<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
Date of Report: July 9, 2000
ShoLodge, Inc.
(Exact name of registrant as specified in its charter)
Tennessee
(State or other jurisdiction of
incorporation or organization)
0-19840 62-1015641
(Commission File Number) (I.R.S. Employer Identification
Number)
130 Maple Drive North
Hendersonville, TN
(Address of principal executive offices)
37075
(Zip Code)
615-264-8000
(Registrant's telephone number)
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ITEM 2 - ACQUISITION OR DISPOSITION OF ASSETS
On July 9, 2000, the Company completed a transaction with Prime Hospitality
Corp. ("Prime") in which it sold to Prime its leasehold interest in 24 Sumner
Suites hotels. The Company's interest in the leases relating to these hotels was
assigned to Prime, and Prime assumed all of the Company's obligations under the
leases in exchange for $1.6 million. As a part of that transaction, the Company
assigned to Prime its interest in a $14 million security deposit securing the
Company's guaranty of the leases, in exchange for $14 million. The Company
leased to Prime its remaining three Sumner Suites hotels on terms similar to
those contained in the Company's lease with Hospitality Properties Trust with an
initial minimum annual rental amount of $2.9 million. The Company also agreed to
construct one 124-room AmeriSuites hotel for Prime on a site owned by Prime at a
construction and development price of $76,500 per room, less Prime's cost of the
land, and the Company agreed to construct two AmeriSuites hotels on sites
already owned by the Company (which two hotels may be exchanged upon completion
for two of the 24 Sumner Suites hotels that are included in the leasehold
interests sold to Prime). The Company will also provide other services to Prime
in the future, including reservation services for a fee based on a percentage of
net room revenue. The 27 Sumner Suites hotels currently operating will be
converted by Prime to AmeriSuites hotels within the next few months.
The $15.6 million gross proceeds of the transaction have been applied to (1)
fund an escrow account in the amount of $13.9 million to complete the two
AmeriSuites hotels to be built on the Company's two sites, (2) pay off
furniture, fixture and equipment loans on the three properties leased to Prime
in the amount of $1.6 million, and (3) to pay approximately $98,000 of the
closing costs on the transaction. In connection with the transaction, the
Company repurchased from Prime $2.5 million of the Company's outstanding senior
subordinated notes and convertible subordinated debentures at a cost of $1.6
million.
ITEM 7-FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
- (b) Proforma condensed financial statements
See attached proforma condensed financial statements
(c) Exhibits:
10.1 Sale and Purchase Agreement by and between ShoLodge, Inc.
and Prime Hospitality Corp., dated as of March 16, 2000.
Incorporated by reference to the Company's Annual Report on
Form 10-K, filed with the Commission on March 27, 2000.
10.2 First Amendment to Sale and Purchase Agreement by and between
ShoLodge, Inc. and Prime Hospitality Corp., dated as of July 9, 2000*
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10.3 Lease Agreement by and between Southeast Texas Inns,
Inc., as landlord, and May-Ridge, L.P., as tenant, dated as of
July 9, 2000*
10.4 Contractor and Development Agreement by and between Prime
Hospitality Corp., as owner, Moore & Associates, Inc., as
contractor, and ShoLodge, Inc., as guarantor, dated as of July 9,
2000*
10.5 Interim Agreement for Reservation Services by and between
ShoLodge, Inc. and Prime Hospitality Corp., dated as of July 9, 2000*
10.6 Agreement for Reservation Services by and between ShoLodge, Inc.
and Prime Hospitality Corp., dated as July 9, 2000*
* Filed herewith
<PAGE> 4
Signatures
Pursuant to the requirements of the Securities and 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: July 20, 2000 By: /s/ Bob Marlowe
Bob Marlowe
Secretary-Treasurer
Chief Accounting Officer
<PAGE> 5
SHOLODGE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
APRIL 16, APRIL 16,
2000 PRO FORMA 2000
ASSETS ACTUAL ADJUSTMENTS* PRO FORMA
----------------------------- ----------
<S> <C> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 6,422 $ (2,219)(A) $ 4,203
Restricted cash 803 13,335 (B) 14,138
Accounts receivable-trade, net 5,348 32 (C) 5,380
Construction contracts receivable 597 597
Costs and estimated earnings in excess of billings on construction contracts 6,966 6,966
Income taxes receivable 1,035 1,035
Prepaid expenses 852 852
Notes receivable, net 469 469
Other current assets 443 (247)(D) 196
-------------------------- -----------
Total current assets 22,935 10,901 33,836
NOTES RECEIVABLE, NET 60,843 60,843
PROPERTY AND EQUIPMENT 150,001 150,001
Less accumulated depreciation and amortization (25,742) (25,742)
------------- -----------
124,259 124,259
LAND UNDER DEVELOPMENT OR HELD FOR SALE 9,202 9,202
DEFERRED CHARGES, NET 8,079 8,079
DEPOSITS ON SALE/LEASEBACK 35,280 (35,280)(E) 0
INTANGIBLE ASSETS 3,069 3,069
OTHER ASSETS 3,852 (297)(F) 3,555
-------------------------- -----------
TOTAL ASSETS $267,519 $(24,676) $ 242,843
========================== ===========
</TABLE>
* See referenced footnotes.
