<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 First Quarter Ended April 19, 1998 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 NORTH, HENDERSONVILLE, TENNESSEE 37075
(address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (615) 264-8000
----------------------------------------------
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 June 1, 1998, there were 8,255,810 shares of ShoLodge, Inc.
common stock outstanding.
<PAGE> 2
SHOLODGE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
APRIL 19, DECEMBER 28,
1998 1997(1)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 40,456,755 $ 59,105,505
Accounts receivable-net 4,073,508 3,053,422
Construction contracts 125,001 125,001
Income taxes receivable 4,472,362 6,132,154
Prepaid expenses 785,266 532,698
Other current assets 224,373 205,891
------------------------------------
Total current assets 50,137,265 69,154,671
DIRECT FINANCING LEASES, less current portion 292,279 297,037
PROPERTY AND EQUIPMENT 218,351,684 197,129,415
Less accumulated depreciation and amortization -40,322,150 -39,790,321
------------------------------------
178,029,534 157,339,094
LAND UNDER DEVELOPMENT OR HELD FOR SALE 9,468,096 9,404,966
DEFERRED CHARGES 10,547,065 10,787,233
SECURITIES HELD TO MATURITY - RESTRICTED 9,177,458 8,946,985
SECURITIES AVAILABLE FOR SALE 275,888 264,581
DEPOSITS ON SALE/LEASEBACK 28,000,000 28,000,000
DEFERRED TAX ASSET 4,416,887 4,416,887
INTANGIBLE ASSETS 3,382,512 3,435,725
OTHER ASSETS 7,776,904 7,829,813
------------------------------------
TOTAL ASSETS $301,503,888 $299,876,992
====================================
</TABLE>
(1) Derived from fiscal year ended December 28, 1997 audited financial
statements. See notes to consolidated financial statements.
<PAGE> 3
SHOLODGE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
APRIL 19, DECEMBER 28,
1998 1997(1)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 13,689,151 $ 10,919,712
Taxes other than on income 1,716,295 1,040,956
Income taxes payable 198,281 473,962
Current portion of long-term debt
and capitalized lease obligations 2,599,739 2,599,739
------------------------------------
Total current liabilities 18,203,466 15,034,369
LONG-TERM DEBT ASSOCIATED WITH LODGING FACILITIES 31,278,638 31,710,579
OTHER LONG-TERM DEBT 122,150,062 122,166,745
CAPITALIZED LEASE OBLIGATIONS 554,460 760,606
DEFERRED GAIN ON SALE/LEASEBACK 33,181,878 34,377,131
MINORITY INTERESTS IN EQUITY OF
CONSOLIDATED SUBSIDIARIES AND PARTNERSHIPS 385,231 475,590
------------------------------------
TOTAL LIABILITIES 205,753,735 204,525,020
------------------------------------
SHAREHOLDERS' EQUITY:
Series A redeemable nonparticipating stock
(no par value; 1,000 shares authorized, no
shares outstanding) -- --
Common stock (no par value; 20,000,000 shares
authorized, 8,255,810 shares issued and outstanding
as of April 19, 1998 and 8,255,810 shares issued
and outstanding as of December 28, 1997) 1,000 1,000
Additional paid-in capital 42,431,520 42,431,520
Retained earnings 53,218,090 52,827,145
Unrealized gain on securities available for sale (net of tax) 99,543 92,307
------------------------------------
TOTAL SHAREHOLDERS' EQUITY 95,750,153 95,351,972
------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $301,503,888 $299,876,992
====================================
</TABLE>
(1) Derived from fiscal year ended December 28, 1997 audited financial
statements. See notes to consolidated financial statements.
