-----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, MuX/5euIghnxNKVPANVGcwscxRE1K0JQUjzlGa0Ci2cO1pk6BUqU/+5Z5LuuFnI+ WKI9wujgyt8tdp135x+3BA== 0000950144-97-006463.txt : 19970603 0000950144-97-006463.hdr.sgml : 19970603 ACCESSION NUMBER: 0000950144-97-006463 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970420 FILED AS OF DATE: 19970602 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SHOLODGE INC CENTRAL INDEX KEY: 0000881924 STANDARD INDUSTRIAL CLASSIFICATION: HOTELS & MOTELS [7011] 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: 97617793 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 SHOLODGE, INC. FORM 10-Q 4-20-97 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 20, 1997 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 30, 1997, there were 8,235.152 shares of ShoLodge, Inc. common stock outstanding. 2 SHOLODGE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED)
APRIL 20, DECEMBER 29, 1997 1996 (1) ASSETS CURRENT ASSETS: Cash and cash equivalents $ 4,736,479 $ 4,259,768 Accounts receivable 3,778,630 2,676,083 Construction contracts 252,302 259,785 Due from related parties Less profits not recognized on installment sales Prepaid expenses 1,103,504 471,823 Other current assets 530,412 559,982 ------------------------- Total current assets 10,401,327 8,227,441 DIRECT FINANCING LEASES, less current portion 468,370 611,492 PROPERTY AND EQUIPMENT 278,926,118 262,264,264 Less accumulated depreciation and amortization -36,808,613 -33,888,495 ------------------------- 242,117,505 228,375,769 DEFERRED CHARGES 9,975,768 9,899,544 SECURITIES HELD TO MATURITY - RESTRICTED 8,468,479 8,255,810 SECURITIES AVAILABLE FOR SALE 212,062 212,062 EXCESS OF COST OVER FAIR VALUE OF NET ASSETS ACQUIRED 3,090,819 3,136,965 OTHER 5,111,019 4,990,095 ------------------------- TOTAL ASSETS $279,845,349 $263,709,178 =========================
(1) Derived from fiscal year ended December 29, 1996 audited financial statements. See notes to consolidated financial statements. 3 SHOLODGE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Continued)
APRIL 20, DECEMBER 29, 1997 1996(1) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: Accounts payable and accrued expenses $ 9,337,774 $ 12,045,715 Taxes other than on income 1,259,017 984,855 Income taxes payable 0 1,116,972 Current portion of long-term debt and capitalized lease obligations 3,725,013 15,824,914 ------------------------- Total current liabilities 14,321,804 29,972,456 LONG-TERM DEBT ASSOCIATED WITH LODGING FACILITIES 39,370,946 40,104,802 OTHER LONG-TERM DEBT 127,216,597 97,227,576 CAPITALIZED LEASE OBLIGATIONS 1,295,379 1,462,044 DEFERRED INCOME TAXES 4,702,144 4,702,144 MINORITY INTERESTS IN EQUITY OF CONSOLIDATED SUBSIDIARIES AND PARTNERSHIPS 561,631 504,028 ------------------------- TOTAL LIABILITIES 187,468,501 173,973,050 ------------------------- SHAREHOLDERS' EQUITY: Series A redeemable nonparticipating stock (no par value; 1,000 shares authorized, none issued and outstanding) - - Common stock (no par value; 20,000,000 shares authorized, 8,233,985 shares issued and outstanding as of April 20, 1997 and 8,233,318 shares issued and outstanding as of December 29, 1996) 1,000 1,000 Additional paid-in capital 42,217,646 42,212,042 Retained earnings 50,098,463 47,463,347 Unrealized gain on securities available for sale (net of tax) 59,739 59,739 ------------------------- TOTAL SHAREHOLDERS' EQUITY 92,376,848 89,736,128 ------------------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $279,845,349 $263,709,178 =========================
(1) Derived from fiscal year ended December 29, 1996 audited financial statements. See notes to consolidated financial statements. 4 SHOLODGE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED) FOR THE SIXTEEN WEEKS ENDED APRIL 20, 1997 AND APRIL 21, 1996
16 WEEKS ENDED APRIL 20, APRIL 21, 1997 1996 ---------------------------- REVENUES: Hotel $20,853,285 $14,080,821 Construction and development 0 514,234 Construction and development - other 0 200,000 Franchising 1,181,884 1,064,992 Management 37,355 48,908 ---------------------------- Total operating revenues 22,072,524 15,908,955 COSTS AND EXPENSES: Operating expenses: Hotel 11,348,184 8,307,842 Construction and development 0 690,499 Franchising 638,562 984,093 ---------------------------- Total operating expenses 11,986,746 9,982,434 ---------------------------- Gross operating profit 10,085,778 5,926,521 General and administrative 603,206 954,238 ---------------------------- Earnings before interest, taxes, depreciation and amortization 9,482,572 4,972,283 Depreciation and amortization 3,249,473 2,084,212 ---------------------------- Net operating profit (before interest and taxes) 6,233,099 2,888,071 OTHER INCOME AND EXPENSES: Interest expense 2,704,938 481,046 Interest income 353,856 631,808 ---------------------------- Net interest expense 2,351,082 -150,762 Other income 375,702 175,981 ---------------------------- EARNINGS BEFORE INCOME TAXES AND MINORITY INTERESTS 4,257,719 3,214,814 INCOME TAXES 1,565,000 1,185,000 MINORITY INTEREST IN EARNINGS OF CONSOLIDATED SUBSIDIARIES & PARTNERSHIPS 57,603 35,373 ---------------------------- NET EARNINGS $2,635,116 $1,994,441 ============================ EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE Primary $0.32 $0.24 ============================ Fully Diluted $0.32 $0.24 ============================ WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING Primary 8,354,236 8,396,361 Fully Diluted 10,670,838 10,712,963
