<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, 1996 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 10, 1996 was 3,110,000.
<PAGE> 2
PSH MASTER L.P. I
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1996
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 9
Financial Condition and Results of Operation
Part II. Other Information
Items 1 through 6 12
Signatures 13
</TABLE>
2
<PAGE> 3
PSH MASTER L.P.I
BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
Assets March 31, 1996 December 31, 1995
- - ------ -------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 383,891 $ 579,253
Accounts receivable, trade 1,506,994 986,029
Inventories 101,657 103,444
Prepaid expenses and other 376,465 335,179
Cash held in escrow 543,489 346,089
------------ ------------
Total current assets 2,912,496 2,349,994
------------ ------------
Property and equipment:
Land 3,780,000 3,780,000
Leasehold interest in land 7,440,000 7,440,000
Hotels 36,196,003 36,191,902
Furniture, fixtures and equipment 11,201,546 11,104,168
------------ ------------
Total 58,617,549 58,516,070
Less accumulated depreciation and amortization (22,843,129) (22,338,504)
------------ ------------
Total property and equipment, net 35,774,420 36,177,566
------------ ------------
Other assets:
Replacement reserve fund 211,386 46,524
China, glass, linen and silver, net 781,590 781,590
Deferred financing fees, organization costs
and other, net 272,125 319,563
------------ ------------
Total other assets 1,265,101 1,147,677
------------ ------------
Total assets $ 39,952,017 $ 39,675,237
============ ============
</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, 1996 December 31, 1995
- - --------------------------------- -------------- -----------------
<S> <C> <C>
Current liabilities:
Current portion of mortgage notes payable $ 281,060 $ 273,979
Accounts payable 1,132,784 1,739,648
Due to affiliates 57,738 37,442
Accrued expenses:
Payroll and related taxes 442,906 342,265
Real estate and other taxes 387,224 95,671
Interest 4,271 0
Other 231,269 171,966
------------ ------------
Total current liabilities 2,537,252 2,660,971
------------ ------------
Note payable 500,000 500,000
Mortgage notes payable, less current portion 45,449,108 45,528,387
------------ ------------
Partners' Deficit:
General Partner (254,907) (267,409)
Limited Partners (3,110,000 units outstanding) (8,279,436) (8,746,712)
------------ ------------
Total partners' deficit (8,534,343) (9,014,121)
------------ ------------
Total liabilities and partners' deficit $ 39,952,017 $ 39,675,237
============ ============
</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, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
Revenues:
Suites $5,127,145 $4,664,497
Other 1,448,676 1,344,393
---------- ----------
Total revenues 6,575,821 6,008,890
---------- ----------
Operating costs and expenses:
Direct operating:
Suites 1,005,767 936,535
Other 966,185 935,883
Other operating:
Sales, general and administrative 1,330,259 1,252,588
Energy and maintenance 493,039 473,954
Rents, taxes and other 528,829 506,302
Partnership administrative 55,852 66,597
Depreciation and amortization 552,063 459,936
---------- ----------
Total operating costs and expenses 4,931,994 4,631,795
---------- ----------
Income from operations 1,643,827 1,377,095
Interest income 23,813 5,589
Interest expense 1,187,862 1,194,866
---------- ----------
Net income (loss) $ 479,778 $ 187,818
========== ==========
Net income (loss) per unit of
limited partnership interest $ 0.15 $ 0.06
========== ==========
</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, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
Cash provided (used) by operations:
Net income $ 479,778 $ 187,818
Changes not requiring cash:
Depreciation and amortization 552,063 459,936
Working capital changes:
Increase in accounts receivable, trade (520,965) (140,695)
Increase in inventories,
prepaid expenses and other (39,499) (72,314)
Increase (decrease) in accounts payable and
accrued expenses (155,367) 554,293
Increase (decrease) in accrued interest payable 4,271 (381,572)
Increase in due to affiliates 20,296 17,059
----------- -----------
Cash provided by operations 340,577 624,525
----------- -----------
Investment and other transactions:
(Increase) decrease in replacement reserve fund (164,862) 497,457
Increase in cash escrow for real estate taxes (197,400) (293,779)
Additions to property and equipment, net (101,479) (459,710)
Payments of mortgages (72,198) (163,649)
----------- -----------
Cash used by investment and other transactions (535,939) (419,681)
----------- -----------
Increase (decrease) in cash and cash equivalents
$ (195,362) $ 204,844
=========== ===========
Supplemental disclosure of cash flow information--
cash paid for interest $ 1,189,746 $ 1,576,438
=========== ===========
</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,
1996, the Partnership had a partners' deficit of $8,534,343.
