8-K/A 1 FORM 8-K/A CURRENT REPORT 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 8-K/A Current Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 Date of Report (Date of earliest event reported) March 6, 1996 PRIME HOSPITALITY CORP. (Exact name of Registrant as specified in its charter) COMMISSION FILE NO. 1-6869 DELAWARE 22-2640625 (State or other jurisdiction of (IRS employer incorporation or organization) identification no.) 700 ROUTE 46 EAST, FAIRFIELD, NEW JERSEY 07004 (address of principal executive offices) (zip code) REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (201)882-1010 ================================================================================ 2 Item 2. Acquisition of Assets On March 6, 1996, Prime Hospitality Corp. (the "Company") acquired 18 hotels, consisting of 16 Wellesley Inns and two other limited-service hotels for approximately $65.1 million in cash. The acquisition enables the Company to consolidate the ownership and establish full control over its proprietary brand Wellesley Inns with all 30 Wellesley Inns now owned and operated by the Company. The acquisition is intended to provide the Company with significant new opportunities to maximize the value of its brand. The hotels are located in Florida, New York, New Jersey, Virginia, Maryland and Pennsylvania. In 1995, the hotels generated $24.3 million of revenues and earnings before interest, taxes, depreciation and amortization and management fees of $10.4 million. The acquisition price was comprised of $60.4 million to purchase the first mortgage on the 18 hotels with a face value of approximately $70.5 million and $4.7 million to purchase the interests of the three partnerships which owned the hotels. The Company utilized its available cash to fund the acquisition. Approximately $1.9 million of the total purchase price was paid to a partnership in which a general partner is the father of David A. Simon, the Company's President and Chief Executive Officer. In connection with the transaction, the Company also terminated its management agreements and junior subordinated mortgages related to the 18 hotels. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS (a) Financial Statements of Business Acquired -1- 3 REPORT OF INDEPENDENT ACCOUNTANTS To the Partners of Wellesley I, L.P., Meriden Hotel Associates, L.P., Multi-Wellesley Hotels, L.P., Biscayne-Clifton Associates, LeJeune Associates, Fort Pierce Associates and Daytona Associates: We have audited the accompanying combined balance sheets of Wellesley I, L.P., Meriden Hotel Associates, L.P., Multi-Wellesley Hotels, L.P., Biscayne-Clifton Associates, LeJeune Associates, Fort Pierce Associates and Daytona Associates (collectively, the "Partnerships") as of December 31, 1995 and the related combined statements of operations and cash flows for the year then ended. These combined financial statements are the responsibility of the Partnerships' management. Our responsibility is to express an opinion on these combined financial statements based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall combined financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the combined financial position of the Partnerships as of December 31, 1995, and the combined results of operations and cash flows for the year then ended, in conformity with generally accepted accounting principles. As discussed in Note 5 to the combined financial statements, in March 1996, all assets of the Partnerships were sold to Prime Hospitality Corp. ARTHUR ANDERSEN LLP Roseland, New Jersey May 17, 1996 -2- 4 WELLESLEY I, L.P., MERIDEN HOTEL ASSOCIATES, L.P., MULTI- WELLESLEY HOTELS, L.P., BISCAYNE-CLIFTON ASSOCIATES, LEJEUNE ASSOCIATES, FORT PIERCE ASSOCIATES AND DAYTONA ASSOCIATES COMBINED BALANCE SHEET DECEMBER 31, 1995 (IN THOUSANDS) ASSETS Current assets: Cash and cash equivalents ..................................... $ 1,470 Accounts receivable, net of reserves .......................... 715 Other current assets .......................................... 1,086 --------- Total current assets .................................... 3,271 Property, equipment and leasehold improvements, net of accumulated depreciation and amortization ................................. 87,719 Restricted cash .................................................. 