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, 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 -
June 30, 1995 and December 31, 1994 3
Consolidated Statements of Operations - Three
and Six Months Ended June 30, 1995 and 1994 5
Consolidated Statements of Partners' Deficit -
Six Months Ended June 30, 1995 6
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 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>
June 30,
1995 December 31,
ASSETS (Unaudited) 1994
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,893 $ 1,368
Accounts receivable, net of
allowance for doubtful
accounts in 1995 and 1994
of $20 and $19, respectively 736 881
Prepaid expenses 303 986
Other current assets 382 391
Total current assets 3,314 3,626
Property and equipment
net of accumululated depreciation
and amortization 53,169 54,881
Cash and cash equivalents restricted for:
Acquisition of property & equipment 558 610
Interest and taxes 535 467
Total restricted cash & cash
equivalents 1,093 1,077
Other assets, net 915 1,089
$ 58,491 $ 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>
June 30,
1995 December 31,
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) (Unaudited) 1994
<S> <C> <C>
Current liabilities:
Trade accounts payable $ 475 $ 402
Accrued payroll 574 714
Accrued payroll taxes 346 258
Accrued vacation 436 436
Accrued utilities 268 249
Sales tax payable 474 221
Other current liabilities 859 643
Total current liabilities 3,432 2,923
Long-term debt 65,624 66,627
Deferred interest 4,062 4,426
Other liabilities 150 150
Total long term liabilities 69,836 71,203
Total liabilities 73,268 74,126
Commitments and contingencies
Partners' capital (deficit):
General partner (719) (706)
Limited partners (14,058) (12,747)
Total partners' deficit (14,777) (13,453)
$ 58,491 $ 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 Six Months Ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues:
Lodging $10,572 $10,069 $17,384 $16,474
Food & beverage 2,239 2,311 3,908 3,977
Other income (principally interest) 100 100 194 188
Lease settlement proceeds - - 1,025 -
Total revenues 12,911 12,480 22,511 20,639
Expenses:
Direct operating expenses
Lodging 2,154 2,121 3,866 3,759
Food and beverage 2,045 2,002 3,736 3,603
Utilities 611 629 1,388 1,496
Repairs and maintenance 927 884 1,745 1,681
Rent 328 318 659 642
Insurance 193 179 386 358
Property taxes 383 451 766 872
Marketing 867 867 1,614 1,559
Other 1,930 2,013 3,588 3,540
Other general and administrative 173 89 288 294
Depreciation and amortization 1,366 1,403 2,742 2,800
Interest expense 1,541 1,530 3,057 3,041
Total expenses 12,518 12,486 23,835 23,645
Net income (loss) 393 (6) (1,324) (3,006)
Net income (loss) allocable to
general partner 4 - ( 13) ( 30)
Net income (loss) allocable to
limited partners $ 389 $ (6) $(1,311) $(2,976)
Number of limited partnerunits outstanding 4,000 4,000 4,000 4,000
Net income (loss) allocable to limited
partners per Unit $ 0.10 $ - $ (0.33) $ (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>
Six Months Ended June 30, 1995
General Limited
Partner Partners Total
<S> <C> <C> <C>
Balance at January 1, 1995 $ (706) $(12,747) $(13,453)
Net loss for the six
months ended June 30, 1995 (13) (1,311) (1,324)
Balance at June 30, 1995 $ (719) $(14,058) $(14,777)
</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>
Six Months Ended
June 30,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net loss $(1,324) $(3,006)
Adjustments to reconcile net loss
to net cash provided by (used in)
operating activities:
Depreciation and amortization
of property and equipment 2,568 2,550
Lease settlement proceeds (1,025) -
Amortization of other assets 174 250
Amortization of debt discount 22 20
Increase (decrease) from changes in:
Accounts receivable 145 (283)
Prepaid expenses 683 780
Lease and utility deposits - 3
Other current assets 9 65
Trade accounts payable 73 100
Accrued payroll and payroll taxes (52) (98)
Accrued vacation - 3
Accrued utilities 19 (19)
Sales tax payable 253 308
Other current liabilities 216 167
Deferred interest (364) 284
Net cash provided by
operating activities 1,397 1,124
Cash flows from investing activities:
Additions to property and equipment (856) (1,620)
Increase in restricted cash (16) (623)
Net cash used in investing activities (872) (2,243)
</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>
Six Months Ended
June 30,
1995 1994
<S> <C> <C>
Cash flows from financing activities:
Long-term borrowings $ - $ 675
Borrowings under revolving credit
facility 1,200 1,763
Repayment of revolving credit facility (1,200) (1,763)
Net cash provided by
financing activities - 675
Net increase (decrease) in cash and
cash equivalents 525 (444)
Cash and cash equivalents,
beginning of period 1,368 1,724
Cash and cash equivalents,
end of period $ 1,893 $ 1,280
Supplementary cash flow data:
Interest paid $ 3,399 $ 2,737
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 collectively as the "Partnerships", contain
all adjustments, consisting of normal recurring adjustments, necessary to
present fairly the financial position of the Partnerships as of June 30, 1995,
their results of operations for the three and six months ended June 30, 1995
and 1994, and their cash flows for the six months ended June 30, 1995 and 1994.
