<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act
of 1934
For Quarter Ended: September 30, 1994 Commission File Number: 0-16840
------------------ -------
PSH MASTER L.P. I
-------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 31-1204568
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(State of Organization) (IRS Employer Identification Number)
P.O. Box 18035, Columbus, OH 43218
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(Address of Principal Executive Offices, including Zip Code)
(614) 227-4235
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(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.
/X/ Yes / / No
- - ---- ----
The number of outstanding Units of Limited Partner Interest in the Registrant,
as represented by Depository Receipts at November 11, 1994 was 3,110,000.
<PAGE> 2
PSH MASTER L.P.I
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1994
Index
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Part I. Financial Information
Item 1: Financial Statements:
Balance Sheets 3
Statements of Operations 5
Statements of Cash Flow 7
Notes to Financial Statements 8
Item 2: Management's Discussion and Analysis of 10
Financial Condition and Results of Operation
Part II. Other Information
Items 1 through 6 13
Signatures 14
Exhibit 27 - Financial Data Schedule 15
</TABLE>
2
<PAGE> 3
PSH MASTER L.P.I
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
Assets September 30, 1994 December 31, 1993
- - ------ ------------------ -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 441,533 $ 659,326
Accounts receivable, trade 954,267 813,221
Inventories 112,254 120,579
Prepaid expenses and other 121,692 125,228
Cash held in escrow 742,994 200,280
------------- --------------
Total current assets 2,372,740 1,918,634
------------- --------------
Property and equipment:
Land 3,780,000 3,780,000
Leasehold interest in land 7,440,000 7,440,000
Hotels 35,225,293 35,278,769
Furniture, fixtures and equipment 10,379,990 10,074,643
------------- --------------
Total 56,825,283 56,573,412
Less accumulated depreciation and amortization (20,085,454) (18,852,693)
------------- --------------
Total property and equipment, net 36,739,829 37,720,719
------------- --------------
Other assets:
Replacement reserve fund 383,935 373,091
China, glass, linen and silver, net 781,590 779,724
Deferred financing fees, organization costs 557,162 699,476
and other, net ------------- --------------
Total other assets 1,722,687 1,852,291
------------- --------------
Total assets $ 40,835,256 $ 41,491,644
============= ==============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
PSH MASTER L.P.I
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
Liabilities and Partners' Deficit September 30, 1994 December 31, 1993
- - --------------------------------- ------------------ -----------------
<S> <C> <C>
Current liabilities:
Current portion of mortgage notes payable $ 264,226 $ 223,391
Accounts payable 1,059,858 1,086,920
Due to affiliates 29,444 34,677
Accrued expenses:
Payroll and related taxes 361,575 300,733
Workers' compensation 306,972 255,280
Real estate and other taxes 618,651 121,273
Interest 309,750
Other 185,127 158,330
------------- ------------
Total current liabilities 2,825,853 2,490,354
------------- ------------
Mortgage notes payable, less current portion 45,949,839 46,171,876
------------- ------------
Partners' Deficit:
General Partner (256,672) (248,974)
Limited Partners (3,110,000 units outstanding) (7,683,764) (6,921,612)
------------- ------------
Total partners' deficit (7,940,436) (7,170,586)
------------- ------------
Total liabilities and partners' deficit $ 40,835,256 $ 41,491,644
============= ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE> 5
PSH MASTER L.P.I
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Nine
Months ended Months ended
September 30, 1994 September 30, 1993
------------------ ------------------
<S> <C> <C>
Revenues:
Suites $ 12,345,301 $ 11,894,145
Other 3,530,752 3,293,045
------------ ------------
Total revenues 15,876,053 15,187,190
------------ ------------
Operating costs and expenses:
Direct operating:
Suites 2,624,585 2,658,761
Other 2,599,898 2,546,306
Other operating:
Sales, general and administrative 3,451,191 3,323,065
Energy and maintenance 1,464,931 1,468,920
Rents, taxes and other 1,469,511 1,601,995
Partnership administrative 111,466 218,871
Depreciation and amortization 1,375,552 1,227,127
------------ ------------
Total operating costs and expenses 13,097,134 13,045,045
------------ ------------
Income from operations 2,778,919 2,142,145
Interest income 11,769 18,083
Interest expense 3,560,536 3,506,805
------------ ------------
Net loss $ (769,848) $ (1,346,577)