1,964 --------- TOTAL ASSETS ............................................ $ 92,954 ========= LIABILITIES AND PARTNERSHIPS' EQUITY Current liabilities: Current portion of debt ....................................... $ 87,523 Other current liabilities ..................................... 6,041 --------- Total current liabilities ............................... 93,564 Long-term debt, net of current portion ........................... 13,562 Other liabilities ................................................ 250 --------- Total liabilities ....................................... 107,376 --------- Commitments and contingencies Partnership equity: Partnership equity ............................................ 10,775 Retained earnings ............................................. (25,197) --------- Total partnership equity ................................ (14,422) --------- TOTAL LIABILITIES AND PARTNERSHIPS' EQUITY .............. $ 92,954 =========
See Accompanying Notes to Combined Financial Statements. -3- 5 WELLESLEY I, L.P., MERIDEN HOTEL ASSOCIATES, L.P., MULTI- WELLESLEY HOTELS, L.P., BISCAYNE-CLIFTON ASSOCIATES, LEJEUNE ASSOCIATES, FORT PIERCE ASSOCIATES AND DAYTONA ASSOCIATES COMBINED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS) Revenues: Lodging ............................................ $ 24,015 Rental and other ................................... 331 -------- Total revenues ............................... 24,346 -------- Costs and expenses: Direct hotel operating expenses: Lodging .......................................... 6,492 Selling and general .............................. 5,875 Occupancy and other operating ...................... 2,836 Depreciation and amortization ...................... 4,965 -------- Total costs and expenses ..................... 20,168 -------- Operating income ...................................... 4,178 Interest expense ...................................... 5,403 -------- Net loss .............................................. $ (1,225) ========
See Accompanying Notes to Combined Financial Statements. -4- 6 WELLESLEY I, L.P., MERIDEN HOTEL ASSOCIATES, L.P., MULTI- WELLESLEY HOTELS, L.P., BISCAYNE-CLIFTON ASSOCIATES, LEJEUNE ASSOCIATES, FORT PIERCE ASSOCIATES AND DAYTONA ASSOCIATES COMBINED STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 1995 (IN THOUSANDS) Cash flows from operating activities: Net loss ........................................................................ $(1,225) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization ................................................. 4,965 Accretion of excess face amount of prior debt and accrued interest over restructured principal balance .............................................. (2,942) Increase (decrease) from changes in other operating assets and liabilities: Accounts receivable ........................................................... 95 Other current assets .......................................................... (10) Other liabilities ............................................................. 2,180 ------- Net cash provided by operating activities ..................................... 3,063 ------- Cash flows from investing activities: Proceeds from sales of property, equipment and leasehold improvements ........... 75 Purchases of property, equipment and leasehold improvements ..................... (737) Increase in restricted cash ..................................................... (644) Other ........................................................................... 158 ------- Net cash used in investing activities ......................................... (1,148) ------- Cash flows from financing activities: Net proceeds from issuance of debt .............................................. 4,887 Payments of debt ................................................................ (5,780) Distribution to owners .......................................................... (542) ------- Net cash provided by financing activities ..................................... (1,435) ------- Net increase in cash and cash equivalents .......................................... 480 Cash and cash equivalents at beginning of period ................................... 990 ------- Cash and cash equivalents at end of period ......................................... $ 1,470 =======
