<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter Ended September 30, 1995
------------------
Commission file number 33-11096
--------------
CRI HOTEL INCOME PARTNERS, L.P.
- -------------------------------------------------------------------------
(Exact name of registrant as specified in charter)
Delaware 52-1500621
- ---------------------------------------- ----------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
11200 Rockville Pike, Rockville, Maryland 20852
- ----------------------------------------- ---------------------------
(Address of principal executive officer) (Zip Code)
(301) 468-9200
- -------------------------------------------------------------------------
(Registrant's telephone number, including area code)
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 [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at September 30, 1995
- --------------------------------- --------------------------------------
(Not applicable) (Not applicable)
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1995
Page
----
PART I. Financial Information (Unaudited)
Item 1. Financial Statements
Balance Sheets - September 30, 1995
and December 31, 1994 . . . . . . . . . . . . . . . . 1
Statements of Income - for the three and nine
months ended September 30, 1995 and 1994 . . . . . . 3
Statement of Changes in Partners' Capital (Deficit)
- for the nine months ended September 30, 1995 . . . 5
Statements of Cash Flows - for the nine months
ended September 30, 1995 and 1994 . . . . . . . . . . 6
Notes to Financial Statements . . . . . . . . . . . . . 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 11
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 16
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------
CRI HOTEL INCOME PARTNERS, L.P.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------ ------------
(Unaudited)
<S> <C> <C>
Property and equipment - at cost
Land $ 1,574,490 $ 1,574,490
Buildings and site improvements 13,112,968 13,112,968
Furniture, fixtures and equipment 4,430,377 4,194,226
Leasehold improvements 1,382,000 1,382,000
------------ ------------
20,499,835 20,263,684
Less: accumulated depreciation
and amortization (7,495,517) (6,891,531)
------------ ------------
13,004,318 13,372,153
Asset held for sale -- 1,135,556
Cash and cash equivalents 1,133,132 537,352
Working capital reserve 150,000 150,000
Receivables, reserve for replacements
and other assets 649,369 727,480
Acquisition fees, principally paid to
related parties, net of accumulated
amortization of $261,425 and $235,923,
respectively 758,679 784,181
Property purchase costs, net of
accumulated amortization of $46,361
and $41,804, respectively 135,906 140,463
------------ ------------
Total assets $ 15,831,404 $ 16,847,185
============ ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-1-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------
CRI HOTEL INCOME PARTNERS, L.P.
BALANCE SHEETS - Continued
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------ ------------
(Unaudited)
<S> <C> <C>
Distributions payable $ 593,176 $ 452,059
Hotel trade payables 432,934 390,541
Accounts payable and accrued expenses 194,867 184,953
Accrued property taxes 138,682 65,722
Accrued salaries and wages 66,857 76,435
Sales tax payable 65,238 66,763
Building lease payable 29,442 91,608
Accrued management fees 29,079 95,797
------------ ------------
1,550,275 1,423,878
Notes payable 6,458,564 6,865,486
------------ ------------
Total liabilities 8,008,839 8,289,364
------------ ------------
Commitments and contingencies
Partners' capital (deficit):
General Partner (232,329) (218,674)
Beneficial Assignee Certificates (BACs)
Series A; 868,662 BACs issued and
outstanding 8,054,894 8,776,495
------------ ------------
Total partners' capital 7,822,565 8,557,821
------------ ------------
Total liabilities and partners'
capital $ 15,831,404 $ 16,847,185
============ ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-2-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------
CRI HOTEL INCOME PARTNERS, L.P.
STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
September 30, September 30,
-------------------------- -------------------------
1995 1994 1995 1994
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Revenue:
Rooms $ 2,345,334 $ 2,380,589 $ 7,326,816 $ 7,207,422
Telephone 99,002 100,991 316,602 330,180
Rental and other 94,748 103,502 313,861 315,108
Food 13,892 17,990 46,406 50,937
Interest and
other income 15,441 5,695 35,867 21,438
----------- ----------- ----------- -----------
Total revenue 2,568,417 2,608,767 8,039,552 7,925,085
----------- ----------- ----------- -----------
Expenses:
Rooms 722,679 730,655 2,115,068 2,028,652
General and
administrative 228,699 280,571 807,413 883,695
Marketing 220,014 264,709 699,778 769,073
Depreciation and
amortization 217,767 238,576 645,908 739,251
Energy 151,930 152,082 409,867 419,133
Property operations
and maintenance 150,838 166,223 466,515 461,046
Building lease
expense 118,500 117,722 497,232 498,918
Property taxes 117,744 129,216 440,986 349,104
Management fees 88,877 90,448 278,615 274,902
Telephone 38,784 49,511 117,295 151,907
Base asset
management fee,
paid to related
parties 26,250 26,250 78,750 78,750
Rental and other 25,217 39,711 97,293 144,090
Food and beverage 17,091 17,498 50,582 48,722
Miscellaneous,
net 12,341 11,986 36,350 32,653
Professional fees 10,427 16,822 33,217 39,382
----------- ----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-3-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------
CRI HOTEL INCOME PARTNERS, L.P.
STATEMENTS OF INCOME - Continued
(Unaudited)
<TABLE>
<CAPTION>
For the three months ended For the nine months ended
September 30, September 30,
-------------------------- -------------------------
1995 1994 1995 1994
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Total operating
costs and
expenses 2,147,158 2,331,980 6,774,869 6,919,278
----------- ----------- ----------- -----------
Operating income 421,259 276,787 1,264,683 1,005,807
----------- ----------- ----------- -----------
Other expenses:
Interest expense (153,951) (148,812) (468,749) (436,612)
Loss on disposition
of hotel (7,305) -- (7,305) --
----------- ----------- ----------- -----------
Total other
expenses (161,256) (148,812) (476,054) (436,612)
----------- ----------- ----------- -----------
Net income $ 260,003 $ 127,975 $ 788,629 $ 569,195
=========== =========== =========== ===========
Net income allocated
to General
Partner (2%) $ 5,200 $ 2,560 $ 15,773 $ 11,384
=========== =========== =========== ===========
Net income allocated
to BAC
Holders (98%) $ 254,803 $ 125,415 $ 772,856 $ 557,811
=========== =========== =========== ===========
Net income per BAC
based on
868,662 BACs
outstanding $ 0.29 $ 0.14 $ 0.89 $ 0.64
=========== =========== =========== ===========
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-4-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------
CRI HOTEL INCOME PARTNERS, L.P.
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
For the nine months ended September 30, 1995
(Unaudited)
<TABLE>
<CAPTION>
Beneficial
Assignee
General Certificate
Partner Holders Total
--------- ------------ ------------
<S> <C> <C> <C>
Balance, December 31, 1994 $(218,674) $ 8,776,495 $ 8,557,821
Distributions paid or accrued
of $1.72 per BAC (29,428) (1,494,457) (1,523,885)
Net income 15,773 772,856 788,629
--------- ------------ ------------
Balance, September 30, 1995 $(232,329) $ 8,054,894 $ 7,822,565
========= ============ ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-5-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------
CRI HOTEL INCOME PARTNERS, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended
September 30,
----------------------------
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 788,629 $ 569,195
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 645,908 739,251
Accrued interest on notes payable 468,749 436,612
Loss on disposition of hotel 7,305 --
Changes in assets and liabilities:
Decrease (increase) in receivables
and other assets, net 40,427 (120,957)
Increase in accounts payable and
accrued expenses 9,914 72,254
Increase in hotel trade payables 42,393 81,217
Decrease in accrued salaries and
wages (9,578) (65,391)
Decrease in building lease payable (62,166) (351,819)
(Decrease) increase in sales tax
payable (1,525) 16,638
Increase in accrued property taxes 72,960 88,756
Decrease in accrued management fees (66,718) --
------------ ------------
Net cash provided by operating
activities 1,936,298 1,465,756
------------ ------------
Cash flows from investing activities:
Purchase of property and equipment (236,151) (225,155)
Net withdrawals from reserve for
replacements 25,821 --
Net proceeds from disposition of hotel 1,128,251 --
------------ ------------
Net cash provided by (used in)
investing activities 917,921 (225,155)
------------ ------------
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-6-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------
CRI HOTEL INCOME PARTNERS, L.P.
