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Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
|X| Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter ended September 6, 1996
OR
|_| Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number: 333-2336
CBM FUNDING CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 52-1955658
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10400 Fernwood Road
Bethesda, Maryland 20817
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(Address of principal executive offices)
Registrant's telephone number, including area code: 301-380-2070
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes No ____ (Not Applicable)
Shares outstanding as of
Class October 15, 1996
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Common Stock, $.01 par value per share 1,000
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<PAGE>
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CBM Funding Corporation
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TABLE OF CONTENTS
<TABLE>
PAGE NO.
PART I - FINANCIAL INFORMATION
<CAPTION>
<S> <C>
Item 1. Financial Statements
Statement of Operations
Twelve and Thirty-Six Weeks Ended September 6, 1996...............................................................1
Balance Sheet
September 6, 1996 and December 31, 1995...........................................................................2
Statement of Cash Flows
Thirty-Six Weeks ended September 6, 1996 .........................................................................3
Notes to Financial Statements........................................................................................4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations...............................................................................6
PART II - OTHER INFORMATION
Item 5. Other Information......................................................................................................6
</TABLE>
<PAGE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CBM FUNDING CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
(in thousands, except per common share amounts)
<TABLE>
Twelve Weeks Thirty-Six Weeks
Ended Ended
September 6, September 6,
1996 1996
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<S> <C> <C>
REVENUES
Interest income..................................................................$ 7,265 $ 19,678
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EXPENSES
Interest expense................................................................. 7,265 19,678
Amortization of deferred financing costs......................................... 253 681
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7,518 20,359
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NET LOSS...........................................................................$ (253) $ (681)
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NET LOSS PER COMMON SHARE..........................................................$ (253) $ (681)
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</TABLE>
See notes to these financial statements.
1
<PAGE>
CBM FUNDING CORPORATION
BALANCE SHEET
(In thousands, except share amounts)
<TABLE>
<CAPTION>
September 6, December 31,
1996 1995
(Unaudited)
<S> <C> <C>
ASSETS
Mortgage Loan to Associates..............................................................$ 403,108 $ -
Deferred financing costs, net of accumulated amortization................................ 12,603 -
Interest receivable...................................................................... 637 -
Cash and cash equivalents................................................................ 1 1
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Total Assets........................................................................$ 416,349 $ 1
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LIABILITIES AND SHAREHOLDER'S EQUITY
LIABILITIES
Certificates payable.....................................................................$ 403,108 $ -
Interest payable. ....................................................................... 637 -
Accrued liabilities...................................................................... 379 -
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Total Liabilities................................................................... 404,124 -
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SHAREHOLDER'S EQUITY
Common stock (1,000 shares of .01 per value stock issued and outstanding)................ - -
Additional paid-in capital............................................................... 12,906 1
Accumulated deficit...................................................................... (681) -
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Total Shareholder's Equity.......................................................... 12,225 1
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$ 416,349 $ 1
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</TABLE>
See notes to these financial statements.
2
<PAGE>
CBM FUNDING CORPORATION
STATEMENT OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Thirty-Six Weeks
Ended
September 6,
1996
<S> <C>
OPERATING ACTIVITIES
Net loss.................................................................................................$ (681)
Noncash items............................................................................................ 681
Changes in operating accounts............................................................................ -
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Cash provided by (used in) operating activities...................................................... -
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INVESTING ACTIVITIES
Mortgage loan to Associates.............................................................................. (410,200)
Mortgage loan collections................................................................................ 7,092
Payment of financing costs............................................................................... (12,905)
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Cash used in investing activities.................................................................... (416,013)
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FINANCING ACTIVITIES
Proceeds from certificates............................................................................... 410,200
Contribution by Courtyard II Associates, L.P............................................................. 12,905
Principal repayments on certificates..................................................................... (7,092)
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Cash provided by financing activities................................................................ 416,013
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INCREASE/(DECREASE) IN CASH AND
CASH EQUIVALENTS......................................................................................... -
CASH AND CASH EQUIVALENTS at beginning of period........................................................... 1
--------------
CASH AND CASH EQUIVALENTS at end of period.................................................................$ 1
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid as interest on certificates....................................................................$ 19,041
==============
</TABLE>
See notes to these financial statements.
