SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q Quarterly Report Under Section 13 or 15(d) of The Securities Exchange Act of 1934 For the Period ended June 30, 1998 Commission File 2-88942 FAMOUS HOST LODGING V, L.P. ------------------------------------------------------ (Exact name of registrant as specified in its charter) CALIFORNIA 94 - 2933595 ------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2030 J Street Sacramento, California 95814 -------------------------------------- -------- Address of principal executive offices Zip Code Registrant's telephone number, including area code (916) 442 - 9183 Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 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 XX No __ FAMOUS HOST LODGING V, L.P. (A California Limited Partnership) FINANCIAL STATEMENTS JUNE 30, 1998 AND 1997 FAMOUS HOST LODGING V, L.P. (A California Limited Partnership) INDEX Financial Statements: PAGE Balance Sheet - June 30, 1998 and December 31, 1997 2 Statement of Operations - Six Months Ended June 30, 1998 and 1997 3 Statement of Changes in Partners' Equity - Six Months Ended June 30, 1998 and 1997 4 Statement of Cash Flows - Six Months Ended June 30, 1998 and 1997 5 Notes to Financial Statements 6 Management Discussion and Analysis 7 Other Information and Signatures 8 - 10 Famous Host Lodging V, L.P. (A California Limited Partnership) Balance Sheet June 30, 1998 and December 31, 1997 6/30/98 12/31/97 ---------- ---------- ASSETS Current Assets: Cash and temporary investments $ 275,409 $ 146,113 Accounts receivable 37,987 32,624 Prepaid expenses 30,927 37,862 ---------- ---------- Total current assets 344,323 216,599 ---------- ---------- Property and Equipment: Buildings 4,077,604 4,077,604 Furniture and equipment 1,308,121 1,294,151 ---------- ---------- 5,385,725 5,371,755 Accumulated depreciation (3,320,794) (3,190,183) ---------- ---------- Property and equipment, net 2,064,931 2,181,572 ---------- ---------- Other Assets: 32,294 32,294 ---------- ---------- Total Assets $ 2,441,548 $ 2,430,465 ========== ========== LIABILITIES AND PARTNERS' EQUITY Current Liabilities: Accounts payable and accrued liabilities $ 186,967 $ 176,765 ---------- ---------- Total liabilities 186,967 176,765 ---------- ---------- Contingent Liabilities (See Note 1) Partners' Equity: General Partners 4,224 3,385 Limited Partners 2,250,357 2,250,315 ---------- ---------- Total partners' equity 2,254,581 2,253,700 ---------- ---------- Total Liabilities and Partners' Equity $ 2,441,548 $ 2,430,465 ========== ========== The accompanying notes are an integral part of the financial statements. - 2 - Famous Host Lodging V, L.P. (A California Limited Partnership) Statement of Operations For the Six Months Ending June 30, 1998 and 1997 Three Months Six Months Three Months Six Months Ended Ended Ended Ended 6/30/98 6/30/98 6/30/97 6/30/97 ---------- ---------- ----------- ---------- Income: Hotel room $ 664,962 $ 1,317,738 $ 587,612 $ 1,291,751 Restaurant 104,095 239,119 165,713 319,948 Telephone and vending 10,949 23,943 12,429 26,909 Interest 857 1,649 4,118 5,810 Other 16,353 29,645 12,936 22,816 ---------- ---------- ----------- ---------- Total Income 797,216 1,612,094 782,808 1,667,234 ---------- ---------- ----------- ---------- Expenses: Motel operating expenses (Note 2) 596,272 1,233,425 676,324 1,329,339 General and administrative (68,347) 84,130 17,442 40,198 Depreciation and amortization 65,495 130,611 70,239 139,992 Property management fees 39,527 80,045 38,707 82,920 ---------- ---------- ----------- ---------- Total Expenses 632,947 1,528,211 802,712 1,592,449 ---------- ---------- ----------- ---------- Net Income (Loss) $ 164,269 $ 83,883 $ (19,904) $ 74,785 ========== ========== =========== ========== Net Income (Loss) Allocable to General Partners $1,643 $839 ($199) $748 ========== ========== =========== ========== Net Income (Loss) Allocable to Limited Partners $162,626 $83,044 ($19,705) $74,037 ========== ========== =========== ========== Net Income (Loss) per Partnership Unit $18.03 $9.20 ($2.18) $8.21 ========== ========== =========== ========== Distribution to Limited Partners per Partnership Unit $9.20 $18.40 $9.20 $18.40 ========== ========== =========== ========== The accompanying notes are an integral part of the financial statements. - 3 - Famous Host