1
FORM 10-Q
SECURITIES 7 EXCHANGE COMMISSION
WASHINGTON, DC 20549
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended: March 31, 1996
Commission File Number: 2-76543
SUPER 8 MOTELS NORTHWEST II
Washington 91-1172558
PART 1
Financial Information
Item 1. Financial Statements
See attached unaudited March 31, 1996 Financial Statements and the partnership's
balance sheet for the year ended December 31, 1995. The Statement of Cash Flows
is omitted from the attachment and is presented as follows:
PERIOD ENDED MARCH 31,
1996 1995
--------- ---------
CASH FLOWS FROM OPERATING ACTIVITIES
Revenues and other income received in cash $ 832,009 $ 749,187
Operating expenses paid in cash (651,857) (514,594)
Interest paid (61,430) (60,486)
--------- ---------
Net cash provided by operating activities 118,722 174,107
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of property and equipment, net (654) --
Proceeds from disposals of property and equipment -- 934
--------- ---------
Net cash provided (used) by investing
activities (654) 934
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES
Principal payments on debt (35,086) (22,480)
Deposits paid -- (2,500)
Distributions to partners (315,537) (511,616)
--------- ---------
Net cash used by financing activities (350,623) (536,596)
--------- ---------
NET DECREASE IN CASH AND CASH EQUIVALENTS (232,555) (361,555)
CASH AND CASH EQUIVALENTS, beginning of period 733,916 822,944
--------- ---------
CASH AND CASH EQUIVALENTS, end of period $ 501,361 $ 461,389
========= =========
2
PERIOD ENDED MARCH 31,
1996 1995
---- ----
RECONCILIATION OF NET INCOME TO NET CASH PROVIDED
BY OPERATING ACTIVITIES
Net income $ 236,577 $ 98,332
--------- ---------
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 43,816 44,881
Lease expense - deferred 4,336 --
Gain on sale of property and equipment -- (1,521)
Change in assets and liabilities
Accounts receivable (10,801) (12,325)
Inventory -- 986
Prepaid expenses (9,397) (13,469)
Deposits and bank fees -- (2,500)
Accounts payable 20,174 14,766
Accrued expenses 2,129 6,572
Accrued management fees (168,112) 38,385
--------- ---------
(117,855) 75,775
========= =========
NET CASH PROVIDED BY OPERATING ACTIVITIES $ 118,722 $ 174,107
========= =========
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
See attached First Quarter (3/31/96) Update from the Issuer delivered to its
limited partners.
PART 2
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 to a Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K.
None.
3
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.
SUPER 8 MOTELS NORTHWEST II
a Washington limited partnership
By:
-----------------------------------
Gerald L. Whitcomb, General Partner
Dated: May 7, 1996
4
[SUPER 8 MOTEL LOGO]
UPDATE
--------------------------------------------------------------------------------
VOL. 16 NO. 1/APRIL, 1996 SUPER 8 MOTELS NORTHWEST II FIRST QUARTER 1996
--------------------------------------------------------------------------------
NATIONAL NEWS
Super 8 Motels and its parent company, HFS Incorporated, continued to
be a focus of the lodging spotlight as the first quarter of 1996 in concluded.
The mid-March Super 8 Motels International Convention in Las Vegas, Nevada,
served as the forum for several important announcements, particularly related to
marketing strategies.
"EXPERTS" MARKETING CAMPAIGN FOR 96/97
Super 8 introduced its print and broadcast "experts" campaign, which
utilizes real people rather than actors in selling the chain's attributes. The
30-second spot introduces Pete Robinson, a retired U.S. Army colonel, who tells
viewers that Super 8 surpasses even his high standards. Three 15-second spots
bring us a car wash owner, who talks about Super 8 cleanliness, a greeting card
salesman, who introduces viewers to the popular VIP Club card, and finally, the
owners of a copy center, who speak about Super 8's consistent quality and
service.
The campaign, created by Grey Advertising of New York, is running on
CNN, CNN Headline News, ESPN, TNN U.S. and Canada, TBS and print ads will be
carried in USA Today.
SUPER 8 JOINS NASCAR
Super 8 Motels Vice President of Marketing, Tom McNulty, announced that
Super 8 has teamed up with Winston Cup legend, Bill Elliott, as an associate
sponsor of his #94 Elliott-Hardy McDonald's Ford T-Bird. This exciting move
establishes Super 8 as the only lodging chain active in NASCAR sponsorship.
A study by Wake Forest University for NASCAR illustrates that over 90%
of NASCAR fans support sponsors' products. With auto racing now clearly the
number one sport in the country -- reaching over 500 million live and
television viewers annually -- this sponsorship is an ideal association for
Super 8.
