FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended Commission
File
Number
October 2, 1998 0-
9708
SUPER 8 MOTELS TEXAS, LTD.
(Exact name of registrant as specified in its charter)
State of Organization TEXAS IRS Identification No.
74-2062237
P. O. Box 969, Rockwall, TX 75087-0969
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (972)
771-6783
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 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 X
No
SUPER 8 MOTELS TEXAS, LTD.
(A Limited Partnership)
October 2, 1998
CONTENTS
PART I. FINANCIAL INFORMATION Page
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets 3
Statement of Operations
Three Months ended October 2, 1998 and
September 26, 1997 4
Statement of Operations
Nine Months ended October 2, 1998 and
September 26, 1997 5
Statement of Partners' Equity 6
Statement of Cash Flows
Nine Months ended October 2, 1998 and
September 26, 1997 7
Notes of Financial Statements 8 - 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF
OPERATIONS 11 -12
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDING 13
ITEM 2. CHANGES IN SECURITIES 13
ITEM 3. DEFAULTS UPON SENIOR SECURITIES 13
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS 13
ITEM 5. OTHER INFORMATION 13
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K 13
SUPER 8 MOTELS TEXAS. LTD.
(A Limited Partnership)
BALANCE SHEETS
October 2, 1998 and January 2, 1998
ASSETS 1998 1997
Unaudited
CURRENT ASSETS
Cash $ 442,300 $319,111
Accounts Receivable, net
of allowance for doubtful
accounts of $7,000 in 1998
and $7,000 in 1997 115,245 83,685
Prepaid expenses 44,315 20,630
Total current assets 601,860 423,426
PROPERTY AND EQUIPMENT
Land 769,800 769,800
Building and
improvements 2,552,257 2,539,443
Furniture and equipment 512,857 496,345
3,834,914 3,805,588
Accumulated Depreciation 1,449,647 1,336,157
2,385,267 2,469,431
OTHER ASSETS 22,054 24,162
$3,009,181 $2,917,019
LIABILITIES AND PARTNERS? EQUITY
CURRENT LIABILITIES
Current portion of
mortgage payable $ 45,000 $ 45,000
Accounts payable 123,564 84,294
Sales tax payable 46,096 43,315
Property taxes payable 39,562 50,485
Accrued compensation 20,651 20,711
Accrued interest payable 1,414 1,577
Total current liabilities 276,287 245,382
MORTGAGE PAYABLE
less current portion 203,088 236,838
PARTNERS? EQUITY 2,529,806 2,434,799
$3,009,181 $2,917,019
The accompanying notes are an integral part of this
statement.
SUPER 8 MOTELS TEXAS, LTD.
(A Limited Partnership)
STATEMENTS OF OPERATIONS
FOR THE THREE MONTH PERIODS ENDED
October 2, 1998 and September 26, 1997
(Unaudited)
1998 1997
AVERAGE ROOM RATE $40.81 $38.01
OCCUPANCY PERCENTAGE 84.8% 87.7%
Revenues
Room rentals 396,783 382,107
Other 14,536 15,145
411,319 397,252
Expenses
Departmental:
Rooms 112,820 112,214
Other 4,909 5,087
General and administrative 65,340 60,312
Sales 8,797 12,733
Franchise fees 33,776 32,538
Utilities 32,888 28,589
Maintenance & Repair 29,015 22,407
Management fees 23,283 23,063
Depreciation 37,830 37,856
Amortization 702 702
Property taxes 13,180 12,497
Insurance 7,359 6,945
Interest 7,118 8,319
377,017 363,262
NET INCOME (LOSS) $ 34,302 $ 33,990
The accompanying notes are an integral part of this
statement
SUPER 8 MOTELS TEXAS, LTD.
(A Limited Partnership)
STATEMENTS OF OPERATIONS
FOR THE NINE MONTH PERIODS ENDED
October 2, 1998 and September 26, 1997
(Unaudited)
1998 1997
AVERAGE ROOM RATE $40.76 $38.39
OCCUPANCY PERCENTAGE 87.1% 89.0%
Revenues
Room rentals 1,220,496 1,175,783
Other 40,845 48,088
1,261,341 1,223,871
Expenses
Departmental:
Rooms 345,705 328,998
Other 14,727 16,638
General and administrative 218,954 187,745
Sales 33,054 37,117
Franchise fees 103,903 100,298
Utilities 84,894 84,491
Maintenance & Repair 91,230 74,232
Management fees 70,944 72,453
Depreciation 113,490 113,568
Amortization 2,108 2,108
Property taxes 40,337 37,513
Insurance 24,832 22,212
Interest 22,156 25,648
1,166,334 1,103,021
NET INCOME (LOSS) $ 95,007 $ 120,850
The accompanying notes are an integral part of this
statement.
SUPER 8 MOTELS TEXAS, LTD.