Lodging V, L.P. (A California Limited Partnership) Statement of Changes in Partners' Equity For the Six Months Ending June 30, 1998 and 1997 1998 1997 ---------- ---------- General Partners: Balance at beginning of year $ 3,385 $ 3,836 Net income (loss) 839 748 ---------- ---------- Balance at end of period 4,224 4,584 ---------- ---------- Limited Partners: Balance at beginning of year 2,250,315 2,626,948 Net income (loss) 83,044 74,037 Distributions to limited partners (83,002) (166,005) ---------- ---------- Balance at end of period 2,250,357 2,534,980 ---------- ---------- Total Partners' Equity $ 2,254,581 $ 2,539,564 ========== ========== The accompanying notes are an integral part of the financial statements. - 4 - Famous Host Lodging V, L.P. (A California Limited Partnership) Statement of Cash Flows For the Six Months Ending June 30, 1998 and 1997 1998 1997 ---------- ---------- Cash flows from operating activities: Received from hotel and restaurant revenues $ 1,605,082 $ 1,662,323 Expended for hotel and restaurant operation and general and administrative expenses (1,380,463) (1,421,142) Interest received 1,649 5,379 ---------- ---------- Net cash provided (used) by operating activities 226,268 246,560 ---------- ---------- Cash flows from investing activities: Purchases of property and equipment (13,970) (27,818) Proceeds from sale of equipment - 230 ---------- ---------- Net cash provided (used) by investing activities (13,970) (27,588) ---------- ---------- Cash flows from financing activities: Distributions paid to limited partners (83,002) (166,005) ---------- ---------- Net cash provided (used) by operating activities (83,002) (166,005) ---------- ---------- Net increase (decrease) in cash and temporary investments 129,296 52,967 Cash and Temporary Investments: Beginning of year 146,113 246,283 ---------- ---------- End of Period $ 275,409 $ 299,250 ========== ========== Reconciliation of net income (loss) to net cash provided (used) by operating activities: Net income (loss) $ 83,883 $ 74,785 ---------- ---------- Adjustments to reconcile net income to net cash used by operating activities: Depreciation and amortization 130,611 139,992 (Gain) loss on disposition of property and equipment - (230) (Increase) decrease in accounts receivable (5,363) 468 (Increase) decrease in prepaid expenses 6,935 3,976 Increase (decrease) in accounts payable and accrued liabilities 10,202 27,569 ---------- ---------- Total adjustments 142,385 171,775 ---------- ---------- Net cash provided (used) by operating activities $ 226,268 $ 246,560 ========== ========== The accompanying notes are an integral part of the financial statements. - 5 - Famous Host Lodging V, L.P. (A California Limited Partnership) Notes to Financial Statements June 30, 1998 and 1997 Note 1: The attached interim financial statements include all adjustments which are, in the opinion of management, necessary to a fair statement of the results for the period presented. Users of these interim financial statements should refer to the audited financial statements for the year ended December 31, 1997 for a complete disclosure of significant accounting policies and practices and other detail necessary for a fair presentation of the financial statements. In accordance with the partnership agreement, the following information is presented related to fees paid to the General Partners or affiliates for the period. Property Management Fees $80,045 In February, 1991 the Partnership terminated its franchise and its affiliation with Super 8 Motels, Inc. and began operating as a Holiday Inn. Accordingly, no franchise or advertising fees have been paid to the General Partners or their affiliates for the period. Partnership management fees and subordinated incentive distributions are contingent in nature and none have been accrued or paid during the current period. Note 2: The following table summarizes the major components of hotel operating expenses for the periods reported: Three Months Six Months Three Months Six Months Ended Ended Ended Ended 6/30/98 6/30/98 6/30/97 6/30/97 ---------- ---------- ----------- ---------- Salaries and related expenses $ 174,270 $ 374,902 $ 218,151 $ 431,881 Cost of food and beverage 37,454 85,093 69,111 129,659 Rent 74,024 149,345 72,537 154,354 Franchise, advertising and reservation fees 45,044 