<PAGE>
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1996
COMMISSION FILE NUMBER: 0-26528
PATRIOT AMERICAN HOSPITALITY, INC.
(Exact name of registrant as specified in its charter)
VIRGINIA 75-2599709
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3030 LBJ FREEWAY, SUITE 1500 75234
DALLAS, TEXAS (Zip Code)
(Address of principal executive office)
(214) 888-8000
(Registrant's telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changes since last
report)
Indicate by check mark whether the registrant (1) has filed all
documents and 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. YES X NO
-- --
The number of shares of common stock, no par value, of Patriot
American Hospitality, Inc. outstanding on May 10, 1996 was 14,665,935.
Exhibit Index is located on page 28.
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<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC.
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ITEM 1. FINANCIAL STATEMENTS:
PATRIOT AMERICAN HOSPITALITY, INC.:
Consolidated Balance Sheets as of December 31, 1995 and March 31, 1996 (unaudited)......... 3
Consolidated Statement of Operations for the three months ended March 31, 1996 (unaudited).. 4
Consolidated Statement of Cash Flows for the three months ended March 31, 1996 (unaudited).. 5
Notes to Consolidated Financial Statements as of March 31, 1996 (unaudited)................. 6
CHC LEASE PARTNERS:
Balance Sheets as of December 31, 1995 and March 31, 1996 (unaudited)...................... 11
Statement of Operations for the three months ended March 31, 1996 (unaudited)............... 12
Statement of Cash Flows for the three months ended March 31, 1996 (unaudited)............... 13
Notes to Financial Statements as of March 31, 1996 (unaudited).............................. 14
INITIAL HOTELS COMBINED FINANCIAL STATEMENTS:
Combined Statement of Operations for the three months ended March 31, 1995 (unaudited)...... 16
Combined Statement of Cash Flows for the three months ended March 31, 1995 (unaudited)...... 17
Notes to Combined Financial Statements as of March 31, 1995 (unaudited)..................... 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS... 22
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K:
Exhibits.................................................................................... 28
Reports on Form 8-K......................................................................... 28
SIGNATURE........................................................................................ 29
</TABLE>
2
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
PATRIOT AMERICAN HOSPITALITY, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 1996 DECEMBER 31, 1995
--------------- ------------------
(UNAUDITED)
ASSETS
<S> <C> <C>
Investment in hotel properties, net of accumulated depreciation of $5,337
and $2,529 at March 31, 1996 and December 31, 1995, respectively.......... $306,552 $265,759
Cash and cash equivalents (including capital improvement reserves of $1,806
and $1,091 at March 31, 1996 and December 31, 1995, respectively).......... 8,098 4,769
Lease revenue receivable..................................................... 2,279 2,260
Receivables from selling entities............................................ 1,489 1,765
Investment in unconsolidated subsidiary...................................... 4,561 4,263
Mortgage notes and other receivables from unconsolidated subsidiary.......... 40,866 40,855
Inventory.................................................................... 1,219 1,035
Deferred expenses, net of accumulated amortization of $184 and $88
at March 31, 1996 and December 31, 1995, respectively...................... 1,825 1,852
Prepaid expenses and other assets............................................ 2,689 1,666
-------- --------
Total assets......................................................... $369,578 $324,224
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
Borrowings under line of credit.............................................. $ 50,250 $ 9,500
Dividends and distributions payable.......................................... 8,235 8,154
Accounts payable and accrued expenses........................................ 1,782 3,179
Due to unconsolidated subsidiary............................................. 2,099 91
Minority interest in Operating Partnership................................... 45,485 41,522
Commitments and contingencies................................................ -- --
Shareholders' equity:
Preferred stock, no par value, 20,000,000 shares authorized,
no shares issued and outstanding...................................... -- --
Common stock, no par value, 200,000,000 shares authorized,
14,665,935 shares issued and outstanding.............................. -- --
Paid-in capital......................................................... 264,503 264,808
Unearned executive compensation, net of accumulated amortization of
$237 and $71 at March 31, 1996 and December 31, 1995,
respectively.......................................................... (1,185) (1,351)
Distributions in excess of earnings..................................... (1,591) (1,679)
-------- --------
Total shareholders' equity........................................... 261,727 261,778
-------- --------
Total liabilities and shareholders' equity........................... $369,578 $324,224
======== ========
</TABLE>
See accompanying notes.
3
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
<S> <C>
Revenue:
Participating lease revenue......................................................... $12,371
Interest and other income........................................................... 92
-------
Total revenue................................................................. 12,463
-------
Expenses:
Real estate and personal property taxes and casualty insurance...................... 1,082
Ground lease expense................................................................ 77
General and administrative.......................................................... 941
Interest expense.................................................................... 601
Depreciation and amortization....................................................... 2,838
-------
Total expenses................................................................ 5,539
-------
Income before equity in earnings of unconsolidated subsidiary and minority interest... 6,924
Equity in earnings of unconsolidated subsidiary..................................... 1,362
-------
Income before minority interest....................................................... 8,286
Minority interest in Operating Partnership.......................................... (1,158)
-------
Net income applicable to common shareholders.......................................... $ 7,128
=======
Net income per common share:
Net income applicable to common shareholders........................................ $ 0.48
=======
Weighted average number of common shares and common share equivalents outstanding..... 14,734
=======
</TABLE>
See accompanying notes.
4
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................................................................... $ 7,128
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation.................................................................... 2,808
Amortization of unearned executive compensation................................. 166
Amortization of deferred loan costs............................................. 43
Amortization of lease inducement costs.......................................... 23
Other amortization.............................................................. 30
Payment of interest on notes receivable from unconsolidated subsidiary.......... 1,064
Equity in earnings of unconsolidated subsidiary................................. (1,362)
Minority interest in income of Operating Partnership............................ 1,158
Changes in assets and liabilities:
Lease revenue receivable.................................................... (19)
Mortgage notes and other receivables from unconsolidated subsidiary......... (12)
Prepaid expenses and other assets........................................... (361)
Accounts payable and other accrued expenses................................. (1,664)
--------
Net cash provided by operating activities.............................. 9,002
--------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of hotel properties and related working capital assets.................. (38,550)
Improvements and additions to hotel properties...................................... (1,198)
Collection of receivables from selling entities..................................... 354
Prepaid acquisition costs........................................................... (503)
Advances from unconsolidated subsidiary............................................. 2,009
Principal payment received on other note receivable................................. 50
--------
Net cash used in investing activities.................................. (37,838)
--------
CASH FLOWS FROM FINANCING ACTIVITIES:
Borrowings under line of credit..................................................... 40,750
Payment of deferred loan costs...................................................... (68)
Payment of other prepaid expenses................................................... (58)
Payment of initial public offering costs............................................ (305)
Dividends and distributions paid.................................................... (8,154)
--------
Net cash provided by financing activities.............................. 32,165
--------
Net increase in cash and cash equivalents.............................................. 3,329
Cash and cash equivalents at beginning of period....................................... 4,769
--------
Cash and cash equivalents at end of period............................................. $ 8,098
========
Supplemental disclosure of cash flow information:
Cash paid during the period for interest............................................ $ 620
========
</TABLE>
See accompanying notes.
5
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. ORGANIZATION AND BASIS OF PRESENTATION:
Patriot American Hospitality, Inc. (collectively with its subsidiaries, the
"Company"), a Virginia corporation, was formed April 17, 1995 as a self-
administered real estate investment trust ("REIT") for the purpose of acquiring
equity interests in hotel properties. On October 2, 1995, the Company completed
an initial public offering (the "Offering") of 14,605,000 shares of its common
stock (including 1,905,000 shares of common stock issued upon exercise of the
underwriters' over-allotment option) and commenced operations. The offering
price of all shares sold was $24.00 per share, resulting in net proceeds (less
the underwriters' discount and Offering expenses) of approximately $313,170.
Upon completion of the Offering, the Company, through its wholly-owned
subsidiary, PAH LP, Inc., contributed substantially all of the net proceeds of
the Offering to Patriot American Hospitality Partnership, L.P. (the "Operating
Partnership") in exchange for an approximately 85.3% limited partnership
interest in the Operating Partnership. The Company, through its wholly-owned
subsidiary, PAH GP, Inc., is the sole general partner and the holder of a 1.0%
general partnership interest in the Operating Partnership.