<PAGE> 6
<TABLE>
<CAPTION>
APRIL 16, APRIL 16,
2000 PRO FORMA 2000
LIABILITIES AND SHAREHOLDERS' EQUITY ACTUAL ADJUSTMENTS* PRO FORMA
------------------------------ ----------
<S> <C> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 8,821 $ (597)(G) $ 8,224
Taxes other than on income 1,581 1,581
Income taxes payable 6,017 (H) 6,017
Current portion of long-term debt
and capitalized lease obligations 2,083 (528)(I) 1,555
---------------------------- -----------------
Total current liabilities 12,485 4,892 17,377
OTHER LONG-TERM DEBT AND CAPITALIZED LEASE
OBLIGATIONS, LESS CURRENT PORTION 127,300 (3,800)(J) 123,500
DEFERRED INCOME TAXES 2,089 2,089
DEFERRED GAIN ON SALE/LEASEBACK 35,585 (35,585)(K) 0
DEFERRED CREDITS 750 750
MINORITY INTERESTS IN EQUITY OF
CONSOLIDATED SUBSIDIARIES AND PARTNERSHIPS 750 750
---------------------------- -----------------
TOTAL LIABILITIES 178,959 (34,493) 144,466
---------------------------- -----------------
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 5,308,645 shares issued and outstanding
as of April 16, 2000 and 5,372,578 shares issued
and outstanding as of December 26, 1999) 1 1
Additional paid-in capital 42,488 42,488
Retained earnings 63,480 9,817 (L) 73,297
Unrealized gain on securities available for sale (net of tax) 75 75
Treasury stock (17,484) (17,484)
---------------------------- -----------------
TOTAL SHAREHOLDERS' EQUITY 88,560 9,817 98,377
---------------------------- -----------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $267,519 $(24,676) $242,843
============================ =================
</TABLE>
* See referenced footnotes.
<PAGE> 7
FOOTNOTES TO CONSOLIDATED BALANCE SHEET
(A) Net cash expenditures resulting from this transaction.
(B) Cash escrowed to construct the two hotels on Company-owned sites, less
transfer of FF&E reserve to Prime.
(C) Accrued interest receivable on Company debt repurchased from Prime, to be
collected on next interest payment date.
(D) Write-off of operating supplies at the hotels under the lease transferred
to Prime in this transaction.
(E) Elimination of the deposits on sale/leaseback transferred to Prime in this
transaction.
(F) Liquor licenses transferred to Prime in this transaction.
(G) Reserve for FF&E offset to FF&E reserve in restricted cash transferred to
Prime in this transaction.
(H) Income taxes payable resulting from this transaction.
(I) Current portion of FF&E loans paid off.
(J) Non-current portion of FF&E loans paid off, plus $2.5 million of the
Company's debt repurchased from Prime.
(K) Elimination of all deferred gain on sale/leaseback, due to this transaction
transferring the lease to Prime.
(L) The net income effect of this transaction (see consolidated statement of
earnings).
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SHOLODGE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE YEAR ENDED DECEMBER 26, 1999
(IN THOUSANDS)
<TABLE>
<CAPTION>
1999 PRO FORMA 1999
ACTUAL ADJUSTMENTS* PRO FORMA
--------------------------------------- ---------------
<S> <C> <C> <C>
REVENUES:
Hotel $66,188 $(50,795)(A) $15,393
Franchising and management 4,152 2,000 (B) 6,152
Construction and development 11,234 8,371 (C) 19,605
-------------------------------------- --------------
Total revenues 81,574 (40,424) 41,150
COSTS AND EXPENSES:
Operating expenses:
Hotel 46,282 (34,589)(D) 11,693
Franchising and management 2,420 500 (E) 2,920
Construction and development 9,826 7,471 (F) 17,297
-------------------------------------- --------------
Total operating expenses 58,528 (26,618) 31,910
General and administrative 6,342 (1,000)(G) 5,342
Rent expense, net 13,530 (12,874)(H) 656
Depreciation and amortization 7,101 (27)(I) 7,074
-------------------------------------- --------------
Loss from operations (3,927) 95 (3,832)
OTHER INCOME AND (EXPENSES):
Interest expense (12,136) 367 (J) (11,769)
Interest income 6,182 488 (K) 6,670
Gain on sale of property 15,002 13,450 (L) 28,452
Other income 843 2,628 (M) 3,471
-------------------------------------- --------------
EARNINGS (LOSS) BEFORE INCOME TAXES, MINORITY
INTERESTS AND EXTRAORDINARY GAIN 5,964 17,028 22,992
INCOME TAX (BENEFIT) EXPENSE (1,909) (6,471)(N) (8,380)
MINORITY INTERESTS IN EARNINGS OF CONSOLIDATED
SUBSIDIARIES & PARTNERSHIPS (1,910) (1,910)
-------------------------------------- --------------
EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM 2,145 10,557 12,702
EXTRAORDINARY GAIN ON EARLY EXTINGUISHMENT OF DEBT
(net of related tax effect ) 2,394 565 (O) 2,959
-------------------------------------- --------------
NET EARNINGS (LOSS) $ 4,539 $ 11,122 $15,661
====================================== ==============
</TABLE>
* See referenced footnotes.
