<PAGE>
FORM 10-Q
UNITED STATES 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, 1996
------------------
Commission file number 33-11096
--------------
CRI HOTEL INCOME PARTNERS, L.P.
- -------------------------------------------------------------------------
(Exact name of registrant as specified in its 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 offices) (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, 1996
- ---------------------------- ---------------------------------
(Not applicable) (Not applicable)
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1996
Page
----
PART I. Financial Information (Unaudited)
Item 1. Financial Statements
Balance Sheets - September 30, 1996
and December 31, 1995 . . . . . . . . . . . . . . . . 1
Statements of Income - for the three and nine months
ended September 30, 1996 and 1995 . . . . . . . . . . 2
Statement of Changes in Partners' Capital (Deficit)
- for the nine months ended September 30, 1996 . . . 3
Statements of Cash Flows - for the nine months
ended September 30, 1996 and 1995 . . . . . . . . . . 4
Notes to Financial Statements . . . . . . . . . . . . . 5
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 9
PART II. Other Information
Item 6. Exhibits and Reports on Form 8-K . . . . . . . . . . . 14
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------
CRI HOTEL INCOME PARTNERS, L.P.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------ ------------
(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 4,900,356 4,501,971
Leasehold improvements 1,382,000 1,382,000
------------ ------------
20,969,814 20,571,429
Less: accumulated depreciation and amortization (8,329,144) (7,700,997)
------------ ------------
12,640,670 12,870,432
Cash and cash equivalents 627,514 677,454
Working capital reserve 225,000 225,000
Receivables, reserve for replacements and other assets 669,602 700,722
Acquisition fees, principally paid to related parties,
net of accumulated amortization of $295,429 and $269,926,
respectively 724,675 750,178
Property purchase costs, net of accumulated amortization
of $52,437 and $47,880, respectively 129,830 134,387
------------ ------------
Total assets $ 15,017,291 $ 15,358,173
============ ============
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT)
Distributions payable $ 429,456 $ 549,562
Hotel trade payables 216,675 305,473
Accounts payable and accrued expenses 282,641 306,592
Building lease payable 88,131 38,596
Accrued property taxes 144,555 64,183
Accrued salaries and wages 86,916 71,767
Sales tax payable 68,327 62,268
Accrued management fees 30,745 107,804
------------ ------------
1,347,446 1,506,245
Notes payable 7,064,422 6,604,974
------------ ------------
Total liabilities 8,411,868 8,111,219
------------ ------------
</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.
LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) - Continued
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
------------ ------------
(Unaudited)
<S> <C> <C>
Commitments and contingencies
Partners' capital (deficit):
General Partner (256,695) (243,841)
Beneficial Assignee Certificates (BACs) Series A; 868,662 BACs
issued and outstanding 6,862,118 7,490,795
------------ ------------
Total partners' capital 6,605,423 7,246,954
------------ ------------
Total liabilities and partners' capital $ 15,017,291 $ 15,358,173
============ ============
</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,
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Revenue:
Rooms $ 2,267,857 $ 2,345,334 $ 7,155,748 $ 7,326,816
Telephone 83,134 99,002 263,052 316,602
Rental and other 93,882 82,289 272,079 277,284
Food and beverage 21,666 13,892 65,214 46,406
------------ ------------ ------------ ------------
2,466,539 2,540,517 7,756,093 7,967,108
------------ ------------ ------------ ------------
Departmental expenses:
Rooms (717,028) (722,679) (2,101,747) (2,115,068)
Telephone (25,634) (37,956) (82,185) (116,181)
Rental and other (22,505) (29,131) (65,107) (101,207)
Food and beverage (18,405) (17,091) (55,218) (50,582)
------------ ------------ ------------ ------------
(783,572) (806,857) (2,304,257) (2,383,038)
------------ ------------ ------------ ------------
Gross operating income 1,682,967 1,733,660 5,451,836 5,584,070
------------ ------------ ------------ ------------
Unallocated operating income (expenses):