See Accompanying Notes to Combined Financial Statements. -5- 7 WELLESLEY I, L.P., MERIDEN HOTEL ASSOCIATES, L.P., MULTI-WELLESLEY HOTELS, L.P., BISCAYNE-CLIFTON ASSOCIATES, LEJEUNE ASSOCIATES, FORT PIERCE ASSOCIATES AND DAYTONA ASSOCIATES NOTES TO COMBINED FINANCIAL STATEMENTS (1) BUSINESS OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations -------------------- During 1995 and through March 6, 1996 (see Note 5), Wellesley I, L.P. and Meriden Hotel Associates, L.P. owned 55.6% and 44.4%, respectively, of the following limited service hotels which were operated under a management agreement with Prime Hospitality Corp. ("Prime"). Wellesley Inn - Deerfield Beach, Florida 79 rooms Wellesley Inn - Hazlet, New Jersey 89 rooms Wellesley Inn - Miami, Florida 106 rooms Wellesley Inn - Reading, Pennsylvania 105 rooms Wellesley Inn - Rochester, New York 99 rooms During 1995 and through March 6, 1996 (see Note 5), Multi-Wellesley Hotels, L.P. owned the following four limited service hotels which were operated under a management agreement with Prime. Wellesley Inn - Buffalo, New York 84 rooms Wellesley Inn - Fairfax, Virginia 83 rooms Holiday Inn Express - Herndon, Virginia 115 rooms Wellesley Inn - Miami Lakes, Florida 100 rooms During 1995 and through March 6, 1996 (see Note 5), Biscayne-Clifton Associates, LeJeune Associates, Fort Pierce Associates and Daytona Associates owned the following nine limited service hotels which were operated under a management agreement with Prime. Wellesley Inn - Coral Springs, Florida 106 rooms Wellesley Inn - Ft. Lauderdale, Florida 106 rooms Wellesley Inn - Ft. Lauderdale, Florida 100 rooms Wellesley Inn - Fishkill, New York 83 rooms Wellesley Inn - Hagerstown, Maryland 84 rooms Wellesley Inn - Rochester, New York 98 rooms Wellesley Inn - Ramsey, New Jersey 90 rooms Wellesley Inn - Suffern, New York 97 rooms Days Inn - Dunmore, Pennsylvania 90 rooms -6- 8 These hotel properties (the "Hotels"), excluding the Suffern Wellesley Inn, were purchased from Prime Motor Inns, Inc. ("PMI") the predecessor corporation to Prime, in 1989 for $107,000,000. The consideration consisted of $16,120,000 in cash, the assumption of $77,455,000 in existing first mortgage notes payable to a group of financial institutions ("the Holders") and $13,425,000 in new second mortgage notes payable to PMI. PMI retained ownership of the land under the hotels owned by the Wellesley I and Multi-Wellesley, L.P.'s and leased it back to these partnerships under a long-term lease. The land was subsequently sold to these partnerships (see Note 3). Effective December 1, 1992, the Suffern Wellesley Inn was transferred to the Biscayne-Clifton partnership in exchange for the assumption of mortgage debt. As reflected in the accompanying combined financial statements of Wellesley I, L.P., Meriden Hotel Associates, Multi-Wellesley Hotels, L.P., Biscayne-Clifton Associates, LeJeune Associates, Fort Pierce Associates and Daytona Associates (collectively, the "Partnerships") and described in Note 3, a significant portion of the Partnerships' debt matured in December 1995. On March 6, 1996, the Holders, the Partnerships and Prime entered into an agreement in which Prime purchased the first mortgage notes of the Holder and the Partnerships' interests in the 18 hotels for $65,100,000 in cash (see Note 5). Principles of Combination ------------------------- The combined financial statements include the accounts of the Partnerships for the year ended December 31, 1995. The combined financial statements do not reflect the sale of these hotels to Prime. Use of Estimates ---------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents ------------------------- All investments with a maturity of three months or less are considered to be cash equivalents. Restricted Cash --------------- Restricted cash is cash held by the servicer, Kleinwort Benson Limited, for payment of principal and interest on the first mortgage notes (Note 3) and to provide for the -7- 9 replacement and maintenance of buildings and equipment at the Hotels in accordance with the provisions of the management agreement. Property, Equipment and Leasehold Improvements ---------------------------------------------- The property, equipment and leasehold improvements of the Partnerships are reflected in the accompanying combined financial statements at