(A Limited Partnership)
STATEMENT OF PARTNERS' EQUITY
FOR THE NINE MONTH PERIODS ENDED
October 2,1998 and September 26, 1997
(Unaudited)
General Limited Partners
Partners Total
Balance -
December 27, 1996 $(18,793) $2,298,569 $2,279,776
Net Income (Loss) -
Three Months Ended
March 28, 1997 308 30,534 30,842
Net Income (Loss) -
Three Months Ended
June 27, 1997 560 55,458 56,018
Net Income (Loss) -
Three Months Ended
September 26, 1997 340 33,650 33,990
Balance -
September 26, 1997 $(17,585) $2,418,211 $2,400,626
Balance -
January 2, 1998 $(17,243) $2,452,042 $2,434,799
Net Income (Loss) -
Three Months Ended
April 3, 1998 321 31,764 32,085
Net Income (Loss) -
Three Months Ended
July 3, 1998 286 28,334 28,620
Net Income (Loss) -
Three Months Ended
October 2, 1998 343 33,959 34,302
Balance -
October 2, 1998 $(16,293) $2,546,099 $2,529,806
The accompanying notes are an integral part of this
statement.
SUPER 8 MOTELS TEXAS, LTD.
(A Limited Partnership)
STATEMENT OF CASH FLOWS
Nine Months Ended October 2, 1998 and September 26, 1997
(Unaudited)
1998 1997
Cash flows from
operating activities
Net income (loss) $ 95,007 $120,850
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities
Depreciation and amortization 115,598 115,676
Change in operating assets and
liabilities
Accounts receivable (31,560) (14,843)
Prepaid expenses (23,685) (8,285)
Other assets (30)
Accounts payable 39,270 38,267
Sales tax payable 2,781 (1,437)
Property taxes payable (10,923) (12,859)
Accrued compensation (60) (5,872)
Accrued interest (163) (215)
Net cash provided by (used in)
operating activities 186,265 231,252
Cash flows from financing
activities
Payments made on mortgage payable (33,750) (33,750)
Net cash provided by (used in)
financing activities (33,750) (33,750)
Cash flows from investing
activities
Property additions (29,326) (2,728)
Net cash provided by (used in)
investing activities (29,326) (2,728)
NET INCREASE (DECREASE) IN
CASH 123,189 194,774
Cash at beginning of year 319,111 37,456
Cash at end of period $ 442,300 $232,230
Interest paid during the period $ 22,319 $ 25,863
The accompanying notes are an integral part of this
statement.
SUPER 8 MOTELS TEXAS, LTD.
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A summary of the significant accounting policies applied in
the preparation of the accompanying financial statements
follows.
Depreciation
Depreciation is provided in amounts sufficient to relate the
cost of depreciable assets to operations over their
estimated service lives by the straight-line method.
Accelerated methods of depreciation are used for tax
purposes.
Federal Income Taxes
Federal income taxes (benefits) are not reflected in the
financial statements as the partners individually report
their distributive shares of the taxable income or loss of
the Partnership.
Fiscal Year
The Partnership's fiscal year ends on the Friday nearest
December 31. Fiscal years 1998 and 1997 are comprised of
fifty-two and fifty-three week periods, respectively.
NOTE B - PARTNERSHIP AGREEMENT
The Partnership was formed under the laws of the State of
Texas in September 1979. The Partnership was organized to
develop and operate nonspecified "budget" hotels in Texas.
Allocation of cash distributions and income (losses) are 99%
and 1%, respectively, to limited partners and general
partners.
The general partners have an option which expires in 1999 to
purchase a special 20% limited partner interest for
$500,000.
Franchise Fees
Effective June 30, 1994, the partnership received approval
from Ramada Franchise Systems, Inc. to operate the facility
as a Ramada Limited hotel for a term of fifteen years
subject to Ramada having the right to terminate the license
without cause effective on the fifth anniversary of the
license. Prior to June 30, 1994, the Partnership paid to
Super 8 Motels, Inc. monthly fees equal to 4% of its gross
room revenue and contributed an additional 1% of its gross
room revenues to an advertising fund administered by the
franchisor. Effective June 30, 1994, the Partnership will
pay to Ramada Franchise Systems, Inc. monthly fees equal to
3.5% of its gross room revenue for the first twelve months
from the effective date of the Ramada license and 4% of its
gross room revenue beginning in the thirteenth month through
the balance of the license term. In addition, the
partnership must contribute 4.5% of its gross room revenue
to Ramada Inter-National Association for marketing,
reservation systems and other assessments. Franchise fees
were $103,903 and $100,298 for the nine months ended October
2, 1998 and September 26, 1997, respectively.
NOTE C - RELATED PARTY TRANSACTIONS
Management Fees
An affiliate of one of the former General Partners managed
the hotel for the Partnership until May 31, 1989. The fee
for this service was 5% of gross operating revenues from
Partnership operations. This management fee was payable
monthly; however, three-fifths of the management fee was
deferred until receipt by the Limited Partners of a
cumulative 10% per annum pre-tax return on their adjusted
capital contributions. During 1994 this obligation was
written off because it was determined that it was unlikely
to require payment in the future.