The results of operations for the six months ended June 30, 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.
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.
OPERATIONS OF THE INNS:
Winegardner & Hammons, Inc. ("W&H") manages the operations of the Inns (the
"Inns") pursuant to a management agreement with Operating Partners. At June
30, 1995 and December 31, 1994, the Partnerships had approximately $77,000 and
$97,000, respectively, in receivables from an entity controlled by W&H which
manages certain of the lounges at the Inns.
OTHER ASSETS:
The components of other assets are as follows (dollar amounts in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
<S> <C> <C>
Deferred lease costs $ 21 $ 21
Debt acquisition costs 2,839 2,839
Franchise acquisition
fees 820 820
Other 4 4
3,684 3,684
Less accumulated
amortization 2,769 2,595
$ 915 $ 1,089
</TABLE>
Amortization of debt acquisition costs charged to expense was $104,000 and
$180,000 in the six months ended June 30, 1995 and 1994, respectively.
Amortization of franchise acquisition costs charged to expense was $70,000 in
each of the six months ended June 30, 1995 and 1994.
DEBT:
For the six months ended June 30, 1995, no additional debt was incurred by
Operating Partners for capital improvements under the Tranche A Loan portion
of the Priming Loan. All capital improvements and refurbishments made during
the six months ended June 30, 1995 were funded from cash restricted for
acquisition of property and equipment (the "FF&E Reserve").
During the first quarter of 1995, Operating Partners borrowed $1,200,000 of
the revolving credit portion of the Priming Loan, defined as the Tranche B Loan,
to fund operating expenses that could not be paid from operating revenues. In
the second quarter of 1995, Operating Partners repaid the entire Tranche B Loan
from excess working capital.
<TABLE>
Long-term debt consists of the following:
<CAPTION>
June 30, 1995 December 31, 1994
<S> <C> <C>
Mortgage Notes, net of
unamortized discount $ 54,124,000 $ 55,127,000
Priming loan 11,500,000 11,500,000
$ 65,624,000 $ 66,627,000
</TABLE>
Unamortized discount on the Mortgage Notes was $225,000 and $247,000 at June
30, 1995 and December 31, 1994, respectively.
COMMITMENTS AND CONTINGENCIES:
In November, 1994 the Mortgage Lenders received 127,924 shares of common stock
in Prime Hospitality Corp. on account of claims asserted in the bankruptcy
reoganization of Prime Motor Inns, Inc. These shares were subsequently sold
by the Mortgage Lenders, and the proceeds of $1,025,000 were utilyzed 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 is expected by the Partnerships on account of such claims.
Should any further recovery be received by the Mortgage Lenders, the proceeds
would be utilized to reduce the principal balance of the Mortgage Notes. 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.
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
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
Operations in the second quarter of 1995 generated net income of $393,000,
compared to a $6,000 net loss for the same quarter of 1994. Total net loss
for the six months ended June 30, 1995 was $1,324,000, compared to a net loss
of $3,006,000 in the first six months of 1994. The decrease in losses
reflects the $1,025,000 in lease settlement proceeds received in the first
quarter of 1995 coupled with an increase in lodging revenues.
Total revenues for the three months ended June 30, 1995 increased to
$12,911,000 from $12,480,000 in the corresponding quarter of 1994. Excluding
the $1,025,000 in lease settlement proceeds received, total revenues from
operations in the six months ended June 30, 1995 rose $847,000, to
$21,486,000, compared to $20,639,000 for the first six months of 1994.
The increase is attributable to the increase in room revenue, which is due to
the achievement of higher Average Daily Rates (ADR) at the Inns, as occupancy
has remained flat.
The following table compares room revenues, occupancy percentage levels and
ADR, for the periods indicated:
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
Room Revenues $10,572,000 $10,069,000 $17,384,000 $16,474,000
Occupancy 69.4% 69.4% 58.6% 58.7%
ADR $64.74 $61.79 $62.74 $59.56
The Inns have achieved increases in ADR in the second quarter and in the first
six months of 1995 over the same periods in 1994 due to the upgraded condition
of the Inns from the improvements completed in 1994 under the Capital
Improvement Program and the continued additions to property and equipment made
by Operating Partners to maintain the competitive condition of the Inns. The
improved condition of the Inns, together with effective internal marketing and
sales efforts and promotions, have enabled the Partnerships to reposition the
Inns, thereby changing the mix of market segments at the Inns and attracting
market segments that pay a higher ADR. The Inns have become less dependent
upon the defense industry and airline crews, and have recovered business from
the insurance, healthcare, and other government industries. The ADR increased
$2.95, from a $61.79 ADR in the second quarter of 1994 to a $64.74 ADR in the
second quarter of 1995. Overall, the ADR has increased 5.3%, or $3.18, in the
first six months of 1995 compared to the first six months of 1994.
