-----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, Rxzzhgmd8vNxOA4h4OnKIOLM8DI5IQtTTSHUW+ZkgO52xR19ln7DtfsF9eyoMWUa HDcCXlkCY4k/+5w8Ktt7mQ== 0000950144-98-003566.txt : 19980331 0000950144-98-003566.hdr.sgml : 19980331 ACCESSION NUMBER: 0000950144-98-003566 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970420 FILED AS OF DATE: 19980330 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: 1229 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: SEC FILE NUMBER: 000-19840 FILM NUMBER: 98577765 BUSINESS ADDRESS: STREET 1: 130 MAPLE DR N CITY: HENDERSONVILLE STATE: TN ZIP: 37075 BUSINESS PHONE: 6152648000 MAIL ADDRESS: STREET 1: 130 MAPLE DRIVE NORTH CITY: HENDERSONVILLE STATE: TN ZIP: 37075 10-Q/A 1 SHOLODGE INC FORM 10-Q/A DATED 04-20-97 1 FORM 10-Q/A 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) (AS RESTATED) (SEE NOTE C) ASSETS CURRENT ASSETS: CASH AND CASH EQUIVALENTS $ 4,736,479 $ 4,259,768 ACCOUNTS RECEIVABLE - NET 3,560,586 2,676,083 CONSTRUCTION CONTRACTS 197,343 259,785 PREPAID EXPENSES 1,103,504 471,823 OTHER CURRENT ASSETS 517,848 559,982 ------------ ------------ TOTAL CURRENT ASSETS 10,115,760 8,227,441 DIRECT FINANCING LEASES, LESS CURRENT PORTION 468,370 611,492 PROPERTY AND EQUIPMENT 278,466,358 262,264,264 LESS ACCUMULATED DEPRECIATION AND AMORTIZATION -36,838,064 -33,888,495 ------------ ------------ 241,628,294 228,375,769 DEFERRED CHARGES 9,970,611 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 3,257,844 4,990,095 ------------ ------------ TOTAL ASSETS $277,212,239 $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) (AS RESTATED) (SEE NOTE C) LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES: ACCOUNTS PAYABLE AND ACCRUED EXPENSES $ 9,438,524 $ 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 14,422,554 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 3,656,144 4,702,144 MINORITY INTERESTS IN EQUITY OF CONSOLIDATED SUBSIDIARIES AND PARTNERSHIPS 633,858 504,028 ------------ ------------ TOTAL LIABILITIES 186,595,478 173,973,050 ------------ ------------ 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 48,338,376 47,463,347 UNREALIZED GAIN ON SECURITIES AVAILABLE FOR SALE (NET OF TAX) 59,739 59,739 ------------ ------------ TOTAL SHAREHOLDERS' EQUITY 90,616,761 89,736,128 ------------ ------------ TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $277,212,239 $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 (AS RESTATED) (SEE NOTE C) ----------------------------------- REVENUES: HOTEL $ 20,694,148 $14,080,821 CONSTRUCTION AND DEVELOPMENT -- 514,234 CONSTRUCTION AND DEVELOPMENT - OTHER -- 200,000 FRANCHISING 1,181,884 1,064,992 MANAGEMENT 37,355 48,908 ------------ ----------- TOTAL OPERATING REVENUES 21,913,387 15,908,955 COSTS AND EXPENSES: OPERATING EXPENSES: HOTEL 11,676,097 8,307,842 CONSTRUCTION AND DEVELOPMENT 170,869 690,499 FRANCHISING . 711,579 984,093 ------------ ----------- TOTAL OPERATING EXPENSES 12,558,545 9,982,434 ------------ ----------- GROSS OPERATING PROFIT 9,354,842 5,926,521 GENERAL AND ADMINISTRATIVE 757,645 954,238 DEPRECIATION AND AMORTIZATION 2,929,057 2,084,212 ------------ ----------- NET OPERATING PROFIT (BEFORE INTEREST AND TAXES) 5,668,140 2,888,071 OTHER INCOME AND EXPENSES: INTEREST EXPENSE 2,866,225 481,046 INTEREST INCOME 353,856 631,808 ------------ ----------- NET INTEREST EXPENSE (INCOME) 2,512,369 -150,762 OTHER INCOME 223,202 175,981 ------------ ----------- EARNINGS BEFORE INCOME TAXES MINORITY INTERESTS AND CUMULATIVE EFFECT OF ACCOUNTING CHANGE 3,378,973 3,214,814 INCOME TAXES 1,210,000 1,185,000 MINORITY INTEREST IN EARNINGS OF CONSOLIDATED SUBSIDIARIES & PARTNERSHIPS 129,830 35,373 ------------ ----------- EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 2,039,143 1,994,441 CUMULATIVE EFFECT OF CHANGE IN AN ACCOUNTING PRINCIPLE - NET OF $691,000 OF RELATED TAX EFFECT (1,164,114) ============ =========== NET EARNINGS $ 875,029 $ 1,994,441 ============ =========== EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE $ 0.24 $ 0.24 CUMULATIVE EFFECT OF ACCOUNTING CHANGE $ (0.14) NET EARNINGS $ 0.10 $ 0.24 PRO FORMA: NET EARNINGS ASSUMING ACCOUNTING CHANGE IS APPLIED RETROACTIVELY $ 2,039,143 $ 1,762,922 EARNINGS PER SHARE $ 0.24 $ 0.21 WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING PRIMARY AND FULLY DILUTED 8,354,236 8,396,361 ------------ -----------
