<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 Quarter Ended: March 31, 1998
Commission File Number: 2-76543
SUPER 8 MOTELS NORTHWEST II
Washington 91-1172558
PART 1
Financial Information
Item 1. Financial Statements
See attached unaudited March 31, 1998 Financial Statements and the partnership's
balance sheet for the year ended December 31, 1997. The Statement of Cash Flows
is omitted from the attachment and is presented as follows:
<TABLE>
<CAPTION>
PERIOD ENDED MARCH 31,
1998 1997
--------- ---------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Revenues and other income received in cash $ 702,100 $ 688,697
Operating expenses paid in cash (578,690) (580,118)
Interest paid (63,559) (40,389)
--------- ---------
Net cash provided by operating activities 59,851 68,190
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on debt (48,615) (30,624)
Distributions to partners (119,176) (119,173)
--------- ---------
Net cash used by financing activities (167,791) (149,797)
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (107,940) (81,607)
CASH AND CASH EQUIVALENTS, beginning of period 387,878 551,202
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 279,938 $ 469,595
========= =========
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
PERIOD ENDED MARCH 31,
1998 1997
-------- --------
<S> <C> <C>
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
Net income (loss) ($14,182) $ 76,900
-------- --------
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 39,990 43,816
Lease expense - deferred 8,255 (1,994)
Change in assets and liabilities
Accounts receivable 1,041 9,658
Prepaid expenses 2,713 7,065
Accounts payable 68,180 (4,946)
Accrued expenses (46,146) (62,309)
-------- --------
74,033 (8,710)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 59,851 $ 68,190
======== ========
</TABLE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
See attached First Quarter (3/31/98) 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: /s/ Gerald L. Whitcomb
-----------------------------------
Gerald L. Whitcomb, General Partner
Dated: May 12, 1998
<PAGE> 4
SUPER 8 MOTELS NORTHWEST II UPDATE
VOL. 18 NO. 1 /APRIL 30, 1998 FIRST QUARTER 1998
NATIONAL NEWS
CENDANT CORPORATION IS LAUNCHED
On December 17, 1997, the Super 8 Motels franchise owner, HFS Incorporated,
merged with CUC International, Inc., and officially became "Cendant
Corporation." With assets valued at $14 billion, Cendant is one of the world's
leading providers of consumer and business services.
Cendant will create innovative approaches to delivering value and convenience to
consumers and business partners. The company's three principal segments of
operation are travel, membership and real estate. With each of these business
units combined, Cendant is poised to make marketing history.
SUPER 8 MOTELS, INC. RECEIVES MARKETING AWARDS
On January 19,1998, Super 8 received four awards at the Hospitality Sales &
Marketing Association International Award Competition. This competition is the
largest and most prestigious in the hospitality and travel industry. Super 8
competed against thousands of entries from all over the world, winning:
* Gold Public Relations Award for the Super 8 "Rooms at the Inn" Program
* Silver Public Relations Award for the Super 8 Bedmaking Championship
* Bronze Public Relations Award for the 1500th motel grand opening
campaign
* Bronze Advertising Award for the Bill Elliott television commercial
50TH SUPER 8 MOTEL NOW OPEN IN CANADA
Super 8 Motels' rapid growth has reached north to Canada, with its fiftieth
motel opening in the fourth quarter of 1997. In just one year, ten new motels
have opened in that country, bringing the year-end total to 52.
Calgary-based Royop Hospitality Corporation, the owner of development and
franchise rights for Canada, is focused on building the Super 8 name across
Canada. Plans are in place for the opening of another 48 Super 8 Motels within-
the next two years.
1998 NASCAR SPONSORSHIP ANNOUNCED
Super 8 Motels, Inc., recently announced the renewal of its NASCAR sponsorship
with Bill Elliott Racing. In 1997, Elliott appeared in a national Super 8
commercial praising the benefits of staying at Super 8 Motels. This television
campaign will continue in 1998 with the "Let's Look Inside Bill's Room"
commercial.
The sponsorship includes Elliott's #94 McDonald's Ford for the entire Winston
Cup Series. The series is covered on national television and radio, and reached
more than 188 million viewers in 1997.
1
<PAGE> 5
NATIONAL CONVENTION KEYNOTES BOB DOLE
Keynote speaker at the 1998 Super 8 Motels International Convention, held March
6-8 in Orlando, Florida, was former U. S. Senate Majority Leader Bob Dole.
