<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB - Quarterly or Transitional Report
/X/ QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1998
// TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission File Number 33-16163-LA
Nashville Super 8 Ltd., A California Limited Partnership
(Exact name of small business issuer as specified in its charter)
California 33-0249749
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1466 9th Avenue, San Diego, CA 92101
(Address of principal executive offices)
(619) 699-6100
(Issuer's telephone number)
(Former name, former address and former fiscal year, if changed
since last report)
Check whether the registrant (1) has filed all reports required to be filed by
Sections 13 or 15(d) of the Exchange Act during the last 12 months (or for
such shorter period that the issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes /x/ No / /
State the number of limited partnership interests outstanding as of the latest
practicable date: 3,975
<PAGE>
PART I. -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Incorporated herein is the following unaudited financial information:
Balance Sheet as of September 30, 1998 and December 31, 1997..
Statement of Operations for the three and nine month periods ended September
30, 1998 and September 30, 1997.
Statement of Cash Flows for the three and nine month periods ended September
30, 1998 and September 30, 1997.
Notes to Financial Statements.
<PAGE>
NASHVILLE SUPER 8 LTD.
A California Limited Partnership
Balance Sheet
September 30, 1998 and December 31, 1997
(Unaudited)
(Part 1 of 2)
<TABLE>
<CAPTION>
September 30, December 31,
ASSETS 1998 1997
----------- ------------ ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents $ 86,046 $ 159,319
Accounts receivable 11,001 17,447
Operating supplies 15,455 15,455
Prepaid expenses 4,178 4,947
----------- ----------
Total current assets 116,680 197,168
Investment property, at cost:
Land 711,092 711,092
Building and improvements 2,889,440 2,854,422
Furniture, fixtures and equipment 634,574 634,303
------------ ------------
4,235,106 4,199,817
Less accumulated depreciation 1,331,487 1,252,452
------------ ------------
Investment property,
net of accumulated depreciation 2,903,619 2,947,365
------------ ------------
Franchise fees, net (note 3) 10,667 11,417
------------ -------------
$3,030,966 $3,155,950
=========== ============
</TABLE>
See accompanying notes to financial statements.
Page 1
<PAGE>
NASHVILLE SUPER 8 LTD.
A California Limited Partnership
Balance Sheet
September 30, 1998 and December 31, 1997
(Unaudited)
(Part 2 of 2)
<TABLE>
<CAPTION>
LIABILITIES AND September 30, December 31,
PARTNER'S CAPITAL ACCOUNTS 1998 1997
-------------------------- ---------------- -------------
<S> <C> <C>
Current liabilities:
Notes Payable (note 5) $ 9,268 $ 8,163
Accounts payable and accrued expenses 63,270 82,430
Due to affiliates (note 4) 4,266 11,553
----------- ------------
Total current liabilities 76,804 102,146
----------- ------------
Long-term debt, less
current portion (note 5) 148,568 156,121
----------- ------------
Total liabilities $ 225,372 $258,267
----------- ------------
Partners' capital accounts
(deficit):
General Partners:
Cumulative net earnings $ 12,523 $ 16,732
Cumulative cash distributions (76,950) (71,950)
------------ -------------
(64,427) (55,218)
Limited partners:
Capital contributions, net of offering costs 3,449,823 3,449,823
Cumulative net earnings 112,739 150,620
Cumulative cash distributions (692,541) (647,542)
------------- -------------
2,870,021 2,952,901
------------- -------------
Total partners' capital accounts 2,805,594 2,897,683
------------- ------------
$3,030,966 $3,155,950
============= ============
</TABLE>
See accompanying notes to financial statements.
Page 2
<PAGE>
NASHVILLE SUPER 8 LTD.