Interest and other income 21,150 31,811 59,726 76,357
General and administrative (249,891) (241,865) (778,834) (844,876)
Building lease expense (124,385) (118,500) (529,035) (497,232)
Marketing (227,265) (220,014) (700,597) (699,778)
Depreciation and amortization (226,550) (217,767) (670,070) (645,908)
Energy (153,356) (151,930) (413,826) (409,867)
Property taxes (128,010) (117,744) (394,134) (440,986)
Property operations and maintenance (133,441) (150,838) (412,664) (466,515)
Management fees (86,244) (88,877) (271,160) (278,615)
Base asset management fee, paid to related
parties (23,436) (26,250) (70,312) (78,750)
Professional fees (12,405) (10,427) (32,008) (33,217)
------------ ------------ ------------ ------------
(1,343,833) (1,312,401) (4,212,914) (4,319,387)
------------ ------------ ------------ ------------
Operating income 339,134 421,259 1,238,922 1,264,683
</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,
---------------------------- ----------------------------
1996 1995 1996 1995
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Other income (expenses):
Interest expense (156,595) (153,951) (459,448) (468,749)
Loss on disposition of hotel -- (7,305) -- (7,305)
------------ ------------ ------------ ------------
Net income $ 182,539 $ 260,003 $ 779,474 $ 788,629
============ ============ ============ ============
Net income allocated to General Partner (2%) $ 3,650 $ 5,200 $ 15,589 $ 15,773
============ ============ ============ ============
Net income allocated to BAC Holders (98%) $ 178,889 $ 254,803 $ 763,885 $ 772,856
============ ============ ============ ============
Net income per BAC based on 868,662
BACs outstanding $ 0.21 $ 0.29 $ 0.88 $ 0.89
============ ============ ============ ============
</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, 1996
(Unaudited)
<TABLE>
<CAPTION>
Beneficial
Assignee
General Certificate
Partner Holders Total
--------- ------------ ------------
<S> <C> <C> <C>
Balance, December 31, 1995 $(243,841) $ 7,490,795 $ 7,246,954
Distributions paid or accrued of $1.60 per BAC (28,443) (1,392,562) (1,421,005)
Net income 15,589 763,885 779,474
--------- ------------ ------------
Balance, September 30, 1996 $(256,695) $ 6,862,118 $ 6,605,423
========= ============ ============
</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,
------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 779,474 $ 788,629
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 670,070 645,908
Accrued interest on notes payable 459,448 468,749
Loss on disposition of hotel -- 7,305
Changes in assets and liabilities:
(Increase) decrease in receivables and other assets, net (6,808) 40,427
(Decrease) increase in accounts payable and accrued expenses (23,951) 9,914
(Decrease) increase in hotel trade payables (88,798) 42,393
Increase (decrease) in accrued salaries and wages 15,149 (9,578)
Increase (decrease) in building lease payable 49,535 (62,166)
Increase (decrease) in sales tax payable 6,059 (1,525)
Increase in accrued property taxes 80,372 72,960
Decrease in accrued management fees (77,059) (66,718)
------------ ------------
Net cash provided by operating activities 1,863,491 1,936,298
------------ ------------
Cash flows from investing activities:
Purchase of property and equipment (398,385) (236,151)
Net withdrawals from reserve for replacements 26,065 25,821
Net proceeds from disposition of hotel -- 1,128,251
------------ ------------
Net cash (used in) provided by investing activities (372,320) 917,921
------------ ------------
Cash flows from financing activities:
Distributions paid to BAC Holders and General Partner (1,541,111) (1,382,768)
Retirement of note payable -- (875,671)
------------ ------------
Net cash used in financing activities (1,541,111) (2,258,439)
------------ ------------
Net (decrease) increase in cash and cash equivalents (49,940) 595,780
Cash and cash equivalents, beginning of period 677,454 537,352
------------ ------------
Cash and cash equivalents, end of period $ 627,514 $ 1,133,132
============ ============
</TABLE>
The accompanying notes are an integral part
of these financial statements.
-6-
<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, 1996
and December 31, 1995, and the results of its operations for the three and nine
months ended September 30, 1996 and 1995 and its cash flows for the nine months
ended September 30, 1996 and 1995.
