<PAGE>
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.
<PAGE>
<TABLE>
SHOLODGE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<CAPTION>
APRIL 21, DECEMBER 31,
1996 1995 (1)
<S> <C> <C>
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.
</TABLE>
<PAGE>
<TABLE>
SHOLODGE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (CONTINUED)
<CAPTION>
APRIL 21, DECEMBER 31,
1996 1995 (1)
<S> <C> <C>
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.
</TABLE>
<PAGE>
<TABLE>
SHOLODGE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
FOR THE SIXTEEN WEEKS ENDED APRIL, 21, 1996 AND APRIL 16, 1995
<CAPTION>
APRIL 21, APRIL 16,
1996 1995
<S> <C> <C>
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.
</TABLE>
<PAGE>
<TABLE>
SHOLODGE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIXTEEN WEEKS ENDED APRIL 21,1996 AND APRIL 16,1995
(UNAUDITED)
<CAPTION>
16 WEEKS ENDED
APRIL 21, APRIL 16,
1996 1995
<S> <C> <C>
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.
</TABLE>
<PAGE>
<TABLE>
SHOLODGE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIXTEEN WEEKS ENDED APRIL 21,1996 AND APRIL 16,1995
(UNAUDITED)
<CAPTION>
16 WEEKS ENDED
APRIL 21, APRIL 16,
1996 1995
<S> <C> <C>
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
============ ==========
</TABLE>
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
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)
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.
<PAGE>
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.
<PAGE>
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.
<PAGE>
(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.
<PAGE>
(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.
<PAGE>
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.
<PAGE>
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
EXHIBIT 11
<TABLE>
SHOLODGE, INC. AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
PRIMARY AND ASSUMING FULL DILUTION
<CAPTION>
16 WEEKS ENDED
APRIL 21, APRIL 16,
1996 1995
<S> <C> <C>
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
========== ==========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
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.
</LEGEND>
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> APR-21-1996
<CASH> 5,026,930
<SECURITIES> 0
<RECEIVABLES> 3,685,572
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 9,726,138
<PP&E> 209,694,570
<DEPRECIATION> 28,631,380
<TOTAL-ASSETS> 209,562,381
<CURRENT-LIABILITIES> 30,807,402
<BONDS> 90,673,279
0
0
<COMMON> 1,000
<OTHER-SE> 84,532,942
<TOTAL-LIABILITY-AND-EQUITY> 209,562,381
<SALES> 15,908,955
<TOTAL-REVENUES> 15,908,955
<CGS> 0
<TOTAL-COSTS> 13,020,884
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 481,046
<INCOME-PRETAX> 3,179,441
<INCOME-TAX> 1,185,000
<INCOME-CONTINUING> 1,994,441
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,994,441
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.24
</TABLE>
