<PAGE> 1
FORM 10-Q
SECURITIES 7 EXCHANGE COMMISSION
WASHINGTON, DC 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Period Ended: June 30, 1996
Commission File Number: 2-76543
SUPER 8 MOTELS NORTHWEST II
Washington 91-1172558
PART 1
Financial Information
Item 1. Financial Statements
See attached unaudited June 30, 1996 Financial Statements and the partnership's
balance sheet for the year ended December 31, 1995. The Statement of Cash
Flows is omitted from the attachment and is presented as follows:
<TABLE>
<CAPTION>
PERIOD ENDED JUNE 30,
1996 1995
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Revenues and other income received in cash $1,822,139 $1,616,540
Operating expenses paid in cash (1,425,644) (1,089,770)
Interest paid (122,803) (122,451)
---------- ----------
Net cash provided by operating activities 273,692 404,319
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment, net (23,325) (217)
---------- ----------
Net cash used by investing activities (23,325) (217)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on debt (69,906) (40,504)
Distributions to partners (434,713) (716,263)
---------- ----------
Net cash used by financing activities (504,619) (756,767)
---------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (254,252) (352,665)
CASH AND CASH EQUIVALENTS, beginning of period 733,916 822,944
---------- ----------
CASH AND CASH EQUIVALENTS, end of period $479,664 $470,279
========== ==========
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
PERIOD ENDED JUNE 30,
1996 1995
-------- --------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING
ACTIVITIES
Net income $572,751 $253,316
-------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 87,633 89,878
Lease expense - deferred 8,219 9,125
Gain on sale of property and equipment -- (1,521)
Change in assets and liabilities
Accounts receivable (8,598) (29,024)
Inventory -- 9,549
Prepaid expenses (11,467) 18,467
Deposits and bank fees -- (2,500)
Accounts payable 46,240 (38,753)
Accrued expenses (3,465) 13,434
Accrued management fees (417,621) 82,348
-------- --------
(299,059) 151,003
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES $273,692 $404,319
======== ========
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
See attached Second Quarter (6/30/96) Update from the Issuer delivered to its
limited partners.
PART 2
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 a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
None.
<PAGE> 3
SIGNATURES
Pursuant to the requirements of the Securities 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 NORTHWEST II
a Washington limited partnership
By:
-------------------------------------
Gerald L. Whitcomb, General Partner
Dated: August 9, 1996
<PAGE> 4
VOL. 16 NO. 2/JULY 31, 1996
SUPER 8 MOTELS NORTHWEST II
SECOND QUARTER 1996
NATIONAL NEWS
1400 AND GROWING
This past June the Super 8 System observed the opening of Super 8
Motel number 1,400. However, Super 8 is not stopping at that benchmark as
there are currently 193 new Super 8's under construction, continuing the
system's aggressive growth and development. The only two states in which a
Super 8 Motel has not opened remain Rhode Island and Hawaii. Also of note, six
Canadian provinces now are able to boast of the presence of Super 8 Motels.
4 MILLION VIP'S
At this printing, the number of loyal VIP members will have reached,
or possibly surpassed, the 4,000,000 mark. The Peninsula Group, and its
properties, continues to enjoy playing a leadership role in the sale of VIP
memberships to its customers--with over 2O% of its rooms being sold to new VIP
members. Further, the Peninsula Management staff enjoys the ongoing benefit of
selling another 50%-60% of its rooms to guests who already carry a permanent
VIP Card.
D.K. SHIFFLET REPORT
The independent market research firm D.K. Shifflet reports that
frequent travelers are currently rating Super 8 Motels superior to the entire
economy segment. Their most up-to-date numbers document Super 8 as the segment
leader in both service and value ratings. Also verified in recent reports is
the public's perception of Super 8 as having better prices than the segment
competition.
PREFERRED VENDORS SAVE $$$
Super 8 Motels, Inc. has worked diligently to increase both the
quantity and quality of the preferred vendors made available to regional
franchisees such as The Peninsula Group. This hard work is paying off with
more than 60 manufacturers from which our purchasing department may now order.
