<PAGE>
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 March 31, 1996
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 1-9563
AIRCOA HOTEL PARTNERS, L.P.
(Exact name of registrant as specified in its charter)
Delaware 84-1042607
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) identification No.)
5775 DTC Boulevard
Suite 300
Englewood, Colorado 80111
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (303) 220-2000
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 twelve 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
----- -----
There were 5,340,214 Units outstanding of the Registrant's Class A Units, as of
May 10, 1996.
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
INDEX
<TABLE>
<CAPTION>
Page
Number
------
<S> <C> <C>
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements
Consolidated Balance Sheets
March 31, 1996 (Unaudited) and
December 31, 1995 2 - 3
Consolidated Statements of Operations
Three Months Ended March 31, 1996
and 1995 (Unaudited) 4
Consolidated Statement of Partners' Capital
Three Months Ended March 31, 1996
(Unaudited) 5
Consolidated Statements of Cash Flows
Three Months Ended March 31, 1996 and 1995
(Unaudited) 6
Notes to Consolidated Financial
Statements (Unaudited) 7 - 10
Item 2. Management's Discussion and Analysis of 11 - 13
Financial Condition and Results of Operations
PART II. OTHER INFORMATION AND SIGNATURES 13 - 14
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
PART I. FINANCIAL INFORMATION
- ------- ---------------------
Item 1. Financial Statements
- ------- ---------------------
AIRCOA HOTEL PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Assets March 31, 1996 December 31, 1995
- ------ --------------- ------------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 3,170 $ 2,116
Accounts receivable:
Trade 2,883 2,479
Affiliates 79 143
Inventory 347 339
Prepaid expenses 604 482
-------- --------
Total current assets 7,083 5,559
-------- --------
Property and equipment, at cost:
Land and leasehold improvements 8,914 8,914
Buildings and leasehold improvements 66,839 66,838
Furniture, fixtures and equipment 18,461 18,332
Construction in progress 74 --
-------- --------
94,288 94,084
Less accumulated depreciation and amortization (32,382) (31,329)
-------- --------
Net property and equipment 61,906 62,755
-------- --------
Other assets, including debt issue costs, net of
accumulated amortization of $337 in 1996 and
$237 in 1995 987 1,092
-------- --------
$69,976 $69,406
======== ========
</TABLE>
(continued)
See accompanying notes to consolidated financial statements.
2
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
CONSOLIDATED BALANCE SHEETS (Continued)
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Liabilities and Partners' Capital March 31, 1996 December 31, 1995
- --------------------------------- --------------- ------------------
<S> <C> <C>
Current liabilities:
Current installments of long-term debt $ 1,080 $ 1,080
Trade accounts payable 1,828 1,683
Payables to affiliates 478 715
Accrued liabilities:
Payroll 346 217
Taxes, other than income taxes 744 473
Other 2,385 1,848
Deferred revenue and advance deposits 1,618 1,995
------- -------
Total current liabilities 8,479 8,011
Long-term debt, excluding current installments 43,020 43,290
Notes payable to affiliates 8,100 8,100
Accrued administration and management fees
payable to affiliate 253 253
------- -------
Total liabilities 59,852 59,654
------- -------
Partners' capital:
General partner 241 236
Limited partners:
Class A Unitholders 13,693 13,603
Class B Unitholders (deficit) (3,810) (4,087)
------- -------
Total partners' capital 10,124 9,752
------- -------
$69,976 $69,406
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
1996 1995
---------- ---------
<S> <C> <C>
Revenue:
Rooms $ 7,317 $ 6,508
Food and beverage 3,017 2,635
Other property operations 2,034 1,751
---------- --------
12,368 10,894
---------- --------
Costs and operating expenses:
Rooms 1,886 1,757
Food and beverage 2,187 2,047
Other property operations 961 945
Administrative and general 1,215 1,150
Marketing 1,134 1,058
Energy 617 578
Property maintenance 573 545
Rent, taxes and insurance 683 623
Management fees 492 434
Depreciation and amortization 1,053 1,013
---------- --------
10,801 10,150
---------- --------
Operating income 1,567 744
Interest expense, including
amortization of debt costs 1,195 1,234
---------- --------
Net income (loss) $ 372 (490)
========== ========
Net income (loss) per limited
partnership Unit:
Class A Unitholders:
Net income (loss) $.02 (.14)
