SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of
The Securities Exchange Act of 1934
---------------------------------------------
For the Period ended September 30, 1995
Commission File 0-8913
SUPER 8 MOTELS, LTD
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(Exact name of registrant as specified in its charter)
CALIFORNIA 94 - 2514354
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2030 J Street
Sacramento, California 95814
-------------------------------------- --------------
Address of principal executive offices Zip Code
Registrant's telephone number,
including area code (916) 442 - 9183
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 (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes XX No
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<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
INDEX
Financial Statements: PAGE
Balance Sheet - September 30, 1995 and December 31, 1994 2
Statement of Operations - Nine Months Ended
September 30, 1995 and 1994 3
Statement of Changes in Partners' Equity -
Nine Months Ended September 30, 1995 and 1994 4
Statement of Cash Flows - Nine Months Ended
September 30, 1995 and 1994 5
Notes to Financial Statements 6
Management Discussion and Analysis 7 - 9
Other Information and Signatures 10 - 11
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
BALANCE SHEET
SEPTEMBER 30, 1995 AND DECEMBER 31, 1994
-----------------------------------------
1995 1994
--------- --------
ASSETS
Current Assets:
Cash and temporary investments $ 765,366 $ 502,138
Accounts receivable 86,453 89,647
Prepaid expenses 36,521 21,343
--------- ---------
Total current assets 888,340 613,128
--------- ---------
Property and Equipment:
Buildings 5,189,887 5,189,887
Furniture and equipment 1,039,428 1,007,199
--------- ---------
6,229,315 6,197,086
Accumulated depreciation and amortization (4,398,885) (4,208,270)
--------- ---------
Property and equipment, Net 1,830,430 1,988,816
--------- ---------
Other Assets: 24,456 26,838
--------- ---------
Total Assets $ 2,743,226 $ 2,628,782
========= =========
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Current portion of note payable $ 25,320 $ 23,761
Accounts payable and accrued liabilities 210,150 169,243
--------- ---------
Total current liabilities 235,470 193,004
Long - Term Liabilities:
Note payable 967,381 986,557
--------- ---------
Total liabilities 1,202,851 1,179,561
--------- ---------
Partners' Equity:
General Partners 57,834 53,172
Limited Partners 1,482,541 1,396,049
--------- ---------
Total partners' equity 1,540,375 1,449,221
--------- ---------
Total Liabilities and Partners' Equity $ 2,743,226 $ 2,628,782
========= =========
The accompanying notes are an integral part of the financial statements.
-2-
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
STATEMENT OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
-----------------------------------------------
Three Nine Three Nine
Months Months Months Months
Ended Ended Ended Ended
9/30/95 9/30/95 9/30/94 9/30/94
--------- --------- ---------- ----------
Income:
Guest room $ 1,034,421 $ 2,642,652 $ 941,881 $ 2,474,503
Telephone and vending 24,961 55,609 15,053 46,020
Interest 5,030 11,449 2,369 5,456
Other 19,254 24,617 2,272 6,274
--------- --------- --------- ---------
Total Income 1,083,666 2,734,327 961,575 2,532,253
Expenses:
Motel operating expenses 623,860 1,767,691 569,040 1,659,231
General and
administrative expenses 17,330 64,893 21,074 64,412
Depreciation and
amortization expense 64,461 194,850 65,226 199,175
Interest 21,138 63,804 21,628 65,231
Property management fees 53,036 135,268 34,165 112,249
Partnership management
fees 13,889 41,667 13,889 41,667
--------- --------- --------- ---------
Total Expenses 793,714 2,268,173 725,022 2,141,965
--------- --------- --------- ---------
Net Income (Loss) $ 289,952 $ 466,154 $ 236,553 $ 390,288
========= ========= ========= =========
Net Income (Loss) Allocable
to General Partners $2,900 $4,662 $2,366 $3,903
========= ========= ========= =========
Net Income (Loss) Allocable
to Limited Partners $287,052 $461,492 $234,187 $386,385
========= ========= ========= =========
Net Income (Loss)
per Partnership Unit $57.99 $93.23 $47.31 $78.06
========= ========= ========= =========
Distribution to Limited Partners
per Partnership Unit $25.00 $75.00 $25.00 $75.00
========= ========= ========= =========
The accompanying notes are an integral part of the financial statements.
