Casa Munras Hotel Partners L P 10QSB 2001 Q3 Quarterly report (small business)

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

[X]	Quarterly report under Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended September 30, 2001

[   ]	Transition report under Section 13 or 15(d) of the Exchange Act
	For the transition period from_______________to_______________

Commission file number 0-8901

CASA MUNRAS HOTEL PARTNERS, L.P.
(Exact name of small business issuer as specified in its charter)

California
(State or other jurisdiction of
incorporation or organization) 95-3235634
(I.R.S. Employer
Identification No.)

8885 Rio San Diego Drive, Suite 220, San Diego, California 92108
(Address of principal executive offices)

5525 Oakdale Avenue, Suite 300, Woodland Hills, California 91364
(Former Address)

(619) 297-4040
(Issuer’s telephone number, including Area Code)

     Check whether the issuer: (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 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 [   ]

     Transitional Small Business Disclosure Format: Yes [   ]   No [X]

TABLE OF CONTENTS

PART I — FINANCIAL INFORMATION
	Item 1. Financial Statements
		BALANCE SHEETS
		STATEMENTS OF OPERATIONS
		STATEMENTS OF CASH FLOWS
	Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
PART II — OTHER INFORMATION
SIGNATURE

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

     The accompanying unaudited financial statements of Casa Munras Hotel Partners, L.P. have been prepared in accordance with accounting principles generally accepted in the United States of America for interim financial information and with the instructions to Form 10-QSB. Accordingly, these statements do not include all of the information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. In the opinion of the General Partner of the Registrant, all adjustments necessary for a fair presentation have been included. The financial statements presented herein have been prepared in accordance with the accounting policies described in the Registrant’s Annual Report on Form 10-KSB for the year ended December 31, 2000 and should be read in connection therewith. The results of operations for the three and nine month periods ended September 30, 2001 are not necessarily indicative of the results to be expected for the full year.

     In June 2001, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141, “Business Combinations”. SFAS No. 141 requires the use of the purchase method of accounting for all business combinations initiated after June 30, 2001 and eliminates the pooling-of-interests method. The Partnership does not believe that the adoption of SFAS No. 141 will have a significant impact on its financial statements.

     In June 2001, the FASB issued SFAS No. 142, “Goodwill and Other Intangible Assets”. SFAS No. 142 requires that goodwill and other intangible assets with indefinite lives no longer be amortized, but instead tested for impairment at least annually. In addition, the standard includes provisions for the reclassification of certain existing intangibles as goodwill and reassessment of the useful lives of existing recognized intangibles. SFAS No. 142 is effective for fiscal years beginning after December 15, 2001. The Partnership does not believe that the adoption of SFAS No. 142 will have a significant impact on its financial statements.

     In August 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets”. This statement supercedes SFAS No. 121, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of”, and the accounting and reporting provisions of APB Opinion No. 30, “Reporting the Results of Operations-Reporting the Effects of a Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions”, for disposal of a segment of a business (as previously defined in that Opinion). SFAS No. 144 is effective for fiscal years beginning after December 15, 2001. The Partnership has not determined the impact, if any, that SFAS No. 144 will have on its financial statements.

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CASA MUNRAS HOTEL PARTNERS, L.P.
(A Limited Partnership)

BALANCE SHEETS

			September 30,			December 31,
			2001			2000
			(Unaudited)
ASSETS
CURRENT ASSETS:
	Cash		$	1,019,123		$	1,298,650
	Accounts receivable			57,155			144,876
	Food and beverage inventories			18,855			17,009
	Prepaid expenses			35,678			45,263
		Total current assets		1,130,811			1,505,798
LAND, PROPERTY AND EQUIPMENT — at cost:
	Building and improvements			6,134,662			6,132,807
	Hotel furnishings and equipment			2,111,422			2,075,869
	Restaurant furnishings and equipment			89,432			89,432
	Less accumulated depreciation			(5,278,072	)		(4,992,772	)
				3,057,444			3,305,336
	Land			700,000			700,000
	Construction in progress			302,728
		Land, property and equipment — net		4,060,172			4,005,336
OTHER ASSETS:
	Liquor license			40,000			40,000
	Loan commitment fees — net			158,241			175,818
	Escrow impound accounts			232,719			236,775
		Total other assets		430,960			452,593
		TOTAL	$	5,621,943		$	5,963,727
LIABILITIES AND PARTNERS’ DEFICIT
CURRENT LIABILITIES:
	Accounts payable — trade		$	54,994		$	55,370
	Accounts payable — related parties			32,503			41,599
	Accrued incentive management fees — related parties			116,245			212,487
	Accrued salaries and wages			43,417			82,144
	Accrued room tax			30,318			46,356
	Accrued other			13,825			14,161
	Distributions payable			67,500			67,500
	Current portion of long-term debt			123,282			116,385
		Total current liabilities		482,084			636,002
LONG-TERM DEBT				6,535,552			6,628,895
		Total liabilities		7,017,636			7,264,897
PARTNERS’ DEFICIT:
	General Partner (45 units issued and outstanding)			(227,462	)		(226,517	)
	Limited Partners (4,455 units issued and outstanding)			(1,168,231	)		(1,074,653	)
		Total partners’ deficit		(1,395,693	)		(1,301,170	)
		TOTAL	$	5,621,943		$	5,963,727