WORLD WIDE WEB PAGE LAUNCHED
For those customers now utilizing the ever-expanding computer
technology available today, Super 8's home page on the World Wide Web is now in
place to capture their attention. The site provides Internet browsers with
general information about the chain. Information can be accessed through two
home ports: The Travelweb Home Page (http://www.travelweb.com) and directly
through the Super 8 Home Page (http://www.super8motels.com/super8.html).
REGIONAL NEWS
THREE NATIONAL VIP WINNERS FROM PENINSULA
Peninsula Management Northwest-managed motels were once again honored
at the National level for outstanding performance in VIP sales. All Peninsula
properties excelled well above the national average -- with three motels leading
the nation in their size category:
Klamath Falls, Oregon (58-61 rooms)
Kelso, Washington (65-87 rooms)
Ellensburg, Washington (88+ rooms)
Each of these VIP top-producing properties received a check for $5,000
to share among its entire staff.
REGIONAL MEETINGS AUDIT QUARTER
Included in the '96 business planning and budgeting process was the
concept of Quarterly Regional Meetings. The first series of such meetings are
being held in late April and early May in Port Angeles, Washington, Corvallis,
Oregon, and at SeaTac.
The primary focus of the agendas will be careful analysis of the first
quarter's result of operations, strategies for any adjustments to plans deemed
necessary, and sales targets for Summer and Fall.
Advanced training in the area of sales will be conducted for each group
by Esin Davis, Director of Sales and Marketing, while individual time has been
allotted for each property manager to discuss localized issues with their
Regional Director.
CONTINENTAL BREAKFAST TESTED AT LACEY
In mid-April, a minor lobby reconfiguration was accomplished in Lacey
to facilitate the testing of the continental breakfast concept at that location.
This concept is increasingly found among the amenity packages of competitors in
many markets, thus Peninsula's interest in measuring its value, or lack
thereof, to its Super 8 customers. Should this test in Lacey produce positive
results, similar programs may be tested in other Northwest locations,
particularly those without adjacent dining.
NEW CONSTRUCTION SITES PROGRESS
The two new sites announced in the last issue of the Update are
progressing well. Ferndale, Washington has now been slated to open in October,
1996. Site preparation is completed, and the foundation is being installed as
of this writing.
The Woodburn, Oregon, site has an anticipated opening date in late
January, 1997. Site plans and building plans are currently being reviewed by
city officials, and subcontractors are working on off-site water and sewer.
Continuing this highly visible development on the I-5 corridor, officers
of The Peninsula Group have entered into an option to purchase a site at the
newly-constructed freeway interchange at the northerly end of Roseburg, Oregon.
Look for further details on the Roseburg project in the July Update.
--------------------------------------------------------------------------------
5
--------------------------------------------------------------------------------
NORTHWEST II
Super 8 Motels Northwest II had a good first quarter 1996. Total sales
increased $81,000 or about 11% over the first quarter of 1995. Overall costs
were controlled very well at the properties -- the result is that Net Income
rose by $138,000.
Bremerton occupancy is benefiting greatly from the Navy contract that
began December 1, 1995, and will continue until October 1996. The down side is
that the average daily rate is off about $.65 from 1995. Yakima occupancy was
down about eight occupancy points from 1995, while average daily rate improved
by $2.41 over 1995. Portland continues to be a high-achiever in our system.
Occupancy was up about four occupancy points and had an average daily room rate
increase of $1.56 over 1995. These increases are despite the fact that new
properties continue to be built in the surrounding airport area.
You will find enclosed a complete copy of the 1995 audited financial
statements, the first quarter 1996 unaudited financial statements, and
occupancy charts and room rate comparisons for each property. Your first
quarter 1996 distribution check is in the amount of $25.00 per partnership
unit, which equals a 10% annualized return on your original investment.
The partnership informational meetings were held at the SeaTac Super 8
Motel on April 16, 1996, and at the Portland Super 8 Motel on April 18, 1996.
Attendance was very good and we appreciate your continued interest. One of the
comments at the meeting was that once again there had been offers made by
various liquidity funds to purchase units at far below the original units cost
of $1,000. If you need to dispose of your units, you are urged to call your
NASD registered securities representative or the corporate office of The
Peninsula Group at (360) 943-8000, so that you may be assisted in assessing a
fair value for your units.
The official business meeting for Super 8 Motels Northwest II will be
held on Wednesday, June 12, 1996, at 11:30 a.m. at the corporate office of The
Peninsula Group located at 7515 Terminal St. S.W., Turnwater, Washington.
