UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR
15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1995
--------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR
15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______to_______
Commission file number 1-9443
----------
Red Lion Inns Limited Partnership
---------------------------------
(Exact name of registrant as specified in its charter)
Delaware 94-3029959
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
4001 Main Street, Vancouver, Washington 98663
- - - - - --------------------------------------- -----
(Address of principal executive offices) (Zip Code)
(360) 696-0001
--------------
(Registrant's telephone number, including area code)
__________________________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
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. Yes X No ___.
---
1
RED LION INNS LIMITED PARTNERSHIP
REPORT ON FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1995
TABLE OF CONTENTS
Page
----
PART I. FINANCIAL INFORMATION
Item 1 Consolidated Financial Statements (Unaudited):
Consolidated Statements of Income 3
Consolidated Balance Sheets 4
Consolidated Statement of Partners' Capital 5
Consolidated Condensed Statements of Cash Flows 6
Notes to Consolidated Financial Statements 7-8
Item 2 Management's Discussion and Analysis of
Financial Condition and Results of Operations 9-11
PART II. OTHER INFORMATION
Item 6 Exhibits and Reports on Form 8-K 12
2
PART I: FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
- - - - - -------------------------------------------
RED LION INNS LIMITED PARTNERSHIP AND SUBSIDIARY LIMITED PARTNERSHIP
- - - - - --------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME
(dollar amounts in thousands except per unit amounts)
(unaudited)
Three Months Ended
March 31,
-----------------------
1995 1994
---------- ----------
REVENUES $7,730 $7,018
OPERATING COSTS AND EXPENSES:
Property taxes 647 699
Base management fee 709 678
Depreciation and amortization 2,763 2,680
Other 633 417
------ ------
Total operating costs and expenses 4,752 4,474
------ ------
Operating income 2,978 2,544
INTEREST EXPENSE 2,748 2,561
------ ------
Income (loss) before income taxes 230 (17)
Income tax provision -- --
------ ------
NET INCOME (LOSS) $ 230 $ (17)
====== ======
ALLOCATION OF NET INCOME (LOSS):
General Partner $ 5 $ --
====== ======
Limited Partners $ 225 $ (17)
====== ======
NET INCOME PER LIMITED PARTNER UNIT $ 0.05 $ --
====== ======
AVERAGE LIMITED PARTNER UNITS OUTSTANDING 4,133,500 4,133,500
========= =========
(see notes to financial statements)
3
RED LION INNS LIMITED PARTNERSHIP AND SUBSIDIARY LIMITED PARTNERSHIP
- - - - - --------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
(in thousands)
March 31, December 31,
------------ ------------
1995 1994
-------- --------
(unaudited)
ASSETS
CURRENT ASSETS:
Cash $ 182 $ --
Prepaid property taxes 167 --
-------- --------
Total current assets 349 --
-------- --------
PROPERTY AND EQUIPMENT:
Land 17,705 17,705
Buildings and improvements 161,831 159,602
Furnishings and equipment 51,218 51,638
Construction in progress 1,157 1,454
-------- --------
231,911 230,399
Less -- accumulated depreciation (67,933) (65,226)
-------- --------
163,978 165,173
-------- --------
DEFERRED LOAN COSTS, net 149 32
-------- --------
Total assets $164,476 $165,205
======== ========
LIABILITIES AND PARTNERS' CAPITAL
CURRENT LIABILITIES:
Payable to affiliate $ 14,374 $ 12,322
Accrued distributions to partners 2,329 2,329
Interest payable 794 800
Property taxes 503 392
Current portion long-term debt 1,534 1,500
-------- --------
Total current liabilities 19,534 17,343
-------- --------
LONG-TERM DEBT NET OF CURRENT PORTION 122,609 123,430
-------- --------
DEFERRED INCOME TAXES 1,401 1,401
-------- --------
PARTNERS' CAPITAL:
Limited Partners, 4,940,000 units issued 33,505 35,554
Less - 806,500 treasury units, at cost (11,202) (11,202)
-------- --------
Limited Partners, net 22,303 24,352
General Partner (1,371) (1,321)
-------- --------
Total partners' capital 20,932 23,031
-------- --------
Total liabilities and partners' capital $164,476 $165,205
======== ========
(see notes to financial statements)
4
RED LION INNS LIMITED PARTNERSHIP AND SUBSIDIARY LIMITED PARTNERSHIP
- - - - - ---------------------------------------------------------------------
