EFFICIENCY LODGE, INC. FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934.
For the quarterly period ended September 30, 1998
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from _____________ to ____________
Commission File Number 000-02290
EFFICIENCY LODGE, INC.
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(Exact name of small business issuer as specified in its charter)
Georgia 58-0898219
- ---------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or Identification No.)
organization)
5342 Old Floyd Road, P.O. Box 635, Mableton, Georgia 30059
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(Address of principal executive offices)
(770)819-0039
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(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
past 12 months (or for such shorter period that 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 / /
Shares outstanding of each of the issuer's classes of common equity at
September 30, 1998: 1,043,683 shares of Common Stock, $0.10 per value
share.
Transitional Small Business Disclosure Format (check one)
Yes / / No / X /
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
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<CAPTION>
Efficiency Lodge, Inc.
CONSOLIDATED BALANCE SHEET
ASSETS
September 30, 1998 December 31, 1997
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(Unaudited)
<S> <C> <C>
Property and equipment, net $16,120,682 $10,197,674
Cash 759,025 169,246
Other assets 1,297,559 1,479,390
----------- -----------
$18,177,266 $11,846,310
LIABILITIES AND STOCKHOLDERS' EQUITY
Mortgage notes payable $16,617,444 $11,222,325
Other liabilities 849,833 519,549
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Total liabilities 17,467,277 11,741,874
Stockholders' equity
Common stock 104,368 104,368
Additional paid-in capital 52,674 52,674
Accumulated earnings 552,947 (52,606)
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Total stockholders' equity 709,989 104,436
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$18,177,266 $11,846,310
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</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Efficiency Lodge, Inc.
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
(Unaudited)
Nine months ended September 30, 1998
Additional
Common paid-in Accumulated
stock capital earnings Total
------- ---------- ----------- -----
<S> <C> <C> <C> <C>
Balance at January 1, 1998 $104,368 $ 52,674 $ (52,606) $104,436
Net income for the nine months -- -- 605,553 605,553
-------- --------- ---------- --------
Balance at September 30, 1998 $104,368 $ 52,674 $ 552,947 $709,989
======== ========= ========== ========
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Efficiency Lodge, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
For the Quarter Ending September 30, 1998 and 1997
For the Nine Months Ended September 30 1998 and 1997
Quarter Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
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<S> <C> <C> <C> <C>
Revenues $1,430,502 $1,215,235 $3,839,287 $3,215,538
Operating expenses 808,258 703,689 2,094,951 2,049,225
---------- ---------- ---------- ----------
Operating income 622,244 511,546 1,744,336 1,166,313
Other (income) expense, net 307,800 291,527 884,940 897,905
---------- ---------- ---------- ----------
Earning (loss) before income
taxes 314,444 220,019 859,396 268,408
Provision for income taxes 94,155 82,317 253,843 105,926
---------- ---------- ---------- ----------
Net earnings (loss) $ 220,289 $ 137,702 $ 605,553 $ 162,482
========== ========== ========== ==========
Net earnings (loss) per common
share $ .21 $ .13 $ .58 $ .16
========== ========== ========== ==========
Weighted average number of
common shares outstanding 1,043,683 1,026,880 1,043,683 1,026,880
========== ========== ========== ==========
/TABLE
<PAGE>
<TABLE>
<CAPTION>
Efficiency Lodge, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended September 30
1998 1997
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<S> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ 605,553 $ 162,482
Adjustments to reconcile net earnings (loss) to
to net cash provided by operating activities:
Depreciation and amortization 381,886 297,389
Changes in assets and liabilities:
Loss on sale of asset -- 46,953
Other assets (160,008) (96,844)
Other liabilities 330,284 269,175
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Net cash provided by operating activities 1,157,715 679,155
Cash flows from investing activities:
Increase in advance to affiliate -- (52,165)
Proceeds from sale of building -- 84,448
Capital expenditures (5,963,056) (1,664,794)
----------- ------------
Net cash used for investing activities (5,963,056) (1,632,511)
Cash flows from financing activities:
Payoff of note on building sold -- (37,963)
Principal payments on long-term debt (5,064,880) (318,449)
Proceeds from issuance of debt 10,460,000 1,700,000
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Net cash provided (used) be financing activities 5,395,120 1,343,588
----------- ------------
Increase (decrease) in cash and cash equivalents 589,779 390,232
Cash and cash equivalents, beginning of period 169,246 159,944
----------- ------------
Cash and cash equivalents, end of period $ 759,025 $ 550,176
=========== ============
Cash paid during the period for interest $ 931,180 $ 888,264
=========== ============
/TABLE
<PAGE>
Efficiency Lodge, Inc.
NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Nine months ended September 30, 1998
NOTE A - BASIS OF PREPARATION
The accompanying unaudited interim consolidated financial
statements of Efficiency Lodge, Inc. (The "Company") have been
prepared in accordance with generally accepted accounting
principles for interim financial statements and with the rules
and regulations of the Securities and Exchange Commission.
Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management,
all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation have been included.
