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EXHIBIT 99.6
TOPEKA C.I. ASSOCIATES, L.P.
(A Limited Partnership)
FINANCIAL STATEMENTS
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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
Topeka C.I. Associates, L.P.
We have audited the balance sheets of
TOPEKA C.I. ASSOCIATES, L.P.
a limited partnership, as of December 31, 1995 and 1994, and the related
statements of income, changes in partners' equity 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 Topeka C.I.
Associates, 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.
/s/ MAYER HOFFMAN McCANN L.C.
February 19, 1996
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TOPEKA C.I. ASSOCIATES, L.P.
BALANCE SHEETS
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December 31, 1995 and 1994
1995 1994
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A S S E T S
CURRENT ASSETS
Cash $ 111,739 $ 82,256
Accounts receivable, less allowance for doubtful
accounts (1995, $1,142; 1994, $768) 27,745 20,916
Prepaid expenses and other current assets 13,069 8,943
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TOTAL CURRENT ASSETS 152,553 112,115
PROPERTY AND EQUIPMENT, at cost, less
accumulated depreciation 4,624,978 4,969,813
INTANGIBLE ASSETS, at cost, less
accumulated amortization 68,490 73,656
REPAIR AND REPLACEMENT FUND 110,468 99,469
DEPOSIT 8,450 8,450
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TOTAL ASSETS $ 4,964,932 $ 5,263,503
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L I A B I L I T I E S
CURRENT LIABILITIES
Accounts payable
Trade $ 36,956 $ 48,105
Affiliates 14,057 13,475
Accrued expenses 91,493 82,377
Current portion of long-term debt 151,420 130,126
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TOTAL CURRENT LIABILITIES 293,926 274,083
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LONG-TERM DEBT, less current portion above 2,821,827 2,985,419
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P A R T N E R S' E Q U I T Y
PARTNERS' EQUITY 1,849,186 2,004,001
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TOTAL LIABILITIES AND PARTNERS' EQUITY $ 4,964,939 $ 5,263,503
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See Notes to Financial Statements
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TOPEKA C.I. ASSOCIATES, L.P.
STATEMENTS OF INCOME
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Years Ended December 31, 1995 and 1994
1995 1994
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REVENUES
Rooms $ 2,021,571 $ 1,921,805
Other departments 80,224 79,362
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TOTAL REVENUES 2,101,795 2,001,167
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OPERATING EXPENSES
Rooms 493,063 462,469
Other departments 42,323 40,260
Administrative and general 345,231 337,015
Marketing 123,960 119,825
Property operation, maintenance and
energy costs 188,833 195,300
Property taxes and insurance 100,430 106,076
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TOTAL OPERATING EXPENSES 1,293,840 1,260,945
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OPERATING INCOME BEFORE OTHER INCOME (EXPENSE) 807,955 740,222
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OTHER INCOME (EXPENSE)
Interest income 7,661 236
Interest expense (206,009) (215,213)
Depreciation and amortization (412,857) (407,393)
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TOTAL OTHER INCOME (EXPENSE) (611,205) (622,370)
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NET INCOME $ 196,750 $ 117,852
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See Notes to Financial Statements
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TOPEKA C.I. ASSOCIATES, L.P.
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
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Years Ended December 31, 1995 and 1994
General Limited
Partner Partners Total
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BALANCE, DECEMBER 31, 1993 $ 74,043 $ 2,048,801 $ 2,122,844
DISTRIBUTIONS TO PARTNERS (8,261) (228,434) (236,695)
NET INCOME 4,113 113,739 117,852
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BALANCE DECEMBER 31, 1994 69,895 1,934,106 2,004,001
DISTRIBUTIONS TO PARTNERS (12,273) (339,292) (351,565)
NET INCOME 6,868 189,882 196,750
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BALANCE DECEMBER 31, 1995 $ 64,490 $ 1,784,696 $ 1,849,186
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See Notes to Financial Statements
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TOPEKA C.I. ASSOCIATES, L.P.
STATEMENTS OF CASH FLOWS
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Years Ended December 31, 1995 and 1994
1995 1994
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CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 196,750 $ 117,852
Adjustments to reconcile net income to net
cash provided by operating activities
Depreciation 407,691 402,225
Amortization 5,166 5,168
Loss on disposal of property and equipment -- 9,771
Decrease (increase) in operating assets
Accounts receivable (6,829) 10,667
Prepaid expenses and other current assets (4,126) 1,652
Increase (decrease) in operating liabilities
Accounts payable (10,567) 16,424
Accrued expenses 9,116 (49,960)
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NET CASH PROVIDED BY OPERATING ACTIVITIES 597,201 513,799
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment (62,856) (148,026)
Additions to repair and replacement fund (62,762) (59,787)
Reimbursements received from the repair and
replacement fund 51,763 80,375
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NET CASH USED IN INVESTING ACTIVITIES (73,855) (127,438)
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CASH FLOWS FROM FINANCING ACTIVITIES
Distributions to partners (351,565) (236,695)
Repayment of long-term debt (142,298) (143,784)
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NET CASH USED IN FINANCING ACTIVITIES (493,863) (380,479)
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NET INCREASE IN CASH 29,483 5,882
CASH, BEGINNING OF YEAR 82,256 76,374
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CASH, END OF YEAR $ 111,739 $ 82,256
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See Notes to Financial Statements
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TOPEKA C.I. ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS
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(1) Summary of significant accounting policies
Nature of operations - The Partnership was formed for the
purpose of constructing, owning and operating a 121-room hotel, known as
the "ClubHouse Inn", in Topeka, Kansas. The hotel opened on June 15, 1986.
