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, 1997
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, 1997 and December 31, 1996 3
Consolidated Statements of Operations - Three
Months Ended March 31, 1997 and 1996 5
Consolidated Statement of Partners' Deficit -
Three Months Ended March 31, 1997 6
Consolidated Statements of Cash Flows -
Three Months Ended March 31, 1997 and 1996 7
Notes to Consolidated Financial Statements 8
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of Operations 10
PART II. OTHER INFORMATION AND SIGNATURES:
Item 6. Exhibits and Reports on Form 8-K 14
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
March 31,
1997 December 31,
ASSETS (Unaudited) 1996
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,031 $ 834
Accounts receivable, net 735 774
Prepaid expenses 638 952
Other current assets 327 328
Total current assets 2,731 2,888
Property and equipment
net of accumulated depreciation
and amortization 48,430 48,825
Cash and cash equivalents restricted for:
Acquisition of property and equipment 1,171 1,195
Interest and taxes 555 522
Total restricted cash and cash equivalents 1,726 1,717
Other assets, net 486 542
$ 53,373 $ 53,972
</TABLE>
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,
1997 December 31,
Liabilities and Partners' Deficit (Unaudited) 1996
<S> <C> <C>
Current liabilities:
Revolving credit facility $ 1,600 $ -
Trade accounts payable 375 484
Accrued payroll 491 660
Accrued payroll taxes 333 165
Accrued vacation 440 437
Accrued utilities 308 322
Sales tax payable 407 274
Other current liabilities 763 772
Total current liabilities 4,717 3,114
Long-term debt 65,703 65,691
Deferred interest 2,673 2,872
Other liabilities 213 216
Total long-term liabilities 68,589 68,779
Total liabilities 73,306 71,893
Commitments
Partners' deficit:
General partner ( 771) ( 751)
Limited partners (19,162) (17,170)
Total partners' deficit (19,933) (17,921)
$ 53,373 $ 53,972
</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,
1997 1996
<S> <C> <C>
Revenues:
Direct operating revenues:
Lodging $ 7,586 $ 6,733
Food & beverage 2,118 1,994
Other income (principally interest) 99 97
Total revenues 9,803 8,824
Expenses:
Direct operating expenses:
Lodging 2,005 1,883
Food and beverage 1,802 1,739
Marketing 813 752
Utilities 841 871
Repairs and maintenance 812 819
Rent 329 329
Insurance 239 183
Property taxes 367 369
Other 1,923 1,685
Other general and administrative 235 128
Depreciation and amortization 939 1,352
Interest expense 1,510 1,516
Total expenses 11,815 11,626
Net loss (2,012) (2,802)
Net loss allocable to
general partner (20) (28)
Net loss allocable to
limited partners $(1,992) $(2,774)
Number of limited partner
units outstanding 4,000 4,000
Net loss allocable to limited
partners per unit $ (0.50) $ (0.69)
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements.
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
CONSOLIDATED STATEMENT OF PARTNERS' DEFICIT
(Dollars in Thousands)
Unaudited
<TABLE>
<CAPTION>
Three Months Ended March 31, 1997
General Limited
Partner Partners Total
<S> <C> <C> <C>
Balance at January 1, 1997 $ (751) $(17,170) $(17,921)
Net loss for the three months
ended March 31, 1997 (20) (1,992) (2,012)
Balance at March 31, 1997 $ (771) $(19,162) $(19,933)
</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,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (2,012) $ (2,802)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Depreciation and amortization of property
and equipment 883 1,296
Amortization of other assets 56 56
Amortization of debt discount 12 11
Increase (decrease) from changes in:
Accounts Receivable 39 15
Prepaid Expenses 314 285
Other current assets 1 (19)
Trade accounts payable (109) (169)
Accrued payroll and payroll taxes (1) (460)
Accrued vacation 3 2
Accrued utilities (14) (36)
Sales tax payable 133 112
Other current liabilities (9) 4
Deferred interest (199) (194)
Other liabilities (3) -
Net cash used by operating activities (906) (1,899)
Cash flows from investing activities:
Additions to property and equipment (488) (390)
Decrease (increase) in restricted cash (9) 449
Net cash provided by (used in) investing activities (497) 59
Cash flows from financing activities:
Borrowings under revolving credit facility 1,600 1,600
Net cash provided by financing activities 1,600 1,600
Net increase in cash and cash equivalents 197 (240)
Cash and cash equivalents, beginning of period 834 792
Cash and cash equivalents, end of period $ 1,031 $ 552
Supplementary cash flow data:
Interest paid $ 1,697 $ 1,699
</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
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 of normal recurring adjustments, necessary to present
fairly the financial position of the Partnerships as of March 31, 1997, their
results of operations for the three months ended March 31, 1997 and 1996, and
their cash flows for the three months ended March 31, 1997 and 1996.
