995 By: /s/ S. Leonard Okin
S. Leonard Okin
Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1995
<PERIOD-END> MAR-31-1995
<CASH> 661
<SECURITIES> 0
<RECEIVABLES> 829
<ALLOWANCES> 15
<INVENTORY> 0
<CURRENT-ASSETS> 2490
<PP&E> 53916
<DEPRECIATION> 0
<TOTAL-ASSETS> 58537
<CURRENT-LIABILITIES> 3710
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 58537
<SALES> 8481
<TOTAL-REVENUES> 9600
<CGS> 3403
<TOTAL-COSTS> 83107
<OTHER-EXPENSES> 1491
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1516
<INCOME-PRETAX> (1717)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1717)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1717)
<EPS-PRIMARY> (.43)
<EPS-DILUTED> (.43)
</TABLE>
