<PAGE> 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 Third Quarter Ended October 5, 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)
130 MAPLE DRIVE, HENDERSONVILLE, TENNESSEE 37075
(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 November 14, 1997, there were 8,255,293 shares of ShoLodge, Inc.
common stock outstanding.
<PAGE> 2
SHOLODGE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
OCTOBER 5, DECEMBER 29,
1997 1996 (1)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 4,726,457 $ 4,259,768
Accounts receivable 4,291,905 2,676,083
Construction contracts 179,960 259,785
Prepaid expenses 1,383,079 471,823
Other current assets 1,061,645 559,982
----------------------------
Total current assets 11,643,046 8,227,441
DIRECT FINANCING LEASES, less current portion 446,872 611,492
PROPERTY AND EQUIPMENT 302,277,766 262,264,264
Less accumulated depreciation and amortization -41,464,036 -33,888,495
----------------------------
260,813,730 228,375,769
DEFERRED CHARGES 11,137,685 9,899,544
SECURITIES HELD TO MATURITY - RESTRICTED 8,814,067 8,255,810
SECURITIES AVAILABLE FOR SALE 228,399 212,062
EXCESS OF COST OVER FAIR VALUE
OF NET ASSETS ACQUIRED 3,021,601 3,136,965
OTHER 5,537,991 4,990,095
----------------------------
TOTAL ASSETS $301,643,391 $263,709,178
============================
</TABLE>
(1) Derived from fiscal year ended December 29, 1996 audited financial
statements. See notes to consolidated financial statements.
<PAGE> 3
SHOLODGE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
OCTOBER 5, DECEMBER 29,
1997 1996 (1)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 8,442,472 $ 12,045,715
Taxes other than on income 1,580,558 984,855
Income taxes payable 1,303,143 1,116,972
Current portion of long-term debt
and capitalized lease obligations 4,179,541 15,824,914
-----------------------------
Total current liabilities 15,505,714 29,972,456
LONG-TERM DEBT ASSOCIATED WITH LODGING FACILITIES 41,136,280 40,104,802
OTHER LONG-TERM DEBT 139,674,636 97,227,576
CAPITALIZED LEASE OBLIGATIONS 1,069,065 1,462,044
DEFERRED INCOME TAXES 4,702,144 4,702,144
MINORITY INTERESTS IN EQUITY OF
CONSOLIDATED SUBSIDIARIES AND PARTNERSHIPS 647,777 504,028
-----------------------------
TOTAL LIABILITIES 202,735,616 173,973,050
-----------------------------
SHAREHOLDERS' EQUITY:
Series A redeemable nonparticipating stock
(no par value; 1,000 shares authorized,
no shares issued and outstanding) - -
Common stock (no par value; 20,000,000 shares
authorized, 8,253,626 shares issued and outstanding
as of October 5, 1997 and 8,233,318 shares issued
and outstanding as of December 29, 1996) 1,000 1,000
Additional paid-in capital 42,413,175 42,212,042
Retained earnings 56,423,725 47,463,347
Unrealized gain on securities available for sale (net of tax) 69,875 59,739
-----------------------------
TOTAL SHAREHOLDERS' EQUITY 98,907,775 89,736,128
-----------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $301,643,391 $263,709,178
=============================
</TABLE>
(1) Derived from fiscal year ended December 29, 1996 audited financial
statements. See notes to consolidated financial statements.
