10-Q 1 y89281e10vq.txt PRIME HOSPITALITY CORP. 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 JUNE 30, 2003 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 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 44,733,503 shares of common stock, $.01 par value, outstanding as of August 12, 2003. PRIME HOSPITALITY CORP. AND SUBSIDIARIES INDEX
PAGE NUMBER ------ PART I. FINANCIAL INFORMATION Item 1. Financial Statements Consolidated Balance Sheets June 30, 2003 (Unaudited) and December 31, 2002 ................ 1 Consolidated Statements of Operations Three and Six Months Ended June 30, 2003 and 2002 (Unaudited) .. 2 Consolidated Statements of Cash Flows Six Months Ended June 30, 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 ................................................. 17 Item 6. Exhibits and Reports on Form 8-K .................................. 17 Signatures .................................................................... 18
PRIME HOSPITALITY CORP AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
JUNE 30, DECEMBER 31, 2003 2002 ----------- ----------- (Unaudited) ASSETS Current assets: Cash and cash equivalents .......................................... $ 14,227 $ 25,850 Accounts receivable (net of allowances of $1,096 and $611 in 2003 and 2002, respectively) ................................. 24,273 18,178 Restricted cash .................................................... 1,695 5,140 Hotel inventories .................................................. 11,656 11,989 Income tax receivable .............................................. 26,560 10,923 Other current assets ............................................... 7,697 10,534 ----------- ----------- Total current assets ......................................... 86,108 82,614 Property, equipment and leasehold improvements, net of accumulated depreciation and amortization ................... 925,651 949,730 Assets held for sale ................................................... 8,787 8,787 Investments in unconsolidated joint ventures ........................... 14,438 23,140 Mortgages and notes receivable, net of current portion .................................................... 12,316 13,021 Other assets ........................................................... 11,977 42,357 ----------- ----------- TOTAL ASSETS ................................................. $ 1,059,277 $ 1,119,649 =========== =========== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued expenses .............................. $ 23,431 $ 21,189 Current portion of debt ............................................ 1,056 1,052 Current portion of deferred income ................................. 3,527 3,527 Other current liabilities .......................................... 18,454 20,985 ----------- ----------- Total current liabilities .................................... 46,468 46,753 Long-term debt, net of current portion ................................. 253,142 284,017 Deferred income ........................................................ 9,748 13,338 Deferred income taxes .................................................. 61,362 61,362 Other liabilities ...................................................... 8,296 7,503 ----------- ----------- Total liabilities ............................................ 379,016 412,973 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 June 30, 2003 and December 31, 2002 .......................... 566 566 Capital in excess of par value ..................................... 527,787 527,787 Retained earnings .................................................. 268,838 293,292 Treasury stock (11,872,878 and 11,522,878 shares at June 30, 2003 and December 31, 2002, respectively) ........... (116,930) (114,969) ----------- ----------- Total stockholders' equity ................................... 680,261 706,676 ----------- ----------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY ................... $ 1,059,277 $ 1,119,649 =========== ===========
