<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 18, 1999 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 May 31, 1999, there were 7,273,378 shares of ShoLodge, Inc. common stock
outstanding.
<PAGE> 2
SHOLODGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
APRIL 18, DECEMBER 27,
1999 1998(1)
(UNAUDITED)
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 12,412,891 $ 2,480,984
Restricted Cash 773,026 701,484
Accounts receivable-net 3,942,940 3,251,104
Construction contracts 319,065 27,799
Income taxes receivable 4,775,686 4,775,686
Prepaid expenses 1,053,147 519,534
Notes Receivable-Net 162,500 3,363,394
Other current assets 414,294 443,967
-------------------------------
Total current assets 23,853,549 15,563,952
NOTES RECEIVABLE, NET 53,971,533 58,390,170
PROPERTY AND EQUIPMENT 195,333,653 187,360,706
Less accumulated depreciation and amortization (22,686,500) (20,335,047)
-------------------------------
172,647,153 167,025,659
LAND UNDER DEVELOPMENT OR HELD FOR SALE 9,631,999 9,556,720
DEFERRED CHARGES, NET 9,041,469 9,201,837
DEPOSITS ON SALE/LEASEBACK 28,000,000 28,000,000
DEFERRED TAX ASSET 127,035 127,035
INTANGIBLE ASSETS 3,236,880 3,290,162
OTHER ASSETS 2,665,895 3,845,824
-------------------------------
TOTAL ASSETS $303,175,513 $295,001,359
===============================
</TABLE>
(1) Derived from fiscal year ended December 27, 1998 audited financial
statements. See notes to condensed consolidated financial statements.
<PAGE> 3
SHOLODGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (CONTINUED)
<TABLE>
<CAPTION>
APRIL 18, DECEMBER 27,
1999 1998(1)
(UNAUDITED)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 13,726,620 $ 11,438,292
Taxes other than on income 1,850,697 1,636,220
Current portion of long-term debt
and capitalized lease obligations 26,999,202 21,597,951
--------------------------------
Total current liabilities 42,576,519 34,672,463
OTHER LONG-TERM DEBT AND CAPITALIZED LEASE
OBLIGATIONS, LESS CURRENT PORTION 131,552,794 128,945,784
DEFERRED GAIN ON SALE/LEASEBACK 28,977,608 30,158,244
DEFERRED CREDITS 1,935,262 2,368,523
MINORITY INTERESTS IN EQUITY OF
CONSOLIDATED SUBSIDIARIES AND PARTNERSHIPS 1,005,706 757,311
-------------------------------
TOTAL LIABILITIES 206,047,889 196,902,325
--------------------------------
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, 7,262,910 shares issued and outstanding
as of April 18, 1999 and 7,472,310 shares issued
and outstanding as of December 27, 1998) 1,000 1,000
Additional paid-in capital 42,435,645 42,433,395
Retained earnings 61,349,472 60,973,496
Unrealized gain on securities available for sale (net of tax) 87,331 67,704
Treasury Stock (6,745,824) (5,376,561)
--------------------------------
TOTAL SHAREHOLDERS' EQUITY 97,127,624 98,099,034
--------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $303,175,513 $295,001,359
================================
</TABLE>
(1) Derived from fiscal year ended December 27, 1998 audited financial
statements. See notes to condensed consolidated financial statements.
<PAGE> 4
SHOLODGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
FOR THE SIXTEEN WEEKS ENDED APRIL 18, 1998 AND APRIL 19, 1988
<TABLE>
<CAPTION>
16 WEEKS ENDED
APRIL 18, APRIL 19,
1999 1998
(AS ADJUSTED)
------------------------------
<S> <C> <C>
REVENUES:
Hotel $18,258,701 $22,615,511
Franchising and management 922,422 998,345
Construction and development 291,265 0
------------------------------
Total revenues 19,472,388 23,613,856
COSTS AND EXPENSES:
Operating expenses:
Hotel 12,044,052 13,507,001
Franchising and management 637,158 748,256
Construction and development 245,938 0
------------------------------
Total operating expenses 12,927,148 14,255,257
General and administrative 1,714,529 1,569,778
Rent expense, net 3,013,532 3,067,780
Depreciation and amortization 2,464,030 2,572,478
------------------------------
(Loss) Income from operations (646,851) 2,148,563
OTHER INCOME AND (EXPENSES):
Interest expense (3,674,653) (3,507,771)
Interest income 1,880,360 1,346,271
Gain on sale of property 4,609,256 49,866
Other income 320,366 194,029
------------------------------
INCOME BEFORE INCOME TAXES AND MINORITY
INTERESTS 2,488,478 230,958
INCOME TAXES (230,000) (81,000)
MINORITY INTERESTS IN EARNINGS OF CONSOLIDATED
SUBSIDIARIES & PARTNERSHIPS (1,882,502) (19,221)
------------------------------
NET INCOME $ 375,976 $ 130,737
==============================
EARNINGS PER COMMON SHARE
Basic $0.05 $0.02
==============================
Diluted $0.05 $0.02
==============================
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING
Basic 7,304,456 8,255,810
Diluted 7,556,835 8,353,228
------------------------------
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE> 5
SHOLODGE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE SIXTEEN WEEKS ENDED APRIL 18, 1999 AND APRIL 19, 1998
<TABLE>
<CAPTION>
16 WEEKS ENDED
APRIL 18, APRIL 19,
1999 1998
(AS ADJUSTED)
--------------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET INCOME $ 375,976 $ 130,737
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 2,464,030 2,572,478
ACCRETION OF DISCOUNT ON SECURITIES
HELD TO MATURITY 0 (230,473)
RECOGNITION OF PREVIOUSLY DEFERRED PROFIT (6,224,534) (1,195,253)
GAIN ON CASUALTY LOSS (93,071) 0
GAIN ON SALE OF PROPERTY AND OTHER ASSETS 0 (47,906)
INCREASE IN MINORITY INTEREST IN EQUITY
OF CONSOLIDATED SUBSIDIARIES AND PARTNERSHIPS 1,882,502 19,221
CHANGES IN ASSETS AND LIABILITIES:
(INCREASE) IN RESTRICTED CASH (71,542) (197,298)
(INCREASE) DECREASE IN ACCOUNTS RECEIVABLE (983,102) 639,706
(INCREASE) IN PREPAID EXPENSES (533,613) (252,568)
(INCREASE) IN OTHER ASSETS (381,470) (18,343)
INCREASE IN ACCOUNTS PAYABLE
AND ACCRUED EXPENSES 2,288,328 2,819,135
INCREASE IN INCOME AND OTHER TAXES 214,477 256,587
--------------------------------
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES (1,062,019) 4,496,023
CASH FLOWS FROM INVESTING ACTIVITIES:
