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, 1997
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, 1997 AND 1996
<PAGE>
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
INDEX
Financial Statements: PAGE
Balance Sheet - September 30, 1997 and December 31, 1996 2
Statement of Operations - Nine Months Ended
September 30, 1997 and 1996 3
Statement of Changes in Partners' Equity -
Nine Months Ended September 30, 1997 and 1996 4
Statement of Cash Flows - Nine Months Ended
Septeber 30, 1997 and 1996 5
Notes to Financial Statements 6
Management Discussion and Analysis 7
Other Information and Signatures 8 - 10
<PAGE>
Super 8 Motels III, Ltd.
(A California Limited Partnership)
Balance Sheet
September 30, 1997 and December 31, 1996
9/30/97 12/31/96
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ASSETS
Current Assets:
Cash and temporary investments $ 434,469 $ 254,782
Accounts receivable 94,735 68,114
Prepaid expenses 17,936 11,341
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Total current assets 547,140 334,237
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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 784,802 756,837
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5,757,976 5,730,011
Accumulated depreciation (2,940,268) (2,826,379)
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Property and equipment, net 2,817,708 2,903,632
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Total Assets $ 3,364,848 $ 3,237,869
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 89,234 $ 63,785
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Total current liabilities 89,234 63,785
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Total liabilities 89,234 63,785
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Contingent Liabilities (See Note 1)
Partners' Equity:
General Partners 20,963 19,205
Limited Partners 3,254,651 3,154,879
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Total partners' equity 3,275,614 3,174,084
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Total Liabilities and Partners' Equity $ 3,364,848 $ 3,237,869
=========== ===========
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, 1997 and 1996
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
9/30/97 9/30/97 9/30/96 9/30/96
----------- ----------- ----------- -----------
Income:
Guest room $ 407,133 $ 1,236,746 $ 388,117 $ 1,103,883
Telephone and vending 9,360 25,704 9,797 25,226
Interest 2,964 6,753 2,020 6,677
Other 821 5,783 520 2,499
----------- ----------- ----------- -----------
Total Income 420,278 1,274,986 400,454 1,138,285
----------- ----------- ----------- -----------
Expenses:
Motel operating expenses
(Note 2) 307,710 877,176 298,848 894,384
General and admin-
istrative 11,646 44,273 11,649 45,576
Depreciation and
amortization 37,245 114,487 39,380 119,891
Interest - - 1,526 7,289
Property management fees 20,866 63,257 20,188 56,821
----------- ----------- ----------- -----------
Total Expenses $ 377,467 $ 1,099,193 $ 371,591 $ 1,123,961
----------- ----------- ----------- -----------
Net Income (Loss) 42,811 175,793 28,863 14,324
=========== =========== =========== ===========
Net Income (Loss) Allocable
to General Partners $428 $1,758 $289 $143
=========== =========== =========== ===========
Net Income (Loss) Allocable
to Limited Partners $42,383 $174,035 $28,574 $14,181
=========== =========== =========== ===========
Net Income (Loss)
per Partnership Unit $7.13 $29.29 $4.81 $2.39
=========== =========== =========== ===========
Distribution to Limited
Partners per
Partnership Unit $12.50 $12.50 $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, 1997 and 1996
1997 1996
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General Partners:
Balance at beginning of year $ 19,205 $ 19,194
Net income (loss) 1,758 143
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Balance at end of period 20,963 19,337
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Limited Partners:
Balance at beginning of year 3,154,879 3,153,774
Net income (loss) 174,035 14,181
Less: Cash distributions (74,263) -
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Balance at end of period 3,254,651 3,167,955
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Total balance at end of period $ 3,275,614 $ 3,187,292
=========== ===========
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, 1997 and 1996
1997 1996
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Cash Flows From Operating Activities:
Received from motel revenues $ 1,241,612 $ 1,117,215
Expended for motel operations
and general and administrative expenses (965,972) (1,001,945)
Interest received 6,753 5,729
Interest paid - (8,076)
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Net cash provided (used) by operating activities 282,393 112,923
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Cash Flows From Investing Activities:
Purchases of property and equipment (28,563) (11,478)
Proceeds from sale of equipment 120 -
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Net cash provided (used) by investing activities (28,443) (11,478)
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Cash Flows From Financing Activities:
Payments on notes payable - (94,387)
Distributions paid to Limited Partners (74,263) -