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, 1995.
Certain amounts in the 1995 financial statements have been reclassified to
conform to the 1996 presentation.
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 is for an initial term of twelve to fifteen years,
with a five-year renewal option. The agreements call for a base management
fee of 3.5% 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 call 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. No
incentive management fees were earned for the first three quarters of 1996
or 1995.
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 was $12,620 and $37,858 for the three and
nine months ended September 30, 1996, respectively and $12,192 and $36,577
for the three and nine months ended September 30, 1995, respectively.
3. DISTRIBUTIONS TO BAC HOLDERS
The following distributions were paid or accrued to BAC Holders of record
during the first three quarters of 1996 and 1995:
-7-
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
3. DISTRIBUTIONS TO BAC HOLDERS - Continued
<TABLE>
<CAPTION>
1996 1995
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 $ 485,242 $ 0.56 $ 443,018 $ 0.51
June 30 486,453 0.56 469,077 0.54
September 30 420,867 0.48 582,362* 0.67
---------- ------- ---------- -------
$1,392,562 $ 1.60 $1,494,457 $ 1.72
========== ======= ========== =======
</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.
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. As
mentioned below, distributions may be substantially reduced for the long term,
and possibly terminated for the short term due to the possible refinancing of
the Zero Coupon Purchase Money Notes held by the Partnership.
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 $11,695 and $33,788 for the three and nine months ended September 30,
1996, respectively, and $18,231 and $44,372 for the three and nine months ended
September 30, 1995, 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. The Partnership paid or accrued a base asset management fee of
$23,436 and $70,312, during the three and nine months ended September 30, 1996,
and $26,250 and $78,750 for the three and nine months ended September 30, 1995.
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. The sale price of the
property of $1.2 million generated sufficient proceeds to the Partnership to
-8-
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
5. HOTEL OWNED BY THE PARTNERSHIP - Continued
retire the purchase money note obligation of the Partnership with respect to
such property.
Erosion and settlement have caused some of the walls to buckle and the
hotel concrete floor to crack and sink at the Roseville hotel. Excavation to
determine the severity of the problem and exterior work to prevent further
damage were completed during October 1996. Interior work, including
jackhammering and replacing the concrete floor, is expected to be completed
during January 1997. The cost to repair the exterior of the hotel was
approximately $20,000 and was funded by the hotel's reserves. As of November 8,
1996, preliminary estimates received indicate the cost to repair the interior of
the hotel will be approximately $40,000 to $60,000. These costs may be funded
by the hotel's operations.
6. PURCHASE MONEY NOTES
In addition to capital provided by the sale of BACs, the Partnership
received Zero Coupon Purchase Money Notes (the Notes) financing from Days Inn
for the acquisition of the hotels. The notes are nonrecourse notes
collateralized by the various properties. Each note provides for a ten year
maturity from the date of acquisition with an accrual of interest at 9% per
annum, compounded on a monthly basis. The Notes, including accrued interest,
are scheduled to mature in 1997 and 1998. The Kankakee Zero Coupon note 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 above.
The balances of the Notes, including accrued interest, due upon maturity
are as follows:
<TABLE>
<CAPTION>
Maturity
Date Balance
-------- -----------
<S> <C> <C>
Minneapolis Days Inn 10/31/97 $ 2,274,467
Plymouth Days Inn 12/29/97 1,867,275
Roseville Days Inn 2/28/98 1,990,159
Clearwater Days Inn 3/31/98 1,776,927
Scottsdale Days Inn (A) (A)
-----------
$ 7,908,828
===========
</TABLE>
(A) The Scottsdale Days Inn is held as a leasehold interest. The maturity of
the lease was originally set for January 31, 1994. This lease term was
initially extended an additional five years, thereby expiring on January
31, 1999. During 1996, this lease was extended for an additional five
years, thereby expiring January 31, 2004.
