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Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter ended June 14, 1996
OR
[_] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number: 0-14381
MARRIOTT HOTEL PROPERTIES LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
Delaware 52-1436985
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10400 Fernwood Road
Bethesda, Maryland 20817
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(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: 301-380-2070
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 and (2) has been
subject to such filing requirements for the past 90 days. Yes ____
No _____ (Not Applicable). On August 25, 1992, the Registrant filed an
application for relief from the reporting requirements of the Securities
Exchange Act of 1934 pursuant to Section 12(h) thereof. Because of the
pendency of such application, the Registrant was not required to, and
did not, make any filings pursuant to the Securities Exchange Act of
1934 from October 23, 1989 until the application was voluntarily
withdrawn on November 18, 1996.
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Marriott Hotel Properties Limited Partnership
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TABLE OF CONTENTS
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PAGE NO.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Statement of Operations
Twelve and Twenty-Four Weeks Ended June 14, 1996
and June 16, 1995................................................ 1
Condensed Consolidated Balance Sheet
June 14, 1996 and December 31, 1995.............................. 2
Condensed Consolidated Statement of Cash Flows
Twenty-Four Weeks Ended June 14, 1996 and June 16, 1995.......... 3
Notes to Condensed Consolidated Financial Statements............... 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations.............................. 6
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.................................................. 9
Item 6. Exhibits and Reports on Form 8-K................................... 9
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MARRIOTT HOTEL PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(in thousands, except per unit amounts)
Twelve Weeks Ended Twenty-Four Weeks Ended
June 14, June 16, June 14, June 16,
1996 1995 1996 1995
----------- ----------- ----------- ------------
REVENUES
Hotel....................... $ 13,201 $ 11,618 $ 28,640 $ 26,963
Rental income............... 5,728 5,243 14,267 13,521
Interest and other income... 247 163 310 217
----------- ----------- ----------- ------------
19,176 17,024 43,217 40,701
----------- ----------- ----------- ------------
OPERATING COSTS AND EXPENSES
Interest.................... 4,916 4,870 10,118 9,840
Depreciation and
amortization............... 2,694 2,669 5,387 5,374
Incentive management fee.... 1,995 1,770 4,382 4,218
Base management fee......... 885 830 1,870 1,793
Ground rent, property
taxes and other............ 2,073 1,984 4,103 3,974
----------- ----------- ----------- ------------
12,563 12,123 25,860 25,199
----------- ----------- ----------- ------------
INCOME BEFORE MINORITY
INTEREST.................... 6,613 4,901 17,357 15,502
MINORITY INTEREST............ (1,090) (796) (3,375) (3,035)
----------- ----------- ----------- ------------
NET INCOME................... $ 5,523 $ 4,105 $ 13,982 $ 12,467
=========== =========== =========== ============
ALLOCATION OF NET INCOME
General Partner............. $ 55 $ 41 $ 140 125
Limited Partners............ 5,468 4,064 13,842 12,342
----------- ----------- ----------- ------------
$ 5,523 $ 4,105 $ 13,982 $ 12,467
=========== =========== =========== ============
NET INCOME PER
LIMITED PARTNER UNIT
(1,000 Units)................ $ 5,468 $ 4,064 $ 13,842 $ 12,342
=========== =========== =========== ============
See Notes to Condensed Consolidated Financial Statements.
1
MARRIOTT HOTEL PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEET
(in thousands)
June 14, December 31,
1996 1995
----------- ------------
(Unaudited)
ASSETS
Property and equipment, net.......................................... $ 219,760 $ 222,458
Due from Marriott International, Inc. and
affiliates.......................................................... 11,507 7,136
Minority interest.................................................... 9,295 11,185
Other assets......................................................... 8,717 6,888
Cash and cash equivalents............................................ 13,212 3,550
---------- ------------
$ 262,491 $ 251,217
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LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Mortgage debt........................................................ $ 239,292 $ 239,860
Note payable and amounts due to Host Marriott Corporation............ 6,390 6,484
Note payable and amounts due to
Marriott International, Inc. and affiliates........................ 4,339 6,052
Accounts payable and accrued interest................................ 3,669 1,087
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Total Liabilities.................................................. 253,690 253,483
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PARTNERS' CAPITAL (DEFICIT)
General Partner...................................................... 198 87
Limited Partners..................................................... 8,603 (2,353)
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Total Partners' Capital (Deficit).................................. 8,801 (2,266)
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$ 262,491 $ 251,217
========== ============
See Notes to Condensed Consolidated Financial Statements.