STATEMENTS OF CASH FLOWS - Continued
(Unaudited)
<TABLE>
<CAPTION>
For the nine months ended
September 30,
----------------------------
1995 1994
------------ ------------
<S> <C> <C>
Cash flows from financing activities:
Distributions paid to BAC Holders and
General Partner (1,382,768) (1,049,930)
Retirement of note payable (875,671) --
------------ ------------
Net cash used in financing
activities (2,258,439) (1,049,930)
------------ ------------
Net increase in cash and cash equivalents 595,780 190,671
Cash and cash equivalents, beginning of
period 537,352 715,947
------------ ------------
Cash and cash equivalents, end of period $ 1,133,132 $ 906,618
============ ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-7-
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
In the opinion of CRICO Hotel Associates I, L.P. (the General Partner), the
accompanying unaudited financial statements of CRI Hotel Income Partners, L.P.
(the Partnership) contain all adjustments of a normal recurring nature necessary
to present fairly the Partnership's financial position as of September 30, 1995
and December 31, 1994, and the results of its operations for the three and nine
months ended September 30, 1995 and 1994 and its cash flows for the nine months
ended September 30, 1995 and 1994.
These unaudited financial statements have been prepared pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and note disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted. While the General Partner believes that the disclosures
presented are adequate to make the information not misleading, it is suggested
that these financial statements be read in conjunction with the financial
statements and the notes included in the Partnership's Annual Report filed on
Form 10-K for the year ended December 31, 1994.
2. COMMITMENTS
a. Hotel operations management agreements
--------------------------------------
The Partnership entered into management agreements with Buckhead Hotel
Management Company, Inc. (Buckhead) in connection with operations of the
hotels. Each agreement was for an initial term of ten years, with a
five-year renewal option. The agreements called for a base management fee
of 2.5% of gross revenue from operations, a marketing fee of 1.5% of net
room revenues, and a reservation fee of 2.3% of gross revenues from rental
of hotel guest rooms. The agreements also called for incentive management
fees generally equal to 25% of net cash flow available after payment of a
preferred cash flow return to the Partnership equal to 11% of the aggregate
purchase price for the hotels owned by the Partnership.
On January 1, 1993, the management agreements between the Partnership
and Buckhead were amended to extend the existing term of each agreement for
an additional two to five years and increase the base management fee from
2.5% to 3.5% of gross revenue. The Partnership accepted these
modifications to the management agreements in lieu of having the agreements
terminated by Buckhead in its Chapter 11 Bankruptcy case (filed in 1991).
Had the Partnership contracted with another management agent, costs (which
would have included franchise fees currently not payable because of
Buckhead's management of the hotels) were expected to exceed the increase
in management fees. The amendments for the Clearwater Days Inn and the
Scottsdale Days Inn included a modification to the method of calculating
the incentive management fee. No incentive management fees were earned or
paid for the first three quarters of 1995 or 1994.
-8-
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. COMMITMENTS - Continued
b. Ground lease agreement
----------------------
The Partnership entered into a lease with Vicorp Restaurants, Inc.
(Vicorp) effective January 1991, for a portion of the Minneapolis Days Inn
property to operate a restaurant (Baker's Square). Gross rental income
pursuant to the lease agreement, which is included in rental and other
revenue on the accompanying statements of income, was $12,192 and $36,577
for the three and nine months ended September 30, 1995, respectively, and
$11,780 and $35,340 for the three and nine months ended September 30, 1994,
respectively.
