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
July 3, 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)
July 3, 1998
CONTENTS
PART I. FINANCIAL INFORMATION Page
ITEM 1. FINANCIAL STATEMENTS
Balance Sheets 3
Statement of Operations
Three Months ended July 3, 1998 and
June 27, 1997 4
Statement of Operations
Six Months ended July 3, 1998 and
June 27, 1997 5
Statement of Partners' Equity 6
Statement of Cash Flows
Six Months ended July 3, 1998 and
June 27, 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
July 3, 1998 and January 2, 1998
ASSETS 1998 1997
Unaudited
CURRENT ASSETS
Cash $ 348,899 $319,111
Accounts Receivable, net
of allowance for doubtful
accounts of $7,000 in 1998
and $7,000 in 1997 120,726 83,685
Prepaid expenses 7,704 20,630
Total current assets 477,329 423,426
PROPERTY AND EQUIPMENT
Land 769,800 769,800
Building and
improvements 2,546,212 2,539,443
Furniture and equipment 504,260 496,345
3,820,272 3,805,588
Accumulated Depreciation 1,411,817 1,336,157
2,408,455 2,469,431
OTHER ASSETS 22,757 24,162
$2,908,541 $2,917,019
LIABILITIES AND PARTNERS? EQUITY
CURRENT LIABILITIES
Current portion of
mortgage payable $ 45,000 $ 45,000
Accounts payable 59,847 84,294
Sales tax payable 48,239 43,315
Property taxes payable 26,382 50,485
Accrued compensation 17,746 20,711
Accrued interest payable 1,485 1,577
Total current liabilities 198,699 245,382
MORTGAGE PAYABLE
less current portion 214,338 236,838
PARTNERS? EQUITY 2,495,504 2,434,799
$2,908,541 $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
July 3, 1998 and June 27, 1997
(Unaudited)
1998 1997
AVERAGE ROOM RATE $40.95 $38.91
OCCUPANCY PERCENTAGE 88.7% 91.5%
Revenues
Room rentals 416,303 408,397
Other 13,109 15,438
429,412 423,835
Expenses
Departmental:
Rooms 118,298 109,381
Other 5,399 5,943
General and administrative 75,004 60,659
Sales 12,913 12,116
Franchise fees 35,387
34,625Utilities 29,022 25,304
Maintenance & Repair 30,753 26,081
Management fees 24,058 26,416
Depreciation 37,830 37,856
Amortization 704 703
Property taxes 13,180 12,497
Insurance 10,163 7,633
Interest 8,081 8,603
400,792 367,817
NET INCOME (LOSS) $ 28,620 $ 56,018
The accompanying notes are an integral part of this
statement
SUPER 8 MOTELS TEXAS, LTD.
(A Limited Partnership)
STATEMENTS OF OPERATIONS
FOR THE SIX MONTH PERIODS ENDED
July 3, 1998 and June 27, 1997
(Unaudited)
1998 1997
AVERAGE ROOM RATE $40.74 $38.58
OCCUPANCY PERCENTAGE 88.2% 89.7%
Revenues
Room rentals 823,713 793,676
Other 26,309 32,943
850,022 826,619
Expenses
Departmental:
Rooms 232,885 216,784
Other 9,818 11,551
General and administrative 153,613 127,433
Sales 24,257 24,384
Franchise fees 70,127
67,760Utilities 52,006 55,902
Maintenance & Repair 62,215 51,825
Management fees 47,661 49,390
Depreciation 75,660 75,712
Amortization 1,406 1,406
Property taxes 27,157 25,016
Insurance 17,473 15,267
Interest 15,039 17,329
789,317 739,759
NET INCOME (LOSS) $ 60,705 $ 86,860
The accompanying notes are an integral part of this
statement.
SUPER 8 MOTELS TEXAS, LTD.
(A Limited Partnership)
STATEMENT OF PARTNERS' EQUITY
FOR THE SIX MONTH PERIODS ENDED
July 3,1998 and June 27, 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
Balance - June 27, 1997 $(17,925 $2,384,561 $2,366,636
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
Balance -
July 3, 1998 $(16,636) $2,512,140 $2,495,504
The accompanying notes are an integral part of this
statement.
SUPER 8 MOTELS TEXAS, LTD.
(A Limited Partnership)
STATEMENT OF CASH FLOWS
Six Months Ended July 3, 1998 and June 27, 1997
(Unaudited)
1998 1997
Cash flows from
operating activities
Net income (loss) $ 60,705 $ 86,860
Adjustments to reconcile net
income (loss) to net cash
provided by (used in) operating
activities
Depreciation and amortization 77,065 77,118
Change in operating assets and
liabilities
Accounts receivable (37,041) 11,951
Prepaid expenses 12,926 13,162
Other assets (31)
Accounts payable (24,447) (279)
Sales tax payable 4,924 2,431
Property taxes payable (24,103) (25,356)
Accrued compensation (2,965) (599)
Accrued interest (92) (86)
Net cash provided by (used in)
operating activities 66,672 165,171
Cash flows from financing
activities
Payments made on mortgage payable (22,500) (22,500)
Net cash provided by (used in)
financing activities (22,500) (22,500)
Cash flows from investing
activities
Property additions (14,684)
Net cash provided by (used in)
investing activities (14,684)
NET INCREASE (DECREASE) IN
CASH 29,788 142,671
Cash at beginning of year 319,111 37,456
Cash at end of period $ 348,899 $180,127
Interest paid during the period $ 15,131 $ 17,415
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 1997 and 1996 are comprised of
fifty-three and fifty-two 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 $70,127 and $67,760 for the six months ended July 3,
1998 and June 27, 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 six months ended July 3, 1998 and June 27,
1997, management fees were $47,661 and $49,390,
respectively. Additionally, accounting service fees paid to
another affiliate of a general partner were $19,500 and
$14,000 for the six months ended July 3, 1998 and June 27,
1997, respectively. Expense reimbursements to a general
partner for expenses incurred were $3,915 and $8,904 for the
six months ended July 3, 1998 and June 27, 1997,
respectively.
NOTE D - SIGNIFICANT CUSTOMER
The Partnership's revenues for the six months ended July 3,
1998 and June 27, 1997 include amounts from a single
customer of approximately $155,000 and $158,428,
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 July 3, 1998, the outstanding principal
balance was $259,338, 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 July 3, 1998 and June
27, 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 July 3, 1998,
the Partnership had cash and other current assets in the
amount of $477,329 compared to $267,845 at June 27, 1997.
Current liabilities were $198,699 at July 3,1998, compared
to $188,624 at June 27, 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 $14,684 in capital improvements for the hotel during
the first six months of 1998. The partnership expects to
spend an additional $175,000 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 six
month period ended July 3, 1998, was 88.2% compared to 89.7%
for the six month period ended June 27, 1997. The average
daily room rate for the six month period ended July 3, 1998,
was $40.74 compared to $38.58 for the six month period ended
June 27,1997. Room Revenue for the six month period ended
July 3, 1998 was $823,713 compared to $793,676 for the six
month period ended June 27, 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 six month period ended July 3, 1998, compared
to 51.0% for the six month period ended June 27, 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 six months
ended July 3, 1998.
Item 3.DEFAULTS UPON SENIOR SECURITIES
There are no senior securities and accordingly, there are no
defaults for the six months ended July 3, 1998.
Item 4.SUBMISSION OF MATTERS TO VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of security holders for
the six months ended July 3, 1998.
Item 5.OTHER INFORMATION
There is no other information to report for the six months
ended July 3, 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/SMartin J. Cohen, General Partner
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