SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
( X ) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)
For the Fiscal Year Ended September 30, 1995
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
For the transition period from ______________to___________
Commission file number 0-11512
SUPER 8 ECONOMY LODGING IV, LTD.
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
California 94-2827163
------------------------------- ----------------------
(State or other jurisdiction of (I.R.S. Empolyer Iden-
incorporation or organization) tification No.)
2030 J Street, Sacramento, California 95814
---------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (916) 442-9183
Securities registered pursuant to Section 12 (b) of the Act: None
Securities registered pursuant to Section 12 (g) of the Act:
UNITS OF LIMITED PARTNERSHIP INTEREST
-------------------------------------
(Title of Class)
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 such shorter period that the registrant
has been required to file such reports) and (2) has been subject to the filing
requirements for the past 90 days. Yes _x_ No ___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K. [x]
State the aggregate market value of the voting stock held by non-affiliates of
the registrant.
Inapplicable.
DOCUMENTS INCORPORATED BY REFERENCE
NONE
- 1 -
PART I
Item 1. BUSINESS
General Development of Business
Super 8 Economy Lodging IV, Ltd. (the "Partnership") is a
limited partnership which was organized under the Uniform
Limited Partnership Act of the State of California on February
5, 1982.
The Managing General Partner of the Partnership is
Grotewohl Management Services, Inc., a California corporation
organized and wholly-owned by Philip B. Grotewohl. The
Associate General Partner is Robert J. Dana. The Associate
General Partner does not have general responsibility in
connection with the management of the business and affairs of
the Partnership. The Managing General Partner and the Associate
General Partner are sometimes referred to collectively as the
"General Partners."
Through two public offerings of units of limited partnership
interest in the Partnership ("Units"), the Partnership sold
10,000 Units at a price of $1,000 each.
The net proceeds of the offerings were expended for the
acquisition and development of properties located in Pleasanton,
California and Santa Ana, California. Motel operations
commenced on October 4, 1983 at the Pleasanton property and on
February 19, 1985 at the Santa Ana property. The Partnership's
Pleasanton motel is operated pursuant to franchises acquired
from Super 8 Motels, Inc. under the name "Super 8 Motel." On
April 30, 1992 the Partnership sold the Santa Ana motel.
There is hereby incorporated by reference herein the
information regarding the Partnership's motel property contained
in Part I, Item 2 of this report under the caption "Properties."
Narrative Description of Business
The Partnership's business is to operate its motel property and
to engage in any and all general business activities related or
incidental thereto. The Partnership's motel is operated
pursuant to a franchise originally acquired from Super 8 Motels,
Inc. through Super 8 Management Corporation as a subfranchisor,
under the name "Super 8 Motel."
Super 8 Motels, Inc. is a South Dakota corporation which
was organized in 1972. Its first franchised motel commenced
operation in 1974 and, as of October 24, 1995, a total of 1,348
franchised motels having an aggregate of 82,517 guest rooms were
in operation. On April 30, 1993, Super 8 Motels, Inc. became a
wholly-owned subsidiary of Hospitality Franchise Systems, Inc
("HFS"). In addition to Super 8 Motels, HFS is also the
franchisor of hospitality properties under the Howard Johnson,
Ramada and Days Inn tradenames.
- 2 -
Motels franchised by Super 8 Motels, Inc. are budget motels in
that they offer room rates near the lower end of the room rate
scale in each area in which they are located. Such lower rates
are made possible by the elimination of certain features present
in many higher-priced facilities, such as meeting rooms and
large lobbies; by not operating restaurants or cocktail lounges
in connection with the motels; and by utilizing uniform
construction methods (adapted only slightly to fit specific
locales) which have been developed by Super 8 Motels, Inc. and a
standardized design which facilitates maintenance and minimizes
overhead expense.
Super 8 Motels offer accommodations at the upper end, in terms
of facilities and prices, of the budget segment of the lodging
industry. Generally, Super 8 Motels offer larger rooms and
higher quality furniture and furnishings than motels franchised
under the tradenames Motel 6, Regal 8 and E-Z 8. Rates in the
Super 8 Motels tend to exceed those offered by the chains
mentioned above.
By terms of the franchise agreement with Super 8 Motels, Inc.,
the Partnership pays monthly franchise fees equal to 4% of its
gross room revenues and contributes an additional 1% of its
gross room revenues to a fund administered by Super 8 Motels,
Inc. to finance the national advertising program. The
Partnership has no equity or other interest in Super 8 Motels,
Inc.
Brown & Grotewohl (the "Manager"), a California general
partnership which is an affiliate of the Managing General
Partner, directs the operation of the Partnership's motel. The
Manager supervises and directs the Partnership's employees
having direct responsibility for the operation of the motel,
establishes room rates, and directs the promotional activities
of the Partnership's employees. It directs the purchase of
replacement equipment and supplies, maintenance activity and the
engagement or selection of all vendors, suppliers and
independent contractors. The motel staff, under the supervision
of the Manager, is responsible for, among other things,
performing all service, administrative and bookkeeping duties in
connection with the motel, including all collections and all
disbursements to be paid out of funds generated by such
operations or otherwise supplied by the Partnership.
