<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 March 31, 1997
--------------
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 March 31, 1997
- ---------------------------- ---------------------------------
(Not applicable) (Not applicable)
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
INDEX TO FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1997
Page
----
PART I. Financial Information (Unaudited)
Item 1. Financial Statements
Balance Sheets - March 31, 1997
and December 31, 1996 . . . . . . . . . . . . . . . . 1
Statements of Income - for the three months
ended March 31, 1997 and 1996 . . . . . . . . . . . . 2
Statement of Changes in Partners' Capital (Deficit)
- for the three months ended March 31, 1997 . . . . . 3
Statements of Cash Flows - for the three months
ended March 31, 1997 and 1996 . . . . . . . . . . . . 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 . . . . . . . . . . . 15
Signature . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 1. FINANCIAL STATEMENTS
---------------------
CRI HOTEL INCOME PARTNERS, L.P.
BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
------------ ------------
(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 5,243,370 5,009,400
Leasehold improvements 1,382,000 1,382,000
------------ ------------
21,312,828 21,078,858
Less: accumulated depreciation and amortization (8,768,825) (8,546,840)
------------ ------------
12,544,003 12,532,018
Cash and cash equivalents 503,353 504,423
Working capital reserve 218,120 225,000
Receivables, reserve for replacements and other assets 808,832 596,828
Acquisition fees, principally paid to related parties,
net of accumulated amortization of $312,431 and $303,930,
respectively 707,673 716,174
Property purchase costs, net of accumulated amortization
of $55,475 and $53,956, respectively 126,792 128,311
------------ ------------
Total assets $ 14,908,773 $ 14,702,754
============ ============
</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>
March 31, December 31,
1997 1996
------------ ------------
(Unaudited)
<S> <C> <C>
Current liabilities:
Accounts payable and accrued expenses $ 1,034,860 $ 872,421
Distributions payable 390,012 398,875
Short-term portion of notes payable 7,388,342 3,843,549
------------ ------------
Total current liabilities 8,813,214 5,114,845
------------ ------------
Long term portion of notes payable -- 3,381,018
------------ ------------
Total liabilities 8,813,214 8,495,863
------------ ------------
Commitments and contingencies
Partners' capital (deficit):
General Partner (266,868) (264,641)
Beneficial Assignee Certificates (BACs) Series A; 868,662 BACs
issued and outstanding 6,362,427 6,471,532
------------ ------------
Total partners' capital 6,095,559 6,206,891
------------ ------------
Total liabilities and partners' capital $ 14,908,773 $ 14,702,754
============ ============
</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
March 31,
----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Revenue:
Rooms $ 2,575,495 $ 2,584,878
Telephone 74,983 92,635
Rental and other 97,176 90,989
Food and beverage 25,103 11,386
------------ ------------
2,772,757 2,779,888
------------ ------------
Departmental expenses:
Rooms (655,134) (671,506)
Telephone (24,513) (30,958)
Rental and other (43,527) (21,744)
Food and beverage (20,430) (11,993)
------------ ------------
(743,604) (736,201)
------------ ------------
Gross operating income 2,029,153 2,043,687
------------ ------------
Unallocated operating income (expenses):
Interest and other income 17,450 20,244
General and administrative (312,788) (293,039)
Building lease expense (276,470) (251,095)
Marketing (220,534) (225,377)
Depreciation and amortization (235,958) (221,149)
Energy (139,536) (139,831)
Property taxes (136,217) (138,114)
Property operations and maintenance (139,665) (130,382)
Management fees (97,009) (97,169)
Base asset management fee, paid to related parties (23,438) (23,438)
Professional fees (22,533) (10,552)
------------ ------------
(1,586,698) (1,509,902)
------------ ------------
Operating income 442,455 533,785
Other income (expenses):
Interest expense (163,775) (149,729)
------------ ------------
Net income $ 278,680 $ 384,056
============ ============
</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
March 31,
-----------------------------