Companies and products range from soft drink vendors which stock the vending
machines, to companies such as Zenith and Sealy that supply televisions and
mattresses for the guest rooms. Over the past two years, HFS vendor programs
have returned more than $11 million in savings and incremental revenues to
Super 8 franchisees.
<PAGE> 5
TOUGH STAND ON Q.A.
While the average Quality Assurance score nationwide does continue to improve,
Super 8 President Robert Weller has announced a firm stand with those few
properties who fail inspection scores. Quick and decisive action has been, and
will be, taken against these properties, including an immediate cut-off from
the reservation system. Additionally, a Q.A. Manager has been assigned to
analyze and work with borderline properties to improve overall scores even
further. Vice President of Marketing Tom McNulty summarized, "By enforcing
these standards, it makes our message of cleanliness and consistency more
powerful and believable to consumers."
REGIONAL NEWS
PILOT PROGRAM TESTED IN NORTHWEST
A new VIP program developed by the Marketing Department at Peninsula
Management Northwest has gained recognition and attention at the national level
by Super 8 Motels, Inc. The VIP EXPRESS CHECK-IN has drawn so much interest at
Super 8 Inc., that they have made offers to assist in defraying some of the
expenses incurred in the development of the program's training, signage, and
promotion.
Objectives of the VIP EXPRESS CHECK-IN are-.
* Special identity for VIP members at check-in time
* "Added value" to the VIP membership card
* Sales opportunity for desk staff to potential VIP members
VIP EXPRESS CHECK-IN was implemented at ALL Peninsula Management properties in
the Northwest and Alaska in June. Remembering that well over 50% of all guests
are VIP card holder, it is anticipated that all guests will benefit this summer
from a speedier check-in process for returning VIP's.
HUMAN RESOURCES DIRECTOR HIRED AT PMNW
The Peninsula Group and Peninsula Management Northwest are pleased to
welcome Joni Hower to the Management team. Ms. Hower comes to PMNW with ten
years of experience in the hospitality industry.
Ms. Hower brings both education and experience to the HR position,
holding a Bachelor of Arts in Communication and a Masters of Administration in
Organizational Management. Her job experience includes supervisor of Human
Resources and Training at a four-star Radisson Hotel in Northern California and
consultant to several companies, some of which include the New Jersey
Hotel/Motel Association and The Educational Institute.
Ms. Hower's responsibilities include reviewing and modifying PMNW
hiring practices, human resources policies and procedures, and Company job
descriptions. She will also be recruiting for General
<PAGE> 6
Manager and Assistant General Manager positions. It is anticipated that Ms.
Hower's skills will assist in reducing employee turnover, improve employee
communications and reinforce career path objectives.
SUPER 8 MOTELS NORTHWEST II
Overall Super 8 Motels Northwest II has had a good 1996. Total Sales
increased about $190,000 or 12% over the same period in 1995. Costs were
controlled very well at the properties. The result is that Net Income, after
adjusting for renovation completed during the first six months of 1995, rose by
about $180,000 in 1996. This is an increase of approximately 45%.
Bremerton occupancy continues to benefit greatly from a Navy contract
that is to run into the fourth quarter. Nineteen ninety-six occupancy is
95.85% versus 64.25% in 1995. The downside is that the average daily rate has
decreased by $2.38 from 1995. As a whole, Bremerton's revenues have increased
about 43% over 1995, and costs have been well controlled.
Yakima occupancy continues to drag behind 1995 by approximately ten
occupancy points. Average daily rate improved by $2.63 to $47.96 year to date.
The increased rate does not offset the occupancy loss, however; and, gross
revenues are down by approximately 8%. Again, good control of operating costs
helped maintain the net income.
Portland occupancy continues to be very strong with growth of about
four occupancy points over 1995. Increased occupancy coupled with a $1.33 room
rate increase for the same period of 1995 has resulted in a rise in total
revenues of $54,848, or growth of over 8% compared to 1995. This growth is
despite the fact that additional rooms keep being added to the market area.
You will find enclosed the year-to-date 1996 unaudited financial
statements for the partnership, plus occupancy and room rate charts for each
property. Your second quarter 1996 distribution check is in the amount of
$25.00 per partnership unit. This distribution equals a 10% annualized return
on your original investment.
