SECURITIES AND EXCHANGE COMMISSION
FORM 10-QSB
þ Quarterly report under Section 13 of 15(d) of the Securities Exchange Act of 1934
o Transition report under Section 13 of 15(d) of the Exchange Act
Commission file number 0-8901
CASA MUNRAS HOTEL PARTNERS, L.P.
| 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. Yesþ Noo
Transitional Small Business Disclosure Format: Yeso Noþ
PART I – FINANCIAL INFORMATION
Item 1.Financial Statements
The accompanying unaudited financial statements of Casa Munras Hotel Partners, L.P. (the “Partnership”) 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, 2004 and should be read in connection therewith. The results of operations for the three-month period ended March 31, 2005 are not necessarily indicative of the results to be expected for the full year.
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CASA MUNRAS HOTEL PARTNERS, L.P.
BALANCE SHEETS
| March 31, | ||||||||
| 2005 | December 31, | |||||||
| (Unaudited) | 2004 | |||||||
| ASSETS | ||||||||
| CURRENT ASSETS: | ||||||||
| Cash | $ | 109,526 | $ | 14,385 | ||||
| Accounts receivable | 69,000 | 84,082 | ||||||
| Food and beverage inventories | 19,985 | 20,378 | ||||||
| Prepaid expenses | 117,729 | 28,559 | ||||||
| Total current assets | 316,240 | 147,404 | ||||||
| LAND, PROPERTY AND EQUIPMENT — at cost: | ||||||||
| Building and improvements | 6,418,544 | 6,406,728 | ||||||
| Hotel furnishings and equipment | 1,367,685 | 1,342,732 | ||||||
| Restaurant furnishings and equipment | 115,593 | 115,593 | ||||||
| Less accumulated depreciation | (5,077,001 | ) | (5,018,201 | ) | ||||
| 2,824,821 | 2,846,852 | |||||||
| Land | 700,000 | 700,000 | ||||||
| Land, property and equipment — net | 3,524,821 | 3,546,852 | ||||||
| OTHER ASSETS: | ||||||||
| Liquor license | 40,000 | 40,000 | ||||||
| Loan commitment fees — net | 76,200 | 82,059 | ||||||
| Escrow impound accounts | 244,250 | 295,203 | ||||||
| Total other assets | 360,450 | 417,262 | ||||||
| TOTAL | $ | 4,201,511 | $ | 4,111,518 | ||||
| LIABILITIES AND PARTNERS’ DEFICIT | ||||||||
| CURRENT LIABILITIES: | ||||||||
| Accounts payable — trade | $ | 171,581 | $ | 87,922 | ||||
| Accounts payable — related parties | 437,250 | 188,308 | ||||||
| Accrued incentive management fees — related parties | 92,406 | 91,663 | ||||||
| Accrued salaries and wages | 23,363 | 20,842 | ||||||
| Accrued room and sales tax | 27,819 | 31,414 | ||||||
| Accrued other | 21,929 | 4,222 | ||||||
| Current portion of long-term debt | 161,275 | 158,210 | ||||||
| Total current liabilities | 935,623 | 582,581 | ||||||
| LONG-TERM DEBT | 6,021,312 | 6,062,798 | ||||||
| Total liabilities | 6,956,935 | 6,645,379 | ||||||
| PARTNERS’ DEFICIT: | ||||||||
| General Partner (45 units issued and outstanding) | (241,061 | ) | (238,845 | ) | ||||
| Limited Partners (4,455 units issued and outstanding) | (2,514,363 | ) | (2,295,016 | ) | ||||
| Total partners’ deficit | (2,755,424 | ) | (2,533,861 | ) | ||||
| TOTAL | $ | 4,201,511 | $ | 4,111,518 | ||||
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CASA MUNRAS HOTEL PARTNERS, L.P.
