FORM 10-Q
UNITED STATES 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 Third Quarter Ended October 6, 2002 | Commission File No. 0-19840 |
SHOLODGE, INC.
(Exact name of registrant as specified in its charter)
| Tennessee (State or other jurisdiction of incorporation or organization) |
62-1015641 (I.R.S. Employer Identification Number) |
|
| 130 Maple Drive North, Hendersonville, Tennessee (address of principal executive offices) |
37075 (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 November 15, 2002, there were 5,118,278 shares of ShoLodge, Inc. common stock outstanding.
| PART I | ||||||||
| PART II — OTHER INFORMATION | ||||||||
| SIGNATURES | ||||||||
| CERTIFICATION | ||||||||
| CERTIFICATION | ||||||||
| Section 906 Certification of the CEO and CFO | ||||||||
ShoLodge, Inc. and Subsidiaries
Consolidated Balance Sheets
| October 6, | December 30, | |||||||||
| 2002 | 2001(1) | |||||||||
| (unaudited) | ||||||||||
Assets |
||||||||||
Current assets: |
||||||||||
Cash and cash equivalents |
$ | 1,060,736 | $ | 2,704,161 | ||||||
Restricted cash |
200,000 | 200,000 | ||||||||
Accounts receivable: |
||||||||||
Accounts receivable-trade, net |
4,186,634 | 3,557,591 | ||||||||
Construction contracts |
5,927,117 | 4,016,502 | ||||||||
Costs and estimated earnings in excess of
billings on construction contracts |
401,564 | 3,063,747 | ||||||||
Prepaid expenses |
661,869 | 365,849 | ||||||||
Notes receivable, net |
63,247,337 | 1,728,340 | ||||||||
Other current assets |
170,995 | 153,766 | ||||||||
Total current assets |
75,856,252 | 15,789,956 | ||||||||
Notes receivable, net |
10,151,457 | 68,227,306 | ||||||||
Restricted cash |
24,194 | 1,781,747 | ||||||||
Property and equipment |
114,182,786 | 123,112,190 | ||||||||
Less accumulated depreciation and amortization |
(22,098,664 | ) | (21,944,927 | ) | ||||||
| 92,084,122 | 101,167,263 | |||||||||
Land under development or held for sale |
11,124,795 | 9,254,986 | ||||||||
Deferred charges, net |
2,345,670 | 6,111,825 | ||||||||
Goodwill, net |
765,711 | 2,387,100 | ||||||||
Trademark, franchise costs and reservation rights, net |
128,104 | 408,559 | ||||||||
Other assets |
1,269,578 | 1,457,907 | ||||||||
| $ | 193,749,883 | $ | 206,586,649 | |||||||
| (1) | Derived from fiscal year ended December 30, 2001 audited financial statements. | |
| See accompanying notes. |
ShoLodge, Inc. and Subsidiaries
Consolidated Balance Sheets (continued)
| October 6, | December 30, | |||||||||
| 2002 | 2001(1) | |||||||||
| (unaudited) | ||||||||||
Liabilities and Shareholders’ equity |
||||||||||
Current liabilities: |
||||||||||
Accounts payable and accrued expenses |
$ | 8,876,447 | $ | 14,171,631 | ||||||
Taxes payable other than on income |
569,142 | 476,809 | ||||||||
Income taxes payable |
1,057,258 | 3,859,873 | ||||||||
Current portion of long-term debt |
4,009,967 | 4,058,700 | ||||||||
Total current liabilities |
14,512,814 | 22,567,013 | ||||||||
Long-term debt, less current portion |
86,991,637 | 86,293,381 | ||||||||
Deferred income taxes |
992,275 | 992,275 | ||||||||
Deferred gain on sale/leaseback |
— | 4,129,962 | ||||||||
Deferred credits |
2,366,829 | 2,545,004 | ||||||||
Minority interests in equity of consolidated subsidiaries and
partnerships |
824,750 | 786,477 | ||||||||
Total liabilities |
105,688,305 | 117,314,112 | ||||||||
Shareholders’ equity: |
||||||||||
Preferred stock (no par value; 1,000,000 shares authorized;
no shares issued) |
— | — | ||||||||
Series A redeemable nonparticipating stock
(no par value; 1,000 shares authorized, no
shares issued) |
— | — | ||||||||
Common stock (no par value; 20,000,000 shares
authorized, 5,118,778 and 5,088,278 shares
issued and outstanding as of October 6, 2002
and December 30, 2001, respectively) |
1,000 | 1,000 | ||||||||
Additional paid-in capital |
23,579,621 | 23,519,506 | ||||||||
Retained earnings |
65,863,900 | 67,001,529 | ||||||||
Unrealized gain on securities available-for-sale, net of income
taxes |
— | 100,307 | ||||||||
Notes receivable from officer, net of discount of $148,305 and
$181,444, as of October 6, 2002 and December 30, 2001,
respectively |
(1,382,943 | ) | (1,349,805 | ) | ||||||
Total shareholders’ equity |
88,061,578 | 89,272,537 | ||||||||
| $ | 193,749,883 | $ | 206,586,649 | |||||||
| (1) | Derived from fiscal year ended December 30, 2001 audited financial statements. | |
| See accompanying notes. |