The official partnership meeting was held at the corporate offices of The
Peninsula Group on June 12th.
We appreciate the continued interest of those limited partners who were able to
attend.
Thank you for your support of Super 8 Motels Northwest II. If your summer
includes travel plans, be sure to call SUPERLINE at 1-800-800-8000 to make your
reservations for Super 8 Motels in the United States and Canada.
<PAGE> 7
SUPER 8 MOTELS NORTHWEST II
BALANCE SHEET
JUNE 30, 1996 AND 1995
<TABLE>
<CAPTION>
(Unaudited)
ASSETS
1996 1995
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 479,664 $ 470,279
Accounts receivable 87,045 76,094
Inventory 57,853 61,353
Prepaid expenses 26,467 15,116
---------- ----------
TOTAL CURRENT ASSETS 651,029 622,841
PROPERTY AND EQUIPMENT
Land 714,301 714,301
Buildings 4,097,106 4,097,106
Equipment, furniture, and fixtures 1,241,461 1,240,155
---------- ----------
Subtotal 6,052,868 6,051,562
Less accumulated depreciation (2,644,280) (2,493,903)
---------- ----------
TOTAL PROPERTY AND EQUIPMENT, NET 3,408,588 3,557,660
OTHER ASSETS
Franchise fees 45,000 45,000
Organization costs 6,000 6,000
Deposits and bank fees 26,375 26,375
---------- ----------
Subtotal 77,375 77,375
Less accumulated amortization (43,695) (38,957)
Subtotal 33,680 38,418
TOTAL OTHER ASSETS 33,680 38,418
---------- ----------
TOTAL ASSETS $4,093,297 $4,218,919
========== ==========
LIABILITIES AND PARTNER'S CAPITAL EQUITY
1996 1995
---------- ----------
CURRENT LIABILITIES
Accounts payable - trade $ 74,484 $ 69,170
Accounts payable - Affiliates 58,548 4,323
Accrued expenses 112,411 119,851
Current portion of long-term debt 148,194 87,801
---------- ----------
TOTAL CURRENT LIABILITIES 393,637 271,145
NONCURRENT LIABILITIES
Accrued rent under lease agreement 129,256 110,392
Long-term debt, net of current
portion shown above 2,423,720 2,479,846
Accrued property, management fees 949,539 1,281,396
---------- ----------
TOTAL NONCURRENT LIABILITIES 3,502,515 3,871,634
PARTNER'S CAPITAL EQUITY
General partners 34,263 (30,448)
Limited partners 162,882 106,588
---------- ----------
TOTAL PARTNER'S CAPITAL
EQUITY 197,145 76,140
---------- ----------
TOTAL LIABILITIES AND
PARTNERS' CAPITAL EQUITY $4,093,297 $4,218,919
========== ==========
</TABLE>
<PAGE> 8
SUPER 8 MOTELS NORTHWEST II
STATEMENT OF INCOME
FOR THE SIX MONTHS ENDING JUNE 30, 1996 AND 1995
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
SALES
Rooms $1,772,066 $1,602,794
Other 56,234 35,743
---------- ----------
TOTAL SALES 1,828,300 1,638,537
DIRECT OPERATING EXPENSES
Payroll and related expenses 326,614 332,565
Supplies and maintenance 79,382 216,430
Utilities 96,667 88,232
Other 17,713 16,196
---------- ----------
TOTAL DIRECT OPERATING EXPENSES 520,376 653,423
INDIRECT OPERATING EXPENSES
Advertising and promotion 36,627 65,644
Bank and credit card charges 20,901 22,097
Insurance 18,850 20,973
Property and business taxes 78,214 77,572
Other 6,205 9,639
---------- ----------
TOTAL INDIRECT OPERATING EXPENSES 160,797 195,925
ADMINISTRATIVE AND GENERAL EXPENSES
Administrative service fees 102,820 77,793
Franchise fees 70,530 65,334
Management fees 91,176 82,348
Professional services 14,998 15,271
Other 8,548 14,815
---------- ----------
TOTAL ADMINISTRATIVE AND GENERAL EXPENSES 288,072 255,561
FIXED CHARGES
Amortization 2,319 2,419
Depreciation 85,314 87,459
Interest 122,803 122,451
Lease payments 70,086 67,406
Deferred land lease 8,218 9,125
---------- ----------
TOTAL FIXED CHARGES 288,740 288,860
---------- ----------
INCOME FROM OPERATIONS 570,314 244,768
OTHER INCOME
Gain (Loss) on sale of equipment 0 1,521
Interest income 2,437 7,027
---------- ----------
TOTAL OTHER INCOME 2,437 8,548
---------- ----------
NET INCOME (LOSS) $572,751 $253,316
========== ==========
</TABLE>
This statement subject to change after audit to be performed by Moss Adams,
CPA's.