<PAGE> 4
SHOLODGE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
FOR THE FORTY WEEKS ENDED OCTOBER 5, 1997 AND OCTOBER 6, 1996
<TABLE>
<CAPTION>
12 WEEKS ENDED 40 WEEKS ENDED
OCTOBER 5, OCTOBER 6, OCTOBER 5, OCTOBER 6,
1997 1996 1997 1996
---------------------------------------------------------
<S> <C> <C> <C> <C>
REVENUES:
Hotel $18,060,165 $16,171,522 $57,208,777 $44,392,537
Construction and development 0 14,684 0 529,157
Construction and development - other 0 575,000 0 775,000
Franchising 691,306 1,060,099 2,580,851 3,166,037
Management 26,165 39,319 98,703 154,855
-------------------------------------------------------
Total operating revenues 18,777,636 17,860,624 59,888,331 49,017,586
COSTS AND EXPENSES:
Operating expenses:
Hotel 9,553,734 8,342,687 30,373,118 23,867,466
Construction and development 0 409,374 0 1,100,105
Franchising 376,803 872,974 1,480,138 2,648,621
-------------------------------------------------------
Total operating expenses 9,930,537 9,625,035 31,853,256 27,616,192
-------------------------------------------------------
Gross operating profit 8,847,099 8,235,589 28,035,075 21,401,394
General and administrative 521,094 492,053 1,589,295 1,983,557
Depreciation and amortization 2,524,134 2,099,047 8,432,728 5,919,472
-------------------------------------------------------
Net operating profit (before
interest and taxes) 5,801,871 5,644,489 18,013,052 13,498,365
OTHER INCOME AND EXPENSES:
Interest expense 2,366,916 1,306,555 7,584,999 2,211,629
Interest income 241,404 337,806 906,695 1,180,352
-------------------------------------------------------
Net interest expense 2,125,512 968,749 6,678,304 1,031,277
Other income 525,925 316,348 2,185,530 750,189
-------------------------------------------------------
EARNINGS BEFORE INCOME TAXES AND
MINORITY INTERESTS 4,202,284 4,992,088 13,520,278 13,217,277
INCOME TAXES 1,180,000 1,807,000 4,215,000 4,769,000
MINORITY INTEREST IN EARNINGS OF CONSOLIDATED
SUBSIDIARIES & PARTNERSHIPS 130,856 143,761 344,900 373,027
-------------------------------------------------------
NET EARNINGS $ 2,891,428 $ 3,041,327 $ 8,960,378 $ 8,075,250
=======================================================
EARNINGS PER COMMON AND COMMON EQUIVALENT SHARE
Primary $0.34 $0.36 $1.07 $0.96
Fully Diluted $0.33 $0.34 $1.02 $0.93
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING
Primary 8,476,605 8,470,358 8,389,769 8,451,077
Fully Diluted 10,869,886 10,786,960 10,840,750 10,767,679
-------------------------------------------------------
</TABLE>
<PAGE> 5
SHOLODGE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE FORTY WEEKS ENDED OCTOBER 5, 1997 AND OCTOBER 6, 1996
(UNAUDITED)
<TABLE>
<CAPTION>
40 WEEKS ENDED
OCTOBER 5, OCTOBER 6,
1997 1996
---------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET EARNINGS $ 8,960,378 $ 8,075,250
ADJUSTMENTS TO RECONCILE NET EARNINGS TO NET
CASH PROVIDED BY OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 8,432,728 5,919,472
INCREASE IN MINORITY INTEREST IN EQUITY
OF CONSOLIDATED SUBSIDIARIES AND PARTNERSHIPS 344,900 373,027
GAIN ON SALE OF SECURITIES AVAILABLE FOR SALE 0 -294,839
GAIN ON SALE OF PROPERTY & EQUIPMENT -1,190,687 0
ACCRETION OF DISCOUNT ON SECURITIES
HELD TO MATURITY -558,257 -490,599
CHANGES IN ASSETS AND LIABILITIES:
(INCREASE) DECREASE IN ACCOUNTS RECEIVABLE -1,535,997 356,680
(INCREASE) IN PREPAID EXPENSES -911,256 -618,854
(INCREASE) DECREASE IN OTHER ASSETS -1,251,578 -1,260,471
(DECREASE) INCREASE IN ACCOUNTS PAYABLE
AND ACCRUED EXPENSES -3,603,243 5,618,073
INCREASE IN INCOME AND OTHER TAXES 781,874 2,438,444
- ----------------------------------------------------------------------------------------------
NET CASH PROVIDED BY OPERATING ACTIVITIES 9,468,862 20,116,183
CASH FLOWS FROM INVESTING ACTIVITIES:
REPAYMENT FROM (ADVANCES TO) RELATED PARTIES--NET 0 42,418,759
CAPITAL EXPENDITURES -40,566,179 -67,926,532
PROCEEDS FROM SALE OF PROPERTY & EQUIPMENT 1,743,364 0
- ----------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES -38,822,815 -25,507,773
CASH FLOWS FROM FINANCING ACTIVITIES:
(INCREASE) DECREASE IN DEFERRED CHARGES -1,784,146 33,682
PROCEEDS FROM DIRECT FINANCING LEASES 164,620 45,172
PROCEEDS FROM LONG-TERM DEBT 73,577,000 63,552,371
PAYMENTS ON LONG-TERM DEBT -41,743,835 -57,446,166
PAYMENTS ON CAPITALIZED LEASE OBLIGATIONS -392,979 -439,871
DISTRIBUTIONS TO MINORITY INTERESTS -201,151 -452,471
SALE OF SECURITIES AVAILABLE FOR SALE 0 847,120
EXERCISE OF STOCK OPTIONS 201,133 40,455
- ----------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 29,820,642 6,180,292
- ----------------------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS $466,689 $788,702
==============================================================================================
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD $ 4,259,768 $ 2,444,990
==============================================================================================
CASH AND CASH EQUIVALENTS - END OF PERIOD $4,726,457 $3,233,692
==============================================================================================
</TABLE>
SEE NOTES TO CONSOLIDATED FINANCIAL STATEMENTS.
