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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, 1998 Commission File Number: 0-16840
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PSH MASTER L.P.I
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(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
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The number of outstanding Units of Limited Partner Interest in the Registrant,
as represented by Depository Receipts at July 31, 1998 was 3,110,000.
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PSH MASTER L.P.I
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1998
Index
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Page
Number
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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 10
Part II. Other Information
Items 1 through 5. 10
Item 6 - Exhibits and Reports on Form 8-K 10
Signatures 11
2
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<TABLE>
PSH MASTER L.P.I
BALANCE SHEETS
(UNAUDITED)
<CAPTION>
Assets June 30, 1998 December 31,1997
- - ------ ------------- ----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $1,046,597 $16,833,186
Accounts receivable, trade 71,705
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Total current assets 1,046,597 16,904,891
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Property and equipment:
Furniture, fixtures and equipment 7,695 7,695
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Total 7,695 7,695
Less accumulated depreciation and amortization
(7,442) (7,246)
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Total property and equipment, net 253 449
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Total assets $1,046,850 $16,905,340
========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
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<TABLE>
PSH MASTER L.P.I
BALANCE SHEETS
(UNAUDITED)
<CAPTION>
Liabilities and Partners' Equity June 30, 1998 December 31, 1997
- - -------------------------------- ------------- -----------------
<S> <C> <C>
Current liabilities:
Accounts payable 7,996 22,557
Accrued expenses:
State income taxes 397,139
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Total current liabilities 7,996 419,696
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Partners' Equity:
General Partner (12,630) (12,411)
Limited Partners (3,110,000 units outstanding) 1,051,484 16,498,055
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Total partners' equity 1,038,854 16,485,644
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Total liabilities and partners' equity $1,046,850 $16,905,340
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</TABLE>
The accompanying notes are an integral part of these financial statements.
4
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PSH MASTER L.P.I
STATEMENTS OF OPERATIONS
(UNAUDITED)
Six Six
Months Ended Months Ended
June 30, 1998 June 30, 1997
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Revenues:
Suites $ 0 $11,830,933
Other 33,665 2,975,562
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Total revenues 33,665 14,806,495
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Operating costs and expenses:
Direct operating:
Suites 0 2,250,250
Other 0 1,955,523
Other operating:
Sales, general and administrative 0 2,832,260
Energy and maintenance 0 1,084,879
Rents, taxes and other 0 1,044,356
Partnership administrative 156,707 126,937
Depreciation and amortization 198 1,156,374
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Total operating costs and expenses 156,905 10,450,579
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Income from operations (123,240) 4,355,916
Interest income 101,448 41,029
Interest expense 0 2,358,139
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Net income $ (21,792) $ 2,038,806
========= ===========
Net income per unit of
limited partnership interest $ 0.00 $ 0.65
========= ===========
The accompanying notes are an integral part of these financial statements.
5
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PSH MASTER L.P.I
STATEMENTS OF OPERATIONS
(UNAUDITED)
Quarter Ended Quarter Ended
June 30, 1998 June 30, 1997
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Revenues:
Suites $ 0 $5,881,292
Other 31,468 1,453,430
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Total revenues 31,468 7,334,722
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Operating costs and expenses:
Direct operating:
Suites 0 1,141,862
Other 0 973,412
Other operating:
Sales, general and administrative 0 1,410,858
Energy and maintenance 0 552,289
Rents, taxes and other 0 516,912
Partnership administrative 43,225 58,060
Depreciation and amortization 99 578,058
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Total operating costs and expenses 43,324 5,231,451
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Income from operations (11,856) 2,103,271
Interest income 14,162 27,753
Interest expense 0 1,178,036
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Net income $ 2,306 $ 952,988
======== ==========
Net income per unit of
limited partnership interest $ 0.00 $ 0.30
======== ==========
The accompanying notes are an integral part of these financial statements.
6
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<TABLE>
PSH MASTER L.P.I
STATEMENTS OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Six Six
Months Ended Months Ended
June 30, 1998 June 30, 1997
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<S> <C> <C>
Cash provided (used) by operations:
Net income(loss) $ (21,792) $2,038,806
Changes not requiring cash:
Depreciation and amortization 198 1,156,374
Working capital changes:
Decrease in accounts receivable, trade 71,705 206,068
Increase in inventories,
prepaid expenses and other 0 (77,902)
Decrease in accounts payable and
accrued expenses (411,700) (102,451)
Increase in due to affiliates 0 10,561
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Cash provided(used) by operations (361,589) 3,231,456
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Investment and other transactions:
(Increase) decrease in replacement reserve fund 49,003
Increase in cash escrow for real estate taxes (391,364)
Additions to property and equipment, net (213,231)
Payments of mortgages (161,978)
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Cash used by investment and other transactions (717,570)
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Financing and capital transactions:
Distributions to partners (15,707,071) 0
Guaranty Payments from General Partner 282,071 0
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Cash used by financing and capital transactions (15,425,000) 0
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Increase(decrease) in cash and cash equivalents $(15,786,589) $2,513,886
============ ==========
Supplemental disclosure of cash flow information--
Cash paid for interest $ 0 $2,358,140
============ ==========
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE> 8
NOTES TO THE FINANCIAL STATEMENTS
(1) 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, 1998 and
December 31, 1997 and the results of its operations for the quarterly periods
ended June 30, 1998 and 1997. The Partnership sold its three hotels in July 1997
and, therefore, results of operations for the quarter ended June 30, 1998 do not
include hotel operations.
(2) 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 payments of $1,920,203 (including $282,071 received in
the first quarter of 1998) were received by the Partnership 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 no further distributions.