91,577 42,249 92,095 Utilities 39,361 82,268 47,222 90,922 Allocated costs, mainly indirect salaries 47,755 97,516 44,313 88,423 Renovations and replacements 24,813 28,610 15,482 19,562 Other operating expenses 153,551 324,114 167,259 322,443 ----------- ---------- ---------- ---------- Total hotel and restaurant operating expenses $ 596,272 $ 1,233,425 $ 676,324 $ 1,329,339 ========== ========== ========== ========== The following additional material contingencies are required to be restated in interim reports under federal securities law: None. - 6 - FAMOUS HOST LODGING V, L.P. (A California Limited Partnership) MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION JUNE 30, 1998 LIQUIDITY AND CAPITAL RESOURCES As of June 30, 1998, the Partnership has current assets of $344,323 and current liabilities of $186,967 creating an operating reserve of $157,356. Distributions to the limited partners have been suspended to replenish the operating reserves. The Partnership expended for renovations and replacements $42,580 (of which $13,9670 was capitalized) during the period covered by this report. Included in these expenditures was $8.970 for guest room carpet replacement, $5,000 for new faces on the restaurant signs and $18,915 for roof repairs. RESULTS OF OPERATIONS The following is a comparison of operating results for the six month periods ended June 30, 1998 and June 30, 1997. Total income decreased $55,140 or 3.3%. Hotel room revenues increased $25,987 or 2.0%, due to an increase in the average room rate from $66.11 in 1997 to $68.77 in 1998 notwithstanding a decrease in guest room occupancy from 72.9% in 1997 to 71.5% in 1998. The decrease in occupancy was due primarily to reduced military activity at Fort Irwin in 1998 as compared to the same period in 1997. The $80,829 or 25.3% decrease in restaurant revenue was due to a reduction in the restaurant hours of operations from 16 hours daily to 7 hours daily. Total expenditures decreased $64,238 or 4.0%. This decrease in expenses is due to reduced restaurant costs and to a reduction in the accrual of anticipated partnership liquidation expenses. FUTURE TRENDS The General Partners expect the hotel's performance during 1998 to be substantially unchanged from 1997. Changes in restaurant personnel and procedures are expected to continue bringing improved results. The General Partners expect that these changes will result in a reduction in the net loss experienced by the restaurant operation. As discussed in more detail in the following section labeled "Legal Proceedings," the General Partners have agreed to offer the motels for sale and to present any offer that equal or exceeds 75% of the appraised value for the approval of the Limited Partners. In the opinion of management, these financial statements reflect all adjustments which were necessary to a fair statement of results for the interim periods presented. All adjustments are of a normal recurring nature. - 7 - PART II. OTHER INFORMATION Item 1. Legal Proceedings On October 27, 1997 a complaint was filed in the United States District Court, Eastern District of California by the registrant, the Managing General Partner, and four other limited partnerships (together with the registrant, the "Partnerships") as to which the Managing General Partner serves as general partner (i.e., Super 8 Motels, Ltd., Super 8 Motels II, Ltd., Super 8 Motels III, Ltd. and Super 8 Economy Lodging IV, Ltd.), as plaintiffs. The complaint named as defendants Everest/Madison Investors, LLC, Everest Lodging Investors, LLC, Everest Properties, LLC, Everest Partners, LLC, Everest Properties II, LLC, Everest Properties, Inc., W. Robert Kohorst, David I. Lesser, The Blackacre Capital Group, L.P., Blackacre Capital Management Corp., Jeffrey B. Citron, Ronald J. Kravit, and Stephen P. Enquist ( the "Everest Defendants"). The factual basis underlying the plaintiffs' causes of actions pertained to tender offers directed by certain of the defendants to limited partners of the Partnerships, and to indications of interest made by certain of the defendants in purchasing the property of the Partnerships. The complaint requested the following relief: (i) a declaration that each of the defendants had violated Sections 13(d), 14(d) and 14(e) of the Securities Exchange Act of 1934 (the "Exchange Act"), and the rules and