PAYMENTS RECEIVED ON NOTES RECEIVABLE 12,230,168 49,693
CAPITAL EXPENDITURES (7,912,180) (23,228,340)
PROCEEDS FROM SALE OF PROPERTY AND OTHER ASSETS 0 463,513
--------------------------------
NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES 4,317,988 (22,715,134)
CASH FLOWS FROM FINANCING ACTIVITIES:
DECREASE IN DEFERRED CHARGES 34,690 137,413
PROCEEDS FROM LONG-TERM DEBT 12,390,755 0
PAYMENTS ON LONG-TERM DEBT (4,332,144) (448,624)
PAYMENTS ON CAPITALIZED LEASE OBLIGATIONS (50,350) (206,146)
DISTRIBUTIONS TO MINORITY INTERESTS 0 (109,580)
EXERCISE OF STOCK OPTIONS 2,250 0
PURCHASE OF TREASURY STOCK (1,369,263) 0
--------------------------------
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES 6,675,938 (626,937)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 9,931,907 (18,846,048)
CASH AND CASH EQUIVALENTS - BEGINNING OF PERIOD 2,480,984 58,103,004
--------------------------------
CASH AND CASH EQUIVALENTS - END OF PERIOD $12,412,891 $39,256,956
================================
</TABLE>
See notes to condensed consolidated financial statements.
<PAGE> 6
SHOLODGE, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
A. BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q
and Article 10 of Regulation S-X. Accordingly, they do not include all of
the information and footnotes required by generally accepted accounting
principles for complete financial statements.
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.
The condensed consolidated balance sheet at December 27, 1998 has been
derived from the audited consolidated financial statements at that date.
These financial statements should be read in conjunction with the Company's
Annual Report or Form 10-K for the fiscal year ended December 27, 1998.
The fiscal year consists of a 52/53 week year ending the last Sunday of the
year. The four quarters have 16, 12, 12, and 12 weeks in first, second,
third and fourth quarters, respectively, in each fiscal year. When the 53rd
week occurs in a fiscal year, it is added to the fourth fiscal quarter,
making it 13 weeks in length.
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 18, 1999
and April 19, 1998 are not necessarily indicative of the operating results
for the entire year.
B. COMPREHENSIVE INCOME
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 18, 1999 and April 19, 1998.
<TABLE>
<CAPTION>
4/18/99 4/19/98
------- -------
<S> <C> <C>
Net unrealized gain on securities available
for sale for the quarter $20 $7
</TABLE>
<PAGE> 7
C. EARNINGS PER SHARE
Earnings per share was computed by dividing net income by the weighted
average number of common shares outstanding. The following table reconciles
earnings and weighted average shares used in the earnings per share
calculations for the fiscal quarters ended April 18, 1999, and April 19,
1998:
<TABLE>
<CAPTION>
16 WEEKS ENDED
--------------
APRIL 18, APRIL 19,
1999 1998
<S> <C> <C>
BASIC:
NET INCOME APPLICABLE TO COMMON STOCK $ 375,976 $ 130,737
========= =========
SHARES:
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 7,304,456 8,255,810
========= =========
BASIC EARNINGS PER SHARE $ 0.05 $ 0.02
========= =========
DILUTED:
NET INCOME APPLICABLE TO COMMON STOCK $ 375,976 $ 130,737
========= =========
SHARES:
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING 7,304,456 8,255,810
EFFECT OF DILUTIVE SECURITIES (OPTIONS) 252,379 97,418
--------- ---------
WEIGHTED AVERAGE COMMON AND COMMON EQUIVALENT
SHARES OUTSTANDING 7,556,835 8,353,228
========= =========
DILUTED EARNINGS PER SHARE $ 0.05 $ 0.02
========= =========
</TABLE>
<PAGE> 8
D. OPERATING SEGMENT INFORMATION
The Company's significant operating segments are hotel operations,
franchising and other. The hotel operating segment has exceeded 90% of
total revenues for each of the last three fiscal years. None of the
Company's segments conduct foreign operations. Operating profit includes
the operating revenues and expenses directly identifiable with the
operating segment. Identifiable assets are those used directly in the
operations of each segment. A summary of the Company's operations by
segment follows (in thousands of dollars):
<TABLE>
<CAPTION>
16 Weeks Ended
------------------------------------
April 18, 1999 April 19, 1998
(As adjusted)
<S> <C> <C>
Revenues:
Hotel revenues form external customers $ 18,259 $ 22,616
Franchising and other 8,987 19,691
Elimination of intersegment revenue franchising
and other (7,774) (18,693)
-----------------------------
Total revenues $ 19,472 $ 23,614
=============================
Operating profit (loss):
Hotel $ 1,042 $ 3,526
Franchising and other (1,689) (1,377)
-----------------------------
Total operating profit (loss) $ (647) $ 2,149
=============================
Total assets:
Hotel $251,307 $172,903
Franchising and other 51,869 128,251
-----------------------------
Total assets $303,176 $301,154
=============================
Capital expenditures:
Hotel $ 7,576 $ 21,515
Franchising and other 336 1,713
-----------------------------
Total capital expenditures $ 7,912 $ 23,228
=============================
Depreciation and amortization:
Hotel $ 2,074 $ 2,250
Franchising and other 390 322
-----------------------------
Total depreciation and amortization $ 2,464 $ 2,572
=============================
</TABLE>
<PAGE> 9
E. ADJUSTED PRIOR YEAR'S EARNINGS
As reported in the Company's Form 10-K for the fiscal year ended December
27, 1998, the following is a summary of the unaudited financial information
for the first fiscal quarter ended April 19, 1998 (in thousands, except per
share data):
<TABLE>
<CAPTION>
As Originally As
Reported Adjusted
----------------------------
<S> <C> <C>
Total Revenue $23,614 $23,614
Gross Operating Profit 9,359 9,359
Net Income(a) 391 131
Net Income Per Share .05 .02
</TABLE>
(a) Decrease in net income relates to interest expense and general and
administrative expense, most of which had previously been capitalized
as hotel properties under development.
