<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, 1997
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, 1997 Financial Statements and the partnership's
balance sheet for the year ended December 31, 1996. The Statement of Cash Flows
is omitted from the attachment and is presented as follows:
<TABLE>
<CAPTION>
PERIOD ENDED JUNE 30,
1997 1996
----------- -----------
CASH FLOWS FROM OPERATING ACTIVITIES
<S> <C> <C>
Revenues and other income received in cash $ 1,569,726 $ 1,822,139
Operating expenses paid in cash (1,330,711) (1,425,644)
Interest paid (119,454) (122,803)
----------- -----------
Net cash provided by operating activities 119,561 273,692
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment, net (934) (23,325)
----------- -----------
Net cash used in investing
activities (934) (23,325)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on debt (75,627) (69,906)
Distributions to partners (238,353) (434,713)
----------- -----------
Net cash used in financing activities (313,980) (504,619)
----------- -----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (195,353) (254,252)
CASH AND CASH EQUIVALENTS, beginning of period 551,202 733,916
=========== ===========
CASH AND CASH EQUIVALENTS, end of period $ 355,849 $ 479,664
=========== ===========
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
PERIOD ENDED JUNE 30,
1997 1996
----------- -----------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY OPERATING
ACTIVITIES
Net income $ 292,991 $ 572,751
----------- -----------
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 87,683 87,633
Lease expense - deferred 1,888 8,219
Change in assets and liabilities
Accounts receivable 3,806 (8,598)
Prepaid expenses 6,252 (11,467)
Accounts payable (5,683) 46,240
Accrued expenses (42,376) (3,465)
Accrued management fees (225,000) (417,621)
----------- -----------
(173,430) (299,059)
=========== ===========
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 119,561 $ 273,692
=========== ===========
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
See attached Second Quarter (6/30/97) 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 8, 1997
<PAGE> 4
SUPER 8 MOTELS NORTHWEST II
BALANCE SHEET
JUNE 30, 1997 AND 1996
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 355,849 $ 479,664
Accounts Receivable 16,800 87,045
Inventory 58,319 57,853
Prepaid expenses 5,361 26,467
----------- -----------
TOTAL CURRENT ASSETS 436,329 651,029
PROPERTY AND EQUIPMENT
Land 714,301 714,301
Buildings 4,097,106 4,097,106
Equipment, furniture, and fixtures 1,242,261 1,241,461
----------- -----------
Subtotal 6,053,668 6,052,868
Less accumulated depreciation (2,823,927) (2,644,280)
----------- -----------
TOTAL PROPERTY AND EQUIPMENT, NET 3,229,741 3,408,588
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 (48,632) (42,695)
Subtotal 28,743 33,680
TOTAL OTHER ASSETS 28,743 33,680
----------- -----------
TOTAL ASSETS $ 3,694,813 $ 4,093,297
=========== ===========
LIABILITIES AND PARTNER'S CAPITAL EQUITY
1997 1996
---------- ----------
CURRENT LIABILITIES
Accounts payable - trade $ 79,884 $ 74,484
Accounts payable - Affiliates 45,117 58,548
Accrued expenses 84,102 112,411
Current portion of long-term debt 180,393 148,194
----------- -----------
TOTAL CURRENT LIABILITIES 389,496 393,637
NONCURRENT LIABILITIES
Accrued rent under lease agreement 138,909 129,256
Long-term debt, net of current
portion shown above 2,244,782 2,423,720
Accrued property management fees 474,048 949,539
----------- -----------
TOTAL NONCURRENT LIABILITIES 2,857,739 3,502,515
PARTNER'S CAPITAL EQUITY
General partners 71,828 34,263
Limited partners 375,750 162,882
----------- -----------
TOTAL PARTNER'S CAPITAL EQUITY 447,578 197,415
----------- -----------
TOTAL LIABILITIES AND PARTNER'S
CAPITAL EQUITY $ 3,694,813 $ 4,093,297
=========== ===========
</TABLE>
<PAGE> 5
SUPER 8 MOTELS NORTHWEST II
STATEMENT OF INCOME
FOR THE SIX MONTHS ENDING JUNE 30, 1997 AND 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
