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: September 30, 1998
Commission File Number: 2-76543
SUPER 8 MOTELS NORTHWEST II
Washington 91-1172558
PART 1
Financial Information
Item 1. Financial Statements
See attached unaudited September 30, 1998 Financial Statements and the
partnership's balance sheet for the year ended December 31, 1997. The Statement
of Cash Flows is omitted from the attachment and is presented as follows:
PERIOD ENDED
-----------------------------------
SEPT. 30, SEPT. 30,
1998 1997
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CASH FLOWS FROM OPERATING ACTIVITIES
Revenues and other income received in cash $ 988,996 $ 1,013,284
Operating expenses paid in cash (972,662) (675,164)
Interest paid (65,819) (53,522)
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Net cash provided (used) by operating acetivities (49,485) 284,598
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CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of property and equipment, net (2,044) --
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Net cash used by investing activities (2,044) --
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CASH FLOWS FROM FINANCING ACTIVITIES
Principal Payments (31,750) (31,220)
Proceeds from issuance 87,387 --
Distributions to partners (119,176) (119,175)
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Net cash used by financing activities (63,539) (150,395)
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NET DECREASE IN CASH AND CASH EQUIVALENTS (115,068) 134,203
CASH AND CASH EQUIVALENTS, beginning of period 412,566 355,849
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CASH AND CASH EQUIVALENTS, end of period $ 297,498 $ 490,052
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2
PERIOD ENDED
---------------------------------
SEPT. 30, SEPT. 30,
1998 1997
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RECONCILIATION OF NET INCOME TO NET CASH PROVIDED BY
OPERATING ACTIVITIES
Net income (loss) $ 152,962 $ 323,351
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Adjustments to reconcile net income (loss) to net cash provided by
operating activities:
Depreciation and amortization 40,138 43,841
Lease expense - deferred 3,090 3,882
Change in assets and liabilities
Accounts receivable 5,806 (484)
Prepaid expenses (118) (13,130)
Accounts payable (52,357) 24,107
Accrued expenses 50,994 27,079
Accrued management fees (250,000) (124,048)
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(202,447) (38,753)
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NET CASH PROVIDED (USED) BY OPERATING ACTIVITIES $ (49,485) $ 284,598
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Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
See attached Third Quarter (9/30/98) 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
Pursuant to correspondence from the Securities and
Exchange Commission, the partnership's management is
currently working with legal counsel to file delinquent
Forms 3, 4 and 5.
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: November 16, 1998
4
SUPER 8 NORTHWEST II
BALANCE SHEET
SEPTEMBER 30, 1998 AND 1997
(Unaudited)
ASSETS
1998 1997
------------- -------------
CURRENT ASSETS
Cash $ 297,498 $ 490,052
Accounts receivable 22,417 17,284
Inventory 58,860 58,319
Prepaid expenses 11,695 18,491
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TOTAL CURRENT ASSETS 390,470 584,146
PROPERTY AND EQUIPMENT
Land 714,301 714,301
Buildings 4,097,106 4,097,106
Equipment, furniture and fixtures 1,244,306 1,242,261
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Subtotal 6,055,713 6,053,668
Less accumulated depreciation (3,023,487) (2,866,559)
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TOTAL PROPERTY AND EQUIPMENT, NET 3,032,226 3,187,109
OTHER ASSETS
Franchise fees 45,000 45,000
Organization costs 6,000 6,000
Deposits and bank fees 26,375 26,375
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Subtotal 77,375 77,375
Less accumulated amortization (54,679) (49,841)
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TOTAL OTHER ASSETS 22,696 27,534
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TOTAL ASSETS $ 3,445,392 $ 3,798,789
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LIABILITIES AND PARTNER'S CAPITAL EQUITY
CURRENT LIABILITIES
Accounts payable - trade $ 26,298 $ 107,886
Accounts payable - affiliates 37,436 41,222
Accrued expenses 121,672 111,181
Current portion of long-term debt 180,143 159,594
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TOTAL CURRENT LIABILITIES 365,549 419,883
NONCURRENT LIABILITIES
Accrued rent under lease agreement 166,985 142,792
Long-term debt, net of current portion shown above 2,265,662 2,234,360