A California Limited Partnership
Statement of Operations
Three Months and Nine Months Ended
September 30, 1998 and September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
September 30, September 30, September 30, September 30,
1998 1997 1998 1997
----------- ---------- ---------- -----------
<S> <C> <C> <C> <C>
Revenues:
Room revenues $ 236,754 $ 368,035 $ 768,444 $932,695
Phone revenue 4,719 6,587 19,150 14,554
Interest income 413 336 1,601 477
Other income 1,060 625 2,121 1,562
------------ ----------- ----------- ------------
242,946 375,577 771,316 949,288
------------ ----------- ----------- ------------
Expenses:
Property operating
expenses 125,297 175,242 457,606 452,604
Depreciation 24,059 43,076 79,035 129,818
General and administrative 34,309 82,096 107,291 166,037
Amortization 250 250 750 750
Management fees 14,552 22,515 46,183 56,929
Royalties and advertising 11,837 18,911 37,422 48,876
Real estate taxes 10,497 13,639 29,510 33,364
Interest expense 4,680 4,586 13,309 13,502
Marketing 10,804 13,241 42,300 42,565
------------ ------------ ------------- ------------
236,285 373,556 813,406 944,445
------------ ------------ ------------- ------------
Net earnings $ 6,661 $ 2,011 $ (42,090) $ 4,843
============ =========== =========== ===========
Net earnings per
limited partnership
interest $ 1.51 $ .46 $ (9.53) $ 1.10
======= ======= ======= =======
</TABLE>
See accompanying notes to financial statements.
Page 3
<PAGE>
NASHVILLE SUPER 8 LTD.
A California Limited Partnership
Statement of Cash Flows
Three Months and Nine Months Ended
September 30, 1998 and September 30, 1997
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
September 30, September 30,
1998 1997 1998 1997
--------- -------- ------- --------
<S> <C> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 6,661 $ 2,011 $ (42,090) $ 4,843
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 24,309 43,336 79,785 130,568
(Increase) decrease in other assets: 17,376 27,909 7,215 (12,300)
Increase (decrease) in:
Accounts payable and accrued expenses 2,349 30,466 (19,160) 56,588
Due to/from Affiliates (6,761) (8,413) (7,287) (2,126)
Net cash provided by (used in) --------- -------- ---------- ---------
operating activities 43,934 95,309 18,463 177,573
--------- -------- ---------- ---------
Cash flows from investing activities:
Investment property expenditures (981) (5,619) (35,289) (53,658)
--------- -------- ---------- ---------
Net cash used in investing activities (981) (5,619) (35,289) (53,658)
--------- -------- ---------- ---------
Cash flows from financing activities:
Proceeds/(Payments) of notes payable (2,177) (1,950) (6,448) (5,934)
Cash distributions to partners (50,000) 0 (50,000) 0
Net cash provided by (used in) --------- --------- ---------- ---------
financing activities (52,177) (1,950) (56,448) (5,934)
--------- --------- ---------- ---------
Net increase (decrease) in cash (9,223) 87,740 (73,273) 117,981
Cash and cash equivalents,
beginning of period 95,269 109,509 159,319 79,268
--------- --------- ---------- ---------
Cash and cash equivalents,
end of period 86,046 197,249 86,406 197,249
========= ======== ======== =========
</TABLE>
See accompanying notes to financial statements.
Page 4
<PAGE>
NASHVILLE SUPER 8 LTD.,
A California Limited Partnership
Notes to Financial Statements
September 30, 1998
(Unaudited)
Readers of this quarterly report should refer to the partnership audited
financial statements and annual report Form 10-KSB (File No. 33-16163-LA) for
the period ended December 31, 1997, as certain footnote disclosures which
would substantially duplicate those contained in such financial reports have
been omitted from this report.
1. THE PARTNERSHIP AND A SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nashville Super 8 Ltd., A California Limited Partnership (the Partnership),
(formerly Motels of America Series XI), a California Limited Partnership, was
formed on September 1, 1988 pursuant to the California Revised Uniform Limited
Partnership Act. The purpose of the Partnership is to construct, own, and
operate a 110-room "economy" motel under a Super 8 Franchise. The motel was
opened in April 1989.
The following is a summary of the Partnership's significant accounting
policies:
CASH AND CASH EQUIVALENTS
The Partnership considers all highly liquid instruments purchased with an
original maturity of three months or less to be cash equivalents.
INVESTMENT PROPERTY
Investment property is recorded at cost. Depreciation is computed using the
straight-line method based on estimated useful lives of 5 to 39 years.
Maintenance and repair costs are expensed as incurred, while significant
improvements, replacements, and major renovation are capitalized.
FRANCHISE FEES
Franchise fees are amortized over the 20-year life of the franchise
agreement. Organization costs are amortized over a 60-month period.
INCOME TAXES
No provision for income taxes has been made as any liability for such taxes
would be that of the partners rather than the Partnership.
(Continued)
Page 5
<PAGE>
NASHVILLE SUPER 8 LTD.,
A California Limited Partnership
Notes to Financial Statements (Continued)
Net income per interest is based upon the 90% allocated to limited partners
divided by 3,975 limited partner interests outstanding throughout the year.