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, 1996 (UNAUDITED)
16 WEEKS ENDED APRIL 20, APRIL 21, 1997 1996 (AS RESTATED) (SEE NOTE C) ------------------------------ CASH FLOWS FROM OPERATING ACTIVITIES: EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE $ 2,039,143 $ 1,994,441 ADJUSTMENTS TO RECONCILE NET EARNINGS TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: DEPRECIATION AND AMORTIZATION 2,929,057 2,084,212 DECREASE IN DEFERRED INCOME TAXES -355,000 0 INCREASE IN MINORITY INTEREST IN EQUITY OF CONSOLIDATED SUBSIDIARIES AND PARTNERSHIPS 129,830 35,373 ACCRETION OF DISCOUNT ON SECURITIES HELD TO MATURITY -212,669 -196,240 CHANGES IN ASSETS AND LIABILITIES: (INCREASE) DECREASE IN ACCOUNTS RECEIVABLE -822,061 586,380 INCREASE IN PREPAID EXPENSES -631,681 -282,735 DECREASE IN OTHER ASSETS 73,361 1,437,285 (DECREASE) INCREASE IN ACCOUNTS PAYABLE AND ACCRUED EXPENSES -2,607,191 3,632,388 (DECREASE) INCREASE IN INCOME AND OTHER TAXES -842,810 173,701 - --------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES -300,021 9,464,805 CASH FLOWS FROM INVESTING ACTIVITIES: REPAYMENT FROM RELATED PARTIES--NET 0 42,418,759 SALE OF SECURITIES AVAILABLE FOR SALE 0 847,120 CAPITAL EXPENDITURES -16,202,094 -32,993,424 - --------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES -16,202,094 10,272,455 CASH FLOWS FROM FINANCING ACTIVITIES: INCREASE IN DEFERRED CHARGES -158,499 -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 EXERCISE OF STOCK OPTIONS 5,604 25,192 - --------------------------------------------------------------------------------------------------- NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 16,978,826 -17,155,320 - --------------------------------------------------------------------------------------------------- NET INCREASE 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. BASIS OF PRESENTATION 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. 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. ACCOUNTING CHANGE In the fourth quarter of fiscal 1997, the Company changed its method of accounting for pre-opening costs, effective December 30, 1996, whereby pre-opening costs are expensed as incurred rather than the previous method of capitalizing such costs and amortizing them over a three-year period. The Company believes the new method is preferable in the circumstances and conforms to the predominant practice in the industry. The cumulative effect of the change for periods prior to fiscal 1997, net of income tax effect, is a reduction in net earnings of $1,164,000 or $0.14 per share and was recognized in the first quarter of 1997. The pro forma effect on the first quarter of 1996, as if the change in accounting for pre-opening costs had been adopted prior to fiscal 1996, would be to increase hotel operating expenses by $521,000 and to reduce depreciation and amortization expense by $152,000, resulting in a reduction of earnings before income taxes of $369,000 ($231,000 after income taxes) to $1,763,000, or $0.21 per share for the first quarter of 1996, from $1,994,000 or $0.24 per share as previously reported. C. RESTATEMENT Subsequent to the issuance of the consolidated financial statements for the first three quarters of fiscal 1997, the Company's management determined that certain transactions, primarily relating to the capitalization of various expenses, the timing of recognition of profits on the sales of real estate, and the recording of depreciation and amortization, bad debts and income tax expense, were improperly recorded in the consolidated financial statements. As a result, the consolidated financial statements for the first three quarters of fiscal 1997 have been restated from the amounts previously reported. A summary of the effects of the restatement, and the effect of the accounting change discussed in Note B above, on the consolidated financial statements as of and for the sixteen weeks ended April 20, 1997 (amounts in thousands, except per share data) is as follows:
