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, 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 ___
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, 1997 and December 31, 1996 3
Consolidated Statements of Operations - Three
and Six Months Ended June 30, 1997 and 1996 5
Consolidated Statement of Partners' Deficit -
Six Months Ended June 30, 1997 6
Consolidated Statements of Cash Flows -
Six Months Ended June 30, 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 15
PRIME MOTOR INNS LIMITED PARTNERSHIP
AND SUBSIDIARY LIMITED PARTNERSHIP
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<TABLE>
<CAPTION>
June 30,
1997 December 31,
ASSETS (Unaudited) 1996
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 1,314 $ 834
Accounts receivable, net 912 774
Prepaid expenses 242 952
Other current assets 350 328
Total current assets 2,818 2,888
Property and equipment
net of accumulated depreciation
and amortization 47,835 48,825
Cash and cash equivalents
restricted for:
Acquisition of property
and equipment 1,474 1,195
Interest and taxes 588 522
Total restricted cash and
cash equivalents 2,062 1,717
Other assets, net 556 542
$ 53,271 $ 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>
June 30,
1997 December 31,
Liabilities and Partners' Deficit (Unaudited) 1996
<S> <C> <C>
Current liabilities:
Trade accounts payable $ 377 $ 484
Accrued payroll 567 660
Accrued payroll taxes 228 165
Accrued vacation 440 437
Accrued utilities 298 322
Sales tax payable 521 274
Other current liabilities 921 772
Total current liabilities 3,352 3,114
Long term debt 65,715 65,691
Deferred interest 2,454 2,872
Other liabilities 211 216
Total long-term liabilities 68,380 68,779
Total liabilities 71,732 71,893
Commitments
Partners' deficit:
General partner ( 756) ( 751)
Limited partner (17,705) (17,170)
Total partners' deficit (18,461) (17,921)
$ 53,271 $ 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 Six Months Ended
June 30, June 30,
1997 1996 1997 1996
Revenues:
<S> <C> <C> <C> <C>
Direct operating revenues:
Lodging $ 11,997 $ 11,096 $ 19,583 $ 17,829
Food and beverage 2,516 2,559 4,634 4,553
Other Income 83 93 182 190
Total revenues 14,596 13,748 24,399 22,572
Expenses:
Direct operating expenses:
Lodging 2,623 2,492 4,628 4,375
Food and beverage 2,148 2,071 3,950 3,810
Marketing 985 904 1,798 1,656
Utilities 620 642 1,461 1,513
Repairs and maintenance 1,021 958 1,833 1,777
Rent 330 329 659 658
Insurance 139 183 378 366
Property taxes 367 369 734 738
Other 2,282 2,094 4,205 3,779
Other general and administrative 137 175 372 303
Depreciation and amortization 953 1,352 1,892 2,704
Interest expense 1,519 1,527 3,029 3,043
Total expenses 13,124 13,096 24,939 24,722
Net income (loss) 1,472 652 ( 540) (2,150)
Net income (loss) allocable to
general partner 15 7 ( 5) ( 21)
Net income (loss) allocable to
limited partners $ 1,457 $ 645 $( 535) $(2,129)
Number of limited partner
units outstanding 4,000 4,000 4,000 4,000
Net income (loss) allocable to limited
partners per unit $ 0.36 $ .16 $( .13) $( .53)
</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>
Six Months Ended June 30, 1997
General Limited
Partner Partners Total
<S> <C> <C> <C>
Balance at January 1, 1997 $ ( 751) $ (17,170) $ (17,921)
Net loss for the six months
ended June 30, 1997 ( 5) ( 535) ( 540)
Balance at June 30, 1997 $ ( 756) ( 17,705) $ (18,461)
</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,
1997 1996
<S> <C> <C>
Cash flows from operating activities:
Net loss $ ( 540) $ (2,150)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization of property
and equipment 1,781 2,593
Amortization of other assets 111 111
Amortization of debt discount 24 23
Increase (decrease) from changes in:
Accounts receivable ( 138) ( 400)
Prepaid expenses 710 650
Other current assets ( 22) 9
Other assets ( 125) -
Trade accounts payable ( 107) ( 112)
Accrued payroll and payroll taxes ( 30) ( 44)
Accrued vacation 3 3
Accrued utilities ( 24) ( 63)
Sales tax payable 247 275
Other current liabilities 149 213
Deferred interest ( 418) ( 393)
Other liabilities ( 5) -
Net cash provided by operating activities 1,616 715
Cash flows from investing activities:
Additions to property and equipment ( 791) ( 803)
Decrease (increase) in restricted cash ( 345) 168
Net cash used in investing activities (1,136) ( 635)
Cash flows from financing activities:
Borrowings under revolving credit facility 1,600 1,600
Repayments of revolving credit facility (1,600) (1,100)
Net cash provided by financing activities - 500
Net increase in cash and cash equivalents 480 580
Cash and cash equivalents, beginning of period 834 792
Cash and cash equivalents, end of period $ 1,314 $ 1,372
Supplimental cash flow data:
Interest paid $ 3,423 $ 3,413
</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 June 30, 1997,
their results of operations for the three and six months ended June 30, 1997
and 1996.
