SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB - Quarterly or Transitional Report
/ X / QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
Commission File Number: 33-16163-LA
Nashville Super 8 Ltd., A California Limited Partnership
(Exact name of small business issuer as specified in its charter)
California 33-0249749
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
3145 Sports Arena Blvd., San Diego, CA 92110
(Address of principal executive offices)
(619) 226-1212
(Issuer's telephone number)
(Former name, former address and former fiscal year, if changed since last
report)
Check whether the registrant (1) has filed all reports required to be filed
by Sections 13 or 15(d) of the Exchange Act during the last 12 months (or for
such shorter period that the issuer was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days.
Yes / X / No / /
State the number of limited partnership interests outstanding as of the
latest practicable date: 3,975
PART I. -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Incorporated herein is the following unaudited financial
information:
Balance Sheet as of June 30, 1996 and December 31, 1995.
Statement of Operations for the three- and six-month periods
ended June 30, 1996 and June 30, 1995.
Statement of Cash Flows for the three- and six-month periods
ended June 30, 1996 and June 30, 1995.
Notes to Financial Statements.
1
NASHVILLE SUPER 8 LTD.
A California Limited Partnership
Balance Sheet
June 30, 1996 and December 31, 1995
(Unaudited)
(Part 1 of 2)
June 30, December 31,
ASSETS 1996 1995
------ ------------- ------------
Current Assets:
Cash and cash equivalents $ 138,874 $ 56,208
Accounts receivable 17,429 6,490
Operating supplies 15,455 15,455
Prepaid expenses 10,835 10,439
Due from affiliates (note 4) 0 7,899
---------- ----------
Total current assets 182,593 96,491
Investment property, at cost:
Land 711,092 711,092
Building and improvements 2,805,283 2,796,407
Furniture, fixtures and equipment 623,250 608,295
---------- ----------
4,139,625 4,115,794
Less accumulated depreciation 994,362 910,756
---------- ----------
Investment property, net of
accumulated depreciation 3,145,263 3,205,038
---------- ----------
Franchise fees, net (note 3) 12,917 13,417
---------- ----------
$3,340,773 $3,314,946
========== ==========
See accompanying notes to financial statements.
2
NASHVILLE SUPER 8 LTD.
A California Limited Partnership
Balance Sheet
June 30, 1996 and December 31, 1995
(Unaudited)
(Part 2 of 2)
LIABILITIES AND June 30, December 31,
PARTNER'S CAPITAL ACCOUNTS 1996 1995
-------------------------- ------------- ------------
Current liabilities:
Notes Payable (note 5) $ 7,745 $ 7,374
Accounts payable and accrued expenses 68,382 65,038
Due to affiliates (note 4) 25,840 908
---------- ----------
Total current liabilities 101,967 73,320
---------- ----------
Long-term debt, less
current portion (note 5) 168,316 171,640
---------- ----------
Total liabilities 270,283 244,960
---------- ----------
Partners' capital accounts (deficit):
General Partners:
Cumulative net earnings 12,513 12,463
Cumulative cash distributions (50,450) (50,450)
---------- ----------
(37,937) (37,987)
Limited partners:
Capital contributions,
net of offering costs 3,449,823 3,449,823
Cumulative net earnings 112,647 112,193
Cumulative cash distributions (454,043) (454,043)
---------- ----------
3,108,427 3,107,973
---------- ----------
Total partners' capital accounts 3,070,490 3,069,986
---------- ----------
$3,340,773 $3,314,946
---------- ----------
---------- ----------
See accompanying notes to financial statements.
3
NASHVILLE SUPER 8 LTD.
A California Limited Partnership
Statement of Operations
Three Months and Six Months Ended
June 30, 1996 and June 30, 1995
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
---------------------------- ----------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
Revenues:
Room revenues $ 331,712 $ 350,690 $ 508,149 $ 534,664
Phone revenues 5,701 5,289 9,558 8,901
Interest income 146 429 270 2,463
Other income 432 776 820 1,170
---------- ---------- ---------- ----------
337,991 357,184 518,797 547,198
---------- ---------- ---------- ----------
Expenses:
Property operating expenses 126,431 116,307 234,349 208,369
Depreciation 42,046 37,691 83,606 74,887
General and administrative 34,409 34,468 76,760 68,593
Amortization 250 250 500 500
Management fees 20,271 21,408 31,112 32,679
Royalties and advertising 19,902 21,033 30,468 32,062
Real estate taxes 9,637 8,435 18,724 17,670
Marketing 15,717 19,011 33,346 35,654
Interest expense 4,516 4,941 9,429 4,941
---------- ---------- ---------- ----------
273,179 263,544 518,294 475,355
---------- ---------- ---------- ----------
Net earnings $ 64,812 $ 93,640 $ 503 $ 71,843
========== ========== ========== ==========
Net earnings per limited
partnership interest $ 14.67 $ 21.20 $ 0.11 $ 16.27
========== ========== ========== ==========
See accompanying notes to financial statements.
