ITEM 1. BUSINESS.
GENERAL
Supertel is one of the largest franchisees of Super 8 motels based on the number of motels owned and total rooms rented. The Company develops, acquires, constructs and operates economy-class motels as a franchisee of Super 8 Motels, Inc. and at February 1, 1998 owned 57 Super 8 motels located primarily in Nebraska, Kansas, Iowa, Missouri, Arkansas, Wisconsin and Texas. Supertel is one of the few multiple-location franchisees of Super 8 motels that both owns and operates motels. Supertel also owned two Comfort Inn motels, one River Valley Suites motel, and two Wingate Inns at February 1, 1998.
On March 18, 1998, Supertel announced that it was engaged in discussions regarding a possible business combination with a publicly-traded company pursuant to which Supertel stockholders would receive cash and common stock of the other company. Supertel stated that completion of a definitive agreement and consummation of a transaction are subject to a number of uncertainties, including results of due diligence by both companies, and would be subject to approval by Supertel's board of directors and stockholders. Supertel further stated that there can be no assurance an agreement can be reached, or that if an agreement is entered into, that any transaction will be consummated.
CURRENT OPERATIONS. Supertel is a vertically-integrated motel construction, development and operations company that (i) identifies potential sites for the construction of new motels and analyzes existing motels that are available for acquisition, (ii) develops and constructs new motel properties and renovates existing motels it acquires and (iii) manages its own motel properties. Certain historical information concerning Supertel's operations is set forth in the following table.
(1) Includes telephone, vending and movie revenues.
HISTORY. Paul J. Schulte and Steve H. Borgmann developed their first Super 8 motel as a franchisee of Super 8 Motels, Inc. in 1978. From 1978 through October 1990, Messrs. Schulte and Borgmann developed by acquisition or construction an additional 26 motels in the states of Nebraska, Iowa, Missouri, Kansas and Arizona through a series of limited partnerships and corporations. These various entities were combined into Spartan "8" Limited Partnership ("Spartan") in October 1990. Messrs. Schulte and Borgmann continued as the general partners of Spartan which acquired or developed nine additional motel properties in Nebraska, Kansas, Missouri and Arkansas between October 1990 and February 1994.
Simplex, Inc. ("Simplex") has been involved in the motel management business for Spartan and its predecessors since 1980. Motel Developers, Inc. ("MDI") or its predecessors have acted as a general contractor for motel properties developed by Messrs. Schulte and Borgmann since 1977. Supertel was organized in December 1993 to act as the successor to businesses operated by Spartan, MDI and Simplex, at which time Simplex and MDI became wholly-owned subsidiaries of Supertel. Supertel completed an initial public offering in April 1994. Spartan, MDI and Simplex are sometimes referred to as the "Predecessor Companies". The narrative description and financial information herein have been prepared as if Supertel owned and operated the properties throughout the periods described herein.
LODGING INDUSTRY OVERVIEW
The lodging industry can be divided into four broad segments based on price and chain affiliation. These segments are: upscale, midscale, economy, and small chains or independent motels. Each of the first three categories are further divided into two subcategories based on price: upper and lower. Super 8 motels are in the lower economy segment, together with Motel 6, Budgetel, Ramada Limited, EconoLodge, Roadway Inn, Sleep Inn and others. Wingate Inns are in the upper midscale segment, together with Hampton Inns and Courtyard by Marriott.
Lower economy-class motels appeal to family, senior citizen and business travelers seeking comfortable lodging at low cost. Supertel believes the geographic location and cost structure of its economy motels results in higher margins than are obtained in other segments of the lodging industry. Upper mid-scale hotels appeal to the business traveler looking for extended benefits.
Motel Operations
Supertel's Super 8 motels are economy lodging facilities containing between 40 and 135 guest rooms. The guest rooms contain between 220 and 290 square feet of space and are furnished with either king or queen size or two double beds, dresser, table and chairs or recliner and a remote controlled color television (frequently with cable or satellite hook ups). The motels provide continental breakfasts, wake up calls and 24-hour desk service.
The typical motel is of an English-tudor style design and is located near restaurants operated by third parties.
