FORM 10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

(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, 2003

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION
PERIOD FROM _______________ TO

Commission File No. 1-6869

PRIME HOSPITALITY CORP.
(Exact name of registrant as specified in its charter)

Delaware 22-2640625
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)

700 Route 46 East, Fairfield, New Jersey 07004
(Address of principal executive offices)
(973) 882-1010
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes x No

Indicate by check mark whether the Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes [X] No [ ]

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Section 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
Yes x No

The registrant had 44,733,000 shares of common stock, $.01 par value,
outstanding as of May 13, 2003.

PRIME HOSPITALITY CORP. AND SUBSIDIARIES
INDEX

PAGE
NUMBER
------

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

Consolidated Balance Sheets
March 31, 2003 (Unaudited) and December 31, 2002................................... 1

Consolidated Statements of Operations
Three months ended March 31, 2003 and 2002 (Unaudited) ............................ 2

Consolidated Statements of Cash Flows
Three months ended March 31, 2003 and 2002 (Unaudited) ............................ 3

Notes to Interim Consolidated Financial Statements (Unaudited)......................... 4

Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......................................... 9

Item 3. Quantitative and Qualitative
Disclosures About Market Risk.......................................................... 14

Item 4. Disclosure
Controls and Procedures................................................................ 15

PART II. OTHER INFORMATION

Item 1. Legal Proceedings...................................................................... 16

Item 2. Changes in Securities and Use of Proceeds.............................................. 16

Item 3. Defaults upon Senior Securities........................................................ 16

Item 4. Submission of Matters to a Vote of Security Holders.................................... 16

Item 5. Other Information...................................................................... 16

Item 6. Exhibits and Reports on Form 8-K....................................................... 16

Signatures ....................................................................................... 17

THIS PAGE LEFT BLANK INTENTIONALLY FOR PAGE NUMBERING
DO NOT DELETE.

PRIME HOSPITALITY CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)

MARCH 31, DECEMBER 31,
2003 2002
------------ ------------
(Unaudited)

ASSETS

Current assets:
Cash and cash equivalents ............................................... $ 8,108 $ 25,850
Accounts receivable (net of allowances of $686 and $611
in 2003 and 2002, respectively) ................................... 22,533 18,178
Restricted cash ......................................................... 4,707 5,140
Hotel inventories ....................................................... 11,941 11,989
Income tax receivable ................................................... 15,165 10,923
Other current assets .................................................... 7,862 10,534
----------- -----------
Total current assets ........................................ 70,316 82,614

Property, equipment and leasehold improvements,
net of accumulated depreciation and amortization ........................ 946,982 949,730
Assets held for sale ........................................................... 8,787 8,787
Investments in unconsolidated joint ventures ................................... 23,911 23,140
Mortgages and notes receivable, net of
current portion ......................................................... 13,363 13,021
Other assets ................................................................... 40,965 42,357
----------- -----------

TOTAL ASSETS ................................................ $ 1,104,324 $ 1,119,649
=========== ===========

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:
Accounts payable and accrued expenses ................................... $ 19,861 $ 21,189
Current portion of debt ................................................. 1,055 1,052
Current portion of deferred income ...................................... 3,527 3,527
Other current liabilities ............................................... 23,545 20,985
----------- -----------
Total current liabilities ................................... 47,988 46,753

Long-term debt, net of current portion ......................................... 278,463 284,017
Deferred income ................................................................ 12,389 13,338
Deferred income taxes .......................................................... 61,362 61,362
Other liabilities .............................................................. 6,039 7,503
----------- -----------

Total liabilities ........................................... 406,241 412,973

Commitments and contingencies

Stockholders' equity:
Preferred stock, par value $.10 per share;
20,000,000 shares authorized; none issued
Common stock, par value $.01 per share; 75,000,000 shares authorized;
56,606,381 shares issued and outstanding
at March 31, 2003 and December 31, 2002 ........................... 566 566
Capital in excess of par value .......................................... 527,787 527,787
Retained earnings ....................................................... 286,660 293,292
Treasury stock (11,872,878 and 11,522,878 shares
at March 31, 2003 and December 31, 2002, respectively) ............ (116,930) (114,969)
----------- -----------
Total stockholders' equity .................................. 698,083 706,676
----------- -----------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY .................. $ 1,104,324 $ 1,119,649
=========== ===========

See Accompanying Notes to Interim Consolidated Financial Statements.