<PAGE> 4
SHOLODGE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
FOR THE SIXTEEN WEEKS ENDED APRIL 19, 1998 AND APRIL 20, 1997
<TABLE>
<CAPTION>
16 WEEKS ENDED
APRIL 19, APRIL 20,
1998 1997
---------------------------------
<S> <C> <C>
REVENUES:
Hotel $ 22,615,511 $20,694,148
Franchising 962,499 1,181,884
Management 35,846 37,355
---------------------------------
Total operating revenues 23,613,856 21,913,387
COSTS AND EXPENSES:
Operating expenses:
Hotel 13,507,001 11,433,225
Franchising 748,256 711,579
---------------------------------
Total operating expenses 14,255,257 12,144,804
---------------------------------
Gross operating profit 9,358,599 9,768,583
General and administrative 1,480,610 928,514
Rent expense 3,067,780 242,872
Depreciation and amortization 2,572,478 2,929,057
---------------------------------
Operating profit 2,237,731 5,668,140
OTHER INCOME AND EXPENSES:
Interest expense 3,197,731 2,866,225
Interest income 1,346,271 353,856
---------------------------------
Net interest expense 1,851,460 2,512,369
Other income 243,895 223,202
---------------------------------
EARNINGS BEFORE INCOME TAXES, MINORITY INTERESTS
AND CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING POLICY 630,166 3,378,973
INCOME TAXES 220,000 1,210,000
MINORITY INTERESTS IN EARNINGS OF CONSOLIDATED
SUBSIDIARIES & PARTNERSHIPS 19,221 129,830
---------------------------------
EARNINGS BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING POLICY 390,945 2,039,143
---------------------------------
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING POLICY
(net of tax effect of 691,000) -1,164,114
=================================
NET EARNINGS $ 390,945 $ 875,029
=================================
EARNINGS PER COMMON SHARE
Basic:
Earnings before cumulative effect of change
of accounting policy $ 0.05 $ 0.25
Cumulative effect of change of accounting policy $ (0.14)
Net earnings $ 0.05 $ 0.11
=================================
Diluted:
Earnings before cumulative effect of change of
accounting policy $ 0.05 $ 0.24
Cumulative effect of change of accounting policy $ (0.14)
Net earnings $ 0.05 $ 0.10
=================================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 8,255,810 8,233,777
Diluted 8,353,228 8,354,236
---------------------------------
</TABLE>
See notes to consolidated financial statements.
<PAGE> 5
SHOLODGE , INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIXTEEN WEEKS ENDED APRIL 19, 1998 AND APRIL 20, 1997
(UNAUDITED)
<TABLE>
<CAPTION>
16 WEEKS ENDED
APRIL 19, APRIL 20,
1998 1997
---------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
EARNINGS BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE $ 390,945 $ 2,039,143
ADJUSTMENTS TO RECONCILE NET EARNINGS TO NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 2,572,478 2,929,057
DECREASE IN DEFERRED INCOME TAXES 0 -355,000
INCREASE IN MINORITY INTEREST IN EQUITY
OF CONSOLIDATED SUBSIDIARIES AND PARTNERSHIPS 19,221 129,830
GAIN ON SALE OF PROPERTY & EQUIPMENT -47,906 0
RECOGNITION OF PREVIOUSLY DEFERRED PROFIT ON SALE/LEASEBACK
TRANSACTION -1,195,253 0
ACCRETION OF DISCOUNT ON SECURITIES 0
HELD TO MATURITY -230,473 -212,669
CHANGES IN ASSETS AND LIABILITIES:
DECREASE (INCREASE) IN ACCOUNTS RECEIVABLE 639,706 -822,061
(INCREASE) IN PREPAID EXPENSES -252,568 -631,681
DECREASE IN OTHER ASSETS 26,592 73,361
INCREASE (DECREASE) IN ACCOUNTS PAYABLE
AND ACCRUED EXPENSES 2,769,439 -2,607,191
INCREASE (DECREASE) IN INCOME AND OTHER TAXES 395,587 -842,810
- ----------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 5,087,768 -300,021
CASH FLOWS FROM INVESTING ACTIVITIES:
CAPITAL EXPENDITURES -23,577,852 -16,202,094
PROCEEDS FROM SALE OF PROPERTY & EQUIPMENT 463,513 0
- ----------------------------------------------------------------------------------------------------------
NET CASH (USED IN) INVESTING ACTIVITIES -23,114,339 -16,202,094
CASH FLOWS FROM FINANCING ACTIVITIES:
DECREASE (INCREASE) IN DEFERRED CHARGES 137,413 -158,499
PROCEEDS FROM DIRECT FINANCING LEASES 4,758 143,122
PROCEEDS FROM LONG-TERM DEBT 0 17,900,000
PAYMENTS ON LONG-TERM DEBT -448,624 -744,736
PAYMENTS ON CAPITALIZED LEASE OBLIGATIONS -206,146 -166,665
DISTRIBUTIONS TO MINORITY INTERESTS -109,580 0
EXERCISE OF STOCK OPTIONS 0 5,604
- ----------------------------------------------------------------------------------------------------------
NET CASH (USED IN) PROVIDED BY FINANCING ACTIVITIES -622,179 16,978,826
- ----------------------------------------------------------------------------------------------------------
NET (DECREASE) INCREASE IN CASH AND CASH EQUIVALENTS ($18,648,750) $ 476,711
==========================================================================================================
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD $ 59,105,505 $ 4,259,768
==========================================================================================================
CASH AND CASH EQUIVALENTS - END OF PERIOD $ 40,456,755 $ 4,736,479
==========================================================================================================
</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 or Form 10-K for the fiscal year ended December
28, 1997 and the Company's Quarterly Report on Form 10-Q for the sixteen
weeks ended April 19, 1998.