The Partnership employs (on a part-time basis) one secretarial
employee, four Partnership and motel administrative employees,
two marketing employees, and five accounting employees at its
Sacramento, California office. Included in the above list is
David P. Grotewohl, son of Philip Grotewohl, whom the
Partnership employs as Director of Operations and as an
attorney. Mark Grotewohl, son of Philip Grotewohl, is employed
as Director of Marketing. Julie Grotewohl, daughter of Philip
Grotewohl, is employed as the Regional Director of Sales.
- 3 -
Pleasanton, California
The Pleasanton motel, which consists of 101 guest rooms,
commenced operations on October 4, 1983. The average monthly
occupancy rates and average monthly room rates for the period
from October 1, 1992 through September 30, 1995 are as follows:
AVERAGE OCCUPANCY RATE
1994 - 1993 - 1992 -
1995 1994 1993
---- ---- ----
October 81% 71% 64%
November 69% 70% 63%
December 56% 61% 53%
January 63% 64% 65%
February 66% 69% 70%
March 75% 73% 73%
April 72% 67% 73%
May 78% 72% 76%
June 91% 79% 88%
July 86% 88% 89%
August 87% 87% 84%
September 81% 73% 71%
---- ---- ----
Annual Average 75% 73% 72%
AVERAGE ROOM RATE
1994 - 1993 - 1992 -
1995 1994 1993
---- ---- ----
October $50.53 $49.95 $51.35
November $50.26 $49.77 $49.67
December $49.56 $48.76 $47.35
January $50.12 $50.27 $48.98
February $49.80 $49.80 $49.40
March $49.99 $49.70 $49.28
April $51.89 $49.77 $50.20
May $52.06 $49.81 $48.88
June $51.48 $50.54 $48.57
July $52.95 $48.87 $49.69
August $55.28 $51.45 $51.89
September $53.53 $50.23 $49.78
------ ------ ------
Annual Average $51.62 $49.93 $49.64
Patrons of the Partnership's Pleasanton motel are primarily
commercial or business travelers, with some tourist and vacation
business. The Pleasanton motel has no single customer the loss
of which would, in the opinion of the Managing General Partner,
have a material adverse effect on the motel's operations.
- 4 -
The following lodging facilities provide direct and indirect
competition to the Partnership's Pleasanton motel:
APPROXIMATE
DISTANCE
NUMBER OF FROM PARTNERSHIP'S
FACILITY ROOMS MOTEL
Sheraton Hotel 216 300 Yards
Marriott Courtyard 145 0.75 Mile
Best Western Dublin Park 230 1.0 Mile
Wyndom Hotel 171 1.5 Miles
Hilton Hotel 300 2.0 Miles
Holiday Inn 248 2.0 Miles
Springtown Inn 127 9.0 Miles
All Star Motel 102 9.0 Miles
Holiday Inn 124 10.0 Miles
As of October 1, 1995 the Partnership employed (on a full or
part-time basis) one manager, five desk clerks, one maintenance
worker and twelve housekeeping and laundry employees at the
Pleasanton motel.
Item 2. PROPERTIES
On October 4, 1982, the Partnership acquired from Hopyard
Associates, a general partnership, a parcel of 2.037 acres of
unimproved real property located in Pleasanton, California.
The property is located immediately adjacent to Interstate
Highway 580, on the southeast quadrant of the Hopyard Road
overpass approximately one mile east of Interstate Highway 680
and approximately 40 miles east of San Francisco.
Construction of the 102 room motel commenced on October 18,
1982 and was completed on October 4, 1983, at which point motel
operations commenced.
Item 3. LEGAL PROCEEDINGS
Inapplicable.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Inapplicable.
- 5 -
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
Market Information
The Units are not freely transferable and no public market for
the Units has developed or is expected to develop.
Holders
As of December 15, 1995 a total of 2,110 investors ("Limited
Partners") held Units in the Partnership.
Distributions
Cash Available for Distribution is defined as the cash funds
provided from operations without deduction for depreciation, but
after deducting cash funds used to pay or provide for payment of
debt service, capital improvements and replacements and the
operating expenses of the property, also less adequate cash
reserves for obligations of the Partnership for which there is
no provision.
Cash Available for Distribution shall be distributed quarterly
in the following manner:
(1) 90% to the Limited Partners
(2) 9% to the General Partners as a fee for managing the
Partnership
(3) 1% to the General Partners on account of their
Partnership interest.
Notwithstanding the foregoing, the General Partners shall
receive no distributions of Cash Available for Distribution
until the Limited Partners have received a cumulative 10% per
annum return on their "Adjusted Capital Contributions" (i.e.,
their original capital contributions, adjusted for previous
returns of capital or sale or refinancing proceeds). Inasmuch
as the Limited Partners have not received a cumulative 10% per
annum return, the General Partners have not received any share
of the Cash Available for Distribution since inception of the
Partnership.
The proceeds from the sale or refinancing of properties not
reinvested are to be distributed first to the Limited Partners
until they have received cumulative payments from all
distribution sources equal to 100% of their original capital
contribution and a cumulative 10% per annum return on their
Adjusted Capital Contributions. When the foregoing requirement
has been satisfied, any remaining funds from the sale or
refinancing of properties will be distributed 15% to the General
Partners and 85% to the Limited Partners.