cost, less valuation reserves and net of accumulated depreciation and amortization. Depreciation and amortization have been provided on a straight-line basis for financial reporting purposes as follows- Buildings -- 31.5 years Furniture and equipment -- 4 to 7 years Leasehold improvements and refurbishing -- 10 years Par Operating Equipment ----------------------- Par operating equipment (primarily linen supplies) is reflected at 80% of its original cost. All replacements of par operating equipment are expensed when purchased. Income Taxes ------------ In accordance with the applicable Internal Revenue Service regulations, the income tax effects of profits and losses are attributable to the individual partners and are not reflected in the Partnerships' combined financial statements. (2) PROPERTY, EQUIPMENT AND LEASEHOLD IMPROVEMENTS Property, equipment and leasehold imporvements consist of the following at December 31 (in thousands): Land ............................................. $ 7,894 Furniture, fixtures and equipment ................ 5,762 Buildings ........................................ 103,401 Leasehold improvements ........................... 1,161 Refurbishing ..................................... 1,670 --------- 119,888 Less: accumulated depreciation ................... (32,169) --------- Property, equipment and leasehold improvements-net $ 87,719 =========
-8- 10 (3) LONG-TERM DEBT Long-term debt consists of the following at December 31, 1995 (in thousands): First Mortgages ........................ $ 72,381 Second Mortgages ....................... 11,175 Third Mortgages ........................ 7,894 Subrogation Mortgages .................. 9,635 --------- Total Debt .................... 101,085 Less: Current Portion ......... (87,523) --------- Total Long-term Debt ................... $ 13,562 =========
The first mortgage notes were assumed by the Partnerships in connection with the acquisition of the Hotels by the Partnerships from PMI. PMI had guaranteed a portion of the first mortgage notes payable to the Holders and also guaranteed the payment of interest at a specified rate. In September 1990, PMI filed for protection under Chapter 11 of the Bankruptcy Code. PMI's bankruptcy was an event of default under the loan agreement and consequently the loan agreement was restructured. On July 31, 1992, PMI emerged from its Chapter 11 reorganization and merged with and into Prime. As part of the reorganization, the Holders received notes (the "Prime Notes") in full satisfaction of all claims against PMI. Effective December 1, 1992, the Holders, Prime and the Partnerships entered into a series of related agreements to restructure the debt on the Hotels (the "Restructuring Agreements"). The first mortgage notes matured on December 15, 1995 and the Partnerships were unable to satisfy this obligation. In connection with the acquisition of the Hotels, the first mortgage notes were purchased by Prime and the remaining mortgages held by Prime were cancelled (see Note 5). Interest on the first mortgage notes ranged from LIBOR (5.44% at December 31, 1995) plus 1.7% to LIBOR plus 1.8%. The first mortgage notes were secured by the Partnerships and substantially all of the assets of the Hotels. Interest on the second mortgage notes ranged from 8.2% to 9.5% and was generally payable based on the available cash flow of the Hotels as defined in the Restructuring Agreements. The subrogation notes were issued to Prime and were increased whenever the cash proceeds of the Prime Notes were utilized to pay obligations of the Partnerships to the Holders. In addition, the notes were increased from proceeds of the Prime Notes that were set aside to fund certain capital expenditures, to fund debt service and for unpaid interest on the notes. The subrogation notes accrued interest at the same rate as the first mortgage notes and were due on December 15, 1995. -9- 11 In December 1992, the land under the Hotels was sold to two of the partnerships for new third mortgage notes in the aggregate amount of $7,894,000. The third mortgage notes accrued interest at rates ranging from 10.8% to 11.85% and were scheduled to mature on March 31, 2088. Interest was payable monthly to the extent of available cash flow, as defined. No principal was due until maturity. The Restructuring Agreements were accounted for in accordance with Financial Accounting Standards Board Statement No. 15, "Accounting by Debtors and Creditors for Troubled Debt Restructurings." Accordingly, the remaining excess of the face amounts of the second mortgage note and related accrued interest payable over the restructured principal balance of $2,942,000 was amortized as a reduction of interest expense in 1995. Schedule maturities of long-term debt are as follows (in thousands):
