<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 14 (D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported): November 24, 1998
ShoLodge, Inc.
(Exact name of registrant as specified in its charter)
Tennessee
(State or other jurisdiction of
incorporation or organization)
9-19840 62-1015641
(Commission File Number) (I.R.S. Employer Identification Number)
130 Maple Drive, North
Hendersonville, TN
(Address or principal executive office)
37075
(Zip code)
615-264-8000
(Registrant's telephone number)
<PAGE> 2
Item 4. Changes in Registrant's Certifying Accountant
On November 24, 1998, the firm of Deloitte & Touche LLP verbally notified the
Company that they were resigning as auditors of the Company and confirmed such
resignation in writing by letter dated November 30, 1998. A copy of that letter
is attached as Exhibit 7.1 to this Form 8-K.
The reports of Deloitte & Touche LLP on the Company's financial statements for
the past two fiscal years did not contain an adverse opinion or a disclaimer of
opinion and were not qualified or modified as to uncertainty, audit scope, or
accounting principles.
In connection with the audits of the Company's financial statements for the
fiscal years ended December 28, 1997, and December 29, 1996, and during the
subsequent unaudited interim periods since 1997 there were certain disagreements
with Deloitte & Touche LLP on matters of accounting principles or practices
which if not resolved to the satisfaction of Deloitte & Touche LLP would have
caused Deloitte & Touche LLP to make reference to the matter in their report.
The most significant of those disagreements related to the 1997 accounting for
profits on certain real estate transactions, capitalization of general and
administrative costs, and recording intercompany revenues for rooms rented to
construction workers. Management recorded adjustments relating to each of these
transactions and also restated its financial statements for each of the quarters
in fiscal 1997, as described in three Form 10-Q/A's filed on March 30, 1998 with
the Securities and Exchange Commission; Deloitte & Touche indicated that the
disagreements were satisfactorily resolved. The Company's Audit Committee
discussed each of these disagreements with Deloitte & Touche LLP. The Company
has authorized Deloitte & Touche LLP to respond fully to any successsor
independent auditing firm regarding each disagreement. There were no
disagreements with Deloitte & Touche LLP in this two year period regarding
financial statement disclosure or auditing scope and procedures which if not
resolved to the satisfaction of Deloitte & Touche LLP would have caused Deloitte
& Touche LLP to make reference to the matter in their report. There were no
disagreements on any of these types of matters in 1996 or in the subsequent
unaudited interim periods since 1997.
In addition, in connection with the 1997 audit there were six "reportable
conditions" as that term is described in Item 304 (a) (l) (v) of Regulation S-K.
The 1997 reportable conditions related to the following matters: accounting
structure and internal controls (which matter is considered by Deloitte & Touche
LLP to be a material weakness), accounting for certain real estate transactions,
capitalization of indirect costs associated with internal development and
construction, construction company accounting, capitalization of interest on
land under development, and accounts receivable allowance analysis. There were
four "reportable conditions" in connection with the 1996 audit; they related to
the accounting for capitalization of indirect costs associated with internal
development and construction, capitalization of construction period interest,
capitalization of pre-opening costs and accounting structure and the reporting
process. The Company is in the process of addressing each of these matters and
has taken certain actions in 1998. The Company's Audit Committee discussed each
of these "reportable conditions" with Deloitte & Touche LLP. The Company has
authorized Deloitte & Touche LLP to respond fully to any successor independent
auditing form regarding each reportable condition.
<PAGE> 3
The Company has requested Deloitte & Touche LLP to furnish a letter addressed to
the Commission stating whether it agrees with the above statements. A copy of
that letter, dated December 2, 1998 is filed as Exhibit 7.2 to this Form 8-K.
<PAGE> 4
Item 7. Financial Statements and Exhibits
7.1 Letter from Deloitte & Touche LLP to the Registrant dated November
30, 1998
7.2 Letter from Deloitte & Touche LLP to the Securities and Exchange
Commission dated December 2, 1998
SIGNATURES
Pursuant tot he 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.
Dated: December 2, 1998 SHOLODGE, INC.
By: /s/ Leon Moore
------------------
Leon Moore
President
<PAGE> 1
Exhibit 7.1
DELOITTE &
TOUCHE
(LOGO) Deloitte & Touche LLP Telephone: (615) 259-1800
Suite 2400 Facsimile: (615) 259-1857
424 Church Street
SunTrust Center
November 30, 1998 Nashville, Tennessee 37219
Mr. Steve Birdwell
Chief Financial Officer
ShoLodge, Inc.
Hendersonville, Tennessee
Dear Mr. Birdwell:
This is to confirm that the client-auditor relationship between ShoLodge, Inc.
(Commission File Number 0-19840) and Deloitte & Touche LLP has ceased.
Sincerely,
/s/ Deloitte & Touche LLP
- ----------------------------------
DELOITTE & TOUCHE LLP
cc: Office of the Chief Accountant
SECPS Letter File
Securities and Exchange Commission
Mail Stop 9-5
450 Fifth Street, N.W.
Washington, D.C. 20549
<PAGE> 1
EXHIBIT 7.2
December 2, 1998
Securities and Exchange Commission
Mail Stop 9-5
450 5th Street, N.W.
Washington, DC 20549
Dear Sirs/Madams:
We have read Item 4 of ShoLodge, Inc.'s Report on Form 8-K, dated December 2,
1998, and have the following comments:
1. We agree with the statements made in the first, second, third, and fifth
paragraphs.
2. We agree with the statements made in the fourth paragraph, except that we
have no basis on which to agree or disagree with the fourth sentence of the
fourth paragraph.
Yours truly,
/s/ Deloitte & Touche LLP
- -------------------------------
DELOITTE & TOUCHE LLP