F. CONTINGENCIES
The Company is a party to legal proceedings incidental to its business. In
the opinion of management, any ultimate liability with respect to these
actions will not materially affect the consolidated financial position or
results of operations of the Company. However, legal action pending against
the Company include the following:
In 1997, Tri-State Inns, Inc. and Motels of America, Inc. filed a suit
against ShoLodge Franchise Systems, Inc., a subsidiary of the Company,
seeking to be discharged, relieved and excused of any future performance
under the License Agreement relating to 14 Shoney's Inns, or in the
alternative, compensatory damages, based on theories of alleged breach of
contractual obligations and implied warranties of good faith and fair
dealing, alleged fraudulent inducement based on alleged misrepresentations
and alleged failure to make material disclosures of fact, alleged
promissory estoppel and alleged breach of fiduciary duty. In addition, the
plaintiffs originally sought a declaratory judgment concerning the
provision of the License Agreement which specifies the damages due upon
termination of the License Agreement. On March 18, 1998, the plaintiffs
filed a motion for summary judgment seeking to invalidate the
non-competition and stipulated damages provisions set forth in the License
Agreements. On August 6, 1998, the court denied the plaintiff's motion. The
Company also has filed counter claims against the plaintiffs. The case has
been set for trial on September 7, 1999. The Company intends to continue to
defend the suit vigorously. Neither management or legal counsel can predict
the outcome at this time.
<PAGE> 10
In 1998, two purported class action lawsuits were filed against the Company
and certain officers of the Company, by plaintiffs who claim to be
shareholders and debt security holders of the Company, respectively, both
alleging that the Company violated certain anti-fraud provisions of the
Tennessee Securities Act of 1980, as amended, by issuing allegedly false
and misleading statements and financial information to the investing
public. The complaints seek an unspecified amount of damages and
unspecified injunctive relief. The Company filed motions to dismiss both
suits on the basis that the plaintiff's allegations failed to state a cause
of action under the applicable state statute. The trial court denied both
motions. The court's denial of the Company's motions on these suits are
currently before the Court of Appeals. One case was argued before the Court
of Appeals on May 7, 1999, but the court has not rendered an opinion. Both
cases have been set for trial on September 13, 1999. The Company believes
both suits are without merit and will defend itself vigorously. Neither
management or legal counsel can predict the outcome at this time.
In 1998, the former chief financial officer of the Company, filed a lawsuit
against the Company and its chief executive officer alleging that his
employment by the Company was wrongfully terminated, claiming breach of
contract, fraud, retaliatory discharge and related claims. The plaintiff
seeks $3 million in compensatory damages and punitive and treble damages.
On December 31, 1998 the Company filed a motion to dismiss this lawsuit on
the basis that the plaintiff has intentionally destroyed relevant evidence
during the pendency of the case. The court granted this motion on January
28, 1999 and dismissed the case with prejudice. On March 8, 1999 the
plaintiff filed a Motion to Alter or Amend the Judgment dismissing the
case. The court denied the motion on April 23, 1999. The plaintiff may file
an appeal. The Company believes the suit is without merit and will defend
itself vigorously. Neither management or legal counsel can predict the
outcome at this time.
<PAGE> 11
ShoLodge, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial
Condition and Results of Operations
OVERVIEW
The following discussion should be read in conjunction with the
Company's condensed consolidated financial statements and notes thereto
appearing elsewhere in this quarterly report.
The Company develops, owns and operates all-suites hotels under the
Sumner Suites brand name and is an operator and the exclusive franchisor of
Shoney's Inns. The Company's 26 Sumner Suites owned and operated as of April 18,
1999 are mid-scale, all-suites hotels located in Arizona, Colorado, Florida,
Georgia, Indiana, Kansas, New Mexico, North Carolina, Ohio, Tennessee, Texas and
Virginia. As of April 18, 1999, the Shoney's Inn lodging system consists of 73
Shoney's Inns containing approximately 7,100 rooms of which 17 containing
approximately 1,900 rooms are owned or managed by the Company. Shoney's Inns are
currently located in 21 states with a concentration in the Southeast.
Sumner Suites hotels are marketed primarily to business travelers and,
to a lesser extent, leisure travelers by offering an all-suite setting in a
convenient location at an attractive price/value relationship. Sumner Suites
offer mid-scale accommodations at rates between $75 and $100 per night and are
usually located in or near business or leisure travel destinations in mid-sized
and larger metropolitan markets. A typical Sumner Suites contains from 110 to
135 rooms, lounge facilities, meeting rooms, swimming pool and a fitness room,
and offers a deluxe continental breakfast.
The Sumner Suites concept was launched in 1995 with three hotels. From
1990 until 1995, the Company developed and managed 12 mid-scale, all-suites
hotels under another brand name before selling its interests in those hotels in
March 1995. The Company believes that its experience in developing, constructing
and managing mid-scale, all-suites hotels has enabled it to expand effectively
its development and ownership of the Sumner Suites system. In addition, as
Sumner Suites has a limited presence in the marketplace, the Company is
utilizing its proprietary reservation system, INNLINK, to further expand
awareness of Sumner Suites.
