<PAGE>
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 quarterly period ended September 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 number 1-9443
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Red Lion Inns Limited Partnership
---------------------------------
(Exact name of registrant as specified in its charter)
Delaware 94-3029959
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4001 Main Street, Vancouver, Washington 98663
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
(360) 696-0001
--------------
(Registrant's telephone number, including area code)
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year,
if changed since last report)
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 .
--- ---
1
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RED LION INNS LIMITED PARTNERSHIP
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1995
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
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<S> <C>
PART I. FINANCIAL INFORMATION
ITEM 1 Consolidated Financial Statements (Unaudited):
Consolidated Statements of Income 3-4
Consolidated Balance Sheets 5
Consolidated Statement of Partners' Capital 6
Consolidated Condensed Statements of Cash Flows 7
Notes to Consolidated Financial Statements 8-10
ITEM 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 11-16
PART II. OTHER INFORMATION
ITEM 6 Exhibits and Reports on Form 8-K 17
</TABLE>
2
<PAGE>
PART I: FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
- -------------------------------------------
RED LION INNS LIMITED PARTNERSHIP AND SUBSIDIARY LIMITED PARTNERSHIP
- --------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
(dollar amounts in thousands except per unit amounts)
(unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1995 1994
---------- ----------
<S> <C> <C>
REVENUES $ 11,486 $ 10,382
OPERATING COSTS AND EXPENSES:
Property taxes 771 688
Base management fee 847 794
Incentive management fee 1,651 2,386
Depreciation and amortization 2,229 2,715
Other 428 439
---------- ----------
Total operating costs and expenses 5,926 7,022
---------- ----------
Operating income 5,560 3,360
INTEREST EXPENSE 2,819 2,606
---------- ----------
Income before income taxes 2,741 754
Income tax provision -- 25
---------- ----------
NET INCOME $ 2,741 $ 729
========== ==========
ALLOCATION OF NET INCOME:
General Partner $ 55 $ 15
========== ==========
Limited Partners $ 2,686 $ 714
========== ==========
NET INCOME PER LIMITED PARTNER
UNIT $ 0.65 $ 0.17
========== ==========
AVERAGE LIMITED PARTNER UNITS
OUTSTANDING 4,133,500 4,133,500
========== ==========
</TABLE>
(see notes to financial statements)
3
<PAGE>
RED LION INNS LIMITED PARTNERSHIP AND SUBSIDIARY LIMITED PARTNERSHIP
- --------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
(dollar amounts in thousands except per unit amounts)
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
-----------------------
1995 1994
---------- ----------
<S> <C> <C>
REVENUES $ 30,438 $ 27,609
OPERATING COSTS AND EXPENSES:
Property taxes 2,153 1,901
Base management fee 2,409 2,273
Incentive management fee 4,204 4,021
Depreciation and amortization 7,162 8,126
Other 1,527 1,391
---------- ----------
Total operating costs and expenses 17,455 17,712
---------- ----------
Operating income 12,983 9,897
INTEREST EXPENSE 8,457 7,747
---------- ----------
Income before income taxes 4,526 2,150
Income tax provision -- 25
---------- ----------
NET INCOME $ 4,526 $ 2,125
========== ==========
ALLOCATION OF NET INCOME:
General Partner $ 90 $ 42
========== ==========
Limited Partners $ 4,436 $ 2,083
========== ==========
NET INCOME PER LIMITED PARTNER
UNIT $ 1.07 $ 0.50
========== ==========
AVERAGE LIMITED PARTNER UNITS
OUTSTANDING 4,133,500 4,133,500
========== ==========
</TABLE>
(see notes to financial statements)
4
<PAGE>
RED LION INNS LIMITED PARTNERSHIP AND SUBSIDIARY LIMITED PARTNERSHIP
- --------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1995 1994
-------------- -------------
<S> <C> <C>
(UNAUDITED)
ASSETS
CURRENT ASSETS:
Cash $ -- $ --
Prepaid property taxes 176 --
-------- --------
Total current assets 176 --
-------- --------
PROPERTY AND EQUIPMENT:
Land 17,705 17,705
Buildings and improvements 163,665 159,602