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PRIME HOSPITALITY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

2003 2002
-------- --------

Revenues:
Hotel revenues .......................................................... $ 83,981 $ 91,779
Management, franchise and other fees .................................... 4,220 2,750
Rental and other revenues ............................................... 515 612
-------- --------
Total revenues .............................................. 88,716 95,141

Costs and expenses:
Hotel operating expenses ................................................ 51,502 50,646
Rent and other occupancy ................................................ 20,986 20,457
General and administrative .............................................. 9,073 6,565
Depreciation and amortization ........................................... 10,633 9,827
-------- --------
Total costs and expenses .................................... 92,194 87,495

Operating income (loss) ........................................................ (3,478) 7,646

Investment income .............................................................. 442 485
Interest expense ............................................................... (5,628) (7,753)
Gains on retirement of debt .................................................... 800 -
-------- --------

Income (loss) before equity in earnings of unconsolidated joint
ventures, income taxes and discontinued operations ........................ (7,864) 378

Equity in earnings of unconsolidated joint ventures ............................ 190 -
-------- --------

Income (loss) before income taxes and discontinued operations .................. (7,674) 378
Provision (benefit) for income taxes ........................................... (2,993) 147
-------- --------

Income (loss) before discontinued operations ................................... (4,681) 231

Discontinued operations:
Income (loss) from discontinued operations, net of income taxes ......... (405) 112
Gain (loss) on disposal, net of income taxes ............................ (1,546) 431
-------- --------

Net income (loss) .............................................................. ($ 6,632) $ 774
======== ========

Earnings (loss) per common share:
Basic:

Income (loss) before discontinued operations ............................ ($ 0.11) $ 0.01
Income (loss) from discontinued operations,
net of income taxes ............................................... (0.04) 0.01
-------- --------
Net income (loss) ............................................................. ($ 0.15) $ 0.02
======== ========

Diluted:

See Accompanying Notes to Interim Consolidated Financial Statements.

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PRIME HOSPITALITY CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(IN THOUSANDS)

2003 2002
-------- --------

Cash flows from operating activities:
Net income (loss) ................................................................... $ (6,632) $ 774
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization ................................................. 10,654 9,990
Amortization of deferred financing costs ...................................... 294 811
Utilization of net operating loss carryforwards ............................... - 495
Valuation adjustment .......................................................... 2,534 (706)
Gains on retirement of debt ................................................... (800) -
Amortization of deferred income ............................................... (950) (882)
Equity in earnings of unconsolidated joint ventures ........................... (190) -
Increase (decrease) from changes in other operating assets and liabilities:
Accounts receivable ..................................................... (4,355) 1,200
Other current assets .................................................... (2,281) (2,772)
Other liabilities ....................................................... (1,043) (3,969)
-------- --------

Net cash provided by (used in) operating activities ..................... (2,769) 4,941

Cash flows from investing activities:
Proceeds from mortgages and notes receivable ........................................ 310 98
Disbursements for mortgages and notes receivable .................................... (205) (243)
Proceeds from sales of property, equipment and leasehold improvements ............... - 15,022
Construction and conversion of hotels ............................................... - (2,836)
Purchases of property, equipment and leasehold improvements ......................... (8,100) (697)
Investments in unconsolidated joint ventures ........................................ (6,630) -
Proceeds from sales of interests in unconsolidated joint ventures ................... 5,859 -
Other ............................................................................... 822 (1,640)
-------- --------

Net cash provided by (used in) investing activities ..................... (7,944) 9,704

Cash flows from financing activities:
Net proceeds from issuance of debt .................................................. 5,000 -
Payments of debt .................................................................... (10,068) (9,322)
Purchase of common stock ............................................................ (1,961) -
Proceeds from the exercise of stock options ......................................... - 1,212
-------- --------
Net cash used in financing activities ................................... (7,029) (8,110)
-------- --------

Net increase (decrease) in cash and cash equivalents ................................ (17,742) 6,535

Cash and cash equivalents at beginning of period .................................... 25,850 30,091
-------- --------
Cash and cash equivalents at end of period .......................................... $ 8,108 $ 36,626
======== ========

OTHER CASH FLOW DISCLOSURES:
Interest paid ....................................................................... $ 1,146 $ 5,685
Income taxes paid ................................................................... $ - $ 42

See Accompanying Notes to Interim Consolidated Financial Statements.

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PRIME HOSPITALITY CORP. AND SUBSIDIARIES
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2003 AND 2002
(UNAUDITED)

NOTE 1 - BASIS OF PRESENTATION

In the opinion of management, the accompanying interim unaudited
consolidated financial statements of Prime Hospitality Corp. and its
subsidiaries (the "Company") contain all material adjustments, consisting of
normal recurring adjustments, necessary to present fairly the financial position
of the Company as of March 31, 2003 and the results of its operations for the
three months ended March 31, 2003 and 2002 and cash flows for the three months
ended March 31, 2003 and 2002.

The consolidated financial statements for the three months ended March
31, 2003 and 2002 were prepared on a consistent basis with the audited
consolidated financial statements for the year ended December 31, 2002. Certain
reclassifications have been made to the March 31, 2002 consolidated financial
statements to conform them to the March 31, 2003 presentation.

