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 March 31, 1997
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
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)
1466 9th Avenue, San Diego, CA 92101
(Address of principal executive offices)
(619) 699-6100
(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
1
PART I. -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Incorporated herein is the following unaudited financial
information:
Balance Sheet as of March 31, 1997 and December 31, 1996.
Statement of Operations for the three month periods ended
March 31, 1997 and March 31, 1996.
Statement of Cash Flows for the three month periods ended
March 31, 1997 and March 31, 1996.
Notes to Financial Statements.
2
NASHVILLE SUPER 8 LTD.
A California Limited Partnership
Balance Sheet
March 31, 1997 and December 31, 1996
(Unaudited)
(Part 1 of 2)
March 31, December 31,
ASSETS 1997 1996
--------- --------- ------------
Current Assets:
Cash and cash equivalents $ 39,730 $ 79,268
Accounts receivable 1,421 5,554
Operating supplies 15,455 15,455
Prepaid expenses 4,135 5,197
Due from affiliates (note 4) 0 0
---------- ----------
Total current assets 60,741 105,474
Investment property, at cost:
Land 711,092 711,092
Building and improvements 2,849,509 2,849,283
Furniture, fixtures and equipment 626,273 624,444
---------- ----------
4,186,874 4,140,819
Less accumulated depreciation 1,120,795 1,078,638
---------- ----------
Investment property, net of
accumulated depreciation 3,066,079 3,062,181
---------- ----------
Franchise fees, net (note 3) 12,167 12,417
---------- ----------
$3,138,987 $3,180,072
========== ==========
See accompanying notes to financial statements.
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NASHVILLE SUPER 8 LTD.
A California Limited Partnership
Balance Sheet
March 31, 1997 and December 31, 1996
(Unaudited)
(Part 2 of 2)
LIABILITIES AND March 31, December 31,
PARTNER'S CAPITAL ACCOUNTS 1997 1996
---------------------------- ---------- ------------
Current liabilities:
Notes Payable,current portion (note 5) $ 7,828 $ 8,163
Accounts payable and accrued expenses 46,775 66,229
Due to affiliates (note 4) 35,513 3,931
---------- ----------
Total current liabilities 90,116 78,323
---------- ----------
Long-term debt, less
current portion (note 5) 162,394 164,108
---------- ----------
Total liabilities $ 252,510 $ 242,431
---------- ----------
Partners' capital accounts (deficit):
General Partners:
Cumulative net earnings $ 9,112 $ 14,228
Cumulative cash distributions (65,450) (65,450)
---------- ----------
(56,338) (51,222)
Limited partners:
Capital contributions,
net of offering costs 3,449,823 3,449,823
Cumulative net earnings 82,034 128,082
Cumulative cash distributions (589,042) (589,042)
---------- ----------
2,942,815 2,988,863
---------- ----------
Total partners' capital accounts 2,886,477 2,937,641
---------- ----------
$3,138,987 $3,180,072
========== ==========
See accompanying notes to financial statements.
4
NASHVILLE SUPER 8 LTD.
A California Limited Partnership
Statement of Operations
Three Months Ended
March 31, 1997 and March 31, 1996
(Unaudited)
THREE MONTHS ENDED
March 31,
1997 1996
-------------- -------------
Revenues:
Room revenues $ 187,789 $ 176,437
Phone revenues 3,276 3,857
Interest income 59 124
Other income 142 388
-------------- --------------
191,266 180,806
-------------- --------------
Expenses:
Property operating expenses 94,873 90,261
Depreciation 42,157 41,560
General and administrative 33,437 36,851
Repairs and Maintenance 17,388 17,657
Amortization 250 250
Management fees 11,472 10,841
Royalties and advertising 11,122 10,566
Real estate taxes 9,337 9,087
Marketing 12,420 17,629
Property and liability insurance 5,574 5,500
Interest expense 4,400 4,913
------------- -------------
242,430 245,115
------------- -------------
Net earnings $ (51,164) $ (64,309)
========= ========
Net earnings per limited
partnership interest $ (11.58) $ (14.56)
========= ========
See accompanying notes to financial statements
5
NASHVILLE SUPER 8 LTD.
A California Limited Partnership
Statement of Cash Flows
Three Months Ended
March 31, 1997 and March 31, 1996
(Unaudited)
THREE MONTHS ENDED
MARCH 31,
1997 1996
------------- ------------
Cash flows from operating activities:
Net earnings $ (51,164) $ (64,309)
Adjustments to reconcile net earnings to cash:
Depreciation and amortization 42,407 41,810
Changes in assets and liabilities:
(Increase) decrease in other assets: 5,195 (25,294)
Increase (decrease) in liabilities:
Accounts payable and accrued expenses (19,454) 15,597
Due to/from Affiliates 31,582 27,167
-------------- --------------
Net cash provided by/(used in)
operating activities 8,566 (5,029)
-------------- --------------
Cash flows used in or provided from investing activities:
Acquisition & construction costs
of investment property (46,055) (13,028)
-------------- ---------------
Net cash (used in)/provided
from invest. activities (46,055) (13,028)
------------- ---------------
Cash flows from financing activities:
Increase (decrease) to Notes payable (2,049) (1,727)
Cash distributions to partners 0 0
-------------- ---------------
Net cash (used in) financing activities (2,049) (1,727)
------------- ---------------
Net increase (decrease) in cash (39,538) (19,783)
Cash and cash equivalents at begin. of period 79,268 56,208
------------- --------------
Cash and cash equivalents at end of period $ 39,730 $ 36,425
========== ==========
See accompanying notes to financial statements.
