-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IM6Tb1nyFr3O22w6H6GAJiaxXnHdl09iNysonBRK49Hba/i3UK8yWXxUpAlubeWq FXl/l/rdmFXJg+fzZv9X7A== 0000918695-96-000024.txt : 19960619 0000918695-96-000024.hdr.sgml : 19960619 ACCESSION NUMBER: 0000918695-96-000024 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960421 FILED AS OF DATE: 19960524 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHOLODGE INC CENTRAL INDEX KEY: 0000881924 STANDARD INDUSTRIAL CLASSIFICATION: 6794 IRS NUMBER: 621015641 STATE OF INCORPORATION: TN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-19840 FILM NUMBER: 96572073 BUSINESS ADDRESS: STREET 1: 217 WEST MAIN ST CITY: GALLATIN STATE: TN ZIP: 37066 BUSINESS PHONE: 6154527200 MAIL ADDRESS: STREET 1: 217 WEST MAIN ST CITY: GALLATIN STATE: TN ZIP: 37066 10-Q 1 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 ______________________________________ For the First Quarter Ended April 21, 1996 Commission File No. 0-19840 ______________________________________ SHOLODGE, INC. (Exact name of registrant as specified in its charter) ______________________________________ TENNESSEE 62-1015641 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification Number) 217 WEST MAIN STREET, GALLATIN, TENNESSEE 37066 (address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (615) 452-7200 ______________________________________ Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period as the registrant was required to file such reports) and (2)has been subject to such filing requirements for the past 90 days. Yes ___x___ No _______ Indicate the number of shares outstanding of each of the registrant's classes of common stock as of the latest practicable date. As of May 23, 1996, there were 8,231,501 shares of ShoLodge, Inc. common stock outstanding. SHOLODGE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
APRIL 21, DECEMBER 31, 1996 1995 (1) ASSETS CURRENT ASSETS: Cash and cash equivalents $5,026,930 $2,444,990 Accounts receivable 2,142,393 2,545,108 Construction contracts 1,543,179 1,726,844 Due from related parties 44,100,071 Less profits not recognized on installment sales -1,681,312 ___________ 42,418,759 Prepaid expenses 668,350 385,615 Other current assets 345,286 287,871 __________ ___________ Total current assets 9,726,138 49,809,187 DIRECT FINANCING LEASES, less current portion 643,562 661,631 PROPERTY AND EQUIPMENT 209,694,570 176,701,146 Less accumulated depreciation and amortization -28,631,380 -27,021,202 ___________ ___________ 181,063,190 149,679,944 DEFERRED CHARGES 2,925,121 3,437,887 SECURITIES HELD TO MATURITY - RESTRICTED 7,814,271 7,618,031 SECURITIES AVAILABLE FOR SALE 1,180,289 2,090,943 EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED 3,240,792 3,286,938 OTHER 2,969,018 4,205,151 ___________ ___________ TOTAL ASSETS $209,562,381 $220,789,712 =========== =========== (1) Derived from fiscal year ended December 31, 1995 audited financial statements. See Notes to Consolidated Financial Statements.
SHOLODGE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (CONTINUED)
APRIL 21, DECEMBER 31, 1996 1995 (1) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses $11,382,856 $7,750,468 Taxes other than on income 597,361 689,564 Income taxes payable 2,540,597 2,274,693 Current portion of long-term debt and capitalized lease obligations 16,286,588 34,308,402 __________ __________ Total current liabilities 30,807,402 45,023,127 LONG-TERM DEBT ASSOCIATED WITH LODGING FACILITIES 33,195,257 33,125,280 OTHER LONG-TERM DEBT 55,600,111 54,112,647 CAPITALIZED LEASE OBLIGATIONS 1,877,881 2,104,765 DEFERRED INCOME TAXES 3,153,751 3,153,751 MINORITY INTERESTS IN EQUITY OF CONSOLIDATED SUBSIDIARIES AND PARTNERSHIPS 394,037 533,642 TOTAL LIABILITIES 125,028,439 138,053,212 SHAREHOLDERS' EQUITY: Series A redeemable nonparticipating, stock (no par value; 1,000 shares authorized, issued and outstanding,) Common stock (no par value; 20,000,000 shares authorized, 8,231,501 shares issued and outstanding as of April 21, 1996 and 8,228,502 shares issued and outstanding as of December 31, 1995) 1,000 1,000 Additional paid-in capital 44,260,588 44,235,396 Retained earnings 39,961,064 37,966,623 Unrealized gain on securities available for sale (net of tax) 311,290 533,481 __________ __________ TOTAL SHAREHOLDERS' EQUITY 84,533,942 82,736,500 __________ __________ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $209,562,381 $220,789,712 =========== =========== (1) Derived from fiscal year ended December 31, 1995 audited financial statements. See Notes to Consolidated Financial Statements.