<PAGE> 9
SHOLODGE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE FIRST QUARTER ENDED APRIL 16, 2000
(IN THOUSANDS)
<TABLE>
<CAPTION>
16 WEEKS ENDED 16 WEEKS ENDED
APRIL 16, 2000 PRO FORMA APRIL 16, 2000
ACTUAL ADJUSTMENTS* PRO FORMA
--------------------------------------- --------------
<S> <C> <C> <C>
REVENUES:
Hotel $22,202 $(17,860)(A) $ 4,342
Franchising and management 897 897
Construction and development 4,133 2,500 (C) 6,633
--------------------------------------- ----------------
Total revenues 27,232 (15,360) 11,872
COSTS AND EXPENSES:
Operating expenses:
Hotel 15,687 (12,083)(D) 3,604
Franchising and management 818 818
Construction and development 4,023 2,300 (F) 6,323
--------------------------------------- ----------------
Total operating expenses 20,528 (9,783) 10,745
General and administrative 1,402 (300)(G) 1,102
Rent expense, net 5,366 (5,169)(H) 197
Depreciation and amortization 2,107 (8)(I) 2,099
--------------------------------------- ----------------
Loss from operations (2,171) (100) (2,271)
OTHER INCOME AND (EXPENSES):
Interest expense (3,619) 113 (J) (3,506)
Interest income 1,872 150 (K) 2,022
Gain on sale of property 299 13,950 (L) 14,249
Other income 158 809 (M) 967
--------------------------------------- ----------------
EARNINGS (LOSS) BEFORE INCOME TAXES, MINORITY
INTERESTS AND EXTRAORDINARY GAIN (3,461) 14,922 11,461
INCOME TAX (BENEFIT) EXPENSE (1,197) (5,670)(N) (6,867)
MINORITY INTERESTS IN EARNINGS OF CONSOLIDATED
SUBSIDIARIES & PARTNERSHIPS (19) (19)
--------------------------------------- ----------------
EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM (2,283) 9,252 6,969
EXTRAORDINARY GAIN ON EARLY EXTINGUISHMENT OF DEBT
(net of related tax effect ) 251 565 (O) 816
--------------------------------------- ----------------
NET EARNINGS (LOSS) $(2,032) $ 9,817 $ 7,785
======================================= ================
</TABLE>
* See referenced footnotes.
<PAGE> 10
FOOTNOTES TO CONSOLIDATED STATEMENTS OF EARNINGS
(A) Elimination of all Sumner Suites hotel revenues for the period.
(B) Estimated revenues from reservation services to be provided to Prime,
assuming that it would take six months from the date of this transaction
to get the properties on the central reservation system. The estimated
annual revenues from this source is expected to be approximately $4.0
million per year based upon the current number of hotels.
(C) The estimated construction revenues on the 124 unit hotel to be developed
for Prime on a site currently owned by them is $8.4 million, and it is
assumed that the hotel will be completed within one year of the date of
this transaction.
(D) Elimination of all Sumner Suites hotel operating expenses for the period.
(E) Estimated additional expenses incurred in providing the additional
reservation services. The estimated annual additional expense is expected
to be approximately $1.0 million per year based upon the current number of
hotels.
(F) The estimated construction costs on the 124 unit hotel to be developed for
Prime on a site currently owned by them is $7.5 million, and it is assumed
that the hotel will be completed within one year of the date of this
transaction.
(G) General and administrative expenses are expected to be approximately $1.0
million less in the first year due to the reduction in staffing and other
expenses associated with the 27 Sumner Suites no longer operated and
administered by the Company.
(H) Elimination of rent expense incurred on all the Sumner Suites hotels.
(I) Elimination of depreciation on the vehicles on which titles were
transferred at the three properties leased to Prime.
(J) Elimination of interest expense on the FF&E loans paid off and the Company
debt repurchased from Prime.
(K) Estimated interest earned on the $13.9 million funds escrowed to construct
the two hotels on sites owned by the Company; this would be non-recurring
after the first year subsequent to the date of this transaction.
(L) The balance of the deferred gain on sale/leaseback recognized upon the
closing of this transaction, reduced by the related charge-offs and costs
associated with the recognition of the previously deferred gain. This will
be non-recurring.
(M) Base rent income from the lease of the three hotels to Prime.
(N) Income tax estimated at 38% of the net pre-tax effect.
(O) The estimated after-tax gain resulting from the repurchase of the
Company's $2.5 million debt from Prime at a discount.
