-----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, HCUEPKCX2o4Vj6CkRDXk5wqKPOIGCRA3zeKFXzVWPgSy3Hes/gWRHXiz2XUWRtNI ktl23ovu21m9X/cwBmvX5Q== 0000928385-01-500697.txt : 20010509 0000928385-01-500697.hdr.sgml : 20010509 ACCESSION NUMBER: 0000928385-01-500697 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010323 FILED AS OF DATE: 20010507 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: SEC FILE NUMBER: 000-16728 FILM NUMBER: 1624186 BUSINESS ADDRESS: STREET 1: 10400 FERNWOOD RD DEPT 908 STREET 2: HOST MARRIOT CORP ASSET MANAGEMENT CITY: BETHESDA STATE: MD ZIP: 20817 BUSINESS PHONE: 3013802070 MAIL ADDRESS: STREET 1: 10400 FERNWOOD RD DEPT 908 STREET 2: HOST MARRIOT CORP ASSET MANAGEMENT CITY: BETHESDA STATE: MD ZIP: 20817 10-Q 1 d10q.txt 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 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarter Ended March 23, 2001 Commission File No. 0-16728 COURTYARD BY MARRIOTT II LIMITED PARTNERSHIP 10400 Fernwood Road Bethesda, MD 20817-1109 (301) 380-9000 Delaware 52-1533559 - ----------------------- --------------------------------------- (State of Organization) (I.R.S. Employer Identification Number) Securities registered pursuant to Section 12(b) of the Act: Not Applicable Securities registered pursuant to Section 12(g) of the Act: Units of Limited Partnership Interest ------------------------------------- (Title of Class) 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 (Unaudited) Consolidated Balance Sheets March 23, 2001 and December 31, 2000....................... 1 Condensed Consolidated Statements of Operations Twelve Weeks Ended March 23, 2001 and March 24, 2000....... 2 Condensed Consolidated Statements of Cash Flows Twelve Weeks Ended March 23, 2001 and March 24, 2000....... 3 Notes to Condensed Consolidated Financial Statements........ 4 Management's Discussion and Analysis of Financial Condition and Results of Operations........................ 5 Quantitative and Qualitative Disclosures about Market Risk.. 6 PART II - OTHER INFORMATION Legal Proceedings........................................... 7 COURTYARD BY MARRIOTT II LIMITED PARTNERSHIP CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands)
March 23, December 31, 2001 2000 ----------- ------------ (Unaudited) ASSETS Property and equipment, net................................ $433,461 $439,098 Deferred financing costs, net of accumulated amortization.. 10,822 11,119 Due from Courtyard Management Corporation.................. 11,306 8,453 Other assets............................................... 8 2 Property improvement fund.................................. 23,267 18,912 Restricted cash............................................ 26,986 18,415 Cash and cash equivalents.................................. 1,046 13,511 -------- -------- $506,896 $509,510 ======== ======== LIABILITIES AND PARTNERS' CAPITAL (DEFICIT) LIABILITIES Debt..................................................... $463,642 $466,539 Management fees due to Courtyard Management Corporation.. 34,189 31,417 Due to Marriott International, Inc. and affiliates....... 8,666 8,693 Accounts payable and accrued liabilities................. 10,704 12,106 -------- -------- Total Liabilities.................................... 517,201 518,755 -------- -------- PARTNERS' CAPITAL (DEFICIT) General Partner.......................................... 9,304 9,409 Limited Partners......................................... (19,609) (18,654) -------- -------- Total Partners' Deficit.............................. (10,305) (9,245) -------- -------- $506,896 $509,510 ======== ========
See Notes to Condensed Consolidated Financial Statements. 1 COURTYARD BY MARRIOTT II LIMITED PARTNERSHIP CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited, in thousands, except unit and per unit amounts)
Twelve Weeks Ended March 23, March 24, 2001 2000 ------- -------- REVENUES Hotel revenues Rooms............................................ $63,450 $ 61,453 Food and beverage................................ 3,960 4,092 Other............................................ 1,966 2,472 ------- -------- Total hotel revenues............................ 69,376 68,017 ------- -------- OPERATING COSTS AND EXPENSES Hotel property-level costs and expenses Rooms............................................ 13,999 13,796 Food and beverage................................ 3,578 3,559 Other department costs and expenses.............. 450 960 Selling, administrative and other................ 16,792 15,736 ------- -------- Total hotel property-level costs and expenses... 34,819 34,051 Depreciation...................................... 6,515 6,647 Ground rent, taxes and other...................... 6,586 6,716 Base and Courtyard management fees................ 4,163 4,081 Incentive management fee.......................... 2,954 3,133 ------- -------- Total operating costs and expenses.............. 55,037 54,628 ------- -------- OPERATING PROFIT................................... 14,339 13,389 Interest expense.................................. (9,526) (10,005) Interest income................................... 331 321 ------- -------- NET INCOME......................................... $ 5,144 $ 3,705 ======= ======== ALLOCATION OF NET INCOME General Partner................................... $ 257 $ 185 Limited Partners.................................. 4,887 3,520 ------- -------- $ 5,144 $ 3,705 ======= ======== NET INCOME PER LIMITED PARTNER UNIT (1,470 Units).. $ 3,324 $ 2,395 ======= ========