<PAGE> 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 on Form 10-K for the fiscal year ended December
29, 1996 and the Company's Quarterly Report on Form 10-Q for the
forty weeks ended October 5, 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 October 5, 1997 and October 6, 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.
<PAGE> 7
ShoLodge, Inc. and Subsidiaries Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
For the Fiscal Quarters and Fiscal Year-to-date Periods Ended October 5, 1997
and October 6, 1996.
Total revenues for the fiscal quarter ended October 5, 1997 increased
5.1% to $18.8 million from $17.9 million for the same period in 1996. For the
three fiscal quarters ended October 5, 1997, total revenues increased 22.2% to
$59.9 million from $49.0 million for the same period in 1996.
Revenues from hotel operations in the third fiscal quarter 1997
increased 11.7% to $18.1 million from $16.2 million for the same period in
1996. For the 40 hotels opened for all of both quarterly periods (same hotels),
average daily room rates in the third fiscal quarter of 1997 decreased 1.4% to
$56.13 from $56.93 in the third quarter of 1996 and average occupancy rates
decreased to 62.5% from 63.7%, resulting in a decrease in same hotel revenues of
5.6%. The eight hotels opened after the second quarter of 1996 contributed $6.1
million to hotel revenues in the third quarter of 1997 compared to $3.5 million
for the same period in fiscal 1996. Revenues from hotel operations in the first
three quarters of 1997 increased 28.9% to $57.2 million from $44.4 million for
the same period in 1996. For the 33 same hotels, average daily room rates in the
first three quarters of 1997 increased 1.9% to $53.95 from $52.97 in the first
three quarters of 1996 and average occupancy rates decreased to 61.0% from
63.5%, resulting in a net decrease in same hotel revenues of 0.8%. The 15 hotels
opened during 1996 and the first three quarters of 1997 contributed $18.3
million to hotel revenues in the first three quarters of 1997 compared to $5.1
million for the same period in fiscal 1996.
There were no revenues from regular construction and development
activities for the third fiscal quarter of 1997 compared with a negligible
amount for the same period in 1996. There were no revenues from regular
construction and development activities for the first three quarters of 1997
compared to $529,000 in the same period 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 projects were in progress during the first three quarters of 1997
compared with the final portion of only one project during the comparable period
in 1996. No outside construction contracts are currently in progress.
There were no revenues from "Construction and development - other" in
the first three quarters of 1997 compared with $775,000 in the first three
quarters of 1996, which represents a portion of profits not previously
recognized on installment sales. No revenues from this source are expected to be
generated in the future.
<PAGE> 8
Franchise revenues in the third quarter of 1997 decreased 34.8% to
$691,000 from $1.1 million for the comparable period last year. This decrease
was due primarily to the cancellation of reservation services by two hotel
chains in the first quarter of 1997. Franchise revenues in the first three
quarters of 1997 decreased 18.5% to $2.6 million from $3.2 million for the
comparable period last year. This decrease was due primarily to the cancellation
of reservation service contracts by two hotel chains in the first quarter of
1997 and to a decrease of $110,000 in initial franchise fee revenues. Initial
franchise fees may vary widely from quarter to quarter.
Management contract revenues for the third fiscal quarter of 1997
decreased 33.5% to $26,000 from $39,000 for the same period of 1996. Management
contract revenues for the first three quarters of 1997 decreased 36.3% to
$99,000 from $155,000 for the same period last year. These decreases were due to
the cancellation of one management contract on one hotel in the third quarter of
1996.