Supertel's personnel have extensive experience in conducting site selection. Site selection typically consists of reviewing area demographics, conducting market research and comparing the proposed site to other potential expansion locations. The Company acts as its own general contractor in constructing Super 8 motels. In the conduct of general contractor duties, Supertel's personnel purchase building materials and award contracts for plumbing, concrete, concrete finishing, electrical, heating and air conditioning, carpentry, finish carpentry and specialized equipment such as computer equipment and telephone equipment.
Each of Supertel's 62 motels has an on-site manager. The manager is generally a resident of the local community. Supertel management is in daily contact with each motel manager. Supertel's motels with 80 or fewer rooms employ an average of 12 housekeeping and maintenance employees and its motels with more than 80 rooms employ an average of 16 housekeeping and maintenance employees.
Supertel's training personnel conducts training of all motel staff members including motel managers, motel desk clerks and motel housekeepers. Supertel's employee training emphasizes its guest safety programs which include room key control, outside lighting and security cameras for monitoring motel premises.
CUSTOMERS AND MARKETING
During 1997, the Company rented 1,041,904 rooms. Over 67% of its guests were members of the VIP Club, a popular guest program developed by Super 8 Motels, Inc. The members of the VIP Club receive room discounts upon presentation of their club card at check-in and check cashing privileges in addition to other benefits. Supertel's marketing efforts include VIP Club enrollment drives and VIP enrollment contests among desk clerks.
Supertel's marketing efforts also include negotiating and renewing billboards and developing and renewing yellow page advertising. Specific on-site marketing sales programs for individual motels are implemented and planned by Company personnel. In addition, Supertel participates in various community campaigns in support of the local area at each motel location.
SERVICE AND QUALITY ASSURANCE
Supertel believes it ranks among the best Super 8 motels for quality and service. Super 8 Motels, Inc. conducts surveys of guests of Super 8 motels through the use of in-room guest comment cards. Guests are requested to complete and mail the self-addressed cards to Super 8 Motels, Inc. following a stay in a Super 8 motel. The comment card covers nine areas: appearance, room cleanliness, room comfort, room furnishings, bathroom, price value perception, employee friendliness, employee efficiency and employee response. The following chart reflects the average guest responses on the Super 8 surveys, which use a scale of 1.00 to 4.00 with the best score being 1.00.
Super 8 Motels, Inc. also conducts four unannounced inspections of each motel per year, one each quarter. The inspection scores shown below are the average for the year. A score of 0 to 50 is graded as excellent, 51 to 300 is graded good, 301 to 500 is graded average and above 500 is graded unacceptable.
MOTEL PROPERTIES
Certain information for the 62 motels owned by Supertel at February 1, 1998 is set forth below. All motels are Super 8 motels except as noted.
RELATIONSHIP WITH SUPER 8 MOTELS, INC.
Supertel's motel properties are each operated pursuant to a franchise agreement with Super 8 Motels, Inc. Super 8 Motels, Inc., with corporate offices located in Aberdeen, South Dakota, is a subsidiary of Cendant Corp., a publicly-owned franchisor of hotels and motels, including Days Inn, Howard Johnson, Knights Inn, Ramada, Travelodge, Villager Lodge, Wingate Inn and Super 8. There were 1,617 Super 8 motels operating as of December 31, 1997.
BENEFITS TO SUPERTEL. Supertel's franchisee relationship allows the use of the nationally recognized service mark "Super 8" in its motel operations. Super 8 Motels, Inc. conducts national print and media advertising promoting the service mark and Super 8 motels. Quality and consistency among Super 8 motels is monitored by Super 8 Motels, Inc. through four unannounced annual inspections of each Super 8 motel for compliance with facility and service standards. Super 8 Motels, Inc. also assists franchisees in advertising, design and development, market research and trade show participation.
Super 8 Motels, Inc. operates a 24-hour reservation system. Travelers can use an 800 telephone number through the reservation system to reserve rooms nationwide at Super 8 motels. In addition to the reservation service, an international directory of Super 8 motels is published twice annually and Super 8 Motels, Inc. prepares and delivers a special directory for tour groups to travel agencies.
Members of Super 8 Motels, Inc.'s VIP Club program rented over 67% of Supertel's motel rooms during 1997. The 5,035,265 members of the VIP Club receive room rate discounts upon presentation of their club card at check-in and check cashing privileges in addition to other benefits. Super 8 guarantees any losses that Supertel may incur from checks written by VIP Club cardholders.