SHOLODGE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) FOR THE SIXTEEN WEEKS ENDED APRIL, 21, 1996 AND APRIL 16, 1995
APRIL 21, APRIL 16, 1996 1995 REVENUES: Hotel $14,080,821 $12,121,327 Construction and development 514,234 4,683,695 Construction and development - other 200,000 1,437,741 Sale of hotels 0 6,173,500 Profits not recognized on installment sales 0 -1,955,791 Franchising 1,064,992 842,330 Management 48,908 237,898 Management - previously deferred 0 2,862,000 __________ __________ Total operating revenues 15,908,955 26,402,700 COSTS AND EXPENSES: Operating expenses: Hotel 8,307,842 7,413,148 Construction and development 690,499 4,373,891 Cost of hotels sold 0 4,217,709 Franchising 984,093 773,288 _________ __________ Total operating expenses 9,982,434 16,778,036 _________ _________ Gross operating profit 5,926,521 9,624,664 General and administrative 954,238 592,733 Earnings before interest, taxes, depreciation and amortization 4,972,283 9,031,931 Depreciation and amortization 2,084,212 1,576,909 _________ _________ Net operating profit (before interest and taxes) 2,888,071 7,455,022 OTHER INCOME AND EXPENSES: Interest expense 481,046 2,260,738 Interest income 631,808 2,200,861 _________ _________ Net interest expense -150,762 59,877 Other income 175,981 162,199 EARNINGS BEFORE INCOME TAXES, DISCONTINUED OPERATIONS, _________ _________ MINORITY INTEREST AND EXTRAORDINARY ITEMS 3,214,814 7,557,344 INCOME TAXES 1,185,000 2,852,000 MINORITY INTEREST IN EARNINGS OF CONSOLIDATED SUBSIDIARIES & PARTNERSHIPS 35,373 -97,995 EARNINGS FROM CONTINUING OPERATIONS BEFORE EXTRAORDINARY ITEMS 1,994,441 4,803,339 DISCONTINUED OPERATIONS: INCOME (LOSS) FROM OPERATIONS OF RESTAURANT SUBSIDIARY DISPOSED OF, net of applicable income taxes & minority interest 0 -31,255 EXTRAORDINARY LOSSES, net of income tax benefit 0 517,807 _________ __________ NET EARNINGS $1,994,441 $4,254,277 ========= ========== EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE Primary: Earnings from continuing operations before extraordinary items $0.24 $0.55 Net earnings $0.24 $0.49 _______ _______ Fully Diluted: Earnings from continuing operations before extraordinary items $0.24 $0.51 Net earnings $0.24 $0.46 _______ _______ WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING Primary 8,396,361 8,641,670 Fully diluted 10,712,963 10,958,272 __________ __________ See Notes to Consolidated Financial Statements.
SHOLODGE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIXTEEN WEEKS ENDED APRIL 21,1996 AND APRIL 16,1995 (UNAUDITED)
16 WEEKS ENDED APRIL 21, APRIL 16, 1996 1995 CASH FLOWS FROM OPERATING ACTIVITIES: NET EARNINGS $1,994,441 $4,254,277 ADJUSTMENTS TO RECONCILE NET EARNINGS TO NET CASH PROVIDED BY OPERATING ACTIVITIES: EXTRAORDINARY LOSS ON EARLY EXTINGUISHMENT OF DEBT 0 828,492 DEPRECIATION AND AMORTIZATION 2,084,212 1,576,909 GAIN ON SALE OF PROPERTY & EQUIPMENT 0 -2,690 ACCRETION OF DISCOUNT ON SECURITIES HELD TO MATURITY -196,240 -373,350 CHANGES IN ASSETS AND LIABILITIES: DECREASE IN ACCOUNTS RECEIVABLE 586,380 493,360 (INCREASE) IN PREPAID EXPENSES -282,735 -358,431 (DECREASE) INCREASE PROFITS NOT RECOGNIZED ON INSTALLMENT SALES -1,681,312 9,603,985 DECREASE IN OTHER ASSETS 1,437,285 893,974 (DECREASE) IN DEFERRED CHARGES -332,346 -969,861 INCREASE IN ACCOUNTS PAYABLE AND ACCRUED EXPENSES 3,632,388 964,980 INCREASE IN INCOME AND OTHER TAXES 173,701 2,015,370 INCREASE (DECREASE) IN DEFERRED REVENUE 0 -2,862,000 ___________________________________________________________________________________ NET CASH PROVIDED BY OPERATING ACTIVITIES 7,415,774 16,065,015 CASH FLOWS FROM INVESTING ACTIVITIES: CAPITAL EXPENDITURES -32,993,424 -8,134,067 PROCEEDS FROM SALE OF PROPERTY & EQUIPMENT 0 2,690 MATURITY OF SECURITIES HELD TO MATURITY 0 10,000,000 ___________________________________________________________________________________ NET CASH (USED IN) PROVIDED BY INVESTING ACTIVITIES -32,993,424 1,868,623 CASH FLOWS FROM FINANCING ACTIVITIES: REPAYMENT FROM (ADVANCES TO) RELATED PARTIES--NET 44,100,071 -7,348,515 PROCEEDS FROM DIRECT FINANCING LEASES 18,069 11,786 PROCEEDS FROM LONG-TERM DEBT 20,182,371 8,060,000 PAYMENTS ON LONG-TERM DEBT -36,646,744 -16,710,871 PAYMENTS ON CAPITALIZED LEASE OBLIGATIONS -226,884 -357,530 INCREASE IN MINORITY INTEREST IN EQUITY OF CONSOLIDATED SUBSIDIARIES AND PARTNERSHIPS -139,605 -513,648 SALE OF SECURITIES AVAILABLE FOR SALE 847,120 0 EXERCISE OF STOCK OPTIONS 25,192 86,041 ___________________________________________________________________________________ NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 28,159,590 -16,772,737 ___________________________________________________________________________________ NET INCREASE IN CASH AND CASH EQUIVALENTS $2,581,940 $1,160,901 =================================================================================== CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD $2,444,990 $2,188,185 =================================================================================== CASH AND CASH EQUIVALENTS - END OF PERIOD $5,026,930 $3,349,086 =================================================================================== See Notes to Consolidated Financial Statements.