See Accompanying Notes to Interim Consolidated Financial Statements -1- PRIME HOSPITALITY CORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) THREE AND SIX MONTHS ENDED JUNE 30, 2003 AND 2002 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 2003 2002 2003 2002 --------- --------- --------- --------- Revenues: Hotel revenues ................................................ $ 96,639 $ 101,470 $ 179,952 $ 193,249 Management, franchise and other fees .......................... 6,672 4,282 10,892 7,032 Rental and other revenues ..................................... 493 993 1,008 1,605 --------- --------- --------- --------- Total revenues .......................................... 103,804 106,745 191,852 201,886 Costs and expenses: Hotel operating expenses ...................................... 53,567 53,104 104,778 103,750 Rent and other occupancy ...................................... 21,698 20,202 42,649 40,659 Brand and administrative ...................................... 10,501 7,643 19,574 14,208 Depreciation and amortization ................................. 9,662 9,878 20,295 19,705 --------- --------- --------- --------- Total costs and expenses ................................ 95,428 90,827 187,296 178,322 Operating income (loss) ........................................... 8,376 15,918 4,556 23,564 Investment income ................................................. 429 698 871 1,183 Interest expense .................................................. (5,365) (7,613) (10,993) (15,366) Gains (losses) on retirement of debt .............................. 822 (12,892) 1,622 (12,892) Other income (loss) ............................................... (35,346) (4,500) (35,346) (4,500) --------- --------- --------- --------- Income (loss) before equity in earnings of unconsolidated joint ventures, income taxes and discontinued operations ........... (31,084) (8,389) (39,290) (8,011) Equity in earnings of unconsolidated joint ventures ............... 263 -- 453 -- --------- --------- --------- --------- Income (loss) before income taxes and discontinued operations ..... (30,821) (8,389) (38,837) (8,011) Provision (benefit) for income taxes .............................. (12,020) (3,272) (15,146) (3,124) --------- --------- --------- --------- Income (loss) before discontinued operations ...................... (18,801) (5,117) (23,691) (4,887) Discontinued operations: Income (loss) from discontinued operations, net of income taxes 15 632 (181) 747 Gain (loss) on disposal, net of income taxes .................. 964 -- (582) 428 --------- --------- --------- --------- Net income (loss) ................................................. ($ 17,822) ($ 4,485) ($ 24,454) ($ 3,712) ========= ========= ========= ========= Earnings (loss) per common share: Basic: Income (loss) before discontinued operations .................. ($ 0.42) ($ 0.11) ($ 0.53) ($ 0.11) Income (loss) from discontinued operations, net of income taxes ........................................ 0.02 0.01 (0.02) 0.03 --------- --------- --------- --------- Net income (loss) ................................................. ($ 0.40) ($ 0.10) ($ 0.55) ($ 0.08) ========= ========= ========= ========= Diluted: Income (loss) before discontinued operations .................. ($ 0.42) ($ 0.11) ($ 0.53) ($ 0.11) Income (loss) from discontinued operations, net of income taxes ........................................ 0.02 0.01 (0.02) 0.03 --------- --------- --------- --------- Net income (loss) ................................................. ($ 0.40) ($ 0.10) ($ 0.55) ($ 0.08) ========= ========= ========= =========
See Accompanying Notes to Interim Consolidated Financial Statements. -2- PRIME HOSPITALITY CORP AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) SIX MONTHS ENDED JUNE 30, 2003 AND 2002 (IN THOUSANDS)
2003 2002 --------- --------- Cash flows from operating activities: Net income (loss) $ (24,454) $ (3,712) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation and amortization 20,871 20,038 Amortization of deferred financing costs 584 1,616 Income tax benefit (15,146) (3,124) Non-cash portion of other income (loss) 35,346 4,500 Gains (losses) on retirement of debt (1,622) 12,892 Amortization of deferred income (2,218) (2,832) Equity in earnings of unconsolidated joint ventures (453) -- Gain (losses) on disposals of discontinued operations 582 (428) Increase (decrease) from changes in other operating assets and liabilities: Accounts receivable (6,095) (3,369) Other current assets 3,229 (6,326) Other liabilities 501 (4,616) --------- --------- Net cash provided by operating activities 11,125 14,639 Cash flows from investing activities: Proceeds from mortgages and notes receivable 755 197 Disbursements for mortgages and notes receivable (335) (792) Proceeds from sales of property, equipment and leasehold improvements 17,400 18,556 Construction and conversion of hotels -- (3,883) Purchases of property, equipment and leasehold improvements (13,382) (7,320) Investments in unconsolidated joint ventures (6,580) -- Proceeds from sales and financings of interests in unconsolidated joint ventures 15,722 -- Restricted cash and other (1,557) (255) --------- --------- Net cash provided by operating activities 12,023 6,503 Cash flows from financing activities: Net proceeds from issuance of debt 13,000 195,739 Payments of debt (45,810) (199,835) Purchase of common stock (1,961) -- Proceeds from the exercise of stock options -- 2,628 Premium on early retirement of debt -- (9,484) --------- --------- Net cash used in financing activities (34,771) (10,952) --------- --------- Net increase (decrease) in cash and cash equivalents (11,623) 10,190 Cash and cash equivalents at beginning of period 25,850 26,475 --------- --------- Cash and cash equivalents at end of period $ 14,227 $ 36,665 ========= ========= Other cash flow disclosures: Interest paid $ 10,598 $ 16,630 Income taxes paid $ -- $ 141