========== ========
Class B Unitholders:
Net income $.29 .28
========== ========
Weighted average number of units outstanding:
Class A 5,340,214 5,340,214
Class B 950,000 950,000
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
THREE MONTHS ENDED MARCH 31, 1996
(Unaudited)
(In Thousands, Except Unit Data)
<TABLE>
<CAPTION>
Limited Partners' Capital (Deficit)
-----------------------------------------
Class A Unitholders Class B Unitholders Total
General ------------------- ------------------- Partners'
Partner Units Capital Units Deficit Capital
------- --------- ------- ------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Balances at
December 31, 1995 $236 5,340,214 $13,603 950,000 $(4,087) $ 9,752
Net income 5 -- 90 -- 277 372
---- --------- ------- ------- ------- -------
Balances at
March 31, 1996 $241 5,340,214 $13,693 950,000 $(3,810) $10,124
==== ========= ======= ======= ======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Cash received from customers $11,305 $10,818
Cash paid to suppliers and vendors (6,528) (6,315)
Cash paid to employees (3,110) (3,135)
Interest paid (488) (963)
Other cash receipts, net 349 262
------- -------
Net cash provided by operating activities 1,528 667
------- -------
Cash flows from investing activities:
Capital expenditures (204) (57)
------- -------
Cash flows from financing activities:
Principal payments on long-term debt (270) (825)
------- -------
Increase/(decrease) in cash and cash equivalents 1,054 (215)
Cash and cash equivalents at beginning of period 2,116 1,261
------- -------
Cash and cash equivalents at end of period $ 3,170 $ 1,046
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
6
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
(1) BASIS OF PRESENTATION
AIRCOA Hotel Partners, L.P., a Delaware limited partnership (the
"Partnership") was organized in December 1986 to acquire, own and operate
hotel and resort properties. The Partnership owns and operates six hotel
and resort properties (the "Properties") through operating partnerships
(the "Operating Partnerships") which were acquired in 1986.
The Partnership holds a 99% limited partner interest in each of the six
Operating Partnerships which hold title to the Properties and through which
the Partnership conducts all of its operations. AHS, a wholly owned
subsidiary of Richfield Hospitality Services, Inc. ("Richfield"), is also
the 1% General Partner of each of the Operating Partnerships. Richfield
operates the Properties for the Partnership under certain management
agreements.
The accompanying unaudited consolidated financial statements have been
prepared in accordance with the instructions to Form 10-Q and, therefore,
do not include all information and disclosures necessary for a fair
presentation of financial position, results of operations and cash flows in
conformity with generally accepted accounting principles. In the opinion of
management, these financial statements reflect all adjustments (which
include only normal recurring adjustments) necessary for a fair
presentation of the results of operations and financial position for the
interim periods presented. These interim financial statements should be
read in conjunction with the Annual Report on Form 10-K for the period
ended December 31, 1995. Operating results for the three months ended March
31, 1996, are not necessarily indicative of the results that may be
expected for the year ended December 31, 1996.
(2) LONG-TERM DEBT
On June 8, 1995, the Partnership signed a credit agreement with a new
lender which provided a $45,000,000 first mortgage loan and a $1,000,000
revolving credit line. The proceeds of the $45,000,000 first mortgage loan
were used to refinance, on a long-term basis, the Partnership's existing
mortgage loan in the amount of $38,950,000 and the note payable to bank of
$1,790,000 which were due July 31, 1995 and October 31, 1995, respectively,
and to provide approximately $3,000,000 to fund hotel property renovations.
The balance of the funds was used for the payment of a facility fee and
closing costs.
The first mortgage loan interest rate at March 31, 1996 of 7.375% was based
on the current Eurodollar rate plus 2%, and is fixed through August 1,
1996. Repayment of the first mortgage loan is based on a twenty-year
amortization with a final maturity date in June 2000. Payments under this
loan consist of monthly installments of $90,000 plus interest on the unpaid
balance. The revolving credit line is renewable annually at the option of
the lender. No amounts have been drawn on the line at March 31, 1996.
