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 December 31, 1998 Commission File 0-9218
SUPER 8 MOTELS II, LTD
------------------------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 94 - 2574309
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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 __
<PAGE>
SUPER 8 MOTELS II, LTD.
(A California Limited Partnership)
FINANCIAL STATEMENTS
DECEMBER 31, 1998 AND 1997
<PAGE>
SUPER 8 MOTELS II, LTD.
(A California Limited Partnership)
INDEX
Financial Statements: PAGE
Balance Sheet - December 31, 1998 and September 30, 1998 2
Statement of Operations - Three Months Ended
December 31, 1998 and 1997 3
Statement of Changes in Partners' Equity -
Three Months Ended December 31, 1998 and 1997 4
Statement of Cash Flows - Three Months Ended
December 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 II, Ltd.
(A California Limited Partnership)
Balance Sheet
December 31, 1998 and September 30, 1998
12/31/98 9/30/98
---------- ----------
ASSETS
Current Assets:
Cash and temporary investments $223,010 $303,843
Accounts receivable 6,929 24,016
Prepaid expenses 13,585 22,550
---------- ----------
Total current assets 243,524 350,409
---------- ----------
Property and Equipment:
Capital improvements 34,947 34,947
Buildings 1,845,878 1,845,878
Furniture and equipment 542,970 538,266
---------- ----------
2,423,795 2,419,091
Accumulated depreciation (1,931,963) (1,910,714)
---------- ----------
Property and equipment, net 491,832 508,377
---------- ----------
Other Assets (Note 2)
Deposit of federal income tax 22,434 22,434
---------- ----------
Total Assets $757,790 $881,220
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $87,292 $108,813
---------- ----------
Total liabilities 87,292 108,813
---------- ----------
Contingent Liabilities (See Note 1) - -
Partners' Equity:
Limited Partners; 7,000 units authorized,
issued and outstanding 621,265 722,680
General Partners 49,233 49,727
---------- ----------
Total partners' equity 670,498 772,407
---------- ----------
Total Liabilities and Partners' Equity $757,790 $881,220
========== ==========
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
For the Three Months Ending December 31, 1998 and 1997
Three Months Three Months
Ended Ended
12/31/98 12/31/97
----------- -----------
Income:
Guest room $172,965 $200,933
Telephone and vending 3,054 3,243
Interest 2,161 3,909
Other 1,146 492
----------- -----------
Total Income 179,326 208,577
----------- -----------
Expenses:
Motel operating expenses (Note 2) 171,373 191,743
General and administrative 36,113 32,872
Depreciation and amortization 21,249 21,581
----------- -----------
Total Expenses 228,735 246,196
----------- -----------
Net Income (Loss) ($49,409) ($37,619)
=========== ===========
Net Income (Loss) Allocable
to General Partners ($494) ($376)
=========== ===========
Net Income (Loss) Allocable
to Limited Partners ($48,915) ($37,243)
=========== ===========
Net Income (Loss)
per Partnership Unit ($6.99) ($5.32)
=========== ===========
Distribution to Limited Partners
per Partnership Unit $7.50 $7.50
=========== ===========
The accompanying notes are an integral part of the financial statements.
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<PAGE>
Super 8 Motels II, Ltd.
(A California Limited Partnership)
Statement of Partners' Equity
For the Three Months Ending December 31, 1998 and 1997
1998 1997
---------- ----------
Limited Partners:
Balance at beginning of year 722,680 909,477
Net income (loss) (48,915) (37,243)
Less: Cash distributions paid to Limited Partners (52,500) (52,500)
---------- ----------
Balance at End of Period 621,265 819,734
---------- ----------
General Partners:
Balance at beginning of year $49,727 $49,493
Net income (loss) (494) (376)
---------- ----------
Balance at End of Period 49,233 49,117
---------- ----------
Total Partners' Equity $670,498 $868,851
========== ==========
The accompanying notes are an integral part of the financial statements.
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<PAGE>
Super 8 Motels II, Ltd.
(A California Limited Partnership)
Statement of Cash Flows
For the Three Months Ending December 31, 1998 and 1997
1998 1997
-------- --------
Cash flows from operating activities:
Received from motel revenues $191,963 $211,744
Expended for motel operations and
general and administrative expenses (220,042) (264,330)
Interest received 4,450 5,240
-------- --------
Net Cash Provided (Used) by Operating Activities (23,629) (47,346)
-------- --------
Cash flows from investing activities:
Purchases of property and equipment (4,704) (6,391)
-------- --------
Net Cash Provided (Used) by Investing Activities (4,704) (6,391)
-------- --------
Cash flows from financing activities:
Distributions paid to Limited Partners (52,500) (52,500)
-------- --------
Net Cash Provided (Used) by Financing Activities (52,500) (52,500)
-------- --------
Net Increase (Decrease) in Cash and Temporary Investments (80,833) (106,237)
Cash and Temporary Investments:
Beginning of Period 303,843 459,098
-------- --------
End of Period 223,010 352,861
======== ========
Reconciliation of Net Income (Loss) to Net Cash
Provided (Used) by Operating Activities:
Net Income (Loss) ($49,409) ($37,619)
-------- --------
Adjustments to reconcile net income to net cash used by operating activities:
Depreciation and amortization 21,249 21,581
(Gain) loss on sale of property - 825
(Increase) decrease in accounts receivable 17,087 8,407
(Increase) decrease in prepaid expense 8,965 (4,663)
Increase (decrease) in accounts payable
and accrued liabilities (21,521) (35,877)
-------- --------
Total Adjustments 25,780 (9,727)
-------- --------
Net Cash Provided (Used) by Operating Activities ($23,629) ($47,346)
======== ========
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
For the Three Months Ending December 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 September 30, 1998 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 to the General Partners or affiliates for the
period.
