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, 1996
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, 1996 AND 1995
<PAGE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
INDEX
Financial Statements: PAGE
Balance Sheet - September 30, 1996 and December 31, 1995 2
Statement of Operations - Nine Months Ended
September 30, 1996 and 1995 3
Statement of Changes in Partners' Equity -
Nine Months Ended September 30, 1996 and 1995 4
Statement of Cash Flows - Nine Months Ended
September 30, 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 III, Ltd.
(A California Limited Partnership)
Balance Sheet
September 30, 1996 and December 31, 1995
9/30/96 12/31/95
ASSETS ----------- -----------
Current Assets:
Cash and temporary investments $ 292,612 $ 285,554
Accounts receivable 88,166 72,824
Prepaid expenses 18,413 11,588
----------- -----------
Total current assets 399,191 369,966
----------- -----------
Property and Equipment:
Land 1,670,129 1,670,129
Capital improvements 26,174 26,175
Buildings 3,276,870 3,276,870
Furniture and equipment 754,010 742,531
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5,727,183 5,715,705
Accumulated depreciation (2,794,106) (2,674,215)
----------- -----------
Property and equipment, net 2,933,077 3,041,490
Total Assets $ 3,332,268 $ 3,411,456
=========== ==========
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Current portion of note payable $ 59,069 $ 77,963
Accounts payable and accrued liabilities 85,907 85,032
----------- -----------
Total current liabilities 144,976 162,995
----------- -----------
Long - Term Liabilities:
Note payable - 75,493
----------- -----------
Total liabilities 144,976 238,488
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Contingent Liabilities (See Note 1)
Partners' Equity:
General Partners 19,335 19,194
Limited Partners 3,167,957 3,153,774
----------- -----------
Total partners' equity 3,187,292 3,172,968
----------- -----------
Total Liabilities and Partners' Equity $ 3,332,268 $ 3,411,456
=========== ===========
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 Operations
For the Nine Months Ending September 30, 1996 and 1995
Three Months Nine Months Three Months Nine Month
Ended Ended Ended Ended
9/30/96 9/30/96 9/30/95 9/30/95
----------- ----------- ----------- -----------
Income:
Guest room $ 388,117 $ 1,103,883 $ 398,505 $ 1,201,597
Telephone and vending 9,797 25,226 10,098 24,061
Interest 2,020 6,677 2,900 7,030
Other 520 2,499 10,637 11,739
----------- ----------- ----------- -----------
Total Income 400,454 1,138,285 422,140 1,244,427
----------- ----------- ----------- -----------
Expenses:
Motel operating expenses
(Note 2) 298,848 894,384 312,707 886,964
General and administrative 11,649 45,576 11,420 47,173
Depreciation and amortization 39,380 119,891 39,948 123,372
Interest 1,526 7,289 6,273 22,681
Property management fees 20,188 56,821 21,108 61,325
----------- ----------- ----------- -----------
Total Expenses 371,591 1,123,961 391,456 1,141,515
----------- ----------- ----------- -----------
Net Income (Loss) $ 28,863 $ 14,324 $ 30,684 $ 102,912
=========== =========== =========== ===========
Net Income (Loss) Allocable
to General Partners $289 $143 $307 $1,029
========= ========= ========= =========
Net Income (Loss) Allocable
to Limited Partners $28,574 $14,181 $30,377 $101,883
========= ========= ========= =========
Net Income (Loss)
per Partnership Unit $4.86 $2.41 $5.16 $17.32
========= ========= ========= =========
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 Ending September 30, 1996 and 1995
1996 1995
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General Partners:
Balance at beginning of year $ 19,194 $ 18,506
Net income (loss) 143 1,029
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Balance at end of period 19,337 19,535
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Limited Partners:
Balance at beginning of year 3,153,774 3,085,712
Net income (loss) 14,181 101,883
Less: Cash distributions - -
----------- -----------
Balance at end of period 3,167,955 3,187,595
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Total balance at end of period $ 3,187,292 $ 3,207,130
=========== ===========
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 Cash Flows
For the Nine Months Ending September 30, 1996 and 1995
1996 1995
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Cash Flows From Operating Activities:
Received from motel revenues $ 1,117,215 $ 1,250,043
Expended for motel operations
and general and administrative expenses (1,001,945) (996,827)
Interest received 5,729 5,063
Interest paid (8,076) (24,290)
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Net cash provided (used) by operating activities 112,923 233,989
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Cash Flows From Investing Activities:
Purchases of property and equipment (11,478) (9,020)
Proceeds from sale of equipment - 300
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Net cash provided (used) by investing activities (11,478) (8,720)
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Cash Flows From Financing Activities:
Payments on notes payable (94,387) (193,060)
Distributions paid to Limited Partners - -
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Net cash provided (used) by financing activities (94,387) (193,060)
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Net increase (decrease) in cash
and temporary investments 7,058 32,209
Cash and temporary investments:
Beginning of year 285,554 370,107
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End of period $ 292,612 $ 402,316
=========== ===========
Reconciliation of Net Income to Net Cash Provided by Operating Activities:
Net income (loss) $ 14,324 $ 102,912
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 119,891 123,372
Gain on disposition of property - (300)
(Increase) decrease in accounts receivable (15,342) 10,679
(Increase) decrease in prepaid expenses (6,825) (5,414)
Increase (decrease) in accounts payable
and accrued liabilities 875 2,740
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Total adjustments 98,599 131,077
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Net cash provided by operating activities $ 112,923 $ 233,989
=========== ===========
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)
Notes to Financial Statements
September 30, 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 December 31, 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 fees paid or accrued to the General Partner or affiliates
for the period.