Operating expenses from hotel operations for the third fiscal quarter
of 1997 increased 14.5% to $9.6 million from $8.3 million in the third quarter
of 1996, due to the 11.7% increase in hotel operating revenues. Operating
expenses from hotel operations, expressed as a percentage of hotel operating
revenues, increased to 52.9% in the third quarter of 1997 from 51.6% in the
third quarter of 1996, thus decreasing the gross profit margin on all hotels to
47.1% in the third quarter of 1997 from 48.4% in the same period of 1996. This
decrease was due primarily to (i) a decrease in operating profit margins on the
33 hotels opened prior to 1996 to 43.9% in the third quarter of 1997 from 46.6%
in the third quarter of 1996, and by (ii) a decrease in operating profit margins
for the 15 hotels opened since 1995 to 53.4% in the third quarter of 1997 from
55.2% in the third quarter of 1996. Thirteen of the 15 new hotels are Sumner
Suites which command significantly higher room rates and generally operate at
higher gross operating profit margins as compared with Shoney's Inns. Operating
expenses from hotel operations for the first three quarters of 1997 increased
27.3% to $30.4 million in the first three quarters of 1997 from $23.9 million in
the first three quarters of 1996, due to the 28.9% increase in hotel operating
revenues. Operating expenses from hotel operations, expressed as a percentage of
hotel operating revenues, decreased to 53.1% in the first three quarters of 1997
from 53.8% in the same period of 1996, thus increasing the gross profit margin
on all hotels to 46.9% in the first three quarters of 1997 from 46.2% in the
same period of 1996. The gross profit margin on same hotels for the first three
quarters of 1997 decreased to 45.5% from 45.7% for the same three quarters in
1996. The new hotels (primarily Sumner Suites) have experienced higher profit
margins than the same hotels and have generated a 50.0% profit margin in the
first three quarters of both 1997 and 1996.
There were no costs and expenses of construction and development in the
first three quarters of 1997 compared with $409,000 in the third quarter of 1996
and $1.1 million in the first three quarters of 1996. There were no outside
construction contracts in the first three fiscal quarters of 1997 compared with
one during the comparable period in 1996.
<PAGE> 9
Franchising operating expenses for the third quarter of 1997 decreased
by 56.8% to $377,000 from $873,000 for the third quarter of 1996. Franchising
operating expenses for the first three quarters of 1997 decreased to $1.5
million from $2.6 million in the same period last year. The primary reason for
these decreases was the cancellation in the fourth quarter of 1996 of the
Company's obligation to pay a portion of franchise fees collected to Shoney's,
Inc. The reduction in this royalty fee expense was $273,000 in the third quarter
of 1997 and $858,000 in the first three quarters of 1997.
General and administrative expense for the third quarter of 1997
increased by 5.9% to $521,000 from $492,000 in the third quarter of 1996.
General and administrative expense for the first three quarters of 1997
decreased 19.9% to $1.6 million from $2.0 million in the same period of 1996.
These decreases were due primarily to reduced professional fees and increased
capitalization of general and administrative expenses.
Depreciation and amortization expense in the third quarter of 1997
increased by 20.3% to $2.5 million from $2.1 million in the third quarter of
1996. For the first three quarters of 1997, depreciation and amortization
expense increased 42.5% to $8.4 million from $5.9 million for the same period
last year. These increases were due primarily to the 15 hotels opened during
fiscal 1996 and first three quarters of 1997.
Interest expense for the third quarter of 1997 increased $1.1 million
and interest income decreased $96,000, as compared with the third quarter of
1996, resulting in an increase in net interest expense of $1.2 million. For the
first three quarters of 1997, interest expense increased $5.4 million and
interest income decreased $274,000, resulting in an increase in net interest
expense of $5.6 million. The increase in interest expense resulted primarily
from the additional borrowings incurred for the 12 hotels opened in 1996 and the
three hotels opened in the first three quarters of 1997.