See Accompanying Notes to Interim Consolidated Financial Statements. -3- PRIME HOSPITALITY CORP. AND SUBSIDIARIES NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS THREE AND SIX MONTHS ENDED JUNE 30, 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 ("Prime" or the "Company") contain all material adjustments, consisting of normal recurring adjustments, necessary to present fairly the financial position of the Company as of June 30, 2003 and the results of its operations for the three and six months ended June 30, 2003 and 2002 and cash flows for the six months ended June 30, 2003 and 2002. The consolidated financial statements for the three and six months ended June 30, 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 June 30, 2002 consolidated financial statements to conform them to the June 30, 2003 presentation. The consolidated results of operations for the three and six months ended June 30, 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 reclassified prior years' extraordinary gains and losses from early extinguishments of debt to continuing operations. 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 -4- measuring the guarantor's recognized liability over the term of the related guarantee. The disclosure 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. In April 2003, the Company guaranteed a portion of the debt of an unconsolidated joint venture (See Note 4). Based on the guaranteed amount and other facts and circumstances, including an analysis of the underlying collateral, the fair value of the obligation was not meaningful. 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 and six months ended June 30, 2003 and 2002 (in thousands except earnings per share data):
THREE MONTHS ENDED, SIX MONTHS ENDED, JUNE 30, JUNE 30, 2003 2002 2003 2002 ---------- ---------- ---------- ---------- Net income (loss) as reported .......................... $ (17,822) $ (4,485) $ (24,454) $ (3,712) Add: Stock option expense included in net income (loss) -- -- -- -- Less: Stock option expense determined under fair value recognition method for all awards ........... (981) (959) (1,925) (1,930) ---------- ---------- ---------- ---------- Pro forma net income (loss) ............................ $(18,803) $ (5,444) $ (26,379) $ (5,642) ========== ========== ========== ========== Net income (loss) per share as reported: Basic ............................................. $ (0.40) $ (0.10) $ (0.55) $ (0.08) Diluted ........................................... $ (0.40) $ (0.10) $ (0.55) $ (0.08) Pro forma net income (loss) per share: Basic ............................................. $ (0.42) $ (.12) $ (0.59) $ (.12) Diluted ........................................... $ (0.42) $ (.12) $ (0.59) $ (.12)
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 and six months ended June 30, 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. -5- For purposes of pro forma disclosures, the estimated fair value of stock options is amortized to expense over the options' vesting period. NOTE 4 - INVESTMENTS IN UNCONSOLIDATED JOINT VENTURES In January 2003, 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 manages 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%. In July 2003, the Quebec Venture obtained an $8.2 million (CDN) first mortgage loan at a fixed rate of 6.26% due in 2008. The loan is recourse to the hotel only. Prime received $2.5 million of the loan proceeds. 