The consolidated results of operations for the three months ended March
31, 2003 are not necessarily indicative of the results to be expected for the
full year. The hotel and leisure industry is seasonal in nature; however, the
periods during which the Company's properties experience higher hotel revenue
activities vary from property to property and depend principally upon location.
The Company's revenues historically have generally been lower in the first and
fourth quarters than in the second and third quarters. These interim unaudited
consolidated financial statements should be read in conjunction with the audited
consolidated financial statements included in the Company's Annual Report on
Form 10-K for the year ended December 31, 2002.

The balance sheet at December 31, 2002 has been derived from the
audited financial statements at that date, but does not include all the
information and footnotes required by accounting principles generally accepted
in the United States for complete financial statements.

NOTE 2 - ACCOUNTING POLICIES

GAINS AND LOSSES FROM EXTINGUISHMENT OF DEBT

In April 2002, the Financial Accounting Standards Board (the "FASB")
issued Statement No. 145 which rescinded FASB Statement No. 4, "Reporting Gains
and Losses from Extinguishment of Debt". FASB Statement No. 145 requires, among
other things, the reporting of gains and losses from the early extinguishments
of debt as a component of continuing operations. The Company adopted Statement
No. 145 on January 1, 2003 and is required to reclassify prior years'
extraordinary gains and losses from early extinguishments of debt.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In November of 2002, the FASB issued Interpretation No. 45,
"Guarantors' Accounting and Disclosure Requirements for Guarantees, Including
Indirect Guarantees of Indebtedness of Others". The Interpretation elaborates on
the disclosures to be made by a guarantor in its financial statements about its
obligations under certain guarantees that it has issued. It also clarifies that
a guarantor is required to recognize, at the inception of a guarantee, a
liability for the fair value of the obligation undertaken in issuing the
guarantee. This Interpretation does not prescribe a specific approach for
subsequently measuring the guarantor's recognized liability over the term of the
related guarantee. The disclosure

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provisions of this Interpretation were effective for the Company's December 31,
2002 financial statements. The initial recognition and initial measurement
provisions of this Interpretation are applicable on a prospective basis to
guarantees issued or modified after December 31, 2002. Through March 31, 2003,
no guarantees were issued and therefore no amounts are reflected in the
financial statements. In April 2003, the Company guaranteed a portion of the
debt of an unconsolidated joint venture (See Note 4). The Company is currently
in the process of evaluating the impact that this Interpretation will have on
its second quarter financial statements.

In January 2003, the FASB issued Interpretation No. 46, "Consolidation
of Variable Interest Entities". This Interpretation clarifies the application of
existing accounting pronouncements to certain entities in which equity investors
do not have the characteristics of a controlling financial interest or do not
have sufficient equity at risk for the entity to finance its activities without
additional subordinated financial support from other parties. The provisions of
the Interpretation are immediately effective for all variable interests in
variable interest entities created after January 31, 2003, and the Company will
need to apply its provisions to any existing variable interests in variable
interest entities by no later than September 30, 2003. The Company does not
believe that this Interpretation will have a significant impact on the Company's
financial statements.

NOTE 3 - ACCOUNTING FOR STOCK-BASED COMPENSATION

In December 2002, the FASB issued Statement No. 148 to amend
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition,
Statement No. 148 amends the disclosures in both annual and interim financial
statements about the method of accounting for stock-based employee compensation
and the effect of the method used on reported results. However, the Company has
continued to account for options in accordance with the provision of APB Opinion
No. 25, "Accounting for Stock Issues to Employees" and related interpretations.
Accordingly, no compensation expense has been recognized for stock option plans.

The following table sets forth the Company's pro forma information for
its common stockholders for the three months ended March 31, 2003 and 2002 (in
thousands except earnings per share data):

2003 2002
-------- --------

Net income (loss) as reported .................................... $(6,632) $ 774
Add: Stock option expense included in net income (loss).......... --- ---
Less: Stock option expense determined under fair value
recognition method for all awards ..................... (981) (959)
------- -------
Pro forma net income (loss) ...................................... $(7,613) $ ( 185)
======= =======

Net income (loss) per share as reported:
Basic ....................................................... $ (0.15) $ 0.02
======= =======
Diluted ..................................................... $ (0.15) $ 0.02
======= =======
Pro forma net income (loss) per share:
Basic ....................................................... $ (0.17) $ 0.00
======= =======
Diluted ..................................................... $ (0.17) $ 0.00
======= =======

The fair value for those options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted-average
assumptions for the three months ended March 31, 2003 and 2002: risk-free
interest rate of 5%; dividend yields of 0%; volatility factors of the expected
market price of the Company's common stock of 46.6% and a weighted-average
expected life of the option of 6.5 years. For the three months ended March 31,
2003, no options were granted by the

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Company.

For purposes of pro forma disclosures, the estimated fair value of the
options is amortized to expense over the options' vesting period.