-3-
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
STATEMENT OF PARTNERS' EQUITY
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
-----------------------------------------------
1995 1994
--------- ---------
General Partners:
Balance at beginning of year $ 53,172 $ 48,461
Net income (loss) 4,662 3,903
--------- ---------
Balance at end of period 57,834 52,364
--------- ---------
Limited Partners:
Balance at beginning of year 1,396,049 1,429,691
Net income (loss) 461,492 386,385
Less: Cash distributions to
Limited Partners (375,000) (375,000)
--------- ---------
Balance at end of period 1,482,541 1,441,076
--------- ---------
Total balance at end of period $ 1,540,375 $ 1,493,440
========= =========
The accompanying notes are an integral part of the financial statements.
-4-
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
STATEMENT OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
-----------------------------------------------
1995 1994
--------- ---------
Cash flows from operating activities:
Received from motel revenues $ 2,728,039 $ 2,511,312
Expended for motel operations and
general and administrative expenses (1,983,664) (1,886,068)
Interest received 9,482 5,402
Interest paid (63,929) (65,346)
--------- ---------
Net cash provided by operating activities 689,928 565,300
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Cash flows from investing activities:
Purchases of property and equipment (34,083) (38,678)
Proceeds from sale of equipment 1,350
--------- ---------
Net cash (used) by investing activities (34,083) (37,328)
--------- ---------
Cash flows from financing activities:
Principal payments on notes payable (17,617) (16,199)
Distributions paid to limited partners (375,000) (375,000)
--------- ---------
Net cash (used) by financing activities (392,617) (391,199)
--------- ---------
Net increase (decrease) in cash
and temporary investments 263,228 136,773
Cash and Temporary Investments:
Beginning of period 502,138 360,751
--------- ---------
End of period $ 765,366 $ 497,524
========= =========
Reconciliation of net income to net cash provided by operating activities
Net income (loss) $ 466,154 $ 390,288
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 194,850 199,175
Gain on sale of property (1,350)
(Increase) decrease in accounts receivable 3,194 (15,539)
(Increase) decrease in prepaid expenses (15,178) (8,760)
(Increase) decrease in other assets 551
Increase (decrease) in accounts payable
and accrued liabilities 40,908 935
--------- ---------
Total adjustments 223,774 175,012
--------- ---------
Net cash provided by
operating activities $ 689,928 $ 565,300
========= =========
The accompanying notes are an integral part of the financial statements.
-5-
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
------------------------------------
Note 1:
- -------
The attached interim financial statements include all adjustments which are,
in the opinion of management, necessary to a fair statement of the results
for the period presented.
Users of these interim financial statements should refer to the audited
financial statements for the year ended December 31, 1994 for a complete
disclosure of significant accounting policies and practices and other detail
necessary for a fair presentation of the financial statements.
In accordance with the partnership agreement, the following information
is presented related to fees paid or accrued to the General Partner or
affiliates for the period.
Property Management Fees $ 135,268
Franchise Fees $ 52,853
Partnership Management Fees $ 41,667
Note 2:
- -------
The following table summarizes the major components of motel operating
expenses for the periods reported:
Three Nine Three Nine
Months Months Months Months
Ended Ended Ended Ended
9/30/95 9/30/95 9/30/94 9/30/94
--------- --------- --------- ---------
Salaries and related $ 210,518 $ 591,267 $ 209,230 $ 607,048
Rent 46,389 139,168 47,003 137,234
Utilities 52,870 128,935 44,512 114,317
Allocated costs,
mainly indirect salaries 67,580 197,800 63,553 184,302
Other operating expenses 246,503 710,521 204,742 616,330
--------- --------- --------- --------
Total motel operating
expenses $ 623,860 $ 1,767,691 $ 569,040 $ 1,659,231
========= ========== ========= =========
The following additional material contingencies are required to be
restated in interim reports under federal securities law: None.