Although retired from elective office, Mr. Dole's public service record gives
him a solid perspective on political issues facing our nation, and insight into
the most pressing issues in our nation's future.
Other highlights of the convention included Super 8 President Bob Weller's
"State of the 8" address, a full presentation and update on the "Project Power
Up" computerization program, numerous business development seminars, and
national awards in VIP sales, marketing programs, and customer service. The
Peninsula Group's national awards are noted in the Regional News section of the
Update.
REGIONAL NEWS
PENINSULA MANAGEMENT NORTHWEST SELECTED AS BETA SITE
As mentioned in the January Update, Peninsula Management Northwest requested,
and subsequently received, permission to serve as a test site for the "Project
Power Up" computer program. Power Up is scheduled to go nationwide in 1999.
The Lacey Super 8 Motel was chosen for installation, as it is the official
training property for Peninsula Management. Its close proximity to the corporate
headquarters was also a factor, enabling daily hands-on training and
communication with key management, accounting, and staff development personnel.
Installation and training began in March, and though the first several weeks
were not without challenges, each was worked through to Peninsula's
satisfaction. Management continues to be enthusiastic about the program's short-
and long-term benefits to operations as follows:
* Integration of inventory management with central reservations
* Improved yield management
* On-line credit card processing
* Improved staffing allocations and room maintenance management
* Direct property-to-property reservations
* Access to customer profiles and databases
Equipment and training for Project Power Up are being provided to all 1,600
Super 8 Motels nationwide at no cost by the Cendant Corporation. A schedule for
installation at the balance of Super 8s operated by Peninsula Management
Northwest will be announced in the fall of 1998.
NORTHWEST MOTELS NATIONAL AWARD WINNERS
Several properties managed by Peninsula Management Northwest received national
awards at the 1998 Super 8 Motels International Convention as noted below:
* Golden Pineapple Hospitality Awards for Customer Service: Denise
Johnson, Regional Director, PMNW; Jeanne Wilson and Robin Shaw,
Redmond Super 8 Motel; and Jean Gesh, Lacey Super 8 Motel
2
<PAGE> 6
* Super Sales Award in Marketing- Esin Davis, Sales and Marketing
Director, PMNW
* National 1997 VIP Challenge Award: Tom Zett, General Manager, Portland
Super 8 Motel, and Ron Ehli, General Manager, SeaTac Super 8 Motel
In addition to these honors, 16 PMNW motels were added to the 1997 National "VIP
Club All Stars" Hall of Fame.
ROSEBURG CONSTRUCTION PROGRESSING ON SCHEDULE
Since the January announcement of the Roseburg site acquisition, actual
construction has commenced. Foundation work is complete, and summer travelers on
the 1-5 corridor will observe its progress towards completion.
The total development plan includes sites for the construction, by third
parties, of both a family-style restaurant and a fuel and food mart, as well as
a Phase II addition of 16 rooms to the Super 8 Motel. Future Update news will
keep readers informed as to project process.
The 88-room Roseburg Super 8 Motel is scheduled to open Thursday, November 12,
1998. It will feature all the traditional Peninsula amenities, including an
enclosed pool, meeting room, and continental breakfast bar in the lobby area.
SUPER 8 MOTELS NORTHWEST II
The first quarter of 1998 has been mixed for Super 8 Motels Northwest II. Total
sales increased by $23,000, or about 3% over the first quarter of 1997.
Bremerton saw an increase of overall revenues by about 11 %. Improved occupancy,
up 3.9 points, and average daily rate, up $.91, caused this increase. Portland's
occupancy increased by slightly more than 1 point, but the average daily rate
rose by $1.96. These factors combined to increase revenues by about 6%. Yakima
created the mixed result for the partnership, with an occupancy decrease of 4.4
points which could not be overcome by the $.93 increase in average daily rate.
The result was a decrease in revenues for Yakima of about 6%.
Overall, expenses were well controlled at the properties. The Net Loss shown on
the Income Statement reflects the fact that the partnership traditionally
expenses the majority of its renovation costs as they are completed. Since a
major renovation was completed in Bremerton during the first quarter, the
Supplies and Maintenance line item in expenses shows the almost $90,000 spent in
upgrading the property. The net result is that the partnership shows a net loss
for the year to date. However, the partnership is in strong financial condition
with an excellent cash reserve and a good ratio of current expenses to current
liabilities.
