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Securities and Exchange Commission
Washington, D.C. 20549
Form 10-Q
[X] Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the Quarter ended March 28, 1997
OR
[_] Transition Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Commission File Number: 033-20022
MARRIOTT RESIDENCE INN LIMITED PARTNERSHIP
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(Exact name of registrant as specified in its charter)
Delaware 52-1558094
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(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
10400 Fernwood Road
Bethesda, Maryland
20817
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(Address of principal executive offices)
Registrant's telephone number, including area code: 301-380-2070
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months and (2) has been subject to such filing requirements for
the past 90 days. Yes No (Not Applicable. On August 25, 1992, the Registrant
filed an application for relief from the reporting requirements of the
Securities Exchange Act of 1934 pursuant to Section 12(h) thereof. Pursuant to a
grant of the relief requested in such application, the Registrant was not
required to, and did not make, any filings pursuant to the Securities Exchange
Act of 1934 from October 23, 1989 until the application was voluntarily
withdrawn on January 23, 1998.)
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MARRIOTT RESIDENCE INN LIMITED PARTNERSHIP
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TABLE OF CONTENTS
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PAGE NO.
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<S> <C> <C>
Condensed Statement of Operations
Twelve Weeks Ended March 28, 1997 and March 22, 1996...........................................1
Condensed Balance Sheet
March 28, 1997 and December 31, 1996...........................................................2
Condensed Statement of Cash Flows
Twelve Weeks ended March 28, 1997 and March 22, 1996...........................................3
Notes to Condensed Financial Statements...........................................................4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations............................................................5
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.................................................................................6
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
MARRIOTT RESIDENCE INN LIMITED PARTNERSHIP
CONDENSED STATEMENT OF OPERATIONS
(Unaudited)
(in thousands, except per unit amounts)
<TABLE>
<CAPTION>
Twelve Weeks Ended
March 28, March 22,
1997 1996
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<S> <C> <C>
REVENUES.................................................................................$ 6,766 $ 6,424
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OPERATING COSTS AND EXPENSES
Depreciation and amortization.......................................................... 1,279 1,376
Incentive management fee............................................................... 689 617
Property taxes......................................................................... 587 543
Residence Inn system fee............................................................... 516 492
Base management fee.................................................................... 271 259
Equipment rent and other............................................................... 197 418
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3,539 3,705
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OPERATING PROFIT......................................................................... 3,227 2,719
Interest expense....................................................................... (3,125) (3,068)
Interest income........................................................................ 68 83
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NET INCOME (LOSS)........................................................................$ 170 $ (266)
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ALLOCATION OF NET INCOME (LOSS)
General Partner........................................................................$ 2 $ (3)
Limited Partner........................................................................ 168 (263)
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$ 170 $ (266)
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NET INCOME (LOSS) PER LIMITED PARTNER UNIT
(65,600 Units).........................................................................$ 2 $ (4)
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</TABLE>
See Notes to Condensed Financial Statements.
1
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MARRIOTT RESIDENCE INN LIMITED PARTNERSHIP
CONDENSED BALANCE SHEET
(In thousands)
<TABLE>
<CAPTION>
March 28, December 31,
1997 1996
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(Unaudited)
ASSETS
<S> <C> <C>
Property and equipment, net............................................................$ 139,254 $ 140,272
Due from Residence Inn by Marriott, Inc................................................ 2,413 2,462
Other assets........................................................................... 5,972 5,495
Cash and cash equivalents.............................................................. 2,462 3,429
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$ 150,101 $ 151,658
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LIABILITIES AND PARTNERS' CAPITAL
LIABILITIES
Mortgage note payable..................................................................$ 122,816 $ 123,519
Management fees due to Residence Inn by Marriott, Inc.................................. 21,515 20,825
Accounts payable and accrued interest.................................................. 1,936 1,993
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Total Liabilities................................................................... 146,267 146,337
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PARTNERS' CAPITAL
General Partner........................................................................ 114 129
Limited Partners....................................................................... 3,720 5,192
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Total Partners' Capital............................................................. 3,834 5,321
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$ 150,101 $ 151,658
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</TABLE>
See Notes to Condensed Financial Statements.
2
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MARRIOTT RESIDENCE INN LIMITED PARTNERSHIP
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Twelve Weeks Ended
March 28, March 22,
1997 1996
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<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss)......................................................................$ 170 $ (266)
Noncash items.......................................................................... 2,078 2,097
Changes in operating accounts.......................................................... (8) (1,232)
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Cash provided by operations......................................................... 2,240 599
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INVESTING ACTIVITIES
Additions to property and equipment.................................................... (262) (901)
Changes in property improvement fund................................................... (586) 218
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Cash used in investing activities................................................... (848) (683)
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FINANCING ACTIVITIES
Capital distributions to partners...................................................... (1,657) (3,313)
Principal payment on mortgage debt..................................................... (702) (539)
Deferred financing costs............................................................... -- (44)
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Cash used in financing activities................................................... (2,359) (3,896)
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DECREASE IN CASH AND CASH EQUIVALENTS.................................................... (967) (3,980)
CASH AND CASH EQUIVALENTS at beginning of period......................................... 3,429 7,271
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CASH AND CASH EQUIVALENTS at end of period...............................................$ 2,462 $ 3,291
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SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for mortgage interest........................................................$ 3,122 $ 3,285
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</TABLE>
See Notes to Condensed Financial Statements.