Thank you for your continued support of Super 8 Motels Northwest II.
Remember, whenever you travel, think SUPER 8 and call 1-800-800-8000 to make
your reservations.
--------------------------------------------------------------------------------
The Official Publication of
THE PENINSULA GROUP, INC.
7515 Terminal St. SW, Turnwater, WA 98501 / (360) 943-8000
--------------------------------------------------------
Owners and operators of America's finest economy lodging
serving 23 convenient Northwest locations:
ALASKA: Anchorage * Fairbanks * Juneau * Ketchikan OREGON: Ashland
Bend * Corvallis * Grants Pass * Klamath Falls * Portland International Airport
Salem * Wilsonville WASHINGTON: Bremerton * Ellensburg * Federal Way
Kelso * Kennewick * Moses Lake * Oympia/Lacey * Port Angeles
Sea-Tac International Airport * Walla Walla * Yakima
6
SUPER 8 MOTELS NORTHWEST II
BALANCE SHEET
MARCH 31, 1996 AND 1995
(Unaudited)
ASSETS
1996 1995
----------- -----------
CURRENT ASSETS
Cash $ 501,361 $ 461,389
Accounts receivable 89,608 59,395
Inventory 57,853 69,916
Prepaid expenses 24,397 47,052
----------- -----------
TOTAL CURRENT ASSETS 673,219 637,752
PROPERTY AND EQUIPMENT
Land 714,301 714,301
Buildings 4,097,106 4,097,106
Equipment, furniture, and fixtures 1,240,594 1,239,937
----------- -----------
Subtotal 6,052,001 6,051,344
Less accumulated depreciation (2,623,784) (2,449,808)
----------- -----------
TOTAL PROPERTY AND EQUIPMENT, NET 3,428,217 3,601,536
OTHER ASSETS
Franchise fees 45,000 45,000
Organization costs 6,000 6,000
Deposits and bank fees 26,375 26,375
----------- -----------
Subtotal 77,375 77,375
Less accumulated amortization (42,536) (37,747)
Subtotal 34,839 39,628
TOTAL OTHER ASSETS 34,839 39,628
----------- -----------
TOTAL ASSETS $ 4,136,276 $ 4,278,916
=========== ===========
LIABILITIES AND PARTNER'S CAPITAL EQUITY
1996 1995
---------- ----------
CURRENT LIABILITIES
Accounts payable - trade $ 72,876 $ 89,248
Accounts payable - Affiliates 34,090 27,764
Accrued expenses 118,005 112,989
Current portion of long-term debt 144,880 84,999
---------- ----------
TOTAL CURRENT LIABILITIES 369,852 314,999
NONCURRENT LIABILITIES
Accrued rent under lease agreement 125,374 100,009
Long-term debt, net of current
portion shown above 2,461,854 2,500,672
Accrued property management fees 1,199,048 1,237,433
---------- ----------
TOTAL NONCURRENT LIABILITIES 3,786,276 3,838,114
PARTNER'S CAPITAL EQUITY
General partners (31,408) (29,952)
Limited partners 11,555 155,755
---------- ----------
Total partner's capital equity (19,852) 125,803
---------- ----------
Total liabilities and
partners' capital equity $4,136,276 $4,278,916
========== ==========
7
SUPER 8 MOTELS NORTHWEST II
STATEMENT OF INCOME
FOR THE THREE MONTHS ENDING MARCH 31, 1996 AND 1995
(UNAUDITED)
1996 1995
-------- --------
SALES
Rooms $813,882 $736,345
Other 24,736 20,738
-------- --------
TOTAL SALES 838,617 757,083
DIRECT OPERATING EXPENSES
Payroll and related expenses 156,787 165,308
Supplies and maintenance 35,682 73,215
Utilities 51,798 46,650
Other 9,036 6,477
-------- --------
TOTAL DIRECT OPERATING EXPENSES 253,304 291,650
INDIRECT OPERATING EXPENSES
Advertising and promotion 17,928 32,039
Bank and credit card charges 9,565 9,418
Insurance 9,296 10,487
Property and business taxes 37,638 36,104
Other 2,973 7,623
-------- --------
TOTAL INDIRECT OPERATING EXPENSES 77,399 95,671
ADMINISTRATIVE AND GENERAL EXPENSES
Administrative service fees 47,456 57,436
Franchise fees 32,447 29,455
Management fees 41,909 37,128
Professional services 6,350 6,684
Other 3,005 7,731
-------- --------
TOTAL ADMINISTRATIVE AND GENERAL
EXPENSES 131,167 138,434
FIXED CHARGES
Amortization 1,159 1,209
Depreciation 42,657 43,671
Interest 61,430 60,486
Lease payments 34,781 33,580
Deferred land lease 4,336 0
-------- --------
TOTAL FIXED CHARGES 144,363 138,946
-------- --------
INCOME FROM OPERATIONS 232,385 92,382
OTHER INCOME
Gain (Loss) on sale of equipment 0 1,521
Interest income 4,192 4,429
-------- --------
TOTAL OTHER INCOME 4,192 5,950
-------- --------
NET INCOME (LOSS) $236,577 $ 98,332
======== ========
This statement subject to change after audit to be performed by Moss Adams,
CPA's.