See Notes to Condensed Consolidated Financial Statements. 2 COURTYARD BY MARRIOTT II LIMITED PARTNERSHIP CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited, in thousands)
Twelve Weeks Ended March 23, March 24, 2001 2000 --------- --------- OPERATING ACTIVITIES Net income............................................ $ 5,144 $ 3,705 Depreciation.......................................... 6,515 6,647 Amortization of deferred financing costs as interest.. 363 363 Loss on disposition of fixed assets................... 1 49 Amortization of prepaid expenses...................... 2 (15) Changes in operating accounts......................... (10,089) (1,248) -------- ------- Cash provided by operating activities............. 1,936 9,501 -------- ------- INVESTING ACTIVITIES Additions to property and equipment................... (879) (1,444) Change in property improvement funds.................. (4,355) (6,374) -------- ------- Cash used in investing activities................. (5,234) (7,818) -------- ------- FINANCING ACTIVITIES Capital distributions................................. (6,204) (3,675) Deferred financing costs.............................. (66) -- Repayments of debt.................................... (2,897) (2,688) -------- ------- Cash used in financing activities................. (9,167) (6,363) -------- ------- DECREASE IN CASH AND CASH EQUIVALENTS.................. (12,465) (4,680) CASH AND CASH EQUIVALENTS at beginning of period....... 13,511 23,341 -------- ------- CASH AND CASH EQUIVALENTS at end of period............. $ 1,046 $18,661 ======== ======= SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for mortgage and other interest............. $ 11,263 $11,453 ======== =======
See Notes to Condensed Consolidated Financial Statements. 3 COURTYARD BY MARRIOTT II LIMITED PARTNERSHIP NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Organization Courtyard by Marriott II Limited Partnership (the "Partnership"), a Delaware limited partnership, owns 70 Courtyard by Marriott hotels located in 29 states within the contiguous United States. The hotels are operated, under a management agreement by a subsidiary of Marriott International. 2. Summary of Significant Accounting Policies The accompanying unaudited, condensed consolidated financial statements have been prepared by the Partnership. Certain information and footnote disclosures normally included in financial statements presented in accordance with accounting principles generally accepted in the United States 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 unaudited, 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 year ended December 31, 2000. In the opinion of the Partnership, the accompanying unaudited, condensed consolidated financial statements reflect all adjustments necessary to present fairly the financial position of the Partnership as of March 23, 2001, the results of its operations and its cash flows for the twelve weeks ended March 23, 2001 and March 24, 2000. Interim results are not necessarily indicative of full 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 LLC (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 Federal income tax purposes of accelerated depreciation methods, shorter depreciable lives for certain assets, differences in the timing of the recognition of certain fees and straight-line rent adjustments. Certain reclassifications were made to the prior year financial statements to conform to the 2001 presentation. 3. Amounts Paid to the General Partner and Marriott International, Inc. The chart below summarizes amounts paid to the General Partner and Marriott International, Inc. for the twelve weeks ended March 23, 2001 and March 24, 2000 (unaudited, in thousands):
Marriott International, Inc.: 2001 2000 ------- ------- Base management fee.......................... $ 2,428 $ 2,381 Incentive management fee..................... 2,954 3,133 Chain services and Marriott Rewards Program.. 2,059 2,008 Courtyard by Marriott system fee............. 1,734 1,700 Marketing fund contribution.................. 1,483 1,423 ------- ------- $10,658 $10,645 ======= ======= General Partner: Administrative expenses reimbursed........... $ -- $ -- ======= =======
4 COURTYARD BY MARRIOTT II LIMITED PARTNERSHIP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FORWARD-LOOKING STATEMENTS Certain matters discussed herein are forward-looking statements. We have based these forward-looking statements on our current expectations and projections about future events. Certain, but not necessarily all, of such forward-looking statements can be identified by the use of forward-looking terminology, such as "believes," "expects," "may," "will," "should," "estimates," or "anticipates," or the negative thereof or other variations thereof or comparable terminology. All forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual transactions, results, performance or achievements to be materially different from any future transactions, results, performance or achievements expressed or implied by such forward- looking statements. Although we believe the expectations reflected in such forward-looking statements are based upon reasonable assumptions, we can give no assurance that our expectations will be attained or that any deviations will not be material. We disclaim any obligations or undertaking to publicly release any updates or revisions to any forward-looking statement contained in this quarterly report on Form 10-Q to reflect any change in our expectations with