Long term debt is summarized as follows (in thousands):
March 31, December 31,
1996 1995
--------- ------------
Mortgage loan $44,100 $44,370
Less current installments 1,080 1,080
------- -------
Long-term debt, excluding
current installments $43,020 $43,290
======= =======
7
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
LONG-TERM DEBT (CONTINUED)
The new first mortgage loan and revolving credit line contain various
covenants including: minimum debt service ratios, restrictions on
additional indebtedness, limitations on annual cash distributions to Class
A Unitholders, limitations on the payment of principal on the affiliate
notes payable, prepayment premium during the first two years, deferral of
management fees payable to Richfield if minimum debt service ratios are not
achieved, maintenance of a capital expenditure reserve account equal to 5%
of gross revenue and a maximum loan-to-value ratio of 65% based on the
aggregate appraised values of the Properties. The new first mortgage loan
and revolving credit line are subject to certain limited guarantees of an
affiliate of the General Partner. The first mortgage loan also requires the
Bank's approval of any dilution in the present ownership interests of
affiliates of the General Partner in the Partnership.
In accordance with the Partnership Agreement, the General Partner received
a 1% financing fee reduced by the amount of the financing fee paid to the
lender for arranging the refinancing of the Partnership's indebtedness. In
addition, the Partnership pays an annual guarantee fee calculated at .5% of
the outstanding loan balance at June 8th of each year to an affiliate of
the General Partner for the limited guarantee of the first mortgage loan
and the revolving credit line.
(3) NOTES PAYABLE TO AFFILIATES
A condition of the credit agreement signed by the Partnership for the first
mortgage loan and revolving credit line required the subordination of the
$6,000,000 notes payable to AHS (the "Notes"). AHS has agreed to this
subordination, and as a result, on September 26, 1995 the Board of
Directors of AHS, in its capacity as General Partner, and the Advisory
Committee of AHP authorized the extension of the term and deferral of
certain past-due interest on the Notes.
Pursuant to this extension, the Notes, which originally matured in January
1995 are due on June 8, 2000 which is coterminous with the new mortgage
loan. The unpaid interest on the Notes accrued prior to January 1, 1995 in
the amount of $2,100,000 was converted into a new promissory note ("New
Note") which also matures on June 8, 2000. The New Note accrues interest at
the rate of 12% per annum and is payable at maturity. Interest accrued on
the Notes after December 31, 1994, was paid at closing. Interest incurred
on the Notes subsequent to closing continues to be accrued at 12% per annum
and is paid monthly. The Notes and New Note are convertible into Class A
Units of the Partnership at $16.60 per unit. In addition, the Notes and New
Notes stipulate that 25% of any excess cash flow, as defined in the new
mortgage loan, will be applied against the principal of the notes
outstanding.
(4) PARTNERSHIP UNITS AND ALLOCATIONS
LIMITED PARTNERSHIP UNITS
The Class A Units entitle each Unitholder to a limited partnership interest
in a percentage of the profits and losses, tax allocations and
distributions of the Partnership, as described below.
The Class B Units entitle each Unitholder to a limited partnership interest
which is subordinate to the Class A Units, in certain circumstances. The
Class B Units are redeemable by the Partnership or convertible into Class A
Units, in certain circumstances. The Class B Units do not receive
distributions until the Class A Unitholders receive defined Minimum Annual
Distributions. Through 1996, the Class B Units are convertible into Class A
Units to the extent that distributable cash flow
8
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
PARTNERSHIP UNITS AND ALLOCATIONS (CONTINUED)
LIMITED PARTNERSHIP UNITS (CONTINUED)
of the Partnership in the previous year would have been sufficient to pay
Minimum Annual Distributions for the Class A Units, including the Class B
Units to be converted. Beginning in 1997, during the 30-day period
following the release of the Partnership's annual audited financial
statements, and each year thereafter through 2001, a minimum of 250,000
Class B Units are required to be converted into Class A Units annually
through 2001 at a redemption value of $20.00 per Class B Unit, by issuing
Class A Units valued at the then current market price of the Class A Units.
Therefore, the number of Class A Units to be issued upon conversion of a
Class B Unit will be determined at the time of conversion by dividing
$20.00 by the then current market price of a Class A Unit.
CASH DISTRIBUTIONS
The Partnership Agreement provides for periodic distribution of
distributable cash flow, as defined, to the partners at the discretion of
the General Partner. Distributable cash flow is generally defined as cash
flow from operations of the hotel properties. Such cash is allocated and
distributed (net of AHS' 1% general partnership interest in the Operating
Partnerships) 99% to the Class A Unitholders and 1% to the General Partner
until the Class A Unitholders have received defined Minimum Annual
Distributions. At March 31, 1996, the cumulative unpaid Minimum Annual
Distribution per Class A Unit significantly exceeds the Partnerships' net
asset value per unit based on the December 31, 1995 appraised values of the
hotel properties.