6
NASHVILLE SUPER 8 LTD.,
A California Limited Partnership
Notes to Financial Statements
March 31, 1997
(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, 1996, 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 39 years.
Maintenance and repair costs are expensed as incurred, while significant
improvements, replacements, and major renovations 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)
7
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 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 fran-
chisor 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 reduce the royalties from 6% to 5% of gross
room sales and reduce the royalties payable for the balance of the franchise
agreement or terminate the franchise agreement upon payment of the reduced
liquidated damages. The occupancy rate was 51.81% in 1996 compared to 65.38%
in 1995 and, therefore, management has notified Super 8 that the Partnership
is entitled to the reduction in royalties (approximately $10,000 in annual
savings) payable for the balance of the franchise agreement.
4. RELATED PARTY TRANSACTIONS
The motel is operated pursuant to a management agreement with GHG Hospi-
tality, Inc. (GHG). The agreement provides for the payment of monthly
management fees of 6% of gross revenues.
(Continued)
8
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 ended March 31, 1997 and March 31, 1996 are as follows:
Three Months Ended
3/31/97 3/31/96
------------ -------------
Management Fees $ 11,472 $ 10,841
Reimbursement for partnership
administration expenses $ 6,777 $ 5,731
Salaries and other allocated expenses $ 4,887 $ 6,534
In addition, all motel employees are paid by GMS. For the three months ended
March 31, 1997, the Partnership reimbursed GMS $65,798 for the wages of these
employees including a one percent processing fee. At March 31, 1997, $35,513
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 March 31, 1997) 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)
9
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:
Apr 1997 - Dec 1997 $ 6,114
1998 9,063
1999 10,062
2000 11,170
2001 12,402
Thereafter 121,411
----------
$170,222
=======
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 three months ended March 31,
1997.
(Continued)
10
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 March 31, 1997, a principal balance of $170,222 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 March 31, 1997
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.
An independent appraisal valued the Partnership's motel property at $3,200,000
as of August 26, 1996. The carrying amount of investment property on the
Partnership's financial statements was $3,138,987. as of March 31, 1997.
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 reduce the royalties from 6% to 5% of gross room sales and
reduce the royalties payable for the balance of the franchise agreement or
terminate the franchise agreement upon payment of the reduced liquidated
damages. The occupancy rate was 51.81% in 1996 compared to 65.38% in 1995 and,
therefore,management has notified Super 8 that the Partnership is entitled to
the reduction in royalties payable for the balance of the franchise agreement.
At March 31, 1997, the Partnership had cash and cash equivalents of approxi-
mately $39,730. Such funds will be utilized for working capital requirements.
No distribution to the partners will be paid for the three months ended March
31, 1997.
(Continued)
11
Results of Operations:
For the three months ended March 31, 1997, room revenues were $187,789, the
occupancy rate was 40.53% and the average daily rate was $48.56. This compares
to the three months ended March 31, 1996 when room revenues were $176,437, the
occupancy rate was 38.09% and the average daily rate was $48.02.
Nashville is looking forward to a healthy second and third quarter. Management
is continuing its sales and marketing efforts to increase occupancy. Numerous
group reservations, provided in part by Nashville Express Tours, and the annual
Fanfare in June will result in sold-out occupancies. The Exit Information
Guides continue to be a strong tool for attracting leisure travel. The property
has recently joined a co-op of hotels called the National Airport Hospitality
Association. Co-ops have been very successful in the past by reducing advertis-
ing costs and generating cost effective marketing, security and human resource
ideas and information.
Capital expenditures for 1997 include guest room carpet replacement throughout
the entire property which was recently completed at an approximate cost of
$44,000. Guest room carpet was responsible for over 4,500 deficiency points on
February's Quality Assurance Inspection. Future 1997 projects may include
replacing hallway carpet and Super 8 has announced electronic locks will be a
requirement for all franchisees by 1999.
The effect of current operations on liquidity was net cash provided by operating
activities of $8,566 for the three months ending March 31, 1997 and net cash
used in operating activities of $5,029 for the three months ended March 31,
1996. Investment property expenditures were $46,105. for the three months
ended March 31, 1997 and $13,028 for the three months ended March 31, 1996.
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.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Reg-
istrant has duly caused this report to be signed on its behalf by the under-
signed, 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) May 9, 1997
By (SIGNATURE) /s/ Sylvia Mellor Clark
(NAME AND TITLE) Sylvia Mellor Clark, Controller
(DATE) May 9, 1997
13