Super 8 Motels, Inc. provides Supertel with a central source for purchasing of items used in the motel operations. The Company believes that volume purchasing from a central source results in overall lower purchase costs. As a franchisee of Super 8 Motels, Inc., Supertel also receives rebates on long distance telephone charges and premium television charges through its relationship with the franchisor.
FRANCHISE AGREEMENTS. Supertel pays a monthly franchise fee ranging from 4% to 7% of each motel's gross receipts from room revenues of which 1% to 3% is contributed to an advertising fund administered by Super 8 Motels, Inc. to finance its
national advertising program. An initial franchise fee of $20,000 is required upon the execution of a franchise agreement for a new location.
Super 8 Motels, Inc. has agreed not to franchise additional Super 8 motels within a specific radius (which varies from five to thirty miles depending upon the location) of each motel. Each franchise agreement has a twenty year term. Super 8 Motels, Inc. has the right to terminate a franchise agreement, subject to the Supertel's right to correct the condition giving rise to the right to terminate, if Supertel violates the agreement, becomes insolvent, or permits an attachment or execution to be levied on the subject motel.
Supertel may own and operate motels not subject to a franchise agreement with Super 8 Motels, Inc. In addition, in the event a franchise agreement with respect to a motel is not renewed or is terminated, Supertel may operate such motel independently or pursuant to an agreement with another franchisor while continuing to operate its other motels under franchise agreements with Super 8 Motels, Inc.
AREA DEVELOPMENT RIGHTS. Super 8 Motels, Inc. has granted Supertel exclusive rights to develop motels within the city limits of Omaha, Nebraska and in a portion of the Kansas City metropolitan area located in Kansas.
RELATIONSHIP WITH WINGATE INNS, L.P.
Supertel signed an agreement with Wingate Inns, L.P. in December 1995 which provides rights for Supertel to develop five Wingate Inns in the Dallas/Ft.Worth and Houston metropolitan areas through June 30, 1998. Wingate Inns, L.P. is an affiliate of Cendant Corp., a publicly-held corporation. Super 8 Motels, Inc. is also an affiliate of Cendant Corp.
Wingate Inns is a limited service hotel chain which features comfortable suite-like rooms focused on business travelers. Wingate Inns hotels are in the upper mid-scale segment of the lodging industry. See "Business - Lodging Industry Overview". Supertel will pay a monthly franchise fee of 8.5% of each Wingate Inns gross receipts from room revenues, of which 4% will be contributed to an advertising fund administered by Wingate Inns, L.P. A minimum initial franchise fee of $35,000 is required upon the execution of a franchise agreement for a new location, with an additional initial fee of $350 for each room in excess of 100 rooms at the location. Subject to certain conditions, Wingate Inns, L.P. will advance $250,000 to Supertel for each new Wingate Inn; one-fifteenth of the advance will be forgiven without payment annually following the motel opening if Supertel complies with the terms of the franchise agreement.
COMPETITION
There is significant competition in the lodging industry. There are numerous lodging chains that operate on a national or regional basis, as well as other motels, motor inns and independent lodging establishments throughout the United States. Many of the Company's competitors have recognized trade names, greater resources and longer operating histories than the Company. Supertel's motels also compete directly with other economy motel chains that employ concepts similar to Super 8 motels and compete for the same type of cost-conscious traveler. The number of available rooms in these economy motels has grown rapidly.
GOVERNMENT REGULATION
Supertel is subject to various federal, state and local laws, regulations and administrative practices affecting its business. Supertel's motel facilities must comply with regulations related to health, sanitation and safety standards, equal employment, minimum wages, building codes and zoning ordinances and licenses to operate motel facilities. Supertel believes it is in substantial compliance with all such regulations.
ENVIRONMENTAL MATTERS
Under various federal, state and local laws and regulations, an owner or operator of real estate may be liable for the costs of removal or remediation of certain hazardous or toxic substances on such property. Such laws often impose such liability without regard to whether the owner knew of, or was responsible for, the presence of hazardous or toxic substances. The cost of remediation or removal of such substances may be substantial, and the presence of such substances, or the failure to promptly remediate such substances, may adversely affect the owner's ability to sell such real estate or to borrow using such real estate as collateral.
