SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of
The Securities Exchange Act of 1934
For the Period ended March 31, 1998 Commission File 0-8913
SUPER 8 MOTELS, LTD
------------------------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 94 - 2514354
(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 __
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
INDEX
Financial Statements: PAGE
Balance Sheet - March 31, 1998 and December 31, 1997 2
Statement of Operations - Three Months Ended
March 31, 1998 and 1997 3
Statement of Changes in Partners' Equity -
Three Months Ended March 31, 1998 and 1997 4
Statement of Cash Flows - Three Months Ended
March 31, 1998 and 1997 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
March 31, 1998 and December 31, 1997
3/31/98 12/31/97
---------- ----------
ASSETS
Current Assets:
Cash and temporary investments $ 896,546 $ 812,763
Accounts receivable 105,689 126,154
Prepaid expenses 2,249 21,588
---------- ----------
Total current assets 1,004,484 960,505
---------- ----------
Property and Equipment:
Buildings 5,223,252 5,223,252
Furniture and equipment 1,184,933 1,147,274
---------- ----------
6,408,185 6,370,526
Accumulated depreciation (4,916,985) (4,858,036)
---------- ----------
Property and equipment, net 1,491,200 1,512,490
---------- ----------
Other Assets: 16,519 17,312
---------- ----------
Total Assets $ 2,512,203 $ 2,490,307
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Current portion of note payable $ 31,292 $ 30,636
Accounts payable and accrued liabilities 299,338 217,743
---------- ----------
Total current liabilities 330,630 248,379
Long - Term Liabilities:
Note payable 893,852 901,925
---------- ----------
Total liabilities 1,224,482 1,150,304
---------- ----------
Contingent Liabilities (See Note 1)
Partners' Equity:
General Partners 76,932 75,455
Limited Partners 1,210,789 1,264,548
---------- ----------
Total partners' equity 1,287,721 1,340,003
---------- ----------
Total Liabilities and Partners' Equity $ 2,512,203 $ 2,490,307
========== ==========
The accompanying notes are an integral part of the financial statements.
2
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
Statement of Operations
For the Three Months Ending March 31, 1998 and 1997
Three Months Three Months
Ended Ended
3/31/98 3/31/97
---------- ----------
Income:
Guest room $ 915,699 $ 911,720
Telephone and vending 15,136 21,702
Interest 7,237 10,067
Other 7,834 8,844
---------- ----------
Total Income 945,906 952,333
---------- ----------
Expenses:
Motel operating expenses (Note 2) 591,225 575,173
General and administrative 55,230 28,635
Depreciation and amortization 62,842 61,492
Interest 19,712 20,319
Property management fees 46,957 47,152
Partnership management fees 22,222 16,667
---------- ----------
Total Expenses 798,188 749,438
---------- ----------
Net Income (Loss) $ 147,718 $ 202,895
========== ==========
Net Income (Loss) Allocable
to General Partners $1,477 $2,029
========== ==========
Net Income (Loss) Allocable
to Limited Partners $146,241 $200,866
========== ==========
Net Income (Loss)
per Partnership Unit $29.25 $40.17
========== ==========
Distribution to Limited Partners
per Partnership Unit $40.00 $30.00
========== ==========
The accompanying notes are an integral part of the financial statements.
3
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
Statement of Changes in Partners' Equity
For the Three Months Ending March 31, 1998 and 1997
1998 1997
---------- ----------
General Partners:
Balance at beginning of year $ 75,455 $ 66,559
Net income (loss) 1,477 2,029
---------- ----------
Balance at end of period 76,932 68,036
---------- ----------
Limited Partners:
Balance at beginning of year 1,264,548 1,683,840
Net income (loss) 146,241 146,241
Distributions to limited partners (200,000) (150,000)
---------- ----------
Balance at end of period 1,210,789 1,680,081
---------- ----------
Total balance at end of period $ 1,287,721 $ 1,748,117
========== ==========
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
For the Three Months Ending March 31, 1998 and 1997
1998 1997
---------- ----------
Cash flows from operating activities:
Received from motel revenues $ 960,454 $ 944,513
Expended for motel operations and
general and administrative expenses (614,648) (599,717)
Interest received 5,917 8,765
Interest paid (19,765) (20,367)
---------- ----------
Net cash provided by operating activities 331,958 333,194
---------- ----------
Cash flows from investing activities:
Purchases of property and equipment (40,758) (33,228)
---------- ----------
Net cash provided (used) by investing activities (40,758) (33,228)
---------- ----------
Cash flows from financing activities:
Principal payments on notes payable (7,417) (6,815)
Distributions paid to limited partners (200,000) (150,000)
---------- ----------
Net cash provided (used) by financing activities (207,417) (156,815)
---------- ----------
Net increase (decrease) in cash
and temporary investments 83,783 143,151
Cash and Temporary Investments:
Beginning of period 812,763 1,058,309
---------- ----------
End of period $ 896,546 $ 1,201,460
========== ==========
Reconciliation of net income to net cash provided by operating activities:
Net income (loss) $ 147,718 $ 202,895
---------- ----------
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 62,842 61,492
(Increase) decrease in accounts receivable 20,465 945
(Increase) decrease in prepaid expenses 19,339 19,116
Increase (decrease) in accounts payable
and accrued liabilities 81,594 48,746
---------- ----------
Total adjustments 184,240 130,299
---------- ----------
Net cash provided by
operating activities $ 331,958 $ 333,194
========== ==========
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 Three Months ending March 31, 1998 and 1997
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, 1997 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 $46,957
Franchise Fees $18,326
Partnership Management Fees $22,222
Note 2:
The following table summarizes the major components of motel operating expenses
for the periods reported:
Three Months Three Months
Ended Ended
3/31/98 3/31/97
---------- ----------
Salaries and related costs $ 209,931 $ 199,494
Rent 48,292 47,911
Franchise and advertising 45,816 45,643
Utilities 33,093 41,587
Allocated costs,
mainly indirect salaries 74,642 66,165
Replacements and renovations 17,644 9,904
Other operating expenses 161,807 164,469
---------- ----------
Total motel operating expenses $ 591,225 $ 575,173
========== ==========
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
MARCH 31, 1998
LIQUIDITY AND CAPITAL RESOURCES
The Partnership has current assets of $1,004,484 which exceed its current
liabilities of $330,630 by $673,854. While the Partnership agreement has no
reserve requirement, the General Partner has set a $250,000 target (5% of the
Partnership's original capitalization).
