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, 1996
Commission File 0-9218
SUPER 8 MOTELS II, LTD
------------------------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 94 - 2574309
------------------------------ ------------------
(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 II, LTD.
(A California Limited Partnership)
FINANCIAL STATEMENTS
MARCH 31, 1996 AND 1995
<PAGE>
SUPER 8 MOTELS II, LTD.
(A California Limited Partnership)
INDEX
Financial Statements: PAGE
Balance Sheet - March 31, 1996 and September 30, 1995 2
Statement of Operations - Six Months Ended
March 31, 1996 and 1995 3
Statement of Changes in Partners' Equity -
Six Months Ended March 31, 1996 and 1995 4
Statement of Cash Flows - Six Months Ended
March 31, 1996 and 1995 5
Notes to Financial Statements 6
Management Discussion and Analysis 7 - 8
Other Information and Signatures 9 - 10
<PAGE>
SUPER 8 MOTELS II, LTD.
(A California Limited Partnership)
BALANCE SHEET
MARCH 31, 1996 AND SEPTEMBER 30, 1995
3/31/96 9/30/95
------- -------
ASSETS
Current Assets:
Cash and temporary investments $ 410,870 $ 453,839
Accounts receivable 8,510 17,785
Prepaid expenses 6,993 27,303
---------- ----------
Total Current Assets 426,373 498,927
Property and Equipment:
Capital Improvements 34,947 34,947
Buildings 1,845,878 1,845,878
Furniture and equipment 482,243 466,449
---------- ----------
2,363,068 2,347,274
Accumulated depreciation and amortization (1,713,660) (1,673,284)
---------- ----------
Property and Equipment, Net 649,408 673,990
---------- ----------
Total Assets $ 1,075,781 $ 1,172,917
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 62,575 $ 84,276
---------- ----------
Total Liabilities 62,575 84,276
Partners' Equity:
General Partners 45,591 46,345
Limited Partners 967,615 1,042,296
---------- ----------
Total Partners' Equity 1,013,206 1,088,641
---------- ----------
Total Liabilities and Partners' Equity $ 1,075,781 $ 1,172,917
========== ==========
The accompanying notes are an integral part of the financial statements.
-2-
<PAGE>
SUPER 8 MOTELS II, LTD.
(A California Limited Partnership)
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MARCH 31, 1996 AND 1995
Three Six Three Six
Months Months Months Month
Ended Ended Ended Ended
3/31/96 3/31/96 3/31/95 3/31/95
Income: -------- ------- ------- -------
Guest room $ 129,724 $ 321,187 $ 144,135 $ 321,324
Telephone and vending 2,431 5,515 1,631 4,102
Interest 3,901 8,020 1,980 4,100
Other 128 321 286 573
-------- -------- -------- --------
Total Income 136,184 335,043 148,032 330,099
-------- -------- -------- --------
Expenses:
Motel operating expenses (Note 2) 156,768 342,347 152,608 327,706
General and administrative expense 5,587 21,983 6,502 23,366
Depreciation and amortization 23,185 46,148 24,694 48,895
-------- -------- -------- --------
Total Expenses 185,540 410,478 183,804 399,967
-------- -------- -------- --------
Net Income (Loss) $ (49,356) $ (75,435) $ (35,772) $ (69,868)
======== ======== ======== ========
Net Income (Loss) Allocable to
General Partners $(494) $(754) $(358) $(699)
======= ======= ======= =======
Net Income (Loss) Allocable to
Limited Partners $(48,862) $(74,681) $(35,414) $(69,169)
========= ========= ========= =========
Net Income (Loss) per Partnership
Unit $(6.98) $(10.67) $(5.06) $(9.88)
======== ========= ======== ========
Distribution to Limited Partners per
Partnership Unit $0.00 $0.00 $0.00 $0.00
======= ======= ======= =======
The accompanying notes are an integral part of the financial statements.
-3-
<PAGE>
SUPER 8 MOTELS II, LTD.
