Prime Hospitality Corp. (NYSE:PDQ), a leading hotel owner, operator and
franchisor, reported its results for the first quarter ended March 31, 2002.
Net income before asset transactions for the first quarter was $343,000,
or $.01 per share, compared to $9.6 million, or $.21 per share, for the first
quarter of 2001.
Total net income, which includes gains on asset sales was $774,000, or
$.02 per share, for the first quarter of 2002. There were no gains or losses
on asset sales in the first quarter of 2001.
“The softness in business demand continues to affect our results,” said
A.F. Petrocelli, Chairman and CEO of Prime. “We saw some modest improvement
from the prior quarter and we are cautiously optimistic that we will see
further improvement each quarter this year.”
“We continue to focus on our strategy of growing our brands and our brand
infrastructure and maintaining our financial strength. We are particularly
pleased with the reaction to our new rewards program. During the quarter, we
enrolled another 25,000 members and we increased our revenue contribution from
frequent guests by over 25% from the prior quarter.
“We also generated $15 million from asset sales and retired $9 million of
debt. We are refinancing our 9 3/4% Senior Subordinated Notes with a new
$200 million issue priced at 8 3/8% resulting in a savings of approximately
$2 million per year. The new issuance, which priced on April 16, is expected
to settle on April 29. With a leverage ratio of 30.4% and no debt maturities
until 2006, we have put ourselves in a strong position to grow our company.”
For the quarter, total revenues decreased by $33.6 million to
$98.2 million due to lower revenues at comparable hotels and the impact of
asset divestitures. Revenue per available room (“REVPAR”) at Prime`s
comparable owned and leased hotels decreased by 13.3% as compared to the first
quarter of 2001. The decrease was driven primarily by lower average daily
rate (“ADR”). For the quarter, ADR decreased by 11.0% to $73.14 and occupancy
decreased by 1.6 percentage points to 59.5%. Gross operating profit margins
at comparable owned and leased hotels declined by 4.1 percentage points due to
the lower revenues partially offset by the impact of cost containment
Earnings before interest, taxes, depreciation and amortization (“EBITDA”)
decreased by $15.6 million to $17.8 million in the first quarter of 2002.
EBITDA margins declined by 7.1 percentage points primarily due to the lower
gross profit margins at the owned and leased hotels.
Interest expense declined by 13.0%, or $1.1 million, to $7.8 million for
the quarter ended March 31, 2002 as compared to $8.9 million for the same
period in the prior year primarily due to significant debt reductions in the
past year as a result of asset divestitures and operating cash flow.
For the quarter, Prime reported a 10.9% REVPAR decrease at its comparable
AmeriSuites hotels, as occupancy decreased by 0.2 percentage points to 61.4%
and ADR decreased by 10.8% to $75.19. The major markets affected were
Atlanta, Chicago, Dallas, Northern New Jersey and South Florida.
For the quarter, Prime reported a 15.3% REVPAR decrease at its comparable
Wellesley Inns & Suites hotels, as occupancy decreased by 4.1 percentage
points to 58.6% and ADR decreased by 9.4% to $61.92. The decrease was
attributable to weakness in business and leisure demand in the South Florida,
Phoenix and Austin markets.
Prime`s comparable non-proprietary brand hotels, which consist primarily
of upscale full-service hotels in the Northeast, reported a 17.8% REVPAR
decrease for the quarter as occupancy decreased by 5.9 percentage points to
54.8% and ADR decreased by 9.0% to $103.32. The non-proprietary brands were
impacted by reductions in group business and softness in the greater New York
During the first quarter, Prime sold one Wellesley Inn and one
full-service hotel for total proceeds of $15.4 million, retaining the
franchise rights on the Wellesley Inn under a 20-year franchise agreement.
Prime utilized the majority of the proceeds to retire $9.3 million of debt
which was scheduled to mature in 2002.
As of March 31, 2002, Prime had $310.7 million in debt and $35.5 million
in cash and cash equivalents. Prime`s debt to EBITDA ratio is 3.2 times, and
its debt to book capitalization percentage is 30.4%. In April 2002, Prime commenced a tender offer and consent solicitation for
all of its $190,000,000 of outstanding 9 3/4% Senior Subordinated Notes due
2007. Prime intends to fund the tender offer primarily with the net proceeds
from its issuance of $200,000,000 of 8 3/8% Senior Subordinated Notes due 2012
which it priced on April 16, 2002. Prime expects the settlement of the sale
of these notes to occur on Monday, April 29, 2002.
For full details Prime can be accessed
over the internet at http://www.primehospitality.com.