As Previously Reported As Restated -------- ----------- For the sixteen weeks ended April 20, 1997: Hotel revenues $20,853 $20,694 Operating expenses: Hotel 11,348 11,676 Construction and development -- 171 Franchising 639 712 Operating profit 10,086 9,355 General and administrative expense 603 758 Depreciation and amortization 3,249 2,929 Interest expense 2,705 2,866 Other income 375 223 Income taxes 1,565 1,210 Minority interests 58 130 Cumulative effect of accounting change -- 1,164 Net earnings 2,635 875 Earnings per common share: Earnings before cumulative effect of accounting change .32 .24 Cumulative effect of accounting change -- (.14) Net earnings .32 .10 At April 20, 1997: Accounts receivable-net 3,779 3,561 Construction contracts 252 197 Other current assets 530 518 Property and equipment 278,926 278,466 Accumulated depreciation & amortization (36,809) (36,838) Deferred charges 9,976 9,971 Other assets 5,111 3,258 Accounts payable & accrued expenses 9,338 9,439 Deferred income taxes 4,702 3,656 Minority interests in subsidiaries 562 634 Retained earnings 50,098 48,338
D. EARNINGS PER SHARE The net earnings per share is computed by dividing net earnings by the weighted average number of common and common equivalent shares outstanding. Fully diluted earnings per share is not presented as the after tax effects of the conversion of the Company's subordinated convertible debentures is antidilutive. 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. 7 ShoLodge, Inc. and Subsidiaries Management's Discussion and Analysis of Financial Condition and Results of Operations Restatement and Accounting Change The Company has restated previously issued financial results, for the first three quarters of fiscal 1997. After the consolidated financial statements were originally issued, the Company became aware of additional information indicating that certain transactions had been improperly reported. The restatements involve all non-cash items and relate primarily to capitalization of various expenses; the timing of recognition of profits on the sales of real estate; depreciation and amortization expense; increases of reserves for doubtful accounts; and adjustment of income tax provisions. Additionally, the Company has, effective December 30, 1996, changed its accounting for pre-opening costs to expense such costs as incurred, rather than capitalizing those expenditures and amortizing them over a three year period. See Notes B and C of the Notes to the consolidated financial statements for a discussion of the effects of the restatement and accounting change on the Company's previously reported results of operations and financial position. The comments included in this Management's Discussion and Analysis have been revised to give effect to the restatement and accounting change. 8 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 $21.9 million, or 37.7% more than the total operating revenues for the first quarter of 1996. Revenues from hotel operations increased by $6.6 million, or 47.0%, 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 1.7%, from $13.8 million in first quarter 1996 to $14.1 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 1995. 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. 9 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 $3.4 million, or 40.5%, from $8.3 million in first quarter 1996 to $11.7 million in first quarter 1997, due primarily to operating expenses associated with the 47.0% increase in hotel operating revenues. $173,000 of the increase was due to the change in accounting for pre-opening costs to expense these costs as incurred. Operating expenses as a percentage of operating revenues for this activity decreased from 59.0% in first quarter 1996 to 56.4% in first quarter 1997. The gross profit margin on same hotels increased from 41.1% in first quarter 1996 to 43.4% in first quarter 1997. The 13 hotels opened since the end of 1995 produced a gross profit margin of 44.0% in first quarter 1997, due primarily to significantly higher average daily room rates than for all hotels as a whole. However, the first quarter 1997 new hotel profit margin was negatively impacted by $173,000 due to a change in accounting for pre-opening costs in 1997 to expense these costs as incurred. 