See notes to consolidated financial statements. 5 SHOLODGE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE SIXTEEN WEEKS ENDED APRIL 20, 1997 AND APRIL 21, 1997 (UNAUDITED)
16 WEEKS ENDED APRIL 20, APRIL 21, 1997 1996 ------------------------- CASH FLOWS FROM OPERATING ACTIVITIES: NET EARNINGS $ 2,635,116 $ 1,994,441 ADJUSTMENTS TO RECONCILE NET EARNINGS TO NET CASH PROVIDED BY OPERATING ACTIVITIES: DEPRECIATION AND AMORTIZATION 3,249,473 2,084,212 INCREASE IN DEFERRED INCOME TAXES 0 0 INCREASE IN MINORITY INTEREST IN EQUITY OF CONSOLIDATED SUBSIDIARIES AND PARTNERSHIPS 57,603 35,373 ACCRETION OF DISCOUNT ON SECURITIES HELD TO MATURITY -212,669 -196,240 CHANGES IN ASSETS AND LIABILITIES: (INCREASE) DECREASE IN ACCOUNTS RECEIVABLE -1,095,064 586,380 (INCREASE) IN PREPAID EXPENSES -631,681 -282,735 (INCREASE) DECREASE IN OTHER ASSETS -287,131 1,437,285 (DECREASE) INCREASE IN ACCOUNTS PAYABLE AND ACCRUED EXPENSES -2,707,941 3,632,388 (DECREASE) INCREASE IN INCOME AND OTHER TAXES -842,810 173,701 - ------------------------------------------------------------------------------------------------------ NET CASH PROVIDED BY OPERATING ACTIVITIES 164,896 9,464,805 CASH FLOWS FROM INVESTING ACTIVITIES: REPAYMENT FROM (ADVANCES TO) RELATED PARTIES--NET 0 42,418,759 CAPITAL EXPENDITURES -16,661,854 -32,993,424 - ------------------------------------------------------------------------------------------------------ NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES -16,661,854 9,425,335 CASH FLOWS FROM FINANCING ACTIVITIES: (INCREASE) IN DEFERRED CHARGES -163,656 -332,346 PROCEEDS FROM DIRECT FINANCING LEASES 143,122 18,069 PROCEEDS FROM LONG-TERM DEBT 17,900,000 20,182,371 PAYMENTS ON LONG-TERM DEBT -744,736 -36,646,744 PAYMENTS ON CAPITALIZED LEASE OBLIGATIONS -166,665 -226,884 DISTRIBUTIONS TO MINORITY INTERESTS 0 -174,978 SALE OF SECURITIES AVAILABLE FOR SALE 0 847,120 EXERCISE OF STOCK OPTIONS 5,604 25,192 - ------------------------------------------------------------------------------------------------------ NET CASH PROVIDED BY FINANCING ACTIVITIES 16,973,669 -16,308,200 - ------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $ 476,711 $ 2,581,940 ====================================================================================================== CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD $ 4,259,768 $ 2,444,990 ====================================================================================================== CASH AND CASH EQUIVALENTS - END OF PERIOD $ 4,736,479 $ 5,026,930 ======================================================================================================
See notes to consolidated financial statements. 6 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 or Form 10-K for the fiscal year ended December 29, 1996 and the Company's Quarterly Report on Form 10-Q for the sixteen weeks ended April 20, 1997. There have been no changes in accounting policies nor has the composition of accounts substantially changed since the year ended December 29, 1996. 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 20, 1997 and April 21, 1996 are not necessarily indicative of the operating results for the entire year. B. The net earnings per share is computed by dividing net earnings by the weighted average number of common and common equivalent shares outstanding. The Company will adopt Statement of Financial Accounting Standards No. 128 "Earnings Per Share" for the year ended December 28, 1997. This accounting pronouncement requires the disclosure of basic and diluted earnings per share. The Company believes that, upon adoption, diluted earnings per share will approximate earnings per share as previously reported. Because the concept of basic earnings per share does not include the impact of common stock equivalents, such as stock warrants and stock options, basic earnings per share will be generally higher than diluted earnings per share. C. 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. 