SHOLODGE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIXTEEN WEEKS ENDED APRIL 21,1996 AND APRIL 16,1995 (UNAUDITED)
16 WEEKS ENDED APRIL 21, APRIL 16, 1996 1995 SUPPLEMENTAL CASH FLOW INFORMATION PROPERTY AND EQUIPMENT ACQUIRED UNDER CAPITALIZED LEASE OBLIGATIONS: PROPERTY AND EQUIPMENT 1,024,413 CAPITALIZED LEASE OBLIGATION -1,024,413 ____________ __________ $0 $0 ============ ========== SALE OF HOTELS TO RELATED PARTY: DUE FROM RELATED PARTIES -6,173,500 PROFITS NOT RECOGNIZED ON INSTALLMENT SALES 1,955,791 PROPERTY AND EQUIPMENT 4,217,709 ____________ __________ $0 $0 ============ ==========
SHOLODGE, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) A. The consolidated financial statements have been prepared by the Company without audit. In Management's opinion, the information and amounts furnished in this report reflect all adjustments which are necessary for the fair presentation of the financial position and results of operations for the periods presented. All adjustments are of a normal and recurring nature. It is suggested that these financial statements be read in conjunction with the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995 and the Company's Quarterly Report on Form 10-Q for the sixteen weeks ended April 21, 1996. There have been no changes in accounting policies nor has the composition of accounts substantially changed since the year ended December 31, 1995. The fiscal year consists of a 52/53 week year ending the last Sunday of the year. The Company has historically reported lower earnings in the first and fourth quarters of the year due to the seasonality of the Company's business. The results of operations for the quarters ended April 21, 1996 and April 16, 1995 are not necessarily indicative of the operating results for the entire year. B. Two additional classifications of revenues were created in 1995 to reflect the results of a transaction on March 31, 1995, between the Company and Suites of America, Inc. ("Suites") and its parent, Prime Hospitality Corp., ("Prime") whereby the Company sold its option to acquire 50% of the voting stock of Suites. "Construction and development - other" represents a portion of construction and development related earnings which were previously deferred from 1993 and 1994, as well as additional amounts earned in first quarter 1995, being reported on the installment sales method of accounting upon the receipt of cash on March 31, 1995. "Management - previously deferred" reported in 1995 represents 100% of the "Deferred revenue - profit participation" reflected on the Company's balance sheet as of the end of its 1994 fiscal year, a portion of which was deferred from 1993 and the balance from 1994. C. The net earnings per share is computed by dividing net earnings by the weighted average number of common and common equivalent shares outstanding. D. The number of shares outstanding and earnings per share have been adjusted to reflect the effect of the 5-for-4 stock split on May 14, 1993, and the 4-for-3 stock split on March 28, 1994. ShoLodge, Inc. and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations For the Quarters Ended April 21, 1996 and April 16, 1995 Total operating revenues for the quarter ended April 21, 1996 were $15,909,000, or 39.7% less than the total operating revenues for the first quarter of 1995. Revenues from hotel operations increased by $1,960,000, or 16.2%, over the $12,121,000 reported for the same period last year. For the 29 same hotels opened for all of both quarterly periods, an increase of 5.8% in average daily room rates, from $46.37 in first quarter 1995 to $49.04 in first quarter 1996, partially offset by a decline in average occupancy rates on these hotels from 60.5% last year to 58.9% this year, resulted in a net increase in same hotel revenues of 2.5%, from $11,609,000 in first quarter 1995 to $11,895,000 in first quarter 1996. The nine hotels opened since first quarter 1995 (of which four opened in 1995 and the remaining five opened in 1996) contributed $2,186,000 to hotel operating revenues in first quarter this year. On the other hand, one hotel which was open for the first three months last year before being sold in connection with the transaction with Prime discussed below, caused a decline of $512,000 in hotel operating revenues. Revenues from regular construction and development were $514,000 in first quarter this year in contrast to $4,684,000 for the same period last year. This decrease was primarily due to three projects which were under construction by the company for others during the first quarter of 1995 versus only the final portion of one project completed in early first quarter this year. Revenues from construction and development can vary widely from quarter to quarter depending upon the volume of outside contract work and the timing of those projects. No outside construction contracts are currently in progress. Revenues of $200,000 from "Construction and development - other" in first quarter 1996 represents a portion of profits not previously recognized on installment sales. The $1,438,000 reported for first quarter last year represented approximately 8.4% of the approximately $17.1 million in revenues, a portion of which was deferred from 1993 and 1994, resulting from the transaction closed on March 31, 1995, with Suites and Prime, based upon the application of the installment sales method of accounting (see Note B to the consolidated financial statements). Revenue from the sale of hotels of $6,174,000, net of profits not recognized on installment sales of $1,956,000, was $4,218,000 in first quarter 1995 versus none in first quarter this year. This represents the sale of a hotel on March 31, 1995, in conjunction with the transaction with Suites and Prime previously discussed. This net revenue is completely offset by the cost of hotels sold, resulting in no gross operating profit from this transaction. Approximately $165,000, or 8.4%, of this profit was included in "construction and development - other" under the installment sales method discussed above. Franchising revenues increased by $223,000, or 26.4%, in first quarter 1996 from first quarter 1995. Room revenues of franchised inns increased by 20.0% from first quarter 1995, due to a slight