Casa Munras Hotel Partners L P 10QSB 2003 Q3 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 September 30, 2003

[  ] 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	95-3235634
(State or other jurisdiction of	(I.R.S. Employer
incorporation or organization)	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
	Item 3. Controls and Procedures
PART II – OTHER INFORMATION
	Item 5. Other Information
	Item 6. Exhibits and Reports on Form 8-K
SIGNATURE
EXHIBIT 31
EXHIBIT 32

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, 2002 and should be read in connection therewith. The results of operations for the three and nine-month period ended September 30, 2003 are not necessarily indicative of the results to be expected for the full year.

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

BALANCE SHEETS

			September 30,			December 31,
			2003			2002
			(Unaudited)
ASSETS
CURRENT ASSETS:
	Cash		$	138,626		$	219,528
	Accounts receivable			112,543			50,985
	Food and beverage inventories			18,158			18,934
	Prepaid expenses			51,424			47,449
		Total current assets		320,751			336,896
LAND, PROPERTY AND EQUIPMENT - at cost:
	Building and improvements			6,541,528			6,541,528
	Hotel furnishings and equipment			2,321,947			2,307,694
	Restaurant furnishings and equipment			136,914			136,528
	Less accumulated depreciation			(6,028,638	)		(5,817,138	)
				2,971,751			3,168,612
	Land			700,000			700,000
	Construction in progress			88,580			—
		Land, property and equipment - net		3,760,331			3,868,612
OTHER ASSETS:
	Liquor license			40,000			40,000
	Loan commitment fees - net			111,354			128,931
	Escrow impound accounts			272,601			346,258
		Total other assets		423,955			515,189
		TOTAL	$	4,505,037		$	4,720,697
LIABILITIES AND PARTNERS’ DEFICIT
CURRENT LIABILITIES:
	Accounts payable - trade		$	93,290		$	44,856
	Accounts payable - related parties			33,726			48,289
	Accrued incentive management fees - related parties			77,706			207,273
	Accrued salaries and wages			43,775			6,428
	Accrued room tax			33,730			24,928
	Accrued other			22,773			9,304
	Current portion of long-term debt			143,736			135,696
		Total current liabilities		448,736			476,774
LONG-TERM DEBT				6,258,700			6,367,529
		Total liabilities		6,707,436			6,844,303
PARTNERS’ DEFICIT:
	General Partner (45 units issued and outstanding)			(235,530	)		(234,742	)
	Limited Partners (4,455 units issued and outstanding)			(1,966,869	)		(1,888,864	)
		Total partners’ deficit		(2,202,399	)		(2,123,606	)
		TOTAL	$	4,505,037		$	4,720,697

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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, 2003 AND 2002
(Unaudited)

			Three Months Ended				Nine Months Ended
			September 30,				September 30,
			2003		2002		2003			2002
REVENUES:
	Room		$	1,222,911	$	1,147,211	$	2,561,689		$	2,583,915
	Food and beverage			190,444		182,480		507,519			473,345
	Lease			27,018		26,079		78,664			78,237
	Telephone			7,556		5,556		18,526			20,232
	Other			4,102		14,868		12,441			29,664
		Total		1,452,031		1,376,194		3,178,839			3,185,393
OPERATING EXPENSES:
	Rooms			315,655		290,853		835,287			775,166
	Food and beverage			175,654		152,559		476,659			419,427
	Interest			123,687		126,217		373,002			380,448
	Administrative and general			123,767		118,542		322,065			310,159
	Marketing			107,164		79,443		272,129			238,345
	Depreciation and amortization			76,359		103,059		229,077			309,177
	Repairs and maintenance			59,968		71,716		206,763			209,177
	Energy cost			48,809		42,166		136,878			127,098
	Management fees			118,578		116,180		203,374			225,123
	Insurance			24,134		25,212		73,976			75,636
	Partnership admin. and professional fees			15,866		2,631		58,539			46,436
	Property taxes			21,967		21,759		59,913			61,079
	Telephone			3,566		3,677		9,970			10,467
		Total (including reimbursed costs and payments for services to related parties of $240,253 and $225,084 and $670,299 and $662,954 for the three and nine months ended September 30, 2003 and 2002, respectively)		1,215,174		1,154,014		3,257,632			3,187,738
NET INCOME (LOSS)			$	236,857	$	222,180	$	(78,793	)	$	(2,345	)

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, 2003 AND 2002
(Unaudited)

				Three Months Ended				Nine Months Ended
				September 30,				September 30,
				2003		2002		2003			2002
ALLOCATION OF NET INCOME (LOSS):
	General Partner(45 units outstanding)			$	2,369	$	188	$	(788	)	$	(2,245	)
	Limited Partners (4,455 units outstanding)				234,488		18,637		(78,005	)		(222,280	)
			Total	$	236,857	$	18,825	$	(78,793	)	$	(224,525	)
DISTRIBUTIONS TO PARTNERS				$	—	$	67,500	$	—		$	67,500
PER UNIT INFORMATION:
	(based upon 4,500 total units outstanding):
		Net income (loss)		$	52.63	$	4.18	$	(17.51	)	$	(49.89	)
		Distributions		$	—	$	15.00	$	—		$	15.00

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, 2003 AND 2002
(Unaudited)