The Operating Partnership used approximately $263,600 of the net proceeds of
the Offering to acquire ownership interests in 20 hotels (the "Initial Hotels")
from various entities (the "Selling Entities") and to repay existing mortgage
and other indebtedness of the Initial Hotels. In addition, in connection with
the Offering, the Company closed on a Line of Credit with Paine Webber Real
Estate Securities, Inc. to be utilized primarily for the acquisition of
additional hotels, renovation of certain hotels and for working capital. The
balance of the proceeds from the Offering, together with proceeds from the Line
of Credit, were used to finance acquisitions of two additional hotel
investments, provide for renovations to existing hotels and for general working
capital. In consideration for the sale of the Initial Hotels, certain owners in
the Selling Entities, including affiliates of the Company, elected to receive
limited partnership units in the Operating Partnership. The 2,324,312 limited
partnership units in the Operating Partnership ("OP Units") received by such
owners represented an approximate 13.7% equity interest in the Operating
Partnership at December 31, 1995.
During the first quarter of 1996, the Company acquired three additional hotel
properties, utilizing approximately $32,500 in cash drawn on its Line of Credit
and issuing 167,012 OP Units in connection with the purchases. At March 31,
1996, the Operating Partnership owned interests in 25 hotels and the Company
owned an approximate 85.5% interest in the Operating Partnership.
The Company leases each of its hotels, except the Crowne Plaza Ravinia Hotel,
which is owned through a special purpose corporation, to lessees that are
independent of the Company. The Company leases 23 of its hotel investments to
CHC Lease Partners for staggered terms of ten to twelve years pursuant to
separate participating leases providing for the payment of percentage rent (the
"Participating Leases"). One of the Company's hotels is leased under a similar
Participating Lease agreement to Metro Lease Partners, Inc. ("Metro Lease
Partners" and collectively with CHC Lease Partners, the "Lessees"). The Crowne
Plaza Ravinia Hotel acquisition was structured without a lessee.
These unaudited consolidated financial statements include the accounts of the
Company, its wholly-owned subsidiaries, PAH GP, Inc. and PAH LP, Inc., and the
Operating Partnership. All significant intercompany accounts and transactions
have been eliminated. These financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions for Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have been
included. Operating results for the three month period ended March 31, 1996 is
not necessarily indicative of the results that may be expected for the year
ended December 31, 1996. For further information, refer to the consolidated
financial statements and footnotes thereto included in the Company's annual
report on Form 10-K for the year ended December 31, 1995. Certain prior year
amounts have been reclassified to conform to current year presentation.
6
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
2. ACQUISITION OF HOTEL PROPERTIES:
On January 16, 1996, the Company acquired the 288-room Tremont House Hotel in
Boston, Massachusetts for a purchase price (including closing costs) of
approximately $16,397. The purchase was financed primarily with funds drawn on
the Line of Credit. The hotel is leased to CHC Lease Partners for a period of
11 years pursuant to a Participating Lease.
On March 4, 1996, the Company acquired the 297-room Holiday Inn Lenox in
Atlanta, Georgia for approximately $7,279 in cash plus 167,012 OP Units (valued
at approximately $4,000 based upon the market price of the Company's common
stock on the contract settlement date). The hotel is subject to a 73-year
ground lease. The cash portion of the purchase price was financed with funds
drawn on the Line of Credit. The hotel is leased to CHC Lease Partners for a
period of 12 years pursuant to a Participating Lease.
On March 27, 1996, the Company also acquired the 245-room Del Mar Hilton Hotel
in San Diego, California for a purchase price (including closing costs) of
approximately $14,872. The purchase was financed primarily with funds drawn on
the Line of Credit. The hotel is leased to CHC Lease Partners for a period of
11 years pursuant to a Participating Lease.
3. INVESTMENT IN AND MORTGAGE NOTES RECEIVABLE FROM UNCONSOLIDATED SUBSIDIARY:
The Company, through the Operating Partnership, owns an approximate 99% non-
voting ownership interest in PAH Ravinia, Inc. ("PAH Ravinia"), a Virginia
corporation. PAH Ravinia owns the 495-room Crowne Plaza Ravinia Hotel in
Atlanta, Georgia.
As part of the financing for the acquisition of the Crowne Plaza Ravinia, the
Company, through the Operating Partnership, advanced $40,500 to PAH Ravinia,
which is evidenced by two mortgage notes consisting of a $36,000 first mortgage
note and a $4,500 second mortgage note. The principal amount of both notes is
due and payable on November 28, 1998. Interest at an annual rate equal to
10.25% and 12.5% on the first and second mortgage notes, respectively, is due
and payable monthly. All amounts owing under the mortgage notes will become due
and payable upon a sale of the hotel to a third party purchaser. The mortgage
notes are collateralized by deeds of trust on the Crowne Plaza Ravinia.
4. LINE OF CREDIT:
The Operating Partnership has obtained a revolving credit facility of up to
$165,000 (the "Line of Credit") to fund the acquisition of additional hotels,
renovations and capital improvements to hotels and for general working capital
purposes. The Line of Credit is collateralized by a first mortgage lien on
certain of the hotels. As of March 31, 1996, the Company had $50,250
outstanding on its Line of Credit. Additional hotels, including subsequent
acquisitions, may be pledged in order to increase availability under the Line of
Credit to the maximum of $165,000. The Line of Credit, which expires October 1,
1998, generally bears interest on the outstanding balance at a rate equal to the
30-day LIBOR rate, plus 1.90%. LIBOR was 5.69% at December 31, 1995 and 5.31%
at March 31, 1996. The weighted average interest rate incurred by the Company
during 1996 under this borrowing was 7.40%.
The agreement requires the Company to maintain certain financial ratios
with respect to liquidity, loan to value and net worth and imposes certain
limitations on acquisitions. The Company is in compliance with such covenants
at March 31, 1996. The unused commitment under the Line of Credit at March 31,
1996, is $114,750, subject to certain restrictions and provisions of the Line of
Credit Agreement.
7
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
5. MINORITY INTEREST
The Operating Partnership has 2,491,324 OP Units outstanding as of March
31, 1996 (excluding OP Units held by the Company). Pursuant to the Operating
Partnership's limited partnership agreement, the limited partners of the
Operating Partnership, including certain affiliates of the Company, received
rights (the "Redemption Rights") that enable them to cause the Operating
Partnership to redeem each OP Unit in exchange for cash equal to the value of a
share of common stock (or, at the Company's election, the Company may purchase
each OP Unit offered for redemption for one share of common stock). The
Redemption Rights generally may be exercised at any time after one year
following the issuance of the OP Units. However, certain holders of OP Units,
including directors and officers of the Company, are restricted from exercising
their Redemption Rights for 18 to 24 months from the closing of the Offering.
The number of shares of common stock issuable upon exercise of the Redemption
Rights will be adjusted for share splits, mergers, consolidations or similar pro
rata transactions, which would have the effect of diluting the ownership
interests of the limited partners of the Operating Partnership or the
shareholders of the Company.
6. SHAREHOLDERS' EQUITY:
Capital Stock
On March 26, 1996, the Company declared a $0.48 per common share dividend
to holders of record on March 29, 1996. Concurrent with the dividend
declaration, the Operating Partnership authorized distributions in the same
amount. The dividend and distributions were paid on April 30, 1996.
In response to an independent consultant review of executive compensation,
the Board of Directors elected to accelerate the vesting period for the shares
of common stock held by three of the Company's executive officers, which has
been recorded as unearned executive compensation. The vesting period was
reduced from five years to three years and the amortization period of the
unearned executive compensation was revised accordingly.
7. NONCASH INVESTING AND FINANCING ACTIVITIES:
In connection with the acquisition of hotel properties, the following
assets and liabilities were assumed:
<TABLE>
<CAPTION>
<S> <C>
Receivables from selling entities............... $ (78)
Prepaid expenses and other assets............... (151)
Accounts payable and accrued liabilities........ 267
</TABLE>
<TABLE>
<S> <C>
Issuance of OP Units in connection with the acquisition
of hotel properties.................................. $4,000
</TABLE>
8. CONTINGENCIES:
The Company currently is not subject to any material legal proceedings or
claims nor, to management's knowledge, are any material legal proceedings or
claims currently threatened.
8
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
9. PRO FORMA FINANCIAL INFORMATION:
The unaudited pro forma condensed consolidated statements of operations of
the Company are presented as if the Offering and the acquisition of the 20
Initial Hotels and the subsequent acquisition of five additional hotel
properties had occurred on January 1, 1995, and the hotels (except Crowne Plaza
Ravinia) had been leased to the Lessees pursuant to the Participating Leases.
