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EXHIBIT 99.5
WICHITA C.I. ASSOCIATES III, L.P.
(A Limited Partnership)
FINANCIAL STATEMENTS
-----------------------------------
Years Ended December 31, 1995 and 1994
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[MAYER HOFFMAN McCANN L.C. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
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To the Partners
Wichita C.I. Associates III, L.P.
We have audited the balance sheets of
WICHITA C.I. ASSOCIATES III, L.P.
a limited partnership, as of December 31, 1995 and 1994, and the related
statements of income, changes in partners' equity (deficit) and cash flows for
the years then ended. These financial statements are the responsibility of the
Partnership's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position of Wichita
C.I. Associates III, L.P. as of December 31, 1995 and 1994, and the results of
its operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
February 8, 1996 /s/ MAYER HOFFMAN MCCANN L.C.
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WICHITA C.I. ASSOCIATES III, L.P.
BALANCE SHEETS
--------------
December 31, 1995 and 1994
1995 1994
----------- -----------
A S S E T S
CURRENT ASSETS
Cash $ 186,771 $ 46,353
Accounts receivable, less allowance for
doubtful accounts (1995, $578; 1994, $200) 20,241 36,511
Prepaid expenses and other current assets 36,057 23,800
----------- -----------
TOTAL CURRENT ASSETS 243,069 106,664
PROPERTY AND EQUIPMENT, at cost, less
accumulated depreciation 1,991,819 2,151,240
INTANGIBLE ASSETS, at cost, less
accumulated amortization 151,226 16,155
REPAIR AND REPLACEMENT FUND 38,980 85,259
----------- -----------
TOTAL ASSETS $ 2,425,094 $ 2,359,318
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L I A B I L I T I E S
CURRENT LIABILITIES
Accounts payable
Trade $ 32,543 $ 37,181
Affiliates 16,150 17,652
Accrued expenses 91,719 40,531
Current portion of long-term debt 72,205 3,453,382
----------- -----------
TOTAL CURRENT LIABILITIES 212,617 3,548,746
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LONG-TERM DEBT 3,310,255 -
----------- -----------
P A R T N E R S' E Q U I T Y (D E F I C I T)
PARTNERS' EQUITY (DEFICIT) $(1,097,778) (1,189,428)
----------- -----------
TOTAL LIABILITIES AND PARTNERS'
EQUITY (DEFICIT) $ 2,425,094 $ 2,359,318
=========== ===========
See Notes to Financial Statements
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WICHITA C.I. ASSOCIATES III, L.P.
STATEMENTS OF INCOME
--------------------
Years Ended December 31, 1995 and 1994
1995 1994
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REVENUES
Rooms $ 2,258,137 $ 2,211,036
Other departments 81,187 80,737
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TOTAL REVENUES 2,339,324 2,291,773
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OPERATING EXPENSES
Rooms 490,690 485,852
Other departments 35,031 29,865
Administrative and general 366,986 349,557
Marketing 101,894 100,581
Property operation, maintenance and
energy costs 227,242 209,738
Property taxes and insurance 98,544 96,257
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TOTAL OPERATING EXPENSES 1,320,387 1,271,850
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OPERATING INCOME BEFORE OTHER INCOME (EXPENSE) 1,018,937 1,019,923
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OTHER INCOME (EXPENSE)
Interest income 8,361 44
Interest expense (349,705) (377,990)
Depreciation and amortization (234,196) (260,240)
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TOTAL OTHER INCOME (EXPENSE) (575,540) (638,186)
----------- -----------
NET INCOME $ 443,397 $ 381,737
=========== ===========
See Notes to Financial Statements
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WICHITA C.I. ASSOCIATES III, L.P.
STATEMENTS OF CHANGES IN PARTNERS' EQUITY (DEFICIT)
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Years Ended December 31, 1995 and 1994
General Limited
Partner Partners Total
----------- ----------- -----------
BALANCE, DECEMBER 31, 1993 $ (337,867) $ (840,353) $(1,178,220)
DISTRIBUTIONS TO PARTNERS (52,497) (340,448) (392,945)
NET INCOME 51,000 330,737 381,737
----------- ----------- -----------
BALANCE, DECEMBER 31, 1994 (339,364) (850,064) (1,189,428)
DISTRIBUTIONS TO PARTNERS (46,995) (304,752) (351,747)
NET INCOME 59,242 384,155 443,397
----------- ----------- -----------
BALANCE, DECEMBER 31, 1995 $ (327,117) $ (770,651) $(1,097,778)
=========== =========== ===========
See Notes to Financial Statements
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WICHITA C.I. ASSOCIATES III, L.P.