-6-
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
SEPTEMBER 30, 1995
------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES
- --------------------------------
The Partnership has current assets of $888,340 which exceed its current
liabilities of $235,470 by $652,870. This surplus provides an operating
reserve equal to 13% of the Partnership's original capital raised. While the
Partnership agreement has no reserve requirement, the General Partner has set
a $250,000 target (5% of the Partnership's original capitalization). Recurring
seasonal cash flows have resulted in slight depletions and subsequent
replenishments of the target operating reserve. The General Partner has set
distributions to Limited Partners at a steady $125,000 per quarter in recent
years rather than causing such distributions to vary with seasonal cash flows.
As shown on the Statement of Cash Flows for the nine months ended
September 30, 1995, the Partnership's cash resources increased by $263,228
during the period covered by this report as compared with an increase of
$136,773 during the corresponding period of the preceding fiscal year, which
is an improvement of $126,445. Other than operating cash flow, additional
borrowing against the properties is the only realistic source of cash in the
unlikely event that reserves do not satisfy the Partnership's future cash
requirements.
During the first nine months of this fiscal year, the Partnership's
expenditures for replacement and renovation (which include both capitalized
replacements of personal property and certain non-recurring repairs and
refurbishment to both real and personal property) amounted to approximately
$136,165 (of which $34,083 was capitalized). These expenditures represent 5.2%
of guest room revenues. The General Partner's guideline for this type of
expenditure is 3% of annual guest room revenue. The General Partner has
authorized its guideline to be exceeded this year and possibly next year for
some renovation at its South San Francisco property.
No further significant renovation or replacement expenditures are
anticipated during the remainder of the current fiscal year. The General
Partner has decided to continue to fund long life replacements from cash flow
rather than using leases as the rate spread between potential interest income
and typical lease rates is too great. The Partnership will continue this
policy while operational cash flow can satisfy operating needs, the current
level of distributions to Limited Partners and the minor replacements and
refurbishment necessary to maintain the properties in acceptable condition.
NEW ACCOUNTING STANDARDS
- -------------------------
SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and
for Long-Lived Assets to be Disposed OF, requires the Partnership to disclose
information about potential impairment to the value of long-lived assets. The
Partnership is not required to adopt and does not currently plan to adopt SFAS
No. 121 until its fiscal year ending December 31, 1996. The Partnership does
not expect to make any disclosures about impairment of long-lived assets under
SFAS No. 121.
-7-
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
SEPTEMBER 30, 1995
------------------------------------------------
RESULTS OF OPERATIONS
- ---------------------
The following is a comparison of the first nine months of the fiscal
year ending December 31, 1995 with the corresponding period of the preceding
fiscal year.
Occupancy Percentage
1995 1994
Current Year to Current Year to
Quarter Date Quarter Date
------- ------- ------- -------
South
San Francisco 85.6% 70.6% 75.2% 64.1%
Sacramento 60.5% 58.8% 63.9% 64.7%
Modesto 83.2% 76.3% 76.1% 71.6%
Combined 75.1% 67.3% 71.0% 66.2%
Average Room Rate
1995 1994
Current Year to Current Year to
Quarter Date Quarter Date
------- ------- ------- -------
South
San Francisco $52.48 $49.76 $50.46 $48.43
Sacramento $41.65 $40.68 $39.47 $37.12
Modesto $41.51 $41.15 $42.23 $41.23
Combined $46.06 $44.24 $44.39 $42.16
Total income increased by $202,074 or 8.0%. The major revenue item,
guest room revenue, increased $168,149 or 6.8%, due to an increases in both the
combined average room rate and in the occupancy rate during the first nine
months of 1995 as compared to the corresponding period of the previous fiscal
year.