1997 1996
------------ ------------
<S> <C> <C>
Net income allocated to General Partner (2%) $ 5,574 $ 7,681
============ ============
Net income allocated to BAC Holders (98%) $ 273,106 $ 376,375
============ ============
Net income per BAC based on 868,662 BACs outstanding $ 0.31 $ 0.43
============ ============
</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 three months ended March 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
Beneficial
Assignee
General Certificate
Partner Holders Total
--------- ------------ ------------
<S> <C> <C> <C>
Balance, December 31, 1996 $(264,641) $ 6,471,532 $ 6,206,891
Distributions paid or accrued of $0.44 per BAC
(including return of capital of $0.13 per BAC) (7,801) (382,211) (390,012)
Net income 5,574 273,106 278,680
--------- ------------ ------------
Balance, March 31, 1997 $(266,868) $ 6,362,427 $ 6,095,559
========= ============ ============
</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 three months ended
March 31,
------------------------------
1997 1996
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 278,680 $ 384,056
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 235,958 221,149
Accrued interest on notes payable 163,775 149,729
Changes in assets and liabilities:
Increase in receivables and other assets, net (160,142) (149,596)
Increase in accounts payable and accrued expenses 162,439 13,912
------------ ------------
Net cash provided by operating activities 680,710 619,250
------------ ------------
Cash flows from investing activities:
Purchase of property and equipment (233,970) (64,122)
Net deposits to reserve for replacements (55,815) (139,898)
Net decrease in working capital reserves 6,880 --
------------ ------------
Net cash used in investing activities (282,905) (204,020)
------------ ------------
Cash flows from financing activities:
Distributions paid to BAC Holders and General Partner (398,875) (549,562)
------------ ------------
Net decrease in cash and cash equivalents (1,070) (134,332)
Cash and cash equivalents, beginning of period 504,423 677,454
------------ ------------
Cash and cash equivalents, end of period $ 503,353 $ 543,122
============ ============
</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 March 31, 1997 and
December 31, 1996, and the results of its operations for the three months ended
March 31, 1997 and 1996 and its cash flows for the three months ended March 31,
1997 and 1996.
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, 1996.
Certain amounts in the 1996 financial statements have been reclassified to
conform to the 1997 presentation.
2. NOTES PAYABLE
In addition to the capital provided by the sale of Beneficial Assignee
Certificates (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. Principal and accrued
interest, which will equal 47.4% of the original purchase price of the hotel, is
due to BancBoston Mortgage Corporation (BancBoston) upon maturity of each Note.
The Notes may be prepaid at the initial note balance plus accrued interest at
any time without premium or penalty.
As of March 31, 1997 and December 31, 1996, respectively, the Notes,
including accrued interest, consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
Note Maturity Date 1997 1996
---------------------- ------------- ----------- -----------
<S> <C> <C> <C>
Minneapolis Days Inn 10/31/97 $ 2,158,561 $ 2,110,713
Plymouth Days Inn 12/29/97 1,772,118 1,732,836
Roseville Days Inn 2/28/98 1,833,126 1,792,492
Clearwater Days Inn 3/31/98 1,624,537 1,588,526
----------- -----------
$ 7,388,342 $ 7,224,567
=========== ===========
</TABLE>
The balances of the Notes, including accrued interest, due upon maturity
are as follows:
-7-
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. NOTES PAYABLE - 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. As of May 9, 1997, the Partnership has neither committed
to a plan to sell the hotels or to refinance the Notes, nor is there any
assurance that a sale will take place or that refinancing will be obtained. In
the event that the Partnership is able to obtain satisfactory terms for the sale
of all the hotels as a portfolio, which would result in the dissolution of the
Partnership, the Partnership will solicit BAC Holders for majority approval of
the sale offer, in accordance with the Partnership Agreement.