Other income for the third quarter of 1997 increased to $526,000 from
$316,000 in the third quarter of 1996. Other income for the first three quarters
of 1997 increased to $2.2 million compared with $750,000 in the first three
quarters of 1996. These increases were due to a gain of $1.5 million on the sale
of excess land in the first three quarters of 1997. Minority interest in
earnings and losses of consolidated subsidiaries and partnerships decreased
$13,000 for the third quarter of 1997 compared with the same period in 1996, and
$28,000 for the first three quarters of 1997, compared with the same period in
1996, due to less profitable consolidated entities which include minority
ownership.
The lower effective income tax rate (32.0% for the first three quarters
of 1997 versus 37.1% for the comparable period last year) is due to a reduction
in applicable state tax rates.
<PAGE> 10
Liquidity and Capital Resources
The Company's primary sources of cash in the first three quarters of
1997 were (1) net cash flows from operating activities of $9.5 million, (2) net
proceeds of approximately $33.6 million from the issuance of 9.55% Senior
Subordinated Notes due 2007, (3) proceeds of approximately $4.0 million from the
financing of furniture, fixtures and equipment, and (4) net proceeds of
approximately $1.7 million from the sale of excess land. The primary sources of
cash in the first three quarters of 1996 were (1) net cash flows from operating
activities of $20.1 million, (2) the collection of a note receivable of $44.1
million from Suites of America, Inc. (see discussion of AmeriSuites Transaction
in 1996 Form 10-K), and (3) proceeds of approximately $5.6 million from the
financing of furniture, fixtures and equipment.
The Company currently has a $75.0 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 through the third
fiscal quarter of 1997 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. Thereafter, the interest rate is based on the ratio of senior debt to
EBITDA, as defined in the credit facility (the "Senior Leverage Ratio") and
ranges from prime rate to prime rate plus 0.50% over 175 to 250 basis points
over the 30, 60, 90 or 180 day LIBOR rate, at the Company's option. The weighted
average rate on this facility at October 5, 1997 was 8.00%. The Company pays
commitment fees on the unused portion of the facility ranging from 0.20% to
0.50% based on the Senior Leverage Ratio and certain other fees under the credit
facility. The credit facility contains covenants which, inter alia, limit or
prohibit incurrences of certain additional indebtedness, liens on assets,
investments, asset sales, mergers, dividends and amendments to indebtedness
subordinated to the credit facility. It also contains financial covenants by the
Company, including covenants with respect to net worth, indebtedness to total
capitalization, interest coverage and the Senior Leverage Ratio. As of October
5, 1997, the Company had $14.5 million outstanding under this credit facility.
In November of 1996 the Company issued $33.2 million in 9.75% Senior
Subordinated Notes, due 2006, Series A in the first series of notes issued under
a $125 million shelf registration. In September of 1997 the Company issued $35.0
million of 9.55% Senior Subordinated Notes, due 2007, Series B ("Series B
Notes") under the Company's shelf registration. The Company also has a $1.0
million unsecured line of credit with another bank, bearing interest at the
lender's prime rate, maturing May 31, 1998. As of October 5, 1997, the Company
had $977,000 outstanding under this credit facility.
The Company has announced its intention to sell and leaseback 14 Sumner
Suites hotels for a total price of $140.0 million. The transaction is expected
to close in November 1997. The Company expects to use the net proceeds to pay
off its bank credit facilities and approximately $10.5 million of furniture,
fixtures, and equipment loans on the hotels being sold and leased back. The
balance of net proceeds will be invested in short-term securities until needed
to fund capital expenditures. The holders of the Company's Credit Facility
have consented to the sale/leaseback transaction provided that any outstanding
balance under the Credit Facility is paid off and no new balance is drawn
under the Credit Facility prior to amendment of the terms of the Credit
Facility which must occur by December 15, 1997.
The Company requires capital principally for the construction and
acquisition of new lodging facilities and the purchase of equipment and
leasehold improvements. Capital
<PAGE> 11
expenditures for such purposes were $40.6 million in the first three fiscal
quarters of 1997, and $67.9 million in the first three fiscal quarters of 1996.
The Company opened two Shoney's Inns and ten Sumner Suites hotels in
1996 and three Sumner Suites hotels thus far in 1997. Additionally, renovations
of several existing properties were completed in 1996 and in first three
quarters of 1997, and several others are scheduled for completion in fiscal 1997
and first half of fiscal 1998. Futhermore, the Company's new corporate
headquarters building is substantially complete. The Company has six Sumner
Suites hotels scheduled to open by the end of the first fiscal quarter of 1998,
all of which are under construction. In addition, the Company has another ten
Sumner Suites hotels in various stages of development also scheduled to open in
1998. The Company expects that approximately $90.0 million in additional capital
funds will be necessary through third quarter 1998 to fulfill these plans.
