<PAGE>
______________________________________________________________________________
______________________________________________________________________________
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB/A
Annual Report Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1995
Commission File Number 33-14003
SIGNATURE X LTD. LIMITED PARTNERSHIP
(Exact name of small business issuer in its charter)
Indiana 35-1687036
------- ----------
(State or other jurisdiction I.R.S. Employer Identification No.)
of incorporation or organization)
250 East 96th Street, Suite 450, Indianapolis, Indiana 46240
-------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (317) 581-1111
Securities registered pursuant to Section 12(b) of the Exchange Act: None
Securities registered pursuant to Section 12(g) of the Exchange Act: None
Check whether the Registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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 X No
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Check if there is no disclosure of delinquent filers in response to Item 405
of Regulation S-B contained in this form. No disclosure will be contained, to
the best of Registrant's knowledge, in any definitive proxy or information
statements incorporated by reference herein. [ X ]
Issuer's revenues for the most recent fiscal year $3,117,727 Aggregate Market
Value of Units Held by Non-Affiliates: Unknown
(See Item 5)
Documents Incorporated By Reference: None
Transitional Small Business Disclosure Format (check one):
Yes ; No X
----- -----
______________________________________________________________________________
______________________________________________________________________________
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PART I
------
Item 1. Business of Signature X Ltd. Limited Partnership.
------------------------------------------------
A. Organization.
------------
Signature X Ltd. Limited Partnership (hereinafter sometimes referred to
as the "Issuer," the "Partnership" or the "Registrant") was originally
organized pursuant to a Certificate and Agreement of Limited Partnership dated
September 19, 1986, which was filed for record with the Marion County,
Indiana, Recorder on September 19, 1986, in accordance with the Indiana
Uniform Limited Partnership Act (I.C. Section 23-4-2-1 et seq.) ("ULPA"). On
July 1, 1988, the Partnership filed a Certificate of Limited Partnership under
the Revised Uniform Limited Partnership Act ("INRULPA"), thereby electing to
be governed under the provisions of INRULPA. As a result, effective on July
1, 1988, the Partnership became a partnership governed by INRULPA rather than
by the ULPA.
Subsequent to its organization, the Partnership commenced an SEC
registered, public offering of Units of limited partnership interest (the
"Units") at $10,000 per Unit, with a minimum subscription of one-half Unit
pursuant to a Registration Statement which originally became effective on May
29, 1987. The offering was concluded in October, 1988. A total of 364 Units,
aggregating $3,640,000, was sold in the offering to 386 purchasers who became
limited partners of the Partnership.
Signature Inns, Inc. (hereinafter sometimes referred to as the "General
Partner"), in its capacity as General Partner, contributed $404,445 as its
capital contribution to the Partnership. In addition to its capital
contribution in its capacity as a General Partner, Signature Inns, Inc.
acquired 10 Units in the offering at the same price and on the same terms as
paid by all other investors in the offering, which Units the General Partner
is required to hold indefinitely.
B. The General Partner.
-------------------
The General Partner of the Partnership is Signature Inns, Inc. ("General
Partner"), an Indiana corporation, which was incorporated on March 31, 1978.
C. The General Partner's Affiliated Partnerships and Joint Ventures.
----------------------------------------------------------------
The General Partner, directly or through a wholly-owned subsidiary, is the
general partner of a total of 21 Indiana limited partnerships and joint venture
partnerships. The partnerships own an aggregate of 23 Signature Inn hotels
totaling 2,748 rooms. Each of those 23 operating hotels and one additional
eighty-one room hotel currently under construction are operated under
long-term management and franchise agreements with the General Partner, from
which the General Partner derives substantial fee revenue.
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D. The General Partner's Subsidiaries.
----------------------------------
The General Partner has four, wholly-owned subsidiary corporations.
Signature Securities Corporation ("SSC"), is an SEC/NASD registered "limited"
broker-dealer which previously was engaged in the offer and sale of direct
participation programs (e.g., limited partnership real estate offerings) of
partnerships affiliated with Signature Inns, Inc. SSC has marketed thirteen
limited partnership programs. However, SSC has not offered limited partnership
interests since 1989.
The Signature Franchise Corporation ("SFC") subsidiary was organized in
connection with the 1992 Debt Restructuring. SFC never engaged in any
business operations.
The P & N Corporation ("P & N") subsidiary was organized in late 1993 and
acts as the general partner of the Peoria/Normal Signature Limited
Partnership, which owns and operates the Normal and Peoria, Illinois,
Signature Inn hotel properties , the Knoxville Signature Limited Partnership
which owns and operates the Knoxville, Tennessee, Signature Inn hotel property
and Meridian Signature Limited Partnership which owns land and a hotel under
construction in Indianapolis, Indiana. Those properties are managed and
franchised under management and franchise agreements between the partnerships
and the General Partner.
The S.I.E. Corporation subsidiary was organized in December 1995 and acts
as general partner for Signature Northwestern Ltd. - I.
E. Location of Signature Inn Hotels.
--------------------------------
The General Partner's ownership interest in the following affiliated
hotel partnerships ranges between 5% and 50%, depending upon the capital
contributions made to the particular partnership and other factors relating to
the structuring of the partnership. All mortgage loans on partnership
properties are non-recourse to the General Partner.
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<TABLE>
<CAPTION>
GENERAL PARTNER'S AFFILIATED SIGNATURE INN HOTEL
PARTNERSHIPS AND JOINT VENTURES
Partnership Date Organized Location of Hotel(s)
- ----------- -------------- --------------------
<S> <C> <C>
Signature I Ltd. 01/16/81 Fort Wayne, IN
Signature II Ltd. 11/12/81 Indianapolis, IN
Signature III Ltd. 02/04/82 Lafayette, IN
Signature IV Ltd. 08/27/82 Muncie, IN
Signature V Ltd. 03/09/84 Cincinnati, OH
Signature Southport 04/23/84 Indianapolis, IN
Joint Venture
Signature Northwestern 12/31/84 Indianapolis, IN
Ltd. - I
Signature VI Ltd. 01/16/85 Indianapolis, IN
Signature VII Ltd. 04/24/85 Columbus, OH,
and Kokomo, IN
Signature VIII Ltd. 11/05/85 Evansville, IN
Signature IX Ltd. 07/01/86 Terre Haute, IN
Signature Elkhart Ltd. 07/02/86 Elkhart, IN
Signature X Ltd. 09/19/86 Florence, KY,
and Sharonville, OH
Signature XI Ltd. 09/26/86 Miamisburg
(i.e., Dayton), OH
Signature XII Ltd. 10/03/86 South Bend, IN
Signature XIV Ltd. 12/12/86 Louisville, KY
Signature XVII Ltd. 09/20/88 Indianapolis (North), IN
Signature XXI Ltd. 06/12/89 Bettendorf, IA
Peoria/Normal Signature 12/16/93 Normal, IL
Limited Partnership and Peoria, IL
Knoxville Signature 05/04/94 Knoxville, TN
Limited Partnership
Meridian Signature July 96 Carmel, IN
Limited Partnership Planned opening
</TABLE>
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F. The Signature Inn Hotel Concept.
-------------------------------
The Signature Inn concept has been continuously improved since 1981 and
has been favorably received by the traveling public. The Signature Inn
concept is predicated upon a simple principle of providing first-class service
to its hotel Guests on a consistent basis in all hotels. In order to
accomplish this type of service, Signature has developed a guest services
program entitled "Legendary Service," which involves the employment of
individuals who are goal and team oriented, possess a positive mental
attitude, a good work ethic, have a sincere desire to serve our Guests and
portray the clean-cut "Signature Look." Those employees are then trained
under the Legendary Service program to provide efficient, friendly and
courteous service. The Legendary Service program also requires that, in the
event a problem cannot be resolved to the satisfaction of a guest, the guest
will receive a money-back guarantee.
In addition to the Legendary Service provided by the employees to hotel
Guests, the Signature concept is also identified by the physical features and
specialized services offered to Guests. Signature Inn hotels have large,
spacious, well furnished and attractively decorated lobby-registration areas.
The guest rooms are attractively decorated and designed to have a high
aesthetic appeal and to provide convenience and comfort. Signature rooms
feature a queen or king-sized bed and a recliner chair. Special services and
amenities offered by Signature Inn hotels include:
Newspaper delivered to room HBO, cable and in-room movies
Fax Machines Meeting rooms
Large desk in all rooms Interview centers
Free local calls Guest storage facilities
Free Breakfast Express Business center facilities
Professional conference center No-Smoking rooms
Outdoor or indoor swimming pool Guest spa rooms
Guest voice mail
Other than the professional conference center, meeting rooms, in-room movies
and long distance charges for fax machines, all items on the foregoing list
are furnished to the guest on a complimentary basis.