3. WORKING CAPITAL RESERVES
The working capital reserve of $218,120 and $225,000 as of March 31, 1997
and December 31, 1996, respectively, represents funds held in reserve which are
maintained as working capital for the Partnership. The working capital reserve
may be increased or reduced by the General Partner as it deems appropriate. The
General Partner has approved an increase of the working capital reserve by
$577,000 during 1997, in order to address capital improvements needed to
increase the marketability of the hotels in connection with a potential sale of
the properties, or a refinancing of the Notes, as discussed above. During the
three months ended March 31, 1997 and 1996, the Partnership increased the
working capital reserve by $199,655 and $0, respectively. The General Partner
has approved an additional increase to the working capital reserve of
approximately $377,000 during the remainder of 1997. Additionally, during the
three months ended March 31, 1997, the working capital reserves were decreased
by $206,535 to provide funding to the hotels to perform needed capital
improvements, as mentioned above.
-8-
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. DISTRIBUTIONS TO BAC HOLDERS
The following distributions were paid or accrued to BAC Holders of record
during the first quarters of 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
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 $ 382,211 $ 0.44 $ 486,450 $ 0.56
========== ======= ========== =======
</TABLE>
As a result of the increase in working capital reserves of $577,000 during
1997, as discussed above, the General Partner anticipates a decrease in the 1997
distribution levels. The General Partner expects the distribution for the year
ending December 31, 1997 to range from approximately $1.65 to $1.85 per BAC. In
the event that the Partnership seeks to refinance the Notes, distributions may
be reduced for the long term, and possibly terminated for the short term.
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.
5. 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 quarters of 1996 or
1997.
In connection with the potential sales of the properties owned by the
Partnership, as discussed below, the Partnership could incur termination
fees of approximately $1.6 million with respect to the management
agreements with Buckhead, in the event that the hotels are sold and the
purchaser of the hotels does not elect to maintain Buckhead as the
management company. As the potential sales of the properties, and the
terms thereof, are uncertain as of May 9, 1997, these costs have not been
reflected in the accompanying financial statements.
-9-
<PAGE>
CRI HOTEL INCOME PARTNERS, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
5. 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 was $13,061 and $12,619 for the three
months ended March 31, 1997 and 1996, respectively.
6. 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 $12,080 and $10,193 for the three months ended March 31, 1997 and 1996,
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
$23,438, during each of the three months ended March 31, 1997 and 1996.
-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. In addition to periodic replacement of fixed
assets, which are funded from the replacement reserves, the Partnership has
determined that significant capital improvements are needed to enhance the
marketability of the hotels in connection with a potential sale of the
properties, or a refinancing of the purchase money notes issued in connection
with the Partnership's acquisition of the hotels, as discussed below. The
General Partner has approved a $577,000 increase in the working capital reserves
during 1997, as discussed below, to address the capital improvement needs of the
hotels. During the three months ended March 31, 1997, the working capital
reserves were decreased by $206,535 to provide funding to the hotels to perform
needed capital improvements.
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 three months
ended March 31, 1997, 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 1997 principally due to deposits to replacement reserves and
capital improvements made by the hotels. With the exception of the maturing
Notes, which are discussed further 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 working capital and replacement reserves, and make
distributions to BAC Holders and the General Partner. Short-term liabilities of
$8,813,214 increased from 1996. This resulted primarily from the
reclassification of the remaining portion of purchase money notes which will
mature during February and March 1998, an increase in trade payables at all
hotels, and an increase in sales tax and property tax payables at three and four
hotels, respectively.
Working Capital Reserve
- -----------------------
The working capital reserve of $218,120 and $225,000 as of March 31, 1997
and December 31, 1996, respectively, represents funds held in reserve which are
maintained as working capital for the Partnership. The working capital reserve
may be increased or reduced by the General Partner as it deems appropriate. The
General Partner has approved an increase of the working capital reserve by
$577,000 during 1997, in order to address capital improvements needed to
increase the marketability of the hotels in connection with a potential sale of
the properties, or a refinancing of the purchase money notes, as discussed
below. During the three months ended March 31, 1997 and 1996, the Partnership
increased the working capital reserve by $199,655 and $0, respectively. The
General Partner has approved an additional increase to the working capital
reserve of approximately $377,000 during the remainder of 1997. Additionally,
during the three months ended March 31, 1997, the working capital reserves were
-11-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
decreased by $206,535 to provide funding to the hotels to perform needed capital
improvements, as mentioned above.