These unaudited pro forma condensed consolidated statements of operations are
not necessarily indicative of what actual results of operations of the Company
would have been assuming such transactions had been completed as of January 1,
1995, nor do they purport to represent the results of operations for future
periods.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
---------------------------------------
1995 1996
------------------- ------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C>
Revenue:
Participating lease revenue..................................... $12,843 $13,516
Interest and other income....................................... 11 11
------- -------
Total revenue................................................ 12,854 13,527
------- -------
Expenses:
Real estate and personal property taxes and casualty insurance.. 1,118 1,196
Ground lease expense............................................ 223 223
General and administrative...................................... 719 941
Interest expense................................................ 1,034 963
Depreciation and amortization................................... 3,045 3,086
------- -------
Total expenses............................................... 6,139 6,409
------- -------
Income before equity in earnings of unconsolidated subsidiary
and minority interest........................................... 6,715 7,118
Equity in earnings of unconsolidated subsidiary................ 908 1,362
------- -------
Income before minority interest................................... 7,623 8,480
Minority interest in Operating Partnership...................... (1,105) (1,230)
------- -------
Net income applicable to common shareholders...................... $ 6,518 $ 7,250
======= =======
Net income per common share....................................... $ 0.44 $ 0.49
======= =======
Weighted average number of common shares and common share
equivalents outstanding......................................... 14,734 14,734
======= =======
</TABLE>
10. SUBSEQUENT EVENTS:
Line of Credit
In May 1996, the maximum amount available under the Line of Credit was
increased from $165,000 to $250,000 and certain modifications were made, thereby
increasing the Company's ability to borrow under the Line of Credit.
Hotel Properties Acquired
In April 1996, the Company acquired six hotels with a total of 1,239 guest
rooms located in Washington and California for an aggregate purchase price
(including closing costs) of approximately $84,500. The purchase was funded with
proceeds from the Company's Line of Credit and issuance of 331,577 OP Units
(valued at approximately $8,800 based on the market price of the Company's
common stock on the contract settlement date).
9
<PAGE>
PATRIOT AMERICAN HOSPITALITY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Potential Acquisitions
The Company has entered into non-binding purchase and sale agreements to
acquire the 365-room Hyatt Regency in Lexington, Kentucky for a purchase price
of approximately $14,000, the 492-room Bonaventure Hotel & Spa in Fort
Lauderdale, Florida for a purchase price of approximately $16,200 and the 362-
room Marriott WindWatch Hotel in Long Island New York for a purchase price of
approximately $30,000. In addition, the Company has entered into a letter of
intent agreement to acquire a portfolio of five Wyndham and Wyndham Garden
hotels containing an aggregate 1,141 guest rooms for a purchase price of
approximately $96,000. The Wyndham hotel properties are located in the Houston,
Dallas, Atlanta, Detroit and Chicago metropolitan areas. The acquisition of
these or any other properties is subject to a number of contingencies,
including, among other things, the satisfactory completion of the Company's due
diligence investigation of the hotels, the negotiation of a definitive
acquisition agreement and obtaining financing and/or Line of Credit lender
approval, as applicable. Accordingly, there can be no assurance that the
acquisition of any of these properties will be consummated.
Private Placement
In May 1996, the Company sold an aggregate of approximately $40,000 of
securities to an institutional investor. The securities consisted of 811,393
shares of common stock sold at $26.95 per share and 662,391 Preferred OP Units
(the "Preferred OP Units") sold at $27.375 per unit. The common stock is of the
same class as the Company's existing common stock and is entitled to the same
voting and dividend rights as all outstanding common stock, subject to certain
restrictions on the resale of the stock. The Preferred OP Units are entitled to
quarterly dividends equal to 103% of the quarterly dividends paid on the common
stock. Generally, three years following issuance, the Preferred OP Units may be
converted into shares of common stock on a one-for-one basis, subject to certain
limitations. After 10 years, all outstanding Preferred OP Units will be
converted into common stock.
10
<PAGE>
CHC LEASE PARTNERS
BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
MARCH 31, 1996 DECEMBER 31, 1995
--------------- -----------------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents...................................... $10,182 $ 9,385
Accounts receivable, net of allowance for doubtful accounts
of $188 and $142 at March 31, 1996 and December 31,
1995, respectively........................................... 6,684 5,833
Inventories.................................................... 2,401 2,136
Prepaid expenses............................................... 1,009 441
------- -------
Total current assets......................................... 20,276 17,795
Investments..................................................... 5,100 5,100
Deposits........................................................ 115 71
------- -------
Total assets........................................... $25,491 $22,966
======= =======
LIABILITIES AND PARTNERS' CAPITAL
Current Liabilities:
Accounts payable............................................... $ 2,253 $ 2,202
Accrued rent due to Patriot American Hospitality
Partnership, L.P............................................. 2,279 2,260
Due to affiliates, net......................................... 511 138
Accrued payroll................................................ 2,271 2,219
Taxes payable.................................................. 1,795 1,556
Guest deposits................................................. 1,829 958
Accrued expenses and other liabilities......................... 2,478 2,012
------- -------
Total current liabilities.................................... 13,416 11,345
Due to Patriot American Hospitality Partnership, L.P............ 1,219 1,035
Lease inducement................................................ 954 977
------- -------
Total liabilities....................................... 15,589 13,357
Commitments and contingencies................................... -- --
Partners' capital............................................... 9,902 9,609
------- -------
Total liabilities and partners' capital................. $25,491 $22,966
======= =======
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
CHC LEASE PARTNERS
STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
Revenue:
Rooms.............................................. $24,260
Food and beverage.................................. 7,998
Conference center.................................. 645
Telephone and other................................ 2,295
-------
Total revenue................................... 35,198
-------
Expenses:
Departmental costs and expenses.................... 12,765
Participating lease payments....................... 11,918
General and administrative......................... 2,883
Repairs and maintenance............................ 1,544
Utilities.......................................... 1,496
Marketing.......................................... 3,174
Insurance.......................................... 220
-------
Total expenses.................................. 34,000
-------
Income before lessee income (expense)........... 1,198
-------
Dividend and interest income....................... 210
Management fees.................................... (597)
Lessee general and administrative expenses......... (178)
-------
Total lessee expense............................ (565)
-------
Net income...................................... $ 633
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
CHC LEASE PARTNERS
STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities:
Net income......................................................................... $ 633
Adjustments to reconcile net income to net cash provided by operating activities:
Recognition of lease inducement................................................. (23)
Provision for losses on accounts receivable..................................... 46
Changes in assets and liabilities:
(Increase) decrease in:
Accounts receivable............................................................. (897)
Inventories..................................................................... 255
Prepaid expenses................................................................ (500)
Deposits........................................................................ (44)
Increase (decrease) in:
Accounts payable................................................................ 51
Accrued rent due to Patriot American Hospitality Partnership, L.P............... 19
Due to affiliates............................................................... 373
Accrued payroll................................................................. 52
Taxes payable................................................................... 239
Guest deposits.................................................................. 871
Accrued expenses and other liabilities.......................................... (674)
-------
Net cash provided by operating activities............................................ 401
-------
Cash flows from investing activities:
Acquired cash from new operating leases............................................ 736
-------
Net cash provided by investing activities............................................ 736
-------
Cash flows from financing activities:
Partnership distribution........................................................... (340)
-------
Net cash used in financing activities................................................ (340)
-------
Net increase in cash and cash equivalents............................................ 797
Cash and cash equivalents at beginning of period..................................... 9,385
-------
Cash and cash equivalents at end of period........................................... $10,182
=======
Supplemental Schedule of Non-Cash Investing and Financing Activities:
Assumption of assets and liabilities upon consummation of participating lease
agreements with Patriot American Hospitality Partnership, L.P.:
Acquired cash................................................................... $ 736
Inventories..................................................................... 336
Prepaid expenses................................................................ 68
Due to Patriot American Hospitality Partnership, L.P............................ (320)
Other liabilities............................................................... (820)
-------
Net assets...................................................................... $ --
=======
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
CHC LEASE PARTNERS
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
ORGANIZATION
CHC Lease Partners, was formed as the initial lessee to lease and operate
certain hotels owned by Patriot American Hospitality Partnership, L.P. (the
"Operating Partnership"). At March 31, 1996, Patriot American Hospitality, Inc.
(the "Company"), through its subsidiaries, owns approximately 85.5% of the
Operating Partnership. CHC Lease Partners, a general partnership, is owned
jointly by CHC REIT Lessee Corp., a wholly owned subsidiary of CHC
International, Inc. ("CHC") and by an affiliate of a principal of the Gencom
group of companies.
CHC Lease Partners began operating twenty hotels (the "Initial Hotels") on
October 2, 1995. In January 1996 and March 1996, CHC Lease Partners and the
Operating Partnership entered into three operating leases for three hotels which
were acquired by the Operating Partnership. The leases are substantially
similar to the other participating lease agreements between CHC Lease Partners
and the Operating Partnership. At March 31, 1996, CHC Lease Partners operates
twenty-three hotels.
Each hotel is leased by the Operating Partnership to CHC Lease Partners under
separate participating operating lease agreements which contain cross-default
provisions. These leases, which require CHC Lease Partners to maintain a
minimum net worth and adequate working capital, have an average term of eleven
years, require payment of the greater of (1) minimum base rent or (2)
participating rent based upon certain percentages of room revenue, food and
beverage revenue, conference center revenue and telephone and other revenues of
each of the hotels.