Although each Signature Inn hotel offers high quality lodging
accommodations and services to the public, Signature Inn hotels do not offer
restaurant, bar or lounge facilities. As with many other economy/limited
service hotels, the General Partner eliminated what it considered to be the
lower profit margin departments of "food and beverage" and the unproductive
and costly, large public areas associated with full service hotels. However,
the Signature Inn hotels are generally located adjacent to or near quality
restaurants for the convenience of their Guests. Because Signature Inns do
not have restaurants inside the hotels, Signature Inn hotels, like other
economy/limited service hotels, generally have a significantly lower
break-even threshold and are not as labor and management intensive as
All-Suite or Full Service hotels.
G. Hotel Industry Overview and Partnership Hotel Results.
-----------------------------------------------------
Signature Inn hotels operate in the "upper economy/limited service"
segment of the hotel industry. The following table illustrates average
occupancy and average daily room rates ("ADR") for the years indicated of the
Partnership hotels and the Signature Inn chain (23 hotels) compared to "upper
economy chains" and the industry:
<TABLE>
<CAPTION>
Occupancy ADR
--------------------- ----------------------
1995 1994 1993 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Florence 67.3% 66.2% 63.5% $51.74 $48.94 $46.87
Sharonville 55.6% 56.8% 53.5% $54.59 $53.40 $50.43
Signature Inn Chain 67.2% 67.9% 66.2% $55.81 $53.45 $50.48
Upper Economy Chains* 64.4% 65.4% 64.4% $47.39 $46.08 $44.31
Hotel Industry* 65.5% 65.1% 63.1% $67.34 $63.64 $61.31
</TABLE>
*Source: Smith Travel Research.
---------------------
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The General Partner believes an important indicator of hotel performance
within a segment of the industry is "revenue per available room" (REV PAR),
which combines both the occupancy and the average daily room rate achieved.
REV PAR for the years indicated for the Signature Inn chain and the "upper
economy chains" is as follows:
<TABLE>
<CAPTION>
REV PAR
------------------------------
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Signature Inn Chain $37.50 $36.29 $33.42
Upper Economy Chains $30.52 $28.87 $27.38
The upper economy/limited service hotels have performed better than all
other segmentsin the industry during the past several years. It is
management's belief that the economy/limited service hotel segment will
continue to be the fastest growing segment in the U.S. hotel industry.
Accordingly, management believes that the Signature Inn chain of hotels
are competitively positioned within thedomestic lodging industry. The hotel
industry experienced declines in average occupancy rates for several years
prior to 1991 brought on by room supply growth exceeding room demand, and
annual average daily rate increases less than inflation due to significant
discounting of room rates. In 1992, the industry began to improve with
increasing average occupancy and larger average daily rate gains. Through
1995, this favorable trend has continued. However, continuation of this
positive trend in the hotel industry is dependent in large part on demand
growth in relation to supply growth over the next several years.
Room demand growth continues to increase faster than supply growth,
although recently the supply growth appears to be accelerating.
H. Trademarks.
----------
The mark "Signature Inn" with related logo was registered by the General
Partner with the Indiana Secretary of State effective on October 8, 1980. In
addition, on October 4, 1982, the mark "Signature Inn" (with logo) was
registered on the principal register of the United States Patent and Trademark
Office. On September 18, 1984, the mark "Signature Inn", only, and the
stylized "S" logo, only, were registered on the principal register of the
United States Patent and Trademark Office. On February 14, 1990, the
declarations of five years use for each of the marks was accepted by the
United States Patent and Trademark Office. These registrations are now in
effect until a renewal date of September 18, 2004. Another mark, "We Help You
Get Down to Business," which is used by Signature Inns in its hotel
operations, was registered with the United States Patent and Trademark Office
on October 12, 1982. An additional mark, "Sincerely Yours," was registered in
1990 with the United States Patent and Trademark Office. The mark "Breakfast
Express" was registered with the U.S. Patent and Trademark Office on November
3, 1992. The Mark "There's Something Personal About a Signature" was
registered with the U.S. Patent and Trademark Office on April 30, 1991.
On June 1, 1989, Signature Inns, Inc. entered into an agreement with a
Canadian group which had owned the Canadian trademark registration of
"Signature Inn." Under the agreement, the Canadian registration of the mark
"Signature Inn" became the property of Signature Inns, Inc.
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I. The General Partner's Corporate Account Sales and Marketing.
-----------------------------------------------------------
The General Partner systematically develops regional and national
accounts consisting of corporations and travel agency consortiums which use one
or more Signature Inn hotels in the chain on a regular basis. Many of
these publish their own corporate travel directories, stipulating hotel
locations which have been approved for lodging accommodations. Signature
Inns appears in numerous corporate and travel consortium directories,
including the following: Maritz, Carlson/Wagonlite, BTI Americas, ABC Corporate
Services, Rosenbluth Travel, General Motors, Ameritech, and Navistar.
In addition, a National Sales Director and Director of Hotel Sales work
with and assist hotel employees responsible for local sales efforts
in Signature Inn markets. This corporate marketing program gives Signature
Inn hotels excellent visibility to business customers who are likely to
utilize Signature Inns on a systematic and chain-wide basis.
J. The General Partner's Centralized Reservation System.
----------------------------------------------------
Signature Inn hotels utilize Teleservice Resources, a subsidiary of AMR
Company based in Dallas/Fort Worth, Texas, to provide central reservation
services. The 800 number utilized by Signature as its central reservation
number allows the public in the United States and Canada to make toll-free
reservations by telephone, and travel agents can make electronic reservations
by using one of several electronic airline reservation systems.
K. The General Partner's Hotel Advertising.
---------------------------------------
The General Partner utilizes the services of Lord, Sullivan & Yoder, Inc.
Advertising of Columbus, Ohio, to provide full-service advertising for the
Signature Inn chain and to direct the chain's advertising program. Lord,
Sullivan & Yoder, Inc. assists in the formulation of the Signature Inn chain
and individual hotel advertising programs and budgets. The General Partner
also utilizes Montgomery Zukerman Davis, Inc., a full-service advertising firm
located in Indianapolis, Indiana, for public relations activities.
L. The General Partner's Employees.
-------------------------------
Including its five executive officers, the General Partner employs
twenty-five full-time employees at its corporate office. In addition, the
general and assistant general manager at each of the 23 operating Signature
Inns are employees of the General Partner. The General Partner also employs
approximately seventy-five full-time employees at three of the hotels managed
by the General Partner. The General Partner believes it has an excellent
relationship with its employees.
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M. Seasonality.
-----------
Demand for hotel accommodations varies seasonally in the General
Partner's current market areas. Typically, demand for hotel accommodations
and, correspondingly, occupancy rates for each of the Signature Inn hotels
within the Signature chain will be higher during the period from March through
October and lower during the period from November through February.
N. Competition.
-----------
The operation of hotels is an extremely competitive business. The General
Partner as a management General Partner and its affiliated hotel partnerships
as owners of hotels are each in competition with numerous management companies
and hotel chains in their respective areas of operation of varying quality and
size, including national and regional chains, and hotels which have available
to them greater name recognition and financial resources than the General
Partner. The General Partner believes its management possesses adequate
experience and that the Signature Inn concept is sufficiently recognized to
enable the chain to compete successfully against its competitors.
O. Refurbishing.
------------
To meet competition in the industry and to maintain economic values,
continuing expenditures must be made for modernizing, refurbishing and
maintaining existing facilities prior to the expiration of their anticipated
useful lives. If such expenditures are not made, the value and profitability
of the property may be diminished. Each affiliated hotel limited partnership
establishes reserve funds in connection with the operation of its hotel for
refurbishing which are based upon specified percentages of hotel revenues.
P. Energy and Environmental Factors.
--------------------------------
Present and future regulations issued to meet federal or local
antipollution standards, limitations on or rationing of gasoline usage,
gasoline shortages, or other effects of any future energy crisis or shortage
of natural resources may affect adversely utilization of one or more of the
Signature Inn hotel properties by travelers or increase the cost of operating
such properties and thus adversely affect the General Partner's operations.
Further, environmental studies required to be performed by the General Partner
and its affiliated partnerships in connection with the acquisition of
properties in order to avoid potential liability under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as amended by
the Super Fund Amendments and Reauthorization Act of 1986, add to the costs
and risks of acquisition of real estate sites generally.
Q. Americans With Disabilities Act.
-------------------------------
The General Partner believes that all Signature Inn hotels within the
Signature Inn chain currently are in compliance with the Americans With
Disabilities Act and does not anticipate that future compliance with this
regulation will require substantial cash resources.
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R. Miscellaneous.
-------------
Neither the General Partner nor any of its affiliated limited
partnerships are dependent upon a single customer or a very few customers, the
loss of any one of which would not have a material adverse effect on the
General Partner. All raw materials utilized by the General Partner and its
affiliated limited partnerships in the construction or refurbishing of their
respective hotels are believed to be readily available at competitive prices.
The General Partner is not engaged in any material research or development
activities.