Purchase Money Notes
- --------------------
In addition to the capital provided by the sale of Beneficial Assignee
Certificates (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. Principal and accrued
interest, which will equal 47.4% of the original purchase price of the hotel, is
due to BancBoston Mortgage Corporation (BancBoston) upon maturity of each Note.
The Notes may be prepaid at the initial note balance plus accrued interest at
any time without premium or penalty.
As of March 31, 1997 and December 31, 1996, respectively, the Notes,
including accrued interest, consist of the following:
<TABLE>
<CAPTION>
March 31, December 31,
Note Maturity Date 1997 1996
---------------------- ------------- ----------- -----------
<S> <C> <C> <C>
Minneapolis Days Inn 10/31/97 $ 2,158,561 $ 2,110,713
Plymouth Days Inn 12/29/97 1,772,118 1,732,836
Roseville Days Inn 2/28/98 1,833,126 1,792,492
Clearwater Days Inn 3/31/98 1,624,537 1,588,526
----------- -----------
$ 7,388,342 $ 7,224,567
=========== ===========
</TABLE>
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>
-12-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
(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. As of May 9, 1997, the Partnership has neither committed
to a plan to sell the hotels or to refinance the Notes, nor is there any
assurance that a sale will take place or that refinancing will be obtained. In
the event that the Partnership is able to obtain satisfactory terms for the sale
of all the hotels as a portfolio, which would result in the dissolution of the
Partnership, the Partnership will solicit BAC Holders for majority approval of
the sale offer, in accordance with the Partnership Agreement.
Distributions
- -------------
The following distributions were paid or accrued to BAC Holders of record
during the first quarters of 1997 and 1996:
<TABLE>
<CAPTION>
1997 1996
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 $ 382,211 $ 0.44 $ 486,450 $ 0.56
========== ======= ========== =======
</TABLE>
As a result of the increase in working capital reserves of $577,000 during
1997, as discussed above, the General Partner anticipates a decrease in the 1997
distribution levels. The General Partner expects the distribution for the year
ending December 31, 1997 to range from approximately $1.65 to $1.85 per BAC. In
the event that the Partnership seeks to refinance the Notes, distributions may
be reduced for the long term, and possibly terminated for the short term.
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.
Mini-Tender Offers
- ------------------
The Partnership has received several requests from BAC Holders for lists of
the names and most current addresses of all BAC Holders. These requests may be
the first step by BAC Holders to launch one or more unregistered tender offers
to acquire BACs in the Partnership. The Partnership takes no position as to
-13-
<PAGE>
PART I. FINANCIAL INFORMATION
---------------------
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
-------------------------------------------------
CONDITION AND RESULTS OF OPERATIONS - Continued
-----------------------------------
recommending or not recommending BAC Holders to make mini-tender offers, nor
does it take a position as to recommending or not recommending to BAC Holders to
accept any mini-tender offers which may be made.
Results of Operations
---------------------
The Partnership's net income, which consists principally of revenues from
hotel operations, decreased $ 105,376 during the three months ended March 31,
1997 from the comparable period in 1996 primarily due to a $84,199 increase in
departmental and unallocated expenses. Departmental and unallocated expenses
increased primarily due to a $25,375 increase in building lease expense at the
Scottsdale hotel, a $21,783 increase in rental and other expenses due to
increased volume of pay movie rentals and its related expenses at four hotels, a
$19,749 increase in general and administrative expenses primarily due to rate
hikes in the general insurance costs related to the resignation of the general
manager at the Clearwater hotel and increased help wanted and temporary help
newspaper ads due to increased turnover at the Scottsdale hotel, a $14,809
increase in depreciation and amortization expense due to capital improvement
expenditures and an $11,981 increase in professional fees due to increased legal
costs. Partially offsetting the increase in departmental and unallocated
expenses was a $16,372 decrease in room expense due to reduced occupancy at two
of the Minneapolis hotels. Also contributing to the decrease in net income was
a $17,652 decrease in telephone revenue due higher usage of prepaid and other
calling cards and a $14,046 increase in interest expense due to the compounding
of interest. Partially offsetting the decrease in net income was a $13,717
increase in food and beverage income due to the hosting of two training seminars
for Phoenix College and several corporate meetings at the Scottsdale hotel.