============ ============
Net loss per unit of limited partnership interest $(0.25) $(0.43)
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
PSH MASTER L.P.I
STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter ended Quarter ended
September 30, 1994 September 30, 1993
------------------ ------------------
<S> <C> <C>
Revenues:
Suites $ 3,519,724 $ 3,574,585
Other 1,085,600 1,035,642
------------ ------------
Total revenues 4,605,324 4,610,227
------------ ------------
Operating costs and expenses:
Direct operating:
Suites 772,188 891,457
Other 800,467 810,589
Other operating:
Sales, general and administrative 1,040,733 1,069,190
Energy and maintenance 491,621 512,060
Rents, taxes and other 460,011 489,720
Partnership administrative 13,851 11,646
Depreciation and amortization 453,220 418,999
------------ ------------
Total operating costs and expenses 4,032,091 4,203,661
------------ ------------
Income from operations 573,233 406,566
Interest income 2,565 6,905
Interest expense 1,185,297 1,178,074
------------ ------------
Net loss $ (609,499) $ (764,603)
============ ============
Net loss per unit of
limited partnership interest $(0.19) $(0.24)
====== ======
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
PSH MASTER L.P.I
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Nine Nine
Months ended Months ended
September 30, 1994 September 30, 1993
------------------ ------------------
<S> <C> <C>
Cash provided (used) by operations:
Net loss $ (769,848) $ (1,346,577)
Changes not requiring cash:
Depreciation and amortization 1,375,552 1,227,127
Interest capitalized into mortgage notes 719,056
Working capital changes:
(Increase) decrease in accounts receivable, trade (141,046) 77,572
Decrease in inventories, 11,861 92,031
prepaid expenses and other
Increase in accounts payable and accrued expenses 609,647 509,488
Decrease in accrued interest payable (309,750) (79,889)
Decrease in due to affiliates (5,233) (2,301)
------------ ------------
Cash provided by operations 771,183 1,196,507
------------ ------------
Financing and capital transactions:
Guaranty payments from General Partner 53,475 111,405
Proceeds from mortgage notes payable 219,000
Increase in deferred financing cost (308,872)
Cash provided by financing and capital ------------ ------------
transactions 53,475 21,533
------------ ------------
Investment and other transactions:
Increase in replacement reserve fund (10,844) (114,905)
Increase in china, glass, linen, and silver, net (1,866)
Increase in cash escrow for real estate taxes (542,714) (543,482)
Additions to property and equipment, net (305,825) (385,654)
Payments of mortgages (181,202)
------------ ------------
Cash used by investment and other transactions (1,042,451) (1,044,041)
------------ ------------
Increase (decrease) in cash and cash equivalents $ (217,793) $ 173,999
============ ============
Supplemental disclosure of cash flow information- $ 3,870,286 $ 2,478,000
cash paid for interest ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 8
NOTES TO THE FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
The accompanying financial statements of PSH Master L.P.I (the Partnership)
have been prepared on a going concern basis which contemplates the realization
of assets and the satisfaction of liabilities in the normal course of business.
The Partnership has incurred net losses since its inception and at September
30, 1994, the Partnership had a partners' deficit of $7,940,436. PC
Development Limited Partnership (the General Partner) has not paid cash to the
Partnership to cover these shortfalls in full pursuant to the Performance and
Breakeven Guaranty (the Guaranty Agreement). PC Development was reorganized in
1992 under Chapter 11 of the U.S. Bankruptcy Code.
Recurring losses from operations, the default of the General Partner on its
guaranty to provide sufficient cash to enable the Partnership to pay all its
expenses through 1992, and the reorganization in bankruptcy of the General
Partner raise substantial doubt about the Partnership's ability to continue as
a going concern for a reasonable period of time. The financial statements do
not include any adjustments relating to the recoverability of recorded asset
amounts or the amounts of liabilities that might be necessary should the
Partnership be unable to continue as a going concern. Management is of the
opinion that the Partnership will continue to meet its obligations through the
modified loan terms reached with Aetna Life Insurance Company (Aetna) and Guest
Quarters, the manager of the Partnership's hotels, as described in Note 2,
thereby providing the time necessary for the hotels to achieve profitable
operations and continue as a going concern.