NOTE 4 - INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES

In January 2003, 3072929 Nova Scotia Company, an entity in which a
subsidiary of Prime held a 50% interest, acquired the Quebec City Holiday Inn
Select (the "Quebec Venture"). Prime's partner in the acquisition was a
subsidiary of United Capital Corp. ("UCC"), an entity in which A.F. Petrocelli,
Prime's Chairman and Chief Executive Officer, has a controlling ownership
interest. Pursuant to the operating agreement, all significant operating and
capital decisions are made jointly and operating profits and losses are
allocated based on ownership interest. In addition, Prime will asset manage the
hotel. In March 2003, subsidiaries of Prime and UCC each sold a ten percent
interest in the Quebec Venture at cost to Ark Quebec Inc., an unrelated third
party, decreasing each of their respective equity interests to 40%. There is
currently no debt in the joint venture.

In March 2003, subsidiaries of Prime and UCC each sold a ten percent
interest in East Rutherford Group, L.L.C., an entity which purchased the
Sheraton Meadowlands hotel in December 2002 (the "Meadowlands Venture"). The
interests were sold to Ark Meadowlands, Inc., an unrelated third party, at cost
decreasing Prime's and UCC's equity interests in the Meadowlands Venture to 40%
each.

In April 2003, the Meadowlands Venture entered into a $25.0 million
mortgage loan secured by the hotel. The loan bears interest at LIBOR+2.75% and
is due in April 2006. The proceeds of the loan were distributed to the partners
based on their ownership interests with Prime receiving approximately $10.0
million in April 2003. Under a guaranty agreement, Prime and UCC jointly and
severally guaranteed $4.0 million which will be reduced by scheduled principal
payments.

NOTE 5 - HOTEL DISPOSITIONS

During the three months ended March 31, 2002, the Company sold a
Radisson Hotel in Trevose, PA and a Wellesley Inn in Miami, FL for gross
proceeds of $15.4 million, realizing gains of approximately $700,000. These
gains are included in "Gain (loss) on disposal, net of income taxes" in the
Consolidated Statements of Operations as part of discontinued operations.

NOTE 6 - DEBT

During the three months ended March 31, 2003, Prime purchased $8.0
million of its 8 3/8% Senior Subordinated Notes due 2012 the ("Senior
Subordinated Notes") for $7.2 million realizing a gain of $800,000.

NOTE 7 - COMMON STOCK

During the three months ended March 31, 2003, Prime repurchased 350,000
shares of its common stock at an average price of $5.57 per share.

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NOTE 8 - EARNINGS PER COMMON SHARE

Basic earnings per common share was computed based on the weighted
average number of common shares outstanding during each period. The weighted
average number of common shares used in computing basic earnings per common
share was 44.9 million for both the three months ended March 31, 2003 and 2002.

Diluted earnings per common share reflect adjustments to basic earnings
per common share for the dilutive effect of stock options. For the quarter ended
March 31, 2003, stock options were antidilutive and were not included in the
calculation of diluted earnings per share. The weighted average number of common
shares used in computing diluted earnings per common share was 44.9 million and
46.8 million for the three months ended March 31, 2003 and 2002, respectively.

NOTE 9 - GEOGRAPHIC AND BUSINESS INFORMATION

The Company's hotels primarily operate in three major lodging industry
segments: the all-suites segment, under its AmeriSuites brand; the
limited-service segment, primarily under its Wellesley Inns & Suites brand; and
the full-service segment primarily under major national franchises. The
Company's 149 AmeriSuites are upscale hotels located in 31 states throughout the
United States. The 75 Wellesley Inns & Suites hotels compete in the mid-price
segment, and are primarily located in the Northeast, Texas and Florida regions
of the United States. The Company also operates 20 full-service hotels, with
food and beverage service and banquet facilities primarily under franchise
agreements with national hotel brands in the upscale segment. The Company's
full-service hotels are primarily located in the northeastern region of the
United States.

The Company evaluates the performance of its segments based primarily
on earnings before interest, taxes and depreciation and amortization ("EBITDA")
generated by the operations of its owned and leased hotels. Interest expense,
taxes and other income (loss) are not allocated at the segment level.

The following table presents revenues and other financial information
for the owned and leased hotels by business segment for the three months ended
March 31, 2003 and 2002 (in thousands):

THREE MONTHS ENDED MARCH 31, 2003 ALL-SUITES LIMITED-SERVICE FULL-SERVICE CORPORATE / OTHER CONSOLIDATED
- --------------------------------- ---------- --------------- ------------ ----------------- ------------

Revenues ........................... $ 49,539 $ 20,044 $ 14,398 $ 4,735 $ 88,716
EBITDA ............................. 1,806 4,723 1,413 (787) 7,155
Depreciation and amortization ...... 4,874 3,207 1,473 1,079 10,633
Capital expenditures ............... 3,309 673 555 3,563 8,100
Property, equipment and leasehold
Improvements .................... $503,097 $330,891 $ 85,718 $ 27,276 $946,982

THREE MONTHS ENDED MARCH 31, 2002 ALL-SUITES LIMITED-SERVICE FULL-SERVICE CORPORATE / OTHER CONSOLIDATED
- --------------------------------- ---------- --------------- ------------ ----------------- ------------

