[LIVE]
<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.
250 East 96th Street, Suite 450, Indianapolis, Indiana 46240
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number (317) 581-1111
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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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<PAGE>
PART I
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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. Sec. 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.
<PAGE>
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.
<PAGE>
<TABLE>
GENERAL PARTNER'S AFFILIATED SIGNATURE INN HOTEL
PARTNERSHIPS AND JOINT VENTURES
<CAPTION>
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>
<PAGE>
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.
<PAGE>
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>
Occupancy ADR
-------------------- --------------------
<CAPTION>
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
*Source: Smith Travel Research.
</TABLE>
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>
REV PAR
--------------------------------
<CAPTION>
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
</TABLE>
The upper economy/limited service hotels have performed
better than all other segments in 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 the domestic lodging industry.
<PAGE>
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.
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.
<PAGE>
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.
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.
<PAGE>
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.
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.
<PAGE>
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>
<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. Certain of these fees have been waived or
modified. See Item 6, Management's Discussion and Analysis of
Financial Condition and Results of Operations. 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 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.
<PAGE>
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 cach 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.
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.
<PAGE>
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.)
(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.)
<PAGE>
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 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.)
<PAGE>
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.
<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.
<PAGE>
<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>
(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.
<PAGE>
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 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.
<PAGE>
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:
(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.
<PAGE>
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.
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.
<PAGE>
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.
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.
<PAGE>
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:
Number of Number of
Outstanding Units Holders of Record
- ----------------- -----------------
364 412
Item 6. Management's Discussion and Analysis of Financial
Condition and Results of Operations.
Results of Operations.
Certain operating and financial data for the years ended
December 31, 1995, 1994 and 1993 is as follows:
<TABLE>
<CAPTION>
Occupancy Average Daily Rate
------------------ ----------------------
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
</TABLE>
<TABLE>
<CAPTION>
1995 1994
1995 1994 1993 vs 1994 vs 1993
---- ---- ---- ------- -------
<S> <C> <C> <C> <C> <C>
Room & Other Hotel
Revenues $3,101,641 $3,011,365 $2,729,897 $90,276 $281,468
Interest Income $16,086 $10,452 $3,216 $5,634 $7,236
Operating & Related
Expenses $2,162,901 $2,069,709 $1,957,663 $93,192 $112,046
Interest Expense $560,145 $562,403 $769,261 ($2,258) ($206,858)
Depreciation and
Amortization $304,398 $374,993 $423,740 ($70,595) ($48,747)
Income (loss) before
extraordinary
item $90,283 $14,712 ($417,551) $75,571 $432,263
Net Income (loss) $90,283 $675,396 ($417,551) ($585,113) $1,092,947
</TABLE>
<PAGE>
Room and other hotel revenues of the two hotels increased in
1995 and 1994 due to increases in average room rates at the two
hotels for each of the last two years and an increase in
occupancy in 1994 compared to 1993.
Interest income in 1995 and 1994 increased as there were
higher yields on more investable cash during 1995 and 1994.
Hotel operations and salaries and benefits represent all of the
operational and administrative costs of operating the hotels,
including all payroll, supply, utilities, maintenance and
miscellaneous expenses. For 1995, hotel operations and salaries
and benefits increased primarily due to increased employee
related and maintenance costs in 1995 compared to 1994. In 1994,
hotel operations increased due to increased costs associated with
the increase in rooms sold and maintenance costs of new computer
systems. In 1994, salaries and benefits increased due to the
increased number of rooms sold during the year.
In 1994, the Partnership demolished an office building at a
cost of $7,500 and added additional parking adjacent to the new
Sharonville Convention Center which opened in early 1994. The
twenty-year cost sharing agreement entered into with the City of
Sharonville provides for the maintenance of this parking lot and
allows the City to utilize the new parking area.
Management and franchise fees increased in both 1995 and
1994 due to the increase in room and other hotel revenues for
1995 and 1994. These fees (9% of revenues, as defined) represent
amounts paid to Signature Inns, Inc., the general partner of the
Partnership, for property management, accounting services and
franchise fees. Partnership contributions to a cooperative
advertising and reservation fund administered by the General
Partner (3.5% of revenues, as defined) increased due to the
increase in room and other hotel revenues for 1995 and 1994.
Interest expense represents interest on hotel mortgage
loans, general partner advances and capitalized equipment lease
obligations. During 1995, interest expense decreased due to the
scheduled amortization reduction of the notes. During 1994,
interest expense decreased primarily due to the restructuring of
the general partner note.
A partnership obligation owed to the general partner was
restructured in June 1994. The note had a balance of $3,038,045;
the balance was reduced to $2,377,361 resulting in an
extraordinary gain from the restructuring of $660,684.
