<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: March 31, 1995 Commission File Number: 0-16840
------------------------- -------
PSH MASTER L.P.I
- - -------------------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 31-1204568
- - -------------------------------------------------------------------------------
(State of Organization) (IRS Employer Identification Number)
P.O. Box 18035, Columbus, OH 43218
- - -------------------------------------------------------------------------------
(Address of Principal Executive Offices, including Zip Code)
(614)227-4235
- - -------------------------------------------------------------------------------
(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 May 12, 1995 was 3,110,000.
<PAGE> 2
PSH MASTER L.P. I
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1995
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 Flows 6
Notes to Financial Statements 7
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
</TABLE>
2
<PAGE> 3
PSH MASTER L.P.I
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
Assets March 31, 1995 December 31, 1994
- - ------ -------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 509,976 $ 305,132
Accounts receivable, trade 1,203,580 1,062,885
Inventories 102,173 117,215
Prepaid expenses and other 247,927 174,864
Cash held in escrow 480,918 187,139
----------- -----------
Total current assets 2,544,574 1,847,235
----------- -----------
Property and equipment:
Land 3,780,000 3,780,000
Leasehold interest in land 7,440,000 7,440,000
Hotels 35,310,709 35,889,676
Furniture, fixtures and equipment 11,439,936 10,401,259
----------- -----------
Total 57,970,645 57,510,935
Less accumulated depreciation and amortization (20,963,750) (20,551,050)
----------- -----------
Total property and equipment, net 37,006,895 36,959,885
----------- -----------
Other assets:
Replacement reserve fund 206,833 704,290
China, glass, linen and silver, net 781,590 781,590
Deferred financing fees, organization costs
and other, net 462,284 509,523
----------- -----------
Total other assets 1,450,707 1,995,403
----------- -----------
Total assets $41,002,176 $40,802,523
=========== ===========
</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 March 31, 1995 December 31, 1994
- - --------------------------------- -------------- -----------------
<S> <C> <C>
Current liabilities:
Current portion of mortgage notes payable $ 253,789 $ 268,759
Accounts payable 1,498,205 1,360,583
Due to affiliates 55,228 38,169
Accrued expenses:
Payroll and related taxes 415,295 363,155
Real estate and other taxes 416,589 113,952
Interest 22,067 403,639
Other 142,424 94,826
----------- ------------
Total current liabilities 2,803,597 2,643,083
----------- ------------
Note payable 500,000 500,000
Mortgage notes payable, less current portion 45,754,440 45,903,119
Partners' Deficit:
General Partner (247,096) (259,705)
Limited Partners (3,110,000 units outstanding) (7,808,765) (7,983,974)
----------- ------------
Total partners' deficit (8,055,861) (8,243,679)
----------- ------------
Total liabilities and partners' deficit $41,002,176 $ 40,802,523
=========== ============
</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>
Quarter ended Quarter ended
March 31, 1995 March 31, 1994
-------------- --------------
<S> <C> <C>
Revenues:
Suites $4,664,497 $4,521,339
Other 1,344,393 1,186,207
---------- ----------
Total revenues 6,008,890 5,707,546
---------- ----------
Operating costs and expenses:
Direct operating:
Suites 936,535 968,171
Other 935,883 882,230
Other operating:
Sales, general and administrative 1,252,588 1,202,000
Energy and maintenance 473,954 481,421
Rents, taxes and other 506,302 507,435
Partnership administrative 66,597 58,851
Depreciation and amortization 459,936 469,714
---------- ----------
Total operating costs and expenses 4,631,795 4,569,822
---------- ----------
Income from operations 1,377,095 1,137,724
Interest income 5,589 3,743
Interest expense 1,194,866 1,188,381
---------- ----------
Net income (loss) $ 187,818 $ (46,914)
---------- ----------
Net income (loss) per unit of
limited partnership interest $ 0.06 $ (0.01)
---------- ----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE> 6
PSH MASTER L.P.I
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
Quarter ended Quarter ended
March 31, 1995 March 31, 1994
-------------- --------------
<S> <C> <C>
Cash provided (used) by operations:
Net income (loss) $ 187,818 $ (46,914)
Changes not requiring cash:
Depreciation and amortization 459,936 469,714
Working capital changes:
Increase in accounts receivable, trade (140,695) (653,021)
Increase in inventories,
prepaid expenses and other (72,314) (33,505)
Increase in accounts payable and accrued expenses 554,293 594,796