S. The Partnership's Hotels.
------------------------
The business of the Partnership consists exclusively of the ownership and
operation of two Signature Inn hotels located in Florence, Kentucky, and
Sharonville, Ohio. A listing of these hotels, location, the number of rooms,
and opening dates is as follows:
</TABLE>
<TABLE>
<CAPTION>
Location of Hotel Number of Rooms Opening Date
----------------- --------------- ------------
<S> <C> <C>
I-75/71 & Turfway Road 125 07/14/87
Florence, Kentucky
I-75 & Sharonville Road 130 09/08/87
Sharonville, Ohio
</TABLE>
Each of the foregoing properties is operated as a franchisee of the
General Partner. The Partnership has entered into a Signature Inn Individual
Hotel License Agreement with respect to each of the hotels. By the terms of
those agreements, the Partnership was to pay to Signature Inns, Inc. monthly
franchise fees (i.e., royalties) equal to 4% of the gross receipts of each of
the hotels and, in addition, contribute an additional 3.5% of gross receipts
to advertising and reservation funds administered by Signature Inns, Inc. to
finance advertising programs and a reservation system. The initial term of
each of the agreements is 10 years, and the Partnership has an option to renew
each of those agreements for an additional term of 5 years. Under the terms
of the agreements, the Partnership is authorized to use the name "Signature
Inn," as well as other trademarks and logos associated with the Signature
system, and the General Partner provides various services in relation to that
system.
Each of the Partnership's hotels is managed by the General Partner
pursuant to a Management Agreement entered into between the Partnership and
the General Partner. Under the Management Agreements, the General Partner
establishes policies for the Partnership's employees having direct
responsibility for the hotel's operation. In addition, the General Partner
establishes room rates, directs the promotional activity of the Partnership's
employees, supervises the purchase and replacement of equipment and supplies,
supervises maintenance activities and selects vendors, suppliers and
independent contractors. In addition, the General Partner performs all
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<PAGE>
bookkeeping and administrative duties in connection with each of the hotels
and administers payments and reports to the Limited Partners. The Partnership
is required to pay to the General Partner as compensation for its management
and accounting services an amount equal to 5% of gross receipts per month for
each of the hotels. This compensation is in addition to the cost of
compensating the Partnership's own employees and the costs of goods and
services acquired by the Partnership from independent contractors. However,
the management fee covers all of the General Partner's overhead for which
there is no separate charge.
A mortgage loan of $2,730,000 at December 31, 1995, relating to
industrial revenue bonds issued by the City of Florence, Kentucky, is secured
by the Florence hotel and includes various principal amounts which bear
interest at an effective rate of 9.76% and mature serially to 2016. The bond
indenture requires the maintenance of a debt service fund of $225,000 before
distributions can be made to the partners. Withdrawals from the fund are
permitted for working capital and other operating needs.
A mortgage loan of $2,504,869 at December 31, 1995, is secured by the
Sharonville hotel and is payable in monthly installments of $23,502, including
interest at 10.0%. The interest rate and monthly installments are adjustable
at three-year intervals to 3.75% above the three-year U.S. Treasury Constant
Maturity rate, based on maturity in 2018. The interest rate is not to exceed
15% through maturity in 1998, or be less than 10%.
In 1994, the General Partner restructured the note payable to General
Partner, which had a balance of $3,038,045, and reduced the balance to
$2,377,361 resulting in an extraordinary gain from the restructuring of
$660,684. The restructured note is non-interest bearing and repayments are
dependent on future annual cash flows of the Partnership. The note matures in
2004 and requires annual principal payments equal to 50% of defined available
cash flow but not in excess of $237,736.
In the opinion of Partnership management, both hotel properties are
adequately insured.
Sharonville Office Building. In 1994, the Partnership demolished an
office building at a cost of $7,500, and the City of Sharonville added
additional parking on the former building site which is adjacent to the new
Sharonville Convention Center. The Partnership entered into a twenty-year
cost-sharing agreement with the City for the maintenance of this parking lot
which provides for annual payments to the Partnership of $2,400, increasing 4%
each year. The agreement allows the City to utilize the new parking area for
a period of twenty years. The Partnership has the right to terminate the
agreement at any time prior to the end of the twenty year period, with a
payment to the City of $6,000 for each of the remaining years of the contract.
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T. Reserves.
--------
Although the Partnership attempts to maintain adequate working capital
reserves, the Partnership's working capital reserves historically have been
inadequate. In the past, the General Partner periodically has advanced funds
to the Partnership. The General Partner may be unable or unwilling to make
future advances to the Partnership.
As a result of the Partnership's recurring losses from operations and
decreases in cash flows, the Partnership's audited financial statements
include Note 1 which states that failure to reach the anticipated increased
revenues could jeopardize the Partnership's ability to meet its obligations.
U. Employees.
---------
As of December 31, 1995, the Partnership employed approximately 50
employees, approximately ten (10) of whom were employed on a part-time basis.
V. Summary of Partnership Agreement.
--------------------------------
The following is a brief summary of certain provisions of the Partnership
Agreement.
(1) Powers of the General Partner. Signature Inns, Inc. (the "General
Partner") has full, exclusive, and complete authority and discretion in the
management and control of the business of the Partnership. (Sections 9.01 and
9.02.) Limited Partners have no right or power to take part in the management
of, or to bind, the Partnership. (Section 14.01.)
(2) Liabilities of the Limited Partners. The Partnership Agreement
provides that no Limited Partner shall be liable for any debts or obligations
of the Partnership in excess of the amount of his/her Capital Contribution
which has not been previously returned to him/her (Section 14.03), except
that, under applicable law, the Limited Partners may be required to return
(with interest) amounts distributed to them as a return of their Capital
Contributions if the Partnership is unable to pay creditors who extended
credit to the Partnership prior to the date of any such return of capital.
(Section 6.03.) In addition, all undistributed Cash Available for
Distribution and proceeds of the sale or financing of Partnership Properties
which would otherwise be distributed to the Partners are available, along with
all Partnership assets, to creditors to satisfy the debts and obligations of
the Partnership until actually distributed. (Section 14.03.) Upon
payment in full of the subscription price, Units acquired by Limited Partners
pursuant to the Partnership Agreement become fully paid and nonassessable.
(Section 6.06.) No Limited Partner has the right to withdraw all or any
portion of his Capital Contribution until the full and complete winding up and
liquidation of the business of the Partnership, except as otherwise provided
by law. (Section 6.03.)
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(3) Meetings and Voting Rights of the Limited Partners. Meetings of the
Limited Partners may be called at any time by the General Partner or by one or
more Limited Partners holding more than 25% of the Units. Limited Partners
can vote at any meeting and the Limited Partners can act without a meeting by
written consent, provided that written consents are delivered to the General
Partner. Limited Partners are entitled to one vote for each Unit held.
(Section 14.04.)
Limited Partners may, with the affirmative vote of those holding more
than 50% of the Units, take action on the following matters: (a) the approval
or disapproval of the sale or exchange of all or substantially all of the
Partnership's properties; (b) dissolution of the Partnership; (c) removal of a
General Partner or any successor General Partner; (d) election of new General
Partner upon the removal, retirement, bankruptcy, insolvency or death of a
General Partner or any successor General Partner; and, (e) amendment of the
Partnership Agreement (Section 14.01.).
The right of the Limited Partners to amend the Partnership Agreement,
however, is limited with respect to amendments affecting limited liability of
the Limited Partners and the rights and interests of the General Partner.
(Section 14.02.) Amendments receiving the requisite vote will be executed by
the General Partner on behalf of all Limited Partners acting pursuant to the
power of attorney contained in the Partnership Agreement. (Section 17.01.)
(4) Reserves. The General Partner shall make an initial provision for
adequate reserves (by retention of proceeds from the sale of Units and Cash
Flow from operations) for working capital in an amount equal to approximately
5% of the "Project Cost" of each hotel and for replacements of furniture,
fixtures, and equipment in the amount set forth under Section 9.02(1).
(5) Books and Records. The General Partner is required to maintain at
the Partnership's principal office full and accurate records for the
Partnership, and all Limited Partners shall have the right to inspect and
examine such books and records at all reasonable times and upon reasonable
notice. (Section 13.01.) Annual audits of the Partnership's affairs will be
conducted by such firm of independent certified public accountants as may from
time to time be engaged by the Partnership. (Section 13.02.)
(6) Limited Transferability of Units. There are a number of
restrictions on the transferability of Units, including, among others, the
following: Units may not be subdivided after purchase; and investors
transferring less than all of their Units must transfer a number of Units such
that, after the transfer, both the transferor and the transferee shall own not
less than one Unit. A transfer fee in an amount sufficient to cover transfer
costs will be established by the General Partner, and payment thereof shall be
a condition to effectiveness of a transfer. All transfers of Units must be
pursuant to assignment documentation satisfactory in form and substance to the
General Partner. No Unit may be sold, assigned or exchanged if the sale of
such Unit, when added to the total of all other Units sold or exchanged within
the period of 12 consecutive months prior to the proposed date of sale or
exchange, would, in the opinion of counsel for the Partnership, result in the
termination of the Partnership under Section 708 of the Internal Revenue Code
(dealing with transfers of 50% or more of the outstanding interests of a
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partnership) unless the Partnership and the transferring holder shall have
received a ruling by the Internal Revenue Service that the proposed sale or
exchange will not cause such termination. (Section 15.03.)