2
MARRIOTT HOTEL PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Twenty-Four Weeks Ended
June 14, June 16,
1996 1995
--------- ---------
(in thousands)
OPERATING ACTIVITIES
Net income...................................... $13,982 $12,467
Noncash items................................... 9,001 9,175
Changes in operating accounts................... (3,344) (1,832)
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Cash provided by operations................... 19,639 19,810
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INVESTING ACTIVITIES
Additions to property and equipment............. (2,689) (3,491)
Changes in property improvement funds
and capital reserve escrow..................... (1,968) 567
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Cash used in investing activities............. (4,657) (2,924)
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FINANCING ACTIVITIES
Capital distributions to partners............... (2,908) (1,596)
Capital distributions to minority
interest....................................... (1,485) (990)
Principal repayments of mortgage debt........... (568) (4,210)
Repayments to Marriott International,
Inc. and affiliates............................ (239) (218)
Repayments to Host Marriott Corporation......... (80) --
Payment of financing costs...................... (40) (6)
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Cash used in financing activities............. (5,320) (7,020)
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INCREASE IN CASH AND CASH EQUIVALENTS............ 9,662 9,866
CASH AND CASH EQUIVALENTS at beginning of period.. 3,550 2,743
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CASH AND CASH EQUIVALENTS at end of period....... $13,212 $12,609
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for mortgage and other interest....... $ 6,885 $ 8,823
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See Notes to Condensed Consolidated Financial Statements.
3
MARRIOTT HOTEL PROPERTIES LIMITED PARTNERSHIP AND SUBSIDIARY
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying condensed consolidated financial statements have been
prepared by Marriott Hotel Properties Limited Partnership (the
"Partnership") without audit. Certain information and footnote
disclosures normally included in financial statements presented in
accordance with generally accepted accounting principles have been
condensed or omitted from the accompanying statements. The Partnership
believes the disclosures made are adequate to make the information
presented not misleading. However, the condensed consolidated financial
statements should be read in conjunction with the Partnership's
financial statements and notes thereto included in the Partnership's
1995 Form 10-K for the fiscal year ended December 31, 1995. In the
opinion of the Partnership, the accompanying unaudited condensed
consolidated financial statements reflect all adjustments (which include
only normal recurring adjustments) necessary to present fairly the
financial position of the Partnership as of June 14, 1996 and December
31, 1995 and the results of operations for the twelve and twenty-four
weeks ended June 14, 1996 and June 16, 1995. Interim results are not
necessarily indicative of fiscal year performance because of seasonal
and short-term variations.
The Partnership owns Marriott's Orlando World Center and a 50.5%
interest in a partnership owning Marriott's Harbor Beach Resort (the
"Harbor Beach Partnership"), whose financial statements are consolidated
herein. The remaining 49.5% general partnership interest in the Harbor
Beach Partnership is reported as minority interest. All significant
intercompany balances and transactions have been eliminated.
For financial reporting purposes, net profits and net losses of the
Partnership are allocated 99% to the limited partners and 1% to the
General Partner. Significant differences exist between the net profits
and net losses for financial reporting purposes and the net profits and
net losses reported for Federal income tax purposes. These differences
are due primarily to the use, for income tax purposes, of accelerated
depreciation methods, shorter depreciable lives of the assets,
differences in the timing of the recognition of management fee expense
and the expensing of certain costs incurred during construction which
have been capitalized in the accompanying condensed consolidated
financial statements.
2. Hotel revenues represent house profit from the Orlando Hotel since the
Partnership has delegated substantially all of the operating decisions
related to the generation of house profit of the Orlando Hotel to
Marriott International, Inc. (the "Manager"). House profit reflects
hotel operating results which flow to the Partnership as property owner
and represents gross hotel sales less property-level expenses, excluding
depreciation and amortization, base and incentive management fees,
property taxes and certain other costs, which are disclosed separately
in the condensed consolidated statement of operations.
Hotel revenues consist of hotel operating results for the Orlando Hotel
for the twelve and twenty-four weeks ended (in thousands):
Twelve Weeks Ended Twenty-Four Weeks Ended
June 14, June 16, June 14, June 16,
1996 1995 1996 1995
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HOTEL SALES
Rooms..................... $14,545 $13,885 $30,995 $30,024
Food and beverage......... 11,733 10,764 24,417 23,569
Other..................... 3,200 3,031 6,913 6,187
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29,478 27,680 62,325 59,780
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HOTEL EXPENSES
Departmental Direct Costs
Rooms.................... 2,912 2,916 6,060 5,767
Food and beverage........ 6,965 6,963 14,555 14,326
Other hotel operating
expenses................. 6,400 6,183 13,070 12,724
------- ------- ------- -------
16,277 16,062 33,685 32,817
------- ------- ------- -------
HOTEL REVENUES............. $13,201 $11,618 $28,640 $26,963
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4
3. In the first quarter of 1996, the Partnership adopted Statement of
Financial Accounting Standards ("SFAS") No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of." Adoption of SFAS No. 121 did not have an effect on its condensed
consolidated financial statements.