STATEMENTS OF CASH FLOWS
- - - - - - - - - - - -
Years Ended December 31, 1995 and 1994
1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 443,397 $ 381,737
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 213,092 246,745
Amortization 21,104 13,495
Loss on disposal of property and equipment - 6,718
Decrease (increase) in operating assets
Accounts receivables 16,270 (20,384)
Prepaid expenses and other current assets (12,257) 36,845
Increase (decrease) in operating liabilities
Accounts payable (6,140) 427
Accrued expenses 51,188 (78,725)
----------- -----------
NET CASH PROVIDED BY OPERATING ACTIVITIES 726,654 586,858
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (53,671) (131,355)
Net additions to (payments from) the repair
and replacement fund 46,279 (25,402)
Investment in intangible assets (156,175) -
----------- -----------
NET CASH USED IN INVESTING ACTIVITIES (163,567) (156,757)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from long term debt 3,400,000
Repayment of long term debt (3,470,922) (26,455)
Distributions to partners (351,747) (392,945
----------- -----------)
NET CASH USED IN FINANCING ACTIVITIES (422,669) (419,400)
----------- -----------
NET INCREASE IN CASH 140,418 10,701
CASH, BEGINNING OF YEAR 46,353 35,652
----------- -----------
CASH, END OF YEAR $ 186,771 $ 46,353
=========== ===========
See Notes to Financial Statements
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WICHITA C.I. ASSOCIATES III, L.P.
NOTES TO FINANCIAL STATEMENTS
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(1) Summary of significant accounting policies
Nature of operations - The Partnership was formed on August
21, 1995 for the purpose of owning and operating a 120-room hotel
known as the "ClubHouse Inn", in Wichita, Kansas. ClubHouse
Properties, Inc. (CPI) was previously the owner of 13.361% general
partner interest in Wichita C.I. Associates, L.P. (Wichita). CPI
assigned its partnership interest in Wichita to C.I. Wichita General,
L.L.C. which then exchanged this interest, along with the limited
partner's 86.639% interest, for identical interests in Wichita C.I.
Associates III, L.P. (Wichita III). C.I. Wichita General, L.L.C. is
indirectly owned by ClubHouse Properties, Inc.
For financial statement and tax reporting, assets and
liabilities of the Partnership were recorded at Wichita's historical
cost basis. The accompanying 1995 statement of income includes the
results of operations of Wichita and Wichita III. Partnership revenues
are generated primarily from hotel operations and related activities.
Use of estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements, and the
reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
Depreciation and amortization - Depreciation and amortization
are computed using the straight-line method with estimated useful
lives as follows:
Asset Useful Life
------------------------- -------------------------
Building and improvements 25 - 31.5 years
Furniture and equipment 5 - 10 years
Loan costs 10 years
Organization costs 5 years
Advertising costs - Advertising costs are charged to operations
when incurred. Advertising expense for the years ended December 31,
1995 and 1994 was $66,433 and $64,321, respectively.
Income taxes - No provision is included in these statements
for income taxes since each partner is individually responsible for
reporting their respective share of the Partnership net income or
loss. Net income or loss of the Partnership is allocated between the
general partner and the limited partner in accordance with their
respective ownership percentages. The income for tax purposes for the
years ended December 31, 1995 and 1994 was $350,616 and $316,434,
respectively. The difference between the net income reported for
financial statement purposes and the net income reported for tax
purposes results primarily from using accelerated methods and shorter
useful lives for tax depreciation and amortization of partnership
assets.
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WICHITA C.I. ASSOCIATES III, L.P.
NOTES TO FINANCIAL STATEMENTS
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(1) Summary of significant accounting policies (continued)
Cash - For purpose of the statements of cash flows, cash
consists of cash on-hand and demand deposits with financial
institutions. Cash paid for interest during the years ended December
31, 1995 and 1994 was $349,705 and $377,989, respectively.
(2) Property and equipment
December 31,
--------------------------
1995 1994
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Cost
Land $ 455,000 $ 455,000
Building and improvements 2,050,346 2,050,346
Furniture and equipment 1,546,068 1,518,232
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Total cost 4,051,414 4,023,578
Accumulated depreciation (2,059,595) (1,872,338)
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Net property and equipment $ 1,991,919 $ 2,151,240
=========== ===========
The aggregate depreciation on property and equipment charged
to operations for the years ended December 31,1995 and 1994 was
$213,092 and $246,745, respectively.
(3) Intangible assets
December 31,
----------------------
1995 1994
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Cost
Loan costs
Organization costs $ 142,686 $ 117,595
13,489 15,000
Total cost --------- ---------
156,175 132,595
Accumulated amortization
(4,949) (116,440)
Net intangible assets --------- ---------
$ 151,226 $ 16,155
========= =========
The aggregate amortization on intangible assets charged to
operations for the years ended December 31, 1995 and 1994 was $21,104
and $13,495, respectively.
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WICHITA C.I. ASSOCIATES III, L.P.
