Casa Munras Hotel Partners L P 10QSB 2002 Q2 Quarterly report (small business)

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-QSB

[X] Quarterly report under Section 13 of 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2002

[   ] 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)

(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
	Item 6. Exhibits and Reports on Form 8-K
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, 2001 and should be read in connection therewith. The results of operations for the three and six month period ended June 30, 2002 are not necessarily indicative of the results to be expected for the full year.

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

BALANCE SHEETS

			June 30,			December 31,
			2002			2001
			(Unaudited)
ASSETS
CURRENT ASSETS:
	Cash		$	477,920		$	759,358
	Accounts receivable			55,665			22,372
	Food and beverage inventories			18,406			19,404
	Prepaid expenses			84,923			39,385
		Total current assets		636,914			840,519
LAND, PROPERTY AND EQUIPMENT — at cost:
	Building and improvements			6,311,036			6,310,962
	Hotel furnishings and equipment			2,258,407			2,256,198
	Restaurant furnishings and equipment			133,169			133,169
	Less accumulated depreciation			(5,599,094	)		(5,404,694	)
				3,103,518			3,295,635
	Land			700,000			700,000
	Construction in progress			226,527			—
		Land, property and equipment — net		4,030,045			3,995,635
OTHER ASSETS:
	Liquor license			40,000			40,000
	Loan commitment fees — net			140,649			152,367
	Escrow impound accounts			240,772			263,722
		Total other assets		421,421			456,089
		TOTAL	$	5,088,380		$	5,292,243
LIABILITIES AND PARTNERS’ DEFICIT
CURRENT LIABILITIES:
	Accounts payable — trade		$	118,283		$	58,444
	Accounts payable — related parties			67,868			51,391
	Accrued incentive management fees — related parties			152,636			115,611
	Accrued salaries and wages			37,628			32,843
	Accrued room tax			65,180			35,253
	Accrued other			8,975			7,236
	Distributions payable			67,500			67,500
	Current portion of long-term debt			130,587			125,670
		Total current liabilities		648,657			493,948
LONG-TERM DEBT				6,436,678			6,503,225
		Total liabilities		7,085,335			6,997,173
PARTNERS’ DEFICIT:
	General Partner (45 units issued and outstanding)			(233,475	)		(230,555	)
	Limited Partners (4,455 units issued and outstanding)			(1,763,480	)		(1,474,375	)
		Total partners’ deficit		(1,996,955	)		(1,704,930	)
		TOTAL	$	5,088,380		$	5,292,243

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

STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(Unaudited)

			Three Months Ended				Six Months Ended
			June 30,				June 30,
			2002		2001		2002			2001
REVENUES:
	Room		$	893,303	$	854,092	$	1,436,704		$	1,550,381
	Food and beverage			168,250		174,349		290,865			337,263
	Lease			26,079		25,830		52,158			51,349
	Telephone			8,399		8,958		14,676			17,305
	Other			8,645		12,817		14,796			31,543
		Total		1,104,676		1,076,046		1,809,199			1,987,841
OPERATING EXPENSES:
	Rooms			274,299		262,511		484,313			494,566
	Food and beverage			147,842		147,615		266,868			290,656
	Interest			126,790		129,119		254,231			258,785
	Depreciation and amortization			103,089		100,959		206,118			201,918
	Administrative and general			93,395		101,018		191,617			213,758
	Marketing			80,454		75,567		158,902			141,333
	Repairs and maintenance			69,252		79,604		137,461			144,133
	Management fees			80,145		76,750		108,943			128,674
	Energy cost			43,787		32,365		84,932			107,881
	Insurance			25,212		19,886		50,424			39,842
	Partnership admin. and professional fees			19,804		19,643		43,805			52,916
	Property taxes			18,173		19,840		39,320			38,696
	Telephone			3,609		3,659		6,790			7,571
		Total (including reimbursed costs and payments for services to related parties of $247,141 and $270,762 and $437,870 and $554,948 for the three and six months ended June 30, 2002 and 2001, respectively)		1,085,851		1,068,536		2,033,724			2,120,729
NET INCOME (LOSS)			$	18,825	$	7,510	$	(224,525	)	$	(132,888	)

Continued

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

STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(Unaudited)

				Three Months Ended				Six Months Ended
				June 30,				June 30,
				2002		2001		2002			2001
ALLOCATION OF NET INCOME (LOSS):
	General Partner (45 units outstanding)			$	188	$	75	$	(2,245	)	$	(1,329	)
	Limited Partners (4,455 units outstanding)				18,637		7,435		(222,280	)		(131,559	)
			Total	$	18,825	$	7,510	$	(224,525	)	$	(132,888	)
DISTRIBUTIONS TO PARTNERS				$	67,500	$	67,500	$	67,500		$	135,000
PER UNIT INFORMATION:
	(based upon 4,500 total units outstanding):
		Net income (loss)		$	4.18	$	1.67	$	(49.89	)	$	(29.53	)
		Distributions		$	15.00	$	15.00	$	15.00		$	30.00