3. DISTRIBUTIONS TO BAC HOLDERS
The following distributions were paid or accrued to BAC Holders of record
during the first three quarters of 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
Distributions to Distributions to
BAC Holders BAC Holders
-------------------- --------------------
<S> <C> <C> <C> <C>
Quarter Ended Total Per BAC Total Per BAC
------------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C>
March 31, $ 443,018 $ 0.51 $ 349,550 $ 0.40
June 30, 469,077 0.54 443,969 0.51
September 30, 582,362* 0.67 454,386 0.53
---------- ------- ---------- -------
Total $1,494,457 $ 1.72 $1,247,905 $ 1.44
========== ======= ========== =======
</TABLE>
* Includes the distribution of net cash proceeds from the sale of the
Kankakee hotel of $52,478 (approximately $0.06 per BAC), which is net of
payment of outstanding Kankakee real estate taxes, retirement of the
related note payable and repayment of Partnership advances.
The distribution for the quarter ended September 30, 1995 is expected to be
made on November 29, 1995. The General Partner anticipates the distribution for
the quarter ended December 31, 1995 to range from $0.54 to $0.61 per BAC. Due
to the expiration of the remaining cash flow guarantees during 1993,
distributions are dependent on the net cash flow produced from hotel operations,
net of Partnership expenses. The cash flow from certain hotels may be
materially affected by changing market conditions and by seasonality.
-9-
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. RELATED-PARTY TRANSACTIONS
The Partnership, in accordance with the terms of the Partnership Agreement,
is obligated to reimburse the General Partner or its affiliates for their direct
expenses in connection with managing the Partnership. The Partnership paid or
accrued $18,231 and $44,372 for the three and nine months ended September 30,
1995, respectively, and $18,227 and $46,628 for the three and nine months ended
September 30, 1994, respectively, to the General Partner or its affiliates as
direct reimbursement of expenses incurred on behalf of the Partnership. Such
reimbursements are included in general and administrative expense on the
statements of income.
The amount of the base asset management fee earned by the General Partner
or its affiliates is equal to 0.50% of the weighted average balance of the
adjusted partnership investment during the period, as defined in the Partnership
Agreement. During the three and nine months period ended September 30, 1995 and
1994, the Partnership paid or accrued a base asset management fee of $26,250 and
$78,750, respectively.
5. HOTELS OWNED BY THE PARTNERSHIP
On October 20, 1994, a contract for the sale of the Kankakee hotel was
signed. The sale was completed on July 19, 1995. Accordingly, the assets of
this hotel are classified as an asset held for sale on the balance sheet as of
December 31, 1994. The sale price of the property of $1.2 million generated
sufficient proceeds to the Partnership to retire the purchase money note
obligation of the Partnership with respect to such property. The sale resulted
in a net financial statement loss and a net tax loss in 1995 of approximately
$7,000, and $607,000, respectively. Reserves for loss on the sale of the
Kankakee hotel of $200,000 and $400,000 were recognized for financial statement
purposes in 1993 and 1994, respectively.
On February 21, 1995 and May 10, 1995, the Partnership advanced $35,000 and
$42,000, respectively, from the working capital reserves to the Kankakee hotel
to fund the hotel's short-term working capital needs. These advances were
repaid and the working capital reserves were replenished on July 19, 1995 from
sale proceeds of the Kankakee hotel, as discussed above. Additionally, 1994
advances of $62,055 were repaid from sale proceeds and are included in cash
distributions from operating activities in the third quarter of 1995.
-10-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS
-----------------------------------
Financial Condition/Liquidity
------------------------------
CRI Hotel Income Partners, L.P. (the Partnership) expects that the hotels
in the aggregate will generate sufficient cash to achieve a positive cash flow
after operating expenses. Other than the periodic replacement of fixed assets,
which are funded from the replacement reserves, there are no material
commitments for capital expenditures.