Supertel believes that the motel properties are in compliance in all material respects with all federal, state and local ordinances and regulations regarding hazardous or toxic substances and other environmental matters.
INSURANCE
Supertel has insurance for risks such as fire, personal injury and property damage claims in connection with the operation of the motels as its management deems appropriate and in accordance with prudent risk management, taking into consideration the availability and cost thereof. The motels are insured for other risks, such as business interruption insurance covering six months of each motel's revenues, in amounts deemed adequate by Supertel.
EMPLOYEES
As of December 31, 1997 Supertel had 1,129 employees. The corporate staff consisted of 59 employees involved in development/construction, operations/training, and purchasing and accounting. The motel-level employees included 71 managers and assistant managers/relief managers, 405 desk clerks, 533 housekeepers and shuttle drivers and 61 maintenance employees. Approximately 46% of the desk clerks and housekeepers are part-time employees. The number of Supertel employees varied during 1997 from a low of 1,113 employees to a high of 1,446 employees due to the seasonal nature of the motel business and the addition of motels during the year. None of the employees is covered by a collective bargaining agreement. Supertel considers its relations with employees to be good.
FINANCIAL INFORMATION ABOUT FOREIGN OPERATIONS AND EXPORT SALES
Supertel has no foreign locations or export sales.
EXECUTIVE OFFICERS OF SUPERTEL
The executive officers of Supertel at February 28, 1998 are listed below, together with their ages and all Company positions and offices held by them.
Paul Schulte founded a predecessor of Supertel and was a controlling shareholder, director and president of the predecessor's operations since 1974. Mr. Schulte has extensive experience in acquiring, developing, owning, managing and operating economy motels for Supertel or its predecessors since 1978.
Steve Borgmann was a controlling shareholder, director and officer of the predecessor's operations since 1983. Mr. Borgmann has extensive experience in acquiring, developing, owning, managing and operating economy motels for Supertel or its predecessors since 1978.
Richard Herink became executive vice president of Supertel in August 1995. From April 1993 to August 1995, he was executive vice president of FirsTier Bank, N.A., Norfolk. Prior to April 1993, he was a division president with Farm Credit Services of the Midlands.
Troy Beatty became chief financial officer of Supertel in December 1996. From March 1994 to December 1996, Mr. Beatty was division controller with Raytheon Corp. in Amana, Iowa; from March 1990 to March 1994 was assistant controller with Cooper Industries; and from August 1987 to March 1990 was senior associate with Coopers & Lybrand.
CERTAIN BUSINESS FACTORS
THIS 10-K CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS AND INFORMATION RELATING TO SUPERTEL THAT ARE BASED ON THE BELIEFS OF SUPERTEL MANAGEMENT AS WELL AS ASSUMPTIONS MADE BY AND INFORMATION CURRENTLY AVAILABLE TO SUPERTEL MANAGEMENT. SUCH STATEMENTS REFLECT THE CURRENT VIEWS OF SUPERTEL WITH RESPECT TO FUTURE EVENTS AND ARE SUBJECT TO CERTAIN RISKS, UNCERTAINTIES AND ASSUMPTIONS, INCLUDING THE BUSINESS FACTORS DESCRIBED IN THIS 10-K. SHOULD ONE OR MORE OF THESE RISKS OR UNCERTAINTIES MATERIALIZE, OR SHOULD UNDERLYING ASSUMPTIONS PROVE INCORRECT, ACTUAL RESULTS MAY VARY MATERIALLY FROM THOSE DESCRIBED HEREIN AS BELIEVED, ESTIMATED OR EXPECTED.
LODGING INDUSTRY RISKS. The lodging industry in general, including Super 8, Comfort Inns and Wingate Inns, may be adversely affected by such factors as changes in national and regional economic conditions (particularly in geographic areas in which the Company has a high concentration of motels), changes in local market conditions, oversupply of motel space or a reduction in local demand for rooms and related services, changes in interest rates and the availability of financing.