5
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
For the twelve and twenty-four weeks ended June 16, 1996, total
consolidated Partnership revenues increased $2.2 million, or 13%, and $2.5
million, or 6%, respectively, when compared to 1995 due to strong operating
results at the Hotels. REVPAR, or revenue per available room, represents
the combination of the average daily room rate charged and the average
daily occupancy achieved and is a commonly used indicator of hotel
performance (although it is not a GAAP measure of revenue). The combined
REVPAR for the Hotels for the twelve-week period ended June 14, 1996
improved 5%, to $121, over the comparable period in 1995 due to a slight
increase in combined average occupancy to 83% along with a 5% increase in
combined average room rate to $146. On a year-to-date basis, REVPAR grew
4% to $134 as a result of a 0.4 percentage point increase in combined
average occupancy to 84% along with a 3% improvement in combined average
room rate to $159.
Hotel Revenues. For the twelve and twenty-four weeks ended June 14, 1996,
Hotel revenues improved $1.6 million, or 14%, and $1.7 million, or 6%,
respectively, primarily through an increase in higher-rated leisure
transient business at the Orlando Hotel, which allowed for restriction of
discounted rates. For the twelve-week period ended June 14, 1996, REVPAR
at the Orlando Hotel increased 5% over the same period in 1995 to $115 due
to a 0.6 percentage point increase in average occupancy to 82% combined
with a 4% increase in average room rate to $140. For the year-to-date
period ended June 14, 1996, REVPAR improved 3% to $123 as a result of 0.4
percentage point increase in average occupancy to 84% combined with a 3%
improvement in average room rate to $146. For the twelve and twenty-four
weeks ended June 14, 1996, rooms sales increased $0.7 million, or 5%, and
$1.0 million, or 3%, respectively, over 1995; rooms profit increased $0.7
million, or 6%, and $0.7 million, or 3%, respectively. Increased banquet
volume associated with an overall improvement in group business led to
increases of 9% and 25% in food and beverage sales and profit,
respectively, for the twelve-week period ended June 14, 1996; year-to-date
food and beverage sales and profit grew 4% and 7%, respectively, over 1995.
Marketing efforts at the Orlando Hotel are focused on attracting short-term
group demand, as well as leisure transient demand for the summer months.
Demand is expected to remain strong in the leisure transient segment,
especially from international markets.
Rental Income. Rental income from the Harbor Beach Hotel for the twelve
and twenty-four weeks ended June 14, 1996 increased $0.5 million, or 9%,
and $0.7 million, or 6%, respectively, over 1995 as a result of a 5,800
room night increase in transient business offset by a 5,500 room night
decrease in group business. REVPAR for the twelve-week period ended June
14, 1996 increased 6% over 1995 to $135 due to a 7% increase in average
room rate to $162, offset by a 1.0 percentage point decrease in average
occupancy. As a result, room sales and profit for the twelve-week period
increased $0.4 million, or 6%, and rooms profit increased $0.4 million, or
8%, when compared to 1995. For the year-to-date period, REVPAR improved 4%
over 1995 to $161 primarily due to a 4% increase in average room rate to
$191 while average occupancy remained stable at 85%. Room sales for the
year-to-date period increased $0.6 million, or 4%, and rooms profit
increased $0.5 million, or 3%, over 1995. The Harbor Beach Hotel is
expecting group business to strengthen as group demand for the remainder of
the year is forecasted to increase by over 7,000 room nights over the
comparable period in 1995. Demand is also expected to remain strong in the
leisure transient segment, especially from international markets.
Indirect hotel operating costs and expenses. Indirect hotel operating
costs and expenses increased $0.4 million, or 5%, for the twelve weeks
ended June 14, 1996 when compared to the same period in 1995. For the
twenty-four weeks ended June 14, 1996, indirect hotel operating costs and
expenses increased $0.4 million, or 2% over 1995. The principal components
of this category are discussed below:
Incentive management fees. Incentive management fees increased $0.2
-------------------------
million, or 11%, and $0.2 million, or 5% for second quarter and year-to-
date 1996, respectively. The increase was primarily a result of improved
operating results at the Orlando Hotel.
Base management fees. Base management fees increased $55,000, or 7%, for
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the twelve-weeks ended June 14, 1996 and increased $77,000, or 4%, year-to-
date due to improvements in total sales at the Orlando Hotel.
6
Interest expense. Consolidated interest expense for the twelve weeks ended
June 14, 1996 increased slightly when compared to the same period in 1995.
On a year-to-date basis, consolidated interest expense increased $0.3
million, or 3%, due to an increase in the interest rate on the Orlando
Mortgage Debt from 6.7% to 8.4% in connection with the June 1995
modification and extension, offset by reduced principal balances on the
mortgage debt of the Hotels resulting from required principal amortization
during 1995.