The results of operations for the six months ended June 30, 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.
2. 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.
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 accordance with SFAS No. 121, "Accounting for the Impairment of Long Lived
Assets", 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.
3. 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, 1997 and December 31, 1996, the Partnerships had approximately $81,000
and $61,000, respectively, in receivables from an entity controlled by W&H
which manages certain of the Inns' lounges.
4. OTHER ASSETS:
The components of other assets are as follows (dollar amounts in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
<S> <C> <C>
Deferred lease costs $ 21 $ 21
Debt acquisition costs 2,839 2,839
Franchise fees 945 820
Other 4 4
3,809 3,684
Less accumulated amortization 3,253 3,142
$ 556 $ 542
</TABLE>
In June, 1997, $125,000 was prepaid to Holiday Inns, Inc. to extend the Holiday
Inn franchises to August 29, 1997 for ten of the Inns whose franchises were to
expire on June 30, 1997. If the franchise agreements with HII are renewed the
amount paid will be applied against the franchise renewal costs.
Amortization of debt acquisition costs charged to expense was $81,000 in the
six months ended June 30, 1997 and 1996, respectively. Amortization of
franchise acquisition costs charged to expense was $30,000 in the six months
ended June 30, 1997 and 1996, respectively.
5. DEBT:
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. Operating Partners repaid the
entire $1,600,000 of the Tranche B Loan from excess working capital in the
second quarter of 1997, as required under the Priming Loan.
Long-term debt consists of the following:
<TABLE>
<CAPTION>
June 30, 1997 December 31, 1996
<S> <C> <C>
Mortgage Notes, net of
unamortized discount $ 54,215,000 $ 54,191,000
Priming Loan 11,500,000 11,500,000
$ 65,715,000 $ 65,691,000
</TABLE>
Unamortized discount on the Mortgage Notes was $134,000 and $158,000 at
June 30, 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 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
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 Partnerships to
continue to operate the Inns as going concerns. However, Operating Partners
sold the Glen Burnie South Inn in July, 1997, and has listed for sale the
Baltimore Moravia Road and the Baltimore Pikesville Inns and intends to seek
to sell the remaining Inns that are "highway oriented" properties which, with
their exterior corridors and being older properties (generally over 20 years
old), have a dated appearance. Those Inns, like the Glen Burnie South,
Baltimore Moravia Road and Baltimore Pikesville Inns, are either losing money
or, in the opinion of the General Partner, will not produce a sufficient
return to justify the costs to complete the Holiday Inns, Inc. Product
Improvement Plan (PIP's) and the franchise fees for renewal of their franchises.
The net sale proceeds from the Glen Burnie South Inn and the sale of any other
Inns (including the Baltimore Moravia Road and Baltimore Pikesville Inns)
will be applied to reduce the outstanding principal balance of the Priming
Loand, as required by the Priming Loan Agreement. 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 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, Partnership, Operating Partners or W&H.