Revenues ........................... $ 56,736 $ 19,381 $ 15,707 $ 3,317 $ 95,141
EBITDA ............................. 7,651 4,984 2,932 1,906 17,473
Depreciation and amortization ...... 4,766 3,126 1,418 517 9,827
Capital expenditures ............... 1,785 874 175 699 3,533
Property, equipment and leasehold
Improvements .................... $518,100 $348,044 $ 88,323 $ 36,865 $991,332

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The following table reconciles EBITDA to income before discontinued
operations for the three months ended March 31, 2003 and March 31, 2002 (in
thousands):

THREE MONTHS ENDED
MARCH 31,
--------------------
2003 2002
-------- --------

EBITDA ........................................ $ 7,155 $ 17,473
(Provision) benefits for income taxes ......... 2,993 (147)
Equity in earnings of joint ventures .......... 190 -
Gains on retirement of debt ................... 800 -
Interest expense .............................. (5,628) (7,753)
Investment income ............................. 442 485
Depreciation and amortization ................. (10,633) (9,827)
-------- --------
Income (loss) before discontinued operations... $ (4,681) $ 231
======== ========

NOTE 10 - SUBSEQUENT EVENTS

On April 3, 2003, a wholly owned subsidiary of the Company terminated
lease agreements on three hotels owned by ShoLodge, Inc. ("ShoLodge") due to
operating shortfalls which approximated $1.1 million in the past twelve months.
In accordance with the lease termination, Prime will forfeit its rights to
receive a $3.1 million payment in 2011 which was due at the end of the lease as
compensation for executing the lease agreement. ShoLodge has assumed management
of the hotels and is operating the hotels under new ten-year franchise
agreements with Prime, under the AmeriSuites flag. These franchise agreements
permit ShoLodge to terminate the agreements without termination fees upon proper
notice.

The results of operations for the three months ended March 31, 2003 and
2002 for these hotels are reflected in discontinued operations, net of tax, in
the accompanying financial statements. In addition, a valuation reserve of $1.5
million, net of tax, was recorded as of March 31, 2003 in gain (loss) on
disposal from discontinued operations for the net assets to be written off upon
termination.

-8-

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

GENERAL

Prime Hospitality Corp. ("Prime" or "the Company") is an owner,
operator and franchisor of hotels, with 248 hotels in operation containing
32,047 rooms located in 33 states (the "Portfolio") as of March 31, 2003. Prime
controls three hotel brands -- AmeriSuites (R), Wellesley Inn & Suites (R) and
Prime Hotels and Resorts (R) -- and operates a portfolio of full-service hotels
under franchise agreements with national hotel chains.

The following table sets forth information with respect to the
Portfolio as of March 31, 2003:

HOTELS ROOMS
------ -----

AMERISUITES

Owned 63 8,153
Leased 27 3,291
Managed 28 3,629
Franchised 31 3,713
--- ------
Total 149 18,786

WELLESLEY INNS & SUITES

Owned 53 6,291
Managed 6 668
Franchised 16 1,530
--- ------
Total 75 8,489

PRIME HOTELS & RESORTS

Owned 1 240
--- ------
Total 1 240

NON-PROPRIETARY BRANDS

Owned 8 1,582
Leased 1 160
Managed 12 2,125
Joint Venture 2 665
--- ------
Total 23 4,532

TOTAL PORTFOLIO
Owned 125 16,266
Leased 28 3,451
Managed 46 6,422
Franchised 47 5,243
Joint Venture 2 665
--- ------
Total 248 32,047

The Company's growth has been focused on the development of its
proprietary brands. Through the development of its proprietary brands, Prime has
transformed itself from an owner/operator into a more diversified company with
ownership, franchise and management interests and has positioned itself to
generate additional revenues with minimal capital investment. Prime's strategy
is also focused on opportunistic hotel acquisitions to take advantage of
depressed values while leveraging the Company's operating infrastructure. With
approximately 200 hotels under management, Prime believes it possesses the hotel
management expertise to maximize the profitability and value of its hotel
assets.

The hotel and leisure industry is seasonal in nature; however, the
periods during which the Company's properties experience higher hotel revenue
activities vary from property to property and depend principally upon location.
The Company's revenues historically have generally been lower in the first and
fourth quarters than in the second and third quarters.

Operating results for the three months ended March 31, 2003 were
impacted by the weakness in the economy which had a significant negative impact
on business travel and the demand for hotel rooms. Results were further impacted
by the war with Iraq and concerns about airline safety. These factors have

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resulted in weaker pricing power which has caused the average daily room rate
("ADR") to decline. As a result, for the quarter ended March 31, 2003, revenues
from comparable owned and leased hotels declined by 7.4% and gross operating
profits on these hotels declined by 22.6%. Overall, for the three months ended
March 31, 2003, revenue declined by $6.4 million to $88.7 million and EBITDA
decreased by $10.3 million to $7.2 million due to the results of the comparable
owned and leased hotels and the effect of asset sales and lease terminations.
See Note 9 of Notes to Interim Consolidated Financial Statements for a
reconciliation of EBITDA to net income.