Furnishings and equipment 54,237 51,638
Construction in progress 1,255 1,454
-------- --------
236,862 230,399
Less -- accumulated depreciation (72,097) (65,226)
-------- --------
164,765 165,173
-------- --------
DEFERRED LOAN COSTS, net 416 32
-------- --------
Total assets $165,357 $165,205
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to affiliate $ 15,336 $ 12,322
Accrued distributions to partners 2,329 2,329
Interest payable 347 800
Property taxes 677 392
Current portion of long-term debt 114,970 1,500
-------- --------
Total current liabilities 133,659 17,343
-------- --------
LONG-TERM DEBT, NET OF CURRENT PORTION 9,726 123,430
-------- --------
DEFERRED INCOME TAXES 1,401 1,401
-------- --------
PARTNERS' CAPITAL:
Limited Partners, 4,940,000 units
issued 33,169 35,554
Less - 806,500 treasury units, at
cost (11,202) (11,202)
-------- --------
Limited Partners, net 21,967 24,352
General Partner (1,396) (1,321)
-------- --------
Total partners' capital 20,571 23,031
-------- --------
Total liabilities and partners'
capital $165,357 $165,205
======== ========
</TABLE>
(see notes to financial statements)
5
<PAGE>
RED LION INNS LIMITED PARTNERSHIP AND SUBSIDIARY LIMITED PARTNERSHIP
--------------------------------------------------------------------
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
For the nine months ended September 30, 1995
(dollar amounts in thousands)
(unaudited)
<TABLE>
<CAPTION>
LIMITED PARTNERS
-------------------------------------------
ISSUED UNITS TREASURY UNITS
------------------- --------------------
GENERAL
UNITS AMOUNT UNITS AMOUNT PARTNER TOTAL
--------- ------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994 4,940,000 $35,554 (806,500) $(11,202) $(1,321) $23,031
Distributions to partners -- (6,821) -- -- (165) (6,986)
Net income -- 4,436 -- -- 90 4,526
--------- ------- -------- -------- ------- -------
Balance at September 30, 1995 4,940,000 $33,169 (806,500) $(11,202) $(1,396) $20,571
========= ======= ======== ======== ======= =======
</TABLE>
(see notes to financial statements)
6
<PAGE>
RED LION INNS LIMITED PARTNERSHIP AND SUBSIDIARY LIMITED PARTNERSHIP
--------------------------------------------------------------------
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Increase (decrease) in cash
(in thousands)
(unaudited)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
SEPTEMBER 30,
------------------
1995 1994
------- -------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 4,526 $ 2,125
Adjustments to reconcile net income
to cash provided from operating
activities:
Depreciation and amortization 7,162 8,126
Amortization of other assets
(principally deferred loan costs) 449 --
Deferred income taxes -- 25
Change in certain current assets
and liabilities 2,670 4,398
------- -------
Net cash provided by
operating activities 14,807 14,674
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment,
net (6,754) (6,051)
Cash reserved for capital improvements (2,409) (2,273)
Cash withdrawn from reserve for
capital improvements 2,409 2,273
------- -------
Net cash used in investing
activities (6,754) (6,051)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution of cash to partners (6,986) (6,986)
Payments on term loan (1,112) (1,017)
Net borrowings (payments) on
revolving credit facility 878 (648)
Other financing activities (833) --
------- -------
Net cash used in financing
activities (8,053) (8,651)
------- -------
DECREASE IN CASH -- (28)
CASH AT BEGINNING OF PERIOD -- 213
------- -------
CASH AT END OF PERIOD $ -- $ 185
======= =======
</TABLE>
(see notes to financial statements)
7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
(UNAUDITED)
1. GENERAL
Red Lion Inns Limited Partnership, a Delaware limited partnership (the
"Partnership"), was organized for the purpose of acquiring and owning, through
its subsidiary limited partnership, Red Lion Inns Operating L.P., a Delaware
limited partnership (the "Operating Partnership"), ten Red Lion hotels (the
"Hotels"). On April 14, 1987 (the date of the Partnership's inception), the
Operating Partnership acquired the Hotels from Red Lion, a California limited
partnership ("Red Lion"), which continued to manage the Hotels under a long-term
management agreement (the "Management Agreement").