There have been no changes in accounting policies nor has the composition
of accounts substantially changed since the year ended December 28, 1997.
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 19, 1998
and April 20, 1997 are not necessarily indicative of the operating results
for the entire year.
B. On December 29, 1997, the Company adopted Statement of Financial Accounting
Standards ("SFAS") No. 130, "Reporting Comprehensive Income". Comprehensive
income includes net income and other comprehensive income which is defined
as non-owner transactions in equity. The following table sets forth (in
thousands) the amounts of other comprehensive income included in equity for
the quarters ended April 19, 1998 and April 20, 1997.
<TABLE>
<CAPTION>
4/19/98 4/19/97
------- -------
<S> <C> <C>
Net unrealized gain on securities available
for sale for the quarter $7 None
</TABLE>
C. On December 29, 1997, the Company adopted the practice of capitalizing only
directly identifiable internal costs of identifying and acquiring
commercial properties in accordance with the recently issued Emerging
Issues Task Force ("EITF") Issue No. 97-11. The implementation of this
EITF resulted in increased operating costs of approximately $220,000.
D. The net earnings per share is computed by dividing net earnings by the
weighted average number of common shares outstanding.
<PAGE> 7
ShoLodge, Inc. and Subsidiaries Management's Discussion and Analysis of
Financial Condition and Results of Operations
Results of Operations
For the Quarters Ended April 19, 1998 and April 20, 1997
Total operating revenues for the quarter ended April 19, 1998, were
$23.6 million, or 7.8% more than the total operating revenues of $21.9 million
reported for the first quarter of 1997.
Revenues from hotel operations increased by $1.9 million, or 9.3%, over
the $20.7 million reported for the same period last year. For the 44 same hotels
opened for all of both quarterly periods, an increase of 1.3% in average daily
room rates, from $58.21 in first quarter 1997 to $58.96 in first quarter 1998,
coupled with an increase in average occupancy rates on these hotels from 55.2%
to 56.8% this year, resulted in a net increase in same hotel revenues of 1.6%,
from $19.9 million in first quarter 1997 to $20.2 million in first quarter 1998.
The five hotels opened since the end of 1996 contributed $2.4 million to hotel
operating revenues in first quarter this year, compared to $783,000 in first
quarter 1997.
The Company owns and operated two hotel brands - Shoney's Inns and
Sumner Suites hotels. RevPAR (revenue per available room) for the Company-owned
Shoney's Inns (currently 31) declined slightly, from $28.94 in first quarter
1997 to $28.07 in first quarter 1998. However, the 18 Sumner Suites hotels'
RevPAR increased by 18.9%, from $38.70 in first quarter 1997 to $46.01 in first
quarter this year. The 13 Sumner Suites same-hotels' RevPAR also increased by
18.9%, from $39.48 in first quarter 1997 to $46.96 in first quarter this year.
All future Company-owned hotels currently planned are the Sumner Suites brand.
Franchising revenues declined by $219,000, or 18.6%, in first quarter
1998 from first quarter 1997. The decrease was due to the cancellation of
reservation services by two hotel chains in the first quarter of 1997 when
$388,000 in revenues from these two chains was earned in that quarter versus
none this year. This loss of revenues was partially offset by an increase in
Shoney's Inn franchise fee revenue of $165,000, from $54,000 in first quarter
1997 to $219,000 in first quarter this year. Franchise fee revenue can vary
materially from quarter to quarter depending on the level of franchise sales
activities. Management revenues were not material in either comparative quarter,
but declined slightly, from $37,000 in first quarter last year to $36,000 in
first quarter this year.