The hotels leased by CHC Lease Partners consist of eighteen full service
hotels, four limited service hotels and one executive conference center.
Nineteen of the twenty-three hotels are operated under franchise licenses with
nationally recognized hotel companies. The cost of obtaining the franchise
licenses is paid by the Operating Partnership and the continuing franchise fees
are paid by CHC Lease Partners. Franchise and related fees generally range from
3.5% to 8.0% of room revenues for the hotels under franchise licenses.
These financial statements have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions for Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
do not include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements. In the
opinion of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three month period ended March 31, 1996 are not necessarily
indicative of the results that may be expected for the year ended December 31,
1996. For further information, refer to the CHC Lease Partners financial
statements and footnotes thereto included in the Company's annual report on Form
10-K for the year ended December 31, 1995.
2. COMMITMENTS AND RELATED PARTY TRANSACTIONS:
CHC Lease Partners incurred base rents of $7,321 and participating rents
of $4,620 during the three months ended March 31, 1996, of these amounts, $617
related to leases which commenced in the first quarter of 1996. At March 31,
1996 and December 31, 1995, CHC Lease Partners owed the Operating Partnership
$2,279 and $2,260, respectively, for rents under the terms of the participating
leases.
Under the participating lease agreements, CHC Lease Partners is
obligated to return to the Operating Partnership at the end of each lease term
the inventory at each of the Initial Hotels less a total of $1,000. Such amount
is considered a lease inducement and is recorded as a reduction to participating
lease payments over the lives of the participating lease agreements. As of
March 31, 1996, the balance of the lease inducement and the inventory due to the
Operating Partnership were $954 and $1,219, respectively. As of December 31,
1995, the balances were $977 and 1,035, respectively.
CHC Lease Partners entered into management agreements with hotel
management subsidiaries of CHC and GAH-II, L.P. ("GAH"), an affiliate of CHC and
the Gencom group of companies, to perform all management functions necessary to
operate 22 of the 23 hotels leased by CHC Lease Partners. The terms of these
agreements range from ten to twelve years with management fees due based upon a
percentage of gross revenue of each of the hotels ranging from 2.25% escalating
to 3.0% over a three year period. The fees under these management agreements are
subordinate to CHC Lease Partners' obligations to the Operating Partnership
under the participating lease agreements. Management fees incurred under these
management agreements were $516 during the three months ended March 31, 1996.
Included in due to affiliates, net were amounts for management fees under these
management agreements owed to CHC and GAH of $27 and $309, respectively, at
March 31, 1996 and due from CHC and owed to GAH of $46 and $43, respectively, at
December 31, 1995.
14
<PAGE>
CHC LEASE PARTNERS
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
CHC Lease Partners fully reimburses CHC for office space it occupies
within the corporate offices of CHC and for the payroll and related costs CHC
administers on behalf of CHC Lease Partners. These costs amounted to $149 for
the three months ended March 31, 1996. At March 31, 1996 and December 31, 1995
the amount due CHC for these costs was $175 and $141, respectively.
During the three months ended March 31, 1996, CHC Lease Partners made
distributions to its partners of $340.
3. PRO FORMA FINANCIAL INFORMATION:
The unaudited pro forma statements of operations are presented as if the
leases and the operation of the twenty-three hotels had commenced on January 1,
1995. The unaudited pro forma statements of operations are not necessarily
indicative of what the actual results of operations of CHC Lease Partners would
have been assuming such operations had commenced as of January 1, 1995, nor do
they purport to represent the results of operations for future periods. Pro
forma lessee expenses represent management fees and estimated lessee overhead
expenses and exclude dividend income on 250,001 Operating Partnership Units and
interest income associated with working capital balances.
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1995 1996
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
Revenue:
Rooms............................ $25,583 $26,693
Food and beverage................ 8,559 8,701
Conference center................ 699 645
Telephone and other.............. 2,258 2,540
------- -------
Total revenue................... 37,099 38,579
------- -------
Expenses:
Departmental costs and expenses.. 13,486 14,169
Participating lease payments..... 12,390 13,063
General and administrative....... 2,952 3,284
Repairs and maintenance.......... 1,706 1,698
Utilities........................ 1,556 1,647
Marketing........................ 3,336 3,546
Insurance........................ 288 264
------- -------
Total expenses.................. 35,714 37,671
------- -------
Income before lessee expenses..... 1,385 908
Lessee expenses................... 639 624
------- -------
Net income....................... $ 746 $ 284
======= =======
</TABLE>
15
<PAGE>
INITIAL HOTELS
COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
Revenue from hotel operations:
Rooms.......................................................... $22,242
Food and beverage.............................................. 7,613
Conference center.............................................. 699
Telephone and other............................................ 1,857
-------
Total revenue............................................ 32,411
-------
Expenses:
Departmental costs and expenses................................ 11,806
General and administrative..................................... 2,686
Repairs and maintenance........................................ 1,419
Utilities...................................................... 1,307
Marketing...................................................... 2,821
Management fees paid to affiliates............................. 1,488
Interest expense............................................... 4,904
Real estate and personal property taxes, and insurance......... 1,128
Depreciation and amortization.................................. 2,649
-------
Total expenses........................................... 30,208
-------
Income before extraordinary item......................... 2,203
Extraordinary item--loss on extinguishment of debt............... 1,803
-------
Net income............................................... $ 400
=======
</TABLE>
See accompanying notes.
16
<PAGE>
INITIAL HOTELS
COMBINED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income.......................................................................... $ 400
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization.................................................... 2,649
Amortization of deferred loan costs.............................................. 58
Amortization of discount on note payable......................................... 171
Expenses financed with term debt................................................. 250
Loss on extinguishment of debt................................................... 1,803
Changes in assets and liabilities:
Cash held in escrow.............................................................. (2)
Accounts receivable, net......................................................... (2,073)
Inventories...................................................................... (33)
Prepaid and other assets......................................................... (1,041)
Accounts payable and other accrued expenses...................................... (252)
Payables to affiliates........................................................... 72
-------
Net cash provided by operating activities...................................... 2,002
-------
CASH FLOWS FROM INVESTING ACTIVITIES:
Restricted funds used for acquisition of property and equipment.................. 189
Improvements and additions to hotel properties................................... (1,253)
-------
Net cash used in investing activities.......................................... (1,064)
-------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of mortgages and other notes payable...................... 12,500
Principal payments on mortgages and other notes payable.......................... (9,888)
Payment of financing costs....................................................... (279)
Payments on capital lease obligations............................................ (1,181)
Payments on advances from affiliates............................................. (695)
Capital contributions............................................................ 33
Distributions paid............................................................... (1,529)
-------
Net cash used in financing activities.......................................... (1,039)
-------
Net change in cash and cash equivalents............................................... (101)
Cash and cash equivalents at beginning of period...................................... 8,290
-------
Cash and cash equivalents at end of period............................................ $ 8,189
=======
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest.............................................. $ 4,805
=======
</TABLE>
See accompanying notes.
17
<PAGE>
INITIAL HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS
(UNAUDITED)
(DOLLARS IN THOUSANDS)
1. ORGANIZATION, INITIAL PUBLIC OFFERING AND BASIS OF PRESENTATION:
Organization
Patriot American Hospitality, Inc. (the "Company") is a Virginia corporation
which was created to own, through wholly-owned subsidiaries, an approximately
86.3% general and limited partnership interest in Patriot American Hospitality
Partnership, L.P., a Virginia limited partnership (the "Operating
Partnership"). On October 2, 1995, the Operating Partnership acquired from
various entities (the "Selling Entities") twenty (20) operating hotel properties
(collectively, the "Initial Hotels"). Sixteen of the 20 Initial Hotels were
acquired from Selling Entities owned jointly or individually by Patriot American
(or its principals) ("Patriot American"), CHC International, Inc. ("CHC") and
the Gencom group of companies ("Gencom," and collectively with CHC and Patriot
American, the "Primary Contributors"). The four remaining hotels were acquired
from Selling Entities not affiliated with the Primary Contributors. Following
is a listing of the Initial Hotels.