- 6 -
The following distributions (all from Cash Available for
Distribution) were made during the two most recent fiscal years:
Amount Amount
Distributed Distributed
Date Per Unit to General Partners
11/15/93 $10.00 - 0 -
02/15/94 $12.50 - 0 -
05/15/94 $12.50 - 0 -
08/15/94 $13.65 - 0 -
11/15/94 $13.65 - 0 -
02/15/95 $13.65 - 0 -
05/15/95 $13.65 - 0 -
08/15/95 $13.65 - 0 -
- 7 -
Item 6. SELECTED FINANCIAL DATA
Following are selected financial data of the Partnership
for the fiscal years ended September 30, 1995, 1994, 1993, 1992
and 1991. Due to the sale of the Santa Ana motel on April 30,
1992, data for the 1992 fiscal year is not comparable to any
other fiscal year, and data for the 1995, 1994 and 1993 fiscal
years is not comparable to data for the 1991 fiscal year.
Years Ended September 30:
----------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Total income $1,510,802 $1,415,308 $1,395,176 $1,871,469 $2,257,931
Motel room income $1,448,486 $1,354,227 $1,337,670 $1,757,132 $2,110,358
Interest income $22,379 $19,181 $18,138 $34,085 $56,618
Other income:
Loss on sale of
Santa Ana Motel - - - $(2,297,181) -
Gain on sale of
Pleasanton land
parcel - - $5,825 - -
Net income (loss) $513,436 $419,009 $386,643 $(2,314,004) $(299,447)
Per Partnership Unit:
Cash distributions:
Proceeds from
sale of Santa
Ana Motel - - - $57.11 -
Other $54.60 $48.65 $40.00 $42.89 -
Net income (loss) $51.34 $41.90 $38.66 $(231.40) $(29.95)
Years Ended September 30:
----------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Total assets $2,769,469 $2,786,858 $2,864,030 $2,832,368 $7,997,998
Long-term debt - - - - $1,546,493
- 8 -
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Liquidity
- ---------
The Partnership's current assets of $829,176 exceed its current
liabilities of $111,441 by $717,735. This amount exceeds the
General Partners' cash reserve target of $455,000. In the
opinion of the General Partners, the Partnership's Pleasanton
motel provides adequate liquidity to satisfy the Partnership's
financial obligations.
The Partnership's primary source of liquidity is its gross
revenues from operations. As noted below, the Partnership has a
positive cash flow from motel operations. In addition, the
Partnership's equity in its Pleasanton motel, which is presently
unencumbered, would provide a potential source of liquidity
through financing in the event the Partnership's liquidity were
impaired. There can be no assurance, however, that the
Partnership could borrow against such equity on favorable terms
should additional liquidity be required.
Capital Resources
- ------------------
The Partnership owns and operates one motel property, a
102-room lodging facility located in Pleasanton, California.
The Partnership currently has no material commitments for
capital expenditures. Its motel property is in full operation,
and no further property acquisitions or extraordinary capital
improvements are contemplated. Except as described below, the
General Partners are aware of no material trends or changes with
respect to the mix or relative cost of the Partnership's capital
resources. Working capital is expected to be generated by
revenues from operations.
During the fiscal year covered by this report, the Partnership
spent $98,364 ($60,317 of which was capitalized) on the
refurbishment of its motel and its furnishings. The capitalized
items included $19,888 for a new roof, $13,564 for new
televisions, $7,561 for a new washer, $2,559 for a new dryer and
$4,099 for replacement chairs. The Managing General Partner
anticipates the expenditure of an undetermined amount during the
next fiscal year on further refurbishment of the Partnership's
motel, such amount to be paid from operating cash flow or, if
operating cash flow is inadequate, from reserves.
New Accounting Standards
- -------------------------
SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be Disposed Of, requires
the Partnership to disclose information about potential
impairment to the value of long-lived assets. The Partnership
is not required to adopt and does not currently plan to adopt
- 9 -
SFAS No. 121 until its fiscal year ending September 30, 1997.
The Partnership does not expect to make any disclosures about
impairment of long-lived assets under SFAS No. 121.
Results of Operation
- --------------------
Partnership's Combined Financial Results
- -----------------------------------------
The following is a comparison of combined results for the
twelve-month periods ending September 30, 1993, 1994 and 1995.
Comparative revenue and expense data is included in the
financial statements found in Item 8.
The Partnership achieved a 22.5% increase in net income for the
fiscal year covered by this report as compared to the previous
fiscal year. This result was achieved by increasing total
income by 6.8% while keeping expenses essentially unchanged.
The revenue increase was due primarily to increased guest room
revenue which was the result of both improved occupancy rates
and average room rates.
The Partnership achieved a $20,132 or 1.4% increase in total
income for the fiscal year ended September 30, 1994 as compared
to the previous fiscal year. This revenue increase is primarily
from a slight increase in guest room revenue. This reflects the
stabilization of the Pleasanton lodging market.