On June 1, 1989, an affiliate of one of the current General
Partners assumed management of the hotel. For its services,
the management company receives a base management fee equal
to the greater of three percent (3%) of the Gross Revenues
of the hotel or $36,000 per year. In addition to the base
management fee, the management company receives an incentive
management fee equal to ten percent (10%) of Gross Operating
Profit. For the nine months ended October 2, 1998 and
September 26, 1997, management fees were $70,944 and
$72,453, respectively. Additionally, accounting service
fees paid to another affiliate of a general partner were
$29,250 and $21,000 for the nine months ended October 2,
1998 and September 26, 1997, respectively. Expense
reimbursements to a general partner for expenses incurred
were $5,810 and $10,574 for the nine months ended October 2,
1998 and September 26, 1997, respectively.
NOTE D - SIGNIFICANT CUSTOMER
The Partnership's revenues for the nine months ended October
2, 1998 and September 26, 1997 include amounts from a single
customer of approximately $194,747 and $257,801,
respectively.
NOTE E - MORTGAGE PAYABLE
In April 1994, the partnership entered into a mortgage note
agreement to borrow $450,000 from a financial institution.
The proceeds of this loan were used to complete the
renovation of the facility to comply with the Ramada license
requirements. Under terms of the agreement, the partnership
is required to make monthly principal installments of $3,750
and interest on the outstanding principal balance at 2%
above the financial institution?s prime lending rate. The
mortgage note is collateralized by the hotel's property and
equipment. As of October 2, 1998, the outstanding principal
balance was $248,088, with a current portion of $45,000.
All unpaid principal is due in 2004. The payee may demand
payment of the outstanding balance of the note on the six
year, seven year, eight year and nine year anniversary dates
of the note.
SUPER 8 MOTELS TEXAS, LTD.
Item 2.MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Opinion of Management
In the opinion of management, the accompanying unaudited
financial statements reflect all adjustments (consisting
only of normal recurring adjustments) necessary to present
fairly the financial position as of October 2, 1998 and
September 26, 1997, and the results of operation and its
cash flows for the periods then ended.
Liquidity
The General Partners believe that the Partnership's
liquidity, defined as its ability to generate adequate
amounts of cash to meet its cash needs, is satisfactory. The
Partnership's primary source of liquidity is its revenue
from operations, the cash provided from the sale of its
restaurant in 1990 and the proceeds of the mortgage note
incurred to finance the renovation of the hotel. The
Partnership actively negotiated with the lessee of the
restaurant building to sell the building to such lessee.
Such sale took place on September 14, 1990. The contract
sale price was $500,000. This sale provided a cash infusion
to the property of $445,000 which was used to pay off
delinquent taxes of $137,605, current taxes on the
restaurant through September 14, 1990 of $14,160 and a
$22,000 bank loan secured by the lease. As of October 2,
1998, the Partnership had cash and other current assets in
the amount of $601,860 compared to $368,189 at September 26,
1997. Current liabilities were $276,287 at October 2,1998,
compared to $230,397 at September 26, 1997.
Capital Resources
The partnership spent approximately $24,719, $62,636 and
$6,606 in capital improvements to the hotel's facilities in
1997, 1996 and 1995, respectively. The partnership has
spent $29,326 in capital improvements for the hotel during
the first nine months of 1998. The partnership expects to
spend an additional $75,000 in capital expenditures during
the balance of this year. The hotel is now operating in full
compliance with the Ramada Limited standards.
Results of Operations
The Partnership's hotel average occupancy rate for the nine
month period ended October 2, 1998, was 87.1% compared to
89.0% for the nine month period ended September 26, 1997.
The average daily room rate for the nine month period ended
October 2, 1998, was $40.76 compared to $38.76 for the nine
month period ended June 27,1997. Room Revenue for the nine
month period ended October 2, 1998 was $1,220,496 compared
to $1,175,783 for the nine month period ended September 26,
1997.
The airline employee and airline related lodging resulted in
daily room rentals of approximately 50.0% of the hotel's 126
rooms for the nine month period ended October 2, 1998,
compared to 52.0% for the nine month period ended September
26, 1997.
SUPER 8 MOTELS TEXAS, LTD.
PART II - OTHER INFORMATION
Item 1.LEGAL PROCEEDINGS
There are no material pending legal proceedings.
Item 2.CHANGES IN SECURITIES
There have been no changes in securities for the nine months
ended October 2, 1998.
Item 3.DEFAULTS UPON SENIOR SECURITIES
There are no senior securities and accordingly, there are no
defaults for the nine months ended October 2, 1998.
Item 4.SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders for
the nine months ended October 2, 1998.
Item 5.OTHER INFORMATION
There is no other information to report for the nine months
ended October 2, 1998.
Item 6.EXHIBITS AND REPORT OF FORM 8-K
There are no exhibits or reports on Form 8-k to be filed
with this Form 10-Q.
SIGNATURE
Pursuant to the requirements of the Securities 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 TEXAS, LTD.
(REGISTRANT)
S/S Martin J. Cohen, General Partner
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