Accrued property management fees 0 350,000
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TOTAL NONCURRENT LIABILITIES 2,432,647 2,727,152
PARTNER'S CAPITAL EQUITY
General partner 101,770 16,167
Limited partners 545,426 635,587
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TOTAL PARTNER'S CAPITAL EQUITY 647,196 651,754
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$ 3,445,392 $ 3,798,789
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5
SUPER 8 NORTHWEST II
STATEMENT OF INCOME
FOR THE QUARTER ENDED SEPTEMBER 30, 1998 AND 1997
(Unaudited)
1998 1997
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SALES
Rooms $ 956,052 976,668
Other 25,334 34,275
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TOTAL SALES 981,386 1,010,943
DIRECT OPERATING EXPENSES
Payroll and related expenses 177,101 180,686
Supplies and maintenance 217,221 67,166
Utilities 53,918 51,338
Other 8,713 7,763
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TOTAL DIRECT OPERATING EXPENSES 456,953 306,953
INDIRECT OPERATING EXPENSES
Advertising and promotion 24,542 24,519
Bank and credit card charges 15,429 14,563
Insurance 8,719 8,178
Property and business taxes 38,075 40,587
Other 2,890 3,216
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TOTAL INDIRECT OPERATING EXPENSES 89,655 91,063
ADMINISTRATIVE AND GENERAL EXPENSES
Administrative service fees 43,590 48,135
Franchise fees 38,242 39,066
Management fees 49,070 50,547
Professional services 7,871 8,182
Other 6,768 8,372
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TOTAL ADMINISTRATIVE AND GENERAL
EXPENSES 145,541 154,302
FIXED CHARGES
Amortization 1,209 1,209
Depreciation 38,927 42,632
Interest 57,471 53,522
Lease expense 37,382 36,854
Deferred land lease 3,090 3,882
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TOTAL FIXED CHARGES 138,079 138,099
INCOME FROM OPERATIONS 151,158 320,526
OTHER INCOME
Interest income 1,804 2,825
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TOTAL OTHER INCOME 1,804 2,825
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NET INCOME (LOSS) $ 152,962 323,351
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Super 8 Motel Update
SUPER 8 MOTELS NORTHWEST II
VOL. 18 NO. 3/OCTOBER 31, 1998 THIRD QUARTER 1998
NATIONAL NEWS
SUPER 8 MOTELS SET RECORD
Continuing its path of record growth, Super 8 Motels, Inc., posted a new
record for the chain--opening 51 motels in the second quarter of 1998. Super 8
has opened 88 motels since January, 1998. Of the motels opened this year, 55%
are new construction. Super 8 Motels now has more than 1,700 properties in North
America.
PROJECT POWER UP UPDATE
Project Power Up, Super 8's front-desk computerization program, is continuing
installation of its hardware and software in all Super 8 Motels. As of August,
1998, 35 properties are now up and running. Managers of properties that have had
Project Power Up installed are reporting that they are experiencing faster front
desk and back-of-house operations, leaving them more time to bring in new
business.
Peninsula has had Project Power Up installed at its Lacey property and
soon-to-open Roseburg, Oregon motel. Overall, the Lacey manager has been pleased
with the system-once the "bugs" were worked out. She reports it takes less time
to handle the paperwork allowing her more time to greet guests, perform sales
calls, and "run the property."
REGIONAL NEWS
ROSEBURG SUPER 8 MOTEL
The new Roseburg Super 8 Motel is due to open its doors to the public on
Thursday, November 12, 1998. The grand opening will be held on Monday, November
16, 1998, from 4:00 p. m. to 6:00 p.m. Please feel free to join in the
celebrations if you are in the area. The 88-room Roseburg Super 8 will feature
an indoor pool and spa, handicap rooms, elevator, truck parking, and continental
breakfast.
BEAUTIFICATION AWARD
The Ferndale, Washington, Super 8 Motel has won the national 1998 Super 8
Motels Beautification Award for outstanding curb appeal. The Ferndale Super 8
will be featured on the cover of StrEIGHT Talk, Super 8 Motels' industry
newsletter, and on the Super 8 web site, and will receive a plaque to hang in
its lobby for winning this distinctive award.
SUPER 8 MOTELS NORTHWEST II
Despite a fairly strong third quarter at all three motels in the partnership,
total year-to-date partnership revenues trail 1997 revenues by about $18,000.
When reviewing the enclosed unaudited financial statements, you will note that
all properties in the partnership have exercised good cost control of Direct
Operating Expenses, while Indirect Operating Expenses, Administrative and
General Expenses, as well as Fixed Charges, have all dropped both in real
dollars and as a percentage of revenues.