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 six months ended June 30, 2003, the Company sold one AmeriSuites and one Wellesley Inn for total proceeds of $17.4 million. The Company retained the franchise rights to the hotels under 20-year franchise agreements and signed a management agreement on the AmeriSuites hotel. During the six months ended June 30, 2002, the Company sold a Radisson Hotel and two Wellesley Inns for gross proceeds of $18.6 million. The operations and gains on sales of the hotels, net of tax, in which Prime did not retain management are included in the Consolidated Statements of Operations as part of discontinued operations. NOTE 6 - DEBT During the six months ended June 30, 2003, Prime purchased $21.3 million of its 8-3/8% Senior Subordinated Notes due 2012 (the "8-3/8 Notes") for $19.7 million realizing gains of $1.6 million. NOTE 7 - LEASE AGREEMENTS Glen Rock Holding Corp, a subsidiary of the Company, did not make its scheduled July 1 rent payment of approximately $2.0 million to Hospitality Properties Trust (NYSE:HPT) and received a default notice from HPT. The lease covers 24 AmeriSuites hotels owned by HPT. Over the past twelve -6- months, cash flow was negatively impacted by $11.5 million as rent payments exceeded operating cash flow by $9.0 million and approximately $2.5 million was required to be set aside for capital improvements. The termination of the lease would result in the forfeiture of certain deposits and, accordingly, Prime has taken a $35.0 million non-cash charge against the net book value of the assets associated with the lease. Prime is continuing to operate the hotels as AmeriSuites and the results of operations are, therefore, included in continuing operations. Prime and HPT have had discussions regarding the management and franchise agreements on the hotels which are subordinated to the lease obligations to HPT. 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 these hotels are reflected in discontinued operations, net of tax, in the accompanying financial statements. In addition, a loss of $1.5 million, net of tax, was recorded in the three months ended March 31, 2003 in gain (loss) on disposal from discontinued operations for the net assets associated with the lease. NOTE 8 - COMMON STOCK During the six months ended June 30, 2003, Prime repurchased 350,000 shares of its common stock at an average price of $5.57 per share. NOTE 9 - 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 44.7 million and 45.0 million for the three months ended June 30, 2003 and 2002 and 44.7 million and 44.9 million for the six months ended June 30, 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 three and six months ended June 30, 2003 and June 30, 2002, stock options were antidilutive and were not included in the calculation of diluted earnings per share. NOTE 10 - 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 AmeriSuites are upscale hotels located in 31 states throughout the United States. The 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 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. -7- 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 and six months ended June 30, 2003 and 2002 (in thousands):
ALL-SUITES LIMITED-SERVICE FULL-SERVICE CORPORATE/OTHER CONSOLIDATED ---------- --------------- ------------ --------------- ------------ THREE MONTHS ENDED JUNE 30, 2003 Revenues ........................ $ 59,673 $ 21,419 $15,547 $ 7,165 $103,804 EBITDA .......................... 8,611 4,469 4,605 353 18,038 Depreciation and amortization ... 4,874 3,551 905 332 9,662 Capital expenditures ............ 2,816 604 495 1,367 5,282 Property, equipment and leasehold Improvements ................. $488,687 $327,987 $77,129 $31,848 $925,651 THREE MONTHS ENDED JUNE 30, 2002 Revenues ........................ $ 63,214 $ 21,455 $16,801 $ 5,275 $106,745 EBITDA .......................... 13,397 4,093 6,035 2,271 25,796 Depreciation and amortization ... 4,890 2,946 1,424 618 9,878 Capital expenditures ............ 3,093 573 514 3,490 7,670 Property, equipment and leasehold Improvements ................. $536,583 $340,738 $87,505 $28,814 $993,640 SIX MONTHS ENDED JUNE 30, 2003 Revenues ........................ $110,173 $ 42,625 $27,154 $11,900 $191,852 EBITDA .......................... 9,901 8,763 6,376 756 24,851 Depreciation and amortization ... 9,748 6,758 2,378 1,411 20,295 Capital expenditures ............ 6,125 1,277 1,050 4,930 13,382 Property, equipment and leasehold Improvements ................. $488,687 $327,987 $77,129 $31,848 $925,651 SIX MONTHS ENDED JUNE 30, 2002 Revenues ........................ $121,394 $ 42,564 $29,291 $ 8,637 $201,886 EBITDA .......................... 20,333 9,793 8,468 4,675 43,269 Depreciation and amortization ... 9,738 5,990 2,842 1,135 19,705 Capital expenditures ............ 4,878 1,447 689 4,189 11,203 Property, equipment and leasehold Improvements ................. $536,583 $340,738 $87,505 $28,814 $993,640
The following table reconciles EBITDA to income (loss) before discontinued operations for the three and six months ended June 30, 2003 and 2002 (in thousands):