Results of Operations
Net income from operations was $1,472,000 in the second quarter of 1997, versus
$652,000 of net income in the second quarter of 1996. Net loss for the six
months ended June 30, 1997 was $540,000, as compared to a net loss of
$2,150,000 in the first six months of 1996. Total revenues for the three
months ended June 30, 1997 were $14,596,000, as compared to $13,748,000, in
the corresponding quarter of 1996. The increase in total revenues is due to
the increase in lodging revenues, resulting from higher average daily room
rates (ADR) and increased occupancies at the Inns.
The following table compares lodging revenues, occupancy percentage levels
and ADR, for the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Lodging Revenues $11,997,000 $11,096,000 $19,583,000 $17,829,000
Occupancy 70.0% 68.7% 59.5% 57.0%
ADR $73.95 $69.50 $71.07 $67.22
</TABLE>
The ADR increased 6.4%, or $4.45, in the second quarter of 1997 compared to
the second quarter of 1996. For the six months ended June 30, 1997, the ADR
increased 5.7%, or $3.85, from $67.22 in the first six months of 1996 to
$71.07 in the first six months of 1997. These rates have been achieved
because the Inns have attracted and retained those market segments that are
willing to pay higher room rates, principally as a result of the good condition
of the Inns from continued upgrades and maintenance at the Inns, and effective
internal marketing and sales promotions. While the Partnerships anticipate that
the Inns can continue to improve their mix of market segments, and thereby
increase ADR and improve profit margins, there can be no assurance as to
whether this will be realized, due to , among other things, competitive
pressures in the marketplace.
Occupancies increased 2.5 percentage points, to 59.5% in the first six months
of 1997, as compared to 57.0% during the first six months of 1996. The
increase in occupancy is attributable to increased sales and marketing efforts
and the continued increase in national business and leisure travel. 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 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 generally 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 June 30, 1997 decreased
slightly, to $2,516,000 from $2,559,000 in the second quarter of 1996. The
decline during the quarter is associated with the decline in lunch and banquet
revenues. The decline in banquet revenues is due to efforts to sell the
meeting room facilities as apposed to banquet facilities. During the first
six months of 1997, food and beverage revenues have increased to $4,634,000
from $4,553,000 in the first six months of 1996. Th
Direct operating expenses increased $473,000 for the quarter ended June 30,
1997, to $10,515,000 from $10,042,000 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 and travel agent
commissions. Food and beverage costs also increased, reflecting inflationary
increases in labor and food costs. Increased marketing costs reflect increases
in marketing and sales efforts, including increased advertising and hotel
promotions. Insurance costs decreased due to decreases in certain insurance
rates. 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 cost increases, have contributed
to the year-over-year increase in other direct operating costs.
Other general and administrative expenses during the quarter ended June 30,
1997 decreased as compared to the expenses incurred during the quarter ended,
June 30, 1996. The decrease occurred due to certain recurring expenses being
incurred in the first quarter of 1997, as apposed to being incurred in the
second quarter of 1997, as it had in the previous year. Depreciation and
amortization decreased 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 six months ended June 30, 1997:
<TABLE>
<CAPTION>
<S> <C>
Net cash provided by operating activities $ 1,616,000
Net cash used in investing activities (1,136,000)
Net cash provided by financing activities -
Net increase in cash and cash equivalents $ 480,000
</TABLE>
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. The Partnerships' cash flow
from operations in the six months ended June 30, 1997 of $1,616,000 exceeded
the cash flow from operations in the comparable period of 1996 by $901,000,
as a result of the increase in revenues and improved margins during the
quarter and six months ended June 30, 1997, as compared to the same periods
in 1996.
Net cash used in investing activities totaled $1,136,000 for the six months
ended June 30, 1997, reflecting cash utilized for capital improvements and
refurbishments of $791,000, and the net increase in restricted cash of
$345,000. The net increase in restricted cash included an increase in the
FF&E Reserve of $279,000 (funding plus interest earned of $1,133,000, less
capital expenditures of $854,000 which were funded from the FF&E Reserve) and
an increase of $66,000 in the interest reserve and tax escrow accounts.