Operating factors affecting the lodging industry generally, including the Company, include (i) competition from other motels and hotels, (ii) demographic changes, (iii) the recurring need for renovations, refurbishment and improvements of motels and increased expenses related to motel security, (iv) restricted changes in zoning and similar land use laws, and regulations relating to health, safety, disability and employment laws, (v) changes in government regulations that influence or determine wages, prices or construction costs, (vi) changes in the characteristics of motel locations, (vii) the inability to secure property and liability insurance to fully protect against all losses or to obtain such insurance at reasonable costs, (viii) changes in real estate tax rates and other operating costs, (ix) changes in travel patterns which may be affected by increases in transportation costs or gasoline prices, weather patterns or construction of highways, and (x) changes in brand identity and reputation.
Unexpected or adverse changes in any of the foregoing factors could have a material adverse effect on Supertel's financial condition or results of operations.
EXPANSION RISKS. Supertel has adopted a strategy to increase the number of lodging facilities through the development of new motels and hotels and the acquisition of existing motels. The Company's ability to expand depends on a number of factors, including the selection and availability of suitable locations at acceptable prices, the hiring and training of sufficiently skilled management and personnel, and the availability of financing. There can be no assurance that financing, or desirable locations for acquisitions or new development will be available, or if available, will be on terms acceptable to Supertel. There can be no assurance that the Company's expansion plans will be completed successfully or that the nature of such expansion will not be modified to reflect future events or economic conditions.
New motel development is subject to a number of additional risks including construction delay or cost overruns, risks that properties will not achieve anticipated occupancy levels or sustain expected room rate levels, and commencement risks such as receipt of zoning, occupancy and other required governmental permits and authorizations, which in each case could adversely affect Supertel's financial performance. Supertel has historically incurred significant costs relating to pre-opening activities and operating expenses prior to reaching stabilized levels of occupancy and average daily room rates. Consequently, as the Company develops new motel properties, the costs associated therewith may negatively impact Supertel's results of operations.
Acquisitions entail risks that the new properties will fail to perform in accordance with expectations and that the anticipated costs of renovation or conversion will prove inaccurate, as well as general investment risks associated with any new real estate investment. Certain of the properties acquired by Supertel may not operate as Super 8
franchisees, and the Company may incur financial and guest acceptance risks in converting such properties to Super 8 motels or operating such properties under a franchise agreement with a different motel franchisor.
RISKS OF LEVERAGE. Supertel's business is capital intensive and the Company will have significant capital requirements in the future. In the event Supertel's cash flow and working capital are not sufficient to fund its expenditures or to service its indebtedness, the Company would be required to raise additional funds through the sale of additional equity securities, the refinancing of all or part of its indebtedness, the incurrence of additional indebtedness, or the sale of assets. There can be no assurance that any of these sources of funds would be available in amounts sufficient for Supertel to meet its obligations. Furthermore, Supertel's leveraged capital structure could limit its ability to finance its acquisition strategy and other capital expenditures, or to compete effectively or to operate successfully under adverse economic conditions. In addition, adverse economic conditions could result in higher interest rates which could increase debt service requirements on Supertel's floating rate debt and thereby reduce the amounts available for acquisition and development of lodging facilities.
MANAGEMENT OF GROWTH. Supertel has experienced rapid growth in the number of motel rooms owned and operated. Such growth has resulted in, and is expected to continue to create, increased responsibilities for management personnel, as well as added demands on the Company's operating and financial systems. In addition, as the Company continues to pursue its growth strategy, new motels and hotels will be opened in geographic markets in which Supertel has limited or no previous operating or franchise experience. If the Company is unable to manage its growth effectively, the Company's financial condition and results of operations could be materially and adversely affected.
LODGING INDUSTRY COMPETITION. The economy segment of the lodging industry is highly competitive. The success of an economy motel in its market, in large part, will be dependent upon its ability to compete in such areas as reasonableness of room rates, quality of accommodations, service level and convenience of location. Supertel's motels compete with existing motel and hotel facilities in their geographic markets, as well as future motel and hotel facilities in proximity to Supertel's properties. The Company's motels generally operate in areas that contain numerous competitors. Demographic, geographic or other changes in one or more of the Company's markets could impact the convenience or desirability of the sites of certain motels, which would adversely affect the operations of those motels. There can be no assurance that new or existing competitors will not significantly lower rates or offer greater convenience, services or amenities or significantly expand or improve facilities in a market in which the Company's motels compete. In addition, competition generally reduces the number of suitable motel acquisition opportunities offered to the Company and increases the
bargaining power of property owners seeking to sell, which could adversely affect the availability of or price paid for existing properties acquired by Supertel.