3
<PAGE>
CBM FUNDING CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying financial statements have been prepared by CBM Funding
Corporation (the "Company") without audit. Certain information and footnote
disclosures normally included in financial statements presented in
accordance with generally accepted accounting principles have been
condensed or omitted from the accompanying statements. The Company believes
the disclosures made are adequate to make the information presented not
misleading. However, the financial statements should be read in conjunction
with the Company's audited financial statements and notes thereto for the
fiscal year ended December 31, 1995.
In the opinion of the Company, the accompanying unaudited financial
statements reflect all adjustments (which include only normal recurring
adjustments) necessary to present fairly the financial position of the
Company as of September 6, 1996 and the results of operations for the
twelve and thirty-six weeks ended September 6, 1996.
CBM Funding Corporation, a Delaware corporation and wholly owned subsidiary
of Courtyard II Associates, L.P. (the "Mortgagor" and "Associates"), which
is a wholly owned subsidiary of Courtyard by Marriott II Limited
Partnership (the "Partnership"), was formed on December 28, 1995. The
Company was formed for the purpose of (i) making the single, fixed rate,
non-recourse $410.2 million mortgage loan (the "Mortgage Loan") to the
Mortgagor and (ii) conveying the Mortgage Loan and other instruments
securing the Mortgage Loan including the 69 cross- defaulted and
cross-collaterized mortgages, representing first priority liens on fee or
leasehold interests in 69 Hotels (the "Hotels") owned by the Mortgagor, fee
interests in land leased from Marriott International, Inc. or its
affiliates on which 53 hotels are situated in, and related assets, and a
pledge of the Mortgagor's membership interests in, and the related right to
receive distributions from, the entity that owns the hotel located in
Chicago/Deerfield, Illinois ("Deerfield LLC"), to the trustee (the
"Trustee") under a Trust and Servicing Agreement dated January 24, 1996
(the "Trust and Servicing Agreement") in exchange for Multiclass Mortgage
Pass-Through Certificates (the "Certificates") which represent interests in
the trust fund under the Trust and Servicing Agreement. For financial
accounting purposes the assets and liabilities of the Trustee are included
in the financial statements of the Company. However, legally, the Company
transferred the Mortgage Loan to the Trustee without recourse and has no
interest in the Mortgage Loan, has no obligations with respect to the
Certificates and does not control the Trustee.
2. Debt Refinancing - Certificates
The Certificates in an initial principal amount of $410.2 million were
issued by the Trustee. Proceeds from the sale of the Certificates were
utilized by the Company to provide a Mortgage Loan to Associates. The
Certificates and Mortgage Loan each require monthly payments of principal
and interest based on a 17-year amortization schedule. The Mortgage Loan
matures on January 28, 2008. However, the maturity date of the Certificates
and the Mortgage Loan each may be extended until January 28, 2013 with the
consent of 66 2/3% of the holders of the outstanding Certificates affected
thereby. The Certificates were issued in the following classes and
pass-through rates of interest.
<TABLE>
<CAPTION>
<S> <C> <C>
Initial Certificate Pass-Through
Class Balance Rate
Class A-1 $ 45,500,000 7.550%
Class A-2 $ 50,000,000 6.880%
Class A-3P & I $ 129,500,000 7.080%
Class A-3IO Not Applicable 0.933%
Class B $ 75,000,000 7.480%
Class C $ 100,000,000 7.860%
Class D $ 10,200,000 8.645%
</TABLE>
4
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The Class A-3IO Certificates receive payments of interest only based on a
notional balance equal to the Class A-3P & I Certificate balance.
The Certificates/Mortgage Loan maturities are as follows (in thousands):
1996 $ 10,283
1997 13,216
1998 14,242
1999 15,347
2000 16,539
Thereafter 340,573
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$ 410,200
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The Mortgage Loan is secured primarily by 69 cross-defaulted and
cross-collateralized mortgages representing first priority mortgage liens
on (i) the fee or leasehold interest in the 69 Hotels, related furniture,
fixtures and equipment and the property improvement fund, (ii) the fee
interest in the land leased from Marriott International, Inc. or its
affiliates on which 53 Hotels are located, (iii) a pledge of the
Mortgagor's membership interest in and the related right to receive
distributions from Deerfield LLC and (iv) an assignment of the restated
management agreement. The Mortgage Loan is non-recourse to the Mortgagor,
the Partnership and its partners.