An Assignee of Units shall not become a substituted Limited Partner in
place of his/her assignor unless there is compliance with, among others, the
following additional conditions: (i) the written consent of the General
Partner to such substitution shall have been obtained, which consent in the
General Partner's absolute discretion may be withheld and (ii) the Assignee
shall have expressly agreed to become a party to the Partnership Agreement.
(Section 15.04.)
(7) Assignability of General Partner's Interest. With the consent of
the General Partner and Limited Partners holding more than 50% of the Units,
the General Partner may designate a successor or additional General Partners,
in each case with such participation in such General Partner's interest as
such General Partner and such successor or additional General Partners may
agree upon, provided that the interests of the Limited Partners are not
affected thereby.
A General Partner may withdraw from the Partnership at any time upon 60
days prior written notice to the Limited Partners and any other General
Partner or may transfer his interest to an entity controlling, controlled by,
or under common control with it; provided, however, that in either such event,
if it is determined that the Partnership business is to be continued rather
than dissolved and liquidated upon the happening thereof, the withdrawal or
transfer shall be effective only after receipt by the Partnership of an
opinion of legal counsel to the effect that such withdrawal or transfer will
not cause the Partnership to be classified as an association taxable as a
corporation rather than as a partnership for federal income tax purposes.
(Section 15.01.)
(8) Dissolution and Termination. The Partnership is to continue until
April 22, 2035, but may be dissolved earlier as provided in the Partnership
Agreement or by law. (Article V.) The Partnership Agreement provides that
the withdrawal, bankruptcy, insolvency, death, or removal by the Limited
Partners of the General Partner will dissolve the Partnership unless the
General Partner, or, if there is no remaining General Partner, the Limited
Partners, by a majority vote in interest, elect to continue the business of
the Partnership. (Section 18.01.) The Limited Partners also can dissolve the
Partnership by a vote of a majority in interest without removing the General
Partner. (Section 18.01.) In the event the Partnership is dissolved, the
assets of the Partnership shall be liquidated as promptly as is consistent
with obtaining the fair market value thereof; the proceeds therefrom, together
with assets distributed in kind, shall be distributed first to creditors to
satisfy debts and liabilities of the Partnership other than loans or advances
made by Partners to the Partnership, then to the establishment of reserves
deemed reasonably necessary to satisfy contingent or unforeseen liabilities or
obligations of the Partnership or of the General Partner arising out of or in
connection with the Partnership, then to the repayment of loans or advances
made by any of the Partners to the Partnership, with the balance, if any, to
be distributed among the Partners as provided in the Partnership Agreement
(Section 19.01. and "Distribution Policies") and upon completion of the
foregoing the Partnership shall be terminated.
-13-
<PAGE>
(9) Distribution Policies.
---------------------
(a) Time of Distributions and Allocation Among Limited Partners.
The Partnership makes annual distributions of all Cash Available for
Distribution, if any. Net proceeds of sale of Partnership Properties (and of
refinancing thereof, where the proceeds of such refinancing are not to be
reinvested in the acquisition of additional Properties) will be distributed as
soon as possible following their receipt.
The record date for determining the Limited Partners entitled to
participate in a distribution shall be the last day of the calendar month
preceding the date of distributions.
Each distribution will be allocated to the Limited Partners in the
ratio which the number of Units owned by each of them bears to the total
number of Units outstanding, subject to adjustment with respect to Units
issued by the Partnership during the fiscal year.
(b) Allocations and Distributions to the General Partner and
Limited Partners.
Allocation of Income and Loss and Distributions of Cash. The
following table sets forth (1) the allocation of Partnership income, gains,
losses, deductions, and credits between the General Partner and the Limited
Partners (as a group) and (2) the entitlements of the General Partner and the
Limited Partners (as a group) to cash distributions. The information set
forth with respect to each category, both before and after "Reallocation
Date."
With respect to distributions of Cash Available for Distribution
under Section 8.01 of the Agreement, "Reallocation Date" refers to the date on
which the Limited Partners have received an amount equal to 150% of their
Capital Contributions as a result of the distribution to them of Cash
Available for Distribution under Section 8.01 of the Agreement. With respect
to distribution of Net Proceeds under Section 8.02, "Reallocation Date" refers
to the date on which the Limited Partners have received an amount equal to
100% of their Capital Contributions as a result of the distribution to them of
Net Proceeds under Section 8.02 of the Agreement.
<TABLE>
<CAPTION>
General Limited General Limited
Partner % Partner % Partner % Partner %
Before Before After After Item
Reallocation Reallocation Reallocation Reallocation
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Income, Gains, 25% 75% 50% 50% Losses,
Deduc-
tions and Credits
Cash Available 25% 75% 50% 50% for
Distribution
(From Operations)
Net Proceeds From 25% 75% 50% 50% Sales,
Financing
and Refinancing
of Properties
</TABLE>
-14-
<PAGE>
(c) Allocation of Net Income and Net Losses Among the Limited
Partners. Net income and net loss shall be allocated among the Limited
Partners in proportion to the number of Units owned by each of them as of the
last day of the year, subject to adjustment with respect to Units issued by
the Partnership or transferred by Partners during the year.
(10) Reports to Limited Partners.
---------------------------
Within 75 days after the end of the fiscal year (December 31) of the
Partnership, the General Partner will deliver to each Limited Partner such
information as is necessary for the preparation by each Limited Partner of
his/her federal income tax return and state income or other tax returns with
regard to jurisdictions in which properties are located.
Within 90 days after the end of each Partnership fiscal year, the
General Partner will deliver to each Limited Partner an annual report which
will include audited financial statements of the Partnership prepared in
accordance with generally accepted accounting principles. Such financial
statements will include a profit and loss statement, a balance sheet, a
statement of cash flows, and a statement of changes in Partners' capital. The
annual report for each year will report on the Partnership's activities for
that year, set forth the compensation paid to the General Partner and its
Affiliates with a statement of the services performed in consideration
therefor, and contain such other information as is deemed reasonably necessary
by the General Partner to advise the Limited Partners of the affairs of the
Partnership.
Each Limited Partner will be furnished within 60 days after the end
of the first six-month period of each Partnership year, an unaudited
semi-annual financial report for that period including a profit and loss
statement, a balance sheet, and a statement of cash flows. The foregoing
reports for any period in which fees are paid to the General Partner or its
Affiliates for services shall set forth the fees paid and the services
rendered.
W. The General Partner's Past Financial Difficulties, Restructurings,
Refinancings and Capital Appreciation Fee.
-----------------------------------------------------------------
In October, 1989, the General Partner's primary development lender and
lead bank on its line of credit refused to renew on normal terms the General
Partner's line of credit, which had previously been routinely renewed on an
annual basis. In March 1990, the bank refused to further renew the line of
credit at all. The Bank's refusal to renew the line of credit caused the
General Partner to terminate two on-going public offerings of affiliated
limited partnership interests and prevented the General Partner from
structuring and syndicating any such offerings after 1989. As a result, nine
hotels in their "start-up" phase were not adequately financed and their
-15-
<PAGE>
operation caused the General Partner to exhaust substantially all of its cash
resources and historically adequate working capital reserves. In order to
protect the General Partner's assets from threatened action by the lenders,
and to provide sufficient time to structure alternative financing
arrangements, the General Partner initiated a Chapter 11 bankruptcy proceeding
in April, 1990. As the debtor-in-possession, the General Partner continued in
possession and control of its nine hotel properties and other assets.
In March 1991, a Court order and judgment were entered confirming the General
Partner's Plan of Reorganization ("Confirmed Plan"). The General Partner made
the required payments under the Confirmed Plan throughout the balance of 1991.
During the latter part of 1991, occupancy and average daily room rate levels
for the nine General Partner-owned hotels, as a group, were substantially
lower than the levels which had been projected as a basis of the General
Partner's Confirmed Plan. As a result, the General Partner's operating
results were significantly adversely affected. The cash flow from the General
Partner's operations, together with the cash balances on hand at the
confirmation of the Confirmed Plan, were not sufficient to allow the General
Partner to continue to service its indebtedness under the terms of the
Confirmed Plan. In January 1992, the General Partner suspended debt service
payments to four banks, resulting in material defaults under the Confirmed
Plan.
During 1992 and 1993, the General Partner transferred ownership of a
total of six General Partner-owned hotels to construction mortgage lenders in
lieu of foreclosure and in full release and discharge of the mortgage
indebtedness owing by the General Partner on those hotels. In addition, three
previously affiliate-owned hotels were also reconveyed to the respective
mortgage lenders. As a result, during those two years, the number of
Signature Inn hotels operating in the Signature Inn chain decreased from 32
hotels to 23 hotels.
