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
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For the Period ended September 30, 1997
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
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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, 1997 AND 1996
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
INDEX
Financial Statements: PAGE
Balance Sheet - September 30, 1997 and December 31, 1996 2
Statement of Operations - Nine Months Ended
September 30, 1997 and 1996 3
Statement of Changes in Partners' Equity -
Nine Months Ended September 30, 1997 and 1996 4
Statement of Cash Flows - Nine Months Ended
September 30, 1997 and 1996 5
Notes to Financial Statements 6
Management Discussion and Analysis 7 - 8
Other Information and Signatures 9 - 11
<PAGE>
Super 8 Motels, Ltd.
(A California Limited Partnership)
Balance Sheet
September 30, 1997 and December 31, 1996
9/30/97 12/31/96
----------- -----------
ASSETS
Current Assets:
Cash and temporary investments $ 879,565 $ 1,058,309
Accounts receivable 82,034 122,841
Prepaid expenses 40,927 24,463
----------- -----------
Total current assets 1,002,526 1,205,613
----------- -----------
Property and Equipment:
Buildings 5,223,252 5,223,252
Furniture and equipment 1,113,746 1,049,769
----------- -----------
6,336,998 6,273,021
Accumulated depreciation (4,793,781) (4,620,543)
----------- -----------
Property and equipment, net 1,543,217 1,652,478
----------- -----------
Other Assets: 18,106 20,488
----------- -----------
Total Assets $ 2,563,849 $ 2,878,579
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Current portion of note payable $ 29,994 $ 28,148
Accounts payable and accrued liabilities 148,895 167,471
----------- -----------
Total current liabilities 178,889 195,619
----------- -----------
Long - Term Liabilities:
Note payable 909,829 932,561
----------- -----------
Total liabilities 1,088,718 1,128,180
----------- -----------
Contingent Liabilities (See Note 1)
Partners' Equity:
General Partners 74,806 66,559
Limited Partners 1,400,325 1,683,840
----------- -----------
Total partners' equity 1,475,131 1,750,399
----------- -----------
Total Liabilities and Partners' Equity $ 2,563,849 $ 2,878,579
=========== ===========
The accompanying notes are an integral part of the financial statements.
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<PAGE>
Super 8 Motels, Ltd.
(A California Limited Partnership)
Statement of Operations
For the Nine Months Ending September 30, 1997 and 1996
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
9/30/97 9/30/97 9/30/96 9/30/96
----------- ----------- ----------- -----------
Income:
Guest room $ 1,149,715 $ 3,145,420 $ 1,086,417 $ 2,774,285
Telephone and vending 20,165 63,515 27,402 64,320
Interest 8,082 28,443 7,209 17,994
Other 7,289 28,996 6,172 20,701
----------- ----------- ----------- -----------
Total Income 1,185,251 3,266,374 1,127,200 2,877,300
----------- ----------- ----------- -----------
Expenses:
Motel operating expenses
(Note 2) 657,178 1,847,621 600,366 1,734,956
General and admin-
istrative 18,163 63,293 17,461 62,640
Depreciation and
amortization 61,962 186,326 60,973 189,416
Interest 20,022 60,512 20,603 62,221
Property management fees 58,861 161,668 56,093 143,007
Partnership management
fees 87,500 122,222 15,278 43,056
----------- ----------- ----------- -----------
Total Expenses 903,686 2,441,642 770,774 2,235,296
----------- ----------- ----------- -----------
Net Income (Loss) $ 281,565 $ 824,732 $ 356,426 $ 642,004
=========== =========== =========== ===========
Net Income (Loss) Allocable
to General Partners $2,816 $8,247 $3,564 $6,420
========== ========== ========== ==========
Net Income (Loss) Allocable
to Limited Partners $278,749 $816,485 $352,862 $635,584
========== ========== ========== ==========
Net Income (Loss)
per Partnership Unit $55.75 $163.30 $70.57 $127.12
========== ========== ========== ==========
Distribution to Limited
Partners per
Partnership Unit $37.50 $220.00 $27.50 $77.50
========== ========== ========== ==========
The accompanying notes are an integral part of the financial statements.