Year Ended ---------- 1996 .................. $ 87,523 1997 .................. -- 1998 .................. -- 1999 .................. -- 2000 .................. -- Thereafter ............ 13,562 -------- Total ........ $101,085 ========
(4) COMMITMENTS AND CONTINGENCIES Management Agreements The Hotels were operated under management agreements with Prime. The management fees payable to Prime under the terms of the management agreements was equal to 3.0% of net revenues, as defined, and an accounting fee of $25,000 per year for each hotel property was also payable to Prime. For the year ended December 31, 1995, management and accounting fees of $1,174,295 are included in the combined statement of operations. In connection with the acquisition of the Hotels (see Note 5), the management agreements were terminated. Prime maintained coverage relating to general liability insurance for the Hotels. For the year ended December 31, 1995, insurance premiums charged to the Hotels were $477,000. Prime maintained workmen's compensation and health insurance coverage for the Hotels. Premiums charged by Prime totaled $761,000 for the year ended December 31, 1995. In addition, Prime was reimbursed for reasonable expenses incurred for the benefit of the Hotels, primarily payroll related costs. Amounts due to Prime of $384,000 -10- 12 are included in other current liabilities in the accompanying combined financial statements and consist of operating expenses and management fees payable. Reservation Agreement The Hotels operate under the terms of a reservation agreement with ShoLodge, Inc. ("ShoLodge"). The agreement provides for a fee for participation in ShoLodge's centralized reservation systems equal to 1.0% of gross room revenues, as defined, plus certain other charges. For the year ended December 31, 1995, the Hotels incurred charges of $240,000 for participation in their centralized reservation systems. The Dunmore Days Inn operates under the terms of a franchise license agreement with Days Inn which expires on August 1, 1996. Franchise royalty fees are equal to 5% of gross room revenues, as defined. For the year ended December 31, 1995, the hotel incurred net franchise royalty fees of $57,000. The agreement also provides an advertising fee equal to 1.5% of gross room revenues, as defined, and a fee for participation in Days Inn's centralized reservation system equal to 2.3% of room revenues, as defined, plus certain other fixed charges. During the year ended December 31, 1995 the hotel incurred charges of $17,000 for advertising fees and $27,000 for participation in the centralized reservation system. The Herndon, Virginia hotel operates under the terms of a franchise license agreement with Holiday Inns, which expires on January 31, 2003. Franchise royalty fees are equal to 4% of gross room revenues as defined. For the year ended December 31, 1995, the hotel incurred net franchise royalty fees of $65,000. This agreement also provides for an advertising fee equal to 2% of gross room revenues, as defined, and a reservation fee for participation in Holiday Inn's centralized reservations system equal to 1% of room revenues, as defined, plus certain other fixed charges. During the year ended December 31, 1995, the hotel incurred charges of $32,000 for advertising fees and $29,000 for participation in the centralized reservation system. (5) SUBSEQUENT EVENT On March 6, 1996, Prime acquired the 18 hotels for approximately $65,100,000 in cash. The acquisition price was comprised of approximately $60,400,000 to purchase the first mortgages on the 18 hotels and $4,700,000 to purchase the interests of the Partnerships. In connection with the transaction, the management agreements and subordinated mortgage note agreements with Prime were terminated. -11- 13 (b) Pro Forma Financial Information PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION The following pro