8
OCCUPANCY
BREMERTON SUPER 8 MOTEL
January February March Quarter
-------------- -------------- -------------- --------------
Average Average Average Average
Room Rate Occupancy Room Rate Occupancy Room Rate Occupancy Room Rate Occupancy
--------- --------- --------- --------- --------- --------- --------- ---------
1995 $40.22 74.4% $43.09 68.1% $41.28 60.5% $41.25 68.0%
1996 $40.81 90.4% $40.66 92.8% $40.70 95.6% $40.72 92.9%
PORTLAND SUPER 8 MOTEL
January February March Quarter
-------------- -------------- -------------- --------------
Average Average Average Average
Room Rate Occupancy Room Rate Occupancy Room Rate Occupancy Room Rate Occupancy
--------- --------- --------- --------- --------- --------- --------- ---------
1995 $51.93 70.2% $53.07 75.0% $52.44 87.4% $52.48 77.6%
1996 $53.31 69.2% $54.21 83.9% $54.40 89.3% $54.02 80.7%
YAKIMA SUPER 8 MOTEL
January February March Quarter
-------------- -------------- -------------- --------------
Average Average Average Average
Room Rate Occupancy Room Rate Occupancy Room Rate Occupancy Room Rate Occupancy
--------- --------- --------- --------- --------- --------- --------- ---------
1995 $42.97 56.3% $43.70 63.6% $44.46 79.6% $43.80 66.2%
1996 $42.97 43.2% $46.95 54.1% $47.17 73.4% $46.32 57.0%
9
SUPER 8 MOTELS NORTHWEST II
BALANCE SHEET
ASSETS
DECEMBER 31,
--------------------------
1995 1996
---------- ----------
CURRENT ASSETS
Cash and cash equivalents $ 733,916 $ 822,944
Accounts receivable - trade 76,718 26,590
Accounts receivable - affiliates 2,089 20,480
Inventory 57,853 70,902
Prepaid expenses 15,000 33,583
---------- ----------
Total current assets 885,576 974,499
---------- ----------
PROPERTY AND EQUIPMENT, at cost
Land 714,301 714,301
Buildings 4,097,107 4,097,106
Equipment, furniture and fixtures 1,239,937 1,239,937
---------- ----------
6,051,345 6,051,344
Less accumulated depreciation (2,581,127) (2,406,444)
---------- ----------
3,470,218 3,644,900
---------- ----------
OTHER ASSETS
Franchise fees 45,000 45,000
Lease option costs 6,000 6,000
Deposits and bank fees 26,375 23,875
---------- ----------
77,375 74,875
Less accumulated amortization (41,376) (36,538)
---------- ----------
Total other assets 35,999 38,337
---------- ----------
$4,391,793 $4,657,736
========== ==========
10
SUPER 8 MOTELS NORTHWEST II
BALANCE SHEET
LIABILITIES AND PARTNERS' EQUITY
DECEMBER 31,
-------------------------------
1995 1994
---------- ----------
CURRENT LIABILITIES
Accounts payable, trade $ 43,098 $ 25,299
Accounts payable, affiliates 43,694 76,947
Accrued expenses 115,876 106,417
Current portion of long-term debt 142,000 84,000
---------- ----------
Total current liabilities 344,668 292,663
---------- ----------
NONCURRENT LIABILITIES
Long-term debt, net of current portion
shown above 2,499,820 2,524,151
Accrued rent under lease agreements 121,038 102,787
---------- ----------
2,620,858 2,626,938
---------- ----------
ACCRUED PROPERTY MANAGEMENT FEES 1,367,160 1,199,048
---------- ----------
COMMITMENTS
PARTNERS' EQUITY
General partner deficiency (30,618) (25,819)
Limited partners (authorized and
outstanding, 4,052 units) 89,725 564,906
---------- ----------
59,107 539,087
---------- ----------
$4,391,793 $4,657,736
========== ==========