SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-Q
Quarterly Report Under Section 13 or 15(d) of
The Securities Exchange Act of 1934
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For the Period ended September 30, 1995
Commission File 0-10134
SUPER 8 MOTELS III, LTD
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(Exact name of registrant as specified in its charter
CALIFORNIA 94 - 2664921
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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
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<PAGE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
FINANCIAL STATEMENTS
SEPTEMBER 30, 1995 AND 1994
<PAGE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
INDEX
Financial Statements: PAGE
Balance Sheet - September 30, 1995 and December 31, 1994 2
Statement of Operations - Nine Months Ended
September 30, 1995 and 1994 3
Statement of Changes in Partners' Equity -
Nine Months Ended September 30, 1995 and 1994 4
Statement of Cash Flows - Nine Months Ended
September 30, 1995 and 1994 5
Notes to Financial Statements 6
Management Discussion and Analysis 7 - 9
Other Information and Signatures 10 - 11
<PAGE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
BALANCE SHEET
SEPTEMBER 30, 1995 AND DECEMBER 31,1994
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1995 1995
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ASSETS
Current Assets:
Cash and temporary investments $ 402,316 $ 403,176
Accounts receivable 75,203 101,960
Prepaid expenses 16,137 8,765
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Total current assets 493,656 513,901
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Property and Equipment:
Land 1,670,129 1,670,129
Capital Improvements 26,175 26,175
Buildings 3,276,870 3,276,870
Furniture and equipment 786,731 726,984
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5,759,905 5,700,158
Accumulated depreciation and amortization (2,708,248)(2,420,603)
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Property and equipment, net 3,051,657 3,279,555
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Total Assets $3,545,313 $3,793,456
========= =========
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Current portion of note payable $ 68,322 $ 28,700
Accounts payable and accrued liabilities 92,653 99,175
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Total current liabilities 160,975 127,875
Long - Term Liabilities:
Note payable 177,208 595,214
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Total liabilities 338,183 723,089
Contingent Liabilities (See Note 1)
Partners' Equity:
General Partners 19,535 18,167
Limited Partners 3,187,595 3,052,200
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Total partners' equity 3,207,130 3,070,367
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Total Liabilities and Partners' Equity $3,545,313 $3,793,456
========= =========
The accompanying notes are an integral part of the financial statements.
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<PAGE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
STATEMENT OF OPERATION
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
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Three Nine Three Nine
Months Months Months Months
Ended Ended Ended Ended
9/30/95 9/30/95 9/30/94 9/30/94
---------- --------- --------- ---------
Income:
Motel room income $ 398,505 $1,201,597 $ 412,459 $1,256,782
Telephone and
vending 10,098 24,061 8,939 25,917
Interest 2,900 7,030 2,104 6,256
Other 10,637 11,739 463 1,528
--------- --------- --------- ---------
Total Income 422,140 1,244,427 423,965 1,290,483
--------- --------- --------- ---------
Expenses:
Motel operating expenses
(Note 2) 312,707 886,964 337,044 996,056
General and administrative 11,420 47,173 9,811 42,356
Depreciation and amortization 39,948 123,372 36,918 110,630
Interest 6,273 22,681 12,865 41,580
Property management fees 21,108 61,325 21,002 64,056
--------- --------- --------- ---------
Total Expenses 391,456 1,141,515 417,640 1,254,678
--------- --------- --------- ---------
Net Income (Loss) $ 30,684 $ 102,912 $ 6,325 $ 35,805
========== ========= ========= =========
Net Income (Loss) Allocable
to General Partners $307 $1,029 $63 $358
========== ========= ========= =========
Net Income (Loss) Allocable
to Limited Partners $30,377 $101,883 $6,262 $35,447
========== ========= ========= =========
Net Income (Loss) per
Partnership Unit $5.16 $17.32 $1.06 $6.03
========== ========= ========= =========
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.