The results of operations for the three months ended March 31, 1997, 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, 1996
has been derived from the audited balance sheet in the Partnership's Annual
Report on Form 10-K for the year ended December 31, 1996 filed with the
Securities and Exchange Commission (the "1996 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 1996
Form 10-K.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the dates of the financial statements
and reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
The following is a summary of certain significant accounting policies used in
the preparation of the consolidated financial statements.
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 (1996 was a fifty three week year and
1997 is a fifty two week 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, which do not extend
the useful life of the asset, 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.
Impairment of Long Lived Assets: In March, 1995, the Financial Accounting
Standards Board issued SFAS No. 121, "Accounting for the Impairment of Long
Lived Assets", which is effective for years beginning after December 15, 1995,
with earlier adoption encouraged. The Partnership elected early adoption of
SFAS No. 121 in 1995. In accordance with this pronouncement, the Partnerships
review for impairment and recoverability of, primarily, property and equipment
whenever events or changes in circumstances indicate that the carrying amount
of an asset may not be recoverable.
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 sixteen
full-service motor hotels owned by Operating Partners (the "Inns") pursuant
to a management agreement with Operating Partners. At March 31, 1997 and
December 31, 1996, the Partnerships had approximately $74,000 and $61,000,
respectively, in receivables from an entity controlled by W&H which manages
certain of the Inns' lounges.
OTHER ASSETS:
The components of other assets are as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
<S> <C> <C>
Deferred lease costs $ 21,000 $ 21,000
Debt acquisition costs 2,839,000 2,839,000
Franchise fees 820,000 820,000
Other 4,000 4,000
3,684,000 3,684,000
Less accumulated
amortization 3,198,000 3,142,000
$ 486,000 $ 542,000
</TABLE>
Amortization of debt acquisition costs charged to expense was $40,000 in the
three months ended March 31, 1997 and 1996. Amortization of franchise
acquisition costs charged to expense was $16,000 in each of the three months
ended March 31, 1997 and 1996.
DEBT: The Tranche A portion of the Priming Loan was fully drawn in July, 1994.
Therefore, no additional debt for capital improvements has been incurred by
Operating Partners. All capital improvements and refurbishment's made during
the three months ended March 31, 1997 were funded from cash restricted for
acquisition of property and equipment (the "FF&E Reserve").
During the first quarter of 1997, Operating Partners borrowed $1,600,000 from
the revolving credit portion of the Priming Loan, defined as the Tranche B Loan.
This borrowing funded operating expenses that could not be paid from operating
revenues during the first quarter.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
March 31, 1997 December 31, 1996
<S> <C> <C>
Mortgage Notes, net of
unamortized discount $ 54,203,000 $ 54,191,000
Priming Loan 13,100,000 11,500,000
67,303,000 65,691,000
Less revolving credit portion of
the Priming Loan, due currently 1,600,000 -
$ 65,703,000 $ 65,691,000
</TABLE>
Unamortized discount on the Mortgage Notes was $146,000 and $158,000 at March
31, 1997 and December 31, 1996, respectively.
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Financial Condition
As part of its 1992 plan of reoganization, 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 Partnerships to pay operating expenses and debt service, and to
create required reserves, depends upon the ability of Operating Partners 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 Parnterships to continue to operate the Inns as
going concerns. However it is the present intention of Operating Partners to
sell the Baltimore Moravia Road and Baltimore Glen Burnie South Inns.