4
NASHVILLE SUPER 8 LTD.
A California Limited Partnership
Statement of Cash Flows
Three Months and Six Months Ended
June 30, 1996 and June 30, 1995
(Unaudited)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------------- -------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
Cash flows from operating activities:
Net earnings $ 64,812 $ 93,640 $ 503 $ 71,843
Adjustments to reconcile net earnings to cash:
Depreciation and amortization 42,296 34,718 84,106 69,093
Changes in assets and liabilities:
(Increase) decrease in other assets: 13,959 58,297 (11,335) (22,812)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (12,253) (102,785) 3,344 (51,255)
Due to/from Affiliates 5,664 5,312 32,831 15,704
---------- ---------- ---------- ----------
Net cash provided by operating activities 114,478 89,182 109,449 82,574
---------- ---------- ---------- ----------
Cash flows used in or provided from investing activities:
Acquisition & construct costs of investment property (10,803) (76,759) (23,831) (452,780)
---------- ---------- ---------- ----------
Net cash (used in)/provided
from invest. activities (10,803) (76,759) (23,831) (452,780)
---------- ---------- ---------- ----------
Cash flows from financing activities:
Increase (decrease) to Notes payable (1,226) 184,259 (2,953) 184,259
Cash distributions to partners 0 0 0 0
---------- ---------- ---------- ----------
Net cash (used in) financing activities (1,226) 184,259 (2,953) 184,259
---------- ---------- ---------- ----------
Net increase (decrease) in cash 102,449 196,682 82,666 (185,946)
Cash and cash equivalents at beginning of period 36,425 28,436 56,208 411,064
---------- ---------- ---------- ----------
Cash and cash equivalents at end of period $ 138,874 $ 225,118 $ 138,874 $ 225,118
========== ========== ========== ==========
See accompanying notes to financial statements.
5
NASHVILLE SUPER 8 LTD.,
A California Limited Partnership
Notes to Financial Statements
June 30, 1996
(Unaudited)
Readers of this quarterly report should refer to the partnership
audited financial statements and annual report Form 10-KSB (File
No. 33-16163-LA) for the period ended December 31, 1995, as
certain footnote disclosures which would substantially duplicate
those contained in such financial reports have been omitted from
this report.
1. THE PARTNERSHIP AND A SUMMARY OF SIGNIFICANT ACCOUNTING
POLICIES
Nashville Super 8 Ltd., A California Limited Partnership (the
Partnership), (formerly Motels of America Series XI), a
California Limited Partnership, was formed on September 1, 1988
pursuant to the California Revised Uniform Limited Partnership
Act. The purpose of the Partnership is to construct, own, and
operate a 110-room "economy" motel under a Super 8 Franchise.
The motel was opened in April 1989.
The following is a summary of the Partnership's significant
accounting policies:
CASH AND CASH EQUIVALENTS
The Partnership considers all highly liquid instruments purchased
with an original maturity of three months or less to be cash
equivalents.
INVESTMENT PROPERTY
Investment property is recorded at cost. Depreciation is
computed using the straight-line method based on estimated useful
lives of 5 to 35 years. Maintenance and repair costs are
expensed as incurred, while significant improvements,
replacements, and major renovation are capitalized.
FRANCHISE FEES
Franchise fees are amortized over the 20-year life of the
franchise agreement. Organization costs are amortized over a 60-
month period.
INCOME TAXES
No provision for income taxes has been made as any liability for
such taxes would be that of the partners rather than the
Partnership.
(Continued)
6
NASHVILLE SUPER 8 LTD.,
A California Limited Partnership
Notes to Financial Statements (Continued)
Net income per interest is based upon the 90% allocated to
limited partners divided by 3,975 limited partner interests
outstanding throughout the year.