2. PARTNERSHIP AGREEMENT
Net income or loss and cash distributions from operations of the Partnership
are allocated 90% to the limited partners and 10% to the general partner.
Profits from the sale or other disposition of Partnership property are to be
allocated to the general partner until its capital account equals zero;
thereafter, to the limited partners until their capital accounts equal their
capital contributions reduced by prior distributions of cash from sale or
refinancing plus an amount equal to a cumulative but not compounded annual 8%
return thereon which cumulative return shall be reduced (but not below zero)
by the aggregate amount of prior distributions of cash available for
distribution; thereafter, gain shall be allocated 15% to the general partner
and 85% to the limited partners. Loss from sale shall be allocated 1% to the
general partner and 99% to the limited partners.
3. FRANCHISE AGREEMENT
The Partnership has entered into a twenty-year franchise agreement with Super
8 Motels, Inc. to provide the Partnership with consultation in the areas of
design, construction and operation of the motel. The agreement required the
payment of an initial fee of $20,000 and ongoing royalties equal to 4% of
gross room revenues and a chain-affiliated advertising fee equal to 2% of
gross room revenues.
During 1994, the franchise agreement with Super 8 was amended to reduce the
Partnership's area of protection in exchange for the franchisor reducing by
one-half the liquidated damages that would be payable by the Partnership in
the event it elects an early termination of the franchise agreement. The area
of protection released by the Partnership is small in relation to the original
area of protection and is to the south and west of the Partnership's motel,
away from Opryland and other growth areas. In addition, if the franchisor
grants a franchise in the released area and the occupancy rate at the
Partnership's motel drops by three or more percentage points for any twelve
month period, the Partnership may reduce the royalties from 6% to 5% of gross
room sales and reduce the royalties payable for the balance of the franchise
agreement or terminate the franchise agreement upon payment of the reduced
liquidated damages. The occupancy rate was 51.81% in 1996 compared to 65.38%
in 1995 and, therefore, management has notified Super 8 that the Partnership
is entitled to the reduction in royalties approximately payable for the
balance of the franchise agreement.
4. RELATED PARTY TRANSACTIONS
The motel is operated pursuant to a management agreement with GHG Hospitality,
Inc. (GHG). The agreement provides for the payment of monthly management fees
of 6% of gross revenues. (Continued)
Page 6
<PAGE>
NASHVILLE SUPER 8 LTD.,
A California Limited Partnership
Notes to Financial Statements (Continued)
The Partnership has agreed to reimburse GHG for certain expenses related to
services performed in maintaining the books and administering the affairs of
the Partnership.
GHG and an affiliate, GMS Management Services, Inc. (GMS), allocate to the
Partnership certain marketing, accounting, and maintenance salaries and
certain other expenses directly related to the operation of the Partnership.
Fees and reimbursements for partnership administration expenses paid to GHG
and GMS for the three months and nine months ended September 30, 1998 and
September 30, 1997 are as follows:
<TABLE>
<CAPTION>
Three months Ended Nine Months Ended
9/30/98 9/30/97 9/30/98 9/30/97
---------- --------- --------- ---------
<S> <C> <C> <C> <C>
Management Fees $ 14,552 $22,515 $46,183 $56,929
Reimbursement for partnership
administration expenses $ 5,850 5,598 17,549 15,794
Salaries and other
allocated expenses $ 8,920 6,876 31,000 21,716
</TABLE>
In addition, all motel employees are paid by GMS. For the nine months ended
September 30, 1998, the Partnership reimbursed GMS $254,238.for the wages of
these employees including a one percent processing fee. At September 30,
1998, $4,266. was owed to GHG and GMS relating to reimbursement for these
operating expenses.
5. LONG-TERM DEBT
The Partnership has a note payable to a bank due in monthly installments of
approximately $2,150, including interest at the bank's index rate plus 2%
(10.5% at September 30, 1998) through August 2009. The note is secured by a
first priority deed of trust on the Partnership's motel and the unpaid balance
at September 30, 1998 was $157,836. The fair value of long-term debt
approximates its carrying amount based on the borrowing rates currently
available to the Partnership for loans with similar terms.
(Continued)
Page 7
<PAGE>
NASHVILLE SUPER 8 LTD.,
A California Limited Partnership
Notes to Financial Statements (Continued)
5. LONG-TERM DEBT (Continued)
Principal payments on this note are due as follows:
<TABLE>
<CAPTION>
<S> <C>
October 1998 - Dec 1998 $ 2,228.