Enclosed are a complete copy of the 1997 audited financial statements, the first
quarter 1998 unaudited financial statements, and occupancy and room rate charts
for each property. Your first quarter 1998 distribution check is in the amount
of $25.00 per partnership unit. This distribution equals a 10% annualized return
on your original investment.
Please be reminded that the offers to purchase units by various liquidity funds
are normally far below the original cost of $1,000 per unit, and less than the
consolidated appraised value of the motels owned by the partnership as completed
in August of 1996. This information has been reported to you in past
newsletters, but we again want to remind you that if you find a need to dispose
of your units, you are encouraged to call
3
<PAGE> 7
your NASD registered securities representative, or the partnership office, so
that you may be assisted in transferring your units at a fair value.
IMPORTANT NOTICE: Due to scheduling conflicts, the Annual Informational Meeting
for the partnership has been RESCHEDULED. Please note the NEW dates below:
DATE: Tuesday, June 23, 1998
TIME: 8:00 p.m.
LOCATION: SeaTac Super 8 Motel
3100 South 192nd
SeaTac, Washington
-- OR --
DATE: Thursday, June 25, 1998
TIME: 7:00 p.m.
LOCATION: Portland Airport Super 8 Motel
11011 N.E. Holman
Portland, Oregon
Thank you for your continued support of Super 8 Motels Northwest 1, and
remember, wherever your summer travel leads you-THINK SUPER 8-and call
1-800-800-8000 for reservations.
- --------------------------------------------------------------------------------
The Official Publication of
THE PENINSULA GROUP INCORPORATED
7515 Terminal St. SW, Tumwater, WA 98501 / (360) 943-8000
Owners and operators of America's finest economy lodging
serving 26 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
4
<PAGE> 8
SUPER 8 MOTELS NORTHWEST II
BALANCE SHEET
MARCH 31, 1998 AND 1997
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
1998 1997
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash $ 279,938 $ 469,595
Accounts receivable 14,001 10,948
Inventory 58,860 58,319
Prepaid expenses 4,197 4,548
----------- -----------
TOTAL CURRENT ASSETS 356,996 543,410
PROPERTY AND EQUIPMENT
Land 714,301 714,301
Buildings 4,097,106 4,097,106
Equipment, furniture, and fixtures 1,242,262 1,241,326
----------- -----------
Subtotal 6,053,669 6,052,733
Less accumulated depreciation (2,945,778) (2,781,320)
----------- -----------
TOTAL PROPERTY AND EQUIPMENT, NET 3,107,891 3,271,413
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 (52,260) (47,372)
----------- -----------
TOTAL OTHER ASSETS 25,115 30,003
TOTAL ASSETS $ 3,490,002 $ 3,844,826
=========== ===========
LIABILITIES AND PARTNER'S CAPITAL EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 101,680 $ 87,296
Accounts payable - affiliates 38,301 38,442
Accrued expenses 62,231 64,169
Current portion of long-term debt 124,638 168,865
----------- -----------
TOTAL CURRENT LIABILITIES 326,850 358,772
NONCURRENT LIABILITIES
Accrued rent under lease agreement 160,805 135,027
Long-term debt, net of current portion shown above 2,176,764 2,301,311
Accrued property management fees 350,000 699,048
----------- -----------
TOTAL NONCURRENT LIABILITIES 2,687,569 3,135,386
PARTNER'S CAPITAL EQUITY
General partner 76,027 57,293
Limited partners 399,556 293,374
----------- -----------
TOTAL PARTNER'S CAPITAL EQUITY 475,583 350,667
----------- -----------
TOTAL LIABILITIES AND PARTNER'S CAPITAL EQUITY $ 3,490,002 $ 3,844,825
=========== ===========
</TABLE>
<PAGE> 9
SUPER 8 MOTELS NORTHWEST II
STATEMENT OF INCOME
FOR THE THREE MONTHS ENDING MARCH 31, 1998 AND 1997
(Unaudited)
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
SALES
Rooms $ 673,070 $ 655,657
Other 26,143 20,378
--------- ---------
TOTAL SALES 699,213 676,035
DIRECT OPERATING EXPENSES
Payroll and related expenses 167,152 151,959
Supplies and maintenance 160,158 67,342
Utilities 45,658 48,715
Other 8,365 6,321