<TABLE>
<CAPTION>
NUMBER
OF MONTH/YEAR
SELLING ENTITY PROPERTY NAME/LOCATION ROOMS ACQUIRED
- - ------------------------------------------- -------------------------------------------------------------- ------ -------------
<S> <C> <C> <C>
FULL SERVICE HOTELS:
Bourbon Orleans Investors, LP Bourbon Orleans Hotel--New Orleans, Louisiana 211 8/92
Summit AP Partners, LP Holiday Inn Select North Dallas--Farmers Branch, Texas 374 8/93
Quarry Inn Company Hilton Inn Cleveland South--Independence, Ohio 191 N/A(2)
Crockett Hospitality, Inc. Crockett Hotel--San Antonio, Texas 206 5/90
Troy Hotel Investors, LP Marriott Troy Hotel--Troy, Michigan 350 12/94
Tri-City Associates Four Points by Sheraton--Saginaw, Michigan 156 N/A(2)
1500 Canal Street Investors, LP Radisson New Orleans Hotel--New Orleans, Louisiana 759 9/92
Chartwell Properties, Inc. Radisson Hotel & Suites--Dallas, Texas 198 2/90
Town & Country Hospitality, Co. Radisson Suites (Town & Country)--Houston, Texas 173 11/89
Main Street Hospitality, LP Holiday Inn Aristocrat--Dallas, Texas 172 11/92
290 Ventures, LP Holiday Inn Northwest Plaza--Houston, Texas 193 9/90
Travis Real Estate Group, JV Holiday Inn Northwest Plaza--Austin, Texas 193 1/92
San Angelo Hospitality, LP Holiday Inn--San Angelo, Texas 148 1/93
Sebring Hospitality, LP Holiday Inn--Sebring, Florida 148 8/93
Fairmount Hospitality, LP Fairmount Hotel--San Antonio, Texas 37 10/92
-----
3,509
-----
LIMITED SERVICE HOTELS:
Hotel Group of Jacksonville, JV Hampton Inn Jacksonville Airport - Jacksonville, Florida 113 1985(1)
North Coast Rochester Limited Partnership Hampton Inn--Rochester, New York 113 1986(1)
Great Northern Inns Company, L.P. Hampton Inn Cleveland Airport--North Olmsted, Ohio 113 N/A(2)
North Coast Inns Co. Ltd. Hampton Inn--Canton, Ohio 108 N/A(2)
-----
447
-----
EXECUTIVE CONFERENCE CENTER:
MWL Peachtree Peachtree Executive Conference Center--Peachtree City, Georgia 250 4/93
-----
4,206
=====
</TABLE>
- - ---------------
(1) Constructed by the current owner.
(2) See Basis of Presentation for a discussion of these Initial Hotels which
were not owned by the Primary Contributors or their affiliates.
18
<PAGE>
INITIAL HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
The Operating Partnership purchased the Initial Hotels from the Selling
Entities for an aggregate purchase price of approximately $311,000. The owners
of the Selling Entities received cash and/or units of limited partnership
interest in the Operating Partnership as consideration for the hotels. See
Initial Public Offering below.
Upon acquisition, all of the Initial Hotels were leased to CHC Lease
Partners, a general partnership owned jointly by CHC and an affiliate of a
principal of Gencom, pursuant to separate participating leases (the
"Participating Leases"). Under the terms of the Participating Leases, CHC
Lease Partners is obligated to pay the greater of (1) minimum base rent or (2)
participating rent based upon certain percentages of room revenue, food and
beverage revenue, conference center revenue and telephone and other revenue of
each of the Initial Hotels. The Participating Leases have an average term of
approximately eleven years.
CHC Lease Partners contracted with hotel management subsidiaries of CHC and
with GAH-II, L.P. ("GAH") to manage 19 of the Initial Hotels and Metro Hotels
Joint Venture manages the remaining Initial Hotel (collectively, the
"Operators"). Under the terms of these management agreements the Operators
are required to perform all management functions necessary to operate the
Initial Hotels.
Initial Public Offering
The Company filed its registration statement with the Securities and Exchange
Commission which became effective September 27, 1995 pursuant to which the
Company completed an initial offering (the "Offering") of 14,605,000 shares of
its common stock to the public (including 1,905,000 shares of common stock
issued upon exercise of the underwriters' over-allotment option). The Offering
price of all shares sold in the Offering was $24.00 per share, resulting in net
proceeds (less the underwriters' discount and offering expenses) of
approximately $313,170.
Upon completion of the Offering, the Company contributed, through its wholly-
owned subsidiaries, substantially all of the net proceeds of the Offering to the
Operating Partnership in exchange for an approximately 86.3% general and limited
partnership interest in the Operating Partnership. The Operating Partnership
then used the proceeds from the Company to acquire the Initial Hotels from the
Selling Entities, to finance certain capital improvements and for general
working capital. Rather than receiving cash for their entire interests in the
Selling Entities upon the sale of the Initial Hotels, the Primary Contributors
and certain third-party sellers elected to receive limited partnership interests
in the Operating Partnership aggregating an approximately 13.7% equity interest
in the Operating Partnership.
Basis Of Presentation
The accompanying financial statements are presented on a combined basis
because subsequent to October 1, 1995, these properties are wholly-owned by the
Operating Partnership and because 19 of the 20 Initial Hotels included in the
combination were either owned or managed by one of the Primary Contributors or
their affiliates prior to the Operating Partnership's acquisition.
Management believes that these combined financial statements result in a more
meaningful presentation and thus appropriately reflect the historical financial
position and results of operations of the predecessor of CHC Lease Partners. All
significant inter-entity transactions have been eliminated in the combined
presentation.
Interim Unaudited Financial Information
These unaudited combined statements of operations and cash flows have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions for Form 10-Q and Article 10 of
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three month period ended March 31,
1995 is not necessarily indicative of the results for the year ended December
31, 1995. For further information, refer to the combined financial statements
and footnotes thereto included in the Company's annual report on Form 10-K for
the year ended December 31, 1995.
19
<PAGE>
INITIAL HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
2. MORTGAGES AND OTHER NOTES PAYABLE:
Mortgage Loans
As of March 31, 1995, the combined Initial Hotels were obligated under an
aggregate of 21 mortgage loans, each of which are generally collateralized by a
first lien deed of trust and assignment of rents. The mortgage loans payable
consist of both interest only and amortizing loans which mature at various dates
through November 2011. Seven of the mortgage loans totaling $84,686 as of March
31, 1995 have fixed interest rates ranging from 6.0% to 12.0%. Variable rate
mortgage loans payable at March 31, 1995 total approximately $49,238. Interest
rates on the variable rate debt are generally based on prime or LIBOR rates
which were 9.0% and 6.1%, respectively, at March 31, 1995. Certain of the
mortgage obligations are personally guaranteed by certain partners of the
Selling Entities.
Other Notes Payable
As of March 31, 1995, the combined Initial Hotels were also obligated under
six other notes payable arrangements totaling $6,085. The proceeds from the
notes were used to finance improvements to certain hotels. The notes, which
mature at various dates through December 31, 2004, bear interest at rates
ranging from 7.5% to 14%. Certain of the notes are guaranteed by owners.
Debt Extinguishment
All of the outstanding mortgage and other notes payable described above were
repaid on October 2, 1995 from the proceeds of the Offering.
The Bourbon Orleans Hotel was purchased subject to a mortgage note in the
amount of $9,345 held by the Resolution Trust Corporation ("RTC"). Due to the
non-interest bearing feature of the loan, the mortgage note payable and the
carrying amount of the property were discounted in the amount of $3,220 using an
imputed interest rate of approximately 7.5%. The loan provided for payment to
the RTC equal to 25% of the net proceeds from sale or refinancing of the
property.
In February 1995, the owner refinanced the hotel and the RTC note payable was
retired, prior to scheduled maturity, for $7,588. The excess of the
reacquisition price over the net carrying amount of the debt of $5,785, resulted
in a loss on extinguishment of $1,803, which is presented as an extraordinary
item in 1995. Additionally, interest expense in 1995 includes $1,242 paid to
the RTC for its share of the net refinancing proceeds. The new loan, in the
amount of $12,500, accrued interest at the LIBOR Index, with monthly payments of
interest only due for the first twelve months.
Additionally, the loan proceeds were used to retire other indebtedness of the
hotel of approximately $2,480 and to purchase equipment leased under capital
leases of approximately $1,290.
In March 1995, the Radisson New Orleans Hotel obtained an extension of a
$500,000 note payable due January 1995. The terms of the loan remained
unchanged except for an extension of the loan maturity date to December 2, 1995.
3. COMMITMENTS AND CONTINGENCIES:
Franchise Agreements
Under the terms of hotel franchise agreements expiring at various dates
through July 2013, annual payments for franchise royalties, reservation and
advertising services are due for 17 of the 20 Initial Hotels. Fees are computed
based upon percentages of gross room revenue. Such fees were approximately $875
during 1995. Certain of these agreements require the franchisee to establish
reserves for property improvements, replacement of furniture and equipment or
payment of property taxes and insurance.
