<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, 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 November 10, 1995 was 3,110,000.
<PAGE> 2
PSH MASTER L.P. I
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1995
<TABLE>
<CAPTION>
Index
-----
Page
Number
------
<S> <C>
Part I. Financial Information
Item 1: Financial Statements:
Balance Sheets 3
Statements of Operations 5
Statements of Cash Flows 7
Notes to Financial Statements 8
Item 2: Management's Discussion and Analysis of 11
Financial Condition and Results of Operation
Part II. Other Information
Items 1 through 6 15
Signatures 16
Financial Data Schedule 17
</TABLE>
2
<PAGE> 3
PSH MASTER L.P.I
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
September 30, December 31,
Assets 1995 1994
- - ------ ------------- ---------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 184,837 $ 305,132
Accounts receivable, trade 1,136,311 1,062,885
Inventories 99,326 117,215
Prepaid expenses and other 322,784 174,864
Cash held in escrow 923,552 187,139
------------ ------------
Total current assets 2,666,810 1,847,235
------------ ------------
Property and equipment:
Land 3,780,000 3,780,000
Leasehold interest in land 7,440,000 7,440,000
Hotels 35,876,536 35,889,676
Furniture, fixtures and equipment 11,124,204 10,401,259
------------ ------------
Total 58,220,740 57,510,935
Less accumulated depreciation and amortization (21,841,366) (20,551,050)
------------ ------------
Total property and equipment, net 36,379,374 36,959,885
------------ ------------
Other assets:
Replacement reserve fund 280,592 704,290
China, glass, linen and silver, net 781,590 781,590
Deferred financing fees, organization costs
and other, net 367,209 509,523
------------ ------------
Total other assets 1,429,391 1,995,403
------------ ------------
Total assets $ 40,475,575 $ 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>
September 30, December 31,
Liabilities and Partners' Deficit 1995 1994
- - --------------------------------- ------------- -------------
<S> <C> <C>
Current liabilities:
Current portion of mortgage notes payable $ 267,077 $ 268,759
Accounts payable 1,397,147 1,360,583
Due to affiliates 33,797 38,169
Accrued expenses:
Payroll and related taxes 411,350 363,155
Real estate and other taxes 759,772 113,952
Interest 8,542 403,639
Other 157,409 94,826
----------- -----------
Total current liabilities 3,035,094 2,643,083
----------- -----------
Note payable 500,000 500,000
Mortgage notes payable, less current portion 45,605,667 45,903,119
----------- -----------
Partners' Deficit:
General Partner (263,920) (259,705)
Limited Partners (3,110,000 units outstanding) (8,401,266) (7,983,974)
----------- -----------
Total partners' deficit (8,665,186) (8,243,679)
----------- -----------
Total liabilities and partners' deficit $40,475,575 $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>
Nine Nine
Months Ended Months Ended
September 30, September 30,
1995 1994
------------------- ---------------
<S> <C> <C>
Revenues:
Suites $12,960,636 $12,345,301
Other 3,731,165 3,530,752
----------- -----------
Total revenues 16,691,801 15,876,053
----------- -----------
Operating costs and expenses:
Direct operating:
Suites 2,796,018 2,624,585
Other 2,654,308 2,599,898
Other operating:
Sales, general and administrative 3,578,868 3,451,191
Energy and maintenance 1,524,784 1,464,931
Rents, taxes and other 1,432,527 1,469,511
Partnership administrative 126,013 111,466
Depreciation and amortization 1,432,630 1,375,552
----------- -----------
Total operating costs and expenses 13,545,148 13,097,134
----------- -----------
Income from operations 3,146,653 2,778,919
Interest income 11,342 11,769
Interest expense 3,579,502 3,560,536
----------- -----------
Net income (loss) $ (421,507) $ (769,848)
=========== ===========
Net income (loss) per unit of
limited partnership interest $ (0.13) $ (0.25)
=========== ===========
</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, September 30,
1995 1994
------------------ -------------------
<S> <C> <C>
Revenues:
Suites $3,785,020 $3,519,724
Other 1,106,655 1,085,600
---------- ----------
Total revenues 4,891,675 4,605,324
---------- ----------
Operating costs and expenses:
Direct operating:
Suites 876,284 772,188
Other 800,816 800,467
Other operating:
Sales, general and administrative 1,136,000 1,040,733
Energy and maintenance 528,206 491,621
Rents, taxes and other 459,939 460,011
Partnership administrative 17,781 13,851
Depreciation and amortization 477,725 453,220
---------- ----------
Total operating costs and expenses 4,296,751 4,032,091
---------- ----------
Income from operations 594,924 573,233
Interest income 532 2,565
Interest expense 1,191,455 1,185,297
---------- ----------
Net loss $ (595,999) $ (609,499)
========== ==========
Net loss per unit of
limited partnership interest $ (0.19) $ (0.19)
========== ==========
</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, September 30,
1995 1994
------------- -------------
<S> <C> <C>