increase in same-inn revenues and to an increase in the number of franchised inns, resulting in an increase of $278,000 in fees based upon percentages of sales. However, initial franchise fee income declined by $55,000 from first quarter 1995 to first quarter 1996. Initial franchise fees may vary widely from quarter to quarter. Management contract revenues represent only a small segment of the business. Revenue from this source decreased by $189,000, or 79.4%, from the $238,000 reported for first quarter 1995, due primarily to the cancellation of management contracts on eleven hotels effective March 31, 1995 relative to the transaction with Suites and Prime previously discussed. The 1995 revenue category "Management - previously deferred" represents fees collected from Suites in 1993 and 1994 for the Company's relinquishment of its profit participation in four hotels owned by Suites. These profits were previously deferred due to the Company's option to acquire a 50% ownership in Suites. The option was sold back to Suites on March 31, 1995, allowing all of this previously deferred revenue to be taken into income in first quarter 1995. This does not represent a recurring source of revenue. Operating expenses from hotel operations for the first quarter of 1996 increased by $895,000, or 12.1%, from $7,413,000 in first quarter 1995 to $8,308,000 in first quarter 1996, due to operating expenses associated with the 16.2% increase in hotel operating revenues. Operating expenses as a percentage of operating revenues for this activity decreased from 61.2% in first quarter 1995 to 59.0% in first quarter 1996. The gross profit margin on same hotels increased from 39.5% in first quarter 1995 to 40. 1% in first quarter 1996. The nine hotels opened since the end of first quarter 1995 produced a gross profit margin of 45.8% in first quarter 1996 due primarily to significantly higher average daily room rates than for all hotels as a whole. Costs and expenses of construction and development in first quarter 1996 were $690,000 versus $4,374,000 in 1995's first quarter. Three projects were in various stages of construction in 1995 versus only one completed in early first quarter 1996. No outside construction projects are currently under way. Franchising operating expenses increased by $21 1,000, or 27.3%, from first quarter 1995. This activity generated an $81,000 gross operating profit in first quarter 1996 compared with $69,000 in first quarter 1995, reflecting an improvement of $12,000. General and administrative expenses increased by $361,000 over the comparable quarter last year, due primarily to increased legal expenses and increased payroll and related expenses (due primarily to increased staffing levels). Depreciation and amortization expense increased by $507,000, or 32.2%, over last year's first quarter. This was due primarily to the nine new hotels opened since first quarter 1995. Interest expense decreased by $1,780,000 while interest income also decreased by $1,569,000 from first quarter 1995, for a decrease of $211,000 in net interest expense. The primary cause of the decrease in interest income was the reduction by approximately $1.2 million in interest earned from Suites of America on first mortgage notes receivable, the balance of which was collected early in first quarter 1996. These funds were used to pay off all outstanding bank lines of credit and no additional bank borrowings were incurred until the temporarily invested excess funds were exhausted, thus significantly reducing interest expense in first quarter 1996 from first quarter 1995. Another factor which reduced interest expense this year from last year's first quarter was the full quarter's benefit of four hotel bond issues refinanced during the first half of 1995 to significantly lower interest rates. Other income increased by $14,000 from first quarter 1995 to first quarter 1996. Minority interest in earnings and losses of consolidated subsidiaries and partnerships was $35,000 in first quarter 1996 compared to a favorable $98,000 in first quarter 1995 due to more profitable consolidated entities which include minority ownership. The first quarter 1995 loss from discontinued operations, net of applicable income taxes and minority interest, was from the restaurant subsidiary of which the Company sold its 60% interest to the 40% owner in the first quarter 1996. The first quarter 1995 extraordinary loss, net of income tax benefit, of $518,000 represents the extraordinary non-cash write-off of unamortized deferred financing costs, and early redemption premiums paid, associated with the refinancing of certain indebtedness during the quarter. Liquidity and Capital Resources Net cash provided from operations was $31,570,000 in 1995 and $5,801,000 in 1994. The Company currently has a total of $41,500,000 in unsecured revolving credit facilities with four banks, of which $1,500,000 expires in May 1997, $35,000,000 expires in January 1997, and $5,000,000 expires in February 1997. Interest rates on these lines of credit are (1) $40,000,000 at prime rate, or two points over 30, 60, or 90 day LIBOR rates at the Company's option; and (2) $1,500,000 at prime rate. As of April 21, 1996, the Company had $15,735,000 outstanding under two of these four credit facilities. On March 31, 1995, the Company, Suites and Prime entered into an agreement (the "Cancellation Agreement") under which the Company sold its option to acquire 50% of the voting stock of Suites, discussed below, for approximately $27,327,000. In addition, the Company conveyed one AmeriSuites hotel to Suites for approximately $6,174,000. Approximately $4,997,000 of the aggregate purchase price of $33,501,000 was paid upon closing with the remaining $28,504,000, along with approximately $25,015,000 of existing indebtedness from Suites, consolidated into one note. Approximately $14,880,000 of existing indebtedness from Suites was canceled by the company in connection with the sale of the option. A $10,000,000 cash payment was received in second quarter 1995. Monthly payments of approximately $41 1,000 based upon an amortization schedule were also received until January 1996, when the balance of $44,066,000 plus accrued interest was received. The Company requires capital