<PAGE> 9
SUPER 8 MOTELS NORTHWEST II
BALANCE SHEET___________________________________________________________________
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------
1995 1994
------------ ------------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 733,916 $ 822,944
Accounts receivable--trade 76,718 26,590
Accounts receivable--affiliates 2,089 20,480
Inventory 57,853 70,902
Prepaid expenses 15,000 33,583
----------- -----------
Total current assets 885,576 974,499
----------- -----------
PROPERTY AND EQUIPMENT, at cost
Land 714,301 714,301
Buildings 4,097,107 4,097,106
Equipment, furniture and fixtures 1,239,937 1,239,937
----------- -----------
6,051,345 6,051,344
Less accumulated depreciation (2,581,127) (2,406,444)
----------- -----------
3,470,218 3,644,900
----------- -----------
OTHER ASSETS
Franchise fees 45,000 45,000
Lease option costs 6,000 6,000
Deposits and bank fees 26,375 23,875
----------- -----------
77,375 74,875
Less accumulated amortization (41,376) (36,538)
----------- -----------
Total other assets 35,999 38,337
----------- -----------
$ 4,391,793 $ 4,657,736
=========== ===========
</TABLE>
<PAGE> 10
SUPER 8 MOTELS NORTHWEST II
__________________________________________________________________ BALANCE SHEET
LIABILITIES AND PARTNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------
1995 1994
------------ -----------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable, trade $ 43,098 25,299
Accounts payable, affiliates 43,694 76,947
Accrued expenses 115,876 106,417
Current portion of long-term debt 142,000 84,000
----------- -----------
Total current liabilities 344,668 292,663
----------- -----------
NONCURRENT LIABILITIES
Long-term debt, net of current
portion shown above 2,499,820 2,524,151
Accrued rent under lease agreements 121,038 102,787
----------- -----------
2,620,858 2,626,938
----------- -----------
ACCRUED PROPERTY MANAGEMENT FEES 1,367,160 1,199,048
----------- -----------
COMMITMENTS
PARTNERS' EQUITY
General partner deficiency (30,618) (25,819)
Limited partners (authorized and
outstanding, 4,052 units) 89,725 564,906
----------- -----------
59,107 539,087
----------- -----------
$ 4,391,793 $ 4,657,736
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-1-1996
<PERIOD-END> JUN-30-1996
<CASH> 479,664
<SECURITIES> 0
<RECEIVABLES> 87,045
<ALLOWANCES> 0
<INVENTORY> 57,853
<CURRENT-ASSETS> 651,029
<PP&E> 6,052,868
<DEPRECIATION> 2,644,280
<TOTAL-ASSETS> 4,093,297
<CURRENT-LIABILITIES> 393,637
<BONDS> 3,502,515
0
0
<COMMON> 0
<OTHER-SE> 197,145
<TOTAL-LIABILITY-AND-EQUITY> 4,093,297
<SALES> 0
<TOTAL-REVENUES> 1,828,300
<CGS> 0
<TOTAL-COSTS> 520,376
<OTHER-EXPENSES> 614,806
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 122,803
<INCOME-PRETAX> 572,751
<INCOME-TAX> 0
<INCOME-CONTINUING> 572,751
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 572,751
<EPS-PRIMARY> 127.28
<EPS-DILUTED> 127.28
</TABLE>