Cash provided by operations:
Net loss $ (421,507) $ (769,848)
Changes not requiring cash:
Depreciation and amortization 1,432,630 1,375,552
Working capital changes:
Increase in accounts receivable, trade (73,426) (141,046)
(Increase) decrease in inventories,
prepaid expenses and other (130,031) 11,861
Increase in accounts payable and accrued expenses 793,163 609,647
Decrease in accrued interest payable (395,097) (309,750)
Decrease in due to affiliates (4,372) (5,233)
----------- -----------
Cash provided by operations 1,201,360 771,183
----------- -----------
Financing and capital transactions:
Guaranty payments from General Partner 41,589 53,475
----------- -----------
Cash provided by financing and capital
transactions 41,589 53,475
----------- -----------
Investment and other transactions:
(Increase) decrease in replacement reserve fund 423,698 (10,844)
Increase in china, glass, linen, and silver, net (1,866)
Increase in cash escrow for real estate taxes (736,413) (542,714)
Additions to property and equipment, net (751,395) (305,825)
Payments of mortgages (299,134) (181,202)
----------- -----------
Cash used by investment and other transactions (1,363,244) (1,042,451)
----------- -----------
Decrease in cash and cash equivalents $ (120,295) $ (217,793)
=========== ===========
Supplemental disclosure of cash flow information--
cash paid for interest $ 3,935,447 $ 3,870,286
=========== ===========
</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,
1995 the Partnership had a partners' deficit of $8,665,186. 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 the mortgagor (see Note 5) and Doubletree Hotels Corporation
(Doubletree), the manager of the Partnership's hotels (see Note 4), 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 September 30, 1995
and December 31, 1994 and the results of its operations for the year-to-date and
quarterly periods ended September 30, 1995 and September 30, 1994. 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.
8
<PAGE> 9
(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 were integrated during the first
half of 1995 and a new name of "Doubletree Guest Suites" has replaced the
previous "Guest Quarters" brand. Total fees charged by Doubletree to the
Partnership for management, advertising, reservation and accounting services
were $438,113 and $432,456 during the third quarter of 1995 and 1994,
respectively. Of these amounts, Nuho Company, a successor to PH Management
Company, pursuant to the bankruptcy plan, received $109,782 and $109,372 during
the third quarter of 1995 and 1994, respectively, as its share of residual
management fees. Year-to-date, Doubletree earned $1,337,132 for its services
compared to $1,466,957 in the first three quarters of 1994. Of these amounts,
Nuho Company received residual fees of $392,332 compared to $371,344 received in
the first three quarters of 1994. The total fees earned by Doubletree in 1995
reflect a credit to the Partnership of $117,119 to be used for expenses,
including signage costs, associated with the conversion to the Doubletree name.
(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. 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. The lender will receive appreciation interest equal to 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.
Doubletree has guaranteed, up to $1,000,000, the Partnership's obligation to
make debt service payments. No amounts have been borrowed under the debt service
agreement at September 30, 1995.
9
<PAGE> 10
(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% and payment is equal to the lesser of
the monthly computed interest due or monthly available cash flow from the
Partnership.
(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 losses
allocated to the Unitholders for the quarter ended September 30, 1995 and
September 30, 1994 were ($590,039), or ($.19) per unit, and ($603,404), or
($.19) per unit, respectively. The net income (losses) allocated to the
Unitholders for the first nine months of 1995 were ($417,292), or ($.13) per
unit, compared to ($762,150), or ($.25) per unit, for the same period of the
previous year.
10
<PAGE> 11
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
LIQUIDITY
During 1995 and 1994, the Partnership paid principal and interest payments at
the rate of 10.25% based upon a 30-year amortization schedule in accordance with
the restructured loans. Cash from current year operations, after required
replacement reserves, exceeded the required debt service by $447,218 for the
first nine months of 1995 but fell short of this requirement by $290,662 during
the third quarter of 1995. The year-to-date excess is expected to be diminished
in the fourth quarter, due to the seasonality of the hotels' business.
The Partnership's liquidity is supplemented by the guarantee of Doubletree, up
to $1,000,000 to fund cash deficits in the event the properties cannot meet the
revised loan terms. No amounts have been borrowed under such agreement at
September 30, 1995.