Operating expenses from hotel operations for the first quarter of 1998
increased by $2.1 million, or 18.1%, from $11.4 million in first quarter 1997 to
$13.5 million in first quarter 1998, due partially to the $1.9 million increase
in hotel operating revenues. Operating expenses as a percentage of operating
revenues for this activity, however, increased from 55.2% in first quarter 1997
to 59.7% in first quarter 1998. The negative impact on hotel profit margin was
due primarily to increases in expenses in the areas of
<PAGE> 8
payroll related costs, various supplies costs, repairs and maintenance, real
estate taxes, complimentary food and beverage, and travel agents commissions.
Franchising operating expenses increased by $37,000, or 5.2%, from
first quarter 1997 due primarily to increased payroll related expenses. General
and administrative expenses increased by $552,000, or 59.5%, in first quarter
1998 over first quarter 1997. This increase was due primarily to increased
franchise taxes, increased expenses related to the occupancy of the new
corporate headquarters building, increased professional fees, and increased
land acquisition costs as a result of implementing Emerging Issues Task Force
("EITF") No. 97-11.
Rent expense increased by $2.8 million in first quarter this year over
last year's first quarter due to the sale-leaseback of 14 hotels in fourth
quarter 1997, for which net rent expense incurred in first quarter 1998 was $2.8
million.
Depreciation and amortization expense decreased by $357,000, or 12.2%,
from first quarter 1997. The sale-leaseback of 14 hotels in November of 1997
caused depreciation expense to be eliminated on those hotels for first quarter
1998, compared to an expense of $786,000 on those hotels in first quarter 1997.
This reduction was partially offset, however, with an increase of $429,000 in
depreciation and amortization on additions to depreciable and amortizable assets
since first quarter last year.
Interest expense increased by $332,000, while interest income increased
by $992,000 from first quarter 1997, for a decrease of $661,000 in net interest
expense. The increase in interest expense resulted primarily from additional
borrowings incurred in 1997 for capital expenditures for new hotels. The
increase in interest income was due primarily to the interest earned on the
temporary investment of cash received in the sale-leaseback transaction in
fourth quarter 1997.
Other income increased by $21,000, or 9.3%, from first quarter 1997 to
first quarter 1998 due primarily to a small gain on the sale of one parcel of
land held for sale in the first quarter of this year, whereas no similar
transaction occurred in first quarter 1997. Minority interest in earnings and
losses of consolidated subsidiaries and partnerships was $19,000 in first
quarter 1998 compared with $130,000 for the same period in 1997. This was due to
less profitable consolidated entities which include minority ownership, combined
with a negative adjustment of $72,000 in minority interests receivable in first
quarter 1997.
The Company elected to make a change in accounting for pre-opening
costs effective with the beginning of its 1997 fiscal year to reflect the
preferable method of expensing pre-opening costs as incurred, rather than
capitalizing those expenditures and amortizing them over a three year period.
The cumulative effect of this accounting change for periods prior to fiscal 1997
recognized in the first quarter of 1997, net of income tax effect, was a
reduction in net earnings of $1,164,000. This is a one-time non-recurring
charge.
<PAGE> 9
Liquidity and Capital Resources
The Company's cash flows provided by operating activities were $5.1
million in first quarter 1998, compared with $300,000 used in operating
activities in first quarter 1997. The increase in accounts payable and accrued
expenses in first quarter 1998 of $2.8 million contrasted to a decrease in first
quarter 1997 of $2.6 million, accounted for an increase in operating cash flows
of $5.4 million from this source from first quarter 1997 to first quarter 1998.
In first quarter 1998 the Company recognized $1.2 million of deferred profit
from a sale-leaseback transaction which occurred in fourth quarter 1997.
The Company's cash flows used in investing activities were $23.1
million in first quarter 1998 compared with $16.2 million for the comparable
period in 1997. 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 $23.6
million in first quarter 1998 and $16.2 million in first quarter 1997. One small
parcel of land held for sale was sold in first quarter 1998, providing $464,000
in funds from this activity.