Decrease in accrued interest payable (381,572) (309,750)
Increase in due to affiliates 17,059 17,853
---------- ----------
Cash provided by operations 624,525 39,173
---------- ----------
Investment and other transactions:
Decrease in replacement reserve fund 497,457 39,047
Increase in cash escrow for real estate taxes (293,779) (294,456)
Additions to property and equipment, net (459,710) (98,969)
Payments of mortgages (163,649) (58,865)
---------- ----------
Cash used by investment and other transactions (419,681) (413,243)
---------- ----------
Increase (decrease) in cash and cash equivalents $ 204,844 $ (374,070)
========== ==========
Supplemental disclosure of cash flow information--
cash paid for interest $1,576,438 $1,498,131
========== ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE> 7
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 March 31,
1995 the Partnership had a partners' deficit of $8,055,861. 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) (see Note 5) and
Doubletree Hotels Corporation (Doubletree), the manager of the Partnership's
hotels, see Note 6, thereby providing the time necessary for the hotels to
achieve profitable operations and continue as a going concern.
(2) 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.
(3) 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 March 31, 1995 and
March 31, 1994 and the results of its operations for the quarters then ended.
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.
7
<PAGE> 8
(4) 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.
In December, 1993 Guest Quarters and Doubletree Hotels Corporation completed a
merger of their two companies. The resulting company, Doubletree Hotels
Corporation (Doubletree), now operates a 104 hotel, 26,500 room national hotel
chain. The Doubletree and Guest Quarters brands will be integrated during the
first half of 1995 and a new name of "Doubletree Guest Suites" will replace the
previous "Guest Quarters" brand. Total fees charged by Doubletree to the
Partnership for management, advertising, reservation and accounting services
were $511,941 and $526,873 during the first quarter of 1995 and 1994,
respectively. Of these amounts, Nuho Company, a successor to PH Management
Company, pursuant to the bankruptcy plan, received $141,816 and $133,872 during
the first quarter of 1995 and 1994, respectively, as its share of residual
management fees.
(5) REAL ESTATE MORTGAGE NOTES
The nonrecourse notes in the original aggregate amount of $43,300,000 are
secured by the first mortgages on the hotels, including the ground lease at the
Disney hotel. In February, 1991, Aetna applied $2,000,000 of the General
Partner's funds, previously held in escrow, against the principal balance of the
notes. 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 computed at the contract rate of 10.25%. Additionally, the Partnership
borrowed $219,000 from Aetna during 1993 to pay for closing costs incurred with
the modifications. During 1995 and 1994, the Partnership 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. 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 the loan, as appreciation interest.
Doubletree provided a $500,000 loan to the Partnership for capital improvements
in 1994 (see Note 6), 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 the debt service agreement at March 31, 1995.
(6) NOTE PAYABLE
On October 26, 1994, the Partnership borrowed $500,000 from Doubletree for
capital improvements. This nonrecourse note is secured by second mortgages on
the hotels and is due at the termination of the management agreement with
Doubletree. Interest is computed at 10.25% payable monthly in arrears and
payment is equal to the lesser of the monthly computed interest due or monthly
available cash flow from the Partnership.
8
<PAGE> 9
(7) PARTNERSHIP DISTRIBUTIONS AND ALLOCATIONS
For financial statement reporting purposes, net income (losses) are allocated 99
percent to the Unitholders and 1 percent to the General Partner. The net income
(losses) allocated to the Unitholders for the quarter ended March 31, 1995 and
March 31, 1994 were $185,940, or $.06 per unit, and ($46,445), or ($.01) per
unit, respectively.
9
<PAGE> 10
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
LIQUIDITY
The Partnership has incurred net losses since its inception and has not paid
cash to the Partnership to cover these shortfalls in full pursuant to the
Performance and Break-even Guaranty. The 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. Therefore, the financial statements do not include any
adjustments relating to the recoverability and classification of recorded asset
or liability amounts that might be necessary should the Partnership be unable to
continue as a going concern.