(2) MODIFICATION OF TERMS OF FIRST MORTGAGE LOANS
On May 26, 1993, the Partnership modified certain terms of the mortgage loan
documents with Aetna. Accordingly, during 1993 unpaid interest accruing in the
aggregate amount of $4,876,267 was added to the principal balance of the
mortgage. During 1993, interest accrued at the contract rate of 10.25% and was
payable at an annual rate of 9% of $41,300,000 (original loan balance). In
1994, the Partnership has made monthly payments of principal and interest on
the outstanding principal of $46,395,267 based upon a 30-year amortization
schedule. A final payment, including interest, is due on August 1, 1997 (see
Note 8). Also in 1994, the Partnership may elect to pay interest at a 9.5%
annual rate accruing on the outstanding principal balance, including accrued
interest, at January 1, 1992 of $44,573,980. Interest earned but not paid will
be added to the outstanding principal balance. If this election is made,
amortization of principal will commence in 1995 pursuant to a 30-year
amortization schedule with a final payment, including interest, due on August
1, 1997. Also, Aetna will receive 25% of the net proceeds, as defined, at sale
of the hotels, or net proceeds based upon market value if the hotels are not
sold prior to the maturity of loan, as appreciation interest. If the 9.5% pay
rate option is elected by the Partnership for 1994, Aetna's participation will
increase to 40%. Guest Quarters will provide a $500,000 loan to the
Partnership for capital improvements and has guaranteed, up to $1,000,000, the
Partnership's obligation to make debt service payments to Aetna. No amounts
have been borrowed under such agreement at September 30, 1994.
8
<PAGE> 9
(3) ORGANIZATION AND BUSINESS
The Partnership is a Delaware limited partnership which owns three all-suite
hotels located in Tampa, Florida; WALT DISNEY WORLD(R) Village in Lake Buena
Vista, Florida; and in the Research Triangle area near Raleigh/Durham, North
Carolina.
(4) SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation:
In the opinion of Management, the accompanying financial statements contain all
adjustments (all of which are normal and recurring in nature) necessary to
present fairly the financial position of the Partnership at September 30, 1994,
and the results of its operations for the year-to-date and quarterly periods
ended September 30, 1994 and September 30, 1993. The Partnership has
considered Statement of Financial Accounting Standard Number 109 "Accounting
for Income Taxes" and, given the cumulative operating losses, has concluded
that this standard will have no impact on the Partnership's financial
statements.
(5) RELATED PARTIES
The General Partner, an affiliate, is generally empowered by the Partnership
Agreement to conduct, direct and exercise full control over all activities of
the Partnership.
Total fees charged by Guest Quarters to the Partnership for management,
advertising, reservation and accounting services were $432,456 and $409,995
during the third quarter of 1994 and 1993, respectively. Of these amounts,
Nuho Company, a successor to PH Management Company pursuant to the bankruptcy
plan, received $109,372 and $108,367 in the third quarter of 1994 and 1993,
respectively, as its share of residual management fees. Year-to-date, Guest
Quarters earned $1,466,957 for its services compared to $1,320,039 in the first
nine months of 1993. Of these amounts, Nuho Company received residual fees of
$371,344 compared to $357,280 received in the first nine months of 1993.
(6) PARTNERSHIP DISTRIBUTIONS AND ALLOCATIONS
For financial statement reporting purposes, net losses are allocated 99 percent
to the Unitholders and 1 percent to the General Partner. The net losses
allocated to the Unitholders for the quarter ended September 30, 1994 and
September 30, 1993 were ($603,404), or ($.19) per unit, and ($756,957), or
($.24) per unit, respectively. The net losses allocated to the Unitholders for
the first nine months of 1994 were ($762,150) or ($.25) per unit, compared to
($1,333,111) or ($.43) per unit for the same period of the previous year.