Net cash used in financing activities was $622,000 in first quarter
1998 compared with net cash provided by financing activities of $17.0 million in
first quarter 1997. The primary reason for this $17.6 million difference was the
proceeds from borrowings on unsecured bank credit facilities in the amount of
$17.9 in first quarter 1997 versus none in first quarter 1998. The
sale-leaseback of 14 hotels in November 1997 provided funds to repay all
unsecured bank credit facilities with excess funds which are temporarily
invested in high-grade short-term securities until needed for construction and
acquisition of new lodging facilities. As of the end of first quarter 1998, the
balance of these invested funds totaled $35.7 million.
Effective January 16, 1998, the company amended its $75.0 million
unsecured three-year revolving credit facility with a group of five banks. The
interest rate on this amended credit facility is at the lender's base rate or
one hundred seventy-five 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 EBITDAR, as defined in the credit facility (the "Senior
Leverage Ratio") and ranges from base rate minus .25% to base rate plus .50% or
150 to 250 basis points over the 30, 60, 90 or 180 day LIBOR rate, at the
Company's option. The Company pays commitment fees on the unused portion of the
facility ranging from .15% to .40% 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, fixed charge coverage and the
Senior Leverage Ratio. Currently the Company has no borrowings outstanding under
this credit facility.
<PAGE> 10
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 April 19, 1998, the Company had no borrowings outstanding under this
credit facility.
The Company opened four Sumner Suites hotels in 1997 and one in first
quarter 1998. Additionally, renovations of several existing properties were
completed in 1997, and several others are scheduled for completion in fiscal
1998. Furthermore, the Company's new corporate headquarters building was
completed in 1997. The Company currently has seven Sumner Suites hotels under
construction. In addition, the Company has another seven Sumner Suites hotels
under contract which are scheduled to open by the end of first quarter 1999. The
Company expects that approximately $100 million in additional capital funds will
be necessary through first quarter 1999 to fulfill these plans.
The Company has principal payments totaling approximately $2.6 million
due under existing debt instruments through first quarter 1999. The Company
believes that a combination of the balance 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.
The statements appearing in this report which are not
historical facts are forward-looking statements within the meaning of Section
27A of the Securities Act of 1933, as amended, and Section 21E of the Securities
Exchange Act of 1934, as amended, and are subject to risks and uncertainties
that could cause actual results to differ materially from those set forth in the
forward-looking statements, including delays in concluding or the inability to
conclude transactions, the establishment of competing facilities and services,
cancellation of leases or contracts, changes in applicable laws and regulation,
general market acceptance of the Company=s facilities and services, fluctuations
in margins, demand fluctuations, access to debt or equity financing, adverse
uninsured determinations in existing or future litigation or regulatory
proceedings and other risks.
<PAGE> 11
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
Lorraine Donergue v. Sholodge, Inc., Leon Moore, Michael A. Corbett and
Bob Marlowe, Case No. 3-98-0295, United States District Court for the Middle
District of Tennessee, filed March 31, 1998 ("Donergue Case"). Paul Senior v.
Sholodge, Inc., Leon Moore, Michael A. Corbett and Bob Marlowe, Case No.
98C-136, Chancery Court for Sumner County, Tennessee at Gallatin, filed April
29, 1998 ("Senior Case"). Both of these actions name the Company, two of its
officers, Leon Moore and Bob Marlowe, and a former officer, Michael A. Corbett,
as defendants in a purported class action lawsuit by plaintiffs who claim to be
shareholders of the Company. The Donergue Case alleges that the Company violated
Section 10(b) of the Securities Exchange Act of 1934 by issuing allegedly false
and misleading statements and financial information to the investing public
during 1997. The Senior Case alleges that the Company violated certain
anti-fraud provisions of the Tennessee Securities Act of 1980, as amended, based
on essentially the same factual allegations. The plaintiffs seek an unspecified
amount of damages. The Company has filed motions to dismiss both actions for
failure to state a cause of action under the applicable Federal and state
statutes and, alternatively, has moved that the state action be stayed in
deference to the prior Federal court action. The Company intends to defend both
cases vigorously.