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<PAGE>
Super 8 Motels, Ltd.
(A CALIFORNIA LIMITED PARTNERSHIP)
Statement of Changes in Partners' Equity
For the Nine Months Ending September 30, 1997 and 1996
9/30/97 9/30/96
----------- -----------
General Partners:
Balance at beginning of year $ 66,559 $ 58,480
Net income (loss) 8,247 6,420
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Balance at end of period 74,806 64,900
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Limited Partners:
Balance at beginning of year 1,683,840 1,421,524
Net income (loss) 816,485 635,584
Distributions to limited partners (1,100,000) (387,500)
----------- -----------
Balance at end of period 1,400,325 1,669,608
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Total balance at end of period $ 1,475,131 $ 1,734,508
=========== ===========
The accompanying notes are an integral part of the financial statements.
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<PAGE>
Super 8 Motels, Ltd.
(A California Limited Partnership)
Statement of Cash Flows
For the Nine Months Ending September 30, 1997 and 1996
1997 1996
----------- -----------
Cash flows from operating activities:
Received from motel revenues $ 3,280,150 $ 2,851,544
Expended for motel operations and
general and administrative expenses (2,229,695) (1,938,415)
Interest received 27,031 16,779
Interest paid (60,660) (62,357)
----------- -----------
Net cash provided by operating activities 1,016,826 867,551
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Cash flows from investing activities:
Purchases of property and equipment (74,684) (42,080)
Proceeds from sales of property and equipment - 3,000
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Net cash provided (used) by investing activities (74,684) (39,080)
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Cash flows from financing activities:
Principal payments on notes payable (20,886) (19,190)
Distributions paid to limited partners (1,100,000) (387,500)
----------- -----------
Net cash provided (used) by financing activities (1,120,886) (406,690)
----------- -----------
Net increase (decrease) in cash
and temporary investments (178,744) 421,781
Cash and Temporary Investments:
Beginning of period 1,058,309 631,200
----------- -----------
End of period $ 879,565 $ 1,052,981
=========== ===========
Reconciliation of net income to net cash provided by operating activities:
Net income (loss) $ 824,732 $ 642,004
----------- -----------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 186,326 189,416
(Gain) loss on sale of property - 1,536
(Increase) decrease in accounts receivable 40,807 (8,977)
(Increase) decrease in prepaid expenses (16,464) (16,668)
Increase (decrease) in accounts payable
and accrued liabilities (18,575) 60,240
----------- -----------
Total adjustments 192,094 225,547
----------- -----------
Net cash provided by
operating activities $ 1,016,826 $ 867,551
=========== ===========
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
For the Nine Months Ending September 30, 1997 and 1996
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, 1996 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 $161,668
Franchise Fees $62,909
Partnership Management Fees $122,222
Note 2:
The following table summarizes the major components of motel operating expenses
for the periods reported:
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
9/30/97 9/30/97 9/30/96 9/30/96
----------- ----------- ----------- -----------
Salaries and related costs $ 212,674 $ 623,184 $ 208,354 $ 589,170
Rent 49,093 145,130 47,482 139,878
Franchise and advertising 57,488 157,273 60,702 177,651
Utilities 52,593 138,745 53,721 124,988
Allocated costs,
mainly indirect salaries 65,818 198,453 62,280 202,455
Replacements and renovations 33,573 52,096 6,905 34,290
Other operating expenses 185,939 532,740 160,922 466,524
----------- ----------- ----------- -----------
Total motel operating
expenses $ 657,178 $ 1,847,621 $ 600,366 $ 1,734,956
=========== =========== =========== ===========
The following additional material contingencies are required to be restated in
interim reports under federal securities law: None.