Operating Partners presently has a contract for the purchase of the Glen
Burnie South Inn and is awaiting the buyer financing, which is to be obtained
in mid May, 1997. Closing of the sale would then occur in late June
(although the timing and completion of this purchase contract cannot be
guaranteed). Upon consummating a sale, the net sales proceeds will be utilized
to reduce the outstanding principal balance of the Priming Loan. As required
under the Priming Loan and Restated Loan Agreement, approval by the Lenders is
required for the sale of any of the Inns. Approval for the sale of these two
Inns has been received from the Lenders. Operating Partners has received some
unsolicited proposals to purchase the Partnerships assets or to purchase
certain of the Inns. Operating Partners carefully evaluates any of these
types of proposals.
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 (including to finance the renewal of the Holiday Inn franchise
agreements), changes in real estate 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
The Partnership derives its income from its 99% interest in Operating Partners,
whose income currently is derived from the operations of the Inns. Operations
of the Inns in the first quarter of 1997 resulted in a net loss of $2,012,000,
as compared to a net loss of $2,802,000 in the first quarter of 1996. The
decline in net loss between 1997 and 1996 is primarily due to an increase in
revenues in the first quarter of 1997. Total revenues for the three months
ended March 31, 1996 was $8,824,000, as compared to $9,803,000 in the first
quarter of 1997. Lodging revenues rose $853,000, to $7,586,000 in the first
quarter of 1997, as compared to $6,733,000 in the first quarter of 1996. The
increase in lodging revenues results from the higher average daily room rates
("ADR") and an increase in the occupancy at the Inns. The following table
compares lodging revenues, occupancy percentage levels and ADR, for the
periods indicated:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1997 1996
<S> <C> <C>
Lodging Revenues $7,586,000 $6,733,000
Occupancy 48.9% 45.3%
ADR $66.94 $63.76
</TABLE>
The overall ADR increased 5.0%, or $3.18, from $63.76 in the first quarter of
1996 to $66.94 in the first quarter of 1997. The increased ADR is due to
continued efforts to attract and maintain those market segments that are
willing to pay higher room rates, increased marketing and sales promotions by
the Inns, and the increase in demand that has occurred in the marketplace
during the first quarter of 1997. In addition, the Inns have been able to
attract and retain its guests, and charge increased ADR's, due to the quality
of service and product provided by the Inns. While the Partnerships anticipate
that the Inns can continue to improve and change their mix of market segments,
(which should improve ADR's and profit margins), there can be no assurance that
this will be realized, due to, among other things, competitive pressures in
the marketplace.
Occupancies for the three months ended March 31, 1997 increased to 48.9%,
from 45.3% in the three months ended March 31, 1996. The occupancy increase
was achieved by focused marketing efforts and increased sale promotions, which
included AAA Automobile Club, Holiday Inns, Inc. promotions, additional
billboard advertising and increased direct sales efforts. The Inns also
recognized a return during the first quarter of 1997 of government guests
that were lost due to the government shutdowns during the first quarter
1996. In addition, the mild winter weather during the first quarter of 1997,
as compared to the severe winter weather that occurred in the first quarter
of 1996, also contributed to the increased occupancy of the Inns.
There is intense competition in the geographic areas where the Inns are located,
including conversions of competitor hotels to Holiday Inns, Inc. ("HII")
franchises. Therefore, the Partnerships and W&H believe occupancy levels at
the Inns will not substantially increase over the next year, but is expected
to show some growth. The occupancy growth projected is due to the stable and
growing economic conditions, and the stabilization of supply and demand in
the region where the Inns are located. However, due to the fact that
approximately one-third of the Inns are "highway oriented" location properties
(which in general have lagged behind in demand, as compared to midscale and
urban, suburban and airport location properties), slow occupancy growth is
expected. Also, these "highway oriented" Inns have an external dated appearance
due to their age, which contributes to their median occupancy levels. The Inns'
success is in large part dependent upon their ability to compete on the basis of
factors such as physical condition of the Inns, access, location, service,
franchise affiliation, employees, marketing quality, reservation services,
the quality and scope of food and beverage facilities, and other amenities.
Food and beverage revenues for the three months ended March 31, 1997 increased
to $2,118,000 from $1,994,000 in the three months ended March 31, 1996,
primarily as a result of increased revenues from rental of the meeting room
facilities, amenities provided to guests utilizing these facilities, and the
catering to the meeting room facilities. The increase in food and beverage
revenues is also attributable to increases in food and beverage prices and in
the number of food and beverage patrons.