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CASA MUNRAS HOTEL PARTNERS, L.P.
(A LIMITED PARTNERSHIP)

STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(Unaudited)

			Three Months Ended				Nine Months Ended
			September 30,				September 30,
			2001		2000		2001		2000
REVENUES:
	Room		$	1,138,979	$	1,568,025	$	2,689,360	$	3,533,784
	Food and beverage			177,342		195,292		514,605		537,036
	Lease			26,133		24,885		77,482		73,588
	Telephone			9,512		13,430		26,817		35,218
	Other			14,385		17,344		45,928		50,930
		Total		1,366,351		1,818,976		3,354,192		4,230,556
OPERATING EXPENSES:
	Rooms			277,243		327,498		771,809		851,320
	Food and beverage			154,423		169,159		445,079		485,249
	Interest			128,560		130,731		387,345		393,732
	Administrative and general			110,771		131,910		324,529		313,406
	Depreciation and amortization			100,959		95,859		302,877		287,577
	Energy cost			26,976		51,012		134,857		134,547
	Marketing			71,991		83,879		213,324		231,356
	Repairs and maintenance			75,256		68,457		219,389		205,702
	Management fees			119,497		175,074		248,171		373,644
	Partnership admin. and professional fees			13,350		4,611		66,266		43,235
	Insurance			19,956		12,018		59,798		30,748
	Property taxes			22,720		23,731		61,416		60,979
	Telephone			3,784		4,787		11,355		14,401
		Total (including reimbursed costs and payments for services to related parties of $230,067 and $278,499 and $785,015 and $743,642 for the three and nine months ended September 30, 2001 and 2000, respectively)		1,125,486		1,278,726		3,246,215		3,425,896
NET INCOME			$	240,865	$	540,250	$	107,977	$	804,660

Continued

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CASA MUNRAS HOTEL PARTNERS, L.P.
(A LIMITED PARTNERSHIP)

STATEMENTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(Unaudited)

				Three Months Ended				Nine Months Ended
				September 30,				September 30,
				2001		2000		2001		2000
ALLOCATION OF NET INCOME:
	General Partner (45 units outstanding)			$	2,409	$	5,402	$	1,080	$	8,047
	Limited Partners (4,455 units outstanding)				238,456		534,848		106,897		796,613
			Total	$	240,865	$	540,250	$	107,977	$	804,660
DISTRIBUTIONS TO PARTNERS				$	67,500	$	112,500	$	202,500	$	247,500
PER UNIT INFORMATION:
	(based upon 4,500 total units outstanding):
		Net income		$	53.53	$	120.06	$	23.99	$	178.81
		Distributions		$	15.00	$	25.00	$	45.00	$	55.00

Concluded

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CASA MUNRAS HOTEL PARTNERS, L.P.
(A LIMITED PARTNERSHIP)

STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
(Unaudited)

				2001			2000
OPERATING ACTIVITIES:
	Net income			$	107,977		$	804,660
	Adjustments to reconcile net income to net cash provided by operating activities:
		Depreciation and amortization			302,877			287,577
		Change in assets and liabilities:
			Accounts receivable		87,721			(110,895	)
			Food and beverage inventories		(1,846	)		(5,227	)
			Prepaid expenses		9,585			33,135
			Accounts payable and accrued expenses		(160,815	)		(67,203	)
			Net cash provided by operating activities		345,499			942,047
INVESTING ACTIVITIES:
	Acquisition of property and equipment				(340,136	)		(480,916	)
FINANCING ACTIVITIES:
	Payment of long-term debt				(86,446	)		(80,059	)
	Distributions paid to Partners				(202,500	)		(202,500	)
	Decrease in impound escrow accounts				4,056			24,374
			Net cash used in financing activities		(284,890	)		(258,185	)
NET (DECREASE) INCREASE IN CASH					(279,527	)		202,946
CASH AT BEGINNING OF PERIOD					1,298,650			1,265,796
CASH AT END OF PERIOD				$	1,019,123		$	1,468,742
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
	Cash paid during the period for interest			$	387,345		$	393,732