According to the new first mortgage loan, the maximum annual amount that
the Partnership may distribute to the Class A Unitholders is equal to 50%
of excess cash flow as defined in the mortgage loan agreement. However, if
the debt service coverage ratio, as defined, is greater than 1.50, then the
Partnership may distribute up to 75% of such excess cash flow.
In addition, the Partnership may not make any distributions to the Class A
Unitholders if there are any amounts which are due and payable under the
mortgage loan agreement which are unpaid.
(5) RELATED PARTY TRANSACTIONS
The following amounts resulting from transactions with affiliates are
included in the accompanying consolidated statements of operations (in
thousands):
For the three
months ended March 31,
----------------------
1996 1995
----- -----
Partnership administration fees $ 43 $ 56
===== =====
Management fees $ 492 $ 434
===== =====
Allocated insurance expenses $ 358 $ 349
===== =====
Allocated data processing cost $ 23 $ 13
===== =====
Interest expense $ 243 $ 180
===== =====
Lease income $ 46 $ 41
===== =====
License fees $ 94 $ 62
===== =====
9
<PAGE>
AIRCOA HOTEL PARTNERS, L.P.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1996
(Unaudited)
RELATED PARTY TRANSACTIONS (CONTINUED)
The properties are obligated to reimburse an affiliate for payroll,
professional fees, and certain out-of-pocket expenses incurred by the
affiliate on their behalf. Affiliates are also paid purchasing and design
fees in connection with renovations of the hotels and purchases of
furnishings, equipment and supplies.
The financing fee of $160,000 paid to the General Partner and the annual
guarantee fee of $230,000 paid to an affiliate of the Partnership have been
capitalized and are included in other assets. The financing fee is being
amortized over the life of the first mortgage loan, and the annual
guarantee fee is being amortized over twelve months.
(6) INCOME TAXES
No current provision or benefit for income taxes is included in the
accompanying consolidated financial statements since the taxable income or
loss of the Partnership is included in the tax returns of the individual
partners of the Partnership.
The Partnership's only significant temporary difference is an excess of the
tax basis over the book basis of the Partnership's hotels of approximately
$6,500,000 which gives rise to a net deferred tax asset of approximately
$2,600,000. The Partnership has established a 100% valuation allowance on
these net deferred tax assets. Current federal income tax regulations will
subject the Partnership to corporate taxation beginning in 1998.
10
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
- ------ -----------------------------------------------------------------------
of Operations
-------------
RESULTS OF OPERATIONS
Partnership revenue for the first three months of 1996 increased $1,474,000
or 13.5% compared to the first three months of 1995. Average occupancy and
daily room rates for the portfolio of 1,586 rooms are summarized as
follows:
Three months
ended March 31,
-----------------
1996 1995
-------- ------
Average occupancy 75.9% 75.7%
Average daily room rates $66.45 $60.11
The Partnership's properties produced higher revenue in the first three
months of 1996 when compared to the first three months of 1995, primarily
as a result of increased average daily room rates and increased food and
beverage revenue. Rooms revenue is primarily a function of the Properties'
occupancy levels and room rates.
Net rooms margin (rooms revenue less rooms expenses) increased $680,000 or
14.3% for the first three months of 1996 as compared to the first three
months of 1995, as revenue increased by $809,000 or 12.4%, while expenses
only increased $129,000 or 7.3%. The largest increases in margin occurred
at Sheraton Lakeside, Regal McCormick Ranch and Sheraton Durham. The
increase at Sheraton Lakeside was generated through an increase in room
rates, primarily in the leisure market segment, and a slight increase in
occupancy. The increases at Regal McCormick Ranch and Sheraton Durham were
primarily generated through increased room rates. The rate increases at
Regal McCormick Ranch were achieved in the group and leisure market
segments, while the rate increases at Sheraton Durham were primarily
achieved in the commercial market segment.
Net food and beverage margin (food and beverage revenue less food and
beverage expenses) increased $242,000 or 41.2% for the first three months
of 1996 compared to the first three months of 1995, as revenue increased
$382,000 or 14.5%, while expenses only increased $140,000 or 6.8%. This
significant increase in food and beverage contribution was achieved through
improved margins on food costs and reduction in payroll expenses.
Revenue from other property operations increased $283,000 or 16.2% for the
first three months of 1996 as compared to the same period in the prior
year. The majority of this increase occurred at Regal McCormick Ranch and
was primarily due to increased activities in the Scottsdale region which
benefited from hosting the Super Bowl and Fiesta Bowl at the beginning of
the year.