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30 JUNE 30 2003 2002 2003 2002 -------- -------- -------- -------- EBITDA ..................................... $ 18,038 $ 25,796 $ 24,851 $43,269 (Provision) benefit for income taxes ....... 12,020 3,272 15,146 3,124 Equity in earnings of joint ventures ....... 263 -- 453 -- Other (income) loss ........................ (35,346) (4,500) (35,346) (4,500) Gains on retirement of debt ................ 822 (12,892) 1,622 (12,892) Interest expense ........................... (5,365) (7,613) (10,993) (15,366) Investment income .......................... 429 698 871 1,183 Depreciation and amortization .............. (9,662) (9,878) (20,295) (19,705) -------- -------- -------- -------- Income (loss) before discontinued operations $(18,801) $ (5,117) $(23,691) $ (4,887) ======== ======== ======== ========
NOTE 11 - LITIGATION 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 -8- 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 June 13, 2003, Southeast Texas Inns, Inc. ("Southeast Texas Inns") filed a Complaint against the Company, May-Ridge, L.P. ("May-Ridge") and Ridgewood Holdings Corp. ("Ridgewood"), which is now pending before the United States District Court for the Middle District of Tennessee. The Complaint alleges that May-Ridge has defaulted under a Lease Agreement, dated as July 9, 2000, with Southeast Texas Inns pursuant to which May-Ridge leased three properties located in Texas (the "Three Properties") that were operated as AmeriSuites Hotels. On April 2, 2003, Southeast Texas Inns, as landlord, terminated the Lease Agreement for default and May-Ridge surrendered the three properties to Southeast Texas. In the Complaint, Southeast Texas Inns seeks actual and liquidated damages in an amount in excess of $10 million against May-Ridge and Ridgewood, which is the sole general general partner of May-Ridge. Southeast Texas Inns also seeks to hold the Company jointly liable for all damages under the Lease Agreement, to which the Company is not a party. The Company will be filing a motion to dismiss the Complaint as against the Company on or about August 19, 2003. 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 31,846 rooms located in 33 states (the "Portfolio") as of June 30, 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 primarily under franchise agreements with national hotel chains. The following table sets forth information with respect to the Portfolio as of June 30, 2003:
AMERISUITES HOTELS ROOMS ----------- ------ ----- Owned 62 8,024 Leased 24 2,923 Managed 29 3,757 Franchised 33 3,807 --- ------ Total 148 18,511 WELLESLEY INNS & SUITES ----------------------- Owned 54 6,541 Leased -- -- Managed 6 668 Franchised 20 1,902 --- ------ Total 80 9,111 PRIME HOTELS & RESORTS ---------------------- Owned 1 240 --- ------ Total 1 240 NON-PROPRIETARY BRANDS ---------------------- Owned 6 1,225 Leased 1 160 Managed 10 1,934 Joint Venture 2 665 --- ------ Total 19 3,984 TOTAL PORTFOLIO --------------- Owned 123 16,030 Leased 25 3,083 Managed 45 6,359 Franchised 53 5,709 Joint Venture 2 665 --- ------ Total 248 31,846
-9- 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 and six months ended June 30, 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 resulted in weaker pricing power which has caused the average daily room rate ("ADR") to decline. As a result, for the three and six months ended June 30, 2003, revenues from comparable owned and leased hotels declined by 3.7% and 5.4% and gross operating profits on these hotels declined by 11.7% and 16.6%. Overall, for the three and six months ended June 30, 2003, revenue declined by $2.9 million and $10.0 million to $103.8 million and $191.9 million and EBITDA decreased by $7.8 million and $18.4 million to $18.0 million and $24.9 million due to the results of the comparable owned and leased hotels and the effect of asset sales and lease terminations. See Note 10 of Notes to Interim Consolidated Financial Statements for a reconciliation of EBITDA to net income (loss) from continuing operations. 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 -10- 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 pcan 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 AND SIX MONTHS ENDED JUNE 30, 2003 COMPARED TO THE THREE AND SIX MONTHS ENDED JUNE 30, 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 upscale hotels operated primarily under national franchise agreements. Hotel revenues consist of lodging revenues (which consist primarily of room, telephone and vending revenues) and food and beverage revenues. Hotel revenues decreased by $4.8 million and $13.3 million, or 4.8% and 6.9%, respectively, for the three and six months ended June 30, 2003 compared to the same periods 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 and six month periods in 2003 and 2002.