2. PARTNERSHIP AGREEMENT
Net income or loss and cash distributions from operations of the
Partnership are allocated 90% to the limited partners and 10% to
the general partner. Profits from the sale or other disposition
of Partnership property are to be allocated to the general
partner until its capital account equals zero; thereafter, to the
limited partners until their capital accounts equal their capital
contributions reduced by prior distributions of cash from sale or
refinancing plus an amount equal to a cumulative but not
compounded annual 8% return thereon which cumulative return shall
be reduced (but not below zero) by the aggregate amount of prior
distributions of cash available for distribution; thereafter,
gain shall be allocated 15% to the general partner and 85% to the
limited partners. Loss from sale shall be allocated 1% to the
general partner and 99% to the limited partners.
3. FRANCHISE AGREEMENT
The Partnership has entered into a twenty-year franchise
agreement with Super 8 Motels, Inc. to provide the Partnership
with consultation in the areas of design, construction and
operation of the motel. The agreement required the payment of an
initial fee of $20,000 and ongoing royalties equal to 4% of gross
room revenues and a chain-affiliated advertising fee equal to 2%
of gross room revenues.
During 1994, the franchise agreement was amended to reduce the
Partnership's area of protection in exchange for the franchisor
reducing by one-half the liquidated damages that would be payable
by the Partnership in the event it elects an early termination of
the franchise agreement. In addition, if the franchisor grants a
franchise in the released area and the occupancy rate at the
Partnership's motel drops by three or more points for any twelve
month period, the Partnership may obtain a 1% of gross room sales
reduction in royalties payable for the balance of the franchise
agreement or terminate the franchise agreement upon payment of
the reduced liquidated damages.
4. RELATED PARTY TRANSACTIONS
The motel is operated pursuant to a management agreement with GHG
Hospitality, Inc. (GHG). The agreement provides for the payment
of monthly management fees of 6% of gross revenues.
(Continued)
7
NASHVILLE SUPER 8 LTD.,
A California Limited Partnership
Notes to Financial Statements (Continued)
The Partnership has agreed to reimburse GHG for certain expenses
related to services performed in maintaining the books and
administering the affairs of the Partnership.
GHG and an affiliate, GMS Management Services, Inc. (GMS),
allocate to the Partnership certain marketing, accounting, and
maintenance salaries and certain other expenses directly related
to the operation of the Partnership.
Fees and reimbursements for partnership administration expenses
paid to GHG and GMS for the three months and six months ended
June 30, 1996 and June 30, 1995 are as follows:
Three Months Ended Six Months Ended
------------------ ------------------
6/30/96 6/30/95 6/30/96 6/30/95
------- ------- ------- -------
Management Fees $20,271 $21,408 $31,112 $32,679
Reimbursement for
partnership admini-
stration expenses $ 6,032 $ 5,416 $11,769 $10,822
Salaries and other
allocated expenses $ 5,999 $14,117 $12,533 $36,651
In addition, all motel employees are paid by GMS. The
Partnership reimbursed GMS $78,482 for the wages of these
employees including a one percent processing fee. At June 30,
1996, $25,840 was owed to GHG and GMS relating to reimbursement
for these operating expenses.
5. LONG-TERM DEBT
The Partnership has a note payable to a bank due in monthly
installments of approximately $2,150, including interest at the
bank's index rate plus 2% (10.25% at June 30, 1996) through
August 2009. The note is secured by a first priority deed of
trust on the Partnership's motel. The fair value of long-term
debt approximates its carrying amount based on the borrowing
rates currently available to the Partnership for loans with
similar terms.
(Continued)
8
NASHVILLE SUPER 8 LTD.,
A California Limited Partnership
Notes to Financial Statements (Continued)
5. LONG-TERM DEBT (Continued)
Principal payments on this note are due as follows:
1996 $ 7,374
1997 8,163
1998 9,063
1999 10,062
2000 11,170
Thereafter 133,182
--------
$179,014
========
6. ADJUSTMENTS
In the opinion of the general partners, all adjustments
(consisting solely of normal recurring adjustments) necessary for
a fair presentation have been made to the accompanying figures as
of and for the six months ended June 30, 1996.
7. SUBSEQUENT EVENT
In August 1996, the partnership paid a distribution of
$112,500.26 to the limited partners.
9
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
Financial Condition:
On September 1, 1987, the Partnership commenced its public offering
pursuant to its Prospectus. On September 27, 1988, the Partnership
completed the public offering. The Partnership received $3,449,823
(net of offering costs of $525,177) from the sale of limited
partnership interests. These funds were available for investment
in property, to pay legal fees and other costs related to the
investments, to pay operating expenses, and for working capital.