20
<PAGE>
INITIAL HOTELS
NOTES TO COMBINED FINANCIAL STATEMENTS--(CONTINUED)
(UNAUDITED)
(DOLLARS IN THOUSANDS)
4. RELATED PARTY TRANSACTIONS:
After the Offering described in Note 1, the Operators of 19 of the Initial
Hotels are hotel management subsidiaries of CHC, and GAH, an entity affiliated
with CHC and Gencom. Prior to the Offering, seven of the Initial Hotels were
operated by CHC and six were operated by GAH. In addition, five of the remaining
Initial Hotels were operated by affiliates of the Selling Entities.
The hotels were operated under management agreements expiring through August
2003, and terms included management fees generally ranging from 2% to 5% of
revenue. In addition, certain of the hotels provided for the payment of
incentive management fees based on achievement of specified performance criteria
as defined in the individual management agreements. In certain cases accounting
fees ranging from $1 to $3 per month, asset management fees ranging from $2 to
$3 per month, and construction supervisory fees ranging from 5% to 10% of the
total cost incurred for capital improvements were also due.
Certain of the Selling Entities had working capital loans or advances from
owners or their affiliates. These loans bear interest at rates ranging from 5%
to 14% at March 31, 1995 and mature at various dates through March 1997. The
advances are non-interest bearing and are generally due on demand. Interest
expense related to these loans is $136 during 1995. Loans and advances from
affiliates were repaid in connection with the Offering.
5. CHANGES IN OWNERSHIP:
In January 1995, the partnership owning the Radisson New Orleans Hotel
redeemed the limited partnership interest of a minority partner based upon a
negotiated purchase price of $4,249 and bought out the existing management
contract of the hotel operator in exchange for notes payable aggregating $4,499.
The notes were repaid in connection with the Offering.
21
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The accompanying discussion and analysis of financial condition and results
of operations is based on the consolidated financial statements of the Company,
the financial statements of CHC Lease Partners, and the combined historical
financial statements of the Initial Hotels which are included elsewhere in this
Quarterly Report. The following discussion and analysis should be read in
conjunction with the accompanying financial statements and related notes
thereto.
BACKGROUND
Patriot American Hospitality; Inc. (collectively with its subsidiaries, the
"Company"), a Virginia corporation, was formed April 17, 1995 as a self-
administered real estate investment trust ("REIT") for the purpose of acquiring
equity interests in hotel properties. On October 2, 1995, the Company completed
its initial public offering (the "Offering") of 14,605,000 shares of its common
stock and commenced operations. The Company, through its wholly-owned
subsidiary, PAH LP, Inc., contributed substantially all of the net proceeds of
the Offering to Patriot American Hospitality Partnership, L.P. (the "Operating
Partnership") in exchange for an approximate 85.3% limited partnership interest
in the Operating Partnership. The Company, through its wholly-owned subsidiary,
PAH GP, Inc., is the sole general partner and the holder of a 1.0% general
partnership interest in the Operating Partnership.
The Operating Partnership used approximately $263,600,000 of the net proceeds
from the Company to acquire 20 hotel properties with a total of 4,206 guest
rooms (the "Initial Hotels") from various entities and repay existing mortgages
and other indebtedness of the Initial Hotels. In addition, in connection with
the Offering, the Company closed on a Line of Credit with Paine Webber Real
Estate Securities, Inc. ("Paine Webber Real Estate") to be utilized primarily
for the acquisition of additional hotels, renovation of certain hotels and for
working capital. The balance of the proceeds from the Offering were used to
acquire one additional hotel and, together with proceeds from the Line of
Credit, to acquire a second hotel property through an unconsolidated subsidiary.
On November 15, 1995, the Company acquired the 223-room Embassy Suites Hotel
in Hunt Valley, Maryland for cash (including closing costs) of approximately
$15,951,000. The purchase was paid for with a portion of the remaining net
proceeds from the Offering.
On December 1, 1995, PAH Ravinia, Inc. ("PAH Ravinia"), a Virginia
corporation of which the Company owns an approximate 99% non-voting ownership
interest, acquired the 495-room Crowne Plaza Ravinia Hotel in Atlanta, Georgia.
The Company paid approximately $4,456,000 for its 99% ownership interest in PAH
Ravinia and advanced to PAH Ravinia an aggregate of $40,500,000 in first and
second lien mortgage notes (the "Mortgage Notes") for the purchase of the hotel.
The investment in PAH Ravinia and funding of the Mortgage Notes was paid for in
part with the remaining net proceeds from the Offering and in part with
borrowings from the Company's Line of Credit in the amount of $9,500,000.
During the first quarter of 1996, the Company has acquired three additional
hotel properties in three states with an aggregate 830 guest rooms. The Company
acquired the 288-room Tremont House Hotel in Boston, Massachusetts in January
1996, for a purchase price (including closing costs) of approximately
$16,397,000. The purchase was financed primarily with funds drawn on the Line
of Credit. In March 1996, the Company acquired the 297-room Holiday Inn Lenox
Hotel in Atlanta, Georgia and the 245-room Del Mar Hilton in San Diego,
California. The Holiday Inn Lenox Hotel is subject to a 73-year ground lease
and was acquired for approximately $7,279,000 in cash (including closing costs)
and 167,012 OP Units valued at approximately $4,000,000 based upon the market
price of the Company's common stock on the contract settlement date. The cash
portion of the purchase was funded with a draw on the Line of Credit. The Del
Mar Hilton Hotel was acquired for a purchase price (including closing costs) of
approximately $14,872,000. The purchase was also financed primarily with funds
drawn on the Line of Credit.
As of March 31, 1996, the Company, through the Operating Partnership and PAH
Ravinia, owned 25 hotel properties in ten states with an aggregate 5,754 guest
rooms (the "Hotels").
In order for the Company to qualify as a REIT, neither the Company nor the
Operating Partnership can operate hotels. Therefore, the Operating Partnership
leases each of the Hotels, except the Crowne Plaza Ravinia Hotel, to lessees
that are independent of the Company. Of the 25 Hotels owned at quarter end, 23
are leased to CHC Lease Partners for staggered terms of ten to twelve years
pursuant to separate participating leases providing for the payment of base rent
and percentage rent (the "Participating Leases"). One of the Hotels is leased
under a similar Participating Lease agreement to Metro Lease Partners
(collectively, CHC Lease Partners and Metro Lease Partners are referred to
herein as the "Lessees"). The Crowne Plaza Ravinia Hotel acquisition was
structured without a lessee for reasons specific to the acquisition.
22
<PAGE>
The Operating Partnership's, and therefore the Company's, primary source of
revenue is lease payments by the Lessees under the Participating Leases.
Participating Rent is based primarily upon the Hotels' room revenue, and to a
lesser extent, food and beverage, conference center and other revenue. The
Lessees' ability to make payments to the Operating Partnership under the
Participating Leases is dependent upon their ability to generate cash flow from
the operation of the Hotels.
CHC Lease Partners has entered into management agreements whereby 22 of the
Hotels are managed by affiliates of CHC Lease Partners and one Hotel is managed
by Metro Joint Venture ("Metro Hotels"). Metro Lease Partners has entered into a
management agreement with Metro Hotels to manage the Embassy Suites, Hunt
Valley, Maryland. The Crowne Plaza Ravinia is being managed by Holiday Inns,
Inc. for a period of ten years pursuant to a management agreement between PAH
Ravinia and Holiday Inns, Inc. These hotel management entities are referred to
herein collectively as the "Operators."
RECENT DEVELOPMENTS
In April 1996, the Company acquired six hotels with a total of 1,239 guest
rooms located in Washington and California for an aggregate purchase price
(including closing costs) of approximately $84,500,000. The purchase was funded
with proceeds from the Line of Credit and issuance of 331,577 OP Units (valued
at approximately $8,800,000 based on the market price of the Company's common
stock on the contract settlement date).
The Company has also entered into non-binding purchase and sale agreements to
acquire the 365-room Hyatt Regency in Lexington, Kentucky for a purchase price
of approximately $14,000,000, the 492-room Bonaventure Hotel & Spa in Fort
Lauderdale, Florida for a purchase price of approximately $16,200,000 and the
362-room Marriott WindWatch Hotel in Long Island New York for a purchase price
of approximately $30,000,000. In addition, the Company has entered into a
letter of intent agreement to acquire a portfolio of five Wyndham and Wyndham
Garden hotels containing an aggregate 1,141 guest rooms for a purchase price of
approximately $96,000,000. The hotel properties are located in the Houston,
Dallas, Atlanta, Detroit and Chicago metropolitan areas.
The acquisition of these or any other properties is subject to a number of
contingencies, including, among other things, the satisfactory completion of the
Company's due diligence investigation of the hotels, the negotiation of a
definitive acquisition agreement and obtaining financing and/or Line of Credit
lender approval, as applicable. Accordingly, there can be no assurance that the
acquisition of any of these properties will be consummated.
