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, 1996
Commission File 0-10134
SUPER 8 MOTELS III, LTD
------------------------------------------------------
(Exact name of registrant as specified in its charter)
CALIFORNIA 94 - 2664921
------------------------------ ------------------
(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
---- ------
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
FINANCIAL STATEMENTS
JUNE 30, 1996 AND 1995
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
INDEX
Financial Statements: PAGE
Balance Sheet - JUNE 30, 1996 and December 31, 1995 2
Statement of Operations - Six Months Ended
June 30, 1996 and 1995 3
Statement of Changes in Partners' Equity -
Six Months Ended June 30, 1996 and 1995 4
Statement of Cash Flows - Six Months Ended
June 30, 1996 and 1995 5
Notes to Financial Statements 6
Management Discussion and Analysis 7 - 8
Other Information and Signatures 9 - 10
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
BALANCE SHEET
JUNE 30, 1996 AND DECEMBER 31, 1995
6/30/96 12/31/95
ASSETS ---------- ----------
Current Assets:
Cash and temporary investments $ 215,232 $ 285,554
Accounts receivable 90,154 72,824
Prepaid expenses 20,743 11,588
---------- ----------
Total current assets 326,129 369,966
---------- ----------
Property and Equipment:
Land 1,670,129 1,670,129
Capital Improvements 26,175 26,175
Buildings 3,276,870 3,276,870
Furniture and equipment 753,629 742,531
---------- ----------
5,726,803 5,715,705
Accumulated depreciation and amortization (2,754,726) (2,674,215)
---------- ----------
Property and equipment, net 2,972,077 3,041,490
---------- ----------
Total Assets $ 3,298,206 $ 3,411,456
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Current portion of note payable $ 24,619 $ 77,963
Accounts payable and accrued liabilities 74,722 85,032
---------- ----------
Total current liabilities 99,341 162,995
Long - Term Liabilities:
Note payable 40,437 75,493
---------- ----------
Total liabilities 139,778 238,488
---------- ----------
Contingent Liabilities (See Note 1)
Partners' Equity:
General Partners 19,049 19,194
Limited Partners 3,139,379 3,153,774
---------- ----------
Total partners' equity 3,158,428 3,172,968
---------- ----------
Total Liabilities and Partners' Equity $ 3,298,206 $ 3,411,456
========== ==========
The accompanying notes are an integral part of the financial statements.
-2-
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
Three Six Three Six
Months Months Months Months
Ended Ended Ended Ended
6/30/96 6/30/96 6/30/95 6/30/95
---------- ---------- ---------- ----------
Income:
Motel room income $ 360,354 $ 715,766 $ 409,347 $ 803,092
Telephone and
vending 7,711 15,429 5,951 13,962
Interest 2,123 4,657 1,977 4,129
Other 1,445 1,979 612 1,102
---------- ---------- ---------- ----------
Total Income 371,633 737,831 417,887 822,285
---------- ---------- ---------- ----------
Expenses:
Motel operating expenses
(Note 2) 308,693 595,538 293,571 574,257
General and administrative 14,463 33,926 10,951 35,753
Depreciation and amortization 40,261 80,511 41,673 83,424
Interest 2,239 5,763 7,086 16,408
Property management fees 18,441 36,633 20,804 40,216
---------- ---------- ---------- ----------
Total Expenses 384,097 752,371 374,085 750,058
---------- ---------- ---------- ----------
Net Income (Loss) $ (12,464) $ (14,540) $ 43,802 $ 72,227
========== ========== ========== ==========
Net Income (Loss) Allocable
to General Partners ($125) ($145) $438 $722
======== ======== ======== ========
Net Income (Loss) Allocable
to Limited Partners ($12,339) ($14,395) $43,364 $71,505
======== ======== ======== ========
Net Income (Loss) per
Partnership Unit ($2.08) ($2.42) $7.30 $12.04
======== ======== ======== ========
Distribution to
Limited Partners
Per Partnership Unit $0.00 $0.00 $0.00 $0.00
======== ======== ======== ========
The accompanying notes are an integral part of the financial statements.
-3-
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
STATEMENT OF PARTNERS' EQUITY
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
1996 1995
General Partners: ---------- ----------
Balance at beginning of year $ 19,194 $ 18,506
Net income (loss) (145) 722
---------- ----------
Balance at end of period 19,049 19,228
---------- ----------
Limited Partners:
Balance at beginning of year 3,153,774 3,085,712
Net income (loss) (14,395) 71,505
Less: Cash distributions - -
---------- ----------
Balance at end of period 3,139,379 3,157,217
---------- ----------
Total balance at end of period $ 3,158,428 $ 3,176,445
========== ==========
The accompanying notes are an integral part of the financial statements.