Due to the expiration of all remaining cash flow guarantees in 1993, the
Partnership's liquidity and future results of operations are primarily dependent
upon the performance of the underlying hotels. Hotel operations may be
materially affected by changing market conditions and by seasonality caused by
variables such as vacations, holidays and climate. The Partnership closely
monitors its cash flow position in an effort to ensure that sufficient cash is
available for operating requirements and distributions to BAC Holders. The
Partnership's net cash provided by operating activities for the nine months
ended September 30, 1995, was adequate to support operating and investing
requirements and the distributions to BAC Holders and the General Partners. In
addition, the net proceeds from the sale of Kankakee were adequate to retire the
related purchase money note, as discussed below. The Partnership estimates that
existing cash and cash equivalents along with future cash flows from the hotels'
operations, in the aggregate, will be sufficient to pay operating expenses and
short term commitments, fund replacement reserves, and make distributions to BAC
Holders. Short-term commitments of $1,550,275 increased from December 31, 1994
primarily due to an increase in distributions payable.
The Partnership's notes payable, including accrued interest, are scheduled
to mature in 1997 and 1998. The Kankakee note payable of $434,925 plus accrued
interest of $440,746 was retired on July 19, 1995 in connection with the sale of
the hotel, as discussed below. The Managing General Partner is currently
investigating refinancing options for the remaining notes. There is no
assurance that a refinancing or refinancings will be completed.
On October 20, 1994, a contract for the sale of the Kankakee hotel was
signed. The sale was completed on July 19, 1995. Accordingly, the assets of
this hotel are classified as an asset held for sale on the balance sheet as of
December 31, 1994. The sale price of the property of $1.2 million generated
sufficient proceeds to the Partnership to retire the purchase money note
obligation of the Partnership with respect to such property. The sale resulted
in a net financial statement loss and a net tax loss in 1995 of approximately
$7,000, and $607,000, respectively. Reserves for loss on the sale of the
Kankakee hotel of $200,000 and $400,000 were recognized for financial statement
purposes in 1993 and 1994, respectively. The sale of the Kankakee hotel is not
expected to have a negative effect on the future net income or cash flow of the
Partnership.
On February 21, 1995 and May 10, 1995, the Partnership advanced $35,000 and
$42,000, respectively, from the working capital reserves to the Kankakee hotel
to fund the hotel's short-term working capital needs. These advances were
repaid and the working capital reserves were replenished on July 19, 1995 from
sale proceeds of the Kankakee hotel, as discussed above. Additionally, 1994
advances of $62,055 were repaid from sale proceeds and are included in cash
distributions from operating activities in the third quarter of 1995.
-11-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
The following distributions were paid or accrued to BAC Holders of record
during the first three quarters of 1995 and 1994:
<TABLE>
<CAPTION>
1995 1994
Distributions to Distributions to
BAC Holders BAC Holders
-------------------- --------------------
Quarter Ended Total Per BAC Total Per BAC
------------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C>
March 31, $ 443,018 $ 0.51 $ 349,550 $ 0.40
June 30, 469,077 0.54 443,969 0.51
September 30, 582,362* 0.67 454,386 0.53
---------- ------- ---------- -------
Total $1,494,457 $ 1.72 $1,247,905 $ 1.44
========== ======= ========== =======
</TABLE>
* Includes the distribution of net cash proceeds from the sale of the
Kankakee hotel of $52,478 (approximately $0.06 per BAC), which is net of
payment of outstanding Kankakee real estate taxes, retirement of the
related note payable and repayment of Partnership advances.
The distribution for the quarter ended September 30, 1995 is expected to be
made on November 29, 1995. The General Partner anticipates the distribution for
the quarter ended December 31, 1995 to range from $0.54 to $0.61 per BAC. Due
to the expiration of the remaining cash flow guarantees during 1993,
distributions are dependent on the net cash flow produced from hotel operations,
net of Partnership expenses. The cash flow from certain hotels may be
materially affected by changing market conditions and by seasonality.