forma condensed combined balance sheet and statement of operations are provided for Prime Hospitality Corp. ("Prime") for the year ended December 31, 1995, and give effect to the acquisition of Wellesley I, L.P., Multi-Wellesley Hotels, L.P., Biscayne-Clifton Associates, LeJeune Associates, Fort Pierce Associates and Daytona Associates (collectively, "Partnerships") and the related financing as though they had occurred at the beginning of the earliest period presented. Those pro forma condensed combined balance sheet and statement of operations are presented for illustrative purposes only, and therefore are not necessarily indicative of the financial position or operating results that might have been achieved had such events occurred as of an earlier date, nor are they necessarily indicative of the operating results that may occur in the future. The condensed consolidated historical balance sheet and statement of operations of Prime are derived from the historical consolidated financial statements of Prime. The condensed combined historical balance sheet and statement of operations for the Partnerships are derived from the historical combined financial statements of the Partnerships. -12- 14 PRIME HOSPITALITY CORP. PRO FORMA CONDENSED COMBINED BALANCE SHEET DECEMBER 31, 1995
Eliminations of Total Partnership Pro Forma Pro Forma Prime(1) Partnerships(2) Asset/Liab(3) Adjustments Combined -------- --------------- ------------- ----------- -------- ASSETS Current assets: Cash and cash equivalents .............. $ 49,533 $ 1,470 $ -- $(51,003)(4)(5) $ -- Marketable securities available for sale 11,929 -- -- -- 11,929 Accounts receivables-net ............... 13,139 715 -- -- 13,854 Other current assets ................... 18,576 1,086 -- -- 19,662 -------- --------- ------- -------- -------- Total current assets ............... 93,177 3,271 -- (51,003) 45,445 Property, equipment and leasehold improvements, net of accumulated depreciation and amortization ........ 398,201 87,719 -- (23,189)(4) 462,731 Mortgages and notes receivable, net of current portion ...................... 64,962 -- -- (2,816)(4) 62,146 Other assets ........................... 16,901 1,964 -- (1,964)(4) 16,901 -------- --------- ------- -------- -------- TOTAL ASSETS ....................... $573,241 $ 92,954 $ -- $(78,972) $587,223 ======== ========= ======= ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilites: Current portion of debt ................ $ 5,731 $ 87,523 $ -- $(87,523)(4) $ 5,731 Other current liabilities .............. 38,961 6,041 -- (3,916)(4) 41,086 -------- --------- ------- -------- -------- Total current liabilities .......... 44,692 93,564 -- (91,439) 46,817 Long-term debt, net of current portion . 276,920 13,562 -- (1,955)(4)(5) 288,527 Other liabilities ...................... 18,713 250 -- -- 18,963 -------- --------- ------- -------- -------- Total liabilities .................. 340,325 107,376 -- (93,394) 354,307 -------- --------- ------- -------- -------- Total stockholders' equity ................ 232,916 (14,422) 14,422 -- 232,916 -------- --------- ------- -------- -------- TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $573,241 $ 92,954 $14,422 $(93,394) $587,223 ======== ========= ======= ======== ========
The accompanying notes are an integral part of the pro forma condensed combined financial statements. -13- 15 PRIME HOSPITALITY CORP. PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS YEAR ENDED DECEMBER 31, 1995
Total Pro Forma Pro Forma Prime(1) Partnerships(2) Adjustments Combined -------- --------------- ----------- -------- REVENUES Lodging ................................ $ 146,184 $ 24,015 $ -- $ 170,199 Food & Beverage ........................ 37,955 -- -- 37,955 Management and Other Fees .............. 8,115 -- (1,174)(6) 6,941 Interest Income on Mortgages and Notes . 11,895 -- (163)(7) 11,732 Rental and Other ....................... 1,479 331 -- 1,810 --------- -------- ------- --------- TOTAL REVENUES ..................... 205,628 24,346 (1,337) 228,637 --------- -------- ------- --------- COSTS AND EXPENSES Direct Hotel Operating Expenses: Lodging .............................. 38,383 6,492 -- 44,875 Food and Beverage .................... 28,429 -- -- 28,429 Selling and General .................. 49,753 5,875 -- 55,628 Occupancy and Other Operating .......... 