(A California Limited Partnership)
STATEMENT OF CHANGES IN PARTNERS' EQUITY
SIX MONTHS ENDED MARCH 31, 1996 AND 1995
1996 1995
------ ------
General Partners:
Balance at beginning of year $ 46,345 $ 46,034
Net income (loss) (754) (699)
---------- ----------
Balance at End of Period 45,591 45,335
---------- ----------
Limited Partners:
Balance at beginning of year 1,042,296 1,011,518
Net income (loss) (74,681) (69,169)
---------- ----------
Balance at End of Period 967,615 942,349
---------- ----------
Total Partners' Equity $ 1,013,206 $ 987,684
========== ==========
The accompanying notes are an integral part of the financial statements.
-4-
<PAGE>
SUPER 8 MOTELS II, LTD.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED MARCH 31, 1996 AND 1995
1996 1995
------ ------
Cash flows from operating activities:
Received from motel revenues $ 336,322 $ 333,421
Expended for motel operations and
general and administrative expenses (365,741) (347,525)
Interest received 7,996 4,162
---------- ----------
Net Cash Provided (Used) by Operating Activities (21,423) (9,942)
---------- ----------
Cash flows from investing activities:
Purchases of property and equipment (21,566) (13,924)
Proceeds from sale of property and equipment 20 -
---------- ----------
Net Cash Provided (Used) by Investing Activities (21,546) (13,924)
---------- ----------
Cash flows from financing activities:
Payments on capital lease obligations - -
---------- ----------
Net Cash Provided (Used) by Financing Activities - -
---------- ----------
Net Increase (Decrease) in Cash and
Temporary Investments (42,969) (23,866)
Cash and Temporary Investments:
Beginning of Period 453,839 338,374
---------- ----------
End of Period $ 410,870 $ 314,508
========== ==========
Reconciliation of Net Income (Loss) to Net Cash Provided (Used) by
Operating Activities:
Net Income (Loss) $ (75,435) $ (69,868)
---------- ----------
Adjustments to reconcile net income to
net cash used by operating activities:
Depreciation and amortization 46,148 48,895
Loss (gain) on disposition of property and equipment (20) -
Increase) decrease in accounts receivable 9,275 7,484
(Increase) decrease in prepaid expense 20,310 19,408
Increase (decrease) in accounts payable
and accrued liabilities (21,701) (15,861)
---------- ----------
Total Adjustments 54,012 59,926
---------- ----------
Net Cash Provided (Used) by
Operating Activities $ (21,423) $ (9,942)
========== ==========
The accompanying notes are an integral part of the financial statements.
-5-
<PAGE>
SUPER 8 MOTELS II, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 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 September 30, 1995 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 fee paid to the General Partners or affiliates for the
period.
Franchise Fees $ 6,426
Upon the sale of the Ontario Motel property in February, 1990,
management felt that the payment of the property management fees and
partnership management fees became remote. Therefore, no property management
fees or partnership management fees have been accrued.
Note 2:
The following table summarizes the major components of motel operating
expenses for the periods reported:
Three Six Three Six
Months Months Months Month
Ended Ended Ended Ended
3/31/96 3/31/96 3/31/95 3/31/95
--------- --------- --------- ---------
Salaries and related costs $ 40,295 $ 89,803 $ 45,406 $ 98,516
Rent 23,349 46,697 23,349 47,319
Utilities 12,022 27,586 16,252 30,932
Allocated costs, mainly
indirect salaries 22,909 47,780 21,131 44,525
Replacements and renovations 5,518 25,381 1,993 14,981
Other operating expenses 52,675 105,100 44,477 91,433
--------- --------- --------- ---------
Total motel operating $ 156,768 $ 342,347 $ 152,608 $ 327,706
========= ========= ========= =========
The following additional material contingencies are required to be
restated in interim reports under federal securities law: None.
-6-
<PAGE>
SUPER 8 MOTELS II, LTD.