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
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 months ended March
31, 1997 and 1996 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
For the three months ended
March 31,
----------------------------
Hotel Location 1997 1996
- -------------- ------------ ------------
<S> <C> <C>
Clearwater, FL $ 431,696 $ 390,141
Minneapolis, MN 303,231 315,164
Plymouth, MN 136,927 154,029
Roseville, MN 177,881 188,689
Scottsdale, AZ 979,418 995,664
------------ ------------
Total $ 2,029,153 $ 2,043,687
============ ============
</TABLE>
<TABLE>
<CAPTION>
Operating Income (Loss)
For the three months ended
March 31,
----------------------------
Hotel Location 1997 1996
- -------------- ------------ ------------
<S> <C> <C>
Clearwater, FL $ 241,508 $ 209,611
Minneapolis, MN 94,578 102,787
Plymouth, MN (20,981) 10,735
Roseville, MN 18,854 24,388
Scottsdale, AZ 402,290 443,984
Depreciation and Partnership
operating expenses (293,794) (257,720)
------------ ------------
Total $ 442,455 $ 533,785
============ ============
</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
For the three months ended
March 31,
----------------------------
Hotel Location 1997 1996
- -------------- ------------ ------------
<S> <C> <C>
Clearwater, FL 86% 82%
Minneapolis, MN 76% 75%
Plymouth, MN 61% 68%
Roseville, MN 80% 81%
Scottsdale, AZ 95% 94%
------- ------
Total (1) 81% 81%
====== ======
</TABLE>
(1) 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 months ended March 31, 1997 increased from the same period in 1996
primarily due to increased room rates. Gross operating income and operating
income for the Minneapolis hotel for the three months ended March 31, 1997
decreased from the same period in 1996 primarily due to poor rate management
which led to the replacement of the hotel's general manager during March 1997.
Gross operating income and operating income for the Plymouth hotel for the three
months ended March 31, 1997 decreased from the same period in 1996 primarily due
to decreased occupancy. Gross operating income and operating income for the
Roseville hotel for the three months ended March 31, 1997 decreased from the
same period in 1996 primarily due to decreased occupancy related to major
capital improvements made at the hotel during 1997. Gross operating income and
operating income for the Scottsdale hotel for the three months ended March 31,
1997 decreased from the same period in 1996 primarily due to increased room
demand in the area during 1996 as a result of Super Bowl XXX being hosted by the
City of Phoenix.
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 March 31, 1997.
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
May 15, 1997 By: /s/ Susan R. Campbell
- --------------------- -------------------------------------
Date Susan R. Campbell
Senior Vice President
Signing on behalf of the
Registrant and as Acting
Chief Accounting Officer,
Principal Financial and
Principal Accounting Officer
-17-
<PAGE>
EXHIBIT INDEX
-------------
Exhibit Method of Filing
- ------- -----------------------------
27 Financial Data Schedule Filed herewith electronically
-18-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFOMRATION EXTRACTED FROM
THE FIRST QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH 10-Q.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 476,844
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 21,312,828
<DEPRECIATION> 8,768,825
<TOTAL-ASSETS> 14,908,773
<CURRENT-LIABILITIES> 8,786,622
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 6,122,151
<TOTAL-LIABILITY-AND-EQUITY> 14,908,773
<SALES> 0
<TOTAL-REVENUES> 2,790,207
<CGS> 0
<TOTAL-COSTS> 2,347,752
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 163,775
<INCOME-PRETAX> 278,680
<INCOME-TAX> 0
<INCOME-CONTINUING> 278,680
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 278,680
<EPS-PRIMARY> 0.31
<EPS-DILUTED> 0.31
</TABLE>