Red Lion Hotels, Inc. (the "Company") was incorporated in Delaware in March
1994. On August 1, 1995, Red Lion contributed substantially all of its assets
(excluding 17 hotels, certain minority joint venture interests and cash) and
certain liabilities to the Company. In connection with this transaction, Red
Lion assigned the Management Agreement to the Company, which continues to
operate and manage the Hotels thereunder. The general partner of the Partnership
and Operating Partnership is Red Lion Properties, Inc. (the "General Partner"),
a wholly owned subsidiary of the Company. The Company became a publicly held
Company in July 1995. The Company files reports and other information with the
Securities and Exchange commission in accordance with the Securities Exchange
Act of 1934.
The Company manages the Hotels as part of a full service hotel chain which
operates in the western half of the United States. The Red Lion hotel system,
established in 1959, which currently includes 53 lodging facilities with a total
of approximately 14,000 rooms, has approximately 11,000 employees. Revenues for
Red Lion for the year ended December 31, 1994 (before the contribution of assets
and liabilities to the Company) were $462.9 million. The lodging facilities are
designed to provide guests with a full range of high-quality hotel
accommodations in convenient locations at competitive prices.
2. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of the
Partnership and those of the Operating Partnership, of which the Partnership
owns 99 percent and the General Partner owns one percent. All significant
intercompany transactions and accounts have been eliminated.
8
<PAGE>
Certain information and footnote disclosures included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in accordance with the rules and regulations of
the Securities and Exchange Commission. The interim financial statements should
be read in conjunction with the audited financial statements included in the
Partnership's 1994 Annual Report on Form 10-K.
Revenues reported in the accompanying statements of income represent the gross
operating profits of the Hotels which is credited to the Partnership from the
Company under the terms of the Management Agreement. Operating revenues and
expenses and the working capital of the Hotels are included in consolidated
financial statements of the Company and are excluded from the accompanying
financial statements of the Partnership. The amounts are excluded from the
accompanying financial statements of the Partnership because the Company, and
not the Partnership, had operating responsibility for the Hotels and such
operating responsibility is substantially the same as those for owned hotels.
The operating results for the Current Quarter ended September 30, 1995 (the
"Current Quarter"), and the nine months then ended do not necessarily indicate
the results expected for the full 1995 year.
In the opinion of management, the accompanying interim financial statements
contain all necessary adjustments, which are of a normal recurring nature, to
present fairly the Partnership's financial condition, cash flows and results of
operations for the Current Quarter and the nine months ended September 30, 1995.
3. RELATED PARTY TRANSACTIONS
Amounts payable to affiliate of $15,336,000 at September 30, 1995, consists of
amounts payable to the Company for construction costs, payroll and payroll
taxes, support services, base and current incentive management fees, operating
supplies, furnishings and equipment and other current liabilities arising out of
normal operations in accordance with the Management Agreement. Amounts payable
to affiliate also include an offset for the Hotels' net working capital items
which consist of cash held in hotel accounts, accounts receivable, inventories,
prepaid expenses, hotel accounts payable, certain taxes other than property,
income and payroll taxes. Since the Company has operating responsibilities
associated with the Hotels, these working capital items are excluded from the
accompanying financial statements. These balances are due in the normal course
of business. Such net working capital items amounted to $1,865,000 and
$2,072,000 at September 30, 1995 and 1994, respectively. Amounts payable to
affiliate which are outstanding for more than 30 days incur interest at a Prime-
based interest rate (9.25% at September 30, 1995).
9
<PAGE>
Included in long-term debt is a $3.7 million non-interest bearing loan made to
the Partnership by the General Partner and $6 million of non-interest bearing
deferred incentive management fees owed to the Company.