The majority of the proceeds was used to acquire and construct the
110-room "economy" motel on approximately 2 acres of land.
Construction of an indoor swimming pool, workout center, and spa
and renovations of the lobby and certain guest rooms were completed
in 1995. The total cost of the project was approximately $677,300.
The project's cost was funded by cash from operations and a loan of
$184,258 from First Bank & Trust of Tennessee. As of June 30,
1996, a principal balance of $176,061 was outstanding on this note.
The note is payable in monthly installments of approximately $2,150
including interest at two points over the index which is the New
York Consensus Prime as quoted in the Wall Street Journal. The
interest rate at June 30, 1996 was 10.25%. The final balance is
due August 2009. The note is secured by a first priority deed of
trust on the Partnership's motel.
During 1994, the franchise agreement with Super 8 was amended to
reduce the Partnership's area of protection in exchange for the
franchisor reducing by one-half the liquidated damages that would
be payable by the Partnership in the event it elects an early
termination of the franchise agreement. The area of protection
released by the Partnership is small in relation to the original
area of protection and is to the south and west of the
Partnership's motel, away from Opryland and other growth areas. In
addition, if the franchisor grants a franchise in the released area
and the occupancy rate at the Partnership's motel drops by three or
more percentage points for any twelve month period, the Partnership
may obtain a 1% of gross room sales reduction in royalties payable
for the balance of the franchise agreement or terminate the
franchise agreement upon payment of the reduced liquidated damages.
Management has been considering changing to another national
franchisor due to the proliferation of Super 8 motels in the
Nashville area. However, there are no immediate plans to make such
a change.
At June 30, 1996, the Partnership had cash and cash equivalents of
approximately $138,874. Such funds will be utilized for working
capital requirements and to fund the distribution paid to the
partners in August 1996.
10
Results of Operations:
For the three months ended June 30, 1996, room revenues were
$331,712, the occupancy rate was 62.9% and the average daily rate
was $54.67. This compares to the three months ended June 30, 1995
when room revenues were $350,690, the occupancy rate was 84.3% and
the average daily rate was $42.74.
For the six months ended June 30, 1996, room revenues were
$508,149, the occupancy rate was 50.49% and the average daily rate
was $52.17. This compares to the six months ended June 30, 1995,
when the room revenues were $534,664, the occupancy rate was 70.12%
and the average daily rate was $39.62.
Occupancy in the Nashville area is down for 1996 compared to 1995.
This is due in part to the fact that Nashville has become over
built with hotels. Another factor causing this decline in business
was the severe weather conditions in the winter season. The
partnership's occupancy was down 19% for the six months ended June
30, 1996. The partnership had a temporary contract with American
Eagle Airlines in 1995 that added to our occupancy percentage for
the six months ended June 30, 1995.
The addition of the swimming pool has increased our average rate
substantially ($52.17 for the six months ending June 30, 1996
compared to $39.62 for the six months ending June 30, 1995). This
increase in average daily rate enabled the hotel's gross receipts
to fall only 5% while occupancy was down 19%.
Management is working towards recovering from this decline in
occupancy. The partnership has increased its sales efforts to
travel agents, group tours and other leisure travel, as well as
corporate business.
A new sports arena is being constructed in Nashville which will
bring arena football, rodeos and other entertainment to the area in
the spring of 1997.
The effect of current operations on liquidity was net cash provided
by operating activities of $109,449 for the six months ending June
30, 1996 and $82,574 for the six months ended June 30, 1995.
Investment property expenditures were $10,803 for the three months
ended June 30, 1996 and $23,831 for the six months ended June 30,
1995.
Seasonality:
The motel business is seasonal with the third quarter being the
strongest due to the tourist business and the last half of the
fourth quarter and the first half of the first quarter being the
weakest.
11
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
(REGISTRANT) NASHVILLE SUPER 8 LTD.,
A California Limited Partnership
By: GHG Hospitality, Inc.
Corporate General Partner
BY (SIGNATURE) /s/ J. Mark Grosvenor
(NAME AND TITLE) J. Mark Grosvenor, President and Director
(DATE) August 9, 1996
BY (SIGNATURE) /s/ Sylvia Mellor Clark
(NAME AND TITLE) Controller and Director
(DATE) August 9, 1996