Pleasanton, California Motel
- -----------------------------
The following is a comparison of operating results at the
Partnership's Pleasanton motel for the fiscal years 1993, 1994
and 1995:
AVERAGE AVERAGE
OCCUPANCY ROOM
PERIOD ENDED RATE RATE
--------- -------
September 30, 1993 72.4% $49.64
September 30, 1994 72.8% $49.93
September 30, 1995 75.4% $51.62
TOTAL
EXPENDITURES PARTNERSHIP
TOTAL AND DEBT CASH
PERIOD ENDED REVENUE SERVICE FLOW (1)
- ------------------ ---------- ------------ -----------
September 30, 1993 $1,395,176 $927,848 $467,328
September 30, 1994 $1,415,309 $893,827 $521,482
September 30, 1995 $1,510,802 $947,078 $563,724
(1) While cash flow from operations as it is used here is not
an amount found in the financial statements, this amount is the
best indicator of the annual change in the amount available, if
- 10 -
any, for distribution to the Limited Partners. This calculation
is reconciled to the financial statements in the following table.
Reconciliation of Partnership Cash Flow (included in the chart
above) to Net Income as shown on the Statements of Operations
(in the financial statements) is as follows:
1993 1994 1995
-------- -------- --------
Partnership Cash Flow $467,328 $521,482 $563,724
Net Additions to Fixed Assets 20,883 3,311 59,067
Depreciation and Amortization (106,826) (105,784) (109,175)
Other Items 5,258 0 (180)
-------- -------- --------
Net Income $386,643 $419,009 $513,436
During the fiscal year covered by this report, the
Partnership's Pleasanton motel achieved improvements in both its
occupancy rate and in its average room rate which yielded a
$94,259 or 7.0% increase in guest room revenue. While there was
a very slight reduction in corporate room nights sold, the
average rate for corporate business increased as to provide
increased revenue from this market segment. The leisure market
segment increased in both room nights sold and in the average
rate paid.
The Partnership's Pleasanton motel achieved a $20,133 or 1.4%
increase in total revenue for the fiscal year ended September
30, 1994 as compared to the previous fiscal year. This increase
is associated primarily with a slight rise in the number of room
nights sold to corporate and government travelers.
During the fiscal year covered by this report as compared to
the previous fiscal year, the Pleasanton motel's total
expenditures and debt service increased $53,251 or 6.0%. Motel
operating expenses declined by $10,538 due to the continued
benefit from the cost-cutting program instituted by the Managing
General Partner in early calendar 1994. The increase in total
expenditures and debt service is associated with renovations and
replacements, which increased $57,006 on a comparative basis.
The roof, washer and dryer replacements previous referenced in
the section captioned "Capital Requirements" are infrequent
expenditures. No similar expenditures are expected during the
next fiscal year.
During the fiscal year ended September 30, 1994 as compared to
the previous fiscal year, the Pleasanton motel's total
expenditures and debt service declined $34,021, or 3.7%. The
Managing General Partner instituted a cost-cutting program that
eliminated relatively expensive, ineffective marketing
expenditures and directed that cost control rather than business
expansion become the main operational thrust. Changes in the
responsibilities of the resident manager have resulted in cost
savings of $8,018 in front desk payroll and $15,839 in
housekeeping payroll costs. Abandonment of the ineffective
marketing program has resulted in a $10,652 reduction in print
advertising expense. These costs savings were offset by a
$14,120 increase in bad debt expense due to the write-off of an
old account that was sent to collection.
- 11 -
Future Trends
- --------------
The General Partners anticipate that the Partnership will
continue to achieve favorable financial results. The
cost-cutting program has been in place for the entire fiscal
year covered by this report. The comparative saving achieved
under that program will not continue, but the program will
remain in force to minimize future expenditures.
Future financial results will be dependent upon the economic
climate in the Pleasanton hospitality market. While the market
is presently strong, this area has been subjected to both
favorable and unfavorable cyclical business conditions.
The General Partners expect the Partnership's occupancy
rate (and hence its revenues and profits) to benefit, in the
long range, from economic growth. The General Partners
anticipate lower occupancy rates and perhaps lower room rates in
the event of an economic downturn.
The General Partners anticipate that, during the long range,
any increase in operating costs and expenses due to inflation
will be met by an upward adjustment in room rates. In the short
range, however, competitive conditions in the Partnership's
market area may make such adjustments difficult or impossible.
The General Partners are unable to predict when improved
competitive conditions would make such adjustments possible.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
See Financial Statements and Notes to Financial Statements
at pages F-1 through F-11.
- 12 -
ANNUAL REPORT ON FORM 10-K
ITEM 8
FINANCIAL STATEMENTS
SUPER 8 ECONOMY LODGING IV, LTD.
SACRAMENTO, CALIFORNIA
SEPTEMBER 30, 1995
F-1
Item 8: Financial Statements
SUPER 8 ECONOMY LODGING IV, LTD.
INDEX OF FINANCIAL STATEMENTS
Pages
-----
Financial Statements:
Report of Independent Certified Public Accountants F-3
Balance Sheets, September 30, 1995 and 1994 F-4
Statements of Operations for the years ended
September 30, 1995, 1994 and 1993 F-5
Statements of Partners' Equity for the years ended
September 30, 1995, 1994 and 1993 F-6
Statements of Cash Flows for the years ended F-7 to
September 30, 1995, 1994 and 1993 F-8
Notes to Financial Statements F-9 to
F-11
Note: All schedules have been omitted since the required information is not
present or not present in amounts sufficient to require submission of the
schedule or because the information required is included in the financial
statements or notes thereto.
F-2
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Partners
Super 8 Economy Lodging IV, Ltd.