Occupancies were flat at 69.4% in the second quarters of 1995 and 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. In
general, occupancies throughout the Middle Atlantic states have been flat.
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 or maintain their mix of market segments and thereby
increase ADR and improve profit margins.
Food and beverage revenues for the quarter and six months ended June 30, 1995,
declined slightly, from $2,311,000 in the second quarter of 1994 to $2,239,000
in the second quarter of 1995 and from $3,977,000 in the first half of 1994 to
$3,908,000 in the first half of 1995. The decline is attributable to the
change in mix of market segments, since some of the market segments that pay a
lower ADR and were displaced, used the restaurant and banquet facilities at
the Inns more than some of the higher ADR segments.
Direct operating expenses were comparable between the quarter ended June 30,
1995 and the corresponding quarter of 1994, declining slightly from $9,464,000
in 1994 to $9,439,000 in 1995. Normal increases in variable operating
expenses, especially those that are revenue based, were offset by cost savings
during the second quarter of 1995. Other general and administrative costs
increased in the second quarter of 1995, compared to the same quarter of 1994,
as a result of certain items being expensed in the second quarter of 1995,
while in 1994 those expenses were reflected in the first quarter. However,
other general and administrative expenses were $288,000 in the first half of
1995, compared to $294,000 in the first half of 1994. Depreciation and
amortization expenses decreased to $1,366,000 in the second quarter of 1995
from $1,403,000 in 1994, due to certain items becoming fully amortized at the
end of the first quarter of 1995.
Liquidity and Capital Resources
The following table represents the changes in cash and cash equivalents for
the six months ended June 30, 1995:
Net cash provided by operating activities $ 1,397
Net cash used in investing activities (872)
Net cash provided by financing activities -
Net increase in cash and cash equivalents $ 525
The Inns have historically experienced negative cash flow from operations in
the first quarter of each year and increased cash flows from operations
beginning in the second quarter of each year. As a result of the increase in
revenues in the quarter and six months ended June 30, 1995, compared to the
same periods of 1994, coupled with the generally unchanged total expenses, the
Partnership's margins improved in the second quarter and first half of 1995
compared to the same periods of 1994, resulting in positive cash flow from
operations.
Net cash used in investing activities for the six months ended June 30, 1995
included $856,000 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 six months ended June 30, 1995, funding to the FF&E Reserve was
exceeded by capital expenditures funded from the FF&E Reserve by $52,000.
Required funding to the Tax Escrow Account and interest earned in the Interest
Reserve Account increased by $68,000 during the six months ended June 30,
1995.
During the first quarter of 1995, borrowings of $1,200,000 under the Tranche B
portion of the Priming Loan funded operating cash deficiencies. During the
second quarter of 1995, Operating Partners repaid the entire $1,200,000
Tranche B Loan from excess working capital.
In September 1994, Holiday Inns, Inc. ("HII") announced a new Core
Modernization Program (the "Core Modernization Program"). HII has informed
the Partnership that it is temporarily exempt from the current category of
hotels included in the Core Modernization Program, due to the completion, by
Operating Partners, of its capital improvement program. HII has further
informed Operating Partners that the Inns may be reviewed for the Core
Modernization Program at the beginning of 1996 or thereafter. The Core
Modernization Program may require capital expenditures, not currently
determinable, be made at certain of the Inns in order for those Inns to retain
their Holiday Inn franchises. Accordingly, Operating Partners must evaluate
for each of the Inns, the relative benefits and costs of renewing the Holiday
Inns franchise for that Inn, operating that Inn under other franchises that
may be available, and the possible sale of that Inn.
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 8, 1995 By: /s/ S. Leonard Okin
S. Leonard Okin
Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1995
<PERIOD-END> JUN-30-1995 JUN-30-1995
<CASH> 0 1893
<SECURITIES> 0 0
<RECEIVABLES> 0 736
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 0 382
<PP&E> 0 53169
<DEPRECIATION> 0 0
<TOTAL-ASSETS> 0 58491
<CURRENT-LIABILITIES> 0 3432
<BONDS> 0 0
<COMMON> 0 0
0 0
0 0
<OTHER-SE> 0 (14777)
<TOTAL-LIABILITY-AND-EQUITY> 0 58491
<SALES> 12811 21292
<TOTAL-REVENUES> 12911 22511
<CGS> 4199 7602
<TOTAL-COSTS> 9438 17748
<OTHER-EXPENSES> 1539 3030
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1541 3057
<INCOME-PRETAX> 393 (1324)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 393 (1324)
<EPS-PRIMARY> .10 (.33)
<EPS-DILUTED> .10 (.33)
</TABLE>