CONSOLIDATED STATEMENT OF PARTNERS' CAPITAL
For the three months ended March 31, 1995
(dollar amounts in thousands)
(unaudited)
Limited Partners
-----------------------------------------
Issued Units Treasury Units
-------------------- -------------------- General
Units Amount Units Amount Partner Total
--------- -------- --------- -------- -------- --------
Balance at December 31, 1994 4,940,000 $35,554 (806,500) $(11,202) $(1,321) $23,031
Distributions to partners -- (2,274) -- -- (55) (2,329)
Net income -- 225 -- -- 5 230
--------- -------- --------- -------- -------- --------
Balance at March 31, 1995 4,940,000 $33,505 (806,500) $(11,202) $(1,371) $20,932
========= ======== ========= ======== ======== ========
(see notes to financial statements)
5
RED LION INNS LIMITED PARTNERSHIP AND SUBSIDIARY LIMITED PARTNERSHIP
- - - - - --------------------------------------------------------------------
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
Increase (decrease) in cash
(in thousands)
(unaudited)
Three Months Ended
March 31,
------------------
1995 1994
-------- --------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 230 $ (17)
Adjustments to reconcile net income (loss) to cash
provided from operating activities:
Depreciation and amortization 2,763 2,680
Change in certain current assets and liabilities 1,990 1,533
------- -------
Net cash provided by operating activities 4,983 4,196
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment, net (1,540) (1,147)
Cash reserved for capital improvements (709) (678)
Cash withdrawn from reserve for capital improvements 709 678
------- -------
Net cash used in investing activities (1,540) (1,147)
------- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distribution of cash to partners (2,329) (2,329)
Payments on term loan (363) (331)
Net repayments on revolving credit facility (424) (357)
Other financing activities (145) --
------- -------
Net cash used in financing activities (3,261) (3,017)
------- -------
INCREASE IN CASH 182 32
CASH AT BEGINNING OF PERIOD -- 213
------- -------
CASH AT END OF PERIOD $ 182 $ 245
======= =======
(see notes to financial statements)
6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MARCH 31, 1995
(UNAUDITED)
1. GENERAL
Red Lion Inns Limited Partnership, a Delaware limited partnership (the
"Partnership"), was organized for the purpose of acquiring and owning, through
its subsidiary limited partnership, Red Lion Inns Operating L.P., a Delaware
limited partnership (the "Operating Partnership"), ten Red Lion hotels (the
"Hotels"). On April 14, 1987 (the date of the Partnership's inception), the
Operating Partnership acquired the Hotels from Red Lion, a California limited
partnership ("Red Lion"). Red Lion continues to operate and manage the Hotels
pursuant to a long-term management agreement (the "Management Agreement"). The
general partner of the Partnership and Operating Partnership is Red Lion
Properties, Inc. (the "General Partner"), a wholly-owned subsidiary of Red
Lion.
2. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the accounts of the
Partnership and those of the Operating Partnership, of which the Partnership
owns 99 percent and the General Partner owns one percent. All significant
intercompany transactions and accounts have been eliminated.
Certain information and footnote disclosures included in annual financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted in accordance with the rules and regulations of
the Securities and Exchange Commission. The interim financial statements should
be read in conjunction with the audited financial statements included in the
Partnership's 1994 Annual Report on Form 10-K.
Revenues reported in the accompanying statements of income represent the gross
operating profits of the Hotels which is credited to the Partnership by Red Lion
under the terms of the management agreement.
The operating results for the current quarter ended March 31, 1995, do not
necessarily indicate the results expected for the full 1995 year.
In the opinion of management, the accompanying interim financial statements
contain all necessary adjustments, which are of a normal recurring nature, to
present fairly the Partnership's financial condition and results of operations
as of March 31, 1995 and for the quarter then ended.