We have audited the accompanying balance sheets of Super 8 Economy Lodging IV,
Ltd., a California limited partnership, as of September 30, 1995 and 1994 and
the related statements of operations, partners' equity and cash flows for each
of the three years in the period ended September 30, 1995. 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 audits 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 Super 8 Economy Lodging IV,
Ltd. as of September 30, 1995 and 1994 and the results of its operations and
its cash flows for each of the three years in the period ended September 30,
1995, in conformity with generally accepted accounting principles.
VOCKER KRISTOFFERSON AND CO.
November 17, 1995
San Mateo, California
F-3
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
BALANCE SHEETS
September 30, 1995 and 1994
ASSETS
1995 1994
---- ----
Current Assets:
Cash and temporary investments (Notes 1 and 3) $ 794,899 $ 763,487
Accounts receivable 22,343 25,087
Prepaid expenses 11,934 11,459
---------- ----------
Total Current Assets 829,176 800,033
---------- ----------
Property and Equipment (Notes 2 and 5):
Land 799,311 799,311
Buildings 2,226,531 2,226,531
Furniture and equipment 548,367 504,918
---------- ----------
3,574,209 3,530,760
Accumulated depreciation (1,672,013) (1,577,026)
---------- ----------
Property and Equipment, Net 1,902,196 1,953,734
---------- ----------
Other Assets (Note 2):
Deposit of federal income taxes 38,097 33,091
---------- ----------
Total Assets $2,769,469 $2,786,858
========== ==========
LIABILITIES AND PARTNERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities $ 109,975 $ 88,167
Due to related parties (Note 4) 1,466 8,099
---------- ----------
Total Liabilities 111,441 96,266
Partners' Equity:
General Partners (17,358) (22,492)
Limited Partners 2,675,386 2,713,084
---------- ----------
Total Partners' Equity 2,658,028 2,690,592
---------- ----------
Total Liabilities and Partners' Equity $2,769,469 $2,786,858
========== ==========
The accompanying notes are an integral part of these financial statements.
F-4
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
STATEMENTS OF OPERATIONS
Years Ended September 30:
---------------------------------------
1995 1994 1993
---- ---- ----
Income:
Motel room $1,448,486 $1,354,227 $1,337,670
Telephone and vending 36,519 37,699 34,984
Interest 22,379 19,181 18,138
Other 3,418 4,201 4,384
---------- ---------- ----------
Total Income 1,510,802 1,415,308 1,395,176
---------- ---------- ----------
Expenses:
Motel operations (Notes 4 and 5) 777,015 787,553 800,431
General and administrative (Note 4) 36,760 33,331 38,444
Depreciation and amortization (Note 2) 109,175 105,784 106,826
Property management fees (Note 4) 74,416 69,631 68,657
---------- ---------- ----------
Total Expenses 997,366 996,299 1,014,358
---------- ---------- ----------
Other Income (Expenses):
Gain on sale of Pleasanton Land
parcel (Note 6) - - 5,825
---------- ---------- ----------
Net Income $ 513,436 $ 419,009 $ 386,643
========== ========== ==========
Net Income Allocable to General
Partners $ 5,134 $ 4,190 $ 3,866
=========== ========== ==========
Net Income Allocable to Limited
Partners $ 508,302 $ 414,819 $ 382,777
=========== ========== ==========
Net Income Per Partnership Unit
(Note 1) $ 51.34 $ 41.90 $ 38.66
=========== ========== ==========
Distributions to Limited Partners
Per Partnership Unit (Note 1) $ 54.60 $ 48.65 $ 40.00
=========== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-5
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
STATEMENTS OF PARTNERS' EQUITY
Years Ended September 30:
---------------------------------------
1995 1994 1993
---- ---- ----
General Partners:
Balance at beginning of year $ (22,492) $ (26,682) $ (30,548)
Net income 5,134 4,190 3,866
---------- ---------- ----------
Balance at End of Year (17,358) (22,492) (26,682)
---------- ---------- ----------
Limited Partners:
Balance at beginning of year 2,713,084 2,784,765 2,801,988
Net income 508,302 414,819 382,777
Distributions to Limited Partners (546,000) (486,500) (400,000)
---------- ---------- ----------
Balance at End of Year 2,675,386 2,713,084 2,784,765
---------- ---------- ----------
Total Partners' Equity $2,658,028 $2,690,592 $2,758,083
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-6
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS
Years Ended September 30:
---------------------------------------
1995 1994 1993
---- ---- ----
Cash Flows From Operating Activities:
Received from motel operations $1,492,593 $1,407,648 $1,374,125
Expended for motel operations and
general and administrative expenses (877,067) (934,917) (857,609)
Interest received 20,953 18,719 18,107
---------- ---------- ----------
Net Cash Provided by Operating
Activities 636,479 491,450 534,623
---------- ---------- ----------
Cash Flows From Investing Activities:
Purchases of property and equipment (60,317) (3,311) (30,583)
Proceeds from sale of equipment 1,250 - -
Proceeds from sale of parcel of land - - 9,700
---------- ---------- ----------
Net Cash Used by Investing
Activities (59,067) (3,311) (20,883)
---------- ---------- ----------
Cash Flows From Financing Activities:
Distributions paid to limited
partners (546,000) (486,500) (400,000)
---------- ---------- ----------
Net Cash Used by Financing
Activities (546,000) (486,500) (400,000)
---------- ---------- ----------
Net Increase in Cash and
Temporary Investments 31,412 1,639 113,740
Cash and Temporary Investments:
Beginning of year 763,487 761,848 648,108
---------- ---------- ----------
End of Year $ 794,899 $ 763,487 $ 761,848
========== ========== ==========
The accompanying notes are an integral part of these financial statements.