The results of operations for the quarter ended September 30,
1998 are not necessarily indicative of the results that may be
expected for the full year. The interim consolidated financial
statements should be read in conjunction with the Company's 1997
consolidated financial statements and related notes.
NOTE B - NEW ACCOUNTING PRONOUNCEMENT
The FASB has issued Statement of Financial Accounting Standards
No. 128, Earnings Per Share, which is effective for financial
statements issued after December 15, 1997. Early adoption of the
new standard is not permitted. The new standard eliminates
primary and fully diluted earnings per share and requires
presentation of basic and diluted earnings per share together
with disclosures of how the per share amounts were computed. The
adoption of this new standard is not expected to have a material
impact on the disclosure of earnings per share in the financial
statements.
NOTE C - PRO FORMA RESULTS OF OPERATIONS
The following pro forma results of operations for the nine months
ended September 30, 1998 are unaudited and were prepared under
the assumption that the Company was a taxable entity.
Net earnings $ 605,553
Earnings per share $ .58
<PAGE>
Item 2. Management Discussion and Analysis
Total assets increased during the third quarter from $11,846,310
on December 31, 1997 to $18,177,266 on September 30, 1998. This
increase is primarily the result of an increase in cash from $169,246
to $759,025 during the same period and an increase in fixed assets
resulting from two new lodges which began operations during the third
quarter 1998.
Revenue increased during the third quarter from $1,215,235 in the
third quarter of 1997 to $1,430,502 in 1998. This increase can be
attributed to two factors. First, increased occupancies in existing
facilities and secondly, the addition of a new lodge in DeKalb County,
Georgia that had revenue for one month only in the first quarter
during 1997. In addition, two new lodges began operations during the
third quarter 1998. One lodge is located in Cobb County, Georgia (Town
Center Lodge) and had operations for the last half of the third
quarter 1998. The second is located in Columbus, Georgia and had
operations for the months of August and September 1998. The costs
incurred in the construction of the Columbus Lodge have been incurred
by a corporation owned by the two controlling shareholders of the
Company. Upon completion and permanent financing, the ownership of
such corporation was transferred to the Company at no profit to the
controlling shareholders.
Operating expenses increased in the third quarter from $703,689
in 1997 to $808,258 in 1998. This increase is primarily attributable
to the one time start up expenses of the two new lodges. As a result
of the increased revenue and increased expenses, operating income
during the third quarter of 1998 was $622,244 compared to $511,546 for
the same period in 1997. Other expenses increased from $291,527 in
the third quarter of 1997 to $307,800 in 1998 which was primarily
attributable to the increased expenses of the additional lodges.
Earnings before taxes were $314,444 compared to $220,019 during the
same period in 1997. Net earnings were $220,289 for the third quarter
of 1998 compared to $137,702 in the third quarter of 1997. Improved
earnings were again the result of increased revenue and decreased
operating expenses.
In August 1998, five of the existing lodges were refinanced by a
conduit loan from Morgan Stanley Financial Corporation. The
refinancing transaction also included financing for the purchase of
Town Center Lodge from an unrelated third party. The purchase price
for the assets of Town Center Lodge was $3,119,435.<PAGE>
Part II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) The following Exhibits are filed as part of this report:
(b) The registrant filed a Current Report on Form 8-K on
September 3, 1998 reporting an acquisition under Item 2.
On November 2, 1998, the company filed an amendment to
that Form 8-K providing the following financial statements
under Item 7:
(1) Financial Statements of Business Acquired for the
year ended December 31, 1997 and for the period
January 1, 1998 to August 17, 1998
(2) Pro Forma Financial Information for the year ended
December 31, 1997 and the six months ended June 30,
1998
Exhibit
Number Description
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27 Financial Data Schedule - (for SEC use only)
<PAGE>
SIGNATURE
In accordance with the requirements of the Exchange Act, the
Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
EFFICIENCY LODGE, INC.
DATE: November 10, 1998 By: /s/ W. Ray Barnes
W. Ray Barnes
President and Chief Executive Officer
DATE: November 10, 1998 By: /s/ Roy E. Barnes
Roy E. Barnes
Secretary/Treasurer
(Principal Financial and Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000092066
<NAME> EFFICIENCY LODGE, INC.
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<CASH> 759,025
<SECURITIES> 0
<RECEIVABLES> 805,046
<ALLOWANCES> 0
<INVENTORY> 70,509
<CURRENT-ASSETS> 0
<PP&E> 19,588,459
<DEPRECIATION> 3,249,947
<TOTAL-ASSETS> 18,177,266
<CURRENT-LIABILITIES> 0
<BONDS> 16,617,444
0
0
<COMMON> 104,368
<OTHER-SE> 52,674
<TOTAL-LIABILITY-AND-EQUITY> 18,177,266
<SALES> 0
<TOTAL-REVENUES> 3,839,287
<CGS> 0
<TOTAL-COSTS> 2,094,951
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 931,180
<INCOME-PRETAX> 859,396
<INCOME-TAX> 253,843
<INCOME-CONTINUING> 605,553
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 605,553
<EPS-PRIMARY> .58
<EPS-DILUTED> .58
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