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<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
SEPTEMBER 30, 1997
LIQUIDITY AND CAPITAL RESOURCES
The Partnership has current assets of $1,002,526 which exceed its current
liabilities of $178,889 by $823,637. This surplus provides an operating reserve
equal to 16.5% 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).
As shown on the Statement of Cash Flows for the nine months ended September 30,
1997, the Partnership's cash resources decreased by $178,744 during the period
covered by this report as compared with an increase of $421,781 during the
corresponding period of the preceding fiscal year. The negative cash flow would
have been an increase of $533,756 if the distributions during 1997 had been the
same as those during the corresponding period of the pervious fiscal year. 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 nine month period covered by this report, the Partnership's
expenditures for replacements and renovation totaled $126,780 or 4.0% of guest
room revenues. Included in the total renovations and replacements was $16,428 in
lobby and guest room carpet, $33,228 for four replacement washing machines,
$11,488 in replacement bedspreads, $8,494 for furniture refurbishing, $12,890 in
tub refurbishing, $5,633 for a new security system and $5,957 for replacement
locks.
RESULTS OF OPERATIONS
The following is a comparison of the first nine months of the fiscal year ending
December 31, 1997 with the corresponding period of the preceding fiscal year.
Total income increased $389,074 or 13.5%. The major revenue item, guest room
revenue, increased $371,135 or 13.4%, due to an average rate increase from
$46.36 in 1996 to $49.72 in 1997. and to an increase in occupancy from 67.2% in
1996 to 71.3% in 1997.
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<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
SEPTEMBER 30, 1997 (Continued)
The San Francisco motel achieved a net increase in room revenue due to increased
room nights in the leisure market segment. The Sacramento motel a net increase
in room revenue due to increased room nights from the corporate and leisure
market segments. Motel revenue from the Modesto property was essentially
unchanged from the previous fiscal year as a decline in the occupancy rate was
offset by increased room rates.
Total expenses increased $206,346 or 9.2% during the first nine months of the
fiscal year ending December 31, 1997 as compared to the corresponding period of
the previous fiscal year. The motel operating expenses increase $112,665 or
6.5%. The increase in property management fees is directly proportionate with
the increased room revenue. The partnership management fee is proportionate to
the distributions to the limited partners.
FUTURE TRENDS
The General Partners anticipate an improved economic climate for 1997 as
compared with the previous fiscal year. The South San Francisco market, which
traditionally generated 40% of the Partnership's room revenue, has recovered
from its depressed condition. The General Partners have determined that a
continuing cost control strategy 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 continue to benefit the Partnership through the fiscal
quarter covered by this report.
Prior to 1995 the Sacramento property had significant occupancy from the
McClellan Air Force Base. In 1995 the base added 30 rooms to its on-base
transient housing. This reduced the motels demand in 1995 and in 1996. The
facility was added to the 1995 base closing list. The remaining room nights
generated from this source will decline as the base operations are phased out
through 2000. The actual closing activity and the future use of the facility
should generate some business for the Sacramento motel.
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.
- 8 -
<PAGE>
PART II. OTHER INFORMATION
----------------------------
Item 1. Legal Proceedings
-----------------
On October 27, 1997 a complaint was filed in the United States District
Court, Eastern District of California by the registrant, Grotewohl Management
Services, Inc. (a general partner of the registrant) and four other limited
partnerships (together with the registrant, the "Partnerships") as to which
Grotewohl Management Services, Inc. serves as general partner (i.e., Super 8
Motels II, Ltd., Super 8 Motels III, Ltd., Super 8 Economy Lodging IV, Ltd., and
Famous Host Lodging V, L.P.), as plaintiffs. The complaint names as defendants
Everest/Madison Investors, LLC, Everest Lodging Investors, LLC, Everest
Properties, LLC, Everest Partners, LLC, Everest Properties II, LLC, Everest
Properties, Inc., W. Robert Kohorst, David I. Lesser, The Blackacre Capital
Group, L.P., Blackacre Capital Management Corp., Jeffrey B. Citron, Ronald J.