7
3. RELATED PARTY TRANSACTIONS
Amounts payable to affiliate of $14,374,000 at March 31, 1995, consist of
amounts payable to Red Lion for construction costs, payroll and payroll taxes,
support services, base and current incentive management fees, operating
supplies, furnishings and equipment and other current liabilities arising out
of normal operations in accordance with the Management Agreement. Amounts
payable to affiliate also include an offset for the Hotels' net working capital
items which consist of cash held in hotel accounts, accounts receivable,
inventories, prepaid expenses, hotel accounts payable, certain taxes other than
property, income and payroll taxes. These balances are due in the normal course
of business. Such net working capital items amounted to $2,217,000 and
$2,314,000 at March 31, 1995 and 1994, respectively. Amounts payable to
affiliate which are outstanding for more than 30 days incur interest at a Prime-
based interest rate (9.50% at March 31, 1995).
Included in long-term debt is a $3.7 million non-interest bearing loan made to
the Partnership by the General Partner and $6 million of non-interest bearing
deferred incentive management fees owed to Red Lion.
4. INCOME TAXES
During 1987, Congress passed the Omnibus Budget Reconciliation Act which, among
other things, treats certain publicly-traded partnerships as corporations for
tax purposes for the years beginning after December 31, 1987. Publicly-traded
partnerships in existence prior to December 18, 1987, such as the Partnership,
will not be treated as corporations, for tax purposes, for ten years or until
taxable years beginning after December 31, 1997. The effect of treating
publicly-traded partnerships as corporations will be to tax the income of the
Partnership at the entity level and reflect distributions to partners as
dividends. Additional costs to the Partnership for such taxes would reduce the
amount available for distribution to the partners.
In 1993, the Partnership adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" (SFAS109). This statement requires, among
other things, the recording of deferred income taxes based on the difference
between the financial statement and income tax bases of assets and liabilities
using the enacted marginal income tax rate. The Partnership determined that no
adjustment to deferred income taxes was necessary during the three months ended
March 31, 1995.
5. SUPPLEMENTAL CASH FLOW DISCLOSURE
During the quarter ended March 31, 1995 and 1994, the Partnership made interest
payments amounting to $2,750,000 and $2,566,000, respectively.
8
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
Operating Revenues and Expenses of the Hotels
- - - - - ---------------------------------------------
(in thousands)
Three Months Ended
March 31,
------------------
1995 1994
------- -------
REVENUES:
Rooms $13,363 $12,457
Food and beverage 7,953 7,887
Other 2,322 2,248
------- -------
Total revenues 23,638 22,592
OPERATING COSTS AND EXPENSES:
Departmental direct expenses
Rooms 3,483 3,277
Food and beverage 6,440 6,459
Other 909 873
Administration and general 2,151 2,108
Sales, promotion and advertising 1,193 1,133
Utilities 762 801
Repairs and maintenance 970 923
------- -------
Total operating costs and expenses 15,908 15,574
------- -------
Gross operating profit of Hotels $ 7,730 $ 7,018
======= =======
PARTNERSHIP REVENUES: For the current quarter, revenues (which represent the
amounts credited from Red Lion), increased to $7.7 million from $7.0 million in
the comparable 1994 quarter, an increase of $.7 million, or 10.1%. The changes
in specific revenues and expenses, including those of the Hotels that affect the
amounts credited from Red Lion and thus the Partnership's revenues and operating
results, are discussed below.
GROSS REVENUES OF THE HOTELS: For the current quarter, room revenues increased
to $13.4 million from $12.5 million, an increase of $.9 million, or 7.3% from
the prior year quarter. The increase in room revenues for the current quarter
is due principally to higher room rates. The average occupancy rate was
slightly lower for the current quarter due in part to the effects of major
renovation work at one of the Partnership hotels.
9
A summary of occupancy and room rates for the Hotels follows:
Three Months Ended
March 31,
------------------
1995 1994
------ ------
Occupancy Percentage 66.9% 67.1%
Average Room Rate $72.50 $67.25
For the current quarter, food and beverage revenues, at $8.0 million, were
essentially unchanged from the prior year period.
Operating results are affected by seasonality. The current period results
reflect the winter and early spring seasons in which revenues are typically
lower than in the second and third quarters. There can be no assurance,
however, that such trends will continue.