Under the Management Agreement, the Partnership pays base and incentive
management fees to the Company. Incentive management fees payable to the
Company are equal to the sum of 15% of adjusted gross operating profit up to $36
million (operating profit target) and 25% of adjusted gross operating profit in
excess of the operating profit target. Adjusted gross operating profit is gross
operating profit (the revenues reported in the accompanying financial
statements) less base management fees (3% of gross revenues of the Hotels).
Incentive management fees are only payable to the extent that cash flow
available for distributions and incentive management fees, as defined in the
Management Agreement ("Cash Flow"), exceeds the amount required to pay the
annual priority distribution to Limited Partners of $2.20 per Unit. Cash Flow
is defined as net income (or loss) before non-cash charges (primarily
depreciation and amortization) and incentive management fees, but after the
reserve for capital improvements and principal payments on mortgage debt.
4. INCOME TAXES
During 1987, Congress passed the Omnibus Budget Reconciliation Act which, among
other things, treats certain publicly-traded partnerships as corporations for
tax purposes for the years beginning after December 31, 1987. Publicly-traded
partnerships in existence prior to December 18, 1987, such as the Partnership,
will not be treated as corporations, for tax purposes, for ten years or until
taxable years beginning after December 31, 1997. The effect of this Act will be
to cause the Partnership to be taxed as a corporation beginning January 1, 1998.
The effect of treating publicly-traded partnerships, such as the Partnership, as
corporations will be to tax the income of the Partnership at the entity level
and reflect distributions to partners as dividends. Additional costs to the
Partnership for such taxes would reduce the amount available for distribution to
the partners.
In 1993, the Partnership adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" (SFAS109). This statement requires, among
other things, the recording of deferred income taxes based on the difference
between the financial statement and income tax bases of assets and liabilities
using the enacted marginal income tax rate. The Partnership determined that no
adjustment to deferred income taxes was necessary during the three and nine
months ended September 30, 1995.
5. SUPPLEMENTAL CASH FLOW DISCLOSURE
During the nine-month periods ended September 30, 1995 and 1994, the Partnership
made interest payments amounting to $8,461,000 and $7,744,000, respectively.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
- ------- ---------------------------------------------------------------
RESULTS OF OPERATIONS
---------------------
RESULTS OF OPERATIONS:
The revenues of the Partnership represent the gross operating profits of the
Hotels which is credited to the Partnership from the Company under the terms of
the Management Agreement. The gross operating revenues and expenses of the
Hotels are included in the consolidated financial statements of the Company, and
are excluded from the financial statements of the Partnership, because the
Company, and not the Partnership, has operating responsibility for the Hotels.
The following table sets forth the Company's operating revenues and expenses
associated with the Hotels:
Gross Operating Revenues and Expenses of the Hotels
---------------------------------------------------
(in thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
------------------ -------------------
1995 1994 1995 1994
-------- ------- -------- -------
<S> <C> <C> <C> <C>
REVENUES:
Rooms $17,756 $16,415 $48,224 $44,530
Food and beverage 7,879 7,649 24,503 24,145
Other 2,599 2,404 7,575 7,092
------- ------- ------- -------
Total revenues 28,234 26,468 80,302 75,767
------- ------- ------- -------
OPERATING COSTS AND EXPENSES:
Departmental direct expenses
Rooms 4,111 3,768 11,593 10,633
Food and beverage 6,294 6,217 19,608 19,456
Other 958 945 2,853 2,783
Administrative and general 2,236 2,061 6,665 6,394
Sales, promotion and advertising 1,262 1,177 3,737 3,463
Utilities 910 913 2,410 2,523
Repairs and maintenance 977 1,005 2,998 2,906
------- ------- ------- -------
Total operating costs and expenses 16,748 16,086 49,864 48,158
------- ------- ------- -------
Gross operating profit of Hotels $11,486 $10,382 $30,438 $27,609
======= ======= ======= =======
</TABLE>
GROSS REVENUES OF THE HOTELS: For the quarter ended September 30, 1995 (the
"Current Quarter"), room revenues increased to $17.8 million from $16.4 million
in the prior year quarter, an increase of $1.4 million, or 8.2%. For the nine
months ended September 30, 1995, room revenues increased to $48.2 million from
$44.5 million in the comparable 1994 period, an increase of $3.7 million or
8.3%. The increase in room revenues for the Current Quarter and nine months
ended September 30, 1995, is due to higher rooms rates and an increase in
occupancy.