Franchise Fees $3,462
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 Months Three Months
Ended Ended
12/31/98 12/31/97
----------- -----------
Salaries and related costs $51,440 $55,715
Rent 25,275 25,194
Franchise and advertising fees 8,655 10,061
Utilities 19,180 17,469
Allocated costs,
mainly indirect salaries 25,108 26,837
Repairs and minor renovations 1,268 11,111
Maitenance expenses 8,186 10,547
Property taxes 5,812 9,132
Property insurance 4,344 4,509
Other operating expenses 22,105 21,168
----------- -----------
Total motel operating expenses $171,373 $191,743
=========== ===========
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 II, LTD.
(A California Limited Partnership)
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
DECEMBER 31, 1998
LIQUIDITY AND CAPITAL RESOURCES
As of December 31, 1998, the Partnership's current assets of $243,524 exceeded
its current liabilities of $87,292 thereby providing an operating reserve of
$156,262. 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 annual 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 three months of
the fiscal year which will end on September 30, 1999 were $5,971 or 3.5% of room
revenues. Included in these expenditures was $4,703 for guest room carpet.
RESULTS OF OPERATIONS
The following is a comparison of operating results for the three month periods
ended December, 1998 and December 31, 1997.
Total revenues decreased $29,251 or 14.0% during the first three months of
fiscal year ending September 30, 1999 as compared to the previous fiscal year.
Guest room revenue decreased $27,968 or 13.9% during the period covered by this
report as compared to the previous fiscal year. The Partnership's motel
experienced a decrease in its occupancy rate from 46.4% in the previous fiscal
year compared to 33.3% in the current fiscal year. This performance decrease was
partially offset by an increase in average daily room rate from $47.09 in the
corresponding three month period of the previous fiscal year as compared to
$51.57 during the three month period ended December 31, 1998. The motel
experienced decreased occupancy in the leisure and corporate market segments
with partially offsetting improved occupancy in the discount segment.
Total expenses for the three month period ended December 31, 1998 decreased
$17,461 or 7.1% from those incurred in the corresponding period of the previous
fiscal year. The operating expenses are lower as the occupancy and revenues were
lower.
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<PAGE>
SUPER 8 MOTELS II, LTD.
(A California Limited Partnership)
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
DECEMBER 31, 1998 (Continued)
FUTURE TRENDS
On May 15, 1998, the Partnership and four other limited partnerships managed by
the Managing General Partner entered into a contract to sell all of their motel
assets. Escrow for the sale opened in June 1998. By majority vote the limited
partners of the Partnership and the four other partnerships have approved the
sale pursuant to such contract. The sale of the Partnership's motel assets and
the motel assets of the other limited partnerships are subject to certain
contingencies. Because of these contingencies the Partnership has not yet
reclassified its motel assets as held for sale. If the sale occurs on the terms
approved by the Limited Partners, it is anticipated that the Partnership would
report a gain per books in the amount of approximately $1,690,000. Accordingly,
there has been no adjustment to the carrying value of the Partnership's motel
assets. If the sale is consummated the Partnership would be liquidated.
In the previous fiscal year ended September 30, 1998, the Partnership's Santa
Rosa motel continued the improved economic performance that it had experienced
during the previous fiscal year. The General Partner expects occupancies and
profitability to decline from the previous fiscal year due to increased
competition in the market.
On December 9, 1998 the limited partners of the Partnership approved the sale of
the properties to another party in accordance with separately filed proxy
materials.
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 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
- 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, Ltd.
2-12-99 By /S/ Philip B. Grotewohl
--------- -------------------------
Date Philip B. Grotewohl,
Chairman of Grotewohl Management
Services, Inc.,
Managing General Partner
2-12-99 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
- 10 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-START> OCT-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 223,010
<SECURITIES> 0
<RECEIVABLES> 6,929
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 243,524
<PP&E> 2,423,795
<DEPRECIATION> 1,931,963
<TOTAL-ASSETS> 757,790
<CURRENT-LIABILITIES> 87,292
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 670,498
<TOTAL-LIABILITY-AND-EQUITY> 757,790
<SALES> 176,019
<TOTAL-REVENUES> 179,326
<CGS> 171,373
<TOTAL-COSTS> 171,373
<OTHER-EXPENSES> 57,362
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (49,409)
<INCOME-TAX> 0
<INCOME-CONTINUING> (49,409)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (49,409)
<EPS-PRIMARY> (6.99)
<EPS-DILUTED> (6.99)
</TABLE>