Certain statements in this Form 10-Q constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. Such forward-looking statements involve known and unknown risks,
uncertainties and other important factors that could cause the actual results,
performance or achievements of the Company, or industry results, to differ
materially from any future results, performance or achievements expressed or
implied by such forward-looking statements.

Forward-looking statements include the information about Prime's
possible or assumed future results of operations and statements preceded by,
followed by or that include the words "believe," "except," "anticipate,"
"intend," "plan," "estimate," or similar expressions, or the negative thereof.
Actual results may differ materially from those expressed in these
forward-looking statements. Readers of this Form 10-Q are cautioned not to
unduly rely on any forward-looking statements.

The following important factors, in addition to those discussed
elsewhere in this Form 10-Q or incorporated herein by reference, could cause
results to differ materially from those expressed in such forward-looking
statements: competition within each of the Company's business segments in areas
such as access, location, quality or accommodations and room rate structures;
the balance between supply of and demand for hotel rooms and accommodations; the
Company's continued ability to obtain new operating contracts and franchise
agreements; the Company's ability to develop and maintain positive relations
with current and potential hotel owners and other industry participants; the
level of rates and occupancy that can be achieved by such properties and the
availability and terms of financing; changes in travel patterns, taxes and
government regulations which influence or determine wages, prices, construction
procedures and costs; the effect of national and regional economic conditions
that will affect, among other things, demand for products and services at the
Company's hotels; government approvals, actions and initiatives including the
need for compliance with environmental and safety requirements, and change in
laws and regulations or the interpretation thereof and the potential effects of
tax legislative action; and other risks described from time to time in the
Company's filings with the SEC, including its Form 10-K.

Although the Company believes the expectations reflected in these
forward-looking statements are based upon reasonable assumptions, no assurance
can be given that Prime will attain these expectations or that any deviations
will not be material. Except as otherwise required by the federal securities
laws, the Company disclaims any obligation or undertaking to disseminate any
updates or revisions to any forward-looking statement contained herein to
reflect any change in its expectations with regard thereto or any change in
events, conditions or circumstances on which any such statement is based.

RESULTS OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH 31, 2003 COMPARED TO THE
THREE MONTHS ENDED MARCH 31, 2002

The Company operates three product types: its proprietary AmeriSuites
which are upscale all-suites hotels; its proprietary Wellesley Inns & Suites
which are mid-price limited service hotels; and its full-service hotels which
are primarily upscale hotels operated under national franchise agreements.

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Hotel revenues consist of lodging revenues (which consist primarily of
room, telephone and vending revenues) and food and beverage revenues. Hotel
revenues decreased by $7.8 million, or 8.5%, for the three months ended March
31, 2003 compared to the same period in 2002, primarily due to a decline in
revenue per available room ("REVPAR") at comparable hotels.

The following table illustrates the REVPAR change for the quarter, by
segment for all owned and leased hotels and for managed hotels where Prime has a
significant financial commitment, which were operated for comparable three-month
periods in 2003 and 2002.

THREE MONTHS ENDED MARCH 31,
2003 2002 % CHANGE
---- ---- --------

AMERISUITES
Occupancy 57.8% 60.4%
ADR $ 68.79 $ 72.81
REVPAR $ 39.77 $ 43.98 (9.6)%

WELLESLEY INNS & SUITES
Occupancy 64.5% 56.7%
ADR $ 54.63 $ 61.54
REVPAR $ 35.25 $ 34.86 1.1 %

FULL-SERVICE
Occupancy 54.6% 54.8%
ADR $ 96.22 $103.32
REVPAR $ 52.51 $ 56.65 (7.3)%

TOTAL
Occupancy 59.4% 58.9%
ADR $ 66.93 $ 72.63
REVPAR $ 39.78 $ 42.81 (7.1)%

The REVPAR decrease was primarily attributed to the weak economy which
has affected business travel. In addition, the war with Iraq and travel safety
concerns have also had a negative impact. The decline was driven by a decrease
in ADR of 7.9% due to competitive pressure on room rates. Key markets which
contributed to the revenue decline were Atlanta, Chicago, Dallas, Northern New
Jersey and South Florida. The hotels in the Houston and Phoenix markets reported
increases primarily due to increased occupancy at the Wellesley Inns & Suites
hotels.

Management, franchise and other fees consist primarily of base and
incentive fees earned under management agreements, royalties earned under
franchise agreements and sales commissions earned by the Company's national
sales group. Management, franchise and other fees increased by $1.5 million, or
53.5%, for the three months ended March 31, 2003 compared to the same period in
2002. The increase was due to additional franchised and managed hotels arising
from hotels sold to franchisees and new hotel openings. In addition, management,
franchise and other fees increased due to fees charged to franchisees for
providing reservation services. In November 2002, Prime opened a new reservation
center near its headquarters in Fairfield, NJ. Previously, these reservation
services were provided by a third party.