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, 2003 2002 % CHANGE 2003 2002 % CHANGE ---- ---- -------- ---- ---- -------- AMERISUITES Occupancy 72.1% 66.3% 65.0% 63.3% ADR $64.91 $73.64 $ 66.55 $ 73.41 REVPAR $46.79 $48.82 (4.2)% $ 43.24 $ 46.43 (6.9)% WELLESLEY INNS & SUITES Occupancy 65.9% 56.7% 64.5% 56.0% ADR $52.42 $60.21 $ 53.60 $ 61.10 REVPAR $34.57 $34.16 1.2% $ 34.58 $ 34.24 1.0% FULL-SERVICE Occupancy 70.8% 72.9% 63.6% 65.4% ADR $104.61 $112.55 $103.90 $111.08 REVPAR $74.07 $82.01 (9.7)% $ 66.08 $ 72.60 (9.0)% TOTAL Occupancy 70.1% 63.9% 64.7% 61.3% ADR $64.44 $73.43 $ 65.44 $ 73.12 REVPAR $45.17 $46.92 (3.7)% $ 42.36 $ 44.79 (5.4)%
-11- The REVPAR decrease was primarily attributed to weak business travel trends due to the sluggish economy combined with the war with Iraq. The decline was driven by a decrease in ADR due to competitive pressure on room rates. Key markets which contributed to the revenue decline were Chicago, Dallas, Denver, 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 $2.4 million and $3.9 million, or 55.8% and 54.9%, respectively, for the three and six months ended June 30, 2003 compared to the same periods in 2002. The increase was due to additional franchised and managed hotels arising from hotels sold to franchisees and new hotel openings, termination fees on three AmeriSuites hotels and 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 and six months ended June 30, 2003 decreased by $0.5 million and $0.6 million, or 50.4% and 37.2%, respectively, compared to the same periods in 2002 due to condemnation proceeds in 2002. Hotel operating expenses consist of all direct costs related to the operation of the Company's properties (lodging, food & beverage, administration, selling and advertising, utilities and repairs and maintenance). Hotel operating expenses increased by $0.5 million and $1.0 million, or 0.9% and 1.0%, for the three and six months ended June 30, 2003 compared to the same periods in 2002. For the comparable three-month periods, hotel operating expenses, as a percentage of hotel revenues, increased from 52.3% and 53.7% in 2002 to 55.4% and 58.2%, respectively, in 2003. The increase in hotel operating expenses is due to the increase in occupancy. Offsetting this increase was a decrease in reservation costs as Prime is now providing this service and the costs are now recorded as brand 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 $1.5 million and $2.0 million, or 7.4% and 4.9%, respectively, for the three and six months ended June 30, 2003 as compared to the same periods in 2002, primarily due to higher property insurance costs and costs of terminating franchise agreements on three Ramada hotels which were converted to the Wellesley brand in the second quarter of 2003. Brand and administrative expenses consist primarily of centralized management expenses associated with operating the hotels, corporate expenses, national brand advertising expenses and reservation costs. Brand and administrative expenses increased by $2.9 million and $5.4 million, or 37.4% and 37.8%, for the three and six months ended June 30, 2003 compared to the same periods 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 decreased by $0.2 million, or 2.2%, for the three months ended June 30, 2003 compared to the same period in 2002 due to asset sales. Depreciation and amortization increased by $0.6 million, or 3.0%, for the six months ended June 30, 2003 compared to the same period in the prior year due to depreciation associated with capital additions on existing hotels not -12- offset by the hotel sales. Investment income decreased by $0.3 million and $0.3 million, or 38.5% and 26.4%, for the three and six months ended June 30, 2003 compared to the same periods in 2002 due to lower cash balances and interest rates. Interest expense decreased by $2.2 million and $4.4 million, or 29.5% and 28.5%, respectively, for the three and six months ended June 30, 2003 compared to the same periods in 2002 primarily due to debt reductions 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") at a lower interest rate. Gains (losses) on retirement of debt for the three and six months ended, June 30, 2003, related to the retirement of $21.3 million of the 8-3/8% Notes. For the three and six months ended, June 30, 2002, gains (losses) on