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 March 31, 1998 Commission File 0-11512
SUPER 8 ECONMY LODGING IV, LTD
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(Exact name of registrant as specified in its charter)
CALIFORNIA 94 - 2827163
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2030 J Street
Sacramento, California 95814
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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 __
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
FINANCIAL STATEMENTS
MARCH 31, 1998 AND 1997
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
INDEX
Financial Statements: PAGE
Balance Sheet - March 31, 1998 and September 30, 1997 2
Statement of Operations - Six Months Ended
March 31, 1998 and 1997 3
Statement of Changes in Partners' Equity -
Six Months Ended March 31, 1998 and 1997 4
Statement of Cash Flows - Six Months Ended
March 31, 1998 and 1997 5
Notes to Financial Statements 6
Management Discussion and Analysis 7
Other Information and Signatures 9 - 10
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
Balance Sheet
March 31, 1998 and December 31, 1997
3/31/98 9/30/97
---------- ----------
ASSETS
Current Assets:
Cash and temporary investments $ 926,680 $ 1,079,735
Accounts receivable 50,138 54,290
Prepaid expenses 671 13,463
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Total current assets 977,489 1,147,488
---------- ----------
Property and Equipment:
Land 799,311 799,311
Buildings 2,246,419 2,246,419
Furniture and equipment 524,641 519,267
---------- ----------
3,570,371 3,564,997
Accumulated depreciation (1,876,693) (1,824,868)
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Property and equipment, net 1,693,678 1,740,129
---------- ----------
Other Assets: 63,975 63,975
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Total Assets $ 2,735,142 $ 2,951,592
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 220,879 $ 126,020
---------- ----------
Total current liabilities 220,879 126,020
---------- ----------
Total liabilities 220,879 126,020
---------- ----------
Contingent Liabilities (See Note 1)
Partners' Equity:
General Partners (241) (2,128)
Limited Partners 2,514,504 2,827,700
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Total partners' equity 2,514,263 2,825,572
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Total Liabilities and Partners' Equity $ 2,735,142 $ 2,951,592
========== ==========
The accompanying notes are an integral part of the financial statements.
2
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
Statement of Operations
For the Six Months Ended March 31, 1998 and 1997
Three Six Three Six
Months Months Months Months
Ended Ended Ended Ended
3/31/98 3/31/98 3/31/97 3/31/97
--------- --------- --------- ---------
Income:
Guest room $ 418,430 $ 848,465 $ 415,746 $ 842,962
Telephone and vending 7,456 17,060 9,633 22,687
Interest 8,403 18,760 8,471 17,641
Other 151 220 237 533
--------- --------- --------- ---------
Total Income 434,440 884,505 434,087 883,823
--------- --------- --------- ---------
Expenses:
Motel operating expenses
(Note 2) 206,742 421,702 184,850 391,000
General and administrative 143,248 176,120 7,136 34,614
Depreciation and amortization 27,355 54,710 28,604 56,642
Property management fees 21,306 43,282 21,302 43,307
--------- --------- --------- ---------
Total Expenses 398,651 695,814 241,892 525,563
--------- --------- --------- ---------
Net Income (Loss) $ 35,789 $ 188,691 $ 192,195 $ 358,260
========= ========= ========= =========
Net Income (Loss) Allocable
to General Partners $358 $1,887 $1,922 $3,583
========= ========= ========= =========
Net Income (Loss) Allocable
to Limited Partners $35,431 $186,804 $190,273 $354,677
========= ========= ========= =========
Net Income (Loss)
per Partnership Unit $3.54 $18.68 $19.03 $35.47
========= ========= ========= =========
Distribution to Limited Partners
per Partnership Unit $25.00 $50.00 $18.75 $37.50
========= ========= ========= =========
The accompanying notes are an integral part of the financial statements.
3
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
Statement of Partners' Equity
For the Six Months Ended March 31, 1998 and 1997
3/31/98 3/31/97
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General Partners:
Balance, beginning of year $ (2,128) $ (10,707)
Net income (loss) 1,887 3,583
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Balance, End of period (241) (7,124)
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Limited Partners:
Balance, beginning of year 2,827,700 2,740,835
Net income (loss) 186,804 354,677
Distributions to Limited Partners (500,000) (375,000)
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Balance, End of Period 2,514,504 2,720,512
---------- ----------
Total Partners' Equity $ 2,514,263 $ 2,713,388
========== ==========
The accompanying notes are an integral part of the financial statements.