principally for the construction and/or acquisition of new lodging facilities and the purchase of equipment and leasehold improvements. Capital expenditures for such purposes were $56,174,000 in 1995 and $47,126,000 in 1994. To date in 1996, two Shoney's Inns and three all-suite hotels have opened and eight all-suite hotels are under development scheduled to open in 1996. Additionally, renovations of several existing properties are underway and/or scheduled for completion in 1996. The Company also plans to have an additional four all-suite hotels under construction by this year-end and another three under construction by the end of first quarter 1997. The Company expects that approximately $40,000,000 of additional capital funds will be necessary through the next twelve months to fulfill these plans. In addition to its planned development expenditures, the Company has principal payments totaling $2,052,000 due under existing debt instruments through the end of first fiscal quarter of 1997. The Company believes that a combination of net cash provided from operations, borrowings under existing credit facilities, cash received from Prime from the above-discussed transaction, and available furniture, fixtures and equipment financing packages will be sufficient to fund its scheduled development and debt repayments for the next twelve months. PART II - OTHER INFORMATION Item 1.Legal Proceedings There have been no material developments during the quarter. Item 2.Changes in the Rights of the Company's Security Holders Not applicable. Item 3.Defaults by the Company on its Senior Securities None. Item 4.Results of Votes of Security Holders Not applicable. Item 5.Other information Not applicable. Item 6.Exhibits and Reports on Form 8-K 6 (a) Exhibits - 10.1 -Employment Contract between the Company and Michael A. Corbett, dated September 11, 1995 11 - Statement Re: Computation of Per Share Earnings 27 - Financial Data Schedule 6 (b) Reports on Form 8-K There were no reports on Form 8-K for the quarter ended April 21, 1996. 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. ShoLodge, Inc. Date: May 23, 1996 S/ LEON MOORE Leon Moore President, Chairman of the Board and Director (Chief Executive Officer) Date: May 23, 1996 S/ BOB MARLOWE Bob Marlowe Secretary, Treasurer and Director (Chief Accounting Officer) Date: May 23, 1996 S/ MICHAEL A. CORBETT Michael A. Corbett (Chief Financial Officer) EX-10 2 EMPLOYMENT CONTRACT This Employment Contract (sometimes hereinafter referred to as this "Agreement") is entered into this 11th day of September, 1995, by and between SHOLODGE, INC., a Tennessee corporation (hereinafter referred to as "Employer"), and MICHAEL A. CORBETT (hereinafter referred to as "Employee"). WITNESSETH: WHEREAS, Employer wishes to assure itself of the full-time employment of Employee during the period specified herein; and WHEREAS, Employee is prepared to enter into this Employment Contract and to give Employer the assurances contained herein. NOW, THEREFORE, IN CONSIDERATION of the premises, the mutual agreements and covenants contained herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: 1. EMPLOYMENT. Employer hereby employs Employee and Employee hereby accepts said employment upon the terms and conditions hereinafter set forth. 2. DUTIES. Employee agrees that he will at all times faithfully, industriously and to the best of his ability, experience and talents perform all of the duties that may be required of or from him by Employer, to the satisfaction of Employer and in accordance with the policies of Employer as they are communicated to Employee from time to time. All actions taken hereunder shall be for the account of Employer, and any compensation received therefor shall be received by Employee on Employer's behalf, shall be held by Employee in a fiduciary capacity and shall be accounted for and paid to Employer. 3. TERM OF EMPLOYMENT. Subject to the provisions for termination as provided in Paragraph 13 hereof, the term of this Agreement shall commence upon the date hereof and shall continue until September 11, 1996. This Agreement shall be automatically renewed for succeeding terms of one (1) year each, unless either party shall, at least thirty (30) days, but not more than one hundred eighty (180) days, prior to the expiration of any term, give written notice of his or its intention not to renew this Agreement. 4. OTHER EMPLOYMENT. Employee shall devote all of his time, attention, knowledge and skills solely to the business and interest of Employer, unless otherwise approved in writing by Employer, and Employer shall be entitled to all of the benefits, profits or other issues arising from or incident to all work, services and advice of Employee, and Employee shall not, during the term hereof, unless otherwise approved in writing by Employer, be interested, directly or indirectly, in any manner as partner, officer, director, stockholder, adviser, employee, agent or in any other capacity in any other business or venture of any type. All of Employee's working time and efforts shall be spent in such manner as will secure the success of Employer. Notwithstanding the foregoing, Employee shall be allowed to pursue personal business ventures as long as (i) such ventures do not compete with any business of Employer, (ii) Employee's involvement in such ventures is only in the nature of a passive investor, and (iii) Employee's involvement in such ventures does not interfere with the performance of his duties for Employer. 5. EXPENSES. Employee shall be reimbursed for the reasonable expenses incurred in the day to day business of Employer as shall have been previously approved by Employer upon his presenting to Employer an itemized expense voucher. 