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 three month period covered by this report, the Partnership's
expenditures for replacements and renovation totaled $58,403 or 6.4% of guest
room revenues. Included in that amount was 43,224 for guest room and hallway
carpet replacements.
RESULTS OF OPERATIONS
The following is a comparison of the first three months of the fiscal year
ending March 31, 1998 with the corresponding period of the preceding fiscal
year.
Total income decreased $6,427 or 0.6%. The major revenue item, guest room
revenue, increased $3,979 or 0.4%, due to an average rate increase from $45.72
in 1997 to $52.87 in 1998, while the occupancy rate decreased from 68.2% in 1997
to 59.2% in 1998. All three motel achieved increases in the average daily room
rate and decreases in the average occupancy rate. The South San Francisco motel
achieved an increase in guest room rentals which was substantially offset by
decreased revenues at the Sacramento and Modesto motels.
7
<PAGE>
SUPER 8 MOTELS, LTD.
(A California Limited Partnership)
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
MARCH 31, 1998 (Continued)
Total expenses increased $48,750 or 6.5% during the three months of the fiscal
quarter ended March 31, 1998 as compared to the corresponding quarter of the
previous fiscal year. The increased expenses are due to increases in the minimum
wage, legal fees, appraisal and other costs associated with the potential
liquidation of the partnership and with fees to the general partners that are a
percentage of increased distributions to the limited partners.
FUTURE TRENDS
The General Partners anticipate an economic climate that is substantially
unchanged for 1998 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 Sacramento property had significant occupancy from the McClellan Air Force
Base. The facility was added to the 1995 base closing list. The room nights
generated from this source will decline as the base operations are phased out
through 2002. The actual closing activity and the future use of the facility
should generate some business for the Sacramento motel.
As discussed in more detail in the following section labeled "Legal
Proceedings," the General Partners have agreed to offer the motels for sale and
to present any offer that equal or exceeds 75% of the appraised value for the
approval of the limited partners.
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, the Managing General Partner,
and four other limited partnerships (together with the registrant, the
"Partnerships") as to which the Managing General Partner 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 named 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 P. Enquist ( the "Everest
Defendants"). The factual basis underlying the plaintiffs' causes of actions
pertained 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
requested the following relief: (i) a declaration that each of the defendants
had 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 had 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.
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 pertained
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 Partnerships' partnership
agreements and California law. The complaint requested the following relief: (i)
a declaration that the action has 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.
9
<PAGE>
PART II. OTHER INFORMATION (Continued)
On February 20, 1998, the parties entered into a settlement agreement and both
of the above complaints were dismissed. Pursuant to the terms of the settlement
agreement, among other things, the General Partner has agreed to proceed with
the marketing for sale of the properties of the Partnerships, if by June 30,
1998, it receives an offer to purchase one or more properties for a cash price
equal to 75% or more of the appraised value. In addition, the General Partner
has agreed to submit the offer for approval to the limited partners as required
by the partnership agreements and applicable law. The General Partner has also
agreed that upon the sale of one or more properties, to distribute promptly the
proceeds of the sale after payment of payables and retention of reserves to pay
anticipated expenses. The Everest Defendants agreed not to generally solicit the
acquisition of any additional units of the Partnerships without first filing
necessary documents with the SEC. Under the terms of the settlement agreement,
the Partnerships have agreed to reimburse the Everest Defendants for certain
costs not to exceed $60,000, to be allocated among the Partnerships. Of this
amount, the Partnership will pay approximately $12,000 during the year covered
by this report.
Item 2. Changes in Securities
None
Item 3. Defaults upon Senior Securities
None
Item 4. Submission of Matter to the Vote of Security Holders
None
Item 5. Other Information
See Notes to Financial Statements
Item 6. Exhibits and Reports on Form 8-K
None
10
<PAGE>
SIGNATURES
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.
4-30-98 By /S/ Philip B. Grotewohl
------- -------------------------
Date Philip B. Grotewohl,
Chairman of Grotewohl
Management Services, Inc.,
Managing General Partner
4-30-98 By /S/ Philip B. Grotewohl
------- -------------------------
Date Philip B. Grotewohl,
Chief executive officer,
chief financial officer,
chief accounting officer
and sole director of
Grotewohl Management
Services, Inc., Managing
General Partner
11
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 896,546
<SECURITIES> 0
<RECEIVABLES> 105,689
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,004,484
<PP&E> 6,408,185
<DEPRECIATION> 4,916,985
<TOTAL-ASSETS> 2,512,203
<CURRENT-LIABILITIES> 330,630
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 1,287,721
<TOTAL-LIABILITY-AND-EQUITY> 2,512,203
<SALES> 930,835
<TOTAL-REVENUES> 945,906
<CGS> 591,225
<TOTAL-COSTS> 591,225
<OTHER-EXPENSES> 187,251
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 19,712
<INCOME-PRETAX> 147,718
<INCOME-TAX> 0
<INCOME-CONTINUING> 147,718
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 147,718
<EPS-PRIMARY> 29.25
<EPS-DILUTED> 29.25
</TABLE>