11
<PAGE>
A summary of occupancy and room rates for the Hotels follows:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------
1995 1994 1995 1994
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Occupancy Percentage 81.7% 80.8% 76.5% 75.4%
Average Room Rate $77.13 $72.00 $75.35 $70.54
</TABLE>
For the Current Quarter and nine months ended September 30, 1995, food and
beverage revenues, at $7.9 million and $24.5 million, respectively, were
essentially unchanged from the prior year periods.
Other revenues for the Current Quarter and 1995 nine-month period increased by
$.2 million, or 8.1%, and $.5 million, or 6.8%, respectively, from prior year
periods due to the increase in occupancy and higher meeting room and equipment
rentals.
Operating results are affected by seasonality. The Current Quarter results
reflect the late summer and early fall seasons in which revenues are typically
higher than winter and spring seasons. There can be no assurance, however, that
such trends will continue.
GROSS OPERATING COSTS AND EXPENSES OF THE HOTELS: For the Current Quarter gross
operating costs and expenses of the Hotels increased to $16.7 million from $16.1
million in the prior year quarter, an increase of $0.7 million, or 4.1%. The
increase is largely due to a $0.3 million increase in rooms expense and a $0.2
million increase in administrative and general costs. For the nine months ended
September 30, 1995, gross operating costs and expenses of the Hotels increased
to $49.9 million from $48.2 million for the comparable period in 1994, an
increase of $1.7 million, or 3.5%. The increase is due primarily to increases
in rooms expense and administrative and general costs of $1.0 million and $0.3
million, respectively. The increases in rooms expense and administrative and
general costs for both the quarter and nine month periods is primarily due to
higher occupancy.
Gross Revenues improved by 6.7% for the Current Quarter and 6.0% for the nine
months ended September 30, 1995. With the improved Gross Revenues of the Hotels
and careful management of operating costs, the gross operating profit of the
Hotels improved by 10.6% and 10.3% for the Current Quarter and nine months ended
September 30, 1995, respectively.
12
<PAGE>
PARTNERSHIP REVENUES: For the Current Quarter, revenues (which represent the
gross operating profit of the Hotels credited from the Company) increased to
$11.5 million from $10.4 million in the comparable 1994 quarter, an increase of
$1.1 million, or 10.6%. For the nine months ended September 30, 1995, revenues
increased to $30.4 million from $27.6 million in the comparable 1994 period, an
increase of $2.8 million, or 10.2%. The changes in gross revenues and expenses
of the Hotels that affect the amounts credited from the Company are discussed
above.
OPERATING INCOME: For the Current Quarter, operating income before incentive
management fee, depreciation and amortization increased to $9.4 million from
$8.5 million in the prior year quarter, an increase of 11.6%. As a percentage
of Hotel gross revenues, this item increased to 33.4% from 32.0% in the prior
year quarter, an increase of 1.4 points. For the nine months ended September
30, 1995, operating income before incentive management fee, depreciation and
amortization increased to $24.3 million from the comparable prior year period
amount of $22.0 million, an increase of 10.5%. As a percentage of Hotel gross
revenues, this item increased to 30.3% from 29.1% in the prior year, an increase
of 1.2 points. These increases reflect the improvement in operations discussed
above.
OPERATING COSTS & EXPENSES: For the Current Quarter, operating costs and
expenses decreased by $1.1 million when compared to the same period in 1994.
The decrease is largely due to a $0.7 million decrease in incentive management
fees as explained below (see Incentive Management Fee). Also contributing to
the decrease in operating costs and expenses is a $0.5 million decrease in
depreciation and amortization due to assets having been fully depreciated in
March of the current year. Operating costs and expenses for the nine months
ended September 30, 1995, decreased $0.3 million to $17.5 million from $17.7
million for the same period in 1994. The decrease in operating costs is due to
a $1.0 million decrease in depreciation and amortization offset by increases in
property taxes, base management fees, incentive management fees and other
operating costs. The decrease in depreciation and amortization is due to assets
having been fully depreciated earlier in the year.
