-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, GM7cgvf5B2381thMq8zMQmD6n/NpdkfCZnUV1AZqb0vIfVVKLVkNSlYkNQdOdSTd RScM+oWzQMB1+TNysqnk3A== 0000832179-97-000006.txt : 19970512 0000832179-97-000006.hdr.sgml : 19970512 ACCESSION NUMBER: 0000832179-97-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970328 FILED AS OF DATE: 19970509 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: COURTYARD BY MARRIOTT II LIMITED PARTNERSHIP /DE/ CENTRAL INDEX KEY: 0000832179 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] IRS NUMBER: 521533559 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-16728 FILM NUMBER: 97598812 BUSINESS ADDRESS: STREET 1: 10400 FERNWOOD RD DEPT 908 STREET 2: C/O HOST MARRIOT CORP ASSET MANAGEMENT CITY: BETHESDA STATE: MD ZIP: 20817 BUSINESS PHONE: 3013809000 MAIL ADDRESS: STREET 1: 10400 FERNWOOD RD DEPT 908 STREET 2: C/O HOST MARRIOT CORP ASSET MANAGEMENT CITY: BETHESDA STATE: MD ZIP: 20817 10-Q 1 FORM 10-Q - ----------------------------------------------------------------------- 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: 0-16728 COURTYARD BY MARRIOTT II LIMITED PARTNERSHIP ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 52-1533559 - -------------------------------- ----------------------------------- (State or other jurisdiction of I.R.S. Employer Identification No.) incorporation or organization 10400 Fernwood Road Bethesda, Maryland 20817 - -------------------------------------------------------------------------- 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 x No __ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- COURTYARD BY MARRIOTT II LIMITED PARTNERSHIP - -------------------------------------------------------------------------------- - --------------------------------------------------------------------------------
TABLE OF CONTENTS PAGE NO. PART I - FINANCIAL INFORMATION Item 1. Financial Statements Condensed Consolidated Statement of Operations Twelve Weeks Ended March 28, 1997 and March 22, 1996.... 1 Condensed Consolidated Balance Sheet March 28, 1997 and December 31, 1996.................... 2 Condensed Consolidated Statement of Cash Flows Twelve Weeks ended March 28, 1997 and March 22, 1996.... 3 Notes to Condensed Consolidated 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
PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS COURTYARD BY MARRIOTT II LIMITED PARTNERSHIP CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (Unaudited) (in thousands, except per unit amounts)
Twelve Weeks Ended March 28, March 22, 1997 1996 -------------- --------- REVENUES Hotel revenues.........................................................................$ 32,677 $ 27,989 Interest income........................................................................ 478 591 -------------- -------------- .................................................................................... 33,155 28,580 -------------- -------------- OPERATING COSTS AND EXPENSES Interest............................................................................... 11,399 10,375 Depreciation .......................................................................... 6,297 6,397 Ground rent, taxes and other........................................................... 5,935 5,413 Base and Courtyard management fees..................................................... 3,792 3,474 Incentive management fee............................................................... 3,003 2,435 -------------- -------------- .................................................................................... 30,426 28,094 -------------- -------------- NET INCOME...............................................................................$ 2,729 $ 486 ============== ============== ALLOCATION OF NET INCOME General Partner........................................................................$ 136 $ 24 Limited Partners....................................................................... 2,593 462 -------------- -------------- ....................................................................................$ 2,729 $ 486 ============== ============== NET INCOME PER LIMITED PARTNER UNIT (1,470 Units)........................................$ 1,764 $ 314 ============== ============== See Notes to Condensed Consolidated Financial Statements.
1 COURTYARD BY MARRIOTT II LIMITED PARTNERSHIP CONDENSED CONSOLIDATED BALANCE SHEET (In thousands)
March 28, December 31, 1997 1996 ---------- ------------ (Unaudited) ASSETS Property and equipment, net............................................................$ 458,735 $ 458,687 Due from Courtyard Management Corporation.............................................. 13,518 13,315 Other assets........................................................................... 50,540 54,052 Restricted cash........................................................................ 8,859 6,848 Cash and cash equivalents.............................................................. 10,944 14,197 -------------- -------------- ....................................................................................$ 542,596 $ 547,099 ============== ============== LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) LIABILITIES Debt...................................................................................$ 523,028 $ 526,253 Management fees due to Courtyard Management Corporation. .............................. 35,929 36,442 Due to Marriott International, Inc. and affiliates..................................... 9,142 9,169 Accounts payable and accrued liabilities............................................... 3,709 7,176 -------------- -------------- Total Liabilities................................................................... 571,808 579,040 -------------- -------------- PARTNERS' CAPITAL (DEFICIT) General Partner........................................................................ 5,923 5,787 Limited Partners....................................................................... (35,135) (37,728) -------------- -------------- Total Partners' Deficit............................................................. (29,212) (31,941) -------------- -------------- ....................................................................................$ 542,596 $ 547,099 ============== ============== See Notes to Condensed Consolidated Financial Statements.