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Net cash provided (used) by financing activities (74,263) (94,387)
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Net increase (decrease) in cash
and temporary investments 179,687 7,058
Cash and temporary investments:
Beginning of year 254,782 285,554
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End of period $ 434,469 $ 292,612
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Reconciliation of Net Income to Net Cash Provided by Operating Activities:
Net income (loss) $ 175,793 $ 14,324
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Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 114,487 119,891
Gain on disposition of property (120) -
(Increase) decrease in accounts receivable (26,621) (15,342)
(Increase) decrease in prepaid expenses (6,595) (6,825)
Increase (decrease) in accounts payable
and accrued liabilities 25,449 875
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Total adjustments 106,600 98,599
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Net cash provided by operating activities $ 282,393 $ 112,923
=========== ===========
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, 1997 and 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, 1996 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 $63,257
Franchise Fees $24,735
Note 2:
The following table summarizes the major components of motel operating expenses
for the periods reported:
Three Months Nine Months Three Months Nine Months
Ended Ended Ended Ended
9/30/97 9/30/97 9/30/96 9/30/96
----------- ----------- ----------- -----------
Salaries and related costs $ 116,033 $ 342,723 $ 111,926 $ 333,560
Franchise and advertising 20,357 61,837 21,928 59,323
Utilities 38,135 87,993 40,243 88,720
Allocated costs,
mainly indirect salaries 43,878 132,302 41,520 134,970
Replacements and renovations 10,490 26,591 3,253 36,425
Other operating expenses 78,817 225,730 79,978 241,386
----------- ----------- ----------- -----------
Total motel operating
expenses $ 307,710 $ 877,176 $ 298,848 $ 894,384
=========== =========== =========== ===========
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, 1997
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's current assets of $547,140 exceed its current
liabilities of $89,234 by $457,906. This excess of current assets over current
liabilities constitutes an operating reserve that is greater than the $297,050
operating reserve requirement in the Partnership Agreement
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, 1997, the Partnership
expended $55,154 (of which $28,563 was capitalized) in such expenditures which
is equal to 4.5% of guest room revenue. Included in the renovations was $15,023
for guest room carpet at both properties, $5,099 for replacement bedspreads,
$4,262 for replacement televisions, $4,255 for tub refurbishment and $8,021 for
two replacement ice machines.
RESULTS OF OPERATIONS
The following is a comparison of the first nine months of the fiscal
year ending December 31, 1997 with the corresponding period of the preceding
fiscal year.
Total revenues increased $136,701 (or 12.0%) for the nine month period
as compared to the previous fiscal year. The increase in total revenue was due
to a $132,863 (or 12.0%) increase in room revenue. Motel occupancy increased
from 70.1% during the previous fiscal year to 72.1% during the current fiscal
year, while the average room rate increased from $33.63 during the first nine
months of 1996 to $36.73 during the corresponding period of 1997. The increase
in guest room revenue occurred primarily at the Partnership's San Bernardino
motel and was due to increased patronage in the corporate and leisure market
segments.
The Partnership's expenses decreased by $24,768 or 2.2%. This reduction
is due to reduced interest expense and to reduced renovation expenses during the
current fiscal year.
FUTURE TRENDS
The General Partners expect that overall occupancy for the fiscal year
ending December 31, 1997 will be greater than that achieved in 1996. The General
Partners expect income for the current fiscal year to be greater 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 greater 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.
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<PAGE>
PART II. OTHER INFORMATION
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Item 1. Legal Proceedings
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On October 27, 1997 a complaint was filed in the United States District
Court, Eastern District of California by the registrant, Grotewohl Management
Services, Inc. (a general partner of the registrant) and four other limited
partnerships (together with the registrant, the "Partnerships") as to which
Grotewohl Management Services, Inc. serves as general partner (i.e., Super 8
Motels, Ltd., Super 8 Motels II, Ltd., Super 8 Economy Lodging IV, Ltd., and
Famous Host Lodging V, L.P.), as plaintiffs. The complaint names as defendants
Everest/Madison Investors, LLC, Everest Lodging Investors, LLC, Everest
Properties, LLC, Everest Partners, LLC, Everest Properties II, LLC, Everest
Properties, Inc., W. Robert Kohorst, David I. Lesser, The Blackacre Capital
Group, L.P., Blackacre Capital Management Corp., Jeffrey B. Citron, Ronald J.