STATEMENTS OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 2005 AND 2004
(Unaudited)
| 2005 | 2004 | |||||||
| REVENUES: | ||||||||
| Room | $ | 555,756 | $ | 474,685 | ||||
| Food and beverage | 117,625 | 119,329 | ||||||
| Lease | 29,103 | 28,617 | ||||||
| Telephone | 2,824 | 3,924 | ||||||
| Other | 2,356 | 6,190 | ||||||
| Total | 707,664 | 632,745 | ||||||
| OPERATING EXPENSES: | ||||||||
| Rooms | 236,871 | 207,773 | ||||||
| Interest | 119,509 | 122,348 | ||||||
| Food and beverage | 108,435 | 121,368 | ||||||
| Administrative and general | 84,747 | 100,171 | ||||||
| Marketing | 73,295 | 77,353 | ||||||
| Repairs and maintenance | 70,673 | 61,747 | ||||||
| Depreciation and amortization | 64,659 | 59,859 | ||||||
| Energy cost | 47,972 | 51,853 | ||||||
| Partnership administration and professional fees | 46,994 | 40,452 | ||||||
| Management fees | 28,977 | 25,124 | ||||||
| Insurance | 24,940 | 24,193 | ||||||
| Property taxes | 19,540 | 20,040 | ||||||
| Telephone | 2,615 | 2,684 | ||||||
| Total (including reimbursed costs and payments for services to related parties of $276,853 and $281,178 for the three months ended March 31, 2005 and 2004, respectively) | 929,227 | 914,965 | ||||||
| NET LOSS | $ | (221,563 | ) | $ | (282,220 | ) | ||
Continued
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CASA MUNRAS HOTEL PARTNERS, L.P.
STATEMENTS OF CHANGES IN PARTNERS’ DEFICIT
| 2005 | 2004 | |||||||
| ALLOCATION OF NET LOSS: | ||||||||
| General Partner (45 units outstanding) | (2,216 | ) | (2,822 | ) | ||||
| Limited Partners (4,455 units outstanding) | (219,347 | ) | (279,398 | ) | ||||
| Total | $ | (221,563 | ) | $ | (282,220 | ) | ||
| DISTRIBUTION TO PARTNERS | $ | — | $ | — | ||||
| PER UNIT INFORMATION: | ||||||||
| (based upon 4,500 total units outstanding): | ||||||||
| Net loss | $ | (49.24 | ) | $ | (62.72 | ) | ||
| Distribution | $ | — | $ | — | ||||
Concluded
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CASA MUNRAS HOTEL PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
| 2005 | 2004 | |||||||
| OPERATING ACTIVITIES: | ||||||||
| Net loss | $ | (221,563 | ) | $ | (282,220 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 64,659 | 59,859 | ||||||
| Change in assets and liabilities: | ||||||||
| Accounts receivable | 15,082 | (14,475 | ) | |||||
| Food and beverage inventories | 393 | 869 | ||||||
| Prepaid expenses | (89,170 | ) | (70,469 | ) | ||||
| Accounts payable and accrued expenses | 349,977 | 351,008 | ||||||
| Net cash provided by operating activities | 119,378 | 44,572 | ||||||
| INVESTING ACTIVITIES: | ||||||||
| Acquisition of property and equipment | (36,769 | ) | (11,085 | ) | ||||
| Decrease in impound escrow accounts | 50,953 | 47,996 | ||||||
| Net cash provided by investing activities | 14,184 | 36,911 | ||||||
| FINANCING ACTIVITIES: | ||||||||
| Payment of long-term debt | (38,421 | ) | (35,583 | ) | ||||
| NET INCREASE IN CASH | 95,141 | 45,900 | ||||||
| CASH AT BEGINNING OF PERIOD | 14,385 | 38,611 | ||||||
| CASH AT END OF PERIOD | $ | 109,526 | $ | 84,511 | ||||
| SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION - | ||||||||
| Cash paid during the period for interest | $ | 119,509 | $ | 122,348 | ||||
| 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 |
Disclosure Regarding Forward Looking Statements
The Partnership may from time to time make written or oral “forward-looking statements”, including statements contained in the Partnership’s filings with the Securities and Exchange Commission (including this Quarterly Report on Form 10-QSB and the exhibits hereto and thereto), in its reports to Partners and in other communications by the Partnership, which are made in good faith by the Partnership pursuant to the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.
These forward-looking statements include statements with respect to the Partnership’s beliefs, plans, objectives, goals, expectations, anticipations, estimates and intentions, that are subject to significant risks and uncertainties, and are subject to change based on various factors (some of which are beyond the Partnership’s control). The words “may”, “could”, “should”, “would”, “believe”, “anticipate”, “estimate”, “expect”, “intend”, “plan”, and similar expressions are intended to identify forward-looking statements. The following factors, among others, could cause the Partnership’s financial performance to differ materially from the plans, objectives, expectations, estimates and intentions expressed in such forward-looking statements:
| • | The strength of the United States economy in general and the strength of the local economy in which the Partnership conducts its operations; | |||
| • | The timely development of and acceptance of new services of the Partnership and the perceived overall value of these products and services by users, including the features, pricing and quality compared to competitors’ products and services; | |||
| • | The willingness of users to substitute competitors’ services for the Partnership’s services; | |||
| • | The impact of changes in laws and regulations (including laws concerning taxes and securities); | |||
| • | Technology changes; | |||
| • | Changes in consumer spending and saving habits; | |||
| • | Our ability to pay down our debt; | |||
| • | Our ability to hire and retain qualified personnel; and | |||
| • | The success of the Partnership at managing the risks involved in the foregoing. | |||
The foregoing list of important factors is not exclusive. Additional discussion of factors affecting the Partnership’s business is contained in the Partnership’s periodic filings with the Securities and Exchange Commission. The Partnership does not undertake and expressly disclaims any intent or obligation, to update any forward-looking statements, whether written or oral, that may be made from time to time by or on behalf of the Partnership.
