<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: JUNE 30, 1995 COMMISSION FILE NUMBER: 0-16840
------------- -------
PSI 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 August 14, 1995 was 3,110,000.
<PAGE> 2
PSH MASTER L.P. I
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 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 7
Notes to Financial Statements 8
Item 2: Management's Discussion and Analysis of
Financial Condition and Results of Operation 11
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>
Assets June 30, 1995 December 31, 1994
- ------ ------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 450,648 $ 305,132
Accounts receivable, trade 992,430 1,062,885
Inventories 110,218 117,215
Prepaid expenses and other 164,511 174,864
Cash held in escrow 702,451 187,139
------------ ------------
Total current assets 2,420,258 1,847,235
------------ ------------
Property and equipment:
Land 3,780,000 3,780,000
Leasehold interest in land 7,440,000 7,440,000
Hotels 35,906,442 35,889,676
Furniture, fixtures and equipment 11,030,594 10,401,259
------------ ------------
Total 58,157,036 57,510,935
Less accumulated depreciation and amortization
(21,411,280) (20,551,050)
------------ ------------
Total property and equipment, net 36,745,756 36,959,885
------------ ------------
Other assets:
Replacement reserve fund 162,846 704,290
China, glass, linen and silver, net 781,590 781,590
Deferred financing fees, organization costs
and other, net 414,848 509,523
------------ ------------
Total other assets 1,359,284 1,995,403
------------ ------------
Total assets $ 40,525,298 $ 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 June 30, 1995 December 31, 1994
- --------------------------------- ------------- -----------------
<S> <C> <C>
Current liabilities:
Current portion of mortgage notes payable $ 260,348 $ 268,759
Accounts payable 1,102,898 1,360,583
Due to affiliates 42,435 38,169
Accrued expenses:
Payroll and related taxes 292,642 363,155
Real estate and other taxes 553,359 113,952
Interest 34,880 403,639
Other 126,919 94,826
----------- ------------
Total current liabilities 2,413,481 2,643,083
----------- ------------
Note payable 500,000 500,000
Mortgage notes payable, less current portion 45,681,003 45,903,119
Partners' Deficit:
General Partner (247,229) (259,705)
Limited Partners (3,110,000 units outstanding) (7,821,957) (7,983,974)
----------- ------------
Total partners' deficit (8,069,186) (8,243,679)
----------- ------------
Total liabilities and partners' deficit $40,525,298 $ 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>
Six Six
Months ended Months ended
June 30, 1995 June 30, 1994
------------- -------------
<S> <C> <C>
Revenues:
Suites $ 9,175,616 $ 8,825,577
Other 2,624,510 2,445,152
----------- ------------
Total revenues 11,800,126 11,270,729
----------- ------------
Operating costs and expenses:
Direct operating:
Suites 1,919,734 1,852,397
Other 1,853,492 1,799,431
Other operating:
Sales, general and administrative 2,442,868 2,410,458
Energy and maintenance 996,578 973,310
Rents, taxes and other 972,588 1,009,500
Partnership administrative 108,232 97,615
Depreciation and amortization 954,905 922,332
----------- ------------
Total operating costs and expenses 9,248,397 9,065,043
----------- ------------
Income from operations 2,551,729 2,205,686
Interest income 10,810 9,204
Interest expense 2,388,047 2,375,239
----------- ------------
Net income (loss) $ 174,492 $ (160,349)
=========== ============
Net income (loss) per unit of
limited partnership interest $ 0.06 $ (0.05)
=========== ============
</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
June 30, 1995 June 30, 1994
------------- -------------
<S> <C> <C>
Revenues:
Suites $4,511,119 $4,304,238
Other 1,280,117 1,258,945
---------- ----------
Total revenues 5,791,236 5,563,183
---------- ----------
Operating costs and expenses:
Direct operating:
Suites 983,199 884,226
Other 917,609 917,201
Other operating:
Sales, general and administrative 1,190,280 1,208,458
Energy and maintenance 522,624 491,889
Rents, taxes and other 466,286 502,065
Partnership administrative 41,635 38,764
Depreciation and amortization 494,969 452,618
---------- ----------
Total operating costs and expenses 4,616,602 4,495,221
---------- ----------
Income from operations 1,174,634 1,067,962
Interest income 5,221 5,461
Interest expense 1,193,181 1,186,858
---------- ----------
Net loss $ (13,326) $ (113,435)
========== ==========
Net loss per unit of $ (0.00) $ (0.04)
limited partnership interest ========== ==========
</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>
Six Six
Months ended Months ended
June 30, 1995 June 30, 1994
------------- -------------
<S> <C> <C>
Cash provided (used) by operations:
Net income (loss) $ 174,492 $ (160,349)
Changes not requiring cash:
Depreciation and amortization 954,905 922,332
Working capital changes:
(Increase) decrease in accounts receivable, trade 70,455 (533,617)
(Increase) decrease in inventories,
prepaid expenses and other 17,350 (27,319)
Increase in accounts payable and accrued expenses 143,303 532,920
Decrease in accrued interest payable (368,759) (309,750)
Increase in due to affiliates 4,266 4,752
---------- ----------
Cash provided by operations 996,012 428,969
---------- ----------
Investment and other transactions:
(Increase) decrease in replacement reserve fund 541,444 (165,539)
Increase in cash escrow for real estate taxes (515,312) (514,436)
Additions to property and equipment, net (646,101) (178,512)
Payments of mortgages (230,527) (119,254)
---------- ----------
Cash used by investment and other transactions (850,496) (977,741)
Increase (decrease) in cash and cash equivalents ---------- ----------
$ 145,516 $ (548,772)
========== ==========
Supplemental disclosure of cash flow information-- $2,756,807 $2,684,989
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 June 30, 1995
the Partnership had a partners' deficit of $8,069,186. 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 June 30, 1995 and