INCENTIVE MANAGEMENT FEE: Incentive management fees payable to the Company are
equal to the sum of 15% of adjusted gross operating profit up to $36 million and
25% of adjusted gross operating profit in excess of $36 million. Adjusted gross
operating profit is gross operating profit (Partnership revenues) less base
management fees (3% of gross revenues of the Hotels). Incentive management fees
are only payable to the extent that Cash Flow available for distributions and
incentive management fees, as defined in the Management Agreement ("Cash Flow"),
exceeds the amount required to pay the annual priority distribution to Limited
Partners of $2.20 per Unit. Cash Flow is defined as net income (or loss) before
non-cash charges (primarily depreciation and amortization) and incentive
management fees, but after the reserve for capital improvements and principal
payments on mortgage debt.
13
<PAGE>
During the year, the Company recognizes incentive management fees equal to 15%
of the adjusted gross operating profit as defined, not to exceed cash flow
available for incentive management fees. Therefore, interim period results can
reflect significant differences between periods in incentive management fees
expense depending upon the interim period's cash flow available to pay incentive
management fees.
On a year-to-date basis, 1995 incentive management fees to be recognized as
defined by the Management Agreement were approximately equal to the comparable
1994 period. However, as a result of significantly higher cash flow available
for incentive management fees generated in the first six months of 1995 as
compared to the prior year period, the Company recognized more incentive
management fee expense earlier in the year. Therefore, the Current Quarter
reflects lower incentive management fees expense of $1.7 million as compared to
$2.4 million for the same quarter last year.
NET INCOME: For the Current Quarter, net income was $2.7 million ($0.65 per
unit) compared to the prior year quarter's $.7 million ($.17 per unit). For the
nine months ended September 30, 1995, net income was $4.5 million ($1.07 per
unit) compared to the comparable prior year period amount of $2.1 million ($.50
per unit). The Current Quarter and nine-month amounts reflect higher revenues
offset by decreased operating costs and expenses as discussed above.
Interest expense for the Current Quarter increased $0.2 million to $2.8 million
from $2.6 million for the same period in 1994. Interest expense for the nine
months ended September 30, 1995 increased $0.7 million to $8.5 million from $7.7
million in 1994. The increases for both the Current Quarter and the nine months
ended September 30, 1995 were due to increases in interest rates and of deferred
loan costs. Deferred loan costs for the Current Quarter and the nine months
ended September 30, 1995 amounted to $0.2 million and $0.4 million,
respectively.
14
<PAGE>
CASH FLOW AVAILABLE FOR DISTRIBUTION AND INCENTIVE MANAGEMENT FEES: Cash Flow
for the quarters and nine-month periods ended September 30, 1995 and 1994 is
presented below (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
SEPTEMBER 30, SEPTEMBER 30,
-------------------- -------------------
1995 1994 1995 1994
--------- -------- -------- --------
<S> <C> <C> <C> <C>
Net Income (loss) $ 2,741 $ 729 $ 4,526 $ 2,125
Add (deduct):
Depreciation and amortization
(including deferred loan costs) 2,444 2,715 7,611 8,126
Incentive management fee 1,651 2,386 4,204 4,021
Deferred income taxes -- 25 -- 25
Cash reserved for capital improvements (847) (794) (2,409) (2,273)
Repayments on term loan (379) (346) (1,112) (1,017)
------- ------- ------- -------
Cash flow available for distribution and
incentive management fees 5,610 4,715 12,820 11,007
Cash required for priority distribution (2,329) (2,329) (6,986) (6,986)
------- ------- ------- -------
Cash flow available for incentive
management fees 3,281 2,386 5,834 4,021
Incentive management fee 1,651 2,386 4,204 4,021
------- ------- ------- -------
Excess cash flow $ 1,630 $ -- $ 1,630 $ --
======= ======= ======= =======
</TABLE>
Cash Flow available for incentive management fees for the nine months ended
September 30, 1995 was $5,834,000, which exceeded the incentive management fee
of $4,204,000 for the period by $1,630,000. Under the Management Agreement, 25%
of any such excess Cash Flow at year end will be paid to the Company to pay down
the $6 million in non-interest bearing deferred incentive management fees
currently outstanding. The balance of any additional excess Cash Flow will be
paid to the General Partner to pay down the $3.7 million non-interest bearing
loan. As noted in the discussion of operations above, the operations of the
Hotels are affected by seasonality with summer and fall revenues typically
higher than winter revenues.