OPERATING INCOME: Operating income before depreciation and amortization
increased to $5.7 million from $5.2 million, an increase of $.5 million, or
9.9%. The increase is predominantly due to the increase in hotel revenues
discussed above. After depreciation and amortization expense, operating income
increased to $3.0 million from $2.5 million in the prior year quarter, an
increase of $.5 million, or 17.1%.
NET INCOME: For the current quarter, net income was $.2 million ($.05 per unit)
compared to the prior year quarter's loss of $.02 million. The improvement is
due primarily to the increase in revenues and operating income discussed above.
CASH FLOW AVAILABLE FOR DISTRIBUTION AND INCENTIVE MANAGEMENT FEES: As defined
in the Management Agreement, cash flow available for distributions and incentive
management fees ("Cash Flow") is net income (or loss) before non-cash charges
(principally depreciation and amortization) and incentive management fees but
after the reserve for capital improvements and principal payments on mortgage
debt. Cash Flow increased in the first quarter of 1995 to $1.9 million ($.45
per unit) from the prior year quarter's $1.7 million ($.39 per unit), an
increase of $.2 million ($.06 per unit), or 11.6%. The increase in Cash Flow is
due to the higher operating income discussed above.
LIQUIDITY
- - - - - ---------
During the current quarter, cash provided by operating activities was sufficient
to satisfy operating cash requirements. It is expected that, for 1995, cash
provided by both operations and the lending facility discussed below, or other
sources, will be sufficient to meet anticipated cash requirements.
10
The Operating Partnership has the availability of a $14.1 million revolving loan
facility. During the current quarter, average borrowings under the facility
were $12.2 million. The interest rate on the outstanding balance averaged 7.5%
for the quarter. At March 31, 1995, the balance outstanding under the line was
$12.3 million.
In April 1995, pursuant to a commitment obtained in January 1995, the
Partnership's lenders extended the maturity of the Partnership's $101,984,000
mortgage note and the line of credit for one year to April 14, 1996.
On April 19, 1995, the General Partner declared a quarterly cash distribution of
$.55 per unit ($2.20 annualized) for the current quarter, payable on May 15,
1995, to unitholders of record on April 30, 1995. This distribution has been
accrued in the accompanying financial statements.
Cash Flow, as defined in the Management Agreement, for the quarters ended March
31, 1995 and 1994 is presented below (in thousands):
Three Months Ended
March 31,
------------------
1995 1994
------ ------
Net Income (loss) $ 230 $ (17)
Add (deduct):
Depreciation and amortization 2,763 2,680
Cash reserved for capital improvements (709) (678)
Repayments on term loan (363) (331)
------ ------
Cash flow available for distribution and
incentive management fees 1,921 1,654
Cash required for priority distribution (2,329) (2,329)
------ ------
Cash flow available for incentive
management fees $ (408) $ (675)
====== ======
The current quarter accrued distribution exceeded cash flow available for
distribution and incentive management fees for the current quarter by $408,000.
The deficit, as in prior years, is funded from the sources discussed above. As
noted in the discussion of operations above, operations of the Hotels are
affected by seasonality with summer and fall revenues typically higher than
winter revenues. Operating results for the interim period do not necessarily
indicate the results expected for the full year.
CAPITAL RESOURCES
- - - - - -----------------
During the current quarter, gross expenditures on capital improvements amounted
to $1.5 million.
11
RED LION INNS LIMITED PARTNERSHIP
PART II: OTHER INFORMATION
ITEM 6: EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits: Exhibit 27 - Article 5 Financial Data Schedule for 1st Quarter
10-Q.
(b) Reports on form 8-K - No reports on Form 8-K were filed during the quarter
for which this report is being filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized in the City of Vancouver, Washington, on
the 12th day of May 1995.
RED LION INNS LIMITED PARTNERSHIP
- - - - - ---------------------------------
(Registrant)
By: RED LION PROPERTIES, INC.
Its sole General Partner
By: /s/ DAVID J. JOHNSON
------------------------------
David J. Johnson
President and Chief Executive Officer
12
INDEX OF EXHIBITS
Exhibit
Number
- - - - - -------
27 Article 5 Financial Data Schedule for 1st Quarter 10-Q