The final payment on the Partnership's real estate mortgage notes due on August
1, 1997 (see Note 5), the accumulated Partners' deficits and the uncertainty of
the Partnership's ability to refinance the first mortgage debt on maturity,
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 and classification of recorded
asset amounts or the amounts and classification of liabilities that might be
necessary should the Partnership be unable to continue as a going concern. The
General Partner has begun to explore the various alternatives which may be
available to the Partnership. These alternatives include further renegotiations
with the current lender, an infusion of equity into the Partnership, securing
subordinated debt or the sale of one or more of the hotels. For some of these
alternatives, the General Partner may be required to seek the approval of the
Limited Partners in accordance with the Partnership Agreement.
(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, 1996 and
December 31, 1995 and the results of its operations for the quarterly periods
ended March 31, 1996 and 1995. 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.
Total fees charged by Doubletree to the Partnership for management, advertising,
reservation and accounting services were $541,005, and $511,941 during the first
quarter of 1996 and 1995, respectively. Nuho Company, a successor to PH
Management Company (a previous management company) pursuant to the bankruptcy
plan, received residual management fees of $153,195, and $141,816 during the
first quarter of 1996 and 1995, respectively.
(5) REAL ESTATE MORTGAGE NOTES
The nonrecourse notes are secured by the first mortgages on the hotels,
including the ground lease at the Disney hotel. The Partnership makes monthly
payments of principal and interest 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 made a loan commitment of up to $1,000,000, to fund cash deficits
in the event the Partnership cannot meet its obligation to make debt service
payments. No amounts have been borrowed under the debt service agreement at
March 31, 1996.
(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
Pursuant to the terms of the renegotiated debt, the Partnership is precluded
from making cash distributions to the partners until such time as the interest
capitalized by the lender has been repaid. This is not expected to occur prior
to the maturity of the first mortgage loans on August 1, 1997.
For financial statement reporting purposes, net income is allocated 99 percent
to the Unit-holders and 1 percent to the General Partner. The net income
allocated to the Unitholders for the quarter ended March 31, 1996 and 1995 were
$474,980, or $.15 per unit, and $185,940, or $.06 per unit, respectively.
8
<PAGE> 9
PART I. FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
LIQUIDITY AND CAPITAL RESOURCES
The Partnership has incurred net losses since its inception and at March 31,
1996, the Partnership had a partners' deficit of $8,534,343. The final payment
on the Partnership's real estate mortgage notes due on August 1, 1997 (see Note
5 to the financial statements), the Partners' accumulated deficits and the
uncertainty of the Partnership's ability to refinance the first mortgage debt on
maturity (see Page 10), raise substantial doubt about the Partnership's ability
to continue as a going concern for a reasonable period of time. Accordingly, the
opinion the Partnership received from its independent auditors for the year
ended December 31, 1995 included a going concern qualification. 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.
During the first quarter of 1996, the Partnership made monthly payments of
principal and interest on its first mortgage debt based upon a 30-year
amortization schedule at the contract rate of 10.25%, in accordance with the
restructured loans. Cash from operations, after funding replacement reserves
exceeded the required debt service by $695,819, significantly improving the
Partnership's working capital and current ratio positions. This excess amount is
expected to increase during the second quarter and then partially decline in the
second half of the year due to the seasonal business of the hotels. The
Partnership's liquidity is supplemented by the loan commitment 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 March
31, 1996.
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.