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

Results of Operations for the Three and Nine Months Ended September 30, 2001 and 2000

     The Registrant’s revenues, which were already substantially under 2000 revenues, have been further impacted by the terrorist events of September 11, 2001 and thereafter. The General Partner has initiated cost cutting procedures, but does not know the long-term impact the current economic downturn will have on future revenue levels.

     For the three and nine months ended September 30, 2001 as compared to the same periods of the prior year, occupancy rates at the Registrant’s hotel were 50% and 55% versus 64% and 79% and average room rates were $133.11 and $119.41 versus $130.65 and $121.46, respectively. The results of the lower occupancy and room rate changes was a decrease in room revenue totaling $429,046 and $844,424 for the three and nine months ended September 30, 2001 as compared to the same periods of 2000, respectively. The decrease in occupancy resulting in reduced room revenue is primarily the result of reduced business and leisure travel due to the regional and national economic downturn more recently influenced by the terrorist events of September 11, 2001 and thereafter for the three and nine months ended September 30, 2001 as compared to the same periods of 2000, respectively. In addition, in June 2000 the United States Open Golf Tournament was held at Pebble Beach on the Monterey Peninsula resulting in higher occupancy and room rates in June 2000 as compared to June 2001. Further, due to reduced occupancy on the Monterey Peninsula, area hotels have been more competitive in reducing room rates to attract additional occupancy for the three and nine months ended September 30, 2001 as compared to the same periods of 2000, respectively, which competition has resulted in lower room rates for the Hotel. Food and beverage revenues decreased $17,950 and $22,431 for the three and nine months ended September 30, 2001 as compared to the same periods of 2000, respectively. Food and beverage revenues have decreased in 2001 over the comparable 2000 period primarily due to decreased patrons in the restaurant which number of patrons is impacted by the occupancy of the Hotel.

     Operating expenses totaled $1,125,486 and $3,246,215 for the three and nine months ended September 30, 2001 as compared to $1,278,726 and $3,425,896 for the three and nine months ended September 30, 2000, respectively. Operating expenses for the three and nine months ended September 30, 2001 were down due to reduced occupancy levels for the three and nine months ended September 30, 2001 as compared to the same periods of 2000, respectively, particularly management fees which are substantially based upon the Hotel’s gross revenue.

     Net income decreased $299,385 and $696,683 to $240,865 and $107,977 for the three and nine months ended September 30, 2001 as compared to the same periods of 2000, respectively. The decrease in net income is principally attributed to reduced room revenues due to reduced occupancy and room rates due to reduced business and leisure travel for the three and nine months ended September 30, 2001 as compared to the same

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periods of 2000, respectively, and the one time positive impact in June 2000 of the United States Open Golf Tournament.

Liquidity and Capital Resources

     The Registrant’s primary source of cash is revenues from the operation and leasing of the Hotel. The Registrant’s primary uses of cash are to fund Hotel operating expenses, payments on the first mortgage, renovations and to pay distributions to Partners.

     During the nine months ended September 30, 2001, the Registrant generated $345,499 in net cash flow provided by operating activities. Reductions in long-term debt totaled $86,446 and impound escrow accounts decreased $4,056 during the first nine months of 2001.

     Acquisition of property and equipment during the nine months ended September 30, 2001 totaled $340,136. It is estimated that approximately $300,000 more will be expended in 2001 for ongoing renovations of existing assets.

     Distributions totaling $67,500 were accrued in the fourth quarter 2000 and paid in the first quarter 2001. Distributions totaling $202,500 were declared, of which $135,000 was paid, during the nine months ended September 30, 2001.

     The General Partner intends, to the extent cash from operations is available and such distributions are permitted under the first mortgage payable, to continue making cash distributions to the Partners at amounts approximating the Registrant’s net income.

PART II — OTHER INFORMATION

     No Part II items applicable.

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SIGNATURE

In accordance with the requirements of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CASA MUNRAS HOTEL PARTNERS, L.P.

CASA MUNRAS GP, LLC General Partner
By:	/s/ JOHN F. ROTHMAN
	John F. Rothman, Managing Member

Dated: November 7, 2001

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