In December 1992, the General Partner and its lead bank entered into
a comprehensive Restructure Agreement, pursuant to which indebtedness owing by
the General Partner in the aggregate principal amount of $35,242,000 was
significantly modified and restructured and warrants for preferred stock were
issued to the bank (the "Restructuring"). In November 1993, the General
Partner entered into an Addendum to Restructure Agreement (the "Addendum").
Under the terms of the Addendum, the General Partner's primary bank granted to
the General Partner the right and option, exercisable not later than December
31, 1993, to pay $6,000,000 in cash in full settlement, satisfaction, release
and discharge of all indebtedness and other obligations owing by the General
Partner under the Restructure Agreement, including the warrant obligations
under the Restructuring. As a condition to the option, the General Partner
was required to convey to a to-be-formed affiliated limited partnership (the
"Partnership") the General Partner's Normal and Peoria hotels, thereby
eliminating the mortgage indebtedness owing on those hotels. In
December 1993, the General Partner, with Banc One Capital Corporation of
Columbus, Ohio ("BOCC"), acting as financial advisor, completed the
settlement, satisfaction, release and discharge of all obligations under the
Restructuring (the "Refinancing"). The necessary funds required by the
Refinancing were provided by the following sources:
-16-
<PAGE>
(a) Bank One, Indianapolis, N.A. ("Bank One") provided a
"senior" credit facility in the principal amount of $2,500,000, with an
initial maturity date of December 31, 1995, renewable annually thereafter on
May 31 of each year for a two-year term.
(b) Banc One Capital Partners II Limited Partnership ("BOCP
II") provided a variable rate subordinated loan in the principal amount of
$1,800,000, with a final maturity date of December 16, 1998 ("the
"Subordinated Loan").
(c) The General Partner provided approximately $1,200,000,
which represented the amount which the General Partner, as seller, realized
upon the sale of its Normal and Peoria Hotel Properties to Peoria/Normal
Signature Limited Partnership.
(d) The General Partner also provided approximately $1,000,000
from its general, unrestricted corporate cash balances.
The gain to the General Partner from debt extinguishment in
connection with the Refinancing eliminated entirely the General Partner's
shareholders' deficit and restored a positive shareholders' equity.
In connection with the Subordinated Loan, the General Partner agreed to pay to
BOCP II a "Capital Appreciation Fee" equal to 25% of the value of the General
Partner, measured according to three alternative calculations, not earlier
than 36 months nor later than 72 months after December 16, 1993. In August,
1995, the General Partner entered into a Repayment Agreement with BOCP II
pursuant to which (a) the unpaid principal balance of the Subordinated Loan
was repaid in full, together with all accrued interest thereon, and (b) the
General Partner paid, and BOCP II accepted, a payment of $900,000 in full
satisfaction of the General Partner's Capital Appreciation Fee obligation,
subject to adjustment to the original terms of the Capital Appreciation Fee in
the event of a Private Sale of the General Partner, as defined in the original
fee agreement, on or before December 16, 1996.
In connection with the BOCP II subordinated debt financing, BOCP II
required the General Partner's officers to commit to invest at least $500,000
in the General Partner's Common Stock. In order to facilitate such
investment, allow the other shareholders an opportunity to avoid possible
dilution of their interests in the General Partner and to raise additional
equity for the General Partner, the General Partner filed a Registration
Statement with the Securities and Exchange Commission on April 12, 1994,
pursuant to which the General Partner's existing shareholders were issued
non-transferrable rights to purchase an additional five (5) shares of the
General Partner's Common Stock for each one (1) share currently held at a
purchase price of twenty cents ($.20) per share. In addition to the
investment by Management, a total of 1,808,520 shares of Common Stock were
issued, for an aggregate purchase price of $361,704, pursuant to the rights
offering.
-17-
<PAGE>
X. Certain Affiliated Partnerships' Operating Losses.
-------------------------------------------------
A number of the General Partner's affiliated partnerships have
experienced financial difficulties in varying degrees, in most cases
principally resulting from operating losses and cash flow deficits experienced
by certain hotels owned by such partnerships.
Signature XVI Ltd., the owner of a Signature Inn hotel in Lexington,
Kentucky, filed a voluntary petition under Chapter 11 of the Bankruptcy Code
on September 26, 1991. Because Signature XVI Ltd. was not able to secure
replacement financing, the mortgage lender on the Lexington property obtained
title to the Lexington hotel in July, 1992. The Signature XVI Ltd.
partnership was thereafter terminated and dissolved.
Signature XXI Ltd., which owned Signature Inn hotels in Bettendorf,
Iowa, and Auburn Hills, Michigan, filed a voluntary petition under Chapter 11
of the Bankruptcy Code on July 26, 1991. A foreclosure and sale of the Auburn
Hills property took place in February 1992, with the mortgage holder taking
title to the Auburn Hills property. The Signature XXI Ltd. Plan of
Reorganization was confirmed by the Bankruptcy Court on November 2, 1992 and
provided for the continuation of the Partnership and its operation of the
Bettendorf hotel. The Bettendorf mortgage loan was restructured, retroactive
to January 1, 1992, into three non-recourse replacement notes maturing
December, 1995, with an option to extend the maturity to December, 1997.
Defaults have also existed with respect to hotel financings involving
Signature XI Ltd.'s Dayton, Ohio, hotel project and Signature XVII Ltd.'s
Indianapolis, Indiana, hotel project. The defaults with respect to those
hotels were cured under restructured financing arrangements with the
Partnership's lenders completed in 1994.
Item 2. Description of Properties. A description of the location
and general character of the Partnership's hotels and related facilities and
other property is set forth under Item 1.
Item 3. Legal Proceedings. With the exception of the prior Chapter
11 bankruptcy proceedings of Signature Inns, Inc. and the prior Chapter 11
bankruptcy proceedings of Signature XVI Ltd. and Signature XXI Ltd.,
affiliates of the Registrant, described earlier, all of which matters have
been resolved, neither the Registrant nor any of its subsidiaries nor any of
its affiliates, is or was a party to, nor is their property the subject of,
any material pending legal, administrative, judicial, or similar proceeding.
The Registrant and certain of its affiliated limited partnerships are
involved, from time to time, in routine litigation incidental to their
businesses. There are no proceedings to which any director, officer, nominee
or affiliate of the Registrant or its subsidiaries or affiliates is a party
adverse to the Registrant or its subsidiaries or affiliates or has a material
adverse interest to the Registrant or its subsidiaries or affiliates.
Item 4. Submission of Matters to a Vote of Security Holders. No matter was
submitted to a vote of the security holders of the Registrant during the
fourth quarter of the fiscal year covered by this Form 10-KSB Report.
-18-
<PAGE>
PART II
-------
Item 5. Market for the Registrant's Equity and Related Equity Holder
Matters. The Registrant's common equity consists of Units of limited
partnership interest in the Partnership. There is only one class of Units,
and all Units have the same rights and the same interests in income, loss,
distributions and capital of the Partnership. Each Unit represents a total
required capital contribution of $10,000. Units are not subject to assessment
for additional contributions. Holders of the Units possess certain limited
voting rights (with respect to those matters which are submitted to a vote of
the Limited Partners) and rights to certain distributions. Such voting and
distribution rights will be based upon the number of Units owned by each
Limited Partner. The Partnership Agreement contains a number of restrictions
on the transferability of the Units. The General Partner does not have the
right and is not obligated to redeem or repurchase the Units, and the
Partnership Agreement prohibits the holders of the Units from withdrawing
their respective capital contributions.
The Registrant's Units are not listed on any securities exchange and
are not subject to any quotations under the "NASDAQ" system. The Units are
not actively traded in any established public trading market. Units are
expected to be transferable, if at all, only in privately negotiated
transactions. Accordingly, the Registrant is unable to furnish any
information with respect to ranges of high and low bid quotations for the
Units during the past two years.
The following table sets forth the number of Units outstanding and
the approximate number of holders or record of the Units as of the date of
this report:
<TABLE>
<CAPTION>
Number of Number of
Outstanding Units Holders of Record
----------------- -----------------
<S> <C>
364 412
</TABLE>
Item 6. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Certain combined operating data for the years ended December 31, 1995, 1994
and 1993 is as follows for the two Partnership owned hotels - Sharonville (130
rooms) and Florence (125 rooms):
<TABLE>
<CAPTION>
Occupancy Average Daily Rate
--------- ------------------
1995 1994 1993 1995 1994 1993
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Combined 61.4% 61.4% 58.4% $53.19 $51.21 $46.68
</TABLE>
Results of Operations
- ---------------------
1995 compared to 1994
-19-
<PAGE>
Room and other hotel revenues increased $90,276 or 3.0% over 1994, due
primarily to the increase in room revenues. The average occupancy of the two
hotels remained constant at 61.4% due to a demand in both of the hotel's
market areas. The average daily rate inceased $1.98, or 3.9% due to
chain-wide rate policy changes. Revenue per available room (REVPAR), which is
the combination of occupancy and the average daily rate, increased to $32.66,
or 3.9% over 1994. Interest income increased $5,634 over 1994 due to higher
yields on greater investable cash balances.