SEASONALITY. The motel industry is seasonal in nature. Generally, motel revenues are greater in the second and third quarters than in the first and fourth quarters. This seasonality can be expected to cause quarterly fluctuations in the Company's revenues. Quarterly earnings also may be adversely affected by factors beyond the Company's control, including weather conditions and economic factors.
LOSS OF FRANCHISES OR CERTAIN FRANCHISOR SERVICES. Each Super 8 motel owned by Supertel will be subject to a franchise agreement in the form provided by Super 8 Motels, Inc. Similarly, each Wingate Inn hotel owned by Supertel will be subject to a franchise agreement with Wingate Inns, L.P. The continuation of each franchise agreement will be subject to specified operating standards and other terms and conditions. The failure of Supertel to maintain such standards or adhere to such other terms and conditions with respect to a motel or hotel could result in the loss or cancellation of the franchise agreement covering that property and may have an adverse effect upon the profitability of a covered property. In addition, the failure of the franchisor to perform its obligations under each Franchise Agreement may have an adverse effect on Supertel. See "Business - Relationship With Super 8 Motels, Inc." and "Business - Relationship with Wingate Inns, L.P."
DEPENDENCE ON SENIOR MANAGEMENT. Supertel's continued success will depend to a significant extent upon the efforts and abilities of its senior management team, including Paul J. Schulte, Steve H. Borgmann and Richard L. Herink. The loss of their services could have a material adverse affect upon Supertel's business. Supertel has employment agreements with each of these individuals.
ENVIRONMENTAL MATTERS. Under various federal, state and local laws, ordinances and regulations, an owner or operator of real property may become liable for the cost of removal or remediation of certain hazardous substances released on or in its property. Such laws often impose liability without regard to whether the owner or operator knew of, or was responsible for, the release of such hazardous substances. The presence of such substances, or the failure to properly remediate any contamination from such substances, may adversely affect the owner's ability to sell the real estate or to borrow using the real estate as collateral. In addition to clean-up actions brought by the federal, state and local agencies, the presence of hazardous waste or materials on a property could result in personal injury or similar claims by private plaintiffs. Neither Supertel nor its predecessors have been notified by any governmental authority of any liability or other claim in connection with any of its motels and Supertel is not aware of any other
environmental condition with respect to any of its motels that could be material to its results of operations. See "Business - Environmental Matters."
ITEM 2.
ITEM 2. PROPERTIES.
Supertel's executive, training and administrative operations are located in an owned building containing approximately 18,000 square feet of space in Norfolk, Nebraska.
The Company's motel properties are all owned. See "Business - Motel Properties" and "Business - Motel Operations".
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
Supertel from time to time is involved in litigation relating to claims arising out of its operations in the normal course of business. In the opinion of management, the ultimate disposition of all litigation involving Supertel will not have a material impact on Supertel's consolidated financial statements.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matter was submitted to a vote of stockholders of Supertel during the fourth quarter of the fiscal year ended December 31, 1997.
PART II
ITEM 5.
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER MATTERS.
The sections entitled "Quarterly Financial Information (Unaudited)" on page 20 and "Common Stock" on page 21 of the 1997 Annual Report are incorporated herein by reference.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
The section entitled "Selected Financial Statement Data" on page 5 of the 1997 Annual Report is incorporated herein by reference.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
The section entitled "Management's Discussion and Analysis of Financial Condition and Results of Operations" on pages 6 through 8 of the 1997 Annual Report is incorporated herein by reference.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of Supertel Hospitality, Inc. and subsidiaries, and the independent auditors' report thereon, are incorporated herein by reference to pages 9 through 19 of the 1997 Annual Report. Certain supplementary data is incorporated herein by reference to the section entitled "Quarterly Financial Information (Unaudited)" on page 20 of the 1997 Annual Report.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
There has been no change in Supertel's independent accountants during the two most recent fiscal years.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The section entitled "Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" in the 1998 Proxy Statement is incorporated herein by reference.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
The sections entitled "Director Meetings and Compensation", "Summary Compensation Table", "Option Grants in 1997", and "Option Exercises in Fiscal 1997 and Year-End Values" in the 1998 Proxy Statement are incorporated herein by reference.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The section entitled "Certain Stockholders" in the 1998 Proxy Statement is incorporated herein by reference.