Rental and other revenues consists of rental income, interest on notes
receivable and other miscellaneous operating income. Rental and other revenues
for the three months ended March 31, 2003 was relatively unchanged compared to
the same period in 2002.

Hotel operating expenses consist of all direct costs related to the
operation of the Company's

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properties (lodging, food & beverage, administration, selling and advertising,
utilities and repairs and maintenance). Hotel operating expenses increased by
$0.9 million, or 1.7%, for the three months ended March 31, 2003 compared to the
same period in 2002. For the comparable three-month periods, hotel operating
expenses, as a percentage of hotel revenues, increased from 55.2% in 2002 to
61.3% in 2003. The increase in hotel operating expenses is due to the increase
in occupancy and higher weather-related costs such as utilities and snow
removal. Offsetting this increase was a decrease in reservation costs as Prime
is now providing this service and the costs are now recorded as general and
administrative expenses versus hotel operating expenses in 2002.

Rent and other occupancy expenses consist primarily of rent expense,
property insurance and real estate and other taxes. Rent and other occupancy
expenses increased by $0.5 million, or 2.6%, for the three months ended March
31, 2003 as compared to the same period in 2002, primarily due to higher
property insurance costs.

General and administrative expenses consist primarily of centralized
management expenses associated with operating the hotels, corporate expenses,
national brand advertising expenses and reservation costs. General and
administrative expenses increased by $2.5 million, or 38.2%, for the three
months ended March 31, 2003 compared to the same period in 2002, due primarily
to the timing of brand advertising expenditures and the operation of the new
reservation center which opened in November 2002.

Depreciation and amortization expense increased by $0.8 million, or
8.2%, for the three months ended March 31, 2003 compared to the same period in
2002. This increase was due to depreciation associated with capital additions on
existing hotels.

Investment income was $0.4 million for the three months ended March 31,
2003 and was relatively unchanged compared to the same period in 2002.

Interest expense decreased by $2.1 million, or 27.4%, for the three
months ended March 31, 2003 compared to the same period in 2002 primarily due to
debt reductions, the refinancing in April 2002 of the Company's 9 3/4% Senior
Subordinated Notes due 2007 with the 8 3/8% Senior Subordinated Notes and the
retirement of 9 1/4% First Mortgage Notes in August 2002 with borrowings under
the Company's $125 Million Revolving Credit Facility (the "Credit Facility").

Equity in earnings from joint ventures for the three months ended March
31, 2003 related to the Meadowlands Venture and the Quebec Venture.

Discontinued operations for the three months ended March 31, 2003
reflect the operations of three hotels no longer operated by Prime due to the
decision by management in March 2003 to terminate lease agreements and the
write-off of the net assets associated with these hotels. For the three months
ended March 31, 2002, discontinued operations reflect the operations of these
three hotels and the results of operations and gain on the disposal of hotels
sold in 2002 which are no longer operated by the Company.

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LIQUIDITY AND CAPITAL RESOURCES

Sources. The Company's major sources of cash for the three months ended
March 31, 2003 were borrowings of $5.0 million and the sales of joint venture
interests of $5.9 million. The Company's major uses of cash during the period
were debt retirements of $10.1 million, capital expenditures of $8.1 million and
an investment in a joint venture of $6.6 million.

The Company had borrowings of $72.5 million under its Credit Facility
at LIBOR +2.25%, or approximately 4.1%, as of March 31, 2003. The Credit
Facility consists of a $125 million revolving line of credit which expires in
2006 and is secured by the equity interests of certain of Prime's subsidiaries.
The Credit Facility contains loan covenants customary for a credit facility of
this size and nature, including but not limited to, limitations on making
capital expenditures, selling or transferring assets, making certain investments
(including acquisitions), repurchasing shares and liens. In addition, the
Company must maintain a debt to EBITDA ratio of 4.5 times (4.25 times after June
30, 2003) and an EBITDA to interest ratio of 2.35 times (2.50 times after June
30, 2003). As of March 31, 2003, the Company's debt to EBITDA ratio was 4.38
times and its EBITDA to interest ratio was 2.61 times. The Company was in
compliance with its covenants at March 31, 2003. However, there can be no
assurance that the Company will continue to be in compliance with these
covenants.

In April 2003, the Company sold an AmeriSuites hotel in Oklahoma City,
OK. The Company retained the franchise rights to the hotel under a 20-year
franchise agreement and also entered into an agreement to manage the hotel.

Uses. The Company intends to continue the growth of its brands
primarily through franchising and, therefore, new construction spending will be
limited. There are currently no new construction projects underway. During the
three months ended March 31, 2003, the Company spent $8.1 million on capital
additions which primarily consisted of capital improvements at its owned and
leased hotels. The Company plans to fund capital improvements at existing hotels
primarily with internally generated cash flow.