6. COMPENSATION. During the initial term of this Agreement, compensation from Employer to Employee for the faithful performance of Employee's duties hereunder shall be Nine Thousand One Hundred Sixty-Six and 66/100 Dollars ($9,166.66) per month, payable in the same manner as the salary of other executive employees of Employer is paid, as determined by Employer from time to time, subject to any and all withholdings and deductions required by law. During any renewal term of this Agreement, compensation from Employer to Employee for the faithful performance of Employee's duties hereunder shall be determined from time to time by the Compensation Committee of the Board of Directors of Employer. If Employee dies or becomes disabled during the term hereof, the Compensation Committee of the Board of Directors of Employer may affirmatively act to continue the compensation payable to Employee, otherwise, such compensation shall only be paid through the date of death or disability, as applicable. Disability, as used herein, shall mean the inability of Employee to perform the duties of his position or the inability of Employee to devote at least sixty (60%) percent of his time to the duties of his position, due to accident or illness or disease, mental or physical, for ninety (90) days in any one hundred twenty (120) day period. 7. FRINGE BENEFITS; VACATION. Employee shall have the right to receive or to participate in such "fringe" benefits, including but not limited to life insurance programs, medical, accident, dental and health arrangements, and pension and profit sharing plans, as may from time to time be made generally available to other officers of Employer. Further, subject to Employee passing physical examinations and satisfying other conditions to obtaining coverage established by the insurance company or provider, Employer shall be provided the same key employee supplemental income plan provided to Richard L. Johnson and Bob Marlowe on the date hereof. While employed by Employer, Employee shall be provided with a company-owned automobile, but Employee shall reimburse Employer for all fuel and maintenance costs related to Employee's personal (as opposed to business) use of such automobile. Employee may take such vacations as may be agreed upon by Employer and Employee from time to time. 8. NON-COMPETITION AGREEMENT. In the event that Employee resigns, retires or otherwise leaves the employment of Employer, including, but not limited to, any election by Employee or by Employer not to renew this Agreement pursuant to Paragraph 3 hereof and any election by Employee or by Employer to terminate this Agreement pursuant to Paragraph 13 hereof, Employee agrees that for a period of three (3) years thereafter, he shall not, without obtaining the prior express written consent of Employer, which consent may be arbitrarily and unreasonably withheld, directly or indirectly, own, manage, operate, control, be employed by, participate in, or be connected in any manner with the ownership, management, operation or control of any business involving the lodging industry within ten (10) miles of any hotel or motor hotel owned or operated by Employer or any subsidiary or affiliate of Employer. Further, if Employee ceases to be in the continuous employ of Employer for any reason, Employee shall promptly return to Employer all financial and cost information, form agreements, formulas and other items related to the business of Employer in the possession, actual or constructive, of Employee. Employee hereby acknowledges and agrees that the provisions set forth in this Paragraph 8 constitute a reasonable restriction on his ability to compete with Employer. 9. INFORMATION CONFIDENTIAL. Employee shall not divulge, disclose or communicate, either verbally or in writing, directly or indirectly, to any other person or persons, firm or corporation, and shall not make use of, either directly or indirectly, any information concerning, affecting or relating to the business of Employer or any subsidiary or affiliate of Employer, including without limitation, the terms and provisions of any contract to which Employer or any subsidiary or affiliate of Employer is a party, the financial and cost information, future plans, customers, suppliers, contacts, form agreements, personnel information, special methods, general methods, formulas or other business secrets of Employer or any subsidiary or affiliate of Employer, the same being deemed, as between the parties hereto, to be important, material and confidential and to affect the effective and successful conduct of the business of Employer and its goodwill. Further, Employee shall not make known or divulge any information acquired from Employer or any subsidiary or affiliate of Employer, either directly or indirectly, to any person or persons or firms or corporations in competition with or contemplated competition with Employer or any subsidiary or affiliate of Employer. 10. NO ENTICEMENT OF EMPLOYEES. Employee shall not, directly or indirectly, entice or induce or attempt to entice or induce, any employee of Employer to leave such employ, nor shall Employee employ any such person in any business during the term of this Agreement or within three (3) years thereafter. 11. OWNERSHIP OF MATERIAL. (a) COPYRIGHTABLE MATERIAL. Employer shall be deemed to be the absolute and unqualified owner of all copyrightable material created by Employee during the term of this Agreement if such material is created at the request or suggestion of Employer or during regular hours of work, it being understood that Employee acts hereunder as an employee and that Employee shall have no right, title or interest in or to any such material and that Employer shall have the right to obtain copyright protection for any such copyrightable material. Furthermore, should Employee be found to have any such right, title or interest, Employee hereby assigns all of his right, title and interest in and to such copyrightable material to Employer. Employee further agrees to execute and deliver to Employer any instrument or document which Employer, in its sole and absolute discretion, shall deem necessary or advisable to evidence, establish, maintain or defend Employer's rights in or to such copyrightable material. (b) INVENTIONS, PATENTS, ETC. If Employee, during the term of this Agreement, shall invent anything or any improvement in anything if such invention is made at the request or upon the suggestion or plans of Employer or during regular hours of work, such invention or improvement shall be the exclusive property of Employer. Employee agrees, at the request of Employer, to make application in due form for United States letters patent and foreign letters patent on any said inventions or improvements, and to assign to