1999 9,533.
2000 10,609.
2001 11,807.
2002 13,140.
Thereafter 110,528.
------------
$157,836.
===========
</TABLE>
6. SUBSEQUENT EVENT
On August 14, 1998 the Partnership entered into a Hotel Purchase and Sale
Agreement with AM & PS, LLC, a Tennessee Limited Liability Company
("Purchaser") whereby the Purchaser will purchase the motel from the
Partnership for a price of $2,900,000. The Purchase Price is payable in
cash. Sale of the Motel required the consent of holders of a majority of the
Partnership's 3975 limited partnership interests.
If the holders of a majority of the Interests approve the proposed Sale of the
Property and the Sale is closed, the Partnership will pay all its
indebtedness, set up a contingency reserve of $300,000. and then distribute
the remaining net sale proceeds pursuant to the terms of the Partnership
Agreement.
7. ADJUSTMENTS
In the opinion of the general partners, all adjustments (consisting solely of
normal recurring adjustments) necessary for a fair presentation have been made
to the accompanying figures as of and for the nine months ended September 30,
1998.
(Continued)
Page 8
<PAGE>
NASHVILLE SUPER 8 LTD.,
A California Limited Partnership
Notes to Financial Statements (Continued)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Financial Condition:
On September 1, 1987, the Partnership commenced its public offering pursuant
to its Prospectus. On September 27, 1988, the Partnership completed the
public offering. The Partnership received $3,449,823 (net of offering costs
of $525,177) from the sale of limited partnership interests. These funds were
available for investment in property, to pay legal fees and other costs
related to the investments, to pay operating expenses, and for working
capital. The majority of the proceeds was used to acquire and construct the
110-room "economy" motel on approximately 2 acres of land.
Construction of an indoor swimming pool, workout center, and spa and
renovations of the lobby and certain guest rooms were completed in 1995. The
total cost of the project was approximately $677,300. The project's cost was
funded by cash from operations and a loan of $184,258 from First Bank & Trust
of Tennessee. As of September 30, 1998, a principal balance of $160,013. was
outstanding on this note. The note is payable in monthly installments of
approximately $2,150 including interest at two points over the index which is
the New York Consensus Prime as quoted in the Wall Street Journal. The
interest rate at September 30, 1998 was 10.5%. The final balance is due
August 2009. The note is secured by a first priority deed of trust on the
Partnership's motel.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (Continued)
Financial Condition:
An independent appraisal valued the Partnership's motel property at $3,200,000
as of August 26, 1996. An update of this appraisal was completed in August
1997 showing the same value of $3,200,000. The carrying amount of investment
property on the Partnership's financial statements was $2,926,697. as of
September 30, 1998. During 1994, the franchise agreement with Super 8 was
amended to reduce the Partnership's area of protection in exchange for the
franchisor reducing by one-half the liquidated damages that would be payable
by the Partnership in the event it elects an early termination of the
franchise agreement. The area of protection released by the Partnership is
small in relation to the original area of protection and is to the south and
west of the Partnership's motel, away from Opryland and other growth areas.
In addition, if the franchisor grants a franchise in the released area and the
occupancy rate at the Partnership's motel drops by three or more percentage
points for any twelve month period, the Partnership may reduce the royalties
from 6% to 5% of gross room sales and royalties payable for the balance of the
franchise agreement or terminate the franchise agreement upon payment of the
reduced liquidated damages. The occupancy rate was 51.81% in 1996 compared to
65.38% in 1995 and, therefore, management has notified Super 8 that the
Partnership is entitled to the reduction in royalties payable for the balance
of the franchise agreement.
(Continued)
Page 9
<PAGE>
NASHVILLE SUPER 8 LTD.,
A California Limited Partnership
Notes to Financial Statements (Continued)
For the nine months ended September 30, 1998, the Partnership had cash and
cash equivalents of $86,046. Such funds will be utilized for working capital
requirements and distributions to partners.
For the three months ended September 30, 1998, room revenues were $236,754.,
the occupancy rate was 46.85% and the average daily rate was $51.81. This
compares to the three months ended September 30, 1997 when room revenues were
$368,035., the occupancy rate was 75.58% and the average daily rate was
$49.93. And for the nine months ended September 30, 1998, room revenues were
$768,444., the occupancy rate was 59.59% and the average daily rate was
$43.40. This compares to the nine months ended September 30, 1997 when room
revenues were $932,695., the occupancy rate was 63.04% and the average daily
rate was $51.13.