NOTES TO FINANCIAL STATEMENTS
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(4) Long-term debt
December 31,
1995 1994
----------- ----------
<X>
7.95% mortgage note due in monthly installments
of $28,333, including interest, with final payment
due October 2005; collateralized by substantially
all of the Partnership's assets. Proceeds from the
note were used to refinance the Partnership's
variable rate mortgage note which was to mature
during 1995. $ 3,382,460 $ -
Variable rate mortgage note, collateralized by
substantially all of the Partnership's assets, with
interest at the lower of 10 3/4% or the "weekly
yield percentage" on United States Treasury
Securities as published by the Federal Reserve
Board plus 3%. Monthly payments of principal and
interest were due until maturity, June 1995.
- 3,453,382
Less: current portion 72,205 3,453,382
----------- ----------
Noncurrent portion $ 3,310,255 $ -
=========== ==========
Maturities for long - term debt are as follows:
Years Ending December 31.
-------------------------
1996 $ 72,205
1997 78,159
1998 84,604
1999 91,581
2000 99,132
Thereafter 2,956,779
----------
Total long - term debt $3,382,460
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WICHITA C.I. ASSOCIATES III, L.P.
NOTES TO FINANCIAL STATEMENTS
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(5) Related party transactions
ClubHouse Inns of America, Inc. (CIA) is an affiliate of the
Partnership through common ownership. There is a management agreement
with CIA to manage the Partnership's hotel and to provide accounting
services. Management and accounting fees of $91,295 and $89,249 were
earned by CIA during the years ended December 31, 1995 and 1994,
respectively.
In addition to the fees above, the Partnership is obligated
under a franchise agreement with CIA to pay franchise and marketing
fees along with its share of the costs of the central reservation
system. The Partnership may purchase goods through the centralized
purchasing service. The Partnership incurred the following expenses
relating to the franchise agreement:
Years Ended December 31,
------------------------
1995 1994
----------- -----------
Royalty fees $90,325 $88,441
Marketing fees 33,872 33,165
Central reservation expenses 13,707 14,184
Administrative fees 12,000 12,000
(6) Repair and replacement fund
Under the terms of the Partnership's management and debt
agreements, the Partnership is required to fund a reserve for repair
and replacement of property and equipment. The agreements call for the
Partnership to place up to 4% of the projected annual gross income of
the property in this fund.
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WICHITA C.I. ASSOCIATES III, L.P.
NOTES TO FINANCIAL STATEMENTS
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(7) Fair value of financial instruments
Statement of Financial Accounting Standards No. 107, "Disclosures
about Fair Value of Financial Instruments", requires disclosure of estimated
fair values for financial instruments held by the Partnership. Financial
instruments, as defined in SFAS No. 107, held by the Partnership include cash,
repair and replacement reserves and the Partnership's mortgage note. The
carrying amounts and estimated fair values of these financial instruments, as
of December 31, 1995, are as follows:
December 31, 1995
-----------------------
Estimated
Carrying Fair
Amount Value
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Cash $ 186,771 $ 186,771
Repair and replacement reserves $ 38,980 $ 38,980
Mortgage note payable $3,382,460 $3,382,460
The carrying value's of the Partnership's cash and repair and
replacement reserves approximate fair value as of December 31, 1995.
The fair value of the Partnership's mortgage note payable is estimated
using a discounted cash flow calculation based on current market rates
being offered for similar debt issues.
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ADDITIONAL INFORMATION
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[MAYER HOFFMAN McCANN L.C. LETTERHEAD]
INDEPENDENT AUDITORS' REPORT ON ADDITIONAL INFORMATION
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To the Board of Directors
Wichita C.I. Associates III, L.P.
Our audits were made for the purpose of forming an opinion on the
basic financial statements of Wichita C.I. Associates III, L.P. for the years
ended December 31, 1995 and 1994, taken as a whole. The accompanying ADDITIONAL
INFORMATION is presented for purposes of additional analysis and is not a
required part of the basic financial statements. Such information has been
subjected to the auditing procedures applied in the audit of the basic
financial statements. In our opinion, the accompanying ADDITIONAL INFORMATION
is fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
February 8, 1996 /s/ MAYER HOFFMAN MCCANN L.C.
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WICHITA C.I ASSOCIATES III, L.P.
ADDITIONAL INFORMATION - STATEMENTS OF INCOME
---------------------------------------------
RECONCILIATION OF FINANCIAL REPORTING INCOME
TO TAX BASIS INCOME
1995 1994
----------------------------------------- ------------
January 1 to September 14
September 13 to December 13 Total
------------ -------------- ----------- ------------
Net Income, financial reporting basis $ 356,137 $ 87,260 $ 443,397 $ 381,737
Tax depreciation in excess of less than
financial reporting depreciation (86,404) (15,341) (101,745) (61,711)
Tax amortization (in excess of) less
than financial reporting amortization 10,675 - 10,675 (6,780)
Amounts owed to affiliate, not deductible
for tax purposes until paid (17,653) 16,151 (1,502) 1,448
Other (993) 784 (209) 1,740
----------- ----------- ----------- -----------
Net income, tax basis $ 261,762 $ 88,854 $ 350,616 $ 316,434
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