---------- ----------
<S> <C> <C>
SALES
Rooms $1,510,640 $1,772,066
Other 51,071 56,234
---------- ----------
TOTAL SALES 1,561,711 1,828,300
DIRECT OPERATING EXPENSES
Payroll and related expenses 327,442 326,615
Supplies and maintenance 109,935 79,382
Utilities 94,958 96,667
Other 14,623 17,713
---------- ----------
TOTAL DIRECT OPERATING EXPENSES 546,958 520,377
INDIRECT OPERATING EXPENSES
Advertising and promotion 42,231 36,627
Bank and credit card charges 21,059 20,901
Insurance 19,117 18,850
Property and business taxes 71,486 78,214
Other 6,494 6,205
---------- ----------
TOTAL INDIRECT OPERATING EXPENSES 160,387 160,797
ADMINISTRATIVE AND GENERAL EXPENSES
Administrative service fees 107,530 102,820
Franchise fees 60,426 70,530
Management fees 78,086 91,176
Professional services 16,343 14,998
Other 15,720 8,548
----------- -----------
TOTAL ADMINISTRATIVE AND
GENERAL EXPENSES 278,105 288,072
FIXED CHARGES
Amortization 2,419 2,319
Depreciation 85,264 85,314
Interest 119,160 122,803
Lease payments 72,871 70,086
Deferred land lease 7,765 8,218
---------- ----------
TOTAL FIXED CHARGES 287,479 288,740
---------- ----------
INCOME FROM OPERATIONS 288,782 570,314
OTHER INCOME
Gain (Loss) on sale of equipment 0 0
Interest income 4,209 2,437
---------- ----------
TOTAL OTHER INCOME 4,209 2,437
---------- ----------
NET INCOME (LOSS) $ 292,991 $ 572,751
========== ==========
</TABLE>
<PAGE> 6
SUPER 8 MOTELS NORTHWEST II UPDATE
VOL. 17 NO. 2/JUNE 30, 1997 SECOND QUARTER 1997
NATIONAL NEWS
SUPER 8 ROOMS NEARING 100,000 MARK
Super 8 Motels President, Robert Weller, reminds us in the May issue of the
Super 8 newsletter StrEIGHTTalk that the chain continues to expand its services
nationwide in 1997. Currently, a new Super 8 Motel opens every 2.5 days, a new
franchise is sold every working day, and a guest joins the VIP Club every
minute!
Another benchmark will be reached this summer when the 101 motels now under
construction open their doors, bringing the number of guest rooms to over
100,000. This exposure of product, in combination with the VIP Club membership
rapidly approaching the five million mark, will assure Super8's position as the
finest franchise lodging chain in the industry.
Investors should note, further, that Super 8 continues to keep pace with design
and service developments within the industry--maintaining an edge in the
marketplace. Consider the following nationwide statistics:
- 95% of all Super 8 Motels now offer non-smoking rooms
- 90% of all Super 8 Motels offer fax machine services
- 66% of nationwide Super 8s offer a continental breakfast --and--
- Over one-third offer meeting rooms, swimming pools, and suites.
Of course, all motels comply with current standards to accommodate the
physically disabled guest, and the hearing and/or visually impaired guest. All
motels are in the process of converting to the newer security-conscious
electronic lock systems, and many newly constructed and renovated properties are
offering computer data ports in the guest rooms.
PENINSULA MANAGEMENT PROPERTIES SWEEP TOP VIP HONORS
During the 1996 National VIP Challenge, over 606,000 guests joined and began
receiving the benefits of VIP membership. The 1996 National Awards were
presented at the 1997 Regional Meetings by Super 8's Vice President of
Marketing, Tom McNulty. Peninsula Management Northwest properties competed in
four of the six size categories, and proudly took top honors in three of those
four categories:
- SeaTac Airport Super 8 Motel--First Prize 89-290 Room Category-over
6,000 VIPs
- Portland Airport Super 8 Motel--First Prize 66-88 Room Category-over
6,200 VIPs
- Klamath Falls Super 8 Motel--First Prize 57-61 Room Category-over 2,800
VI Ps
The staffs at the SeaTac and Portland Airport properties continue this
leadership role in 1997.
1
<PAGE> 7
Also at the national level, Peninsula Management Northwest was honored with the
newly created "Curb Appeal Award" on behalf of the Grants Pass, Oregon, Super 8,
for its outstanding exterior appearance.