LIQUIDITY AND CAPITAL RESOURCES
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.
<PAGE>
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
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.
<PAGE>
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
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.
<PAGE>
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.
<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____________________________
John D. Bontreger,
President, Chairman of the
Board and Chief Executive
Officer of Signature Inns,
Inc., its General Partner
ATTEST:
_____________________________
David R. Miller, Secretary
of Signature Inns, Inc., its
General Partner
Date: March 25, 1996
Pursuant to the requirements of the Exchange Act of 1934,
this report has been signed below by the following persons on
behalf of the Registrant and in the capacities and on the dates
indicated.
Date: March 25, 1996 ______________________________
John D. Bontreger, President
Chairman of the Board and
Chief Executive Officer and
Director of Signature Inns,
Inc., its General Partner
Date: March 25, 1996 ______________________________
David R. Miller, Secretary and
Director of Signature Inns,
Inc., its General Partner
<PAGE>
Date: March 25, 1996 ______________________________
Mark D. Carney, Vice President
Finance, Chief Financial
Officer and Director of
Signature Inns, Inc., its
General Partner
Date: March 25, 1996 ______________________________
Bo L. Hagood, Vice President -
Hotel Operations and Director
of Signature Inns, Inc., its
General Partner
Date: March 25, 1996 _____________________________
Martin D. Brew, Treasurer and
Controller of Signature Inns,
Inc., its General Partner
Date: March 25, 1996 _____________________________
George A. Morton, Director of
Signature Inns, Inc., its
General Partner
Date: March 25, 1996 _____________________________
Stephen M. Huse, Director of
Signature Inns, Inc., its
General Partner
Date: March 25, 1996 ______________________________
Richard L. Russell, Director
of Signature Inns, Inc., its
General Partner
Date: March 25, 1996 ______________________________
Richard E. Shank, Director of
Signature Inns, Inc., its
General Partner
Date: March 25, 1996 ______________________________
Orus W. Weaver, Director of
Signature Inns, Inc., General
Partner
<PAGE>
Item 13. Exhibits and Reports on Form 8-K.
(a) EXHIBIT INDEX
Title of Exhibit Reference
Plan of Acquisition,
Reorganization, etc. Not applicable
Partnership Agreement and
Certificate Incorporated by reference to
S-1 Registration Statement
Instruments Defining Rights
of Security Holders Incorporated by reference to
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, page 31
(b) No reports on Form 8-K were filed by the Registrant
during the last quarter of the period covered by this report.
<PAGE>
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 31
Balance Sheets--December 31, 1995 and 1994 32
Statement of Operations--Years ended December 31,
1995 and 1994 33
Statements of Partners' Equity (Deficit)--Years Ended
December 31, 1995 and 1994 34
Statements of Cash Flows--
Years ended December 31, 1995 and 1994 35
Notes to Financial Statements--
December 31, 1995 and 1994 36-39
<PAGE>
Exhibit A
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
<PAGE>
<TABLE>
SIGNATURE X LTD. LIMITED PARTNERSHIP
Balance Sheets
December 31, 1995 and 1994
<CAPTION>
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 104,573 89,044
(note 2)
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 5,197,742 5,283,835
(note 2)
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 372,149 281,866
--------- ---------
$ 8,391,241 8,426,193
=========== =========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
SIGNATURE X LTD. LIMITED PARTNERSHIP
Statements of Operations
Years ended December 31, 1995 and 1994
<CAPTION>
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 278,020 269,523
(note 3)
Advertising and reservations 108,119 104,815
(note 3)
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 13,542 101,309
--------- ---------
Limited partners' 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
========= =========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
SIGNATURE X LTD. LIMITED PARTNERSHIP
Statements of Partners' Equity (Deficit)
Years ended December 31, 1995 and 1994
<CAPTION>
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
======== ========== ==========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
SIGNATURE X LTD. LIMITED PARTNERSHIP
Statements of Cash Flows
Years ended December 31, 1995 and 1994
<CAPTION>
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 35,722 (77,915)
------- --------
Net cash provided by
operating activities 428,641 315,841
------- -------
Cash flows from investing activities:
Additions to furniture and
equipment reserves, net (147,886) (81,447)
Other additions to property and equipment (59,666) (7,132)
Proceeds from disposal of equipment 6,401 -
-------- -------
Net cash used in investing activities (201,151) (88,579)
-------- -------
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 partne r(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 212,006 105,034
of year ------- -------
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
======== =======
See accompanying notes to financial statements.
</TABLE>
<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.
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
maturities of three months or less.
<PAGE>
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.
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. 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. Withdrawals from the
fund are permitted for working capital and other operating needs.
<PAGE>
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.
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.
<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>