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. However, internal development expenses of $171,000 were incurred in the first quarter of 1997. Franchising operating expenses decreased by $273,000, or 27.7%, 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 $197,000 from the comparable quarter last year, due primarily to reduced professional fees. Depreciation and amortization expense increased by $845,000, or 40.5%, over last year's first quarter. This was due primarily to the 13 new hotels opened, beginning in first quarter 1996. Amortization of pre-opening costs in the first quarter of 1996 was $152,000, versus none in 1997 due to the accounting change in 1997 to expense these costs as incurred. 10 Interest expense increased by $2.4 million while interest income decreased by $278,000 from first quarter 1996, for an increase of $2.7 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 $47,000 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 $130,000 in first quarter 1997 compared to $35,000 in first quarter 1996 due to more profitable consolidated entities which include minority ownership, and to a negative adjustment of $72,000 in minority interests receivable. 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 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 11 $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. 12 PART II - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K 6 (a) Exhibits - 11 Statement Re: Computation of per share earnings 18 Letter Re: Change in accounting principles 27 Financial Data Schedule (for SEC use only) 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: March 25, 1998 /s/ Leon Moore -------------------------------------- Leon Moore President, Chairman of the Board and Director (Chief Executive Officer) Date: March 25, 1998 /s/ Bob Marlowe -------------------------------------- Bob Marlowe Secretary, Treasurer and Director (Chief Accounting Officer) Date: March 25, 1998 /s/ Michael A. Corbett -------------------------------------- Michael A. Corbett Chief Financial Officer EX-11 2 COMPUTAION 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): BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE $ 2,039,143 $ 1,994,441 CUMULATIVE EFFECT OF A CHANGE IN AN ACCOUNTING PRINCIPLE $(1,164,114) ----------- ----------- NET EARNINGS $ 875,029 $ 1,994,441 =========== =========== SHARES: WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES OUTSTANDING 8,354,236 8,396,361 =========== =========== PRIMARY EARNINGS PER SHARE: BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE $ 0.24 $ 0.24 CUMULATIVE EFFECT OF A CHANGE IN AN ACCOUNTING PRINCIPLE $ (0.14) ----------- ----------- NET EARNINGS $ 0.10 $ 0.24 =========== ===========
Fully diluted earnings per share are not presented as the effect of the conversion of the Company's subordinated convertible debentures is antidilutive EX-18 3 CHANGE IN ACCOUNTING PRINCIPLES 1 March 24, 1998 ShoLodge, Inc. 130 Maple Drive North Hendersonville, Tennessee 37075 Dear Sirs: At your request, we have read the description included in your Quarterly Report on Form 10-Q/A to the Securities and Exchange Commission for the quarter ended April 20, 1997, of the facts relating to the write-off of pre-opening costs. We believe, on the basis of the facts so set forth and other information furnished to us by appropriate officials of the Company, that the accounting change described in your Form 10-Q/A is to an alternative accounting principle that is preferable under the circumstances. We have not audited any consolidated financial statements of ShoLodge, Inc. and its consolidated subsidiaries as of any date or for any period subsequent to December 29, 1996. Therefore, we are unable to express, and we do not express, an opinion on the facts set forth in the above-mentioned Form 10-Q/A, on the related information furnished to us by officials of the Company, or on the financial position, results of operations, or cash flows of ShoLodge, Inc. and its consolidated subsidiaries as of any date or for any period subsequent to December 29, 1996. Yours truly, /s/ Deloitte & Touche LLP DELOITTE & TOUCHE LLP Nashville, Tennessee EX-27 4 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. 3-MOS DEC-28-1997 APR-20-1997 4,736,479 212,062 3,935,429 177,500 0 10,115,760 278,466,358 36,838,064 277,212,239 14,422,554 167,882,922 0 0 1,000 90,615,761 277,212,239 20,694,148 21,913,687 0 16,245,247 0 0 2,866,225 3,249,143 1,210,000 2,039,143 0 0 (1,164,114) 875,029 .10 .10
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