Shoney's Inns operate in the upper economy limited-service segment and
are designed to appeal to both business and leisure travelers, with rooms
usually priced between $40 and $65 per night. The typical Shoney's Inn includes
60 to 120 rooms and, in most cases, meeting rooms. Although Shoney's Inns do not
offer full food service, most offer continental breakfast and most of the
Shoney's Inns are located adjacent or in close proximity to Shoney's
restaurants. Management believes that its strategy of locating most of its
Shoney's Inns in close proximity to free-standing Shoney's restaurants has given
it a competitive advantage over many other limited-service lodging
<PAGE> 12
chains by offering guest services approximating those of full-service facilities
without the additional capital expenditures, operating costs or higher room
rates.
RESULTS OF OPERATIONS
For the Quarters Ended April 18, 1999 and April 19, 1998
Total operating revenues for the quarters ended April 18, 1999, were
$19.5 million, or 17.5% less than the total operating revenues of $23.6 million
reported for the first quarter of 1998.
Revenues from hotel operations decreased by $4.4 million, or 19.3%,
from the $22.6 million reported for the same period last year. For the 32 same
hotels opened for all of both quarterly periods, an increase of 2.5% in average
daily room rates, from $65.26 in first quarter 1998 to $66.90 in first quarter
1999, offset by a decrease in average occupancy rates on these hotels from 55.5%
to 54.1% this year, resulted in an increase in same hotel revenues of 0.4% from
$15.4 million in first quarter 1998 to $15.5 million in first quarter 1999. The
nine hotels opened since the end of 1997 contributed $2.8 million to hotel
operating revenues in first quarter this year, compared to only $14,000 in first
quarter last year from the one hotel which opened near the end of the first
quarter of 1998. Sixteen hotels were sold in third quarter 1998; these hotels
contributed $7.2 million to hotel operating revenues in first quarter 1998
versus none in first quarter this year.
The Company owns and operates two hotel brands - Shoney's Inns and
Sumner Suites hotels. RevPAR (revenue per available room) for all Company-owned
Shoney's Inns decreased from $28.07 in first quarter 1998 (including the 16
hotels sold in third quarter 1998) to $23.13 in first quarter 1999. The 15
Shoney's Inns same-hotels, which are also the only ones currently owned by the
Company, reflected a decrease in RevPAR from $24.73 in first quarter 1998 to
$23.13 in first quarter 1999, due primarily to decreases at two hotels affected
by increased competition from new hotels and the loss of a nearby large
corporate customer. The 26 Sumner Suites hotels' RevPAR decreased by 9.7%, from
$45.91 in first quarter 1998 to $41.45 in first quarter 1999, due primarily to
the lower occupancies at the nine hotels opened since January, 1998, which had
not reached stabilization. However, the 17 Sumner Suites same-hotels' RevPAR
increased by 2.8%, from $46.24 in first quarter 1998 to $47.54 in first quarter
this year. All future Company-owned hotels currently planned will be of the
Sumner Suites brand.
Franchising and management revenues declined by $76,000, or 7.6%, in
first quarter 1999 from first quarter 1998. Initial franchise fees decreased by
$220,000 from first quarter of last year, most of which was offset by a 20.5%
increase in royalty and reservation fees from $737,000 in first quarter 1998 to
$888,000 in first quarter 1999, due primarily to the franchise revenues earned
on the 16 Shoney's Inns sold to a new franchisee in third quarter 1998. Initial
franchise fee revenue can vary materially from
<PAGE> 13
quarter to quarter depending on the level of franchise sales activities.
Revenues from construction and development activities were $291,000 in first
quarter 1999 on one outside construction contract in progress versus none in
first quarter 1998 when no outside construction contracts existed.
Operating expenses from hotel operations for the first quarter of 1999
decreased by $1.5 million, or 10.8%, from $13.5 million in first quarter 1998,
due partially to the $4.4 million decrease in hotel operating revenues. The sale
of the 16 Shoney's Inns in third quarter 1998 accounted for a decrease of $4.2
million in hotel operating expenses from first quarter 1998 to first quarter
1999. The nine Sumner Suites hotels opened in 1998 and first quarter 1999 caused
hotel operating expenses to increase by $2.5 million over first quarter last
year. Hotel operating expenses on the 32 same-hotels increased by 1.9%, or
$178,000, in first quarter 1999 over first quarter 1998. The operating expenses
as a percentage of operating revenues for this activity increased from 59.7% in
first quarter 1998 to 66.0% in first quarter 1999; however, operating expenses
as a percentage of operating revenues on the 32 same-hotels only increased from
59.8% in first quarter 1998 to 60.7% in first quarter 1999. The nine hotels
which opened in 1998 and first quarter 1999 impacted hotel operating expenses
significantly due to pre-opening and startup expenses during their first year or
two after opening before the hotels reach stabilization. Increases in hotel
operating expenses on same-hotels were primarily in the areas of real estate
taxes, repairs and maintenance, credit card discounts, and payroll related
costs.
Franchising and management operating expenses decreased by $111,000, or
14.8%, from first quarter 1998. The decreases were primarily in the central
reservation center operating costs in the areas of payroll and related benefits,
telephone expense, postage and freight, and equipment maintenance costs.
Construction and development expenses in first quarter 1999 were $246,000 on the
one outside construction contract in progress versus none in first quarter 1998
when no outside construction contracts existed. General and administrative
expenses increased by $145,000, or 9.2%, from first quarter 1998. This increase
was due primarily to increased state franchise taxes, professional fees, and
travel expenses.
Rent expense decreased by $54,000 in first quarter this year from last
year's first quarter, due primarily to a reduction in rent by $65,000 associated
with the 16 Shoney's Inns sold in third quarter 1998.
Depreciation and amortization expense decreased by $108,000, or 4.2%,
from first quarter 1998. The sale of the 16 Shoney's Inns in 1998 reduced
depreciation expense in first quarter 1999 by $1.1 million from first quarter
1998. However, depreciation and amortization increased in first quarter 1999
over first quarter 1998 by $1.0 million due to the nine new hotels opened in
1998 and 1999 and various other depreciable assets acquired since first quarter
1998.