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<PAGE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
STATEMENT OF PARTNERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
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1995 1994
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General Partners:
Balance at beginning of year $ 18,506 $ 18,167
Net income (loss) 1,029 358
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Balance at end of period 19,535 18,525
Limited Partners:
Balance at beginning of year 3,085,712 3,052,200
Net income (loss) 101,883 35,447
Less: Cash distributions 0 0
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Balance at end of period 3,187,595 3,087,647
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Total balance at end of period $3,207,130 $3,106,172
========= =========
The accompanying notes are an integral part of the financial statements.
-4-
<PAGE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
STATEMENT OF PARTNERS' EQUITY
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
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1995 1994
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Cash Flows From Operating Activities:
Received from motel revenues $1,250,043 $1,282,248
Expended for motel operations
and general and administrative expenses (996,827)(1,129,885)
Interest received 5,063 6,188
Interest paid (24,290) (37,420)
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Net cash provided (used) by operating activities 233,989 121,131
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Cash Flows From Investing Activities:
Purchases of property and equipment (9,020) (13,931)
Proceeds from sale of equipment 300 0
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Net cash provided (used) by investing activities (8,720) (13,931)
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Cash Flows From Financing Activities:
Payments on notes payable (193,060) (124,731)
Distributions paid to Limited Partners 0 0
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Net cash provided (used) by financing activities (193,060) (124,731)
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Net increase (decrease) in cash
and temporary investments 32,209 (17,531)
Cash and temporary investments:
Beginning of year 370,107 403,176
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End of period $ 402,316 $ 385,645
========= =========
Reconciliation of Net Income to Net Cash Provided by Operating Activities:
Net income (loss) $ 102,912 $ 35,805
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Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 123,372 110,630
(Increase) decrease in accounts receivable 10,679 (2,047)
(Increase) decrease in prepaid expenses (5,414) (8,875)
Increase (decrease) in accounts payable
and accrued liabilities 2,740 (14,382)
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Total adjustments 131,377 85,326
--------- ---------
Net cash provided by operating activities $ 234,289 $ 121,131
========= =========
The accompanying notes are an integral part of the financial statements
-5-
<PAGE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
-----------------------------------
Note 1:
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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, 1994 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.
Property Management Fees $ 61,325
Franchise Fees $ 24,032
Partnership management fees and subordinated incentive distributions are
contingent in nature and none have been accrued or paid during the current
period.
Note 2:
- -------
The following table summarizes the major components of motel operating costs
for the periods reported:
Three Nine Three Nine
Months Months Months Months
Ended Ended Ended Ended
9/30/95 9/30/95 9/30/94 9/30/94
--------- --------- --------- ---------
Salaries and related costs $ 113,228 $ 339,359 $ 131,079 $ 394,597
Utilities 43,385 97,711 46,519 103,152
Allocated costs, mainly
indirect salaries 45,053 131,867 42,369 122,868
Other operating expenses 111,041 318,027 117,077 375,439
--------- --------- --------- ---------
Total motel operating expense $ 312,707 $ 886,964 $ 337,044 $ 996,056
========= ========= ========= =========
The following additional material contingencies are required to be restated in
interim reports under federal securities law: None.
-6-
<PAGE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
SEPTEMBER 30, 1995
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LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
The Partnership's current assets of $493,656 exceed its current
liabilities of $160,975 by $332,681. This excess of current assets over current
liabilities exceeds the $297,050 operating reserve requirement in the
Partnership Agreement. The Partnership had a positive cash flow of $32,209
during the nine month period covered by this report. During that period the
Partnership has made $150,000 in mortgage principal payments in excess of those
required under the mortgage as discussed in the next paragraph.
The Partnership's Bakersfield Motel is encumbered by a mortgage calling
for a $108,215 balloon payment on September 11, 1997. Rather than accumulate
funds to make this balloon payment, the General Partners have decided to make
additional principal payments on the mortgage, thus saving on interest expense.
The General Partners have also decided to suspend quarterly distributions to
the Limited Partners in order to accumulate the funds necessary for these extra
principal payments.