				2003			2002
OPERATING ACTIVITIES:
	Net loss			$	(78,793	)	$	(2,345	)
	Adjustments to reconcile net loss to net cash (used in) provided by operating activities:
		Depreciation and amortization			229,077			309,177
		Change in assets and liabilities:
			Accounts receivable		(61,558	)		(27,032	)
			Food and beverage inventories		776			1,684
			Prepaid expenses		(3,975	)		(17,066	)
			Accounts payable and accrued expenses		(36,078	)		91,020
			Net cash provided by operating activities		49,449			355,438
INVESTING ACTIVITIES:
	Acquisition of property and equipment				(103,219	)		(278,867	)
	Impound escrow accounts				73,657			(95,206	)
			Net cash used in investing activities		(29,562	)		(374,073	)
FINANCING ACTIVITIES:
	Payment of long-term debt				(100,789	)		(93,343	)
	Distributions paid to Partners				—			(135,000	)
			Net cash used in financing activities		(100,789	)		(228,343	)
NET DECREASE IN CASH					(80,902	)		(246,978	)
CASH AT BEGINNING OF PERIOD					219,528			759,358
CASH AT END OF PERIOD				$	138,626		$	512,380
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
	Cash paid during the period for interest			$	373,002		$	380,448
	Cash paid during the period for taxes			$	1,600		$	1,600

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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, 2003 and 2002

     For the three and nine months ended September 30, 2003 as compared to the same periods of the prior year, occupancy rates at the Registrant’s hotel were 68% and 52% versus 58% and 49% and average room rates were $117.96 and $108.98 versus $129.79 and $117.14, resulting in an increase (decrease) in room revenue totaling $75,700 and $(22,226) for the three and nine months ended September 30, 2003 as compared to the comparable period in 2002. Food and beverage revenues increased $7,964 and $34,134 for the three and nine months ended September 30, 2003 as compared to 2002.

     The decrease in average room rates for 2003 as compared to 2002 are due to the continued economic recession and resulting intensified competition among hotels resulting in the lowering of room rates in the San Francisco/Monterey Bay, California area. This area of the country has been more severely impacted by the effects of September 11, 2001 and reduced foreign travel than other parts of the United States. 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 business travel. Leisure travel bookings at the hotel improved in the third quarter 2003 as compared to 2002 resulting in increased occupancy, but, as noted above, at the expense of decreased room rates.

     Food and beverage revenues are primarily influenced by the number of hotel guests. Hotel guests were up for the three and nine months ended September 30, 2003, resulting in increased food and beverage revenues.

     Operating expenses totaled $1,215,174 and $3,257,632 for the three and nine months ended September 30, 2003 as compared to $1,154,014 and $3,187,738 for the three and nine months ended September 30, 2002, respectively. Operating expense as a percentage of revenue totaled 84% and 102% versus 84% and 100% for the three and nine months ended September 30, 2003 as compared to 2002. The principal reasons for the increase in operating expenses as a percentage of revenue for the nine months ended September 30, 2003 as compared to 2002 were increased salary and wages, medical insurance, and worker’s compensation insurance premiums due to the increase in the California minimum wage which impacts prevailing hospitality wage rates, increased medical insurance premiums in California and nationwide, and higher worker’s compensation insurance rates throughout California. These increases were partially offset by reduced depreciation and amortization.

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Recent Accounting Pronouncements

     In 2002 and 2001 and through October 27, 2003, the Financial Accounting Standards Board (“FSAB”) issued Statements of Financial Accounting Standards (“SFAS”) No. 143, “Accounting for Asset Retirement Obligations,” SFAS No. 145, “Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections,” SFAS No. 146, “Accounting for Costs Associated with Exit of Disposal Activities,” SFAS No. 147, “Acquisitions of Certain Financial Institutions”, SFAS No. 148, “Accounting for Stock Based Compensation Transition and Disclosures,” SFAS No. 149, “Amendment of Statement 133 on Derivative Instruments and Hedging Activities,” and SFAS No. 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity,” which are required to be adopted by the Partnership, if applicable, in calendar 2003 or later years. The Partnership does not expect the adoption of these SFAS’s in 2003, or later years as required by the FASB, to have any impact on the financial condition, results of operations, or cash flows.

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 nine months ended September 30, 2003, the Registrant provided $49,449 in net cash flow for operating activities. Reductions in long-term debt totaled $100,789 and impound escrow accounts decreased $73,657 during the first nine months of 2003.

     Acquisition of property and equipment during the nine months ended September 30, 2003 totaled $103,219. It is estimated that approximately $100,000 more will be expended in the remainder of calendar 2003 for ongoing renovations of existing assets.

     No distributions were declared for the fourth quarter of 2002 and the first, second, and third quarters of 2003 or paid in the first, second, and third quarters of 2003.

     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.

Item 3. Controls and Procedures

     During the 90-day period prior to the filing date of this report, the Managing Member of the General Partner who performs the functions of the Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of the design and

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operation of the Registrant’s disclosure controls and procedures. Based upon, and as of the date of that evaluation, the Managing Member of the General Partner who performs the functions of the Chief Executive Officer and Chief Financial Officer concluded that the disclosure controls and procedures were effective, in all material respects, to ensure that information required to be disclosed in the reports the Registrant files and submits under the Exchange Act is recorded, processed, summarized and reported as and when required.

     There have been no significant changes in the Registrant’s internal controls or in other factors that could significantly affect internal controls subsequent to the date the Registrant carried out its evaluation. There were no significant deficiencies or material weakness identified in the evaluation and therefore, no corrective actions were taken.

PART II – OTHER INFORMATION

Item 5. Other Information

     The Managing Member of the General Partner who performs the functions of the Chief Executive Officer and Chief Financial Officer of the Registrant have certified that the Quarterly Report of the Registrant on Form 10-QSB for the quarterly period ended September 30, 2003 fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934 (15 U.S.C. (ss) 78m or (ss) 78o(d)) and that information contained in such report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Item 6. Exhibits and Reports on Form 8-K

     (a) Exhibits:

31 – Rule 13a-14(a) / 15(d)-14(a) Certification for Managing Member of the General Partner who performs the functions of the Chief Executive Officer and Chief Financial Officer

32 – Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

     (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: October 27, 2003

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