Minority interest in income. Based upon its 50.5% ownership interest, the
Partnership controls the Harbor Beach Partnership, and as a result, the
condensed consolidated financial statements of the Partnership include the
accounts of the Harbor Beach Partnership. Minority interest in income
represents the net income from the Harbor Beach Partnership allocable to
the co-General Partner. For the twelve and twenty-four weeks ended June
14, 1996, minority interest in income increased $0.3 million, or 37%, and
$0.3 million, or 11%, respectively, over 1995, primarily due to the
increase in rental income from the Harbor Beach Hotel, as discussed above,
combined with decreased interest expense on the Harbor Beach Mortgage Debt.
Net income. For the twelve weeks ended June 14, 1996, the Partnership
achieved net income of $5.5 million, an increase of $1.4 million, or 35%,
over the same period in 1995. For the year-to-date period, net income
increased $1.5 million, or 12%, to $14.0 million. These increases were
primarily due to higher hotel revenues and rental income offset by
increased interest expense and an increase in minority interest in income.
CAPITAL RESOURCES AND LIQUIDITY
General
The Partnership's financing needs have historically been funded through
loan agreements with independent financial institutions, Host Marriott
Corporation ("Host Marriott") and its affiliates or Marriott International,
Inc. ("MII") and its affiliates. The General Partner believes that the
Partnership will have sufficient capital resources and liquidity to
continue to conduct its business in the ordinary course.
Principal Sources and Uses of Cash
The Partnership's principal source of cash is from operations. Its
principal uses of cash are to fund the property improvement funds of the
Orlando World Center and the Harbor Beach Hotel (the "Hotels"), required
principal amortization of the mortgage debt incurred to fund costs of the
capital improvements at the Hotels and cash distributions to the partners.
Total consolidated cash provided by operations for the twenty-four weeks
ended June 14, 1996, and June 16, 1995, was $19.6 million and $19.8
million, respectively. The variance was primarily due to an increase in
the amount due from MII from Hotel operations as of June 14, 1996, when
compared to the amount due as of June 16, 1995. See discussion of results
of operations below.
For the twenty-four weeks ended June 14, 1996 and June 16, 1995, cash
utilized in investing activities was $4.7 million and $2.9 million,
respectively. The variance is the result of an $0.8 million increase in
cash contributed to the property improvement funds of the Hotels, combined
with a $1.0 million decrease in cash provided by the capital reserve
escrow, which was used to fund capital improvements at the Harbor Beach
Hotel during 1995. Cash contributed to the property improvement funds
increased from $3.8 million to $4.6 million for the twenty-four week period
ended June 14, 1996 and June 16, 1995, respectively, primarily due to an
increase in the required contribution amount to the Orlando Hotel property
improvement fund from 4% to 5% of total sales upon maturity of the Orlando
Mortgage Debt in June 1995.
For the twenty-four weeks ended June 14, 1996 and June 16, 1995, cash
utilized in financing activities was $5.3 million and $7.2 million,
respectively. The variance is the result of a $3.6 million decrease in
required mortgage debt principal amortization (due to the timing of
required principal repayments on the Orlando Mortgage Debt) when compared
to the same period in 1995, offset by a $1.3 million increase in capital
distributions to the partners and a $0.5 million increase in capital
distributions to the minority general partner of the Harbor Beach
Partnership.
7
Other
In the first quarter of 1996, the Partnership adopted Statement of
Financial Accounting Standards ("SFAS") No. 121 "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed
of." Adoption of SFAS No. 121 did not have an effect on its condensed
consolidated financial statements.
SEASONALITY
Demand, and thus occupancy and room rates, is affected by normally
recurring seasonal patterns. Demand tends to be higher during the months
of November through April than during the remainder of the year. This
seasonality tends to affect the results of operations, increasing the
revenue and rental income during these months. In addition, this
seasonality may also increase the liquidity of the Partnership during these
months.
8
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Neither the Partnerships nor the Hotels are presently subject to any
material litigation nor, to the General Partner's knowledge, is any
material litigation threatened against the Partnerships or the Hotels,
other than routine litigation and administrative proceedings arising in the
ordinary course of business, some of which are expected to be covered by
liability insurance and which collectively are not expected to have a
material adverse effect on the business, financial condition or results of
operations of the Partnership.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
27. Financial Data Schedule
9
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this Form 10-Q to be signed on its behalf by
the undersigned, thereunto duly authorized.
MARRIOTT HOTEL PROPERTIES
LIMITED PARTNERSHIP
By: HOTEL PROPERTIES MANAGEMENT, INC.
General Partner
November 18, 1996 By: /s/ Bruce F. Stemerman
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Bruce F. Stemerman
President, Treasurer
and Chief Accounting Officer