11
<PAGE> 12
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, 1995 and 1994, the
Partnership received payments of $41,589 and $53,475, 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 Partnership has received a total of
$710,335 against it claim. The debtors estimate that approximately $1,000,000
will be paid to the Partnership in satisfaction of its 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 the lender and Doubletree, 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 the lender. The
monthly deposits to the escrow account are sufficient to meet these tax
obligations as they come due.
12
<PAGE> 13
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>
Nine Months Nine Months
Quarter Ended Quarter Ended Ended Ended
Sept. 30, 1995 Sept. 30, 1994 Sept. 30, 1995 Sept. 30, 1994
---------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Available suites 58,420 58,420 173,355 173,355
Occupancy percentage 72.25% 68.20% 76.85% 75.32%
Average daily rate $ 89.67 $ 88.33 $ 97.28 $ 94.54
Direct operating costs as a
percent of total revenues 34.3% 34.1% 32.6% 32.9%
Income before
depreciation and
amortization expense ($118,274) ($156,279) $1,011,123 $605,704
Income before
depreciation and
amortization expense
per unit of limited
partnership interest ($.04) ($.05) $ .32 $ .19
</TABLE>
NINE MONTHS ENDED SEPTEMBER 30, 1995
Total revenues increased 5.1% during the first nine months of 1995, driven by an
increase in average daily rate of $2.74 or 2.9%. Occupancy increased due to
strong volume increases at the Raleigh/Durham hotel. Occupancy at the Disney
hotel was up slightly, while volumes at Tampa declined by 1.5 points. Food,
beverage and other revenues increased 5.7% over the prior year, based upon both
higher volumes and price increases.
13
<PAGE> 14
Direct operating costs increased by 4.3% in the first nine months, compared to
the same period of 1994, but remained steady as a percent of sales due to
increased average daily rate and other revenue gains. Sales, general and
administrative expenses, up 3.7%, reflect increased sales and marketing activity
and increases in certain employee benefits and promotional costs associated with
the conversion to the Doubletree brand. Sales, general and administrative
expenses include a credit, recorded in the second quarter, received from
Doubletree in the amount of $117,119 to fund costs associated with the
conversion, including signage changes. Higher management fees and credit card
commissions (based upon higher revenue levels), increased security expenses and
relocation costs associated with personnel changes at the Disney hotel offset
the credit received from Doubletree. Energy and maintenance costs increased by
4% over 1994 due primarily to higher grounds and landscaping costs incurred at
all the properties, including tree removals and shrubbery replacements of aging
foliage. Rents, taxes and other expenses decreased 2.5% over 1994 due to and
lower insurance costs for the properties when compared to the previous year.
Partnership administrative expenses consist primarily of quarterly and annual
report costs, tax processing and transfer agent charges, and legal and audit
fees.
QUARTER ENDED SEPTEMBER 30, 1995
Total revenues increased by 6.2% during the quarter, resulting from a
significant increase in occupancy at each of the hotels. Higher average daily
rates also contributed to the revenue increase. Direct operating costs
associated with the suites department increased 13.5% in the quarter, driving
direct operating costs up to 34.3% of revenues, compared to 34.1% in the third
quarter of 1994. Suites costs were negatively impacted by higher labor costs in
Disney and Raleigh/Durham and by the purchase of necessary guest supplies.
Reservations expense and rooms commissions increased due to higher volumes.
Energy and maintenance costs increased 7.4% during the quarter, due to
maintenance costs incurred primarily for air conditioning and landscaping
repairs.
14
<PAGE> 15
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, 1995.
15
<PAGE> 16
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 11/10/95
------------------------------- ----------
James V. Pickett, Chairman Date
By: /s/ Stephen C. Denz 11/10/95
------------------------------- ----------
Stephen C. Denz, Controller Date
(Principal Financial Officer)
16
<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-31-1995
<PERIOD-END> SEP-30-1995
<CASH> 184,837
<SECURITIES> 0
<RECEIVABLES> 1,136,311
<ALLOWANCES> 0
<INVENTORY> 99,326
<CURRENT-ASSETS> 2,666,810
<PP&E> 58,220,740
<DEPRECIATION> 21,841,366
<TOTAL-ASSETS> 40,475,575
<CURRENT-LIABILITIES> 3,035,094
<BONDS> 46,105,667
<COMMON> 0
0
0
<OTHER-SE> (8,665,186)
<TOTAL-LIABILITY-AND-EQUITY> 40,475,575
<SALES> 16,691,801
<TOTAL-REVENUES> 16,703,143
<CGS> 0
<TOTAL-COSTS> 13,545,148
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,579,502
<INCOME-PRETAX> (421,507)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (421,507)
<EPS-PRIMARY> (.13)
<EPS-DILUTED> (.13)
</TABLE>