--------- ---------
TOTAL DIRECT OPERATING EXPENSES 381,333 274,337
INDIRECT OPERATING EXPENSES
Advertising and promotion 18,713 20,403
Bank and credit card charges 9,618 8,596
Insurance 9,779 9,413
Property and business taxes 24,826 35,122
Other 4,027 3,261
--------- ---------
TOTAL INDIRECT OPERATING EXPENSES 66,963 76,796
ADMINISTRATIVE AND GENERAL EXPENSES
Administrative service fees 42,589 50,986
Franchise fees 26,943 26,226
Management fees 34,947 33,801
Professional services 8,190 4,408
Other 9,217 4,954
--------- ---------
TOTAL ADMINISTRATIVE AND GENERAL EXPENSES 121,886 120,376
FIXED CHARGES
Amortization 1,209 1,159
Depreciation 38,781 42,657
Interest 59,960 46,579
Lease expense 36,854 36,352
Deferred land lease 8,255 3,882
--------- ---------
TOTAL FIXED CHARGES 145,059 130,630
INCOME (LOSS) FROM OPERATIONS (16,028) 73,896
OTHER INCOME
Interest income 1,846 3,004
--------- ---------
NET INCOME (LOSS) $ (14,182) $ 76,900
========= =========
</TABLE>
<PAGE> 10
SUPER 8 MOTELS NORTHWEST II
BALANCE SHEET
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------
1997 1996
----------- -----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 387,878 $ 551,202
Accounts receivable, trade 15,042 17,457
Accounts receivable, affiliates -- 3,149
Inventory 58,858 58,319
Prepaid expenses 6,912 11,613
----------- -----------
Total current assets 468,690 641,740
----------- -----------
PROPERTY AND EQUIPMENT, at cost
Land 714,301 714,301
Buildings 4,097,107 4,097,107
Equipment, furniture, and fixtures 1,242,261 1,241,326
----------- -----------
6,053,669 6,052,734
Less accumulated depreciation (2,906,997) (2,738,663)
----------- -----------
Total property and equipment 3,146,672 3,314,071
----------- -----------
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 (51,051) (46,214)
----------- -----------
Total other assets 26,324 31,161
----------- -----------
$ 3,641,686 $ 3,986,972
=========== ===========
</TABLE>
<PAGE> 11
SUPER 8 MOTELS NORTHWEST II
BALANCE SHEET
- --------------------------------------------------------------------------------
LIABILITIES AND PARTNERS' EQUITY
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------
1997 1996
------------ ------------
<S> <C> <C>
CURRENT LIABILITIES
Accounts payable, trade $ 17,862 $ 47,021
Accounts payable, affiliates 53,939 83,663
Accrued expenses 108,377 126,478
Current portion of long-term debt 127,000 155,000
------------ ------------
Total current liabilities 307,178 412,162
------------ ------------
NONCURRENT LIABILITIES
Long-term debt, net of current portion shown above 2,223,015 2,345,801
Accrued rent under lease agreeements 152,550 137,021
------------ ------------
2,375,565 2,482,822
------------ ------------
ACCRUED PROPERTY AND MANAGEMENT FEES 350,000 699,048
------------ ------------
COMMITMENTS (Notes 7 and 9)
PARTNERS' EQUITY
General partners' equity 96,031 63,632
Limited partners' equity (authorized, issued and
outstanding 4,052 units) 512,912 329,308
------------ ------------
608,943 392,940
------------ ------------
$ 3,641,686 $ 3,986,972
============ ============
</TABLE>
<PAGE> 12
EXHIBIT INDEX
Exhibit Number Description
- -------------- ---------------------------
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000701258
<NAME> SUPER 8 MOTELS NORTHWEST II
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
<CASH> 279,938
<SECURITIES> 0
<RECEIVABLES> 14,001
<ALLOWANCES> 0
<INVENTORY> 58,860
<CURRENT-ASSETS> 356,996
<PP&E> 6,053,669
<DEPRECIATION> 2,945,778
<TOTAL-ASSETS> 3,490,002
<CURRENT-LIABILITIES> 326,850
<BONDS> 2,687,569
0
0
<COMMON> 0
<OTHER-SE> 475,583
<TOTAL-LIABILITY-AND-EQUITY> 3,490,002
<SALES> 0
<TOTAL-REVENUES> 699,213
<CGS> 0
<TOTAL-COSTS> 381,333
<OTHER-EXPENSES> 273,948
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 59,960
<INCOME-PRETAX> (14,182)
<INCOME-TAX> 0
<INCOME-CONTINUING> (14,182)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (14,182)
<EPS-PRIMARY> (3.50)
<EPS-DILUTED> (3.50)
</TABLE>