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

STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2002 AND 2001
(Unaudited)

				2002			2001
OPERATING ACTIVITIES:
	Net loss			$	(224,525	)	$	(132,888	)
	Adjustments to reconcile net loss (income) to net cash (used in) provided by operating activities:
		Depreciation and amortization			206,118			201,918
		Change in assets and liabilities:
			Accounts receivable		(33,293	)		64,167
			Food and beverage inventories		998			(1,167	)
			Prepaid expenses		(45,538	)		(23,096	)
			Accounts payable and accrued expenses		149,792			(186,192	)
			Net cash provided by (used in) operating activities		53,552			(77,258	)
INVESTING ACTIVITIES:
	Acquisition of property and equipment				(228,810	)		(245,214	)
	Impound escrow accounts				22,950			52,714
			Net cash used in investing activities		(205,860	)		(192,500	)
FINANCING ACTIVITIES:
	Payment of long-term debt				(61,630	)		(57,076	)
	Distributions paid to Partners				(67,500	)		(135,000	)
			Net cash used in financing activities		(129,130	)		(192,076	)
NET DECREASE IN CASH					(281,438	)		(461,834	)
CASH AT BEGINNING OF PERIOD					759,358			1,298,650
CASH AT END OF PERIOD				$	477,920		$	836,816
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
	Cash paid during the period for interest			$	254,231		$	258,785

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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 Six Months Ended June 30, 2002 and 2001

     For the three and six months ended June 30, 2002 as compared to the same periods of the prior year, occupancy rates at the Registrant’s hotel were 52% and 44% versus 50% and 47% and average room rates were $112.46 and $108.68 versus $112.42 and $110.32, resulting in an increase (decrease) in room revenue totaling $39,211 and ($113,677) for the three and six months ended June 30, 2002 as compared to the comparable period in 2001. Food and beverage revenues decreased $6,099 and $46,398 for the three and six months ended June 30, 2002 as compared to the same periods of 2001.

     The decrease in occupancy and average room rates year to date is due to the continued economic recession in the San Francisco/Monterey Bay area. This area of the country has been more severely impacted by the effects of September 11, 2001, due to reduced foreign travel. Additionally, the effects of the dot.com slowdown, for which the region is noted, have reduced business travel to the region and have resulted in job cutbacks in the area resulting in reduced local leisure travel.

     The slight increase in occupancy and approximately equal room rates for the three months ended June 30, 2002 as compared to June 30, 2001 are a result of the stabilization in the decline in business levels in the San Francisco/Monterey Bay area. There is no assurance the stabilization will continue.

     Reduced guests at the hotel have resulted in fewer patrons at the restaurant and lounge and reduced food and beverage revenues year to date. Food and beverage revenue for the three months ended June 30, 2002 as compared to 2001 are approximately equal due to the stabilization of occupancy during the comparable periods.

     Operating expenses totaled $1,085,851 and $2,033,724 for the three and six months ended June 30, 2002 as compared to $1,068,536 and $2,120,729 for the three and six months ended June 30, 2001, respectively. The principal reasons for the decrease in operating expenses in 2002 as compared to 2001 were reduced rooms, food and beverage and administrative expenses, which variable expenses are down due to reduced occupancy and food and beverage revenues.

Recent Accounting Pronouncements

     In July 2001, the Financial Accounting Standards Board (“FSAB”) issued Statements of Financial Accounting Standards (“SFAS”) No. 142, “Goodwill and Other Intangible Assets” which requires the discontinuance of goodwill amortization. In August 2001, the FASB issued SFAS No. 143, “Accounting for Asset Retirement Obligations”. SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated retirement costs. In

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October 2001, the FASB issued SFAS No. 144, “Accounting for the Impairment or Disposal of Long-Lived Assets to be Disposed Of”, and addressed financial accounting and reporting for the impairment of long-lived assets to be disposed of. The partnership adopted SFAS No. 142, 143, and 144 during the first quarter of calendar 2002, which did not have a material effect on it’s financial condition or results of operations.

Liquidity and Capital Resources

     The Registrant’s primary source of cash is revenues from the operation and leasing of the hotel facility. 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 six months ended June 30, 2002, the Registrant generated $53,552 in net cash flow provided by operating activities. Reductions in long-term debt totaled $61,630 and impound escrow accounts decreased $22,950 during the six months of 2002.

     Acquisition of property and equipment during the six months ended June 30, 2002 totaled $228,810. It is estimated that approximately $100,000 more will be expended in the remainder of calendar 2002 for ongoing renovations of existing assets.

     Distributions totaling $67,500 were accrued in the fourth quarter of 2001 and paid in the first quarter 2002. No distributions were accrued and paid for the first quarter of 2002. Distributions accrued in the second quarter of 2002 and paid in the third quarter of 2002 totaled $67,500.

     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

Item 6. Exhibits and Reports on Form 8-K

     (a) Exhibits:

     None

     (b) Reports on Form 8-K:

     None

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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: August 2, 2002

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