retirement of debt related to premiums and the write-off of deferred loan fees on the retirement of the 9-3/4% Senior Subordinated Notes. Other income (loss) for the three and six months ended, June 30, 2003 is primarily comprised of the reserve for assets associated with the HPT lease. For the three and six months ended, June 30, 2002, other income (loss) relates to a litigation charge. Equity in earnings from joint ventures for the three and six months ended June 30, 2003 related to the Meadowlands Venture and the Quebec Venture. Discontinued operations for the three and six months ended June 30, 2003 and 2002 reflect the operations of hotels no longer operated by Prime and the gain or loss on the disposal of these hotels. LIQUIDITY AND CAPITAL RESOURCES Sources. The Company's major sources of cash for the six months ended June 30, 2003 were asset sales of $17.4 million, borrowings of $13.0 million, sales and financings of joint venture interests of $15.7 million and operating cash flow of $11.1 million. The Company's major uses of cash during the period were debt retirements of $45.8 million, capital expenditures of $13.4 million and an investment in a joint venture of $6.6 million. The Company had borrowings of $60.5 million under its Credit Facility at LIBOR +2.75%, or approximately 4.1%, as of June 30, 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 June 30, 2003, the Company's debt to EBITDA ratio was 4.00 times and its EBITDA to interest ratio was 2.85 times. The Company was in compliance with its covenants at June 30, 2003. However, there can be no assurance that the Company will continue to be in compliance with these covenants. During the six months ended June 30, 2003, the Company sold one AmeriSuites and one Wellesley Inn for the total proceed of $17.4 million. The Company retained the franchise rights to the hotels under 20-year franchise agreements. -13- 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%. In July 2003, the Quebec Venture obtained an $8.2 million (CDN) first mortgage loan at a fixed rate of 6.26% due in 2008. The loan is recourse to the hotel only. Prime received $2.5 million of the loan proceeds. In March 2003, subsidiaries of Prime and UCC each sold a ten percent interest in 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. 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 six months ended June 30, 2003, the Company spent $13.4 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 six months ended June 30, 2003, Prime purchased $21.3 million of its 8-3/8% Notes for $19.7 million realizing a gain of $1.6 million. During the six months ended June 30, 2003, Prime repurchased 350,000 shares of its common stock at an average price of $5.57 per share. In January 2003, Nova Scotia Company, an entity in which a subsidiary of Prime held a 50% interest, acquired the Quebec Venture. Prime's partner in the acquisition was a subsidiary of 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 manages the hotel. Glen Rock Holding Corp, a subsidiary of the Company, did not make its scheduled July 1 rent payment of approximately $2.0 million to Hospitality Properties Trust (NYSE:HPT) and received a default notice from HPT. The lease covers 24 AmeriSuites hotels owned by HPT. Over the past twelve months, cash flow was negatively impacted by $11.5 million as rent payments exceeded operating cash flow by $9.0 million and approximately $2.5 million was required to be set aside for capital improvements. The termination of the lease would result in the forfeiture of certain deposits and, accordingly, Prime has taken a $35.0 million non-cash charge against the net book value of the assets associated with the lease. Prime is continuing to operate the hotels as AmeriSuites and Prime and HPT have had discussions regarding the management and franchise agreements on the hotels which are subordinated to the lease obligations to HPT. 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 forfeited 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 -14- 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. 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 June 30, 2003, the Company had $254.2 million of debt outstanding of which $193.7 million bears interest at fixed rates. The interest rate on the Company's Credit Facility, under which $60.5 million was outstanding at June 30, 2003, is variable at a rate of LIBOR + 2.75%. A hypothetical 100 basis point adverse move (increase) on short-term interest rates on the floating rate debt outstanding at June 30, 2003 would adversely affect Prime's annual interest cost by approximately $0.6 million assuming borrowed amounts under the Credit Facility remained at $60.5 million. SUMMARY OF INDEBTEDNESS Combined aggregate principal maturities of debt as of June 30, 2003, are as follows (in thousands):