Operating Partners borrowed $1,600,000 under the Tranche B portion of the
Priming Loan for operating cash deficiencies during the first quarter of 1997
and repaid the entire $1,600,000 of the Tranche B Loan from excess working
capital during the second 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 the 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 the 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 Partnerships, 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 were to 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
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 by W&H, Operating Partners
estimated the cost of the capital expenditures to be in the range of
$13,000,000, although Operating Partners believed that the scope of work and
related costs would be subject to negotiation. In June 1997, the Partnership
requested that HII extend the expiration of the ten Inns. HII agreed to
extend the franchise expirations for the ten Inns to August 29, 1997 and
prepared revised PIPs. In June, 1997, Operating Partners paid HII $125,000,
as a prepayment for the franchise renewals. The Partnerships are in the
process of determining the cost of capital expenditures required by these
new PIP's, after which Operating Partners will re-assess and re-evaluate the
alternatives for each of the Inns. Operating Partners will be required to
pay franchise renewal fees of approximately &834,000 ($500 per room, excluding
the Glen Burnie South Inn which was sold in July, 1997) for the eleven Inns.
Generally, in connection with the renewal of the franchise for an Inn,
Operating Partners will have one year, which may be negotiable, from the
expiration date of the old franchise to complete the capital improvements
included in the PIP. It is anticipated that the capital improvements for the
PIPs 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 and have not consented to the Partnerships payment of the balance of
the franchise renewal fees, pending review of the Partnerships' business
and financing plans. 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, become independent hotels or certain of the Inns may have to be
sold. 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.
Effective before the opening of the market on June 20, 1997, the Units were
delisted by the New York Stock Exchange (the "Exchange") because 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 fell below the Exchange's continued listing criteria. From June 20,
1997 through July 8, 1997, the Units were traded by brokers who made a market
in the Units, and since July 9, 1997, the Partnership's Units have been trading
on the NASDAQ Over the Counter Bulletin Board, under the ticker symbol PMPI.
Under the Internal Revenue Code, the Partnership, as a publicly traded
partnership, will be taxable as a corporation after December 31, 1997.
The recently-enacted Taxpayer Relief Act of 1997 exempts from taxation as a
corporation any publicly traded partnership that satisfies certain conditions,
including making payment in the amount of 3.5% of its gross revenues. The
Partnership believes that, as a result of its operating losses, it should not
have any tax liability for a substantial period of time and such 3.5% of gross
revenues payment would be substantially in excess of any corporate income tax
that the Partnership might foreseeable pay. The General Partner is evaluating
the consequences of the transition to corporate form (which might require
transfer of title to the Inns, probably would have some tax consequences and
might affect the franchise agreements and liquor licenses for the Inns).
The General Partner expects to submit to the Limited Partners a proposal for
the merger of the Partnership into Operating Partner and for the conversion
of the surviving partnership to a corporation owned by, and managed by a
Board of Directors elected by, the Unitholders and the General Partner.
The General Partner has received correspondence from a lawyer representing
several Unitholders. In this correspondence, the lawyer indicates that the
holders of 25% of the Units request a meeting of the Limited Partners. While
the purpose of the meeting is still being defined, it appears that the
principal purpose of the meeting will be to discuss possible strategic
redirections of the Partnership's business and operations and a possible
additional purpose of the meeting will be to remove the Prime-American Realty
Corp. as the General Partner and elect as a new General Partner an entity
designated by one or more of the Unitholders calling the meeting. It is
anticipated that such a meeting will be held in the latter part of September,
1997.
PART II. OTHER INFORMATION AND SIGNATURES
Item 6. Exhibits and Reports on Form 8-K
(b) Reports on Form 8-K
During the quarter ended June 30, 1997 the Partnership filed a
Report of Form 8-K on June 2, 1997.
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 13, 1997 By: /s/ S. Leonard Okin
S. Leonard Okin
Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1000
<CURRENCY> U.S. DOLLARS
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997
<PERIOD-END> JUN-30-1997 JUN-30-1997
<EXCHANGE-RATE> 1 1
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