Operating profit from the Hotels and the Deerfield Hotel in excess of debt
service on the Mortgage Loan is available to be distributed to the
Partnership. Amounts distributed to the Partnership are used for the
following, in order of priority: (i) to pay debt service on the $127.4
million of senior notes ("Senior Notes") issued in a concurrent offering by
the Partnership and its wholly owned subsidiary, Courtyard II Finance
Company, (ii) to fund a supplemental debt service reserve, if necessary,
(iii) to offer to purchase a portion of the Senior Notes at par, if
necessary, (iv) for working capital as discussed in the working capital
agreement with Marriott International, Inc. and (v) for distributions to
the partners of the Partnership.
Prepayments of the Mortgage Loan are permitted with the payment of a
premium (the "Prepayment Premium"), subject to certain exceptions. The
Prepayment Premium is equal to the greater of (i) one percent of the
Mortgage Loan being prepaid or (ii) a yield maintenance amount based on a
spread of .25% or .55% over the U.S. treasury rate, as defined.
3. Exchange Offer
On June 30, 1996, the Company completed an exchange offer of its Multiclass
Mortgage Pass-Through Certificates, Series 1996-1A with an outstanding
principal balance of $406.2 million at that time, ("Old Certificates") for
an equal amount of Multiclass Mortgage Pass-Through Certificates, Series
1996-1B ("New Certificates"). The form and terms of the New Certificates
are substantially identical to the form and terms of the Old Certificates,
except that the New Certificates are registered under the Securities Act of
1933, as amended and their transfers are not restricted.
5
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
CAPITAL RESOURCES AND LIQUIDITY
Principal Sources and Uses of Cash
The Company's principal source of cash is from collections on the mortgage loan
and from additional paid-in capital from the issuance of stock. For the
thirty-six weeks ended September 6, 1996, collections on the mortgage loan were
used to repay principal on the certificates of $7.1 million. For the thirty-six
weeks ended September 6, 1996, additional paid- in capital from the issuance of
stock was used to pay financing costs of $12.9 million.
RESULTS OF OPERATIONS
For the thirty-six weeks ended September 6, 1996, the Company reported revenues
and interest expense of $19.7 million each. Amortization of deferred financing
costs for the thirty-six weeks ended was $.7 million. Therefore, the Company
reported a net loss of $.7 million for the thirty-six weeks ended September 6,
1996.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
Earla L. Stowe was appointed to Vice President and Chief Accounting Officer of
CBM Funding Corporation on October 8, 1996. Ms. Stowe joined Host Marriott
Corporation in 1982 and held various positions in the tax department until 1988.
She joined the Partnership Services department as an accountant in 1988 and in
1989 became an Assistant Manager--Partnership Services. She was promoted to
Manager--Partnership Services in 1991 and to Director--Asset Management in June
1996.
6
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Form 10-Q to be signed on its behalf by the
undersigned, thereunto duly authorized.
CBM FUNDING CORPORATION
October 18, 1996 By: /s/ Earla Stowe
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Earla Stowe
Vice President and
Chief Accounting Officer
7
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
THIRD QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0001010683
<NAME> CBM Funding Corporation
<MULTIPLIER> 1,000
<CURRENCY> US dollars
<S> <C>
<PERIOD-TYPE> 9-mos
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-06-1996
<EXCHANGE-RATE> 1.000
<CASH> 1
<SECURITIES> 12,603 <F1>
<RECEIVABLES> 403,745
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 416,349
<PP&E> 0
<DEPRECIATION> 0
<TOTAL-ASSETS> 416,349
<CURRENT-LIABILITIES> 1,016
<BONDS> 403,108
0
0
<COMMON> 0
<OTHER-SE> 12,225
<TOTAL-LIABILITY-AND-EQUITY> 416,349
<SALES> 0
<TOTAL-REVENUES> 19,678
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 20,359
<INCOME-PRETAX> (681)
<INCOME-TAX> 0
<INCOME-CONTINUING> (681)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (681)
<EPS-PRIMARY> (.68)
<EPS-DILUTED> (.68)
<FN>
<F1> This represents deferred financing costs, net.
</FN>
</TABLE>