9
<PAGE> 10
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
LIQUIDITY
The Aetna modifications of the interest pay rate have allowed the Partnership
to remain current in its debt service obligations. During the first nine
months of 1994, the Partnership paid principal and interest payments to Aetna
at the rate of 10.25% based upon a 30-year amortization schedule in accordance
with the restructured loans. Cash from operations, after required replacement
reserves exceeded this requirement by $39,413 during the first nine months of
1994 but fell short of this requirement by $328,533 during the third quarter of
1994. Management expects that sufficient cash will be generated during the
fourth quarter to meet future debt service requirements.
The Partnership's liquidity is supplemented by the guarantee of Guest Quarters,
up to $1,000,000, to fund cash deficits in the event the properties cannot meet
the revised terms of the Aetna loans. No amounts have been borrowed under such
agreement at September 30, 1994.
CAPITAL RESOURCES
Hotel operations are the Partnership's primary and on-going source of cash to
pay its operating expenses, to meet its reserve requirements, and to make cash
distributions to its partners. Hotel occupancy is seasonal by nature. Cash
flows track this seasonality closely due to the nature of trade receivables.
Other trade receivables include wholesale and travel agent accounts, and
corporate and group billings, the majority of which are collected within 30
days. The Partnership earns interest income from its various operating cash
accounts including the balances held in the Replacement Reserve Funds.
The General Partner established an escrow account in 1987 in the initial amount
of $5,500,000 on behalf of the Partnership to secure its obligation under the
Guaranty Agreement through 1990. Payments from the escrow account totaled
$5,500,000 through 1991. In addition to the amounts released from escrow, the
General Partner made direct payments to the Partnership of $6,220,000 through
1990 pursuant to the Guaranty Agreement. On September 10, 1994 and 1993, the
Partnership received payments of $53,473 and $111,405, respectively, on its
unsecured claim against PC Development Limited Partnership, the General
Partner, which filed for protection from creditors under Chapter 11 of the U.S.
Bankruptcy code on February 1, 1991. Total payments received by the
Partnership against its unsecured claim total $668,744. The debtors estimate
that approximately $1,000,000, including the previous payments, will be paid to
the Partnership in satisfaction of the Partnership's claim.
10
<PAGE> 11
The Partnership is required by its Management Agreement to maintain Replacement
Reserve Fund balances of specified amounts to facilitate operating the Hotels
as "first-class" suite accommodations. Separate Replacement Reserve Funds have
been established for replacements, substitutions and additions to furniture and
equipment and must be funded each accounting period. In connection with the
agreements with Aetna and Guest Quarters, the Partnership is depositing cash
into replacement reserves based upon 2% of revenue for the Tampa and
Raleigh/Durham hotels and 3% of revenue for the Disney hotel. In addition, the
Partnership can borrow up to $500,000 from Guest Quarters to be used for
capital improvements. Although no amounts have been borrowed under such
agreement at September 30, 1994, it is anticipated that the full amount of this
loan will be borrowed by the Partnership in 1995 to fund, in part, renovation
and refurbishment projects currently under way at the Disney and Tampa hotels.
In 1991, the Partnership began depositing cash each month into escrow for the
payment of real and personal property taxes, as required by Aetna. The monthly
deposits to the escrow account are equal to the estimated prorated expense of
these taxes.
RESULTS OF OPERATIONS
The following table summarizes combined operating information for the hotels:
<TABLE>
<CAPTION>
Nine Months Nine Months
Quarter Ended Quarter Ended Ended Ended
September 30, 1994 September 30, 1993 September 30, 1994 September 30, 1993
------------------ ------------------ ------------------ ------------------
<S> <C> <C> <C> <C>
Available suites 58,420 58,420 173,355 173,355
Occupancy percentage 68.20% 70.58% 75.32% 74.65%
Average daily rate $88.34 $86.69 $94.54 $91.91
Direct operating costs as a percent
of total revenues 34.1% 36.9% 32.9% 34.3%
Income (loss) before depreciation
and amortization expense
($156,279) ($345,604) $605,704 ($119,450)
Income (loss) before
depreciation and
amortization expense
per unit of limited
partnership interest ($.05) ($.11) $.19 ($.04)
</TABLE>
11
<PAGE> 12
Although revenues declined slightly in the current quarter compared to the same
quarter of 1993, the Partnership's cash loss (before depreciation and
amortization expense) improved by 55%, reflecting continued improvements by
Quest Quarters in operating efficiencies at the hotels. The 1.5% decline in
suite revenues during the quarter resulted from low volumes in September,
particularly at the Disney hotel. That local market continues to be negatively
impacted by new hotel supply built primarily by the Walt Disney organization.