11,763 2,836 (1,174)(6) 13,425 General & Administrative Expense ....... 15,515 -- -- 15,515 Depreciation and Amortization .......... 15,974 4,965 (2,959)(8) 17,980 --------- -------- ------- --------- TOTAL EXPENSES ..................... 159,817 20,168 (4,133) 175,852 --------- -------- ------- --------- OPERATING INCOME .......................... 45,811 4,178 2,796 52,785 Investment Income ...................... 4,861 -- -- 4,861 Interest Expense ....................... (21,603) (5,403) (619)(7)(9) (27,625) Other Income ........................... 2,239 -- -- 2,239 Other Expense .......................... (2,200) -- -- (2,200) --------- -------- ------- --------- INCOME (LOSS) BEFORE INCOME TAXES AND EXTRAORDINARY ITEMS .................... 29,108 (1,225) 2,177 30,060 Provision for Income Taxes ............. 11,643 -- 871(10) 12,514 --------- -------- ------- --------- INCOME (LOSS)BEFORE EXTRAORDINARY ITEMS ... 17,465 (1,225) 1,306 17,546 Extraordinary Items, Net of Income Taxes 104 -- -- 104 --------- -------- ------- --------- NET INCOME (LOSS) ......................... $ 17,569 $ (1,225) $ 1,306 $ 17,650 ========= ======== ======= =========
The accompanying notes are an integral part of the pro forma condensed combined financial statements. -14- 16 FOOTNOTES TO PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION OF PRIME HOSPITALITY CORP. (1) The balance sheet and statement of operations of Prime Hospitality Corp. include the financial condition and results of Prime Hospitality Corp as of December 31, 1995 and for the year then ended. (2) The balance sheet and statement of operations of the Partnerships include the combined results of Wellesley I L.P., Multi-Wellesley Hotels, L.P., Biscayne-Clifton Associates, LeJeune Associates, Fort Pierce Associates and Daytona Associates as of December 31, 1995. (3) The eliminated Partnerships net assets and liabilities represent the equity of the combined Partnerships which were not acquired or assumed in the acquisition as only the assets and related liabilities of the Partnerships were acquired. (4) Represents the purchase of the first mortgage notes from the Holders, reclassification of restricted cash to cash and cash equivalents, elimination of accrued interest, elimination of the Prime second, third and subrogation mortgages and adjustments to property, equipment and leasehold improvements to their fair value in accordance with purchase accounting. (5) Represents additional borrowing necessary to fund the acquisition. (6) Represents the elimination of management and accounting fees paid to Prime by the Partnerships for the year ended December 31, 1995. (7) Represents the elimination of interest income and interest expense recorded between Prime, the Partnerships and the Holders for the year ended December 31, 1995. (8) Represents adjustment of depreciation expense based upon the new fair value of the property, equipment and leasehold improvements. (9) Interest expense based upon the total purchase price at Prime's incremental borrowing rate. (10) To tax effect all statement of operations pro forma adjustments at a rate of 40%, Prime's effective tax rate. -15- 17 (c) Exhibits 2.1(a) Contract of Purchase and Sale dated February 1, 1996 between Hillsborough Associates, Meriden Hotel Associates, L.P., Wellesley I, L.P., Multi-Wellesley Limited Partnership, Seller and Prime Hospitality Corp., Buyer (previously filed). 2.1(b) Consent of the Holders thereof to the Purchase by Prime Hospitality Corp. of the Outstanding First Mortgage Notes (previously filed). -16- 18 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 therunto duly authorized. PRIME HOSPITALITY CORP. Date: May 17, 1996 By: /s/ David A. Simon ------------------ David A. Simon, President and Chief Executive Officer Date: May 17, 1996 By: /s/ John M. Elwood ------------------ John M. Elwood, Executive Vice President and Chief Financial Officer -17- 19 EXHIBIT INDEX Exhibit 2.1(a) Contract of Purchase and Sale dated February 1, 1996 between Hillsborough Associates, Meriden Hotel Associates, L.P., Wellesley I, L.P., Multi-Wellesley Limited Partnership, Seller and Prime Hospitality Corp., Buyer (previously filed). 2.1(b) Consent of the Holders thereof to the Purchase by Prime Hospitality Corp. of the Outstanding First Mortgage Notes (previously filed). -18-