regulations promulgated by the Securities and Exchange Commission thereunder; (ii) a declaration that certain of the defendants had violated Section 15(a) of the Exchange Act and the rules and regulations thereunder; (iii) an order permanently enjoining the defendants from (a) soliciting tenders of or accepting for purchase securities of the Partnerships, (b) exercising any voting rights attendant to the securities already acquired, (c) soliciting proxies, and (d) violating Sections 13 or 14 of the Exchange Act or the rules and regulations promulgated thereunder; (iv) an order enjoining certain of the defendants from violating Section 15(a) of the Exchange Act and the rules and regulations promulgated thereunder; (v) an order directing certain of the defendants to offer to each person who sold securities to such defendants the right to rescind such sale; and (vi) a declaration that the Partnerships need not provide to the defendants a list of limited partners in the Partnerships or any other information respecting the Partnerships which is not publicly available. On October 28, 1997 a complaint was filed in the Superior Court of the State of California, Sacramento County by Everest Lodging Investors, LLC and Everest/Madison Investors, LLC, as plaintiffs, against Philip B. Grotewohl, Grotewohl Management Services, Inc., Kenneth M. Sanders, Robert J. Dana, Borel Associates, and BWC Incorporated, as defendants, and the Partnerships, as nominal defendants. The factual basis underlying the causes of action pertained to the receipt by the defendants of franchise fees and reimbursement of expenses, the indications of interest made by the plaintiffs in purchasing the properties of the nominal defendants, and the alleged refusal of the defendants to provide information required by the terms of the Partnerships' partnership agreements and California law. The complaint requested the following relief: (i) a declaration that the action has a proper derivative action; (ii) an order requiring the defendants to discharge their fiduciary duties to the Partnerships and to enjoin them from breaching their fiduciary duties; (iii) disgorgement of certain profits; (iv) appointment of a receiver; and (v) an award for damages in an amount to be determined. - 8 - PART II. OTHER INFORMATION (Continued) On February 20, 1998, the parties entered into a settlement agreement and both of the above complaints were dismissed. Pursuant to the terms of the settlement agreement, among other things, the General Partner has agreed to proceed with the marketing for sale of the properties of the Partnerships, if by June 30, 1998, it receives an offer to purchase one or more properties for a cash price equal to 75% or more of the appraised value. In addition, the General Partner has agreed to submit the offer for approval to the limited partners as required by the partnership agreements and applicable law. The General Partner has also agreed that upon the sale of one or more properties, to distribute promptly the proceeds of the sale after payment of payables and retention of reserves to pay anticipated expenses. The Everest Defendants agreed not to generally solicit the acquisition of any additional units of the Partnerships without first filing necessary documents with the SEC. Under the terms of the settlement agreement, the Partnerships have agreed to reimburse the Everest Defendants for certain costs not to exceed $60,000, to be allocated among the Partnerships. Of this amount, the Partnership will pay approximately $12,000 during the year covered by this report. Item 2. Changes in Securities None Item 3. Defaults upon Senior Securities None Item 4. Submission of Matter to the Vote of Security Holders None Item 5. Other Information See Notes to Financial Statements Item 6. Exhibits and Reports on Form 8-K None - 9 - SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. FAMOUS HOST LODGING V, L.P. 8-13-98 By /S/ Philip B. Grotewohl - ------- ------------------------- Date Philip B. Grotewohl, Chairman of Grotewohl Management Services, Inc., Managing General Partner 8-13-98 By /S/ Philip B. Grotewohl - ------- ------------------------- Date Philip B. Grotewohl, Chief executive officer, chief financial officer, chief accounting officer and sole director of Grotewohl Management Services, Inc., Managing General Partner - 10 -