The General Partner is currently reviewing several options available to the
Partnership to address the upcoming maturity of the Notes and the capital
improvement needs of the properties. One option may be to sell the hotels
outright (or in the case of Scottsdale, sell the leasehold interest), either as
-9-
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
6. PURCHASE MONEY NOTES - Continued
individual assets or in a sale pool together. Another option may be to
refinance the Notes to generate sufficient refinancing proceeds to set aside
monies for the needed capital improvements to the properties. It is estimated
that the refinancing option would substantially reduce for the long term, and
possibly terminate for the short-term, any future investor distributions from
the Partnership.
-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 flow to achieve a positive cash
flow after operating expenses. During the nine months ended September 30 1996,
certain hotels retained aggregate additional replacement reserves of
approximately $188,700 for the purpose of funding the purchase of electronic
door locks. The installation of these electronic door locks is a franchise
requirement imposed by Days Inns. As of September 30, 1996, $166,837 had been
paid relating to the lock replacements. Other than the purchase of electronic
door locks and the periodic replacement of fixed assets, which are funded from
the replacement reserves, and the Roseville excavation and repair work, as
discussed below, there are no material commitments for capital expenditures.
However, the Partnership anticipates that the hotels may need to incur
significant expenses for the needed capital improvements of the hotels to remain
competitive.
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, 1996, along with existing cash resources, was adequate to
support operating, investing and financing requirements and declared
distributions to BAC Holders and the General Partner. Cash and cash equivalents
decreased in 1996 principally due to the timing of distributions made to BAC
Holders and the General Partner. 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 liabilities of $1,347,446 decreased from 1995. This resulted
primarily from a decrease in distributions payable, a decrease in hotel trade
payables at four hotels and a decrease in accrued management fees at the
Scottsdale hotel.
In addition to capital provided by the sale of BACs, the Partnership
received Zero Coupon Purchase Money Notes (the Notes) financing from Days Inn
for the acquisition of the hotels. The notes are nonrecourse notes
collateralized by the various properties. Each note provides for a ten year
maturity from the date of acquisition with an accrual of interest at 9% per
annum, compounded on a monthly basis. The Notes, including accrued interest,
are scheduled to mature in 1997 and 1998. The Kankakee Zero Coupon note 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 above.
The balances of the Notes, including accrued interest, due upon maturity
are as follows:
-11-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
<TABLE>
<CAPTION>
Maturity
Date Balance
-------- -----------
<S> <C> <C>
Minneapolis Days Inn 10/31/97 $ 2,274,467
Plymouth Days Inn 12/29/97 1,867,275
Roseville Days Inn 2/28/98 1,990,159
Clearwater Days Inn 3/31/98 1,776,927
Scottsdale Days Inn (A) (A)
-----------
$ 7,908,828
===========
</TABLE>
(A) The Scottsdale Days Inn is held as a leasehold interest. The maturity of
the lease was originally set for January 31, 1994. This lease term was
initially extended an additional five years, thereby expiring on January
31, 1999. During 1996, this lease was extended for an additional five
years, thereby expiring January 31, 2004.
The General Partner is currently reviewing several options available to the
Partnership to address the upcoming maturity of the Notes and the capital
improvement needs of the properties. One option may be to sell the hotels
outright (or in the case of Scottsdale, sell the leasehold interest), either as
individual assets or in a sale pool together. Another option may be to
refinance the Notes to generate sufficient refinancing proceeds to set aside
monies for the needed capital improvements to the properties. It is estimated
that the refinancing option would substantially reduce for the long term, and
possibly terminate for the short-term, any future investor distributions from
the Partnership.
The following distributions were paid or accrued to BAC Holders of record
during the first three quarters of 1996 and 1995:
<TABLE>
<CAPTION>
1996 1995
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 $ 485,242 $ 0.56 $ 443,018 $ 0.51
June 30 486,453 0.56 469,077 0.54
September 30 420,867 0.48 582,362* 0.67
---------- ------- ---------- -------
$1,392,562 $ 1.60 $1,494,457 $ 1.72
========== ======= ========== =======
</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
-12-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
payment of outstanding Kankakee real estate taxes, retirement of the
related note payable and repayment of Partnership advances.