2 COURTYARD BY MARRIOTT II LIMITED PARTNERSHIP CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited) (in thousands) Twelve Weeks Ended March 28, March 22, 1997 1996 -------------- --------- OPERATING ACTIVITIES Net income ............................................................................$ 2,729 $ 486 Noncash items.......................................................................... 6,147 7,857 Changes in operating accounts.......................................................... (3,670) (2,019) -------------- -------------- Cash provided by operating activities............................................... 5,206 6,324 -------------- -------------- INVESTING ACTIVITIES Additions to property and equipment.................................................... (6,345) (3,016) Change in property improvement funds................................................... 3,122 79 -------------- -------------- Cash used in investing activities................................................... (3,223) (2,937) -------------- -------------- FINANCING ACTIVITIES Repayments of debt .................................................................... (3,225) (532,100) Change in reserve accounts............................................................. (2,011) (3,706) Proceeds from debt .................................................................... -- 537,600 Payment of financing costs............................................................. -- (12,511) Repayment of advances from Host Marriott Corporation................................... -- (6,489) -------------- -------------- Cash used in financing activities................................................... (5,236) (17,206) -------------- -------------- DECREASE IN CASH AND CASH EQUIVALENTS.................................................... (3,253) (13,819) CASH AND CASH EQUIVALENTS at beginning of period......................................... 14,197 27,708 -------------- -------------- CASH AND CASH EQUIVALENTS at end of period...............................................$ 10,944 $ 13,889 ============== ============== SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for mortgage and other interest..............................................$ 14,574 $ 9,277 ============== ============== See Notes to Condensed Consolidated Financial Statements.
3 COURTYARD BY MARRIOTT II LIMITED PARTNERSHIP NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. The accompanying condensed consolidated financial statements have been prepared by the Courtyard By Marriott II 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 consolidated financial statements should be read in conjunction with the Partnership's consolidated 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 consolidated 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 and cash flows 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. For financial reporting purposes, the net income of the Partnership is allocated 95% to the Limited Partners and 5% to CBM Two Corporation (the "General Partner"). Significant differences exist between the net income for financial reporting purposes and the net income reported for Federal income tax purposes. These differences are due primarily to the use for income tax purposes of accelerated depreciation methods, shorter depreciable lives for the assets, differences in the timing of the recognition of certain fees and straight-line rent adjustments. Certain reclassifiations were made to the prior year financial statements to conform to the 1997 presentation. 2. Revenues represent house profit which is hotel sales less hotel-level expenses, excluding certain operating costs and expenses such as depreciation, base, Courtyard and incentive management fees, real and personal property taxes, ground and equipment rent, insurance and certain other costs. Revenues consist of the following for the twelve weeks ended (in thousands): March 28, March 22, 1997 1996 --------- -------- HOTEL SALES Rooms...............................$ 56,756 $ 51,576 Food and beverage... ............... 4,111 4,149 Other............................... 2,337 2,174 -------------- -------------- ............................................ 63,204 57,899 --------------- -------------- HOTEL EXPENSES Departmental direct costs Rooms............................ 11,640 11,380 Food and beverage................ 3,434 3,562 Other............................... 15,453 14,968 -------------- -------------- ................................. 30,527 29,910 ---------------- -------------- HOTEL REVENUES.........................$ 32,677 $ 27,989 ============== ============= 4 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CAPITAL RESOURCES AND LIQUIDITY Principal Sources and Uses of Cash The Partnership's principal source of cash is cash from operations. Its principal uses of cash are to make debt service payments, fund the property improvement fund and to make distributions to limited partners. Cash provided by operations for the twelve weeks ended March 28, 1997 and March 22, 1996, was $5.2 million and $6.3 million, respectively. During the twelve weeks ended March 28, 1997, the Partnership utilized funds from the property improvement fund to purchase $6.3 million of property and equipment. In addition, the Partnership repaid $3.2 million of debt during the first quarter of 1997. The General Partner believes that cash from hotel operations combined with the ability to defer certain management fees to the Manager and ground rent payments to Marriott International, Inc. and affiliates