<PAGE> 14
Interest expense increased by $167,000, while interest income increased
by $534,000 from first quarter 1998, for a net decrease of $367,000 in net
interest expense. The increase in interest expense resulted from additional
borrowings incurred in 1998 and first quarter 1999 for capital expenditures for
new hotels, partially offset by interest expense reductions from the
extinguishment of debt in third quarter 1998 associated with the hotels sold.
The increase in interest income was due primarily to interest earned on mortgage
notes receivable in the principal amount of $67.5 million from the sale of
hotels in 1998, which exceeded interest earned in first quarter 1998 from cash
temporarily invested from the proceeds of the sale-leaseback transaction which
occurred in the fourth quarter of 1997.
The gain recognized on sale of property in first quarter 1999 totaled
$4.6 million and relates to three of the 16 hotels sold in third quarter 1998,
the recognition of which was originally deferred and recognized on the
installment method. Only $50,000 in gains on sale of property was reported for
first quarter 1998, which related to land held for sale. Other income increased
by $126,000 from first quarter 1998 to first quarter 1999. Other income can vary
widely from quarter to quarter due to the nature of this income and its varied
sources. Minority interests in earnings of consolidated subsidiaries and
partnerships increased from $19,000 in first quarter 1998 to $1.9 million in
first quarter 1999, due primarily to the 40% minority interest in $4.6 million
of the gain on sale of property recognized in first quarter 1999, described
above.
LIQUIDITY AND CAPITAL RESOURCES
The Company's cash flows used in operating activities were $1.1 million
in first quarter 1999, compared with $4.5 million provided by operating
activities in the first quarter 1998. Accounts receivable increased by $1.0
million in first quarter 1999, compared with a decrease of $640,000, in first
quarter 1998, due primarily to the opening of three new hotels in first quarter
1999 and to substantially increased construction contracts receivable in the
first quarter of 1999. The increase in accounts payable in first quarter 1999 of
$2.3 million, compared with a $2.8 million increase in first quarter 1998.
The Company's cash flows provided by investing activities were $4.3
million in first quarter 1999, compared with cash flows used in investing
activities of $22.7 million for the comparable period in 1998. The Company
collected $12.2 million from notes receivable in first quarter 1999, which
related to two hotel properties sold in 1997 and 1998. Only $50,000 was received
in first quarter 1998 from the collection of notes receivable. 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 $7.9 million in first quarter 1999 and $23.2
million in first quarter 1998. One parcel of land held for sale was sold in
first quarter 1998, providing $464,000 in funds.
<PAGE> 15
Net cash provided by financing activities was $6.7 million in first
quarter 1999 compared with net cash used in financing activities of $627,000 in
first quarter 1998. Borrowings, net of repayments, on the bank revolving credit
facility were $4.9 million in first quarter 1999 versus none in first quarter
1998. Payments on long-term debt, other than on the bank revolving credit
facility, were $432,000 in first quarter 1999 compared with $449,000 in first
quarter 1998. Additionally, $3.6 million was borrowed in first quarter 1999 to
finance the purchase of hotel furniture, fixtures, and equipment, versus none in
first quarter 1998. In the first quarter of 1999, the Company repurchased
210,000 shares of its common stock for $1.4 million pursuant to a plan to
repurchase up to $12.5 million of the Company's outstanding common stock. In
1998, 784,000 shares were repurchased for $5.4 million.
The Company maintains a $22.5 million revolving credit facility with a
group of five banks, secured by a pledge of certain promissory notes payable to
the Company, received in connection with the sale of 16 of the Company's lodging
facilities in the third quarter of 1998. Effective October 21, 1998, the Company
and its lenders amended the terms of its revolving credit agreement. The amended
credit facility terminates June 30, 1999. Other terms and conditions of the
amended credit agreement, including interest rates and covenant requirements,
are similar to the previous credit agreement. On April 9, 1999, the Company and
its lenders further amended the agreement to eliminate any future LIBOR
borrowings, to amend the base interest rate to prime plus 1.25% and to require a
monthly maintenance fee. As of April 18, 1999, the Company had $25.2 million
borrowed under this credit facility. The Company intends to repay such borrowing
with monies obtained from various sources including hotel equipment financing,
the sale-leaseback of all or some hotels, land sales, and other debt sources
which the Company is currently negotiating.
The Company also maintains a $1 million unsecured line of credit with
another bank, bearing interest at the lender's prime rate, maturing May 31,
2000. As of April 18, 1999, the Company had no borrowings outstanding under this
credit facility.
The Company opened six new Sumner Suites hotels in 1998 (including one
in first quarter 1998) and three in first quarter 1999. As of the end of the
first fiscal quarter of 1999, one Sumner Suites hotel was under construction
which is expected to open in the third quarter of 1999. The Company estimates
that approximately $6.0 million in capital funds will be necessary to complete
the construction of the hotel under construction. Additionally, the Company has
acquired four sites for future development and estimates that approximately
$29.0 million in capital funds will be required to complete their development,
some or all of which may be complete by the end of 1999. In 1998 the Company
decided to slow its aggressive development schedule of new Sumner Suites hotels
in the near term. This decision was based on current market conditions, rooms
supply in certain areas, and capital availability.
<PAGE> 16
On September 23, 1998, the Company's Board of Directors authorized the
use of up to $12.5 million for the repurchase of shares of the Company's common
stock. The purchases, including block purchases, are to be made from time to
time in the open market at prevailing market prices, or in privately negotiated
transactions at the Company's discretion. No time limit has been placed on the
duration of the stock repurchase plan, and the Company may discontinue the plan
at any time. By the end of the first fiscal quarter of 1999, 994,000 shares had
been repurchased at a cost of $6.7 million.