ClubHouse Properties, Inc. is the managing general partner and owner of
3.491% of the partnership. Partnership revenues are generated 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 on the straight-line method over the following estimated
useful lives:
Asset Useful Life
----- ------------
Building and improvements 15 - 39 years
Furniture and equipment 7 - 10 years
Financing costs 25 years
Franchise costs 15 years
Organization and pre-opening costs 35 years
Advertising costs - Advertising costs are charged to
operations when incurred. Advertising expense for the years ended December
31, 1995 and 1994 was $80,999 and $75,976, 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.
The income for tax purposes for the years ended December 31, 1995 and 1994
was $343,788 and $273,057, respectively.
Allocation of net income or loss - Net income or loss is
allocated between the general partner and the limited partner as follows:
General partner 3.491%
Limited partner 96.509%
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 $206,009 and $215,215, respectively.
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TOPEKA C.I. ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS
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(2) Property and equipment
December 31,
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1995 1994
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Cost
Land $ 617,179 $ 617,179
Building and improvements 5,386,899 5,386,899
Furniture and equipment 1,569,049 1,558,939
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Total cost 7,573,127 7,563,017
Accumulated depreciation (2,948,149) (2,593,204)
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Net property and equipment $ 4,624,978 $ 4,969,813
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The aggregate depreciation on property and equipment charged
to operations for the years ended December 31, 1995 and 1994 was $407,691
and $402,225, respectively.
(3) Intangible assets
December 31,
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1995 1994
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Cost
Financing costs $ 76,000 $ 76,000
Franchise costs 25,000 25,000
Organization and pre-opening costs 16,086 16,086
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Total cost 117,086 117,086
Accumulated amortization (48,596) (43,430)
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Net intangible assets $ 68,490 $ 73,656
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The aggregate amortization on intangible assets charged to
operations for the years ended December 31, 1995 and 1994 was $5,166 and
$5,168, respectively.
(4) Long-term debt
December 31,
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1995 1994
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Mortgage notes payable collateralized by substantially all of the
Partnership's property and equipment, payable in monthly installments
of principal and interest. Final payment due November 2011. Interest
is subject to adjustment periodically using the Federal Home Loan Bank
of Topeka's advance rate plus 2%. The next scheduled
adjustment is July 1996 $ 2,973,247 $ 3,115,545
Less: current portion 151,420 130,126
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Noncurrent portion $ 2,821,827 $ 2,985,419
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TOPEKA C.I. ASSOCIATES, L.P.
NOTES TO FINANCIAL STATEMENTS
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(4) Long-term debt (continued)
Maturities for long-term debt are as follows:
Years Ending December 31,
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1996 $ 151,420
1997 161,963
1998 127,125
1999 133,755
2000 143,068
Later years 2,255,916
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Total long-term debt $ 2,973,247
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(5) Related party transactions
ClubHouse Inns of America, Inc. is an affiliate of the
Partnership through common ownership. There is a management agreement with
ClubHouse Inns of America to manage the Partnership's hotel and to provide
accounting services. Management and accounting fees of $83,439 and $79,542
were earned by ClubHouse Inns of America, Inc. 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 ClubHouse Inns of America, Inc. 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 to ClubHouse Inns of America, Inc.:
Years Ended December 31,
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1995 1994
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Royalty fees $ 80,863 $ 76,872
Marketing fees 30,324 28,827
Central reservation expenses 16,239 15,091
Administrative fees 12,000 12,000
(6) Repair and replacement fund
Under the terms of the Partnership's management agreement,
the Partnership is required to fund a reserve for repair and replacement
of property and equipment. The agreement calls for the Partnership to
place three percent of gross revenues per month in this fund. Expenditures
from this fund require the approval of ClubHouse Inns of America, Inc.,
the Partnership's management company.
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TOPEKA C.I. ASSOCIATES, 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
disclosures 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:
Carrying Estimated
Amount Fair Value
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Cash $ 111,739 $ 111,739
Repair And replacement reserves $ 110,468 $ 110,468
Long-term debt $2,973,247 $2,973,247
The carrying value's of the Partnership's cash and repair and
replacement reserves approximate fair value as of December 31, 1995. The
interest rate on the Partnership's long-term debt is adjusted periodically in
accordance with changes in the "base-rate". Consequently, the carrying value
approximates fair value.
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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
Topeka C.I. Associates, L.P.
Our audits were made for the purpose of forming an opinion on
the basic financial statements of Topeka C.I. Associates, 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.
/s/ MAYER HOFFMAN McCANN L.C.
February 19, 1996
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TOPEKA C.I. ASSOCIATES, L.P.
ADDITIONAL INFORMATION - STATEMENTS OF INCOME
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RECONCILIATION OF FINANCIAL REPORTING INCOME
TO TAX BASIS INCOME
1995 1994
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Net income, financial reporting basis $ 196,750 $ 117,852
Tax depreciation less than financial reporting
depreciation 157,500 161,475
Tax amortization of intangible assets greater
than financial reporting amortization (10,447) (12,681)
Other (15) 6,411
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Net income, tax basis $ 343,788 $ 273,057
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