Item 6. Exhibits and Reports on Form 8-K
6 (a) Exhibits -
11 Statement Re: Computation of per share earnings
27 Financial Data Schedule
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: June 2, 1998 S/ Leon Moore
-------------
Leon Moore
President, Chief Executive Officer,
Principal Executive Officer, Director
Date: June 2, 1998 S/ Bob Marlowe
--------------
Bob Marlowe
Secretary, Treasurer, Chief Accounting
Officer, Principal Accounting Officer,
Chief Financial Officer, Director
<PAGE> 1
EXHIBIT 11
SHOLODGE, INC AND SUBSIDIARIES
COMPUTATION OF EARNINGS PER COMMON SHARE
BASIC AND ASSUMING DILUTION
<TABLE>
<CAPTION>
16 WEEKS ENDED
---------------------------------
APRIL 19, APRIL 20,
1998 1997
---------------------------------
<S> <C> <C>
BASIC:
EARNINGS APPLICABLE TO COMMON STOCK (BASIC):
FROM CONTINUING OPERATIONS $ 390,945 $ 2,039,143
FROM CUMULATIVE EFFECT OF A CHANGE IN AN ACCOUNTING PRINCIPLE $(1,164,114)
---------------------------------
NET EARNINGS $ 390,945 $ 875,029
=================================
SHARES:
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 8,255,810 8,233,777
=================================
PRIMARY EARNINGS PER SHARE:
FROM CONTINUING OPERATIONS $ 0.05 $ 0.25
FROM CUMULATIVE EFFECT OF A CHANGE IN AN ACCOUNTING PRINCIPLE $ (0.14)
---------------------------------
NET EARNINGS $ 0.05 $ 0.11
=================================
DILUTED:
EARNINGS APPLICABLE TO COMMON STOCK (BASIC):
FROM CONTINUING OPERATIONS $ 390,945 $ 2,039,143
FROM CUMULATIVE EFFECT OF A CHANGE IN AN ACCOUNTING PRINCIPLE $(1,164,114)
---------------------------------
NET EARNINGS $ 390,945 $ 875,029
INTEREST (LESS TAX) ON CONVERTIBLE
SUBORDINATED DEBENTURES $ 797,538 $ 781,962
ADJUSTED EARNINGS APPLICABLE TO COMMON STOCK:
FROM CONTINUING OPERATIONS $ 1,188,483 $ 2,821,105
FROM CUMULATIVE EFFECT OF A CHANGE IN AN ACCOUNTING PRINCIPLE $(1,164,114)
---------------------------------
NET EARNINGS $ 1,188,483 $ 1,656,991
=================================
SHARES:
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT SHARES
OUTSTANDING 8,353,228 8,354,236
SHARES ISSUABLE UPON CONVERSION OFCONVERTIBLE
SUBORDINATED DEBENTURES 2,316,602 2,316,602
---------------------------------
10,669,830 10,670,838
=================================
FULLY DILUTED EARNINGS PER SHARE:
FROM CONTINUING OPERATIONS $ 0.05 $ 0.24
FROM CUMULATIVE EFFECT OF A CHANGE IN AN ACCOUNTING PRINCIPLE $ (0.14)
---------------------------------
NET EARNINGS $ 0.05 $ 0.10
=================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE QUARTERLY
FINANCIAL STATEMENTS FOR THE QUARTER ENDED APRIL 19, 1998 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-27-1998
<PERIOD-START> DEC-29-1997
<PERIOD-END> APR-19-1998
<CASH> 40,456,755
<SECURITIES> 9,453,346
<RECEIVABLES> 4,415,294
<ALLOWANCES> 216,785
<INVENTORY> 0
<CURRENT-ASSETS> 50,137,265
<PP&E> 218,351,684
<DEPRECIATION> 40,322,150
<TOTAL-ASSETS> 301,503,888
<CURRENT-LIABILITIES> 18,203,466
<BONDS> 153,983,160
0
0
<COMMON> 1,000
<OTHER-SE> 95,749,153
<TOTAL-LIABILITY-AND-EQUITY> 301,503,888
<SALES> 22,615,511
<TOTAL-REVENUES> 23,613,856
<CGS> 0
<TOTAL-COSTS> 21,376,125
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,197,731
<INCOME-PRETAX> 610,945
<INCOME-TAX> 220,000
<INCOME-CONTINUING> 390,945
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 390,945
<EPS-PRIMARY> 0.05
<EPS-DILUTED> 0.05
</TABLE>