(A California Limited Partnership)
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
MARCH 31, 1996
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1996, the Partnership's current assets of $426,373
exceeded its current liabilities of $62,575 thereby providing an operating
reserve of $363,798. The Partnership experienced a negative cash flow of
$42,969 for the six month period ended March 31, 1996, which is a reduction when
compared to negative cash flow of $23,866 experienced during the corresponding
period of the previous fiscal year. While the Partnership's operating reserve
is $189,082 in excess of the General Partners' reserve target of $174,716, the
General Partners believe that prudence requires that quarterly distributions
remain suspended.
The Partnership has equity in its Santa Rosa motel that could provide
security for a loan against the property. The total annual cash flow for the
Santa Rosa property has been positive in recent years. This positive cash flow
would support a modest loan.
The Partnership has no material commitments for capital expenditures.
Expenditures for replacements and renovations during the first six months of the
fiscal year which will end on September 30, 1996 were $46,947 or 14.6% of room
revenues. Operational considerations have accelerated the timing of these
expenditures. Capitalized expenditures totaling $21,566 included $6,088 for
guest room carpet, $8,149 for a new washing machine and $2,204 for eight
televisions. Included in the $25,381 of uncapitalized expenditures is $6,817
for new backflow devices required by the city, $2,789 for bed sets, $2,730 for
portico repairs, $2,164 for guest room chairs and $2,214 for replacement drapes.
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 September 30, 1997. The Partnership does
not expect to make any disclosures about impairment of long-lived assets under
SFAS No. 121.
RESULTS OF OPERATIONS
The following is a comparison of operating results for the six month
periods ended March 31, 1996 and March 31, 1995.
Total revenues increased $4,944 during the first six months of fiscal
year ending September 30, 1996 as compared to the corresponding period of the
previous fiscal year. Comparative room revenue was essentially unchanged as
the decrease in the occupancy rate from 45.2% in 1995 to 40.9% in 1996 was
offset by an increase in the average room rate from $39.07 in 1995 to $42.86 in
1996.
-7-
<PAGE>
SUPER 8 MOTELS II, LTD.
(A California Limited Partnership)
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
MARCH 31, 1996 (Continued)
Total expenses for the six month period ended March 31, 1996 decreased
$10,511 (or 2.6%) from those incurred in the corresponding period of the
previous fiscal year. The increase is associated with the replacement and
renovation expenditures discussed above and due to cost inflation in some
categories.
FUTURE TRENDS
Commercial travel in the Santa Rosa lodging market continues its
lackluster performance. The General Partners do not anticipate substantial
improvement in the property's fiscal performance until the commercial travel
segment rebounds. The continued intense competitive conditions in the Santa
Rosa market will continue to place adverse pressure on the average room rates.
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
-----------------
None
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters to Vote of Security Holders
-------------------------------------------------
None
Item 5. Other Information
-----------------
See Notes to Financial Statements
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
None
-9-
<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 II, LTD
5-2-96 By /S/ David P. Grotewohl
------ -------------------------
Date David P. Grotewohl,
President of Grotewohl
Management Services, Inc.,
Managing General Partner
5-2-96 By /S/ David P. Grotewohl
------ -------------------------
Date David P. Grotewohl,
Chief Financial Officer
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> MAR-31-1996
<CASH> 410,870
<SECURITIES> 0
<RECEIVABLES> 8,510
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 426,373
<PP&E> 2,363,068
<DEPRECIATION> 1,713,660
<TOTAL-ASSETS> 1,075,781
<CURRENT-LIABILITIES> 62,575
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 1,013,206
<TOTAL-LIABILITY-AND-EQUITY> 1,075,781
<SALES> 326,702
<TOTAL-REVENUES> 335,043
<CGS> 342,347
<TOTAL-COSTS> 342,347
<OTHER-EXPENSES> 68,131
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (75,435)
<INCOME-TAX> 0
<INCOME-CONTINUING> (75,435)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (75,435)
<EPS-PRIMARY> (10.67)
<EPS-DILUTED> (10.67)
</TABLE>