F-7
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
STATEMENTS OF CASH FLOWS (Continued)
Years Ended September 30:
---------------------------------------
1995 1994 1993
---- ---- ----
Reconciliation of Net Income to Net Cash
Provided by Operating Activities:
Net income $513,436 $419,009 $386,643
-------- -------- --------
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 109,175 105,784 106,826
(Gain) loss on disposition of
property and equipment 1,430 - (5,826)
(Increase) decrease in accounts
receivable 2,745 11,059 (2,943)
(Increase) decrease in prepaid
expenses (475) (1,630) 795
(Increase) decrease in other assets (5,006) (33,091) 4,109
Increase (decrease) in accounts
payable and accrued liabilities 15,174 (9,952) 45,151
Increase (decrease) in due to
related parties - 271 (132)
-------- -------- --------
Total Adjustments 123,043 72,441 147,980
-------- -------- --------
Net Cash Provided by
Operating Activities $636,479 $491,450 $534,623
======== ======== ========
The accompanying notes are an integral part of these financial statements.
F-8
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - THE PARTNERSHIP
Super 8 Economy Lodging IV, Ltd., is a limited partnership organized under
California law on February 5, 1982, to acquire and operate motel properties in
Pleasanton and Santa Ana, California. The Pleasanton motel was opened in
October, 1983, and the Santa Ana motel was opened in February, 1985. The
Partnership grants credit to customers, substantially all of which are local
businesses in Pleasanton. The Santa Ana property was sold in April, 1992.
The net income or net loss of the Partnership is allocated 1% to the General
Partners and 99% to the Limited Partners. Net income (loss) and distributions
per partnership unit are based upon 10,000 units outstanding. All partnership
units are owned by the Limited Partners.
The Partnership agreement requires that the Partnership maintain reserves for
normal repairs, replacements, working capital and contingencies in an amount
of at least 5% of adjusted capital contributions. As of September 30, 1995,
the Partnership had a combined balance in cash and temporary investments of
$794,899, which was $339,899 in excess of the $455,000 required amount.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Items of Partnership income are passed through to the individual partners for
income tax purposes, along with any income tax credits. Therefore, no federal
or California income taxes are provided for in the financial statements of the
Partnership, except for a deposit of federal income taxes which is required of
partnerships with fiscal year ends other than a calendar year. The amount of
the deposit is based upon the taxable income of the partnership in the prior
year.
Property and equipment are recorded at cost. Depreciation and amortization
are computed using the following estimated useful lives and methods:
Description Methods Useful Lives
----------------------- ---------------------- ------------
Buildings 150% declining balance
and straight-line 10-25 years
Furniture and equipment 200% and 150% declining
balance and straight-line 3-7 years
Costs incurred in connection with maintenance and repair are charged to
expense. Major renewals and betterments that materially prolong the life of
assets are capitalized.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect certain reported amounts and disclosures. Accordingly, actual
results could differ from those estimates.
F-9
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 3 - CASH AND TEMPORARY INVESTMENTS
Cash and temporary investments as of September 30, 1995 and 1994 consist of
the following:
1995 1994
---- ----
Cash in bank, non-interest bearing $ 26,949 $ 31,742
Money market accounts 567,950 531,745
Certificates of deposit and commercial paper 200,000 200,000
--------- ---------
Total Cash and Temporary Investments $ 794,899 $ 763,487
========= =========
Temporary investments are recorded at cost, which approximates market value.
The Partnership considers temporary investments and all highly liquid
marketable securities with original maturities of six months or less to be
cash equivalents for purposes of the statement of cash flows.
NOTE 4 - RELATED PARTY TRANSACTIONS
Franchise Fees
Super 8 Motels, Inc., now a wholly-owned subsidiary of Hospitality Franchise
Systems, Inc., is franchisor of all Super 8 Motels. The Partnership pays to
the franchisor monthly fees equal to 4% of the gross room revenues of the
motel and contributes an additional 1% of the gross room revenues to an
advertising fund administered by the franchisor. In return, the franchisor
provides the right to use the name "Super 8," a national institutional
advertising program, an advance room reservation system, and inspection
services. These costs ($72,424 in 1995, $67,631 in 1994 and $66,694 in 1993)
are included in motel operations expense in the accompanying statements of
operations. The Partnership operates its motel property as a franchisee of
Super 8 Motels, Inc. through a sub-franchise agreement with Brown & Grotewohl,
a partnership of the Estate of Dennis A. Brown and Grotewohl Management
Services, Inc., the general partner of Super 8 Economy Lodging IV, Ltd. Under
the sub-franchise agreement, Brown & Grotewohl earned 40% of the above
franchise fees, which amounted to $28,970, $27,052 and $26,678 in 1995, 1994
and 1993, respectively.