7 ShoLodge, Inc. and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations Results of Operations For the Quarters Ended April 20, 1997 and April 21, 1996 Total operating revenues for the quarter ended April 20, 1997, were $22.1 million, or 38.7% more than the total operating revenues for the first quarter of 1996. Revenues from hotel operations increased by $6.8 million, or 48.1%, over the $14.1 million reported for the same period last year. For the 33 same hotels opened for all of both quarterly periods, an increase of 3.7% in average daily room rates, from $51.27 in first quarter 1996 to $53.19 in first quarter 1997, partially offset by a decline in average occupancy rates on these hotels from 58.1% last year to 56.8% this year, resulted in a net increase in same hotel revenues of 2.9%, from $13.8 million in first quarter 1996 to $14.2 million in first quarter 1997. The 13 hotels opened since the end of 1995 contributed $6.6 million to hotel operating revenues in first quarter this year, compared to only $232,000 in first quarter 1996. There were no revenues from regular construction and development in first quarter this year, compared with $514,000 for the same period last year. This was due to no outside construction projects by the company during the first quarter of 1997 versus the final portion of one project completed in early first quarter last 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. No revenues from this source is expected to recur subsequent to 1996. Franchising revenues increased by $117,000, or 11.0%, in first quarter 1997 from first quarter 1996. Room revenues of franchised inns increased by 8.8% from first quarter 1996, due to an increase in the number of franchised inns, resulting in an increase of $141,000 in fees based upon percentages of sales. Management contract revenues represent only a small segment of the business. Revenue from this source decreased by $12,000, or 23.6%, from the $49,000 reported for first quarter 1996. Operating expenses from hotel operations for the first quarter of 1997 increased by $3.0 million, or 36.6%, from $8.3 million in first quarter 1996 to $11.3 million in first quarter 1997, due to operating expenses associated with the 48.1% increase in hotel operating revenues. Operating expenses as a percentage of operating revenues for this activity decreased from 59.0% in first quarter 1996 to 54.4% in first quarter 1997. The gross profit margin on same hotels increased from 41.1% in first quarter 1996 to 44.5% in first quarter 1997. The 13 hotels opened since the end of 1995 produced a gross profit 8 margin of 47.8% in first quarter 1997, 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. One project was completed in early first quarter 1996. No outside construction projects were in progress during first quarter 1997 and none are currently under way. Franchising operating expenses decreased by $346,000, or 35.1%, from first quarter 1996, due primarily to the elimination of royalty fees paid prior to October 25, 1996 to an affiliate of Shoney's, Inc. (See 1996 Form 10-K description of "Shoney's Transaction"). General and administrative expenses decreased by $351,000 from the comparable quarter last year, due primarily to reduced professional fees and to increased capitalization of general and administrative expenses. Depreciation and amortization expense increased by $1.2 million, or 55.9%, over last year's first quarter. This was due primarily to the 13 new hotels opened, beginning in first quarter 1996. Interest expense increased by $2.2 million while interest income decreased by $278,000 from first quarter 1996, for an increase of $2.5 million in net interest expense. The primary cause of the decrease in interest income was the elimination of interest earned from Suites of America on first mortgage notes receivable, the balance of which was collected early in first quarter 1996; first quarter 1996 included $238,000 interest earned on these notes, versus none in first quarter 1997. The increase in interest expense was due primarily to the additional borrowings for the 12 hotels opened in 1996 and the one hotel opened in January, 1997. Other income increased by $200,000 from first quarter 1996 to first quarter 1997. Revenue from this source varies widely from quarter to quarter due to the nature of other (miscellaneous) income. Minority interest in earnings and losses of consolidated subsidiaries and partnerships was $58,000 in first quarter 1997 compared to $35,000 in first quarter 1996 due to more profitable consolidated entities which include minority ownership. Liquidity and Capital Resources Net cash provided from operations was $15.8 million in fiscal 1996, $31.6 million in fiscal 1995, and $5.8 million in fiscal 1994. Fiscal 1995 was an unusual year due to the AmeriSuites Transaction discussed in the Company's fiscal 1996 Form 10-K. The Company currently has a $75 million unsecured three-year revolving credit facility with a group of five banks, which became effective April 30, 1997. The interest rate on this