The Company is investigating various alternatives to maximize
shareholder value. These alternatives could include, without limitation, a
continuation of the development and operation of Sumner Suites and the
franchising and operation of Shoney's Inns, a sale of the remaining Shoney's
Inns, the sale-leaseback of some or all of the Company's Sumner Suites hotels,
negotiating new credit arrangements, developing hotels for other owners, the
repurchase of additional shares of the Company's common stock or outstanding
debt securities, or any combination of these or other strategies. The Company
believes that a combination of net proceeds from possible future sale-leaseback
transactions, the collection of notes receivable, net cash provided by
operations, borrowings under existing and new revolving credit facilities or
mortgage debt, and available furniture, fixture and equipment financing packages
will be sufficient to fund its scheduled hotel development, stock repurchase
plan, debt repayments and operations for the next twelve months, including the
repayment of amounts maturing June 30, 1999, under the Company's revolving line
of credit.
YEAR 2000 ISSUE
The Year 2000 Issue is the result of computer programs being written
using two digits rather than four to define the applicable year. Any of the
Company's computer programs or hardware that have date-sensitive software or
embedded chips may recognize a date using "00" as the year 1900 rather than the
year 2000. This could result in a system failure or miscalculations causing a
possible disruption of operations, including, among other things, a temporary
inability to process transactions, send invoices, or engage in similar normal
business activities.
Based on recent assessments, the Company determined that if will be
required to modify or replace significant portions of its software and certain
hardware so that those systems will properly utilize dates beyond December 31,
1999. The Company presently believes that with modifications or replacements of
existing software and certain hardware, the Year 2000 Issue can be mitigated.
However, if such modifications or replacements are not made, or are not
completed timely, the Year 2000 Issue could have a material impact on the
operations of the Company.
<PAGE> 17
The Company has divided the Year 2000 Issue into what it considers
being critical and non-critical issues. The Company believes that in its line of
business the critical issues involve the ability to process hotel sales
transactions beginning with hotel reservations through settlement and
collection. Additionally, critical importance has been placed on the Company's
ability to process and maintain accurate accounting, financial and corporate
records.
The systems that the Company has identified as being critical are the
core business software applications including, but not limited to, the
following: the IBM AS400 operating system, the accounting and financial
reporting system, the front desk and credit card payment system, the room door
key system, the central reservations system, and the cash management software.
In addition, the computer systems maintained by the Company's banks and the
telecommunications systems maintained by the Company's telecommunications vendor
have been identified as critical systems.
The Company has also identified non-critical issues relating to
peripheral business software including, but not limited to: stand alone personal
computers, in-house development applications, Windows NT and the 98 operating
system, spreadsheet software, word processing software, network server back-up
software, development tools software and computer systems maintained by other
third party vendors.
The Company is currently in the process of making the required
modifications to its existing software systems and scheduling the required
replacements of software and hardware. The Company will utilize both internal
and external resources to program, replace, implement and test these changes.
The Company has not determined the total cost of the Year 2000 project; however,
these costs are not expected to exceed $100,000 nor have a material effect on
its financial statements. The Company has spent less than $50,000 on external
costs on the Year 2000 project through the end of the first fiscal quarter of
1999; however, the Company's internal staff has spent substantial time on the
issue. These costs have been expensed as incurred. The Company plans to complete
the Year 2000 project not later than September, 1999 and is currently on
schedule to meet this target.
The Company believes it has an effective program in place to resolve
the Year 2000 Issue in a timely manner. As noted above, the Company has not yet
completed all necessary phases of the Year 2000 project. In the event that the
Company does not timely complete the project, the Company could be unable to
take reservations, invoice customers or collect payments. In addition,
disruptions in the economy generally resulting from Year 2000 issues could also
materially adversely affect the Company's operations. The amount of potential
liability or lost revenue cannot be reasonably estimated at this time.
The Company currently has no contingency plans in place in the event it
does not complete the Year 2000 project. The Company plans to evaluate the
status of completion in July 1999 and determine whether a contingency plan may
be necessary.
<PAGE> 18
FORWARD-LOOKING STATEMENT DISCLAIMER
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,
in margins, demand fluctuations, access to debt or equity financing, adverse
uninsured determinations in existing or future litigation or regulatory
proceedings and other risks.
MARKET RISK
There have been no material changes in the Company's exposure to market
risk in the first fiscal quarter ended April 18, 1999.
<PAGE> 19
PART II - OTHER INFORMATION
Item 1. Paul Senior v. ShoLodge, Inc., Leon Moore and Bob Marlowe, Case
No. 98C-136, Chancery Court for Sumner County, Tennessee at Gallatin,
filed April 29, 1998 (the "Senior Case"). This case names the Company
and two of its officers, Leon Moore and Bob Marlowe, as defendants in
a class action lawsuit by plaintiffs who claim to be shareholders of
the Company. The case originally named Michael A. Corbett, former
chief financial officer of the Company, as a defendant, but the
plaintiffs subsequently deleted Mr. Corbett as a named defendant. The
Senior Case alleges that the Company violated certain anti-fraud
provisions of the Tennessee Securities Act of 1980, as amended, by
issuing allegedly false and misleading statements and financial
information to the investing public during the first three quarters of
1997. The Company moved to dismiss the complaint on the basis that the
plaintiff's allegations failed to state a cause of action under the
Tennessee Securities Act of 1980. The court denied the motion but
granted the Company's request that the Tennessee Court of Appeals
review the court's decision on an interlocutory basis. The court's
denial of the Company's motion is now before the Court of Appeals. On
January 29, 1999, the Company filed its appellate brief. The case was
argued before the Court of Appeals on May 7, 1999, but the court has
not rendered an opinion as of the date of this filing. The case is
scheduled for trial on September 13, 1999.
Michael A. Corbett v. ShoLodge, Inc. and Leon Moore, Case No. 98C-184,
Chancery Court for Sumner County, Tennessee at Gallatin, filed June
12, 1998. This case was filed by Michael A. Corbett, the former chief
financial officer of the Company, and alleges that his employment by
the Company was wrongfully terminated. The plaintiff alleges breach of
contract, fraud, retaliatory discharge and related claims. The
plaintiff seeks $3 million in compensatory damages and punitive and
treble damages. On December 31, 1998 the Company filed a motion to
dismiss this lawsuit on the basis that the plaintiff has intentionally
destroyed relevant evidence during the pendency of the case. The court
granted this motion on January 28, 1999 and dismissed the case with
prejudice. On March 8, 1999 the plaintiff filed a Motion to Alter or
Amend the Judgment dismissing the case. The court denied the motion on
April 23, 1999. The plaintiff may file an appeal.