Property Management Fees $ 56,821
Franchise Fees $ 22,192
Note 2:
The following table summarizes the major components of motel operating expenses
for the periods reported:
Three Months Nine Months Three Months Nine Month
Ended Ended Ended Ended
9/30/96 9/30/96 9/30/95 9/30/95
----------- ----------- ----------- -----------
Salaries and related costs $ 111,926 $ 333,560 $ 113,228 $ 339,359
Franchise and advertising 21,928 59,323 54,460 66,533
Utilities 40,243 88,720 43,385 97,711
Allocated costs,
mainly indirect salaries 41,520 134,970 45,053 131,867
Replacements and renovations 3,253 36,425 10,599 22,651
Other operating expenses 79,978 241,386 45,982 228,843
----------- ----------- ----------- -----------
Total motel operating
expenses $ 298,848 $ 894,384 $ 312,707 $ 886,964
=========== =========== =========== ===========
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 III, Ltd.
(A California Limited Partnership)
Management Discussion and Analysis
of Financial Condition and Results of Operation
September 30, 1996
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's current assets of $399,191 exceed its current liabilities of
$144,976 by $254,215. This excess of current assets over current liabilities
is less than the $297,050 operating reserve requirement in the Partnership
Agreement. The decline in operating reserve is attributable to the Partner-
ship's payments in 1995 and 1996 of $275,000 in extra payments against
principal on the Bakersfield motel note.
As discussed in the Partnership's previous reports on Forms 10-Q and Forms 10-K,
the General Partners had intended to accumulate a sinking fund to pay the
existing Bakersfield loan balloon payment due in September 1997. The General
Partners have since decided instead to make the planned sinking fund deposits
directly to the mortgage in the form of additional periodic principal payments,
thus saving on interest expense. The General Partners have also decided to
suspend quarterly distributions to the Limited Partners in order to apply the
available funds to extra principal payments.
The Partnership has no major commitments for capital expenditures. The Partner-
ship has a replacement and renovation target equal to 3% of guest room revenue.
During the nine months ended September 30, 1996, the Partnership expended
$35,091 in such expenditures which is equal to 3.2% of guest room revenue.
Included in the total expenditures for renovations and replacements was $21,900
for a major parking lot refurbishment at the Bakersfield motel, $1,800 in
replacement bed sets and $5,365 in tub repairs. The annual partial guest room
carpet replacement will start in the fourth calendar quarter. The General
Partners anticipate that renovation and repair expenditures will exceed 3% of
guest room revenue during the current fiscal year due to the major parking lot
refurbishment.
RESULTS OF OPERATIONS
The following is a comparison of the first nine months of the fiscal year ending
December 31, 1996 with the corresponding period of the preceding fiscal year.
Total revenues decreased $106,142 (or 8.5%) for the nine month period as
compared to the previous fiscal year. This decrease in total revenue was due to
a $97,714 (or 8.1%) decrease in room revenue. Motel occupancy decreased from
74.6% to 70.1%, while the average room rate declined from $34.51 to $33.63. The
reduction in guest room revenue occurred primarily at the Partnership's San
Bernardino motel and was due to reduced patronage in the corporate and leisure
market segments. According to various lodging industry publications, the San
Bernardino market is the second worst performing market in the country.
The Partnership's expenses decreased by $17,554 or 1.5%. The Partnership
experienced an $13,774 increase in renovation and replacement expense due to
the parking lot repairs. This increase was partially offset by decreased motel
operating expenses due to the lower occupancy and by decreased interest expense
as the mortgage note balanced is reduced.
- 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, 1996
FUTURE TRENDS
The General Partners expect that overall occupancy for the fiscal year ending
December 31, 1996 will be equal to or less than that achieved in 1995. The
General Partners expect income for the current fiscal year to be less than the
previous fiscal year. Expenses are subject to both cost inflation and to the
deferred maintenance associated with the effects of high occupancy in previous
years. The net effect should be net income less than 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.
- 8 -
<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
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None
-9-
<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
11-11-96 By /S/ David P. Grotewohl
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Date David P. Grotewohl,
President of Grotewohl
Management Services, Inc.,
Managing General Partner
11-11-96 By /S/ David P. Grotewohl
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Date David P. Grotewohl,
Chief Financial Officer
-10-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 292,612
<SECURITIES> 0
<RECEIVABLES> 88,166
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 399,191
<PP&E> 5,727,183
<DEPRECIATION> 2,794,106
<TOTAL-ASSETS> 3,332,268
<CURRENT-LIABILITIES> 144,976
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 3,187,292
<TOTAL-LIABILITY-AND-EQUITY> 3,332,268
<SALES> 1,129,109
<TOTAL-REVENUES> 1,138,285
<CGS> 894,384
<TOTAL-COSTS> 894,384
<OTHER-EXPENSES> 109,686
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,289
<INCOME-PRETAX> 14,324
<INCOME-TAX> 0
<INCOME-CONTINUING> 14,324
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,324
<EPS-PRIMARY> 2.41
<EPS-DILUTED> 2.41
</TABLE>