Cash Flow increased in the Current Quarter to $5.6 million ($1.33 per limited
partner unit) from the prior year quarter's $4.7 million ($1.11 per limited
partner unit), an increase of $.9 million, or 19%. Cash Flow for the nine
months ended September 30, 1995 increased to $12.8 million ($3.03 per limited
partner unit) from the comparable prior year period's $11.0 million ($2.60 per
limited partner unit), an increase of $1.8 million, or 16.5%. The increase in
Cash Flow is due to improved operations as discussed above.
15
<PAGE>
LIQUIDITY
- ---------
During the Current Quarter, cash provided by operating activities was sufficient
to satisfy operating cash requirements. It is expected that, for 1995, cash
provided by both operations and the lending facility discussed below, or by the
Company, will be sufficient to meet anticipated cash requirements.
The Operating Partnership has the availability of a $14.1 million revolving loan
facility. During the Current Quarter, average borrowings under the facility
were $12.2 million. As of September 30, 1995, the interest rate was 8.8% and
the balance outstanding was $12.3 million.
In April, the Partnership's lenders extended the maturity of the Partnership's
mortgage note and the line of credit for one year to April 14, 1996. At
September 30, 1995, the mortgage note balance was $101.4 million.
On October 18, 1995, the General Partner declared a quarterly cash distribution
of $.55 per unit ($2.20 annualized) for the Current Quarter, payable on November
15, 1995, to unitholders of record on October 31, 1995. This distribution has
been accrued in the accompanying financial statements.
CAPITAL RESOURCES
- -----------------
The main purpose of the Partnership's capital expenditure program is to maintain
all facilities in good condition, to conform with all applicable legal
requirements and to upgrade or improve facilities as needed to provide a
competitive product in the marketplace. These expenditures include guest room,
lounge and restaurant renovations, public area refurbishments and telephone and
computer system upgrades.
During the nine months ended September 30, 1995, gross expenditures on capital
improvements amounted to $6.8 million. These were funded by operating cash
flows, borrowings on the line of credit or from the Company. Future capital
needs will be met from these same sources.
16
<PAGE>
RED LION INNS LIMITED PARTNERSHIP
PART II: OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
- ------- ---------------------------------
(a) Exhibits: Exhibit 27 - Article 5 Financial Data Schedule for 3rd Quarter
10-Q.
(b) Reports on form 8-K - No reports on Form 8-K were filed during the quarter
for which this report is being 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 in the City of Vancouver, Washington, on
the 14th day of November 1995.
RED LION INNS LIMITED PARTNERSHIP
- ---------------------------------
(Registrant)
By: RED LION PROPERTIES, INC.
Its sole General Partner
By: /S/DAVID J. JOHNSON
-------------------
David J. Johnson
President and Chief Executive Officer
17
<PAGE>
INDEX OF EXHIBITS
Exhibit
Number
------
27 Article 5 Financial Data Schedule for 3rd Quarter 10-Q
18
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE COMPANY'S
CONSOLIDATED FINANCIAL STATEMENTS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 176
<PP&E> 236,862
<DEPRECIATION> (72,097)
<TOTAL-ASSETS> 165,357
<CURRENT-LIABILITIES> 133,659
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 20,571
<TOTAL-LIABILITY-AND-EQUITY> 165,357
<SALES> 30,438
<TOTAL-REVENUES> 30,438
<CGS> 0
<TOTAL-COSTS> 17,455
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 8,457
<INCOME-PRETAX> 4,526
<INCOME-TAX> 0
<INCOME-CONTINUING> 4,526
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,526
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 1.07
</TABLE>