No material developments occurred during the first fiscal quarter
ended April 18, 1999, with respect to any other pending litigation.
Item 4. Submission of Matters to a vote of Security Holders
Not applicable
Item 6. Exhibits and Reports on Form 8-K
6 (a) Exhibits -
10.1 Letter Agreement dated April 9, 1999, between First
Union National Bank (f/k/a First Union National
Bank of Tennessee) as Administrative Agent, ShoLodge,
Inc., et. al.
27 Financial Data Schedule for quarter ended April 18,
1999
27.1 Financial Data Schedule (Restated) for quarter ended
April 19, 1998
<PAGE> 20
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 1, 1999 /s/ Leon Moore
----------------------------------------------
Leon Moore
President, Chief Executive Officer, Principal
Executive Officer, Director
Date: June 1, 1999 /s/ Bob Marlowe
-----------------------------------------------
Bob Marlowe
Secretary, Treasurer, Chief Accounting Officer,
Principal Accounting Officer, Chief Financial
Officer, Director
<PAGE> 1
EXHIBIT 10.1
April 9, 1999
Mr. Steve Birdwell
ShoLodge, Inc.
217 West Main Street
Gallatin, Tennessee 37066
Re: Credit Agreement dated as of April 30, 1997 (as supplemented
by Joinder Agreement No. 1 dated as of June 11, 1997, as
amended by First Amendment to Credit Agreement dated as of
January 16, 1998, as supplemented by the Consent Letter
dated as of July 16, 1998, as supplemented by the Consent
and Waiver Letter dated as of August 13, 1998, as amended by
the Second Amendment and Waiver Agreement to Credit
Agreement dated as of October 21, 1998, and as further
amended, restated, supplemented or otherwise modified, the
"Credit Agreement") by and among ShoLodge, Inc.
("ShoLodge"), the Subsidiaries of ShoLodge party thereto
(the "Subsidiary Borrowers", and together with ShoLodge, the
"Borrowers"), the Lenders party thereto (the "Lenders"),
First Union National Bank (f/k/a First Union National Bank
of Tennessee), as Administrative Agent (the "Administrative
Agent"), and NationsBank of Tennessee, N.A., as Co-Agent
(the "Co-Agent")
Dear Steve:
Reference is made to the above-referenced Credit Agreement.
Capitalized terms used herein and not defined herein shall have the meanings
assigned thereto in the Credit Agreement.
I. Waiver of Events of Default.
In accordance with the Credit Agreement, the Borrowers have
requested that the Administrative Agent and the Lenders waive the Event of
Default arising as a result of the non-compliance with Section 9.4, Fixed Charge
Coverage Ratio, of the Credit Agreement for the fiscal quarter ending December
27, 1998.
Subject to and in accordance with the terms and conditions set
forth herein, the Administrative Agent and the Lenders hereby agree to waive the
Event of Default arising as a result of non-compliance with Section 9.4, Fixed
Charge Coverage Ratio, of the Credit Agreement for the fiscal quarter ending
December 27, 1998.
II. Agreement with Respect to Interest and Fees.
Subject to and in accordance with the terms and conditions set
forth herein, the Borrowers, the Administrative Agent and the Lenders hereby
agree that:
<PAGE> 2
(a) from and after the date of acceptance by the Company, on
behalf of the Borrowers, of this letter agreement, (i) the
Borrowers shall only be permitted to request Base Rate Loans
under the Credit Agreement, (ii) the Borrowers shall not be
permitted to request LIBOR Rate Loans under the Credit
Agreement, (iii) the Borrowers shall have no right to
convert any Revolving Credit Loan to or continue any
Revolving Credit Loan as a LIBOR Rate Loan and (iv) the
Lenders shall not be obligated to make any LIBOR Rate Loan
under the Credit Agreement (provided that any LIBOR Rate
Loans outstanding on the date hereof may remain outstanding
until the end of the then current interest Period applicable
thereto);
(b) from and after the date of acceptance by the Company, on
behalf of the Borrowers, of this letter agreement, the
Applicable Margin with respect to Base Rate Loans shall be
1.25%;
(c) on the date of the acceptance by the Company, on behalf of
the Borrowers, of this letter agreement, the Borrowers shall
pay to the Administrative Agent, for the ratable benefit of
the Lenders, a waiver fee in the amount of $125,000; and
(d) on the first Business Day of each calender month during
the remaining term of the Credit Agreement, the Borrowers
shall pay to the Administrative Agent, for the ratable
benefit of the Lenders, a maintenance fee in the amount of
$50,000.
III. Miscellaneous Provisions.
To induce the Administrative Agent and the Lenders to agree to
the terms of this letter agreement, the Borrowers hereby agree that:
i. The agreements set forth herein are specific and limited
and shall not constitute an amendment, acceptance, consent or
waiver of any other provision of, or default or event of default
under, the Credit Agreement, the Loan Documents or any other
document or instrument entered into in connection therewith, or
any commitment or any other undertaking to agree to or otherwise
consider any further amendment, modification, acceptance, consent
or waiver of the provisions set forth therein at any time after
the execution of this letter agreement.
ii. Except as specifically set forth herein, all terms and
provisions of the Credit Agreement and all other documents
executed in connection therewith and all rights of the
Administrative Agent and the Lenders thereunder and all
obligations of the Borrowers and all other parties thereto shall
remain in full force and effect and are ratified and confirmed in
all respects.
iii. The default by the Borrowers in the performance or
observance of any covenant or agreement contained in Section II
of this letter agreement shall constitute an immediate Event of
Default under the Credit Agreement, which Event of Default shall
permit the Administrative Agent and the Lenders the right to
pursue all rights and remedies under the Credit Agreement and the
other Loan Documents. The Borrowers acknowledge that the
covenants and agreements contained in this letter agreement are a
material and
2
<PAGE> 3
substantial inducement to the agreement of the parties hereto to
enter into this letter agreement.