credit facility is at the lenders' prime rate plus 0.25%, or two hundred basis points over the 30, 60, 90, or 180 day LIBOR rate, at the Company's option. As of April 30, 1997 (the initial funding date), the Company had $41.0 million outstanding under this credit facility. The Company also has a $1.5 unsecured line of credit with another bank, bearing interest at the lender's prime rate, maturing May 31, 1998. As of April 20, 1997, no 9 borrowings were outstanding on this facility. In November of 1996 the Company issued $33.2 million in senior subordinated notes in the first series of notes issued under a $125 million shelf registration, leaving $91.8 million available to issue in the future under this registration. The Company requires capital principally for the construction and acquisition of new lodging facilities and the purchase of equipment and leasehold improvements. Capital expenditures for such purposes were $86.6 million in 1996 and $56.2 million in 1995. The Company opened two Shoney's Inns and ten Sumner Suites hotels in 1996 and one Sumner Suites hotel thus far in 1997. Additionally, renovations of several existing properties were completed in 1996 and several others are scheduled for completion in fiscal 1997. The Company plans to develop and open an additional eight to ten Sumner Suites hotels by the end of fiscal 1997 and an additional eight to ten hotels by the end of 1998. A new corporate headquarters building is also under construction and is scheduled for completion by mid-1997. The Company expects that approximately $85.0 million in additional capital funds will be necessary through first quarter 1998 to fulfill these plans. The Company has principal payments totaling approximately $3.7 million due under existing debt instruments through first quarter 1998. The Company believes that a combination of net proceeds from future offerings under the $125 million registration, net cash provided from operations, borrowings under existing or new credit facilities, proceeds from the sale of excess land and available furniture, fixtures and equipment financing packages will be sufficient to fund its scheduled development and debt repayments for the next twelve months. 10
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 - 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 20, 1997.
11 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 30, 1997 /S/ Leon Moore --------------------------------------- Leon Moore President, Chairman of the Board and Director (Chief Executive Officer) Date: May 30, 1997 /S/ Bob Marlowe --------------------------------------- Bob Marlowe Secretary, Treasurer and Director (Chief Accounting Officer) Date: May 30, 1997 /S/ Michael A. Corbett --------------------------------------- Michael A. Corbett Chief Financial Officer EX-11 2 COMPUTATION OF EARNINGS 1 EXHIBIT 11 SHOLODGE, INC AND SUBSIDIARIES COMPUTATION OF EARNINGS PER COMMON SHARE PRIMARY AND ASSUMING FULL DILUTION
16 WEEKS ENDED ---------------------------- APRIL 20, APRIL 21, 1997 1996 ---------------------------- PRIMARY: EARNINGS APPLICABLE TO COMMON STOCK (PRIMARY): FROM CONTINUING OPERATIONS $ 2,635,116 $ 1,994,441 ---------------------------- NET EARNINGS $ 2,635,116 $ 1,994,441 ============================ SHARES: WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 8,354,236 8,396,361 ============================ PRIMARY EARNINGS PER SHARE: FROM CONTINUING OPERATIONS $ 0.32 $ 0.24 ---------------------------- NET EARNINGS $ 0.32 $ 0.24 ============================ FULLY DILUTED: EARNINGS APPLICABLE TO COMMON STOCK (PRIMARY): FROM CONTINUING OPERATIONS $ 2,635,116 $ 1,994,441 NET EARNINGS $ 2,635,116 $ 1,994,441 INTEREST (LESS TAX) ON CONVERTIBLE SUBORDINATED DEBENTURES $ 781,962 $ 781,962 ADJUSTED EARNINGS APPLICABLE TO COMMON STOCK: FROM CONTINUING OPERATIONS $ 3,417,078 $ 2,776,403 ---------------------------- NET EARNINGS $ 3,417,078 $ 2,776,403 ============================ SHARES: WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 8,354,236 8,396,361 SHARES ISSUABLE UPON CONVERSION OFCONVERTIBLE SUBORDINATED DEBENTURES 2,316,602 2,316,602 ---------------------------- 10,670,838 10,712,963 ============================ FULLY DILUTED EARNINGS PER SHARE: FROM CONTINUING OPERATIONS $ 0.32 $ 0.26 ============================ NET EARNINGS $ 0.32 $ 0.26 ============================
EX-27 3 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE QUARTERLY FINANCIAL STATEMENTS FOR THE QUARTER ENDED APRIL 20, 1997 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 4-MOS DEC-29-1996 APR-20-1997 4,736,479 0 4,108,432 77,500 0 10,401,327 278,926,118 36,808,613 279,845,349 14,321,804 167,882,922 0 0 1,000 92,375,848 279,845,349 20,853,285 22,072,524 0 15,839,425 0 0 2,704,938 4,200,116 1,565,000 2,635,116 0 0 0 2,635,116 0.32 0.32
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