Direct operating expenses increased $501,000 for the quarter ended March 31,
1997, to $9,131,000, from $8,630,000 during the corresponding quarter of 1996.
The increase in lodging expenses is due to inflationary increases in labor
costs, and increases in expenses, such as room amenities, travel agent
commissions and guest supplies, that are incurred in servicing the higher rated
market segments. Increases in food and beverage expenses are attributable to
the inflationary increases in labor costs and increases in food and beverage
costs related to increases in such revenues. Food and beverage as a percentage
of food and beverage revenues decreased from 87.2% for the quarter ended March
31, 1996 to 85.1% for the first quarter of 1997, as a result of higher prices
and effective cost controls. Increased marketing costs during the first
quarter of 1997 reflect increases in marketing and sales efforts, including
increased advertising and hotel promotions. The increase also reflects
increases in those fees paid to HII, which increase with revenues. The utility
costs decreased during the first quarter of 1997 as compared to the same
quarter of 1996, as a result of milder weather in the first quarter of 1997
than in the first quarter of 1996. Insurance costs increased in the first
quarter of 1997 over the same period of 1996, as a result of increases in
insurance rates. Other direct operating costs increased, in part because
certain costs, such as credit card commissions, Inn management fees and
franchise fees are based upon, and increase with, revenues. In addition,
inflationary increases in administrative labor and expenses, plus employment
and training costs increases, have contributed to the year-over-year increase
in other direct operating costs. The increase in other general and
administrative costs is primarily due to the timing of certain recurring
expenses that were incurred in the first quarter of 1997, that were not incurred
in the first quarter of 1996. To a lesser extent, the increase in other
general and administrative costs also includes expenses incurred in the first
quarter of 1997 of analyzing franchise alternatives and product improvement
plans and costs in connection with the "Holiday Inn" franchise renewals.
Depreciation and amortization declined in the first quarter of 1997 from the
first quarter of 1996, due to certain fixed assets becoming fully depreciated
at the end of 1996.
Liquidity and Capital Resources
The following table represents the changes in cash and cash equivalents for the
nine months ended March 31, 1997:
<TABLE>
<CAPTION>
<S> <C> <C>
Net cash provided by operating activities $ ( 906,000)
Net cash used in investing activities ( 497,000)
Net cash provided by financing activities 1,600,000
Net increase in cash and cash equivalents $ 197,000
</TABLE>
The Inns have historically experienced negative cash flows during the first
quarter of each year, and for the quarter ended March 31, 1997, operating
expenses exceeded operating revenues of the Inns and the Partnerships.
Net cash used in investing activities totaled $497,000 for the three months
ended March 31, 1997, resulting from cash utilized for capital improvements
and refurbishment's of $488,000, and the net increase in restricted cash of
$9,000. The net increase in restricted cash included an increase of $33,000
in the interest reserve and tax escrow accounts, net of a decrease in the FF&E
Reserve of $24,000 (capital expenditures of $463,000, which were funded from the
FF&E Reserve exceeded, the funding to the FF&E Reserve of $439,000 at 5% of
revenues, plus interest earned on the account).
Cash provided by financing activities of $1,600,000 was from borrowings under
the Tranche B portion of the Priming Loan for operating cash deficiencies during
the first quarter of 1997.
The Partnerships anticipate continued growth in the economy, in the travel and
hospitality industries, in the real estate market and in the comparative
attractiveness of the Inns resulting from the capital improvements (although
neither the Partnership nor any of its advisors can give any assurances as to
the strength or duration of any such economic growth). The Partnerships
anticipate that such economic growth, coupled with the improvements constantly
being made to the physical condition of the Inns and continued professional
management and marketing of the Inns, will result in the improvement of
occupancies, room rates and related revenues, and thus create better profit
margins. The Partnerships anticipate that their future earnings, together with
the advances under the Priming Loan, will enable the Partnerships to pay all
operating expenses, pay debt service, and satisfy th payment requirements under
the current HII franchise agreements. However, while the Partnerships' budgets
and capital plans reflect their present best estimates of future events, those
events are beyond the control of the Partherships, the General Partner and
W&H and no assurances can be given that the Partnerships will have the liquidity
to meet future operating and capital commitments.