The Partnership modified certain terms of the mortgage loan documents with Aetna
Life Insurance Company (Aetna), effective May 26, 1993. Accordingly, during 1993
unpaid interest accruing in the aggregate amount of $4,876,267 was added to the
principal balance of the mortgage. In 1994 and 1995, the Partnership made
monthly payments of principal and interest on the outstanding principal of
$46,395,267 based upon a 30-year amortization schedule at the contract rate of
10.25%, in accordance with the modified loan terms. Cash from current year
operations, after required replacement reserves, exceeded the required debt
service to Aetna for 1994 by $77,093. This excess amount was paid to Aetna on
March 16, 1995, as a reduction of accrued interest in accordance with the
modified loan terms. For the first quarter ended March 31, 1995, cash from
operations, after required replacement reserves, exceeded the required debt
service by $450,301. This excess is expected to be diminished in the second half
of the year, especially during the fourth quarter, due to the seasonality of the
hotels' business.
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 March 31, 1995.
10
<PAGE> 11
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. During September, 1994, 1993 and 1992,
the Partnership received payments of $53,475, $111,405, and $503,866,
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. The debtors estimate that
approximately $1,000,000, including the previous payments, will be paid to the
Partnership over five years in satisfaction of the Partnership's claim,
including the amounts already received.
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 revenue percentages of 2% for the Tampa and
Raleigh/Durham hotels and 3% for the Disney hotel.
In addition, the Partnership borrowed $500,000 from Doubletree to be used for
capital improvements on October 26, 1994. Interest is computed at 10.25% payable
monthly in arrears.
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 monthly expense of
these taxes.
11
<PAGE> 12
RESULTS OF OPERATIONS
The Tampa and Disney hotels opened in April 1986 and March 1987, respectively,
and the Durham hotel opened in December 1987. The following table summarizes
combined operating information for the hotels:
<TABLE>
<CAPTION>
Quarter Ended Quarter Ended
Mar. 31, 1995 Mar. 31, 1994
-------------- --------------
<S> <C> <C>
Available suites 57,150 57,150
Occupancy percentage 78.34% 79.16%
Average daily rate $ 104.18 $ 99.94
Direct operating costs as a percent of total revenues 31.2% 32.4%
Income before depreciation and amortization expense $647,754 $422,800
Income before depreciation and amortization
expense per unit of limited partnership interest $.21 $.14
</TABLE>
Total revenues increased 5.3% from 1994, based upon a 4.2% increase in average
daily rate and a slight decline of 1.0% in occupancy. Average daily rate
increases were achieved at Tampa and Raleigh/Durham while Disney's rate remained
stable. Food, beverage and other revenues increased 13.3% from 1994, based upon
higher volumes and price increases. Direct operating costs declined as a
percentage of total revenues due to continued cost containment and increased
average daily rate. Sales, general and administrative expenses increased 4% due
primarily from an increase in management fees, based upon higher revenues, and
an increase in certain employee benefits resulting from the Doubletree merger.
Energy and maintenance costs and rents, taxes and other expenses remained steady
when compared to the prior year.
Partnership administrative expenses consist primarily of quarterly and annual
report costs, tax processing and transfer agent charges, and legal and audit
fees.
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 March 31, 1995.
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: James V. Pickett 5/12/95
-------------------------------- ---------
James V. Pickett, Chairman Date
By: Stephen C. Denz 5/12/95
-------------------------------- ---------
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> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<CASH> 509,976
<SECURITIES> 0
<RECEIVABLES> 1,203,580
<ALLOWANCES> 0
<INVENTORY> 102,173
<CURRENT-ASSETS> 2,544,574
<PP&E> 57,970,645
<DEPRECIATION> 20,963,750
<TOTAL-ASSETS> 41,002,176
<CURRENT-LIABILITIES> 2,803,597
<BONDS> 46,254,440
<COMMON> 0
0
0
<OTHER-SE> (8,055,861)
<TOTAL-LIABILITY-AND-EQUITY> 41,002,176
<SALES> 6,008,890
<TOTAL-REVENUES> 6,014,479
<CGS> 0
<TOTAL-COSTS> 4,631,795
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,194,866
<INCOME-PRETAX> 187,818
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 187,818
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