RESULTS OF OPERATIONS OF THE COMPANY
Actual (for the Three Months Ended March 31, 1996)
For the three months ended March 31, 1996, the Company earned $12,371,000 in
Participating Lease revenue from the Lessees, which is net of leasing cost
amortization of $23,000. Interest and other income, which was $92,000 for the
period, consisted primarily of interest income earned on invested cash balances
of the Company's capital improvement reserves. Depreciation and amortization
for the period was $2,838,000. Real estate and personal property taxes and
insurance for the period were $1,082,000 and rent payments on a ground lease
were $77,000. General and administrative expenses were $941,000 (including
amortization of unearned executive compensation of $166,000). The Company
reported $601,000 of interest expense for the period which consists of $558,000
of interest incurred on the Line of Credit balance outstanding and $43,000 of
amortization of deferred financing costs. The Company's share of income from an
unconsolidated subsidiary was $1,362,000. The minority interest's share of
income of the Company was $1,158,000 (representing the minority partners'
interest in the Operating Partnership). The resulting net income applicable to
common shareholders was $7,128,000.
Pro Forma
For the three months ended March 31, 1996, the Company's pro forma lease
revenue increased 5.2% to $13,516,000 from $12,843,000 for 1995, reflecting
improvements in average room rates at the Hotels during 1996 (see pro forma
Results of Operations of Lessees below). Total pro forma expenses increased
from $6,139,000 for the three months ended March 31, 1995 to $6,409,000 for the
three months ended March 31, 1996, an increase of $270,000. This increase is
primarily attributable to pro forma general and administrative expense, which
increased by $222,000 in 1996 compared to 1995 as a result of increases in cost
of amortization of unearned executive compensation and certain professional fees
and consultant costs. Pro forma real estate taxes and personal property taxes
and casualty insurance increased by $78,000. Depreciation and amortization
increased by $41,000. Interest expense decreased by $71,000 as a result of
decreases in the
23
<PAGE>
30-day LIBOR rate (for the first quarter of 1996 as compared to the first
quarter of 1995) upon which Line of Credit interest rate is based. In addition,
the Company's pro forma equity in earnings of its unconsolidated subsidiary
increased from $908,000 for the first quarter of 1995 to $1,362,000 for the
first quarter of 1996 as a result of improvement in operating results of the
property. As a result of the above, pro forma net income increased to
$7,250,000 in 1996 from $6,518,000 in 1995.
Funds from Operations
Funds from Operations (as defined and computed below) was $11,634,000 for the
three months ended March 31, 1996. On a pro forma basis, Funds from Operations
was $12,077,000 for the three months ended March 31, 1996.
The Company considers Funds from Operations to be a key measure of REIT
performance. Funds from Operations represents net income (loss)(computed in
accordance with generally accepted accounting principles), excluding gains (or
losses) from debt restructuring or sales of property, plus depreciation of real
property, and after adjustments for unconsolidated partnerships, joint ventures
and corporations. Adjustments for the Company's unconsolidated subsidiary are
calculated to reflect Funds from Operations on the same basis. The Company has
also made certain adjustments to Funds from Operations for real estate related
amortization. Funds from Operations should not be considered as an alternative
to net income or other measurements under generally accepted accounting
principles as an indicator of operating performance or to cash flows from
operating, investing or financing activities as a measure of liquidity. Funds
from Operations does not reflect working capital changes, cash expenditures for
capital improvements or principal payments on indebtedness.
The following reconciliation of net income to Funds from Operations for the
quarter ended March 31, 1996 illustrates the difference between the two measures
of operating performance:
<TABLE>
<CAPTION>
Three Months Ended
March 31, 1996
------------------
(in 000's)
<S> <C>
Net income........................................ $ 7,128
Add:
Minority interest in Operating Partnership....... 1,158
Depreciation of buildings and improvements and
furniture, fixtures and equipment............... 2,808
Amortization of franchise fees................... 22
Amortization of capitalized lease costs.......... 23
Adjustment for funds from operations of
unconsolidated subsidiary:
Equity in earnings of unconsolidated subsidiary.. (1,362)
Funds from Operations of unconsolidated
subsidiary..................................... 1,857
-------
Funds from Operations............................. $11,634
=======
The Company's share of Funds from Operations...... $10,009
=======
Fully diluted weighted average shares
and OP Units outstanding......................... 17,107
=======
Weighted average number of common shares and
common share equivalents outstanding............. 14,734
=======
</TABLE>
24
<PAGE>
RESULTS OF OPERATIONS OF THE LESSEES
Actual (for the Three Months Ended March 31, 1996)
CHC Lease Partners. For the three months ended March 31, 1996, CHC
Lease Partners had room revenues of $24,260,000 from the 23 Hotels it leases.
Food and beverage, conference center and other revenues were $10,938,000 for the
quarter. Participating Lease payments and hotel operating expenses were
$11,918,000 and $22,082,000, respectively, and net income was $633,000.
Combined Lessees. For the three months ended March 31, 1996, the
combined Lessees had room revenues of $25,308,000. Food and beverage,
conference center and other revenues were $11,258,000 for the quarter.
Participating Lease payments and hotel operating expenses were $12,371,000 and
$23,049,000, respectively, and net income was $547,000.
Pro Forma Comparison of the Three Months Ended March 31, 1996 and 1995
CHC Lease Partners. Pro forma room revenue increased from $25,583,000
to $26,693,000, an increase of $1,110,000 or 4.3%. Average occupancy decreased
from 72.6% in 1995 to 69.6% in 1996 as part of the business plan which raised
average daily rates by 8.0%, from $78.04 in 1995 to $84.27 in 1996. The result
was a 3.4% increase in revenue per available room from $56.66 in 1995 to $58.61
in 1996. This overall increase in revenue per available room was net of
decreases at certain hotels, most notably the two New Orleans properties which
had a 13.2% decrease in revenue per available room as a result of severe weather
in the Northeast (which limited travel to New Orleans), lower group and
convention business and the closing of the temporary land-based casino there.
The hotels continue to benefit from improvement in market conditions in the U.S.
lodging industry and completion of renovations at certain of the hotels. Four
of the Initial Hotels completed renovations in 1995 that were begun in 1994.
Pro forma food and beverage revenue increased from $8,559,000 to
$8,701,000, a total of $142,000, an increase of only 1.7% due to lower
occupancies. Conference center revenue decreased from $699,000 to $645,000, a
decrease of $54,000, or 7.7%, due primarily to decreased conference facility
utilization in the first quarter of 1996 compared to the first quarter of 1995.
Telephone and other revenue increased from $2,258,000 to $2,540,000, an increase
of $282,000, or 12.5%, due primarily to higher forfeitures of deposits on room
cancellations.
Pro forma Participating Lease payments were $13,063,000 for 1996
compared to $12,390,000 in 1995, an increase of 5.4%. Pro forma hotel operating
expenses increased from $23,324,000 to $24,608,000, an increase of $1,284,000 or
5.5%. Of this amount, $683,000 was attributable to a 5.1% increase in
departmental costs and expenses, primarily salaries and benefits. General and
administrative expenses increased $332,000, or 11.2%, due to higher salaries and
benefits costs. Marketing expenses increased $210,000 as a result of increased
marketing efforts at newly renovated hotels. Pro forma hotel operating expenses
as a percentage of total revenue increased from 62.9% in 1995 to 63.8% in 1996
primarily due to higher salaries and benefits costs in most departments.
Lessee expenses, which on a pro forma basis consist of management fees
and overhead expenses, remained relatively stable. CHC Lease Partners' net
income on a pro forma basis was $746,000 in 1995 compared to $284,000 in 1996.
Combined Lessees. On a combined basis, pro forma room revenue from
the hotels was $27,741,000 for the three months ended March 31, 1996, an
increase of 4.6% from $26,525,000 in the first three months of 1995. Food and
beverage, conference center and other revenues increased 3.4% to $12,206,000 for
1996 compared to $11,806,000 for 1995. Combined pro forma Participating Lease
payments were $13,516,000 for 1996 compared to $12,843,000 in 1995, a 5.2%
increase. Hotel operating expenses on a pro forma basis increased 5.7% to
$25,578,000 for the quarter ended March 31, 1996 compared to $24,189,000 for
1995. Combined pro forma net income for the three months ended March 31, 1996
was $195,000 compared to $628,000 in 1995.