4
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
Statement of Cash Flows
For the Six Months Ended March 31, 1998 and 1997
3/31/98 3/31/97
---------- ----------
Cash Flows from Operating Activities:
Received from motel revenues $ 868,510 $ 865,505
Expended for motel operations and
general and administrative expenses (532,590) (479,084)
Interest received 20,147 14,977
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Net Cash Provided (Used) by Operating Activities 356,067 401,398
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Cash Flows from Investing Activities:
Purchases of property and equipment (9,122) (18,607)
Proceeds from sale of land - 500
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Net Cash Provided (Used) by Investing Activities (9,122) (18,107)
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Cash Flows from Financing Activities:
Distributions to limited partners (500,000) (375,000)
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Net Cash Provided (Used) by Financing Activities (500,000) (375,000)
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Net Increase (Decrease) in Cash and
Temporary Investments (153,055) 8,291
Cash and Temporary Investments:
Beginning of period 1,079,735 938,477
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End of period $ 926,680 $ 946,768
========== ==========
Reconciliation of Net Income to Net Cash Provided by Operating Activities:
Net Income $ 188,691 $ 358,260
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Adjustments to reconcile net income
to net cash used by operating activities:
Depreciation and amortization 54,710 56,642
(Gain) loss on disposition of property and equipment 863 (500)
(Increase) decrease in accounts receivable 4,152 (3,341)
(Increase) decrease in prepaid expenses 12,792 11,176
(Increase) decrease in other assets - (15,834)
Increase (decrease) in accounts payable 94,859 (5,005)
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Total Adjustments 167,376 43,138
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Net Cash Provided by Operating Activities $ 356,067 $ 401,398
========== ==========
The accompanying notes are an integral part of the financial statements.
5
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
Notes to Financial Statements
March 31, 1998
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 September 30, 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 $43,282
Franchise Fees $16,982
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 motel operating expenses
for the following periods:
Three Six Three Six
Months Months Months Months
Ended Ended Ended Ended
3/31/98 3/31/98 3/31/97 3/31/97
--------- --------- --------- ---------
Salaries and related costs $ 86,997 $ 176,393 $ 74,954 $ 151,156
Franchise and advertising fees 20,925 42,454 20,809 42,197
Utilities 13,154 30,322 14,760 31,012
Allocated costs,
mainly indirect salaries 24,881 51,718 22,055 46,602
Replacements and renovations 2,754 4,650 2,614 8,265
Other operating expenses 58,031 116,165 49,658 111,768
--------- --------- --------- ---------
Total motel operating expenses $ 206,742 $ 421,702 $ 184,850 $ 391,000
========= ========= ========= =========
The following additional material contingencies are required to be stated in the
interim reports under federal securities law: None.
6
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
MARCH 31, 1998
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998, the Partnership's current assets of $977,489 exceeded its
current liabilities of $220,879 providing an operating reserve of $756,610,
which is greater than the $455,000 target set by the General Partners. In the
unlikely event that the Partnership's reserves do not meet operating needs, the
Partnership's Pleasanton, California motel will provide substantial collateral
against additional debt.
The Partnership has no material commitments for capital expenditures. Renovation
and replacement expenditures during the first six months of the fiscal year
which will end on September 30, 1998, were $13,772 (of which $9,122 was
capitalized) or 1.6% of room revenues.
RESULTS OF OPERATIONS
The following is a comparison of operating results for the six month periods
ended March 31, 1998 and March 31, 1997.
Total revenues increased $682 or 0.1% for the six months ended March 31, 1998 as
compared to the corresponding period of the preceding fiscal year. Guest room
revenue increased $5,503 or 0.7% for the current period as compared to the
corresponding period of the previous fiscal year. This increase is due to an
increase in average room rate from $53.83 in 1997 to $65.77 in 1998 which was
partially offset by a decrease in occupancy from 71.1% in 1997 to 69.5% in 1998.
Total expenditures increased $170,251 or 32.4% during the six months covered by
this report as compared to the previous fiscal year. The increase in
expenditures is due to increases in the minimum wage and to legal, appraisal and
other costs associated with the potential partnership liquidation.
FUTURE TRENDS
The General Partners expect the Pleasanton motel to continue its performance if
the current improvement in the general economic climate continues.
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 equals 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 Famous Host Lodging V, L.P.), 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.
SUPER 8 ECONOMY LODGING IV, Ltd.
4-30-98 By /S/ Philip B. Grotewohl
- ------- --------------------------
Date Philip B. Grotewohl,
Chairman of Grotewohl Management
Services, Inc.,
Managing General Partner
4-30-98 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