-4-
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
1996 1995
---------- ----------
Cash Flows From Operating Activities:
Received from motel revenues $ 715,540 $ 822,025
Expended for motel operations
and general and administrative expenses (684,825) (666,346)
Interest received 4,961 3,530
Interest paid (6,500) (17,883)
---------- ----------
Net cash provided (used) by operating activities 29,176 141,326
---------- ----------
Cash Flows From Investing Activities:
Purchases of property and equipment (11,098) (2,906)
---------- ----------
Net cash provided (used) by investing activities (11,098) (2,906)
---------- ----------
Cash Flows From Financing Activities:
Payments on notes payable (88,400) (177,017)
Distributions paid to Limited Partners - -
---------- ----------
Net cash provided (used) by financing activities (88,400) (177,017)
---------- ----------
Net increase (decrease) in cash
and temporary investments (70,322) (38,597)
Cash and temporary investments:
Beginning of year 285,554 370,107
---------- ----------
End of period $ 215,232 $ 331,510
========== ==========
Reconciliation of Net Income to Net Cash Provided by Operating Activities:
Net income (loss) $ (14,540) $ 72,227
---------- ----------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 80,511 83,424
(Increase) decrease in accounts receivable (17,329) 3,270
(Increase) decrease in prepaid expenses (9,155) (7,733)
Increase (decrease) in accounts payable
and accrued liabilities (10,311) (9,862)
---------- ----------
Total adjustments 43,716 69,099
---------- ----------
Net cash provided by operating activities $ 29,176 $ 141,326
========== ==========
The accompanying notes are an integral part of the financial statements.
-5-
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
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, 1995 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 $ 36,633
Franchise Fees $ 14,325
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 costs for
the periods reported:
Three Six Three Six
Months Months Month Month
Ended Ended Ended Ended
6/30/96 6/30/96 6/30/95 6/30/95
---------- ---------- ---------- ----------
Salaries and related costs $ 113,945 $ 221,634 $ 111,138 $ 226,131
Utilities 24,626 48,478 28,401 54,326
Allocated costs, mainly
indirect salaries 47,631 93,450 44,551 86,814
Renovations and Replacements 25,868 33,172 7,991 12,054
Other operating expenses 96,623 198,804 101,490 194,932
---------- ---------- ---------- ----------
Total motel operating expens $ 308,693 $ 595,538 $ 293,571 $ 574,257
========== ========== ========== ==========
The following additional material contingencies are required to be restated in
interim reports under federal securities law: None.
-6-
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
JUNE 30, 1996
LIQUIDITY AND CAPITAL RESOURCES
The Partnership's current assets of $326,129 exceed its current
liabilities of $99,341 by $226,788. This excess of current assets over
current liabilities is less than the $297,050 operating reserve requirement in
the Partnership Agreement. The decline in operating reserve is attributable to
the Partnership's payments 1995 and 1996 of $275,000 in payments against
principal on the Bakersfield motel note.
As discussed in the Partnership's previous reports on Forms 10-Q and
Forms 10-K, the General Partners had intended to accumulate a sinking fund to
pay the existing Bakersfield loan balloon payment due in September 1997. The
General Partners have since decided instead to make the planned sinking fund
deposits directly to the mortgage in the form of additional periodic principal
payments, thus saving on interest expense. The General Partners have also
decided to suspend quarterly distributions to the Limited Partners in order to
apply the available funds to extra principal payments.
The Partnership has no major commitments for capital expenditures. The
Partnership has a replacement and renovation target equal to 3% of guest room
revenue. During the six months ended June 30, 1996, the Partnership expended
$42,474 in such expenditures which is equal to 4.4% of guest room revenue.
Included in the total expenditures for renovations and replacements was $21,900
for a major parking lot refurbishment at the Bakersfield motel and $10,767 in
new computer systems. The General Partners anticipate that renovation and
repair expenditures will not exceed 3% of guest room revenue during the current
fiscal year.
RESULTS OF OPERATIONS
The following is a comparison of the first six months of the fiscal year
ending December 31, 1996 with the corresponding period of the preceding fiscal
year.
Total revenues decreased $84,454 (or 10.3%) for the six month period as
compared to the previous fiscal year. The decrease in total revenue was due to
a $87,326 (or 10.9%) decrease in room revenue. Motel occupancy decreased from
75.3% to 69.5%, while the average room rate declined from $34.45 to $33.19. The
reduction in guest room revenue occurred primarily at the Partnership's San
Bernardino motel and was due to reduced patronage in the corporate and leisure
market segments. According to various lodging industry publications, the San
Bernardino market is the worst performing market in the country.
The Partnership's expenses increased by $2,313 or 0.3%. The Partnership
experienced an $21,118 increase in renovation and replacement expense due to
the parking lot repairs which was offset by decreased motel operating expenses
due to the lower occupancy and by decreased interest expense as the mortgage
note balanced is reduced.
-7-
SUPER 8 MOTELS III, LTD.
(A California Limited Partnership)
MANAGEMENT DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATION
(Continued)
JUNE 30, 1996
FUTURE TRENDS
The General Partners expect that overall occupancy for the fiscal year
ending December 31, 1996 will be equal to or less than that achieved in 1995.
The General Partners expect income for the current fiscal year to be less than
the previous fiscal year. Expenses are subject to both cost inflation and to
the deferred maintenance associated with the effects of high occupancy in
previous years. The net effect should be net income less than the previous
fiscal year.
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.
-8-
PART II. OTHER INFORMATION
----------------------------
Item 1. Legal Proceedings
-----------------
None
Item 2. Changes in Securities
---------------------
None
Item 3. Defaults upon Senior Securities
-------------------------------
None
Item 4. Submission of Matters
---------------------
None
Item 5. Other Information
-----------------
None
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
None
-9-
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 MOTELS III, LTD
8-2-96 By /S/ David P. Grotewohl
------ -------------------------
Date David P. Grotewohl,
President of Grotewohl
Management Services, Inc.,
Managing General Partner
8-2-96 By /S/ David P. Grotewohl
------ -------------------------
Date David P. Grotewohl,
Chief Financial Officer
-10-