Operating income for the first three months of 1996 increased $823,000 or
111% compared to the first three months of 1995 as revenue increased
13.5%, while operating costs only increased 6.4%.
Interest expense decreased $39,000 or 3.2% during the first quarter of 1996
as compared to 1995 as the result of a decrease in the average interest
rate (inclusive of amortization of debt issue cost) from 10.35% to 9.13%,
offset in part by higher average debt levels.
Cash flow from operations differs from net income of the Partnership due to
the effects of depreciation, amortization and accruals as reflected in the
consolidated statements of cash flows. Net income/(loss) per Class A Unit
and the net income per Class B Unit reflect allocations of the net income
as required by the Partnership Agreement.
11
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Net cash provided by operating activities for the first three months of 1996
was $1,528,000, an increase of $861,000 as compared with the same period in
1995. The increase is primarily attributable to the increase in cash received
from customers of $487,000 and the decrease in interest paid of $475,000. Cash
used in investing activities increased $147,000 in the first three months of
1996 compared to the first three months of 1995. The increase primarily
reflects capital expenditures at Sheraton Durham. Cash used in financing
activities decreased $555,000 in the first three months of 1996 compared to the
first three months of 1995. The decrease is attributable to the Partnership
refinancing its long term debt in June 1995. This refinancing resulted in a new
$45,000,000 first mortgage loan and a $1,000,000 revolving line of credit.
Repayment of the new first mortgage loan is based on a 20 year amortization with
a final maturity date in June 2000. Payments under the new first mortgage loan
consist of monthly installments of $90,000 plus interest on the unpaid balance.
The previous mortgage loan had required monthly installments of $275,000 plus
interest.
The Partnership had indebtedness at March 31, 1996 of $52,200,000 as compared
to $52,470,000 at December 31, 1995. At March 31, 1996, the Partnership had a
working capital deficit of $1,396,000 compared to a working capital deficit of
$2,452,000 at December 31, 1995. The Partnership's working capital
requirements, debt service obligations and capital expenditures are expected to
be satisfied through a combination of operating cash flows and draws on its
revolving line of credit. The Partnership has capital improvements of
approximately $3,700,000 planned in 1996. These improvements will be primarily
funded from hotel operations.
The market value of the Partnership's properties differs significantly from
the historical cost of the properties as reflected in the Partnership's balance
sheet at March 31, 1996. As indicated under Item 2 in the Partnership's 1995
Form 10-K, the aggregate appraised value of the hotel properties at December 31,
1995 was $82,875,000. The December 1995 appraised value may not be
representative of the appraised value which will be obtained as of December 31,
1996 and is not necessarily indicative of the ability of the Partnership to
consummate a sale of the properties or the actual sale price to be realized from
the sale of the properties. However, the appraised value does represent the
appraiser's opinion of the most probable price for which the hotel properties
should sell in a competitive market.
PARTNERSHIP DISTRIBUTIONS AND UNIT CONVERSIONS
The Partnership Agreement provides for periodic distribution of distributable
cash flow, as defined, to the partners subject to any applicable restrictions
and the discretion of the General Partner. The Partnership has not made any
distributions since 1990. Prior to making future distributions, the Partnership
will comply with its capital expenditure requirements as specified in its
mortgage loan agreement and maintain sufficient working capital balances. The
Partnership currently has a Minimum Annual Distribution requirement of $2.16 per
Class A Unit. At March 31, 1996, the cumulative unpaid Minimum Annual
Distribution per Class A Unit significantly exceeds the Partnership's net asset
value per unit based on the December 31, 1995 appraised values of the hotel
properties. At this time, it is unlikely that there will be any funds available
for distribution to the Class A Unitholders in 1996.
Beginning in 1997, during the 30-day period following the release of the
Partnership's annual audited financial statements, and each year thereafter
through 2001, a minimum of 250,000 Class B Units are required to be converted at
a redemption value of $20.00 per Class B Unit, by issuing Class A Units valued
at the then current market price of a Class A Unit. Therefore, the number of
Class A Units to be issued upon the conversion of a Class B Unit will be
determined at the time of conversion by dividing $20.00 by the then current
market price of a Class A Unit. Current market price for this calculation is the
average market price for a Class A Unit during the last five days prior to
conversion.