Results of Operations
---------------------
The Partnership's net income, which consists principally of revenues from
hotel operations, increased during the three months ended
September 30, 1995 from the comparable period in 1994 primarily due to decreased
hotel operating costs and expenses resulting from the sale of the Kankakee hotel
on July 19, 1995. During the third quarter of 1995, operating costs and
expenses for the Kankakee hotel were recorded up to the date of sale, as
compared to a full quarter of expenses recorded during 1994. As a result,
operating costs and expenses for the Kankakee hotel in the third quarter of 1995
accounted for only 2% of total hotel operating costs and expenses, as compared
to 11% for the same period in 1994. Partially offsetting the Partnership's
increase in net income was a decrease in room revenue for the third quarter of
1995 as compared to the same period of 1994. The sale of the Kankakee hotel
resulted in a decrease in room revenue of approximately $182,000 and was
partially offset by increased room revenues of approximately $147,000 from the
remaining hotels primarily due to increased average room rates at those hotels.
The Partnership's net income increased during the nine months ended
September 30, 1995 from the comparable period in 1994 primarily due to a 2%
decrease in total hotel operating costs and expenses for the first three
quarters of 1995 as compared to the same period in 1994. Operating costs and
-12-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
expenses decreased 3% as a result of decreased operations and the eventual sale
of the Kankakee hotel, and decreased another 1% as a result of a reduction in
depreciation and amortization expense due to the reclassification of the
Kankakee hotel as an asset held for sale at the end of 1994. These decreases in
operating costs and expenses were partially offset by a 2% increase in operating
costs and expenses of the remaining hotels resulting from the increases in
occupancy, as discussed herein, as well as an increase in property taxes due to
a one-time refund of real estate taxes for one property in 1994 as a result of a
successful petition to lower the assessment. Contributing to the increase in
net income was a 1.7% increase in room revenue. Room revenue increased in 1995
primarily due to an increase in average occupancy at three of the hotels, as
well as an increase in average room rates at all hotels, which was partially
offset by a decrease in room revenue for the Kankakee hotel due to its sale in
the third quarter of 1995, as discussed above.
Hotels' Results of Operations
-----------------------------
The hotels' results of operations are affected by changing market
conditions and by seasonality caused by variables such as vacations, holidays
and climate. Based on the hotels' operating budgets, the following months
should provide the highest gross operating income and net cash flow:
<TABLE>
<CAPTION>
Hotel Location Peak Months
-------------- ---------------------
<C> <C>
Clearwater, FL October through April
Minneapolis, MN May through October
Plymouth, MN June through October
Roseville, MN May through October
Scottsdale, AZ January through May
</TABLE>
-13-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
The Statements of Operations include operating results for each of the
hotels as outlined below. Gross Operating Income represents total revenue less
departmental expenses. Net Cash Flow (Deficit) represents cash flow after
operating expenses. The operating results and average occupancy for the hotels
for the three and nine months ended September 30, 1995 and 1994 are as follows:
<TABLE>
<CAPTION>
Gross Operating Income Gross Operating Income
For the three months ended For the nine months ended
September 30, September 30,
---------------------------- ----------------------------
Hotel Location 1995 1994 1995 1994
- -------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Clearwater, FL $ 214,570 $ 194,545 $ 877,962 $ 803,141
Kankakee,IL (2) 10,725 159,362 125,853 407,285
Minneapolis, MN 486,696 437,083 1,257,853 1,129,772
Plymouth, MN 295,953 260,914 684,593 592,647
Roseville, MN 296,785 280,751 735,555 685,246
Scottsdale, AZ 428,931 421,566 1,902,254 1,890,291
------------- ------------- ------------- -------------
Total $ 1,733,660 $ 1,754,221 $ 5,584,070 $ 5,508,382
============= ============= ============= =============
</TABLE>
<TABLE>
<CAPTION>
Net Cash Flow (Deficit) Net Cash Flow (Deficit)
For the three months ended For the nine months ended
September 30, September 30,
---------------------------- ----------------------------
Hotel Location 1995 1994 1995 1994
- -------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Clearwater, FL $ 62,526 $ 54,490 $ 389,108 $ 326,958
Kankakee,IL (2) 7,555 24,182 (112,939) 50,444
Minneapolis, MN 250,239 208,796 569,747 464,029
Plymouth, MN 137,627 96,369 228,109 178,824
Roseville, MN 129,053 113,253 244,577 182,595
Scottsdale, AZ 8,429 (8,097) 475,476 436,290
------------- ------------- ------------- -------------
Total $ 595,429 $ 488,993 $ 1,794,078 $ 1,639,140
============= ============= ============= =============
-14-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
</TABLE>
<TABLE>
<CAPTION>
Average Occupancy Average Occupancy
For the three months ended For the nine months ended
September 30, September 30,
---------------------------- ----------------------------
Hotel Location 1995 1994 1995 1994
- -------------- ------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Clearwater, FL 64% 63% 78% 77%
Kankakee, IL(2) 45% 63% 30% 54%
Minneapolis, MN 96% 97% 90% 92%
Plymouth, MN 90% 95% 82% 79%
Roseville, MN 98% 99% 92% 89%
Scottsdale, AZ 88% 91% 94% 95%
------ ------ ------ ------
Total(1) 86% 86% 82% 83%
====== ====== ====== ======
</TABLE>
(1) The totals for average occupancy are based on a weighted average taking
into consideration the number of rooms at each location.