During the three months ended March 31, 2003, Prime purchased $8.0
million of its Senior Subordinated Notes for $7.2 million realizing a gain of
$800,000.

During the three months ended March 31, 2003, Prime repurchased 350,000
shares of its common stock at an average price of $5.57 per share.

-13-

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company is exposed to changes in interest rates from its floating rate
debt arrangements. At March 31, 2003, the Company had $279.5 million of debt
outstanding of which $207.0 million bears interest at fixed rates. The interest
rate on the Company's Credit Facility, under which $72.5 million was outstanding
at March 31, 2003, is variable at a rate of LIBOR + 2.25%. A hypothetical 100
basis point adverse move (increase) on short-term interest rates on the floating
rate debt outstanding at March 31, 2003 would adversely affect Prime's annual
interest cost by approximately $0.7 million assuming borrowed amounts under the
Credit Facility remained at $72.5 million.

SUMMARY OF INDEBTEDNESS

Combined aggregate principal maturities of debt as of March 31, 2003, are as
follows (in thousands):

8 3/8% CREDIT SCHEDULED
NOTES FACILITY AMORTIZATION TOTAL
--------------------------------------------------

2003 $ --- $ --- $ 688 $ 688
2004 --- --- 1,122 1,122
2005 --- --- 229 229
2006 --- 72,500 250 72,750
2007 --- --- 272 272
THEREAFTER 192,000 --- 12,457 204,457
--------------------------------------------------
$192,000 $ 72,500 $ 15,018 $279,518
==================================================

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ITEM 4. CONTROLS AND PROCEDURES

Within the 90-day period prior to the filing of this Quarterly Report
on Form 10-Q, the Company under the supervision and with the participation of
management, including the Chief Executive Officer and the Chief Financial
Officer, evaluated the effectiveness of the Company's disclosure controls and
procedures (as defined in Rules 13a-14 and 15d-14 under the Exchange Act). Based
upon that evaluation, the Company's Chief Executive and the Chief Financial
Officer have concluded that the Company's disclosure controls and procedures are
effective to timely alert them to material information relating to the Company
(including its consolidated subsidiaries) required to be included in Company's
Exchange Act filings.

There have been no significant changes in our internal controls
subsequent to the date the Company completed its evaluation.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is involved in certain legal proceedings incidental to the
normal conduct of its business. The Company does not believe that its
liabilities relating to any of the legal proceedings to which it is a party are
likely to be, individually or in the aggregate, material to its consolidated
financial position or results of operations.

On August 18, 1999, plaintiff Nick Pourzal, a former employee of the
Company, filed a complaint against the Company in the United States District
Court for the Virgin Islands. The complaint alleges that the Company contracted
in 1978 to pay plaintiff ten percent of the pre-tax earning on any use or sale
of a 16.354-acre property on St. Thomas, U.S. Virgin Islands known as the
"Gilbert Land," and that the Company breached this contract by making commercial
use of the Gilbert Land without paying the plaintiff. On January 13, 2003,
plaintiff filed a motion for leave to file a second amended complaint, to add
claims for (i) conspiracy to violate the Virgin Islands Plant Closing Act, (ii)
prima facie tort and (iii) confirmation of arbitration award relating to the
Company's termination of plaintiff's employment in 1999. The complaint seeks
compensatory, incidental and consequential damages, interest and costs, a
declaratory judgment that the Company is liable for payment of ten percent of
pre-tax earnings on the use or sale of the Gilbert Land, and attorneys' fees and
expenses. The Company believes that the plaintiff's action is without merit and
intends to vigorously defend this case.

ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

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ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

(a) Exhibits

Exhibit 99.1 Certification of CEO pursuant to Section 302
of the Sarbanes - Oxley Act of 2002

Exhibit 99.2 Certification of CFO pursuant to Section 302
of the Sarbanes - Oxley Act of 2002

Exhibit 99.3 Certification of VP-Finance pursuant to
Section 302 of the Sarbanes - Oxley Act of
2002

Exhibit 99.4 Certification of CEO pursuant to Section 906
of the Sarbanes - Oxley Act of 2002

Exhibit 99.5 Certification of CFO pursuant to Section 906
of the Sarbanes - Oxley Act of 2002

Exhibit 99.6 Certification of VP-Finance pursuant to
Section 906 of the Sarbanes - Oxley Act of
2002

(b) Reports on Form 8-K

None.

-16-

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.

PRIME HOSPITALITY CORP.

Date: May 14, 2003 By: /s/ A.F. Petrocelli
-------------------------------
A. F. Petrocelli
President and Chief Executive
Officer

Date: May 14, 2003 By: /s/ Douglas W. Vicari
-------------------------------
Douglas W. Vicari
Senior Vice President and Chief
Financial Officer

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