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, decreased $77,464 during the three months ended September 30,
1996 from the comparable period in 1995 primarily due to a $77,477 decrease in
room revenue. Room revenue decreased $48,148 primarily due to decreased
occupancy at the Plymouth and University hotels. Additionally, room revenue
decreased $29,329 due to the sale of the Kankakee hotel.
The Partnership's net income decreased $9,155 during the nine months ended
September 30, 1996 from the comparable period in 1995 primarily due to a
$171,068 decrease in room revenue. Room revenue decreased $219,209 due to the
sale of the Kankakee hotel and $109,661 due to decreased occupancy at the
Plymouth and Minneapolis hotels, partially offset by a $157,802 increase in room
revenue at the remaining hotels resulting from an increase in room rates.
Contributing to the decrease in net income was a $53,550 decrease in telephone
revenue primarily due to decreased occupancy at the Plymouth and Minneapolis
hotels. Partially offsetting the decrease in net income was a $185,254 decrease
in unallocated operating expenses and departmental expenses. These expenses
decreased $360,866 due to the sale of the Kankakee hotel in July 1995, partially
offset by a $175,612 increase in these expenses at the remaining hotels
primarily due to an increase in building lease costs at the Scottsdale hotel and
an increase in depreciation expense resulting from increased furniture fixture
and equipment expenditures during 1996 primarily due to the purchase of door
locks at all hotels, 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>
The Partnership's Statements of Income include operating results for each
of the hotels as outlined below. Gross Operating Income represents total
-13-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
revenue from rooms, telephone, food and beverage, and rental and other, less the
related departmental expenses. Operating Income (Loss) represents Gross
Operating Income less unallocated operating income (expenses). The operating
results and average occupancy for the hotels for the three and nine months ended
September 30, 1996 and 1995 are as follows:
-14-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
<TABLE>
<CAPTION>
Gross Operating Income Gross Operating Income
For the three months ended For the nine months ended
September 30, September 30,
---------------------------- ----------------------------
Hotel Location 1996 1995 1996 1995
- -------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Clearwater, FL $ 207,335 $ 214,570 $ 874,258 $ 877,962
Minneapolis, MN 466,997 486,696 1,196,883 1,257,853
Plymouth, MN 251,127 295,953 619,051 684,593
Roseville, MN 312,017 296,785 743,456 735,555
Scottsdale, AZ 445,491 428,931 2,018,188 1,902,254
------------ ------------ ------------ ------------
Total from continuing operations 1,682,967 1,722,935 5,451,836 5,458,217
Kankakee, IL (1) -- 10,725 -- 125,853
------------ ------------ ------------ ------------
Total $ 1,682,967 $ 1,733,660 $ 5,451,836 $ 5,584,070
============ ============ ============ ============
</TABLE>
<TABLE>
<CAPTION>
Operating Income (Loss) Operating Income (Loss)
For the three months ended For the nine months ended
September 30, September 30,
---------------------------- ----------------------------
Hotel Location 1996 1995 1996 1995
- -------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Clearwater, FL $ 54,758 $ 72,069 $ 377,706 $ 408,233
Minneapolis, MN 248,641 271,156 563,649 602,147
Plymouth, MN 111,151 150,908 185,173 208,513
Roseville, MN 158,396 142,461 283,615 295,228
Scottsdale, AZ 29,502 26,302 607,333 551,558
Depreciation and Partnership operating expenses (263,314) (251,471) (778,554) (686,798)
------------ ------------ ------------ ------------
Total from continuing operations $ 339,134 $ 411,425 $ 1,238,922 $ 1,378,881
Kankakee, IL (1) -- 9,834 -- (114,198)
------------ ------------ ------------ ------------
Total $ 339,134 $ 421,259 $ 1,238,922 $ 1,264,683
============ ============ ============ ============
</TABLE>
-15-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
<TABLE>
<CAPTION>
Average Occupancy Average Occupancy
For the three months ended For the nine months ended
September 30, September 30,
---------------------------- ----------------------------
Hotel Location 1996 1995 1996 1995
- -------------- ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Clearwater, FL 61% 64% 73% 78%
Minneapolis, MN 91% 96% 86% 90%
Plymouth, MN 84% 90% 79% 82%
Roseville, MN 97% 98% 91% 92%
Scottsdale, AZ 94% 88% 94% 94%
------ ------- ------ ------
Total from continuing operations (2) 86% 88% 85% 87%
Kankakee, IL(1) -- 45% -- 30%
------ ------ ------ ------
Total (2) 86% 86% 85% 82%
====== ====== ====== ======
</TABLE>
(1) The 1995 operating results presented for the Kankakee hotel are through
July 19, 1995, the date of sale.