Employer all Employee's right, title and interest in said inventions or improvements, and to execute at any and all times, any and all instruments and do any and all acts necessary or which Employer may deem desirable in connection with such application for letters patent or in order to establish and perfect in Employer the entire right, title and interest to said inventions or improvements, and also to execute any instruments necessary or which Employer may deem desirable in connection with any continuations, renewals or reissues thereof or in the conduct of any proceedings or litigation in regard thereto. All expenses incurred by Employee by reason of the performance of any of the covenants set forth herein shall be borne by Employer. (c) TRADEMARK RIGHTS. Any and all trademark and service mark rights which may arise due to the marketing of any products or services which result from the creative efforts of Employee shall be deemed to be owned by Employer absolutely and without qualification. Employee hereby agrees to execute and deliver any instruments or documents which Employer shall deem necessary or advisable to evidence, establish, maintain or defend Employer's ownership of any said trademark and service mark rights. (d) BUSINESS SECRETS, ETC. Employer shall be the absolute and unqualified owner of all existing and future formulas and business secrets if such formulas or business secrets are developed by Employee at the request or suggestion of Employer or during normal business hours, and all other assets or interests of any kind related to or developed in connection with Employer's business. Employee hereby agrees to execute and deliver any instruments or documents which Employer shall deem necessary or advisable to evidence, establish, maintain or defend Employer's ownership of any of said items. (e) ATTORNEY IN FACT. Employee irrevocably appoints Employer its true and lawful attorney-in-fact to execute, verify, acknowledge and deliver any and all instruments or documents necessary to evidence, establish, maintain or defend Employer's rights in or to such copyrightable material, inventions, improvements, trademark and service mark rights or assets referred to in subparagraphs (a), (b), (c) and (d) of this Paragraph 11. 12. INDEMNIFICATION. Employee shall indemnify and hold harmless Employer from and against any claim, liability, damages or expenses, including reasonable attorneys' fees, incurred in connection with negligent acts and/or omissions by Employee in performing activities pursuant to this Agreement. 13. TERMINATION. (a) DEATH; DISABILITY. This Agreement shall automatically be terminated upon the death or disability (as defined in Paragraph 6 hereof) of Employee, unless the Board of Directors shall affirmatively act to continue this Agreement. In either such event, Employee, his heirs, personal representative and estate, as applicable, shall have the rights and shall be entitled to the payments only as expressly set forth in this Agreement. (b) FOR CAUSE. Either party may terminate this Agreement at any time for cause upon delivery of written notice. (c) CAUSE FOR EMPLOYEE. Employee shall have cause for termination: (i) if Employer shall default in the performance of any material covenant, agreement, term or provision of this Agreement and such default shall continue for a period of fifteen (15) days after written notice to Employer from Employee stating the specific default; or (ii) if Employer shall fail to make any payments to Employee required hereunder and Employer does not make such payment within five (5) days after receiving written notice of such failure from Employee. (d) CAUSE FOR EMPLOYER. Employer shall have cause for termination: (i) if Employee shall default in the performance of any covenant, agreement, term or provision of this Agreement (other than an insignificant default) and such default shall continue for a period of fifteen (15) days after written notice to Employee from Employer stating the specific default; (ii) if Employee shall apply for or consent to the appointment of a receiver, trustee or liquidator of Employee or of all or a substantial part of his assets, file a voluntary petition in bankruptcy or admit in writing his inability to pay his debts as they come due, make a general assignment for the benefit of creditors, file a petition or an answer seeking reorganization or arrangement with creditors or take advantage of any insolvency law, or if an order, judgment or decree shall be entered by any court of competent jurisdiction, on the application of a creditor, adjudicating Employee a bankrupt or insolvent or approving a petition seeking reorganization of Employee or appointing a receiver, trustee or liquidator of Employee or all or a substantial part of the assets of Employee; or (iii) if Employee shall commit any act of dishonesty, theft, embezzlement, fraud, disloyalty, corporate infidelity or insubordination or be indicted or convicted for a crime involving moral turpitude or engage in any illegal or disruptive conduct. (e) WITHOUT CAUSE. Either party hereto may give the other party written notice of his/its intention to terminate, and this Agreement shall be terminated as of the later of (i) the effective date of termination set forth in such written notice or (ii) the date fortyfive (45) days from receipt of such notice. Should Employer terminate this Agreement without cause, (i) Employer shall continue to pay Employee the compensation otherwise payable hereunder and to provide the benefits otherwise to be provided hereunder for a period of one hundred eighty (180) days from the date of termination, and (ii) the provisions of Paragraph 8 above shall not apply from and after the date of termination. (f) EFFECT OF TERMINATION. Except as otherwise provided as to Paragraph 8 in subparagraph (e) above, notwithstanding the termination of this Agreement, Paragraphs 8, 9, 10, 11 and 12 shall remain in effect and shall survive the termination of this Agreement. Further, any rights and obligations which by their terms expressly extend beyond termination shall survive. 