RESULTS OF OPERATIONS OF THE INITIAL HOTELS
For the Three Months Ended March 31, 1995. The Initial Hotels had
room revenues of $22,242,000 for the three months ended March 31, 1995. Average
occupancy was at 74.3%, the average daily rate was $78.97 and revenue per
available room was $58.70 for the Initial Hotels for the three months ended
March 31, 1995. Food and beverage, conference center and other revenue for the
period was $10,169,000. Departmental and other expenses (departmental costs and
expenses, general and administrative, repairs and maintenance, utilities,
marketing and management fees) for the period were $21,527,000, which represents
66.4% of total revenue. Income before fixed expenses (calculated as total
revenues less
25
<PAGE>
departmental and other expenses) was 33.6% of total revenue for the period, a
7.3% increase from the 1994 average of 31.3%. Fixed expenses (composed of
interest expense, real estate and personal property taxes, insurance, and
depreciation and amortization), totaled $8,681,000 for the period, which
represented an increase over 1994, due primarily to a one-time participating
debt payment at the Bourbon Orleans Hotel of $1,242,000 as well as increased
interest costs on new indebtedness incurred by the Initial Hotels in 1995. Net
income for the period was $400,000 and reflects an extraordinary loss from debt
extinguishment on the Bourbon Orleans Hotel of $1,803,000.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1996, the Company had $50,250,000 outstanding on the
Line of Credit. The Line of Credit is secured by a mortgage on certain of the
Hotels. In May 1996, the maximum amount available under the Line of Credit was
increased from $165,000,000 to $250,000,000 and certain modifications were made,
thereby increasing the Company's ability to borrow under the Line of Credit.
Borrowings under the Line of Credit generally bear interest at a rate equal to
the 30-day LIBOR rate plus 1.9%.
In May 1996, the Company sold an aggregate of approximately
$40,000,000 of securities to an institutional investor. The securities
consisted of 811,393 shares of common stock sold at $26.95 per share and 662,391
Preferred OP Units (the "Preferred OP Units") sold at $27.375 per unit. The
common stock is of the same class as the Company's existing common stock and is
entitled to the same voting and dividend rights as all outstanding common stock,
subject to certain restrictions on the resale of the stock. The Preferred OP
Units are entitled to quarterly dividends equal to 103% of the quarterly
dividends paid on the common stock. Generally, three years following issuance,
the Preferred OP Units may be converted into shares of common stock on a one-
for-one basis, subject to certain limitations. After 10 years, all oustanding
Preferred OP Units will be converted into common stock.
In addition, the Company is evaluating other permanent sources of
capital, including equity and long-term debt. It is expected that additional
common or preferred stock offerings will be used both to acquire hotel
properties and to limit the Company's overall debt to market capitalization
ratio.
As previously discussed in "Recent Developments," in April 1996 the
Company acquired six hotels with a total of 1,239 guest rooms located in
Washington and California for an aggregate purchase price (including closing
costs) of approximately $84,500,000 which was funded with borrowings under the
Line of Credit and issuance of 331,577 OP Units. In addition, the Company has
entered into agreements or has executed letters of intent to acquire a total of
eight hotels in the states of Kentucky, New York, Texas, Georgia, Michigan,
Illinois and Florida. These acquisitions are subject to a number of conditions
including completion of the Company's due diligence. The Company currently
intends to use Line of Credit borrowings, OP Units and/or additional permanent
debt or equity capital to acquire these assets during the second and third
quarters of 1996. While no definitive agreements with respect to the acquisition
of any additional hotels have been entered into, the Company expects additional
acquisitions will be completed during the remainder of 1996, which will
initially be funded through the Line of Credit or through permanent debt or
equity financing.
The Company's principal source of cash to meet its cash requirements,
including distributions to its shareholders, is its share of the Operating
Partnership's cash flow. The Operating Partnership's principal source of
revenue is rent payments under the Participating Leases. The Lessees' ability
to make rent payments to the Operating Partnership, and, therefore, the
Company's liquidity, including the ability to make distributions to its
shareholders, is dependent upon the Lessees' ability to generate sufficient cash
flow from operation of the Hotels.
Cash and cash equivalents as of March 31, 1996 were $8,098,000,
including capital improvement reserves of $1,806,000. Additionally, the March
31, 1996 lease revenue receivable of $2,279,000 was paid by the Lessees in April
1996. Cash flows from operating activities of the Company was $9,002,000 for
the three months ended March 31, 1996, which primarily represents collection of
rents under the Participating Leases, less the Company's operating expenses for
the period. Cash flows used in investing activities in the amount of
$37,838,000 resulted from the acquisition of hotel properties. Cash flows from
financing activities of $32,165,000 was primarily related to $40,750,000 in
borrowings on the Line of Credit, net of dividends and distributions paid during
the quarter.
RENOVATIONS AND CAPITAL IMPROVEMENTS
Pursuant to the Participating Leases, the Company is obligated to
establish a reserve for each hotel for capital improvements, including the
periodic replacement or refurbishment of furniture, fixtures and equipment ("F,
F & E"). The aggregate amount of such reserves average 4.0% of total revenue,
with the amount of such reserve with respect to each hotel based upon projected
capital requirements of such hotel. Even though management believes such
amounts will generally
26
<PAGE>
be sufficient to fund recurring capital expenditures for the hotels over time,
such expenditures may exceed 4.0% of total revenue in any given year. Such
expenditures will exceed 4% of total revenues in 1996 for the reasons described
below.
The Company has budgeted $7,500,000 to fund recurring capital
expenditures at the Initial Hotels in 1996 and approximately $2,500,000 to
complete recurring capital expenditures in 1996 for hotels acquired subsequent
to the initial Offering, including the WestCoast portfolio of hotels acquired in
April 1996. The $7,500,000 amount represents an increase over the initially
budgeted expenditures, as management has decided to accelerate certain capital
improvements which were originally planned to be completed beyond 1996. The
Company has also been required to accelerate certain additional capital
expenditures in connection with the transfer of franchise licenses. The
budgeted capital expenditures include upgrades of telephone systems, other major
equipment purchases and improvements management believes will immediately
enhance the revenue producing capabilities of certain of the hotels.
In addition to recurring capital expenditures, the Company also has
plans to commence or complete renovation projects at several hotels during 1996,
including the Crockett Hotel, the Tremont House Hotel, the Crowne Plaza Ravinia
Hotel, the Del Mar Hilton Hotel and the WestCoast Long Beach Hotel and Marina.
Total renovation cost is expected to be approximately $15,500,000 (including
$8,500,000 to renovate the Tremont House Hotel). The Company has spent $853,000
through March 31, 1996 and expects to spend the remainder in 1996 and early
1997.
The Company will finance these renovations with draws on its Line of
Credit, operating cash flow in excess of distributions and reserves, or through
permanent debt or equity financing. Funding for $1,066,000 of the Crowne Plaza
Ravinia Hotel renovation will come from a reserve provided by the seller at the
closing date. The Company attempts to schedule renovations and improvements
during traditionally lower occupancy periods in an effort to minimize disruption
to the hotel's operations. Therefore, the Company does not believe such
renovations and capital improvements will have a material effect on the results
of operations of the hotels.
INFLATION
Operators of hotels in general possess the ability to adjust room
rates quickly. However, competitive pressures may limit the Lessees' ability to
raise room rates in the face of inflation.
SEASONALITY
The hotel industry is seasonal in nature. Generally, hotel revenue
for the hotels are greater in the first and second quarters of a calendar year.
Seasonal variations in revenue at the hotels may cause quarterly fluctuations in
the Company's lease revenue.
27
<PAGE>
PART II
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. EXHIBITS:
ITEM NUMBER DESCRIPTION
27.1 Financial Data Schedule
B. REPORTS ON FORM 8-K:
No reports on Form 8-K were filed during the quarter for which this
report is filed.
28
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934,
the registrant has duly caused the report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: May 10, 1996
PATRIOT AMERICAN HOSPITALITY, INC.
By: /s/Rex E. Stewart
--------------------------------------------
Rex E. Stewart
Executive Vice President and
Chief Financial Officer
(Authorized Officer and Principal Accounting
and Financial Officer)
29
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
BALANCE SHEET AS OF MARCH 31, 1996 AND CONSOLIDATED STATEMENT OF OPERATIONS FOR
THE THREE MONTHS ENDED MARCH 31, 1996 OF PATRIOT AMERICAN HOSPITALITY, INC.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 8,098
<SECURITIES> 0
<RECEIVABLES> 3,768
<ALLOWANCES> 0
<INVENTORY> 1,219
<CURRENT-ASSETS> 0
<PP&E> 311,889
<DEPRECIATION> 5,337
<TOTAL-ASSETS> 369,578
<CURRENT-LIABILITIES> 12,116
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 261,727
<TOTAL-LIABILITY-AND-EQUITY> 369,578
<SALES> 12,371
<TOTAL-REVENUES> 12,463
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 4,938
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 601
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 7,128
<EPS-PRIMARY> 0.48
<EPS-DILUTED> 0.48
</TABLE>