The Company has principal payments totaling approximately $4.2 million
due under existing debt instruments through third fiscal quarter 1998. The
Company believes that a combination of net proceeds from the sale/leaseback
transaction, net cash provided from operations, borrowings under existing or new
credit facilities, proceeds from 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.
<PAGE> 12
PART II - OTHER INFORMATION
<TABLE>
<S> <C>
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
A Form 8-K was filed on September 25, 1997,
relating to the closing of its public offering of
$35,000,000 of 9.55% Senior Subordinated Notes, due
2007, Series B.
</TABLE>
<PAGE> 13
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: November 17, 1997 S/ Leon Moore
--------------
Leon Moore
President, Chairman of the Board
and Director (Chief Executive Officer)
Date: November 17, 1997 S/ Bob Marlowe
---------------
Bob Marlowe
Secretary, Treasurer and Director
(Chief Accounting Officer)
Date: November 17, 1997 S/ Michael A. Corbett
----------------------
Michael A. Corbett
Chief Financial Officer
<PAGE> 1
<TABLE>
<CAPTION>
12 WEEKS ENDED 28 WEEKS ENDED
-------------------------------------------------------
OCTOBER 5, OCTOBER 6, OCTOBER 5, OCTOBER 6,
1997 1996 1997 1996
-------------------------------------------------------
<S> <C> <C> <C> <C>
PRIMARY:
NET EARNINGS APPLICABLE TO COMMON STOCK (PRIMARY) 2,891,428 3,041,327 $ 8,960,378 $ 8,075,250
=======================================================
SHARES:
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 8,476,605 8,470,358 8,389,769 8,451,077
======================================================
PRIMARY EARNINGS PER SHARE $0.34 $0.36 $1.07 $0.96
======================================================
FULLY DILUTED:
NET EARNINGS APPLICABLE TO COMMON STOCK (PRIMARY) $ 2,891,428 $ 3,041,327 $ 8,960,378 $ 8,075,250
INTEREST (LESS TAX) ON CONVERTIBLE
SUBORDINATED DEBENTURES $663,764 $586,284 $ 2,118,773 $ 1,958,642
------------------------------------------------------
ADJUSTED EARNINGS APPLICABLE TO COMMON STOCK $ 3,555,192 $ 3,627,611 $11,079,151 $10,033,892
======================================================
SHARES:
WEIGHTED AVERAGE COMMON AND COMMON
EQUIVALENT SHARES OUTSTANDING 8,553,284 8,470,358 8,524,148 8,451,077
SHARES ISSUABLE UPON CONVERSION OF CONVERTIBLE
SUBORDINATED DEBENTURES 2,316,602 2,316,602 2,316,602 2,316,602
------------------------------------------------------
10,869,886 10,786,960 10,840,750 10,767,679
======================================================
FULLY DILUTED EARNINGS PER SHARE $0.33 $0.34 $1.02 $0.93
======================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE QUARTERLY
FINANCIAL STATEMENTS FOR THE QUARTER ENDED OCTOBER 5, 1997 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-END> OCT-5-1997
<CASH> 4,726,457
<SECURITIES> 0
<RECEIVABLES> 4,549,365
<ALLOWANCES> 77,500
<INVENTORY> 0
<CURRENT-ASSETS> 11,643,046
<PP&E> 302,277,766
<DEPRECIATION> 41,464,036
<TOTAL-ASSETS> 301,643,391
<CURRENT-LIABILITIES> 15,505,714
<BONDS> 181,879,981
0
0
<COMMON> 1,000
<OTHER-SE> 98,906,775
<TOTAL-LIABILITY-AND-EQUITY> 301,643,391
<SALES> 57,208,777
<TOTAL-REVENUES> 59,888,331
<CGS> 0
<TOTAL-COSTS> 41,875,279
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,584,999
<INCOME-PRETAX> 13,175,378
<INCOME-TAX> 4,215,000
<INCOME-CONTINUING> 8,960,378
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 8,960,378
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 1.02
</TABLE>