REGIONAL NEWS
RESER-V-8 NOW INSTALLED in WASHINGTON, OREGON, AND ALASKA
One of the immediate results of PMNW's President H. Samuel Polack's newly formed
five-member President's Advisory Council, was the development of the innovative
"Reserv-8 Now" system. This intracompany reservation concept was referred by
Polack's P.A.C. to the Marketing and Training Departments for co-design and
implementation. After being carefully tested at the Managers Training School
location in Lacey, Washington, the program was adjusted, then installed at all
Northwest locations by the 4th of July holiday weekend.
"Reser-v-8 Now" enables a guest to make a confirmed reservation at their next
Super 8 destination, at the moment of check-in, or, from the comfort of their
room. An incentive program rewarding the motel staff for assisting guests with
the reservations is paired to the promotion.
At this writing, with only preliminary reports available, it does appear that
both guests and staff alike are warming to the new service--one that likely will
continue, in some format, into the winter months.
PARTNER PROGRAM "FIRST CONCERN" LAUNCHED in JUNE
Handsome lapel jewelry--reminding guests in the Northwest that, "You, our Super
8 customer, are our FIRST CONCERN" will be appearing on the uniforms of many
stellar staff members in August and September. Jewelry will be awarded those
motels attaining training, sales, and VIP benchmarks for each month of the year.
REDMOND, OREGON GRAND OPENING A SUCCESS
After a three-day "Pineapple Kind of People" sales blitz in the
Redmond/Bend/Sisters area, and four days of rugged construction and housekeeping
inspections, the 25th PMNW Super 8 Motel opened in Redmond, Oregon on June 27th
as scheduled. Grand Opening festivities were attended by over 300 local area
residents and business persons, which began with a Chamber of Commerce
ribbon-cutting at 4:00 p.m. Tours of the facility were also offered, as were
refreshments, free VIP memberships, and a grand prize drawing.
The location is proving to be a solid one for PMNW. Over the opening weekend,
the motel completely sold out, and bookings are strong through August and into
the Fall. Further, with the Reser-v-8 Now program in place, the Redmond staff is
forwarding numerous referrals to its neighboring Super 8s in Bend, Klamath
Falls, Portland, and even SeaTac Airport.
WOODBURN GRAND OPENING SLATED FOR NOVEMBER 21
Woodburn construction is proceeding smoothly this summer. With assistance from
crews now concluded with the Redmond project, the job superintendent is
confident in the commitment to open prior to Thanksgiving.
2
<PAGE> 8
Currently, aggressive pre-marketing and pre-sales work is being done in the
Woodburn area to assure a firm hold in this market for the winter of 1997-98.
Again, reservation and referrals are being crafted between PMNW's 26th new motel
and its I-5 corridor Super 8 partners in Wilsonville to the North, and Salem,
Grants Pass, and Ashland to the South.
SUPER 8 MOTELS NORTHWEST II
Despite some improving trends in both the Bremerton and Yakima Super 8 Motels,
total revenues of the partnership year to date continue to trail 1996 by
$266,000. The vast majority of this shortfall is because the Bremerton property
is no longer host to a large contingent of naval personnel. As a result of this
revenue shortfall, and despite fairly good cost controls, net income stands at
$292,991 through June 30, 1997, versus $572,751 through the same period in 1996.
As a percent of total sales, net income rose from 11.3% in the first quarter to
18.7% year to date as of June 30, 1997.
In Bremerton, because there is no longer a large Navy contract at the property,
occupancy has dropped 38 occupancy points for the quarter, and 41 points year to
date (see charts). Average daily rate has increased $5.27 over the second
quarter of 1996 and $3.94 for the year. Yakima had an exceptionally poor April,
and though May and June showed favorable trends, occupancy year to date is down
from 1996 by about 5.4 percentage points. Average daily rate remains essentially
even with 1996. Portland occupancy, though down from the very high 1996 levels,
remained at over 85% for the quarter and 81 % year to date. Average daily rate
increased by $1.38 for the quarter and $1.14 for the year to date.
Enclosed you will find the unaudited financial statements through June 30, 1997,
as well as occupancy and room rate charts for each property. Your second quarter
1997 distribution check is in the amount of $25.00 per partnership unit. This
distribution equals a 10% annualized return on your original investment for the
quarter and year to date.