will provide adequate funds in the short term and long term for the operational and capital needs of the Partnership. RESULTS OF OPERATIONS Revenues (hotel sales less direct hotel operating costs and expenses) increased by $4.7 million for the twelve weeks ended March 28, 1997, to $32.7 million, a 16.7% increase when compared to the same period in 1996. This increase in revenues was achieved through an increase in hotel sales. For the twelve weeks ended March 28, 1997, hotel sales increased $5.3 million to $63.2 million, a 9.2% increase over the comparable period in 1996. This increase in sales was achieved primarily through an increase in the combined average room rate of $5.98 to $81.89 from $75.91 for the twelve weeks ended March 28, 1997. The increase in average room rate is primarily due to agressive weekday pricing and national weekend promotional pricing which was extended through February 1997. As a result, room sales for the twelve weeks ended March 28, 1997 increased by $5.2 million, or 10%, to $56.8 million from $51.6 million for the comparable period in 1996. Combined average occupancy for the first quarter 1997 increased by 1.5 percentage points to 79.8% as compared to the same period in 1996. Thirty-four of the Partnership's 70 Hotels posted occupancy rates exceeding 80% for the twelve weeks ended March 28, 1997. REVPAR, or revenue per available room, represents the combination of the combined average daily room rate charged and the combined average occupancy achieved. REVPAR for the twelve weeks ended March 28, 1997, increased $5.91 to $65.35, a 9.9% increase over the same period in 1996. Direct hotel operating costs and expenses increased from $29.9 million for the twelve weeks ended March 22, 1996 to $30.5 million for the twelve weeks ended March 28, 1997. However, as a percentage of total hotel sales, these costs and expenses decreased to 48.3% in the first quarter of 1997 from 51.7% in the first quarter of 1996. This has resulted in higher rooms and food and beverage revenues. Rooms revenues increased by 12.2% for the twelve weeks ended March 28, 1997, as compared to the same quarter in 1996. Food and beverage revenues also increased by 15.3% for the twelve weeks ended March 28, 1997, from the comparable period in 1996. Interest expense increased 9.9% to $11.4 million for the twelve weeks ended March 28, 1997, from $10.4 million for the first quarter of 1996. The increase is due to the refinancing of the mortgage debt at fixed rates which are higher than the variable interest rates which were in effect through January 24, 1996. The weighted average interest rate for first quarter 1997 was 8.8% as compared to 8.2% for the first quarter 1996. 5 The increase in base and Courtyard management fees of 9.2%, from $3.5 million for the first quarter 1996 to $3.8 million for the same period in 1997 is due to the improved combined hotel sales for the 70 Hotels. Ground rent, taxes and other increased by 9.7% primarily due to increases in ground rent and property tax expense during the twelve weeks ended March 28, 1997 over the same quarter in 1996. However, as a percentage of total hotel sales, ground rent and property tax expense remained stable at 4.6% and 3.8%, respectively. In the first quarter of 1997 $3.0 million of incentive management fees were earned as compared to $2.4 million earned in the same period in 1996. The increase in incentive management fees earned was the result of improved combined hotel operating results. For the twelve weeks ended March 28, 1997, the Partnership had net income of $2.7 million, an increase of $2.2 million, from net income of $0.5 million for the same quarter in 1996. This increase was primarily due to higher revenues as discussed above, offset by increases in interest expense and management fees. 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 esxpressed or implied by 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. PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Certain Limited Partners of the Partnership have filed a lawsuit in Texas state court against the General Partner, the Manager and certain of their respective affiliates, officers and directors. These partners have alleged that the General Partner and the Manager have improperly operated the business affairs of the Partnership and its hotels. The General Partner believes that all of these claims are without foundation and intends to vigorously defend against them. The Partnership and the Hotels 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 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. COURTYARD BY MARRIOTT II LIMITED PARTNERSHIP By: CBM TWO CORPORATION General Partner May 9, 1997 By: ------------------------------------------ Earla L. Stowe Vice President and Chief Accounting Officer 7 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. COURTYARD BY MARRIOTT II LIMITED PARTNERSHIP By: CMB TWO CORPORATION General Partner /s/ Earla L. Stowe May 9, 1997 By: --------------------------------- Earla L. Stowe Vice President and Chief Accounting Officer EX-27 2 FDS --
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FIRST QUARTER 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000832179 COURTYARD BY MARRIOTT II LIMITED PARTNERSHIP 1,000 US DOLLARS 3-MOS DEC-31-1997 JAN-01-1997 MAR-28-1997 1.000 19,803 50,540 13,518 0 0 83,861 691,880 (233,145) 542,596 3,709 568,099 0 0 0 (29,212) 542,596 0 33,155 0 19,027 0 0 11,399 2,729 0 2,729 0 0 0 2,729 0 0 THIS REPRESRENTS OTHER ASSETS THIS REPRESENTS PARTNERS DEFICIT
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