Kravit, and Stephen B. Enquist. The factual basis underlying the plaintiffs'
causes of actions pertains to tender offers directed by certain of the
defendants to limited partners of the Partnerships, and to indications of
interest made by certain of the defendants in purchasing the property of the
Partnerships. The complaint requests the following relief: (i) a declaration
that each of the defendants has violated Sections 13(d), 14(d) and 14(e) of the
Securities Exchange Act of 1934 (the "Exchange Act"), and the rules and
regulations promulgated by the Securities and Exchange Commission thereunder;
(ii) a declaration that certain of the defendants have violated Section 15(a) of
the Exchange Act and the rules and regulations thereunder; (iii) an order
permanently enjoining the defendants from (a) soliciting tenders of or accepting
for purchase securities of the Partnerships, (b) exercising any voting rights
attendant to the securities already acquired, (c) soliciting proxies, and (d)
violating Sections 13 or 14 of the Exchange Act or the rules and regulations
promulgated thereunder; (iv) an order enjoining certain of the defendants from
violating Section 15(a) of the Exchange Act and the rules and regulations
promulgated thereunder; (v) an order directing certain of the defendants to
offer to each person who sold securities to such defendants the right to rescind
such sale; and (vi) a declaration that the Partnerships need not provide to the
defendants a list of limited partners in the Partnerships or any other
information respecting the Partnerships which is not publicly available. The
plaintiffs have not yet received an answer of the defendants respecting the
complaint.
On October 28, 1997 a complaint was filed in the Superior Court of the
State of California, Sacramento County by Everest Lodging Investors, LLC and
Everest/Madison Investors, LLC, as plaintiffs, against Philip B. Grotewohl,
Grotewohl Management Services, Inc., Kenneth M. Sanders, Robert J. Dana, Borel
Associates, and BWC Incorporated, as defendants, and the Partnerships, as
nominal defendants. The factual basis underlying the causes of action pertains
to the receipt by the defendants of franchise fees and reimbursement of
expenses, the indications of interest made by the plaintiffs in purchasing the
properties of the nominal defendants, and the alleged refusal of the defendants
to provide information required by the terms of the Partnership's partnership
agreement and California law. The complaint requests the following relief: (i) a
declaration that the action is a proper derivative action; (ii) an order
requiring the defendants to discharge their fiduciary duties to the Partnerships
and to enjoin them from breaching their fiduciary duties; (iii) disgorgement of
certain profits; (iv) appointment of a receiver; and (v) an award for damages in
an amount to be determined. The defendants and nominal defendants have recently
been served and are formulating their response to the complaint.
- 9 -
<PAGE>
PART II. OTHER INFORMATION (CONTINUED)
----------------------------------------
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters
---------------------
None
Item 5. Other Information
-----------------
See Notes to Financial Statements
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
See Item 1 above
- 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
11-10-97 By /S/ David P. Grotewohl
--------- -------------------------
Date David P. Grotewohl,
President of Grotewohl
Management Services, Inc.,
Managing General Partner
11-10-97 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-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 879,565
<SECURITIES> 0
<RECEIVABLES> 82,034
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,002,526
<PP&E> 6,336,998
<DEPRECIATION> 4,793,781
<TOTAL-ASSETS> 2,563,849
<CURRENT-LIABILITIES> 178,889
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,475,131
<TOTAL-LIABILITY-AND-EQUITY> 2,563,849
<SALES> 3,208,935
<TOTAL-REVENUES> 3,266,374
<CGS> 1,847,621
<TOTAL-COSTS> 1,847,621
<OTHER-EXPENSES> 533,509
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 60,512
<INCOME-PRETAX> 824,732
<INCOME-TAX> 0
<INCOME-CONTINUING> 824,732
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 824,732
<EPS-PRIMARY> 163.30
<EPS-DILUTED> 163.30
</TABLE>