ITEM 13.
ITEM 13. CERTAIN TRANSACTIONS AND RELATIONSHIPS.
The section entitled "Certain Agreements and Transactions" in the 1998 Proxy Statement is incorporated herein by reference.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) (1) FINANCIAL STATEMENTS. The consolidated financial statements of Supertel, and the independent auditors' report thereon, have been incorporated by reference as set forth in Item 8 above.
(a) (2) FINANCIAL STATEMENT SCHEDULES. No financial statement schedules are required pursuant to this item.
(a) (3) EXHIBITS. The Exhibit Index, set forth below, is incorporated herein by reference.
(b) REPORTS ON FORM 8-K. Supertel did not file any reports on Form 8-K during the last quarter of its fiscal year ended December 31, 1997.
SIGNATURES
Pursuant to the requirements of Section 13 or Section 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, in the City of Norfolk, State of Nebraska, on the 23rd day of March, 1998.
Supertel Hospitality, Inc.
By: /s/ Paul J. Schulte ---------------------------------------- Paul J. Schulte, President
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of Supertel Hospitality, Inc. and in the capacities indicated on the 23rd day of March, 1998.
/s/ Paul J. Schulte Director and Chief Executive Officer - --------------------------- Paul J. Schulte
/s/ Steve H. Borgmann Director, Executive Vice President and - --------------------------- Chief Operating Officer Steve H. Borgmann
/s/ Richard Herink Director and Executive Vice President - --------------------------- Richard Herink
/s/ Troy Beatty Senior Vice President (Chief Financial - --------------------------- Officer and Principal Accounting Officer) Troy Beatty
/s/ Joseph Caggiano Director - --------------------------- Joseph Caggiano
/s/ Loren Steele Director - --------------------------- Loren Steele
SHAREHOLDER INFORMATION DIRECTORS/OFFICERS
CORPORATE OFFICE Supertel Hospitality, Inc. 309 North 5th Street P.O. Box 1448 Norfolk, NE 68702-1448 Telephone 402-371-2520 Fax 402-371-4229
ANNUAL MEETING The 1998 annual meeting of stockholders will be held on May 1, 1998 at 2 p.m. central time at the Doubletree Inn, 1616 Dodge Street, Omaha, NE 68102.
AVAILABILITY OF 10-K REPORT Stockholders may obtain a copy of Supertel's Form 10-K Annual Report for 1997 by writing the investor relations contact at the corporate office.
INVESTOR RELATIONS CONTACT Troy M. Beatty Chief Financial Officer Telephone 402-371-2520 Fax 402-371-4229
COMMON STOCK The common stock is traded on the NASDAQ National Market System under the symbol SPPR. On March 13, 1998, there were approximately 1,225 beneficial owners of the company's common stock.
STOCK TRANSFER AGENT First National Bank of Omaha, Omaha, NE
INDEPENDENT AUDITORS KPMG Peat Marwick LLP, Omaha, NE
LEGAL COUNSEL McGarth, North, Mullin & Kratz, PC Omaha, NE
Directors
Joseph Caggiano Vice Chairman Emeritus Bozell, Jacobs, Kenyon & Eckhardt, Inc.
Loren Steele Director, Super 8 Motels, Inc. Chairman, International Franchise Association
Paul Schulte President and Chief Executive Officer Supertel Hospitality, Inc.
Steve Borgmann Executive Vice President and Chief Operating Officer Supertel Hospitality, Inc.
Richard Herink Executive Vice President Supertel Hospitality, Inc.
OFFICERS
Paul Schulte President and Chief Executive Officer
Steve Borgmann Executive Vice President and Chief Operating Officer
Richard Herink Executive Vice President
Troy M. Beatty Senior Vice President and Chief Financial Officer
Steve Gilbert Senior Vice President of Purchasing
Karen Schulte Senior Vice President of Administration
EXHIBIT INDEX
Pursuant to Item 601(b)(4) of Regulation S-K, certain instruments with respect to long-term debt are not filed with this annual report on Form 10-K. Supertel will furnish a copy of any such long-term debt agreement to the Securities and Exchange Commission upon request.
Management contracts and compensatory plans are set forth as exhibits 10.6 through 10.9.