Property Management Fees
Brown & Grotewohl, an affiliate of one of the General Partners, manages the
motel property of the Partnership. The fee for this service is 5% of the
gross revenues from Partnership operations as defined in the Partnership
agreement, and amounted to $74,416, $69,631 and $68,657 in 1995, 1994 and
1993, respectively.
Subordinated Partnership Management Fees
During the Partnership's operational stage, the General Partners are to
receive 9% of cash available for distribution for Partnership management
services, along with an additional 1% of cash available for distribution on
account of their interest in the income and losses, subordinated, however, to
receipt by the Limited Partners of a 10% per annum cumulative return on their
adjusted capital investments. At September 30, 1995 the Limited Partners had
not received the 10% cumulative return, and accordingly, no Partnership
management fees are payable. Management does not anticipate payment of these
fees in the immediate future; therefore, they are not reflected in these
financial statements.
F-10
SUPER 8 ECONOMY LODGING IV, LTD.
(A California Limited Partnership)
NOTES TO FINANCIAL STATEMENTS
NOTE 4 - RELATED PARTY TRANSACTIONS (Continued)
Subordinated Incentive Distributions
Under the terms of the Partnership agreement, the General Partners are to
receive 15% of distributions of net proceeds from the sale or refinancing of
Partnership property remaining after distribution to the Limited Partners of
any portion thereof required to cause distributions to the Limited Partners
from all sources to be equal to their capital contributions plus a cumulative
10% per annum pre-tax return on their adjusted capital contributions.
Expenses Shared by the Partnership and its Affiliates
There are certain expenses which are allocated between the Partnership and
affiliated Super 8 partnerships. These expenses, which are allocated based on
usage, are telephone, data processing, rent of the administrative office,
administrative salaries and duplication expenses. The expenses allocated to
the Partnership were approximately $110,000 in 1995, $104,000 in 1994 and
$115,000 in 1993 and are included in motel and restaurant operations and
general and administrative expenses in the accompanying statements of
operations. Included in administrative salaries are allocated amounts paid to
three employees who are related to Philip B. Grotewohl, the sole shareholder
of Grotewohl Management Services, Inc., a general partner of the Partnership.
NOTE 5 - MOTEL OPERATING EXPENSES
The following table summarizes the major components of motel operating
expenses for the years ended September 30, 1995, 1994 and 1993:
1995 1994 1993
---- ---- ----
Salaries and related costs $282,994 $298,050 $333,675
Utilities 70,349 70,875 69,795
Allocated costs, mainly indirect
salaries 89,327 85,609 93,675
Other operating expenses 334,34 333,019 303,286
-------- -------- --------
Total Motel Operating Expenses $777,015 $787,553 $800,431
======== ======== ========
NOTE 6 - SALE OF LAND PARCEL
On March 29, 1993 the Partnership conveyed approximately 428 square feet of
the Pleasanton land adjacent to the freeway to the State of California. The
proceeds of the sale consisted of $9,700. The sale resulted in a net gain of
$5,825.
F-11
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
Inapplicable.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The original Managing General Partners of the Partnership were
Dennis A. Brown and Grotewohl Management Services, Inc., whose
sole shareholder is Philip B. Grotewohl. The original Associate
General Partners were BWC Incorporated and Robert J. Dana.
Upon Mr. Brown's death on February 25, 1988, Mr. Grotewohl,
as president of Grotewohl Management Services, Inc. and Mr.
Dana elected to continue the Partnership. BWC Incorporated was
dissolved in 1989.
Mr. Grotewohl is currently age 77. Mr. Dana is age 67.
Item 11. EXECUTIVE COMPENSATION
The following discussion contains certain information
regarding aggregate direct or indirect compensation paid or
accrued by the Partnership during the fiscal year ended
September 30, 1995 to the General Partners and the Estate of
Dennis A. Brown, and/or their affiliates. Although Mr. Brown
ceased to be a general partner of the Partnership upon his
death, his estate shares in certain compensation otherwise
payable to the General Partners and their affiliates.
Property Management Fees
- ------------------------
The Manager, a California general partnership which is owned
equally by the Estate of Dennis A. Brown and the Managing
General Partner, is managing the Partnership's motel. The fee
for this service is 5% of the gross proceeds from the operation
of the motel. This compensation is in addition to the cost of
compensating the Partnership's employees and the cost of goods
and services acquired for the Partnership from independent
contractors.
During the fiscal year covered by this report the Partnership
accrued such fees in the amount of $74,416, all of which were
paid.
Franchise Fees and Advertising Fees
- ------------------------------------
The Partnership operates its motel as a franchisee of Super 8
Motels, Inc., through a sub-franchise obtained from Super 8
Management Corporation, a corporation of which the Estate of
Dennis A. Brown and Philip B. Grotewohl are the sole
shareholders. In March 1988 the shareholders of Super 8
Management Corporation transferred their interests in the
- 13 -
sub-franchise agreement to the Manager. The Partnershipo as
franchisee, pays to the franchisor monthly franchise fees equal
to 4% of its gross room revenue and contributes 1% pf its gross
room revenue to an advertising fund administered by the
franchisor to finance institutional advertising. The Manager is
entitled to one-half of the 4% franchise fee.
The total of franchise fees accrued during the fiscal year
covered by this report was $57,939, of which $28,970 accrued to
the Manager. All of the above sums have been paid.