(2) The 1995 operating results presented for the Kankakee hotel are through
July 19, 1995, the date of sale.
Gross operating income and net cash flow for the Clearwater hotel for the
three and nine months ended September 30, 1995 increased from the same periods
in 1994 primarily due to an increase in occupancy and average room rates, as
well as management's implementation of cost-control strategies. The Kankakee
hotel was sold on July 19, 1995, as previously discussed. From January 1, 1995
to the date of sale, gross operating income and net cash flow for the Kankakee
hotel decreased from the same period in 1994 primarily due to the re-opening of
a nearby competitor, as well as the opening of a new competitor in 1994. Gross
operating income and net cash flow for the Minneapolis hotel for the three and
nine months ended September 30, 1995 increased from the same periods in 1994
primarily due to an increase in room rates resulting from management's marketing
programs. Gross operating income and net cash flow for the Plymouth hotel for
the three and nine months ended September 30, 1995 increased from the same
periods in 1994 primarily due to an increase in room rates resulting from
increased group volume. Gross operating income and net cash flow for the
Roseville hotel for the three and nine months ended September 30, 1995 increased
from the same periods in 1994 primarily due to an increase in average room rate
resulting from increased room demand in the Roseville area. Gross operating
income and net cash flow for the Scottsdale hotel for the three and nine months
ended September 30, 1995 increased from the same periods in 1994 primarily due
to an increase in average room rates, as well as increased cost control efforts.
-15-
<PAGE>
PART II. OTHER INFORMATION
-----------------
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
No reports on Form 8-K were filed with the Commission during the quarter
ended September 30, 1995.
All other items are not applicable.
-16-
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CRI HOTEL INCOME PARTNERS, L.P.
By: CRICO Hotel Associates I, L.P.
General Partner
By: CRI, Inc.
General Partner
November 14, 1995 By: /s/ Richard J. Palmer
- --------------------- -------------------------------------
Date Richard J. Palmer
Senior Vice President/Finance
Signing on behalf of the Registrant
and as Principal Accounting Officer
-17-
<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 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 1,133,132
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 20,499,835
<DEPRECIATION> 7,495,517
<TOTAL-ASSETS> 15,831,404
<CURRENT-LIABILITIES> 1,550,275
<BONDS> 6,458,564
<COMMON> 0
0
0
<OTHER-SE> 7,822,565
<TOTAL-LIABILITY-AND-EQUITY> 15,831,404
<SALES> 0
<TOTAL-REVENUES> 8,039,552
<CGS> 0
<TOTAL-COSTS> 6,774,869
<OTHER-EXPENSES> 7,305
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 468,749
<INCOME-PRETAX> 788,629
<INCOME-TAX> 0
<INCOME-CONTINUING> 788,629
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 788,629
<EPS-PRIMARY> 0.89
<EPS-DILUTED> 0.89
</TABLE>