Hotel operations and payroll costs totaling $1,778,524 represented an increase
of $87,204 or 5.2% from 1994 due to the increase in maintenance costs and
general increased costs of operating the hotels associated with inflation.
Management and franchise fees, along with advertising and reservation
contributions, are calculated as a percentage of revenues, as defined, and
accordingly, fluctuate directly with hotel revenues. These costs, totaling
$386,139, increased $11,801 or 3.2% from 1994.
Interest expense decreased $2,258 or .4% from 1994. This slight decrease is
due to the scheduled amortization reduction of the mortgage notes.
Depreciation and amortization of $304,398 represented a decrease of $70,595
compared to 1994. Depreciation expense decreased as certain depreciable
assets became fully depreciated during 1995 and 1994.
1994 compared to 1993
Room and other hotel revenues increased $281,468 or 10.3% over 1993, due
primarily to the increase in room revenues. The average occupancy increased
3.0 percentage points, or 5.1% due to some improvement in both of the hotel's
market areas. The average daily rate increased $4.53, or 9.7% due to
chain-wide policy rate changes. Revenue per available room (REVPAR) increased
to $31.44, or 15.3% over 1993. Interest income increased $7,236 over 1993 due
to higher yields on greater investable cash balances.
Hotel operations and payroll costs of $1,691,320 represented an increase of
$92,858 or 5.8% from 1993 due to the increase in the occupancy of the hotels
of 5.1% along with increased costs of operating the hotels associated with
inflation. Management and franchise fees, along with advertising and
reservation contributions, totaling $374,338, increased $35,521 or 10.5% from
1993.
Interest expense decreased $206,858 or 26.9% from 1993. The decrease is
attributable mainly to the restructuring of the general partner note effective
January 1, 1994. During 1993, no debt service payments were made on the note.
Effective January 1, 1994, the note was restructured to be non-interest
bearing, with annual principal payments equal to 50% of defined available cash
flow (but not in excess of $237,736) and a maturity in 2004. During 1993,
interest of $166,715 accrued on the note at the rate of prime plus 1%.
Depreciation and amortization of $374,993 represented a decrease of $48,747
compared to 1993. Depreciation expense decreased as certain depreciable
assets became fully depreciated during 1994 and 1993.
-20-
<PAGE>
Liquidity and Capital Resources
- -------------------------------
The offering of partnership units was completed during 1988. A total of
$3,640,000 was raised from limited partner capital contributions at $10,000
per unit and $404,445 was contributed by the general partner. During the year
ended December 31, 1995 and 1994, the Partnership's capital needs were met
primarily through operating cash flows. In addition, a $18,943 installment
loan secured by a vehicle was obtained in 1995. In the early years of the
Partnership, significant borrowings and cash advances were obtained from the
general partner.
At December 31, 1995, the Partnership had two variable rate mortgage loans
totaling approximately $5.3 million outstanding with maturities in 1998 and
2016. The $2,377,361 note payable due the general partner has a 2004
maturity. At maturity, the Partnership plans to obtain extensions or
replacement first mortgage financing to retire the outstanding indebtedness.
At December 31, 1995, the Partnership had $309,867 of cash and cash
equivalents, compared to $212,006 at December 31, 1994. In addition, the
Partnership set aside 4% of monthly revenues, as defined, for future
refurbishing needs of the hotels. At December 31, 1995, the reserve funds
amounted to $87,841 compared to $90,524 at December 31, 1994. It is expected
that future refurbishing needs of the Partnership will be funded through the
furniture and equipment reserves, and operating cash flows as necessary. The
mortgage securing the Florence property requires a debt service fund be
maintained of $225,000 prior to any partners distributions. No distributions
to partners have been made as the debt service fund level has not been
maintained due to the lack of operating cash flows.
Cash provided by operating activities from the two hotels was $430,753 in 1995
compared to $353,269 in 1994. This increase is due primarily to the increase
in the financial performance of the hotels for 1995.
During 1995, the Partnership used $203,263 in investing activities compared to
$126,007 in 1994. Additions to the furniture and equipment reserve fund were
$149,998 in 1995 (including an additional $25,000 contribution from operating
cash) compared to $118,875 in 1994. The remaining increase is due to capital
additions funded from operating cash flows in 1995.
Net cash used in financing activities was $129,629 in 1995 compared to
$120,290 in 1994. In 1995, the primary factors were proceeds of the new
mortgage loan, principal repayments of $89,507 and repayments of general
partner advances of $59,065.
The general partner believes that cash generated from the operation of the two
hotels, along with existing cash balances, will provide adequate liquidity for
the Partnership to meet its operating needs during the next twelve months.
-21-
<PAGE>
Seasonality
- -----------
Demand for hotel accommodations varies seasonally in the two hotels' market
areas. Typically, demand for hotel accommodations and correspondingly,
occupancy rates for the hotels will be higher during the period from March
through October and lower during the period from November through February.
Inflation
- ---------
The rate of inflation as measured by changes in the average consumer price
index has not had a material effect on the Partnership's financial condition
or results of operations for the periods presented.
Item 7. Financial Statements. The balance sheets of the Registrant as
of December 31, 1995 and 1994, and the related statements of operations,
partners' equity and statement of cash flows for the years ended December 31,
1995 and 1994, together with the independent auditors' report thereon, which
statements meet the requirements of Regulation S-B, are attached as an exhibit
to this report.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure. None.
PART III
--------
Item 9. Directors, Executive Officers, Promoters and Control Persons.
The names, ages, positions and backgrounds of each officer, director, promoter
and control persons of Signature Inns, Inc., the General Partner of the
Partnership are as follows:
JOHN D. BONTREGER, 47 President, Chief Executive
Officer and Chairman of the Board
Mr. Bontreger has served as President, Chief Executive Officer and
Chairman of the Board of Signature Inns, Inc. since the General Partner's
inception on March 31, 1978.
DAVID R. MILLER, 54 Secretary, Executive Director of
Sales and Marketing and Director
Mr. Miller has been employed by Signature Inns, Inc. since August 1978
and has served as the Secretary (and Treasurer until May 1986) of the General
Partner since September, 1978. Since June 1984, he has been President of
Signature Securities Corporation. Since 1990, Mr. Miller has been the
Executive Director of Marketing responsible for hotel room sales programs and
the central reservation system.
MARK D. CARNEY, 39 Vice President Finance, Chief
Financial Officer and Director
-22-
<PAGE>
Mr. Carney has been employed by Signature Inns, Inc. since September
1992 as Vice-President Finance and Chief Financial Officer. Mr. Carney was
previously employed with the public accounting firm KPMG Peat Marwick in its
real estate, hospitality and financial institution practices. He received his
CPA certification in 1982.
BO HAGOOD, 46 Vice President Hotel Operations
and Director
Mr. Hagood has been employed by Signature Inns, Inc. since December 1980
starting as General Manager. In January 1984, he was promoted to Director of
Hotel Operations and then to Vice President Hotel Operations in 1987. Mr.
Hagood has been in the hospitality industry for over 20 years. Prior to
Signature Inns, Mr. Hagood managed several hotels for national chains.
MARTIN D. BREW, 35 Treasurer and Controller
Mr. Brew has been employed by Signature Inns, Inc. since April 1986. In
December 1987, Mr. Brew assumed the position of Controller and additionally,
in April 1992, he began serving as Treasurer. Prior to his employment with
Signature Inns, Mr. Brew worked four years with KPMG Peat Marwick. He
received his CPA certification in 1985.
ORUS E. WEAVER, 72 Director
Mr. Weaver has been an independent life insurance broker since 1981 and
previously assisted in the sale of securities of Signature Inns, Inc. in
various capacities. Mr. Weaver has been a member of the National Association
of Life Underwriters for almost twenty years.
GEORGE A. MORTON, 59 Director
Mr. Morton has been part owner of Morton Farms, Inc. since 1962, and
serves as Vice President and Secretary of that Company. From April 1987 to
January 1989, Mr. Morton served as Deputy Commissioner of Agriculture for the
State of Indiana. He served as the Indiana Director of Farmers Home
Administration from 1989 to 1993.
RICHARD E. SHANK, 63 Director
Mr. Shank has been self-employed in the real estate business since 1961.
Mr. Shank was an elected representative in the Indiana General Assembly for 21
years, and was a State Senator from 1976 to 1987. He served as Executive
Director of the Indiana Professional Licensing Agency during 1988.
RICHARD L RUSSELL, 60 Director
Mr. Russell has been the Executive Director, Direct Regions of the
National Retail Hardware Association, and has been involved in the hardware
industry for nearly thirty years. He has also served as President or director
of several community and civic organizations.