Thank you for your continued support of Super 8 Motels Northwest II and
remember, if travel plans are in your future, CALL SUPER 8 at 1-800-800-8000 for
reservations.
The official Publication of THE PENINSULA GROUP, INC.
7515 Terminal St. SW, Tumwater, WA 98501 / (360) 943-8000
Owners and operators of America's finest economy lodging serving 25
convenient Northwest locations:
ALASKA: Anchorage - Fairbanks - Juneau - Ketchikan
OREGON: Ashland - Bend - Corvallis - Grants Pass - Klamath Falls - Portland
International Airport - Redmond - *Roseburg - Salem - Wilsonville - *Woodburn
WASHINGTON: Bremerton - Ellensburg - Federal Way - Ferndale - Kelso -
Kennewick - Moses Lake - Olympia/Lacey - Port Angeles - Sea-Tac International
Airport - Walla Walla - Yakima
*Coming soon
3
<PAGE> 9
SUPER 8 NORTHWEST II
BALANCE SHEET
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------------------
1996 1995
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 551,202 $ 733,916
Accounts receivable, trade 17,457 76,718
Accounts receivable, affiliates 3,149 2,089
Inventory 58,319 57,853
Prepaid expenses 11,613 15,000
----------- -----------
Total current assets 641,740 885,576
----------- -----------
PROPERTY AND EQUIPMENT, at cost
Land 714,301 714,301
Buildings 4,097,107 4,097,107
Equipment, furniture and fixtures 1,241,326 1,239,937
----------- -----------
6,052,734 6,051,345
Less accumulated depreciation (2,738,663) (2,581,127)
----------- -----------
Total property and equipment 3,314,071 3,470,218
----------- -----------
OTHER ASSETS
Loan fees 26,375 26,375
Franchise fees 45,000 45,000
Lease option costs 6,000 6,000
----------- -----------
77,375 77,375
Less accumulated amortization (46,214) (41,376)
----------- -----------
Total other assets 31,161 35,999
----------- -----------
$ 3,986,972 $ 4,391,793
=========== ===========
</TABLE>
<PAGE> 10
SUPER 8 NORTHWEST II
BALANCE SHEET
LIABILITIES AND PARTNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------
1996 1995
=========== ===========
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable, trade $ 47,021 $ 43,098
Accounts payable, affiliates 83,663 43,694
Accrued expenses 126,478 115,876
Current portion of long-term debt 155,000 142,000
----------- -----------
Total current liabilities 412,162 344,668
----------- -----------
NONCURRENT LIABILITIES
Long-term debt, net of current portion shown above 2,345,801 2,499,820
Accrued rent under lease agreements 137,021 121,038
----------- -----------
2,482,822 2,620,858
----------- -----------
ACCRUED PROPERTY MANAGEMENT FEES 699,048 1,367,160
----------- -----------
PARTNERS' EQUITY
General partners' equity (deficiency) 63,632 (30,618)
Limited partners' equity (authorized, issued and
outstanding 4,052 units) 329,308 89,725
----------- -----------
392,940 59,107
----------- -----------
$ 3,986,972 $ 4,391,793
=========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> JUN-30-1997
<CASH> 355,849
<SECURITIES> 0
<RECEIVABLES> 16,800
<ALLOWANCES> 0
<INVENTORY> 58,319
<CURRENT-ASSETS> 436,329
<PP&E> 6,053,668
<DEPRECIATION> 2,823,927
<TOTAL-ASSETS> 3,694,813
<CURRENT-LIABILITIES> 389,496
<BONDS> 2,857,739
0
0
<COMMON> 0
<OTHER-SE> 447,578
<TOTAL-LIABILITY-AND-EQUITY> 3,694,813
<SALES> 0
<TOTAL-REVENUES> 1,565,920
<CGS> 0
<TOTAL-COSTS> 546,958
<OTHER-EXPENSES> 606,811
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 119,160
<INCOME-PRETAX> 292,991
<INCOME-TAX> 0
<INCOME-CONTINUING> 292,991
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 292,991
<EPS-PRIMARY> 61.46
<EPS-DILUTED> 61.46
</TABLE>