Kravit, and Stephen B. Enquist. The factual basis underlying the plaintiffs'
causes of actions pertains to tender offers directed by certain of the
defendants to limited partners of the Partnerships, and to indications of
interest made by certain of the defendants in purchasing the property of the
Partnerships. The complaint requests the following relief: (i) a declaration
that each of the defendants has violated Sections 13(d), 14(d) and 14(e) of the
Securities Exchange Act of 1934 (the "Exchange Act"), and the rules and
regulations promulgated by the Securities and Exchange Commission thereunder;
(ii) a declaration that certain of the defendants have violated Section 15(a) of
the Exchange Act and the rules and regulations thereunder; (iii) an order
permanently enjoining the defendants from (a) soliciting tenders of or accepting
for purchase securities of the Partnerships, (b) exercising any voting rights
attendant to the securities already acquired, (c) soliciting proxies, and (d)
violating Sections 13 or 14 of the Exchange Act or the rules and regulations
promulgated thereunder; (iv) an order enjoining certain of the defendants from
violating Section 15(a) of the Exchange Act and the rules and regulations
promulgated thereunder; (v) an order directing certain of the defendants to
offer to each person who sold securities to such defendants the right to rescind
such sale; and (vi) a declaration that the Partnerships need not provide to the
defendants a list of limited partners in the Partnerships or any other
information respecting the Partnerships which is not publicly available. The
plaintiffs have not yet received an answer of the defendants respecting the
complaint.
On October 28, 1997 a complaint was filed in the Superior Court of the
State of California, Sacramento County by Everest Lodging Investors, LLC and
Everest/Madison Investors, LLC, as plaintiffs, against Philip B. Grotewohl,
Grotewohl Management Services, Inc., Kenneth M. Sanders, Robert J. Dana, Borel
Associates, and BWC Incorporated, as defendants, and the Partnerships, as
nominal defendants. The factual basis underlying the causes of action pertains
to the receipt by the defendants of franchise fees and reimbursement of
expenses, the indications of interest made by the plaintiffs in purchasing the
properties of the nominal defendants, and the alleged refusal of the defendants
to provide information required by the terms of the Partnership's partnership
agreement and California law. The complaint requests the following relief: (i) a
declaration that the action is a proper derivative action; (ii) an order
requiring the defendants to discharge their fiduciary duties to the Partnerships
and to enjoin them from breaching their fiduciary duties; (iii) disgorgement of
certain profits; (iv) appointment of a receiver; and (v) an award for damages in
an amount to be determined. The defendants and nominal defendants have recently
been served and are formulating their response to the complaint.
- 8 -
<PAGE>
PART II. OTHER INFORMATION (CONTINUED)
----------------------------------------
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters
---------------------
None
Item 5. Other Information
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See Notes to Financial Statements
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
See Item 1 above
- 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
11/13/97 By /S/ David P. Grotewohl
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Date David P. Grotewohl,
President of Grotewohl
Management Services, Inc.,
Managing General Partner
11/13/97 By /S/ David P. Grotewohl
--------- --------------------------
Date David P. Grotewohl,
Chief Financial Officer
- 10 -
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> SEP-30-1997
<CASH> 434,469
<SECURITIES> 0
<RECEIVABLES> 94,735
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 547,140
<PP&E> 5,757,976
<DEPRECIATION> 2,940,268
<TOTAL-ASSETS> 3,364,848
<CURRENT-LIABILITIES> 89,234
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 3,275,614
<TOTAL-LIABILITY-AND-EQUITY> 3,364,848
<SALES> 1,262,450
<TOTAL-REVENUES> 1,274,986
<CGS> 877,176
<TOTAL-COSTS> 877,176
<OTHER-EXPENSES> 222,017
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 175,793
<INCOME-TAX> 0
<INCOME-CONTINUING> 175,793
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 175,793
<EPS-PRIMARY> 29.29
<EPS-DILUTED> 29.29
</TABLE>