STEPHEN M. HUSE, 53 Director
-23-
<PAGE>
Mr. Huse has been President and Chief Executive Officer, Huse Food Group,
Inc., in Bloomington, Indiana, since 1986. Mr. Huse is also a director of
Marsh Supermarkets, Inc., and a member of the Advisory Board of Society
National Bank, Central Indiana District, Indianapolis, Indiana. Item 10.
Executive Compensation. Not applicable. For a description and listing of all
fees and reimbursements paid by the Partnership to its General Partner, see
Note (3) of Notes to the Financial Statements of the Partnership. Item
11. Security Ownership of Certain Beneficial Owners and Management. The
General Partner owns 10 Units of limited partnership interest in the
Partnership. The General Partner's general partnership interest in the
Partnership is described under Item 1.
Item 12. Certain Relationships and Related Transactions. There was no
transaction during the Registrant's last fiscal year of a kind described in
Item 404 of Regulation S-B to which the Registrant was a party or in which the
persons described in Item 404 had a direct or indirect material interest, nor
did any relationship of a kind described in Item 404 exists during the
Registrant's last fiscal year. No loans were made by the Registrant to its
General Partner or any officer, director or affiliate of its General Partner.
-24-
<PAGE>
SIGNATURES
----------
Pursuant to the requirements of Section 13 or 15(d) of the Exchange Act
of 1934, the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
SIGNATURE X LTD. LIMITED
PARTNERSHIP
By /s/
__________________________________________
John D. Bontreger, President,
Chairman of the Board and Chief
Executive Officer of Signature Inns, Inc.,
its General Partner
-25-
<PAGE>
Item 13. Exhibits and Reports on Form 8-K.
------- --------------------------------
<TABLE>
<CAPTION>
(a) EXHIBIT INDEX
-------------
Title of Exhibit Reference
- ---------------- ---------
<S> <C>
Plan of Acquisition,
Reorganization, etc. Not applicable
Partnership Agreement and Incorporated by reference to
Certificate S-1 Registration Statement
Instruments Defining Rights Incorporated by reference to
of Security Holders S-1 Registration Statement
Voting Trust Agreement Not applicable
Material Contracts Incorporated by reference to
Registrant's 1993 Form 10-KSB
Statement Regarding Computation
of Earnings Per Share Not applicable
Annual or Quarterly Reports,
Form 10-QSB Not applicable
Letter on Change in Certifying
Accounting Not applicable
Letter on Change in Accounting
Principals Not applicable
Subsidiaries of the Registrant Not applicable
Published Report Regarding
Matters Submitted to Vote Not applicable
Power of Attorney Not applicable
1995 Annual Report of
Signature X Ltd. Limited
Partnership Exhibit A
(b) No reports on Form 8-K were filed by the Registrant during the last
quarter of the period covered by this report.
-26-
</TABLE>
<PAGE>
EXHIBIT A
---------
SIGNATURE X LTD. LIMITED PARTNERSHIP
1995 FORM 10-KSB ANNUAL REPORT
------------------------------------
Index to Financial Statements
Submitted in Response to Requirements of
Items 7 and 13 of Form 10-KSB
----------------------------------------
Page
----
Independent Auditors' Report on Financial Statements 2
Balance Sheets--December 31, 1995 and 1994 3
Statement of Operations--Years ended December 31,
1995 and 1994 4
Statements of Partners' Equity (Deficit)--Years Ended
December 31, 1995 and 1994 5
Statements of Cash Flows--
Years ended December 31, 1995 and 1994 6
Notes to Financial Statements--
December 31, 1995 and 1994 7-9
-1-
<PAGE>
SIGNATURE X LTD.
LIMITED PARTNERSHIP
Annual Report
December 31, 1995 and 1994
(With Independent Auditors' Report Thereon)
Independent Auditors' Report
The Partners Signature X Ltd. Limited Partnership:
We have audited the accompanying balance sheets of Signature X Ltd. Limited
Partnership as of December 31, 1995 and 1994, and the related statements of
operations, partners' equity (deficit), and cash flows for the years then
ended. These financial statements are the responsibility of the Partnership's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Signature X Ltd. Limited
Partnership as of December 31, 1995 and 1994, and the results of its
operations and its cash flows for the years then ended in conformity with
generally accepted accounting principles.
/s/ KPMG Peat Marwick LLP
Indianapolis, Indiana
February 2, 1996
-2-
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE X LTD. LIMITED PARTNERSHIP
Balance Sheets
December 31, 1995 and 1994
Assets 1995 1994
---- ----
<S> <C> <C>
Current assets:
Cash and short-term cash investments $ 308,404 208,858
Investments held by trustee 1,463 3,148
Cash and cash equivalents 309,867 212,006
Accounts receivable 47,290 52,702
Other current assets 74,028 99,944
------- -------
Total current assets 431,185 364,652
------- -------
Property and equipment:
Land 1,693,614 1,693,614
Land improvements 384,347 384,347
Buildings 6,846,694 6,846,694
Furniture and equipment 1,875,612 1,711,625
--------- ---------
10,800,267 10,636,280
Less accumulated depreciation 3,050,739 2,803,658
---------- ----------
Net property and equipment 7,749,528 7,832,622
Furniture and equipment reserves 87,841 90,524
Deferred costs, net of accumulated amortization
of $296,889 and $281,181 122,687 138,395
---------- ----------
$8,391,241 8,426,193
---------- ---------
---------- ---------
Liabilities and Partners' Equity
Current liabilities:
Current portion of long-term debt (note 2) 104,573 89,044
Accounts payable 25,090 24,554
Accrued payroll and related taxes 34,290 31,456
State and local taxes 57,582 55,591
Accrued interest (note 3) 22,454 23,421
------ ------
Total current liabilities 243,989 224,066
Long-term debt, less current portion (note 2) 5,197,742 5,283,835
Note payable to general partner (note 3) 2,377,361 2,377,361
Advances from general partner (note 3) 200,000 259,065
--------- ---------
Total liabilities 8,019,092 8,144,327
--------- ---------
Partners' equity:
General partner (15% equity interest) 55,439 41,897
Limited partners (85% equity interest;
364 units authorized and outstanding) 316,710 239,969
-------- --------
372,149 281,866
-------- --------
$ 8,391,241 8,426,193
----------- ---------
----------- ---------
</TABLE>
See accompanying notes to financial statements.
-3-
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE X LTD. LIMITED PARTNERSHIP
Statements of Operations
Years ended December 31, 1995 and 1994
1995 1994
---- ----
<S> <C> <C>
Revenue:
Guest room revenue $ 3,014,783 2,908,447
Other hotel revenue 86,858 102,918
Interest 16,086 10,452
--------- ---------
3,117,727 3,021,817
Costs and expenses:
Hotel operations 981,443 961,023
Salaries and benefits 797,081 730,297
Management and franchise fees (note 3) 278,020 269,523
Advertising and reservations (note 3) 108,119 104,815
Interest (note 3) 560,145 562,403
Depreciation and amortization 304,398 374,993
Loss (gain) on disposal of equipment ( 1,762) 4,051
------- --------
3,027,444 3,007,105
Income before extraordinary gain 90,283 14,712
--------- ---------
Extraordinary gain from debt
restructuring (note 3) - 660,684
--------- ---------
Net income 90,283 675,396
General partner's interest (15% interest) 13,542 101,309
-------- --------
Limited partners' interest (85% interest) $ 76,741 574,087
--------- --------
--------- --------
Per limited partner unit:
Income before extraordinary gain 211 34
Extraordinary gain - 1,543
--------- --------
Net income $ 211 1,577
--------- --------
--------- --------
Number of limited partner units outstanding 364 364
--------- --------
--------- --------
</TABLE>
See accompanying notes to financial statements.
-4-
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE X LTD. LIMITED PARTNERSHIP
Statements of Partners' Equity (Deficit)
Years ended December 31, 1995 and 1994
General Limited
Partner Partners Total
------- -------- -----
<S> <C> <C> <C>
Balance at December 31, 1993 $ (59,412) (334,118) (393,530)
Net income 101,309 574,087 675,396
------- ------- -------
Balance at December 31, 1994 41,897 239,969 281,866
Net income 13,542 76,741 90,283
------- ------- -------
Balance at December 31, 1995 $ 55,439 316,710 372,149
-------- ------- -------
-------- ------- -------
Accumulated balances:
Capital contributions 404,445 3,640,000 4,044,445
Offering expenses - (455,000) (455,000)
Net loss (349,006) (2,868,290) (3,217,296)
------- --------- ---------
Balance at December 31, 1995 $ 55,439 316,710 372,149
-------- ------- -------
-------- ------- -------
</TABLE>
See accompanying notes to financial statements.