regard thereto or any change in events, conditions or circumstances on which any such statement is based. RESULTS OF OPERATIONS Hotel Revenues. Total hotel revenues for first quarter 2001 increased by $1.4 million to $69.4 million when compared to the same period in 2000. The increase in hotel revenues was achieved through an increase in rooms revenue, which was slightly offset by a decrease in food and beverage and other income. Rooms revenues for first quarter 2001 increased to $63.5 million when compared to the same period last year due to the increase in revenue per available room ("REVPAR") to $73 in first quarter 2001 when compared to $71 for first quarter 2000, a 2.8% increase. The increase in REVPAR is due to the $6 increase in the combined average rate to $99 partially offset by a 2.3 percentage point decrease in combined average occupancy to 73.9%. Operating costs and expenses. Operating costs and expenses increased $0.4 million, or 0.7%, to $55.0 million for first quarter 2001 when compared to first quarter 2000, primarily due to an increase in property-level costs and expenses discussed below. As a percentage of hotel revenues, operating costs and expenses represented 79% and 80% of revenues for first quarter 2001 and first quarter 2000, respectively. The Partnership's hotel property-level costs and expenses increased $768,000 to $34.8 million when compared to the same period in 2000. Hotel property-level costs and expenses are higher due primarily to a $608,000 increase in utility costs due to the inflation of energy costs in 2001. As a percentage of hotel revenues, property-level costs and expenses represented approximately 50% of revenues for both first quarter 2001 and first quarter 2000. Operating Profit. Operating profit increased $1.0 million for first quarter 2001 to $14.3 million when compared to the same period in 2000. The increase was primarily due to the increase in hotel revenues described above. As a percentage of hotel revenues, operating profit represented 21% of revenues for first quarter 2001 and 20% for first quarter 2000. 5 COURTYARD BY MARRIOTT II LIMITED PARTNERSHIP MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Interest Expense. Interest expense decreased $479,000, or 4.8%, to $9.5 million for first quarter 2001 when compared to the same period in 2000 as a result of principal amortization on the Certificates/Mortgage Loan. Net Income. Net income for first quarter 2001 increased by $1.4 million to $5.1 million when compared to first quarter 2000 as a result of the items discussed above. LIQUIDITY AND CAPITAL RESOURCES The Partnership's financing needs have historically been funded through loan agreements with independent financial institutions. The General Partner believes that cash from hotel operations will be sufficient to make the required debt service payments, to fund the current capital expenditures needs of the Hotels as well as to make cash distributions to the limited partners. Principal Sources and Uses of Cash The Partnership's principal source of cash is 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 first quarter 2001 was $1.9 million compared to $9.5 million for first quarter 2000. The decrease in cash provided by operations is primarily due to increased cash deposited into the corporate reserves to fund management fees and debt service due during second quarter. Cash used in investing activities was $5.2 million and $7.8 million for first quarter 2001 and first quarter 2000, respectively. Cash used in investing activities for 2001 includes capital expenditures of $.9 million, primarily related to renovations and replacements of furniture, fixtures and equipment at the Partnership's Hotels as compared to $1.4 million in 2000. The property improvement fund increased $4.4 million for the first quarter 2001 as compared to an increase of $6.4 million for the comparable period in 2000. Contributions to the property improvement fund were $4.5 million and $3.4 million for first quarter 2001 and 2000, respectively. During first quarter 2000, the Partnership funded an additional $4.9 million to the property improvement fund for capital expenditures at the properties. Cash used in financing activities was $9.2 million and $6.4 million for first quarter 2001 and first quarter 2000, respectively. During these periods, the Partnership repaid $2.9 million and $2.7 million, respectively, of principal on the commercial mortgage-backed securities. Cash used in financing activities included $6.2 million of cash distributions to limited partners during the first quarter of 2001 as compared to $3.7 million of distributions during the first quarter 2000. Distributions for 2001 are made on a monthly basis instead of a quarterly basis as in prior years. Therefore, partners have received distributions for the first and second periods of 2001 as of March 23, 2001. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Partnership does not have significant market risk with respect to interest rates, foreign currency exchanges or other market rate or price risks, and the Partnership does not hold any financial instruments for trading purposes. As of March 23, 2001, all of the Partnership's debt is fixed rate. 6 PART II. OTHER INFORMATION LEGAL PROCEEDINGS 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. 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: CBM TWO LLC General Partner May 7, 2001 By: /s/ Mathew J. Whelan -------------------- Mathew J. Whelan Vice President 8 -----END PRIVACY-ENHANCED MESSAGE-----