8-3/8% CREDIT SCHEDULED NOTES FACILITY AMORTIZATION TOTAL ----- -------- ------------ ----- 2003 $ $ $ 643 $ 643 2004 1,122 1,122 2005 229 229 2006 60,500 250 60,750 2007 272 272 THEREAFTER 178,725 12,457 191,182 -------- ------- ------- -------- $178,725 $60,500 $14,973 $254,198 ======== ======= ======= ========
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. -15- 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 June 13, 2003, Southeast Texas Inns, Inc. ("Southeast Texas Inns") filed a Complaint against the Company, May-Ridge, L.P. ("May-Ridge") and Ridgewood Holdings Corp. ("Ridgewood"), which is now pending before the United States District Court for the Middle District of Tennessee. The Complaint alleges that May-Ridge has defaulted under a Lease Agreement, dated as July 9, 2000, with Southeast Texas Inns pursuant to which May-Ridge leased three properties located in Texas (the "Three Properties") that were operated as AmeriSuites Hotels. On April 2, 2003, Southeast Texas Inns, as landlord, terminated the Lease Agreement for default and May-Ridge surrendered the three properties to Southeast Texas. In the Complaint, Southeast Texas Inns seeks actual and liquidated damages in an amount in excess of $10 million against May-Ridge and Ridgewood, which is the sole general general partner of May-Ridge. Southeast Texas Inns also seeks to hold the Company jointly liable for all damages under the Lease Agreement, to which the Company is not a party. The Company will be filing a motion to dismiss the Complaint as against the Company on or about August 19, 2003. 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 The Company held its annual meeting of stockholders on May 22, 2003 (the "Annual Meeting"). The Company's stockholders were asked to take the following action at the meeting: 1) Elect two Class I Directors to serve until the 2006 Annual Meeting of Stockholders -16- With respect to the Board Proposal, the two individuals nominated for director were both elected by the affirmative vote of a majority of shares of common stock present at the Annual Meeting. The nominees and the votes received by each are as follows:
FOR WITHHELD --- -------- Lawrence N. Friedland 30,204,020 7,337,483 Richard Reitman 37,211,994 324,509 Allen S. Kaplan 30,137,122 7,404,381
A.F. Petrocelli and Howard M. Lorber will continue to serve as directors of the Company. 2) Ratify the Board of Directors selection of Ernst & Young LLP to be the Company's independent auditors for 2003. The selection was ratified by the following vote count.
FOR WITHHELD ABSTAIN --- -------- ------- 25,202,144 12,325,251 14,108
ITEM 5. OTHER INFORMATION None. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit 31.1 Certification of CEO pursuant to Section 302 of the Sarbanes - Oxley Act of 2002 Exhibit 31.2 Certification of CFO pursuant to Section 302 of the Sarbanes - Oxley Act of 2002 Exhibit 32.1 Certification of CEO pursuant to Section 906 of the Sarbanes - Oxley Act of 2002 Exhibit 32.2 Certification of CFO pursuant to Section 906 of the Sarbanes - Oxley Act of 2002 (b) Reports on Form 8-K On June 25, 2003, the Company announced that Douglas Vicari, Senior Vice President, Chief Financial Officer and Director of the Company, would resign effective June 26, 2003 and Richard T. Szymanski would assume the duties of Chief Financial Officer until a permanent successor is found. On July 31, 2003, the Company issued a press release regarding earnings for the second quarter of 2003. -17- 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: August 13, 2003 By: /s/ A.F. Petrocelli ------------------- A. F. Petrocelli President and Chief Executive Officer Date: August 13, 2003 By: /s/ Richard T. Szymanski ------------------------ Richard T. Szymanski Senior Vice President and Chief Financial Officer -18-