General Partners' Interest in Cash Available for Distribution
- --------------------------------------------------------------
At quarterly intervals, the total amount of the
Partnership's Cash Available for Distribution is determined at
the discretion of the General Partners. (See Item 5 above.)
Distributions therefrom are made as follows: (1) 90% of such
distributions are paid to the Limited Partners; (2) 9% thereof
is paid to the General Partners as Partnership management fees;
and (3) 1% thereof is paid to the General Partners in
accordance with their interest in the income and losses of the
Partnership.
Notwithstanding the foregoing, however, distributions of Cash
Available for Distribution to the General Partners which would
otherwise be paid to the General Partners are deferred and paid
only after payment to the Limited Partners of distributions of
Cash Available for Distribution in an amount equal to 10% per
annum cumulative on their Adjusted Capital Contributions.
During the fiscal year covered by this report, $546,000 in
distributions of Cash Available for Distribution were paid to
the Limited Partners. A total of $366,104 representing the
General Partners' Interest in Cash Available for Distribution
has been deferred and remains unpaid since commencement of the
Partnership. The Limited Partners must receive $8,681,355
(calculated through September 30, 1995) and $910,000 each year
thereafter in additional distributions before any of the accrued
amounts will be paid to the General Partners. Accordingly, the
General Partners consider the payment of these deferred amounts
to be unlikely.
General Partner's Interest in Sale or Refinancing Proceeds
- -----------------------------------------------------------
The proceeds from the sale or refinancing of properties not
reinvested are to be distributed first to the Limited Partners
until they have received cumulative payments from all
distribution sources equal to 100% of their original capital
contribution and a cumulative 10% per annum return on their
Adjusted Capital Contributions. When the foregoing requirement
has been satisfied, any remaining funds from the sale or
refinancing of properties will be distributed 15% to the General
Partners and 85% to the Limited Partners.
No such distributions were paid or accrued for the account of
the General Partners during the fiscal year covered by this
report.
- 14 -
Allocation of General Partners' Interest
- -----------------------------------------
Compensation to the General Partners and their affiliates
in the form of franchise fees and property management fees is
allocated 1/3 each to the Estate of Dennis A. Brown, the
Managing General Partner and the Associate General Partner.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Security Ownership of Certain Beneficial Owners
- ------------------------------------------------
No person is known by the Partnership to be the beneficial
owner of more than 5% of the Units.
Security Ownership of Management
- --------------------------------
The General Partners do not beneficially own any Units.
Changes in Control
- -------------------
With the consent of all other General Partners and Limited
Partners holding more than 50% of the Units, a General Partner
may designate a successor or additional general partner, in each
case with such participation in such General Partner's interest
as such General Partner and successor or additional general
partner 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 Partners, or may transfer his interest to
an entity controlled by him; 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 will be effective
only after receipt by the Partnership of an opinion of 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.
The Limited Partners shall take no part in the management
of the Partnership's business; however, a majority in interest
of the Limited Partners, without the concurrence of the General
Partners, shall have the right to amend the Partnership
Agreement, dissolve the Partnership, remove a General Partner or
any successor general partner, elect a new general partner or
general partners upon the removal, retirement, death, insanity,
insolvency or bankruptcy of a General Partner, and approve or
disapprove the sale, exchange or pledge in a single transaction
of all or substantially all of the properties acquired by the
Partnership.
- 15 -
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Administrative Expenses Shared by the Partnership and its Affiliates
- --------------------------------------------------------------------
There are certain administrative expenses allocated between the
Partnership and affiliated Super 8 partnerships. These
expenses, which are allocated based on usage, are telephone,
data processing, rent of administrative offices and
administrative salaries. The administrative expenses allocated
to the Partnership were approximately $110,000 in the fiscal
year ended September 30, 1995 and are included in general and
administrative expenses and motel and restaurant operations
expenses in the Partnership's financial statements. Included in
administrative salaries are allocated amounts paid to three
employee who are related to Philip B Grotewohl, the sole
shareholder of a General Partner.
- 16 -
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as part of this report:
1. Financial Statements Included in Part II of this Report
Report of Independent Certified Public Accountants
Balance Sheets, September 30, 1995 and 1994
Statement of Operations for the Years Ended September 30,
1995, 1994 and 1993
Statements of Partners' Equity for the Years Ended September 30,
1995, 1994 and 1993
Statements of Cash Flows for the Years Ended September 30,
1995, 1994 and 1993
Notes to Financial Statements
2. Financial Statement Schedules Included in Part IV of the Report
None
3. Exhibits
3. and 4. The Partnership Agreement is incorporated herein
as an exhibit from the annual report on Form 10-K for the
fiscal year ended September 30, 1994
(b) Reports on Form 8-K:
Inapplicable
- 17 -
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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) SUPER 8 MOTELS II, LTD.
-----------------------
(Signature and Title) /s/ Philip B. Grotewohl
----------------------------
Philip B. Grotewohl, President of Grotewohl
Management Services, Inc. Managing General Partner
Date December 28, 1995
Pursuant to the requirements of the Securities 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.
By (Signature and Title) /s/ Philip B. Grotewohl
---------------------------
Philip B. Grotewohl, Chief executive officer,
chief financial officer, chief accounting
officer and sole director of Grotewohl
Management Services, Inc., Managing General
Partner
Date December 28, 1995
- 18 -