(2) The sub-totals and totals for average occupancy are based on a weighted
average taking into consideration the number of rooms at each location.
Gross operating income and operating income for the Clearwater hotel for
the three and nine months ended September 30, 1996 decreased from the same
period in 1995 primarily due to the lost room nights previously generated by a
major client that was lost during the fourth quarter of 1995 and increased
marketing and advertising expenses incurred as a result of increased sales
efforts. Gross operating income and operating income for the Minneapolis hotel
for the three and nine months ended September 30, 1996 decreased from the same
periods in 1995 primarily due to unusually harsh weather conditions and a
temporary quarantine of Shriner's Hospital, which indirectly provides a
significant amount of business to the hotel. Gross operating income and
operating income for the Plymouth hotel for the three and nine months ended
September 30, 1996 decreased from the same period in 1995 primarily due to
unusually harsh weather conditions and increased competition for local
advertising space. Gross operating income for the Roseville hotel for the three
and nine months ended September 30, 1996 and operating income for the three
months ended September 30, 1996 increased from the same period in 1995 primarily
due to increased interstate trucking business and expanded trucking contract
rooms during 1996. Operating income for the Roseville hotel for the nine months
ended September 30, 1996 decreased from the same period in 1995 primarily due to
unusually harsh weather conditions and record low temperatures during the first
quarter of 1996. Gross operating income and operating income for the Scottsdale
hotel for the three months ended September 30, 1996 increased primarily due to
an increase in room rates and unexpected increases in the tour and travel
segment of the market. Gross operating income and operating income for the
Scottsdale hotel for the nine months ended September 30, 1996 increased from the
same period in 1995 primarily due to increased room demand in the area as a
-16-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
result of Super Bowl XXX being hosted by the City of Phoenix. The Kankakee
hotel was sold on July 19, 1995, as previously discussed.
Erosion and settlement have caused some of the walls to buckle and the
hotel concrete floor to crack and sink at the Roseville hotel. Excavation to
determine the severity of the problem and exterior work to prevent further
damage were completed during October 1996. Interior work, including
jackhammering and replacing the concrete floor, is expected to be completed
during January 1997. The cost to repair the exterior of the hotel was
approximately $20,000 and was funded by the hotel's reserves. As of November 8,
1996, preliminary estimates received indicate the cost to repair the interior of
the hotel will be approximately $40,000 to $60,000. These costs may be funded
by the hotel's operations.
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, 1996.
All other items are not applicable.
-17-
<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 12, 1996 By: /s/ Deborah K. Browning
- --------------------- -------------------------------------
Date Deborah K. Browning
Vice President/Chief Accounting
Officer
Signing on behalf of the Registrant
and as Principal Accounting Officer
-18-
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Method of Filing
- ------- -----------------------------
27 Financial Data Schedule Filed herewith electronically
-19-
<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-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 852,514
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 20,969,814
<DEPRECIATION> 8,329,144
<TOTAL-ASSETS> 15,017,291
<CURRENT-LIABILITIES> 1,347,446
<BONDS> 7,064,422
0
0
<COMMON> 0
<OTHER-SE> 6,605,423
<TOTAL-LIABILITY-AND-EQUITY> 15,017,291
<SALES> 0
<TOTAL-REVENUES> 7,815,819
<CGS> 0
<TOTAL-COSTS> 2,304,257
<OTHER-EXPENSES> 4,272,640
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 459,448
<INCOME-PRETAX> 779,474
<INCOME-TAX> 0
<INCOME-CONTINUING> 779,474
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 779,474
<EPS-PRIMARY> 0.88
<EPS-DILUTED> 0.88
</TABLE>