The Partnership has no major commitments for capital expenditures. The
Partnership has a replacement and renovation target equal to 3% of guest room
revenue. During the nine months ended September 30, 1995, the Partnership has
expended $31,671 in such expenditures ($9,020 of which was capitalized) which
is equal to 2.6% of guest room revenue. The General Partners anticipate that
renovation and repair expenditures will not substantially exceed 3% of guest
room revenue during the current fiscal year.
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 December 31, 1996. The Partnership does
not expect to make any disclosures about impairment of long-lived assets under
SFAS No. 121.
-7-
<PAGE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
(Continued)
SEPTEMBER 30, 1995
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RESULTS OF OPERATIONS
- ---------------------
The following is a comparison of the first nine months of the
fiscal year ending December 31, 1995 with the corresponding
period of the preceding fiscal year.
Occupancy Percentage
1995 1994
Current Year Current Year
Quarter to Date Quarter to Date
San Bernardino 56.6% 59.5% 59.9% 61.1%
Bakersfield 88.0% 88.1% 87.2% 90.8%
Combined 73.2% 74.6% 74.3% 76.8%
Average Room Rate
1995 1994
Current Year Current Year
Quarter to Date Quarter to Date
San Bernardino $40.18 $40.21 $42.09 $41.38
Bakersfield $31.41 $31.04 $31.08 $31.26
Combined $34.63 $34.51 $35.29 $35.08
Total revenues decreased $46,056 (or 3.6%) for the nine month period
covered by this report as compared to the previous fiscal year. The decrease
in total revenue was due primarily to a $55,185 or 4.4% decrease in room
revenue. The San Bernardino lodging market conditions are the least favorable
in the country according to current industry trade magazines. The declines in
both revenue and room rates at the Bakersfield motel are associated with a
reduction in patronage by Amtrak train crews. Amtrak has reduced the crew size
and number of trains at its Bakersfield facility, thus reducing the demand for
rooms, and it has insisted that the Partnership match a competing bid to house
its crews, thereby reducing the room rates received by the Partnership for such
business from $22 to $20 per room night.
The Partnership's expenses decreased $113,163 or 9.0% . The Partnership
achieved the expenses reductions by a vigorous cost control program in addition
to the savings from reduced occupancy.
-8-
<PAGE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
(Continued)
SEPTEMBER 30, 1995
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FUTURE TRENDS
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The General Partners expect that overall occupancy for the fiscal year
ending December 31, 1995 will be equal to or less than that achieved in 1994.
The General Partners expect income for the current fiscal year to be equal to
the previous fiscal year or to reflect a slight decrease. However, due to
expense reductions, discussed above, the General Partners anticipate net income
equal to the previous fiscal year or slightly better than that achieved in the
previous fiscal year.
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.
-9-
<PAGE>
PART II. OTHER INFORMATION
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Item 1. Legal Proceedings
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None
Item 2. Changes in Securities
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None
Item 3. Defaults upon Senior Securities
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None
Item 4. Submission of Matters
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None
Item 5. Other Information
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None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
None
-10-
<PAGE>
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 III, LTD
11-13-95 By /S/ David P. Grotewohl
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Date David P. Grotewohl,
President of Grotewohl
Management Services, Inc.,
Managing General Partner
11-13-95 By /S/ David P. Grotewohl
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Date David P. Grotewohl,
Chief Financial Officer
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 402,316
<SECURITIES> 0
<RECEIVABLES> 75,203
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 493,656
<PP&E> 5,759,905
<DEPRECIATION> 2,708,248
<TOTAL-ASSETS> 3,545,313
<CURRENT-LIABILITIES> 160,975
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 3,207,130
<TOTAL-LIABILITY-AND-EQUITY> 3,545,313
<SALES> 1,225,658
<TOTAL-REVENUES> 1,244,427
<CGS> 886,964
<TOTAL-COSTS> 886,964
<OTHER-EXPENSES> 231,870
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,681
<INCOME-PRETAX> 102,912
<INCOME-TAX> 0
<INCOME-CONTINUING> 102,912
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 102,912
<EPS-PRIMARY> 17.32
<EPS-DILUTED> 17.32
</TABLE>