The increases in the South San Francisco and Modesto occupancy rates
were offset by the decline in the Sacramento occupancy rate. The South San
Francisco motel has achieved a substantial increase in business from the
corporate and group market segment. The Modesto motel derived its occupancy
increase from the leisure market segment. The decrease in occupancy at the
Sacramento property was due to a decline in the room nights provided by the
McClellan Air Force Base. The base installed 30 additional rooms to its supply
of on-base transient housing. As a result , and not withstanding the occupancy
decrease discussed above, during the period covered by this report, the
Sacramento motel's guest room revenue is basically unchanged from the same nine
month period of the preceding fiscal year.
-8-
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
SEPTEMBER 30, 1995
------------------------------------------------
The Partnership has been able to achieve average room rate increases in
each of its three markets. The general market conditions in both of the South
San Francisco and Modesto markets has enabled the properties to reduce
acceptance of discounted business and in favor of higher-rate corporate and
leisure business. The Sacramento motel has achieved an increase in its leisure
business while experiencing a decrease in its discounted military business.
Sacramento's guest room revenue is actually higher than that achieved in the
corresponding quarter of the previous fiscal year and is basically unchanged
for the nine month period covered by this report.
Total expenses increased $126,208, or 5.9%. Motel operating expenses,
the major expense component, increased by $108,460, or 6.5%. Included within
the increased expenditures is a replacement roof for the Sacramento property in
the amount of $21,517. The other increased expenses are due primarily to costs
associated with the increased occupancy.
FUTURE TRENDS
- -------------
The General Partners anticipate slightly improved market conditions for
1995 as compared with the previous fiscal year. The South San Francisco market,
which traditionally generated 40% of the Partnership's room revenue, has
substantially recovered from the recessionary conditions of the last two years.
The General Partners have determined that cost control efforts will provide the
best immediate return to the Partnership. The major components of the cost
control program were in place by December 31, 1993 and have resulted in
significant increases in profitability.
The Sacramento property historically has had significant occupancy from
the McClellan Air Force Base. The Base added 30 additional rooms to its
transit housing during 1994 which has had a negative effect on the Sacramento
property's occupancy. The inclusion of the McClellan Air Force Base on the
1995 Department of Defense base closing list will have an additional negative
effect on the property's future occupancy sometime after 1996 when base
operations begin to wind down.
In the opinion of Management, these financial statements reflect all
adjustments which were necessary to a fair statement of results for the interim
periods presented. All adjustments are of a normal recurring nature.
-9-
<PAGE>
PART II. OTHER INFORMATION
----------------------------
Item 1. Legal Proceedings
-----------------
None
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters
---------------------
None
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
None
-10-
<PAGE>
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
SUPER 8 MOTELS, LTD
11-13-95 By /S/ David P. Grotewohl
-------------------------
Date David P. Grotewohl,
President of Grotewohl
Management Services, Inc.,
Managing General Partner
11-13-95 By /S/ David P. Grotewohl
-------------------------
Date David P. Grotewohl,
Chief Financial Officer
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 765,366
<SECURITIES> 0
<RECEIVABLES> 86,453
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 888,340
<PP&E> 6,229,315
<DEPRECIATION> 4,398,855
<TOTAL-ASSETS> 2,743,226
<CURRENT-LIABILITIES> 235,470
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 1,540,375
<TOTAL-LIABILITY-AND-EQUITY> 2,743,226
<SALES> 2,698,261
<TOTAL-REVENUES> 2,734,327
<CGS> 1,767,691
<TOTAL-COSTS> 1,767,691
<OTHER-EXPENSES> 436,678
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 63,804
<INCOME-PRETAX> 466,154
<INCOME-TAX> 0
<INCOME-CONTINUING> 466,154
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 466,154
<EPS-PRIMARY> 93.23
<EPS-DILUTED> 0
</TABLE>