Each property recorded increases in average daily rate during the current
quarter.
Year-to-date, revenues increased 4.3% over the first three quarters of 1993,
resulting from relatively flat occupancy but increased average daily rate at
each hotel. Cost containment, as in the current quarter, contributed to a
$725,154 improvement in income (before depreciation and amortization expense).
On December 16, 1993, Guest Quarters (the hotel manager of the Partnership)
merged with Doubletree Hotels Corporation, creating the sixth largest U.S.
hotel chain in the "first-class" lodging category. Reclassifications of
certain expenses were made to the 1994 amounts to conform to the Doubletree
accounting system. These reclassifications increased sales, general and
administrative expenses by 2.8% in the first nine months of 1994 and reduced
suites direct operating expenses. The 1993 expenses have not been restated to
conform to the new format due to immateriality.
Sales, general and administrative expenses increased 3.7% year-to-date but
decreased 2.7% for the current quarter, compared to the prior year and prior
third quarter, due primarily to an increase in management fees as well as the
reclassifications mentioned in the previous paragraph. Energy and maintenance
costs remained steady when compared to the prior year, even with a significant
increase in occupancy, due in part to energy saving devices which were
installed at the properties for better temperature control. However, energy
and maintenance costs for the current quarter decreased 4% below last year due
primarily to the extreme weather conditions and storm damage that occurred at
the Tampa hotel in 1993. Rents, taxes and other expenses experienced a 9%
decrease in the first nine months of 1994 and 6.1% for the third quarter of
1994 due to a revaluation of real and personal property tax values for all the
properties.
Partnership administrative expenses consist primarily of quarterly and annual
report costs, tax processing and transfer agent charges, and legal and audit
fees. The increase in these expenses during the third quarter compared to the
third quarter of 1993 was due primarily to accounting fees. These expenses
declined, compared to the first nine months of 1993, due to a reduction in
legal fees. The Aetna debt restructuring was completed in 1993 resulting in
reduced legal costs during 1994.
12
<PAGE> 13
PART II. OTHER INFORMATION
ITEMS 1 THROUGH 6
Information required in Items 1 through 6 is not applicable to the Registrant
for the quarter ended September 30, 1994.
Exhibit 27 - Financial Data Schedule
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Security Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PSH MASTER L. P. I
(Registrant)
By: PC Development Limited Partnership,
General Partner
By: PH Management Company,
General Partner
By: /s/ JAMES V. PICKETT 11/11/94
-------------------------- --------
James V. Pickett, Chairman Date
By: /s/ STEPHEN C. DENZ 11/11/94
----------------------- --------
Stephen C. Denz, Controller Date
(Principal Financial Officer)
14
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000813897
<NAME> PSH MASTER L P I
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 441,533
<SECURITIES> 0
<RECEIVABLES> 954,267
<ALLOWANCES> 0
<INVENTORY> 112,254
<CURRENT-ASSETS> 2,372,740
<PP&E> 56,825,283
<DEPRECIATION> 20,085,454
<TOTAL-ASSETS> 40,835,256
<CURRENT-LIABILITIES> 2,825,853
<BONDS> 45,949,839
<COMMON> 0
0
0
<OTHER-SE> (7,940,436)
<TOTAL-LIABILITY-AND-EQUITY> 40,835,256
<SALES> 15,876,053
<TOTAL-REVENUES> 15,887,822
<CGS> 0
<TOTAL-COSTS> 13,097,134
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,560,536
<INCOME-PRETAX> (769,848)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (769,848)
<EPS-PRIMARY> (.25)
<EPS-DILUTED> (.25)
</TABLE>
