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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 8-K/A
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)
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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
was attached as Exhibit 7.1 to Form 8-K filed December 2, 1998.
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.
Disagreements:
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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 Deloitte & Touche LLP cited
three disagreements 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
disagreements as communicated to the Company's Audit Committee related to the
1997 (i) accounting for profits on certain real estate transactions, (ii)
capitalization of general and administrative costs, and (iii) recording
intercompany revenues for rooms rented to construction workers. The matter of
accounting for profits on certain real estate transactions involved the question
of the timing of earnings recognition and also the allocation of cost basis
among various outparcels of land sold to third parties. The matter of
capitalization of general and administrative costs concerned the method of
allocating certain indirect costs, such as salaries and related employee
benefits, utilities, telephone expense, printing and supplies, and other
overhead expenses, to internal development costs to be capitalized. The matter
of recording intercompany revenues for rooms rented to construction workers
resulted from the Company's recording room revenues at the hotel properties
earned from the construction company subsidiary of the Company during renovation
or construction of Company-owned hotels. 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 LLP 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. Deloitte & Touche LLP cited no disagreements 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 types of matters described
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in Regulation S-K Item 304 in 1996 or in the subsequent unaudited interim
periods since 1997.
Reportable Conditions:
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In addition, in connection with the 1997 audit there were six "reportable
conditions" as that term is described in Item 304 (a) (l) (v) (A) of Regulation
S-K; that is, Deloitte & Touche LLP advised the Company that the internal
controls necessary for the development of reliable financial statements were
inadequate. 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; also,
of the type described in Item 304 (a) (1) (v) (A) of Regulation S-K. 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's present accounting systems and internal
controls appeared to Deloitte and Touche LLP to be inadequate to ensure that
transactions are recorded and reported in conformity with generally accepted
accounting principles.
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
successsor independent auditing firm regarding each reportable condition.
The Company has requested Deloitte & Touche LLP to furnish a letter addressed to
the Commission stating whether it agrees with the above statements. The letter
from the former accountant will be filed with an amendment upon receipt of same
by the Company.
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Item 7. Financial Statements and Exhibits
7.1 Letter from Deloitte & Touche LLP to the Registrant dated November
30, 1998 (Filed with Form 8-K on December 2, 1998)
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.
Dated: December 16, 1998 SHOLODGE, INC.
By: /s/ Leon Moore
Leon Moore
President