3
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MARRIOTT RESIDENCE INN LIMITED PARTNERSHIP
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying condensed financial statements have been prepared by
Marriott Residence Inn Limited Partnership (the "Partnership") without
audit. Certain information and footnote disclosures normally included in
financial statements presented in accordance with generally accepted
accounting principles have been condensed or omitted from the accompanying
statements. The Partnership believes the disclosures made are adequate to
make the information presented not misleading. However, the condensed
financial statements should be read in conjunction with the Partnership's
financial statements and notes thereto included in the Partnership's Form
10-K for the fiscal year ended December 31, 1996.
In the opinion of the Partnership, the accompanying unaudited condensed
financial statements reflect all adjustments (which include only normal
recurring adjustments) necessary to present fairly the financial position
of the Partnership as of March 28, 1997 and December 31, 1996, and the
results of operations for the twelve-weeks ended March 28, 1997 and March
22, 1996. Interim results are not necessarily indicative of fiscal year
performance because of seasonal and short-term variations.
The net income/loss of the Partnership is allocated 99% to the limited
partners and 1% to RIBM One Corporation (the "General Partner").
Significant differences exist between the net income/loss for financial
reporting purposes and the net income/loss for Federal income tax
purposes. These differences are due primarily to the use, for income tax
purposes, of accelerated depreciation methods and shorter depreciable
lives of the assets and differences in the timing of the recognition of
incentive management fee expense.
2. Revenues represent house profit of the Partnership Inns since the
Partnership has delegated substantially all of the operating decisions
related to the generation of house profit of the Inns to Residence Inn by
Marriott, Inc. (the "Manager"). House profit reflects the net revenues
flowing to the Partnership as property owner and represents Inn operating
results less property-level expenses, excluding depreciation and
amortization, base, Residence Inn system and incentive management fees,
property taxes, equipment rent and certain other costs, which are
disclosed separately in the condensed statement of operations.
In the first quarter of 1996, the Partnership adopted Statement of
Financial Accounting Standards ("SFAS") No. 121 "Accounting For The
Impairment of Long-Lived Assets and For Long-Lived Assets To Be Disposed
Of." Adoption of SFAS No. 121 did not have a material effect on its
condensed financial statements.
Revenues consist of Inn operating results for the twelve weeks ended 1997
and 1996 (in thousands):
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<CAPTION>
March 28, March 22,
1997 1996
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INN SALES
Suites...........................................................................$ 12,900 $ 12,297
Other operating departments...................................................... 665 631
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13,565 12,928
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INN EXPENSES
Departmental direct costs
Suites........................................................................ 2,735 2,549
Other operating departments................................................... 256 265
Other Inn operating expenses.................................................... 3,808 3,690
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6,799 6,504
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REVENUES............................................................................$ 6,766 $ 6,424
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</TABLE>
3. The General Partner has undertaken, on behalf of the Partnership, to
pursue, subject to further approval of the partners, a potential
transaction (the "Consolidation") in which (i) subsidiaries of CRF Lodging
Company, L.P. (the "Company"), a newly formed Delaware limited
partnership, would merge with and into the Partnership and up to five
other limited partnerships, with the Partnership and the other limited
partnerships being the surviving entities (each, a "Merger" and
collectively, the "Mergers"), subject to the satisfaction or waiver of
certain conditions, (ii) CRF Lodging Trust ("CRFLT"), a Maryland real
estate investment trust, the sole general partner of the Company, would
offer its common shares of beneficial interest, par value $0.01 per share
(the "Common Shares") to investors in an underwritten public offering and
would invest the proceeds of such offering in the Company in exchange for
units of limited partnership interests in the Company ("Units") and (iii)
the Partnership would enter into a Lease for the operation of its Hotels
pursuant to which a Lessee would pay rent to the Partnership based upon
the greater of a fixed dollar amount of base rent or specified percentages
of gross sales, as specified in the Lease. If the partners approve the
transaction and other conditions are satisfied, the partners of the
Partnership would receive Units in the Merger in exchange for their
interests in the Partnership.
A preliminary Prospectus/Consent Solicitation was filed as part of a
Registration Statement on Form S-4 with the Securities and Exchange
Commission and which describes the potential transaction in greater
detail. Any offer of Units in connection with the Consolidation will be
made solely by a final Prospectus/Consent Solicitation.