12
<PAGE>
PARTNERSHIP DISTRIBUTIONS AND UNIT CONVERSIONS (CONTINUED)
Based on current market prices of the Class A Units, such required
conversion is expected to result in substantial dilution to the
preconversion Class A Unitholders. For example, based on the average
closing month-end market price of Class A Units during the first quarter
of 1996 of approximately $1.81, the conversion of 250,000 Class B Units in
the first year of the required conversion period would result in an
approximate 34% dilution to the Class A Unitholders upon conversion. The
conversion of all 950,000 Class B Units would result in an approximate 66%
dilution to the preconversion Class A Unitholders at the $1.81 per unit
market price. In addition, using the same per unit market price for a Class
A Unit of $1.81, affiliate ownership of Class A Units would increase to
approximately 81% and 90% upon conversion of the first 250,000 Class B
Units and conversion of all 950,000 Class B Units, respectively. Changes in
the market price of Class A Units do not result in proportional changes in
dilution. The market price of the Partnership's Class A Units is subject to
fluctuations and there is no assurance that such prices upon conversion
will approximate the average per unit market price in the first quarter of
1996.
Pursuant to the Partnership Agreement, the Class A Units to be issued upon
conversion of the Class B Units must be identical to the Class A Units
existing prior to the conversion date. If the General Partner determines,
based on advice of counsel, that no reasonable allowable convention or
other method is available to preserve the uniformity of the intrinsic tax
characteristics of any specifically identifiable group of units, such units
will be separately identified, to the extent practicable, as distinct
classes to reflect these intrinsic tax differences, regardless of any such
non-uniformity.
OTHER MATTERS
Management of the Partnership, the Board of Directors of the General
Partner and the Advisory Committee are seeking to increase the value of the
Partnership for all of its Unitholders. Management has been evaluating and
will continue to evaluate different strategies for maximizing Unitholder
value including; (i) continued ownership and operation of the properties,
(ii) liquidation, sale or other similar transactions, (iii) sale of one or
more of the Partnership's properties in response to exceptional offers, and
(iv) combining the Partnership or its assets with other hotel-owning
entities.
Unless and until such time as management identifies one or more preferable
strategic alternatives, the Partnership intends to pursue its current
strategy of owning and operating its existing portfolio of properties.
PART II. OTHER INFORMATION
- -------- -----------------
All other items are either not applicable or would be answered in the
negative and accordingly have been omitted.
13
<PAGE>
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.
AIRCOA HOTEL PARTNERS, L.P.
By: AIRCOA Hospitality Services, Inc.,
General Partner
Date: May 14, 1996 By: /s/ DOUGLAS M. PASQUALE
-------------- -----------------------
Douglas M. Pasquale
President and Director
(Principal Executive and Financial Officer)
By: /s/ DAVID C. RIDGLEY
--------------------
David C. Ridgley
Vice President
and Chief Accounting Officer
(Duly Authorized Officer)
14
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 3-MOS
<FISCAL-YEAR-END> DEC-31-1996 DEC-31-1995
<PERIOD-START> JAN-01-1996 JAN-01-1995
<PERIOD-END> MAR-31-1996 MAR-31-1995
<CASH> 3,170 2,116
<SECURITIES> 0 0
<RECEIVABLES> 2,962 2,622
<ALLOWANCES> 0 0
<INVENTORY> 347 339
<CURRENT-ASSETS> 7,083 5,559
<PP&E> 94,288 94,084
<DEPRECIATION> 32,382 31,329
<TOTAL-ASSETS> 69,976 69,406
<CURRENT-LIABILITIES> 8,479 8,011
<BONDS> 51,120 51,390
0 0
0 0
<COMMON> 0 0
<OTHER-SE> 10,124 9,752
<TOTAL-LIABILITY-AND-EQUITY> 69,976 69,406
<SALES> 12,368 10,894
<TOTAL-REVENUES> 12,368 10,894
<CGS> 0 0
<TOTAL-COSTS> (10,801) (10,150)
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> (1,195) (1,234)
<INCOME-PRETAX> 372 (490)
<INCOME-TAX> 0 0
<INCOME-CONTINUING> 0 0
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 372 (490)
<EPS-PRIMARY> 0<F1> 0<F2>
<EPS-DILUTED> 0 0
<FN>
<F1>CLASS A UNITHOLDERS $.02
CLASS B UNITHOLDERS $.29
<F2>CLASS A UNITHOLDERS $(.14)
CLASS B UNITHOLDERS $ .28
</FN>
</TABLE>