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Results of Operations for the Three Months Ended March 31, 2005 and 2004
For the three months ended March 31, 2005 as compared to the same period of the prior year, occupancy rates at the Registrant’s hotel were 39% versus 32% and average room rates were $96.13 versus $96.89, resulting in an increase in room revenue totaling $81,071 for the three months ended March 31, 2005 as compared to the comparable period in 2004. Food and beverage revenues decreased $1,704 for the three months ended March 31, 2005 as compared to the first quarter of 2004.
The increase in occupancy percentages for 2005 as compared to 2004 is the result of increased tour business in 2005 as compared to 2004 and marketing efforts, in particular the impact of regional promotional mailings, which has increased occupancy at the expense of average room rate.
Food and beverage revenues are primarily influenced by the number of hotel guests. Management of the hotel facility, effective June 2004, has reduced the hours of operations of the restaurant and lounge located at the hotel. The adjustments were made as guests of the hotel have increasingly been using the large number of restaurant and lounge facilities available to guests in the Monterey Bay area, whose primary business is food and beverage operations. The reduced hours of operations have resulted in decreased revenues, but have had positive impact on food and beverage department profitability due to reduced operating costs.
Operating expenses totaled $929,227 and $914,965 for the three months ended March 31, 2005 and 2004, respectively. The principal reasons for the slight increase in operating expenses in 2005 as compared to 2004 were increased occupancy resulting in increased housekeeping labor and other rooms related expenses and reductions in the hours of operation of the food and beverage operations resulting in reduced labor costs and fewer food and beverage operating expenses due to decreased food and beverage meals served in the restaurant and lounge which expenses are directly affected by meals served.
Recent Accounting Pronouncements
In 2004 and 2005, the United States Financial Accounting Standards Board issued Statement of Financial Accounting Standards (SFAS) No. 151 – “Inventory Costs”, SFAS No. 152 – “Accounting for Real Estate Time Sharing Transactions” and SFAS No. 153 – “Exchange of Nonmonetary Assets”. Adoption of these SFAS’s in calendar 2005 will not have any impact on the Company’s 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
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operating expenses, payments on the first mortgage, renovations and to pay distributions to Partners.
During the three months ended March 31, 2005, the Registrant provided $119,378 in net cash flow for operating activities. Reductions in long-term debt totaled $38,421 and impound escrow accounts decreased $50,953 during the first quarter of 2005.
Acquisition of property and equipment during the three months ended March 31, 2005 totaled $36,769. It is estimated that approximately $150,000 more will be expended in the remainder of calendar 2005 for ongoing renovations of existing assets.
There were no distributions accrued in the fourth quarter of 2004. No distributions were declared for the first quarter of 2005.
The General Partner has entered into an agreement with a nationally recognized hotel brokerage firm to sell the Hotel. No assurance can be given if or when the sale will occur, which is subject to Limited Partner approval.
Management is of the opinion that the Partnership’s cash requirements for 2005 will be met by cash flow generated from operations. Additionally, while the General Partner has no obligation to fund any cash flow deficiencies of the Partnership as described in Note 1 of the Notes to Financial Statements, the General Partner, via cash advances or via advances from Westland, has agreed to provide continuing support to the Partnership for the twelve month period ending December 31, 2005 should cash flow from operations not be sufficient to meet the Partnership’s obligations.
The General Partner intends, to the extent cash from operations is available and such distributions are permitted under the First Mortgage, to restore the program of paying cash distributions to the Partners at amounts approximating the Registrant’s net income.
Item 3.Controls and Procedures
The Partnership maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Partnership’s reports filed pursuant to the Securities Exchange Act of 1934 are recorded, processed, and summarized and reported within the time periods specified in the rules and forms promulgated under such Act, and that such information is accumulated and communicated to the Partnership’s management, including the Managing Member of the General Partner who performs the functions of the Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
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.
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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 March 31, 2005 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 Certification pursuant to Rule 13a-14(a)
32 Certification pursuant to Rule 13a-14(b)
(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: May 12, 2005 | ||||
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