4
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
Certain matters discussed herein are forward-looking statements within the
meaning of the Private Litigation Reform Act of 1995 and as such may involve
known and unknown risks, uncertainties, and other factors which may cause the
actual results, performance or achievements of the Partnership to be different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. Although the Partnership believes the
expectations reflected in such forward-looking statements are based upon
reasonable assumptions, it can give no assurance that its expectations will be
attained. These risks are detailed from time to time in the Partnership's
filings with the Securities and Exchange Commission. The Partnership undertakes
no obligation to publicly release the result of any revisions to these
forward-looking statements that may be made to reflect any future events or
circumstances.
RESULTS OF OPERATIONS
First Quarter 1997 Compared to First Quarter 1996
Revenues. Revenues for First Quarter 1997 increased $342,000, or 5%, to $6.8
million. Revenues and operating profit were impacted primarily by growth in
revenue per available room ("REVPAR") of 5%. REVPAR is a commonly used indicator
of market performance for hotels which represents the combination of daily room
rate charged and the average daily occupancy achieved. REVPAR does not include
food and beverage or other ancillary revenues generated by the property. Inn
sales increased $637,000, or 5%, to $13.6 million in First Quarter 1997 also
reflecting the improvement in REVPAR for the period. REVPAR increased for First
Quarter 1997 due primarily to an increase in average room rates of 8%, while
average occupancy decreased three percentage points. Due to the high occupancy
of these properties, the Partnership expects future increases in REVPAR to be
driven by room rate increases, rather than occupancy increases. However, there
can be no assurance that REVPAR will continue to increase in the future.
Operating Costs and Expenses. Operating costs and expenses decreased $166,000 to
$3.5 million for First Quarter 1997. As a percentage of revenues, Inn operating
costs and expenses were 52% and 58% of revenues for First Quarter 1997 and First
Quarter 1996, respectively.
Operating Profit. As a result of the changes in revenues and operating costs and
expenses discussed above, operating profit increased by $508,000 to $3.2
million, or 48% of revenues, for First Quarter 1997 from $2.7 million, or 42% of
revenues, for First Quarter 1996.
Net Income. Net income for First Quarter 1997 increased $436,000 to $170,000, or
3% of revenues, compared to a net loss of $266,000, or 4% of revenues, for First
Quarter 1996.
5
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LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operations was $2.2 million and $599,000 for First Quarter 1997
and First Quarter 1996, respectively. The improved cash from operations was a
result of improved Inn lodging results and collections of rent receivable from
the Manager.
Cash used in investing activities was $848,000 and $683,000 for First Quarter
1997 and First Quarter 1996, respectively. The Partnership's cash investing
activities consist primarily of contributions to the property improvement fund
and capital expenditures for improvements to existing Inns.
The Partnership's cash used in financing activities was $2.4 million and $3.9
million for the First Quarter of 1997 and the First Quarter of 1996,
respectively. Cash financing activities primarily consist of capital
distributions to partners, repayment of debt and payment of financing costs. The
Partnership distributed $1.7 million to the partners in the first quarter of
1997 from 1996 operations. In the first quarter of 1996, the Partnership
distributed $3.3 million to the partners from 1995 operations.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Partnership and the Inns are involved in routine litigation and
administrative proceedings arising in the ordinary course of business, some of
which are expected to be covered by liability insurance and which collectively
are not expected to have a material adverse effect on the business, financial
condition or results of operations of the Partnership.
6
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this Form 10-Q to be signed on its behalf by the
undersigned, thereunto duly authorized.
MARRIOTT RESIDENCE INN
LIMITED PARTNERSHIP
By: RIBM ONE CORPORATION
General Partner
January 16, 1998 By: /s/ Patricia K. Brady
-----------------------------------
Patricia K. Brady
Vice President and Chief Accounting Officer
7
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
QUARTERLY REPORT 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000829092
<NAME> MARRIOTT RESIDENCE INN LIMITED PARTNERSHIP
<MULTIPLIER> 1,000
<CURRENCY> U.S. DOLLAR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-28-1997
<EXCHANGE-RATE> 1.00
<CASH> 2,462
<SECURITIES> 0
<RECEIVABLES> 2,413
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 5,972
<PP&E> 196,195
<DEPRECIATION> (55,941)
<TOTAL-ASSETS> 150,101
<CURRENT-LIABILITIES> 23,451
<BONDS> 122,816
0
0
<COMMON> 0
<OTHER-SE> 3,834
<TOTAL-LIABILITY-AND-EQUITY> 150,101
<SALES> 0
<TOTAL-REVENUES> 6,766
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 3,471
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,125
<INCOME-PRETAX> 170
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</TABLE>