Total fees charged by Doubletree to the Partnership for management, advertising,
reservation and accounting services were $637,710 during the second quarter of
1997. Nuho Company, a successor to PH Management Company (a previous management
company) pursuant to the bankruptcy plan, received residual management fees of
$172,996 during the second quarter of 1997.
(3) PARTNERSHIP ALLOCATIONS AND DISTRIBUTIONS
For financial statement reporting purposes, net income is allocated 99 percent
to the Unitholders and 1 percent to the General Partner. The net income (loss)
allocated to the Unitholders for the quarters ended June 30, 1998 and 1997 were
$2,306 or $0.00 per unit, and $943,458, or $.30 per unit, respectively.
A cash distribution of $5.00 per unit of Limited Partnership Interest was paid
on January 31, 1998 to owners of record on January 22, 1998. The total payment
of $15,707,071, represents a partial liquidating distribution resulting from the
sale of the Partnership's three hotels in July 1997. The General Partner
returned to the Partnership $282,071, representing the distribution on its
25,000 Units of Limited Partnership Interest in accordance with the bankruptcy
plan and the distribution on its General Partnership interest, which had been
withheld from the 1997 payment on its guaranty.
8
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(4) PENDING LITIGATION
On October 17, 1997, Mr. James Pickett and Mr. Stephen Denz (Chairman and
Secretary, respectively, of PH Management company, the general partner of PC
Development Limited Partnership, the general partner of the Partnership) and two
affiliated companies, PH Management Company and Nuho Company, notified the
Partnership that they have been named as defendants in a complaint filed in
Superior Court of the Commonwealth of Massachusetts. Equity Resource Pilgrim
Fund, the plaintiff, is the owner of 131,225 units of limited partnership
interest of the Partnership, which it acquired during May through September of
1997, in part through a written offer to purchase which it delivered to other
Limited Partners of the Partnership in March, 1997. The complaint alleges that
the defendants breached their fiduciary duties by negotiating a "super premium"
buyout of Nuho Company's interest in the management fees paid to Doubletree and
obtained an inadequate purchase price for the Partnership's hotels. The case was
removed to the United States District Court for the District of Massachusetts. A
motion to dismiss was filed and the court has held two hearings on the motion,
with a ruling expected in the near future.
Contrary to the allegations in the complaint, the General Partner, on behalf of
the Partnership, and the Partnership's lender each obtained an independent
appraisal in connection with the sale of the hotels. Further, the purchase and
sale agreement negotiated with FelCor provided the Partnership with the right to
terminate the sale of the hotels if the purchase price was less than 97% of the
appraised value of the hotels, as agreed to by the Partnership and the lender.
In fact, the purchase price was in excess of 99% of the average value of the two
appraisals. Finally, the purchase price of Nuho Company's interest in future
management fees was based upon reasonable and customary valuation methods.
The defendants maintain that the complaint is based upon inaccurate assumptions
and incomplete factual information and is without merit. The defendants intend
to vigorously defend themselves against the complaint and will avail themselves
to the indemnification and hold-harmless provisions of the Partnership Agreement
of the Partnership. Accordingly, the final distribution of cash to the Limited
Partners, the liquidation of the Partnership and delivery of the final tax
information to the Limited Partners (Form 1099-DIV) have been delayed
indefinitely until such time as the costs of defending the complaint have been
determined.
The Partnership is retaining its remaining net assets as a reserve for legal and
accounting expense associated with the liquidation of the Partnership and to
satisfy possible indemnification claims by affiliates of the General Partner for
legal costs resulting from the lawsuit discussed above. Any remaining cash in
the Partnership after the resolution of this lawsuit and payment of all
liquidation expenses will be paid to the partners in a final liquidating
distribution.
No costs have been accrued for this at June 30, 1998. Due to the uncertainty of
the lawsuit, no estimate of future legal costs can be made at this time.
9
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATION
Due to the sale of the hotels on July, 28, 1997, an analysis of liquidity and
capital resources and the results of operations for the quarter ended June 30,
1998 is not presented herein.
PART II. OTHER INFORMATION
ITEMS 1 THROUGH 5
Information required in Items 1 through 5 is not applicable to the Registrant
for the quarter ended June 30, 1998.
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K
No reports on Form 8-K were filed during the quarter ended June 30, 1998.
Exhibit 27 - Financial Data Schedule is located on page 12.
10
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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
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(Registrant)
By: PC Development Limited Partnership,
General Partner
By: PH Management Company,
General Partner
By: /s/ James V. Pickett 08/07/98
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James V. Pickett, Chairman Date
By: /s/ Stephen C. Denz 08/07/98
--------------------------------- --------
Stephen C. Denz, Controller Date
(Principal Financial Officer)
Pursuant to the requirements of the Securities and Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the date indicated.
/s/ James V. Pickett 08/07/98
------------------------------------------------ --------
James V. Pickett, Chairman of the Board of Date
Directors and President of PH Management Company
/s/ Stephen C. Denz 08/07/98
------------------------------------------------ --------
Stephen C. Denz, Secretary and Director of Date
PH Management Company
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000813897
<NAME> PSH MASTER L.P.I
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 1,046,597
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,046,597
<PP&E> 7,695
<DEPRECIATION> 7,442
<TOTAL-ASSETS> 1,046,850
<CURRENT-LIABILITIES> 7,996
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,038,854
<TOTAL-LIABILITY-AND-EQUITY> 1,046,850
<SALES> 0
<TOTAL-REVENUES> 45,630
<CGS> 0
<TOTAL-COSTS> 43,324
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,306
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,306
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,306
<EPS-PRIMARY> 0.00
<EPS-DILUTED> 0.00
</TABLE>