iv. Upon the effectiveness of this letter agreement, each
representation and warranty made by the Borrowers under the
Credit Agreement and the other Loan Documents shall be true and
correct as of the date hereof (or, in the case of each such
representations and warranty deemed to have been made as of a
specific date, as of such date) and no Default or Event of
Default shall have occurred and be continuing.
v. The Borrowers hereby jointly and severally agree to pay
or reimburse (i) the Administrative Agent for all of its
reasonable and customary out-of-pocket costs and expenses
incurred in connection with the preparation, negotiation and
execution of this letter agreement and all other matters
respecting the Credit Agreement, including, without limitation,
the reasonable fees and disbursements of counsel for the
Administrative Agent, and (ii) the Administrative Agent, for the
ratable benefit of the Lenders, for all other fees set forth in
this letter agreement. The Borrowers hereby agree to pay all such
amounts on the date of the acceptance by the Company, on behalf
of the Borrowers, of this letter agreement (or, in the case of
each fee to be made on a specific date, as of such date).
This letter agreement shall be governed and construed in
accordance with the laws of the State of North Carolina, without reference to
the conflicts on choice of law or principles thereof. This letter agreement
embodies the final, entire agreement among the parties hereto and supersedes any
and all prior commitments, agreements, representations and understandings
whether written or oral relating to the subject matter hereof and may be
contradicted or varied by evidence of prior, contemporaneous or subsequent oral
agreements or discussions of the parties hereto. This letter agreement may be
executed in one or more counterparts and on fax counterparts each of which shall
be deemed an original, but all of which shall constitute one and the same
agreement.
Very truly yours,
FIRST UNION NATIONAL BANK (f/k/a FIRST
UNION NATIONAL BANK OF TENNESSEE),
as Administrative Agent
By: /s/ Orville Kronk
-------------------------------------
Name: Orville Kronk
----------------------------------
Title: Vice President and Director
----------------------------------
3
<PAGE> 4
ACCEPTED AND AGREED TO AS OF APRIL 9, 1999.
BORROWERS:
SHOLODGE, INC., on behalf of Itself and the
other Borrowers
By: /s/ Steve Birdwell
Name: Steve Birdwell
Title: Senior Vice President, Chief
Financial Officer
4
<PAGE> 5
ACCEPTED AND AGREED TO AS OF APRIL 9, 1999.
LENDERS:
FIRST UNION NATIONAL BANK (f/k/a FIRST
UNION NATIONAL BANK OF TENNESSEE),
as Swingline Lender and as Lender
By: /s/ Orville Kronk
Name: Orville Kronk
Title: Vice President and Director
5
<PAGE> 6
ACCEPTED AND AGREED TO AS OF APRIL 9, 1999.
NATIONSBANK OF TENNESSEE, N.A., as
Co-Agent and Lender
By: /s/ Sam Belk
Name: Sam Belk
Title: Senior Vice President
6
<PAGE> 7
ACCEPTED AND AGREED TO AS OF APRIL 9, 1999.
SUNTRUST BANK, NASHVILLE, N.A., as Lender
By: /s/ David L. Castilaw
Name: David L. Castilaw
Title: Vice President
7
<PAGE> 8
ACCEPTED AND AGREED TO AS OF APRIL 9, 1999.
FIRST AMERICAN NATIONAL BANK, as Lender
By: /s/ Marcy A. Harris
Name: Marcy A. Harris
Title: Vice President
8
<PAGE> 9
ACCEPTED AND AGREED TO AS OF APRIL 9, 1999.
FIRST TENNESSEE BANK, NATIONAL
ASSOCIATION, as Lender
By: /s/ Kenneth E. Webb
Name: Kenneth E. Webb
Title: Senior Vice President
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS FINANCIAL INFORMATION EXTRACTED FROM THE QUARTERLY
FINANCIAL STATEMENTS FOR THE QUARTER ENDED APRIL 18, 1999 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-26-1999
<PERIOD-END> APR-18-1999
<CASH> 12,412,891
<SECURITIES> 0
<RECEIVABLES> 4,880,559
<ALLOWANCES> 618,554
<INVENTORY> 0
<CURRENT-ASSETS> 23,853,549
<PP&E> 195,333,653
<DEPRECIATION> 22,686,500
<TOTAL-ASSETS> 303,136,156
<CURRENT-LIABILITIES> 42,576,519
<BONDS> 131,552,794
0
0
<COMMON> 1,000
<OTHER-SE> 97,126,624
<TOTAL-LIABILITY-AND-EQUITY> 303,136,156
<SALES> 18,258,701
<TOTAL-REVENUES> 19,472,388
<CGS> 0
<TOTAL-COSTS> 20,119,239
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,674,653
<INCOME-PRETAX> 605,976
<INCOME-TAX> 230,000
<INCOME-CONTINUING> 375,976
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 375,976
<EPS-BASIC> 0.05
<EPS-DILUTED> 0.05
</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 (AS ADJUSTED) AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-27-1998
<PERIOD-END> APR-19-1998
<CASH> 39,256,956
<SECURITIES> 0
<RECEIVABLES> 4,265,294
<ALLOWANCES> 216,785
<INVENTORY> 0
<CURRENT-ASSETS> 50,137,265
<PP&E> 218,002,172
<DEPRECIATION> 40,322,150
<TOTAL-ASSETS> 301,154,376
<CURRENT-LIABILITIES> 18,114,162
<BONDS> 153,983,160
0
0
<COMMON> 1,000
<OTHER-SE> 95,489,945
<TOTAL-LIABILITY-AND-EQUITY> 301,154,376
<SALES> 22,615,511
<TOTAL-REVENUES> 23,613,856
<CGS> 0
<TOTAL-COSTS> 21,465,293
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 3,507,771
<INCOME-PRETAX> 211,737
<INCOME-TAX> 81,000
<INCOME-CONTINUING> 130,737
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 130,737
<EPS-BASIC> 0.02
<EPS-DILUTED> 0.02
</TABLE>