As requested by the limited partners in an informal survey conducted by the
general partner now that the partnership is nearing its 10th year, the
majority of the limited partners want the motel to be sold and the partnership
dissolved. consequently, the hotel brokerage firm of Hotel Partners
International has been engaged by the partnership to market the hotel for sale
to qualified buyers at the highest and best selling price. On August 14, 1998
the Partnership entered into a Hotel Purchase and Sale Agreement with AM & PS,
LLC, a Tennessee Limited Liability Company ("Purchaser") whereby the Purchaser
will purchase the motel from the Partnership for a price of $2,900,000. The
Purchase Price is payable in cash. Sale of the Motel required the consent of
holders of a majority of the Partnership's 3975 limited partnership interests.
If the holders of a majority of the Interests approve the proposed Sale of the
Property and the Sale is closed, the Partnership will pay all its
indebtedness, set up a contingency reserve of $300,000. and then distribute
the remaining net sale proceeds pursuant to the terms of the Partnership
Agreement. The estimated uses of the sale proceeds are as follows:
<TABLE>
<S> <C>
Contract Sales Price $2,900,000
Costs of Sale $ (112,027)
Repayments of Debt $ (157,844)
Real Estate Taxes Paid from Escrow $ (40,729)
Establishment of Contingency Reserve $ (300,000)
Cash Initially Available for
Distribution by the Partnership
from the Sale of the Property $2,289,400
</TABLE>
(Continued)
Page 10
<PAGE>
NASHVILLE SUPER 8 LTD.,
A California Limited Partnership
Notes to Financial Statements (Continued)
The effect of current operations on liquidity was net cash provided by
operating activities of $43,934. for the three months ending September
30, 1998 and $18,463. of cash provided by operating activities for the nine
months ended September 30, 1998. This compares to net cash provided by
operating activities of $95,309. for the three months ended September 30, 1997
and $177,573.of net cash provided by operating activities for the nine months
ended September 30, 1997. Investment property expenditures were $35,289. for
the nine months ended September 30, 1998.
Results of Operations:
Business for the third quarter 1998 was again down as was the second quarter
1998 because of Opryland Theme Park being closed for remodeling. Many new
hotels have opened in the last few months in anticipation of 2000 opening of
the remodeled Opryland Theme Park which include an extensive shopping center.
This increased competition added to the decrease in business caused by
Opryland's temporary closure.
The NFL's Tennessee Oilers and the NHL Hockey Team seems to being having a
positive effect on the Fall 1998 business.
Profits for the three months ended September 30, 1998 were $6,661. and $2,011.
for the three months ended September 30, 1997. The nine months ended
September 30, 1998 showed a loss of $42,090. compared to the nine months ended
September 30, 1997 which showed a profit of $4,843., a decrease of $46,933.
Seasonality:
The motel business is seasonal with the third quarter being the strongest due
to the tourist business and the last half of the fourth quarter and the first
half of the first quarter being the weakest.
Page 11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
(REGISTRANT) NASHVILLE SUPER 8 LTD.,
A California Limited Partnership
By: GHG Hospitality, Inc.
Corporate General Partner
By:(SIGNATURE) / s / Stephen D. Burchett
(NAME AND TITLE) Stephen D. Burchett, Vice President
(DATE) November 10, 1998
By:(SIGNATURE) / s / Sylvia Mellor Clark
(NAME AND TITLE) Sylvia Mellor Clark, Controller
(DATE) November 10, 1998
Page 12
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 86,046
<SECURITIES> 0
<RECEIVABLES> 11,001
<ALLOWANCES> 0
<INVENTORY> 15,455
<CURRENT-ASSETS> 116,680
<PP&E> 4,235,106
<DEPRECIATION> 1,331,487
<TOTAL-ASSETS> 3,030,966
<CURRENT-LIABILITIES> 76,804
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 3,030,966
<SALES> 0
<TOTAL-REVENUES> 771,316
<CGS> 0
<TOTAL-COSTS> 800,097
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 13,309
<INCOME-PRETAX> (42,090)
<INCOME-TAX> 0
<INCOME-CONTINUING> (42,090)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (42,090)
<EPS-PRIMARY> (9.53)
<EPS-DILUTED> (9.53)
</TABLE>