In addition to its hotel operations, the Partnership will receive annual
payments in 1996 and 1997 on its unsecured claim against the General Partner,
which in 1991 filed for protection against its creditors under Chapter 11 of the
U.S. Bankruptcy Code. The Partnership expects to receive total payments of
approximately $1,000,000, including $710,335 received through 1995, in
satisfaction of its claim.
9
<PAGE> 10
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 these were funded at the rate of 4% of total revenues during the
first quarter of 1996.
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.
The Partnership deposits 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.
The Partnership's mortgage obligations mature on August 1, 1997, requiring a
balloon payment of approximately $45,500,000. In addition, the lender 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. Given the underwriting standards
of first mortgage lenders with respect to loan to value ratios and debt service
coverage ratios, it is unlikely that the Partnership can refinance, in total,
its present debt with a new first mortgage lender. The General Partner has begun
to explore the various alternatives which may be available to the Partnership.
These alternatives include further renegotiations with the current lender, an
infusion of equity into the Partnership, securing subordinated debt or the sale
of one or more of the hotels. For some of these alternatives, the General
Partner may be required to seek the approval of the Limited Partners in
accordance with the Partnership Agreement.
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
March 31, 1996 March 31, 1995
-------------- --------------
<S> <C> <C>
Available suites 57,785 57,150
Occupancy percentage 79.17% 78.34%
Average daily rate $112.07 $104.18
Direct operating costs as a percent of total revenues 30.0% 31.2%
Income before depreciation and amortization expense $1,031,841 $647,754
Income before depreciation and amortization
expense per unit of limited partnership interest $.33 $.21
</TABLE>
10
<PAGE> 11
Room revenues increased 9.9% from the first quarter of 1995, based upon a 7.6%
increase in average daily rate and a 1.1% increase in occupancy. Average daily
rate increased at each hotel while volume gains in the Florida hotels were
partially offset by lower occupancy at Raleigh/Durham. Food, beverage and other
revenues increased from last year, based upon higher volumes and price
increases.
Direct operating expenses increased 5.3% in the current quarter from the same
quarter of 1995, but declined as a percentage of revenues to 30% from 31.2%.
Direct expenses increased due to higher labor costs and rooms sales commissions
associated with increased volume and revenue levels. In addition, the cost of
the Doubletree cookie program, which commenced in late March, 1995, was absent
from last year's first quarter results.
Sales, general and administrative expenses increased 6.2% in the
quarter, due primarily to revenue driven costs including management fees,
national advertising fees and credit card commissions. Energy costs increased
due to higher usage and pricing increases. Ground rents, based on higher
revenues at the Disney hotel, resulted in an increase in fixed costs. This
increase was partially offset by lower real estate taxes at the Disney
property, resulting from a revised tax assessment.
Partnership administrative expenses consist primarily of quarterly and annual
report costs, tax processing and transfer agent charges, and legal and audit
fees. Depreciation and amortization expense increased 20% in the current quarter
due to fixed asset additions in 1995 now being depreciated.
11
<PAGE> 12
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, 1996.
12
<PAGE> 13
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 5/10/95
------------------------------------ -------------
James V. Pickett, Chairman Date
By: Stephen C. Denz 5/10/95
------------------------------------ -------------
Stephen C. Denz, Controller Date
(Principal Financial Officer)
13
<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-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 383,891
<SECURITIES> 0
<RECEIVABLES> 1,506,994
<ALLOWANCES> 0
<INVENTORY> 101,657
<CURRENT-ASSETS> 2,912,496
<PP&E> 58,617,549
<DEPRECIATION> 22,843,129
<TOTAL-ASSETS> 39,952,017
<CURRENT-LIABILITIES> 2,537,252
<BONDS> 45,949,108
0
0
<COMMON> 0
<OTHER-SE> (8,534,343)
<TOTAL-LIABILITY-AND-EQUITY> 39,952,017
<SALES> 6,575,821
<TOTAL-REVENUES> 6,599,634
<CGS> 0
<TOTAL-COSTS> 4,931,994
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,187,862
<INCOME-PRETAX> 479,778
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 479,778
<EPS-PRIMARY> .15
<EPS-DILUTED> .15
</TABLE>