14. NOTICES. Any notice or other communication by either party to the other shall be in writing and shall be given, and be deemed to have been given, if either delivered personally or mailed, postage prepaid, registered or certified mail, or sent, all expenses prepaid, via Federal Express or other similar overnight delivery service, addressed as follows: To Employer: ShoLodge, Inc. 217 West Main Street Gallatin, Tennessee 37066 Attn: President To Employee: Michael A. Corbett 210 Jackson Blvd. Nashville, TN 37205 or to such other address, and to the attention of such other person or officer as either party may designate in writing. 15. BREACH BY EMPLOYEE. In the event of the actual or threatened breach of any of the provisions of this Agreement by Employee, Employer shall be entitled to an injunction restraining Employee therefrom. Nothing shall be construed as prohibiting Employer from pursuing any other available remedies for such breach or threatened breach, including the recovery of damages from Employee. 16. ASSIGNMENT AND DELEGATION. This Agreement shall inure to the benefit and shall be binding upon Employer, its successors and assigns. This is a contract for the personal services of Employee, and, therefore, the duties imposed upon Employee in this Agreement are not subject to delegation, in whole or in part, without the prior express written consent of Employer, which consent may be arbitrarily and unreasonably withheld. 17. SEVERABILITY OF PROVISIONS. If any provision of this Agreement shall be held to be invalid or unenforceable, such invalidity or unenforceability shall not affect any other provision hereof, and this Agreement shall be construed and enforced as if such provision(s) had not been included. If any court of record shall finally adjudicate that the restraints provided for herein are too broad as to the area, activity or time covered, said area, activity or time covered may be reduced to whatever extent the court deems reasonable, and the covenants may be enforced as to such reduced area, activity, and time. 18. GENDER AND NUMBER. Except where otherwise clearly indicated by context, the masculine and the neuter shall include the feminine and the neuter, the singular shall include the plural, and vice versa. 19. MODIFICATION AND CHANGE. Neither this Agreement nor any of the provisions hereof may be changed, modified, waived or terminated orally, but only by an instrument in writing executed by the party against whom enforcement of the change, waiver, discharge or termination is sought. 20.EXECUTION OF COUNTERPARTS. This Agreement may be executed in several counterparts, each of which shall be an original, and all of which shall constitute but one and the same instrument. 21. ENTIRE AGREEMENT. It is understood and agreed that all understandings and agreements heretofore had between the parties hereto, written or verbal, are merged in this Agreement, which alone fully and completely expresses their agreement. 22.CONFIDENTIALITY. Employee hereby agrees that the terms and provisions of this Agreement shall remain confidential and that he shall not divulge, disclose or communicate, either verbally or in writing, directly or indirectly, to any other person or persons, firm or corporation, any part hereof, and that he shall not distribute a copy of this Agreement to any other person or persons, firm or corporation, unless required to do so by law. 23.HEADINGS. The headings contained herein are for convenience of reference only and are not intended to define, limit or describe the scope or intent of any provision of this Agreement, and the same shall not be employed in the construction of this Agreement. 24.GOVERNING LAW. This Agreement shall be deemed to have been made and shall be construed and interpreted in accordance with the laws of the State of Tennessee. EMPLOYER: SHOLODGE, INC. By:/s/LEON MOORE Leon Moore, President EMPLOYEE: /s/ MICHAEL A. CORBETT Michael A. Corbett EX-11 3 EXHIBIT 11 SHOLODGE, INC. AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE PRIMARY AND ASSUMING FULL DILUTION
16 WEEKS ENDED APRIL 21, APRIL 16, 1996 1995 PRIMARY: EARNINGS APPLICABLE TO COMMON STOCK (PRIMARY): FROM CONTINUING OPERATIONS, BEFORE EXTRAORDINARY ITEMS $1,994,441 $4,803,339 INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES -31,255 EXTRAORDINARY LOSS, NET OF INCOME TAXES -517,807 __________ __________ NET EARNINGS $1,994,441 $4,254,277 ========== ========== SHARES: WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 8,396,361 8,641,670 ========== ========== PRIMARY EARNINGS PER SHARE: FROM CONTINUING OPERATIONS, BEFORE EXTRAORDINARY ITEMS $0.24 $0.55 INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES ($0.00) EXTRAORDINARY LOSS, NET OF INCOME TAXES ($0.06) __________ __________ NET EARNINGS $0.24 $0.49 ========== ========== FULLY DILUTED: EARNINGS APPLICABLE TO COMMON STOCK (PRIMARY): FROM CONTINUING OPERATIONS, BEFORE EXTRAORDINARY ITEMS $1,994,441 $4,803,339 INTEREST (LESS TAX) ON CONVERTIBLE SUBORDINATED DEBENTURES 781,962 781,962 __________ __________ ADJUSTED EARNINGS APPLICABLE TO COMMON STOCK: FROM CONTINUING OPERATIONS, BEFORE EXTRAORDINARY ITEMS $2,776,403 $5,585,301 INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES -31,255 EXTRAORDINARY LOSS, NET OF INCOME TAXES -517,807 __________ __________ NET EARNINGS $2,776,403 $5,036,239 ========== ========== SHARES: WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 8,396,361 8,641,670 SHARES ISSUABLE UPON CONVERSION OF CONVERTIBLE SUBORDINATED DEBENTURES 2,316,602 2,316,602 __________ __________ 10,712,963 10,958,272 ========== ========== FULLY DILUTED EARNINGS PER SHARE: FROM CONTINUING OPERATIONS, BEFORE EXTRAORDINARY ITEMS $0.26 $0.51 INCOME (LOSS) FROM DISCONTINUED OPERATIONS, NET OF INCOME TAXES ($0.00) EXTRAORDINARY LOSS, NET OF INCOME TAXES ($0.05) __________ __________ NET EARNINGS $0.26 $0.46 ========== ==========
EX-27 4
5 This schedule contains financial information extracted from the quarterly financial statements for the quarter ended April 21, 1996 and is qualified in its entirety by reference to such financial statements. OTHER DEC-31-1995 APR-21-1996 5,026,930 0 3,685,572 0 0 9,726,138 209,694,570 28,631,380 209,562,381 30,807,402 90,673,279 0 0 1,000 84,532,942 209,562,381 15,908,955 15,908,955 0 13,020,884 0 0 481,046 3,179,441 1,185,000 1,994,441 0 0 0 1,994,441 0.24 0.24
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