The "Holiday Inn" franchises of ten of the Inns expire on June 30, 1997 and the
franchises of two additional Inns will expire on December 31, 1997. Before the
renewal of an expiring franchise for any "Holiday Inn" property, the property is
inspected by HII and that inspection forms the basis for a Property Improvement
Plan ("PIP"), the completion of which is a condition to the renewal of the
franchise for the property. Prior to December 31, 1995, HII had inspected
and prepared PIPs for ten of the Inns whose franchises expire in 1997. During
the second quarter of 1996, HII inspected and prepared PIPs for the remaining
two Inns whose franchises expire in 1997 (though HII had previously indicated
that it might not renew those franchises and , accordingly, had not prepared
PIPs for those Inns). Based on those PIPs, and on analyses of W&H, Operating
Partners estimates the cost of the capital expenditures to be in the range of
$13,000,000, although Operating Partners believes that the scope of work and
related costs will be subject to negotiation. In addition, Operating Partners
will be required to pay franchise renewal costs of approximately $884,000 ($500
per room) for these twelve Inns. Accordingly, Operating Partners engaged W&H
to evaluate, for each Inn, the relative benefits and costs of renewing the
"Holiday Inn" franchise for the Inn, operating the Inn under other franchises
Based on W&H's evaluation, Operating Partners determined that the Inns should
remain franchised as "Holiday Inns". Therefore, Operating Partners has reached
an agreement with HII as to the terms and conditions of the franchise renewals
and have submitted those agreements to the Lenders for their review. Operating
Partners cannot enter into those agreements without the consent of the Lenders.
In addition, Operating Partners is continuing to evaluate the improvements and
expenditures included in each of the PIP's, in order to identify those items
that Operating Partners believes will enhance the Inns's ability to compete in
its market and that will add value to the Inn; and those improvements or
expenditures that Operating Partners believes to be less necessary or which will
add little value. Operating Partners is continuing negotiations with HII as to
the scope of work included in each PIP and the length of time within which such
improvements will be completed. Generally, in connection with the renewal of
the franchise for an Inn, Operating Partners will have one year, which may be
negotiable, for the expiration date of the old franchise to complete the capital
improvements included in each PIP. It is anticipated that the capital
improvements for the PIP's will be financed partially from the FF&E Reserve and
from additional financing, if available. At the present time, the current
Lenders have stated that they are not willing to provide any such financing,
that will be required. Operating Partners is actively investigating financing
possibilities. However, there can be no assurance that additional financing
will be available.
If financing is not available and Operating Partners is unable to defer the
timing and costs of the PIPs, the Inns may have to change franchise affiliations
or become independent hotels. Changes in such franchise affiliations could
adversely impact the Partnerships' results of operations. Further, under the
Priming Loan and Restated Loan Agreements, approval by the Lenders will be
required for any franchise changes, capital expenditures or additional
financing.
During the fourth quarter of 1996, the Partnership received a letter from the
New York Stock Exchange (the "Exchange") advising the Partnership that the
aggregate market value of the Units, the three-year average net income of the
Partnership and the net tangible assets of the Partnership available to the
Units fall below the Exchange's continued listing criteria. The letter from
the Exchange advised the Partnership that it was the Exchange's "preliminary
conclusion that there is not a sufficient basis for maintaining the listing
of the [Units]." The Partnership has made a submission to the Exchange
recommending the continued listing of the Units. In addition, the Partnership
will meet with the Exchange to discuss continued listing on the Exchange.
However, there can be no assurance that the Partnership will be able to
maintain the listing of the Units on the Exchange or to arrange for the Units
to be listed on any other national securities exchange or admitted to trading
on the NASDAQ Stock Market.
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 7, 1997 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-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 1031
<SECURITIES> 0
<RECEIVABLES> 735
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 2731
<PP&E> 48430
<DEPRECIATION> 0
<TOTAL-ASSETS> 53373
<CURRENT-LIABILITIES> 4717
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 53373
<SALES> 9704
<TOTAL-REVENUES> 9803
<CGS> 3807
<TOTAL-COSTS> 9131
<OTHER-EXPENSES> 1174
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1510
<INCOME-PRETAX> (2012)
<INCOME-TAX> 0
<INCOME-CONTINUING> (2012)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (2012)
<EPS-PRIMARY> (.50)
<EPS-DILUTED> (.50)
</TABLE>