-5-
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE X LTD. LIMITED PARTNERSHIP
------------------------------------
Statements of Cash Flows
------------------------
Years ended December 31, 1995 and 1994
--------------------------------------
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net income $ 90,283 675,396
Items which do not use cash:
Depreciation of property and equipment 288,690 359,285
Amortization of deferred costs 15,708 15,708
Extraordinary gain from debt restructuring - (660,684)
Loss (gain) on disposal of equipment (1,762) 4,051
Accrued revenue and expenses, net 37,834 (40,487)
--------- ---------
Net cash provided by
operating activities 430,753 353,269
--------- ---------
Cash flows from investing activities:
Additions to furniture and
equipment reserves (149,998) (118,875)
Other additions to property and equipment (59,666) (7,132)
Proceeds from disposal of equipment 6,401 -
--------- ---------
Net cash used in investing activities (203,263) (126,007)
--------- ---------
Cash flows from financing activities:
Payments on long-term debt (89,507) (120,290)
Proceeds from installment note 18,943 -
Repayment of advances from general partner (59,065) -
-------- ---------
Net cash used in financing activities (129,629) (120,290)
--------- ---------
Increase in cash and cash equivalents 97,861 106,972
Cash and cash equivalents at beginning of year 212,006 105,034
-------- --------
Cash and cash equivalents at end of year $ 309,867 212,006
--------- --------
--------- --------
Additional disclosures:
Interest paid $ 561,112 574,399
--------- --------
--------- --------
Additions to property and equipment from
furniture and equipment reserves $ 150,569 113,016
--------- --------
--------- --------
</TABLE>
See accompanying notes to financial statements.
-6-
<PAGE>
SIGNATURE X LTD. LIMITED PARTNERSHIP
------------------------------------
Notes to Financial Statements
-----------------------------
December 31, 1995 and 1994
--------------------------
(1) Organization and Significant Accounting Policies
Organization
------------
Signature X Ltd. Limited Partnership (the Partnership) was organized on
September 19, 1986 to operate as a franchisee of Signature Inns, Inc. The
Partnership completed construction and began operating Signature Inn hotels in
Florence, Kentucky in July 1987 and in Sharonville, Ohio in September 1987.
Signature Inns, Inc., the general partner, is responsible for the overall
management and operation of the Partnership and presently receives 15% of
partner distributions, which is to increase to 30% if the limited partners
receive cumulative cash distributions equal to their original capital
contribution plus a 10% annual return. The general partner also owns 10 of
the limited partner units.
Property and Equipment
----------------------
Property and equipment are recorded at cost and include assets leased
under noncancelable agreements and construction loan interest and fees.
Depreciation is provided on the straight-line basis over the estimated useful
lives of the related assets as follows: forty (40) years for buildings,
fifteen (15) to twenty (20) years for land improvements, and three (3) to ten
(10) years for furniture and equipment.
In 1994, the Partnership demolished an office building at a cost of
$7,500, and the City of Sharonville added additional parking on the former
building site which is adjacent to the new Sharonville Convention Center. The
Partnership entered into a twenty-year cost-sharing agreement with the City
for the maintenance of the parking lot which provides for annual payments to
the Partnership of $2,400, increasing 4% each year. The agreement allows the
City to utilize the new parking area for a period of twenty years. The
Partnership has the right to terminate the agreement at any time prior to the
end of the twenty-year period, with a payment to the City of $6,000 for each
of the remaining years of the contract.
Deferred Costs
--------------
Fees and other costs incurred in financing the hotels are amortized on
the straight-line basis over the life of the related financing.
Cash and Cash Equivalents
-------------------------
Cash and cash equivalents represent cash on deposit with banks and highly
liquid short-term cash investments with original maturities of three months or
less.
Furniture and Equipment Reserves
--------------------------------
Cash reserves for refurbishings, replacements and major repair
contingencies are established at amounts equal to 4% of defined gross
receipts. Related expenditures are disbursed from this account. In 1995, an
additional deposit of $20,000 was made to the reserve account.
Income Taxes
------------
As a partnership, the allocated share of taxable income or loss is includable
in the income tax returns of the partners; accordingly, income taxes are not
reflected in the Partnership's financial statements.
-7-
<PAGE>
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions relating to the reporting of assets and liabilities and the
disclosure of contingent assets and liabilities. Actual results could differ
from those estimates.
With anticipated increased revenues, the general partner estimates that
the Partnership will be able to generate sufficient levels of cash flows from
operations to meet hotel operating expenses and mortgage debt service
obligations. However, failure to reach these levels could jeopardize the
Partnership's ability to meet its obligations. The accompanying financial
statements do not include any adjustments that might arise from the outcome of
this uncertainty.
Financial Instruments
---------------------
The carrying amounts of the long-term debt secured by the Sharonville
hotel of $2,504,369 and advances from Signature Inns, Inc. of $200,000
approximate fair value because the interest rates on these instruments change
with market interest rates. The fair value of the Partnership's long-term
debt secured by the Florence hotel of $2,730,000 is estimated to be $2,869,000
by discounting the future cash flow payments at rates which are believed to be
currently available to the Partnership for similar debt instruments of
comparable maturities. Since there is no market for instruments comparable to
the note payable to general partner and the timing of future payments is
contingent on cash flow, a reasonable estimate of the fair value of the note
is not practicable without incurring excessive costs. The carrying amounts of
all other financial instruments approximate fair value because of short-term
maturity of these items.
(2) Long-term Debt
Signature Inn Florence
----------------------
A mortgage loan of $2,730,000 at December 31, 1995 relating to industrial
revenue bonds issued by the City of Florence, Kentucky is secured by the
Florence hotel and includes various principal amounts which bear interest at
an effective rate of 9.76% and mature serially to 2016. The bond indenture
requires the maintenance of a debt service fund of $225,000 before
distributions can be made to the partners. Through December 31, 1995, no
deposits had been made to the debt service fund. Withdrawals from the fund
are permitted for working capital and other operating needs.
Signature Inn Sharonville
-------------------------
A mortgage loan of $2,504,869 at December 31, 1995 is secured by the
Sharonville hotel and is payable in monthly installments of $23,502, including
interest at 10.0%. The interest rate and monthly installments are adjustable
at three-year intervals to 3.75% above the three-year U.S. Treasury Constant
Maturity rate, based on maturity in 2018. The interest rate is not to exceed
15% through maturity in 1998, or be less than 10%.
General
-------
Capitalized lease obligations of $48,968 at December 31, 1995 are due in
monthly installments, including imputed interest at rates which range from
13.96% to 14.43%, through maturity in 1998. The lease payments for each of
the next three years range from $4,353 to $26,121 and aggregate $56,595 over
the remaining terms of the leases, including imputed interest of $7,627.
Furniture and equipment includes $264,892 of leased assets, and related
accumulated depreciation amounted to $242,071 and $228,028 at December 31,
1995 and 1994, respectively.
Included in long-term debt at December 31, 1995 is an installment note of
$18,479 which is secured by a vehicle and is due in monthly installments of
$598, including interest at 8.5%, through December 1998.
The annual aggregate maturities of long-term debt over the next five
years are $104,573 in 1996, $116,688 in 1997, $2,501,055 in 1998, $60,000 in
1999 and $65,000 in 2000.
(3) Signature Inns, Inc.
The general partner receives 9.0% of defined gross revenue for hotel
management and franchise fees and $7,000 for annual partnership accounting and
related services. The Partnership contributes 3.5% of defined gross revenue
to a cooperative advertising and reservation fund administered by the general
partner.
-8-
<PAGE>
In 1994, the general partner restructured the note payable to general
partner, which had a balance of $3,038,045, and reduced the balance to
$2,377,361 resulting in an extraordinary gain from the restructuring of
$660,684. The restructured note is non-interest bearing and repayments are
dependent on future annual cash flows of the Partnership. The note matures in
2004 and requires annual principal payments equal to 50% of defined available
cash flow but not in excess of $237,736.
The general partner's advances bear interest at the prime rate plus 1.0%
adjusted quarterly (9.75% and 9.5% at December 31, 1995 and 1994,
respectively). Interest expense on the general partner note and advances
amounted to $25,913 and $21,537 in 1995 and 1994, respectively, and related
accrued interest amounted to $1,988 and $1,925 at December 31, 1995 and 1994,
respectively.
-9-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Consolidated Balance Statement and Consolidated Statement of Operations of
Signature X Ltd. Limited Partnership as of and for the fiscal year ended
December 31, 1995, and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 308,404
<SECURITIES> 311,330
<RECEIVABLES> 47,290
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 431,185
<PP&E> 10,800,267
<DEPRECIATION> 3,050,739
<TOTAL-ASSETS> 8,391,241
<CURRENT-LIABILITIES> 243,989
<BONDS> 7,775,103
0
0
<COMMON> 372,149
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 8,391,241
<SALES> 0
<TOTAL-REVENUES> 3,117,727
<CGS> 0
<TOTAL-COSTS> 2,467,299
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 560,145
<INCOME-PRETAX> 90,283
<INCOME-TAX> 0
<INCOME-CONTINUING> 90,283
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 90,283
<EPS-PRIMARY> 211
<EPS-DILUTED> 211
</TABLE>