Referencing the occupancy charts and average daily rate comparisons, you will
notice that in Bremerton occupancy for both July and August decreased, while the
property had a very good September when compared to the same quarter of 1997.
Its average daily rate increased by 51 cents. The result was that Bremerton
revenues remained essentially even with 1997 for the quarter, while year to date
the property is about $14,000 ahead of 1997. In Portland, occupancy for the
quarter was off less than 1 % when compared with the third quarter of 1997,
while average daily rate decreased by $.23. Year to date, Portland's revenues
are about $2,400 above 1997. Despite having a weak September, Yakima continued
to maintain at about 1997 levels, with the third quarter ending 2.2
7
occupancy points below the previous year, while average daily rate was
essentially even with the same period in 1997.
Your third quarter 1998 distribution check is in the amount of $37.50 per
partnership unit. This distribution equals a 15% annualized return on your
original investment for the quarter. Year-to-date total distributions equal
$87.50 per unit, resulting in an 11.7% annualized return. The partnership will
begin its 1998 pre-audit work in November with the goal of having your
partnership tax information mailed not later than February 28, 1999.
During the second quarter 1998, the general partners engaged an investment
banking firm for the purpose of marketing The Peninsula Group, its affiliates
and subsidiaries, including the assets of Super 8 Motels Northwest II. These
efforts have been terminated at this time. However, the general partners are
exploring alternate avenues to create liquidity for your investment.
Again, it should be noted that there continue to be offers made by various
liquidity funds to purchase units at what appear to be discounted values. While
there can be no assurance as to the actual value which may be realized upon sale
of the assets and/or liquidation of the partnership, each investor should take
note of the efforts being made by the general partner to create liquidity and to
gain maximum value for all investors. If you find a need to dispose of your
units, you are urged to call your NASD registered securities representative or
the investor relations department at the offices of The Peninsula Group so that
you may be assisted in disposing of your units.
Thank you for your continued support of Super 8 Motels Northwest II and
remember-if you plan on traveling over the upcoming holiday season--THINK SUPER
8 and call 1-800-800-8000 for reservations at over l,700 Super 8 Motels
throughout the U. S. and Canada.
8
SUPER 8 MOTELS NORTHWEST II
BALANCE SHEET
ASSETS
DECEMBER 31,
-----------------------------------
1997 1996
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CURRENT ASSETS
Cash and cash equivalents $ 387,878 $ 551,202
Accounts receivable, trade 15,042 17,457
Accounts receivable, affiliates -- 3,149
Inventory 58,858 58,319
Prepaid expenses 6,912 11,613
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Total current assets 468,690 641,740
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PROPERTY AND EQUIPMENT, at cost
Land 714,301 714,301
Buildings 4,097,107 4,097,107
Equipment, furniture and fixtures 1,242,261 1,241,326
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6,053,669 6,052,734
Less accumulated depreciation (2,906,997) (2,738,663)
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3,146,672 3,314,071
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OTHER ASSETS
Loan fees 26,375 26,375
Franchise fees 45,000 45,000
Lease option costs 6,000 6,000
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77,375 77,375
Less accumulated amortization (51,051) (46,214)
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Total other assets 26,324 31,161
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$ 3,641,686 $ 3,986,972
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SUPER 8 MOTELS NORTHWEST II
BALANCE SHEET
LIABILITIES AND PARTNERS' EQUITY
DECEMBER 31,
---------------------------------
1997 1996
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CURRENT LIABILITIES
Accounts payable, trade $ 17,862 $ 47,021
Accounts payable, affiliates 53,939 83,663
Accrued expenses 108,377 126,478
Current portion of long-term debt 127,000 155,000
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Total current liabilities 307,178 412,162
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NONCURRENT LIABILITIES
Long-term debt, net of current portion shown above 2,223,015 2,345,801
Accrued rent under lease agreements 152,550 137,021
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2,375,565 2,482,822
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ACCRUED PROPERTY MANAGEMENT FEES 350,000 699,048
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COMMITMENTS (Notes 7 and 9)
PARTNERS' EQUITY
General partners' equity 96,031 63,632
Limited partners'equity (authorized, issued and
outstanding 4,052 units) 512,912 329,308
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608,943 392,940
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$ 3,641,686 $ 3,986,972
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