June 30, 1994 and the results of its operations for the year-to-date and
quarterly periods ended June 30, 1995 and June 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 have been 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 $387,079 and $507,628 during the second quarter of 1995 and 1994,
respectively. Of these amounts, Nuho Company, a successor to PH Management
Company, pursuant to the bankruptcy plan, received $140,735 and $128,100 during
the second quarter of 1995 and 1994, respectively, as its share of residual
management fees. Year-to-date, Doubletree earned $899,019 for its services
compared to $1,034,501 in the first half of 1994. Of these amounts, Nuho Company
received residual fees of $282,551 compared to $261,972 received in the first
half of 1994. The total fees earned by Doubletree in the second quarter 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. In February, 1991, Aetna Life Insurance Company (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. 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 June 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 June 30, 1995 and June 30,
1994 were ($13,193), or ($.00) per unit, and ($112,301), or ($.04) per unit,
respectively. The net income (losses) allocated to the Unitholders for the first
six months of 1995 were $172,747, or $.06 per unit, compared to ($158,746), or
($.05) 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
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 Aetna modifications of the interest pay rate have allowed the Partnership to
remain current in its debt service obligations. 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 $737,880 for the first six months of 1995 and by
$287,579 during the second quarter of 1995. 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 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 June
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, 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 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 equal to the estimated monthly
expense of these taxes.
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>
Six Months Six Months
Quarter Ended Quarter Ended Ended Ended
June 30, 1995 June 30, 1994 June 30, 1995 June 30, 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Available suites 57,785 57,785 114,935 114,935
Occupancy percentage 80.03% 78.73% 79.19% 78.94%
Average daily rate $97.55 $94.61 $100.81 $97.27
Direct operating costs as a percent
of total revenues 32.8% 32.4% 32.0% 32.4%
Income before depreciation and
amortization expense $481,643 $339,183 $1,129,397 $761,983
Income before depreciation and
amortization expense per unit of
limited partnership interest $.15 $.11 $.36 $.24
</TABLE>
SIX MONTHS ENDED JUNE 30, 1995
Total revenues increased 4.5% during the first six months of 1995, driven by an
increase in average daily rate of $3.54 or 3.6%. Occupancy was down slightly at
both of the Florida hotels, compared to the first six months of 1994, but strong
volumes at the Raleigh/Durham hotel resulted in a small improvement in overall
occupancy. Food, beverage and other revenues increased 7.3% over the prior year,
based upon both higher volumes and price increases.
13
<PAGE> 14
Direct operating costs increased by 3.3% in the first six months, compared to
the same period of 1994, but declined as a percent of sales due to increased
average daily rate and other revenue gains. Sales, general and administrative
expenses, up 1.3%, reflect higher management fees associated with revenue gains
and increases in certain employee benefits and promotional costs associated with
the conversion to the Doubletree brand. Energy and maintenance costs increased
by 2.4% over 1994 due primarily to higher grounds and landscaping costs incurred
at all the properties, such as tree removals and shrubbery replacements for
aging foliage. Rents, taxes and other expenses decreased 4% over 1994 due to
Disney's ground rent being reduced due to lower revenues 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 JUNE 30, 1995
Total revenues increased by 4.1% during the quarter. Nearly all of this increase
resulted from higher average daily rates achieved at each of the hotels. Overall
occupancy volumes were higher, with only the Disney hotel recording slightly
lower occupancy.
Direct operating costs associated with the suites department increased 11.1% in
the quarter, driving direct operating costs up to 32.8% compared to 32.4% in the
second quarter of 1994. Suites costs were negatively impacted by higher labor
costs in Tampa and Raleigh/Durham and by costs associated with the conversion to
the Doubletree brand, including guest supplies and the Doubletree cookie
program.
Sales, general and administrative expenses declined in the second quarter due to
a credit received from Doubletree in the amount of $117,119 to fund costs
associated with the conversion, including signage changes, which are currently
underway. 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 6.2% 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 June 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: James V. Pickett 8/14/95
--------------------------- -------
James V. Pickett, Chairman Date
By: Stephen C. Denz 8/14/95
--------------------------- -------
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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 450,648
<SECURITIES> 0
<RECEIVABLES> 992,430
<ALLOWANCES> 0
<INVENTORY> 110,218
<CURRENT-ASSETS> 2,420,258
<PP&E> 58,157,036
<DEPRECIATION> 21,411,280
<TOTAL-ASSETS> 40,525,298
<CURRENT-LIABILITIES> 2,413,481
<BONDS> 46,181,003
<COMMON> 0
0
0
<OTHER-SE> (8,069,186)
<TOTAL-LIABILITY-AND-EQUITY> 40,525,298
<SALES> 11,800,126
<TOTAL-REVENUES> 11,810,936
<CGS> 0
<TOTAL-COSTS> 9,248,397
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,388,047
<INCOME-PRETAX> 174,492
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 174,492
<EPS-PRIMARY> .06
<EPS-DILUTED> .06
</TABLE>