ShoLodge, Inc. and Subsidiaries
Consolidated Statements of Earnings (unaudited)
| 12 weeks ended | 40 weeks ended | |||||||||||||||||||||
| October 6, | October 7, | October 6, | October 7, | |||||||||||||||||||
| 2002 | 2001 | 2002 | 2001 | |||||||||||||||||||
Revenues: |
||||||||||||||||||||||
Hotel |
$ | 3,520,189 | $ | 2,905,125 | $ | 11,550,205 | $ | 10,114,528 | ||||||||||||||
Franchising, management and reservation services |
1,478,344 | 1,060,872 | 4,701,111 | 2,940,829 | ||||||||||||||||||
Construction and development |
2,934,630 | 7,891,073 | 7,114,691 | 18,048,458 | ||||||||||||||||||
Rent income |
777,722 | 800,269 | 2,647,386 | 2,700,249 | ||||||||||||||||||
Other income |
(25,470 | ) | 8,171 | 40,805 | 134,012 | |||||||||||||||||
Total revenues |
8,685,415 | 12,665,510 | 26,054,198 | 33,938,076 | ||||||||||||||||||
Cost and expenses: |
||||||||||||||||||||||
Hotel |
3,141,537 | 2,353,337 | 9,347,601 | 7,832,266 | ||||||||||||||||||
Franchising, management and reservation services |
1,159,087 | 494,907 | 3,082,636 | 1,426,563 | ||||||||||||||||||
Construction and development |
3,052,646 | 7,425,456 | 8,270,784 | 16,846,922 | ||||||||||||||||||
Rent expense, net |
161,507 | 156,589 | 470,990 | 466,438 | ||||||||||||||||||
General and administrative |
1,548,815 | 1,324,866 | 5,284,760 | 4,417,648 | ||||||||||||||||||
Depreciation and amortization |
1,016,509 | 982,338 | 3,383,156 | 3,442,386 | ||||||||||||||||||
Write-off of goodwill |
— | — | 2,387,100 | — | ||||||||||||||||||
Write-off of franchise and trademark costs |
— | — | 4,421,535 | — | ||||||||||||||||||
Total cost and expenses |
10,080,101 | 12,737,493 | 36,648,562 | 34,432,223 | ||||||||||||||||||
Operating loss |
(1,394,686 | ) | (71,983 | ) | (10,594,364 | ) | (494,147 | ) | ||||||||||||||
Gain on sale of property and leasehold interests |
449,632 | 117,675 | 596,897 | 3,797,066 | ||||||||||||||||||
Gain on sale of available-for-sale securities |
314,998 | — | 314,998 | — | ||||||||||||||||||
Gain on early extinguishments of debt |
101,460 | 591,694 | 2,605,218 | 847,859 | ||||||||||||||||||
Interest expense |
(2,184,446 | ) | (1,692,095 | ) | (6,901,969 | ) | (6,000,632 | ) | ||||||||||||||
Interest income |
1,216,615 | 1,343,306 | 4,235,872 | 5,075,656 | ||||||||||||||||||
Arbitration award |
— | — | 8,900,000 | — | ||||||||||||||||||
(Loss) earnings from continuing operations before income taxes and minority interests |
(1,496,427 | ) | 288,597 | (843,348 | ) | 3,225,802 | ||||||||||||||||
Income tax benefit (expense) |
37,000 | (198,000 | ) | (421,000 | ) | (1,521,000 | ) | |||||||||||||||
Minority interests in earnings of consolidated
subsidiaries and partnerships |
(12,009 | ) | (12,924 | ) | (38,271 | ) | (44,951 | ) | ||||||||||||||
(Loss) earnings from continuing operations |
(1,471,436 | ) | 77,673 | (1,302,619 | ) | 1,659,851 | ||||||||||||||||
Discontinued operations: |
||||||||||||||||||||||
(Loss) income from operations of hotel
disposed of, net of income tax effect |
(19,641 | ) | 14,055 | (40,082 | ) | 70,833 | ||||||||||||||||
(Loss) gain on disposal of hotel, net of income
tax effect |
(5,403 | ) | — | 205,072 | — | |||||||||||||||||
Net (loss) earnings |
$ | (1,496,480 | ) | $ | 91,728 | $ | (1,137,629 | ) | $ | 1,730,684 | ||||||||||||
Net (loss) earnings per common share: |
||||||||||||||||||||||
Basic: |
||||||||||||||||||||||
Continuing operations |
$ | (0.29 | ) | $ | 0.01 | $ | (0.25 | ) | $ | 0.30 | ||||||||||||
Discontinued operations: |
||||||||||||||||||||||
Operations of hotel disposed of |
(0.00 | ) | 0.01 | (0.01 | ) | 0.01 | ||||||||||||||||
(Loss) gain on sale of hotel disposed of |
(0.00 | ) | — | 0.04 | — | |||||||||||||||||
Net (loss) earnings |
$ | (0.29 | ) | $ | 0.02 | $ | (0.22 | ) | $ | 0.31 | ||||||||||||
Diluted: |
||||||||||||||||||||||
Continuing operations |
$ | (0.29 | ) | $ | 0.01 | $ | (0.25 | ) | $ | 0.30 | ||||||||||||
Discontinued operations: |
||||||||||||||||||||||
Operations of hotel disposed of |
(0.00 | ) | 0.01 | (0.01 | ) | 0.01 | ||||||||||||||||
(Loss) gain on sale of hotel disposed of |
(0.00 | ) | — | 0.04 | — | |||||||||||||||||
Net (loss) earnings |
$ | (0.29 | ) | $ | 0.02 | $ | (0.22 | ) | $ | 0.31 | ||||||||||||
Weighted average common shares outstanding: |
||||||||||||||||||||||
Basic |
5,118,778 | 5,521,873 | 5,112,506 | 5,533,792 | ||||||||||||||||||
Diluted |
5,118,778 | 5,604,016 | 5,112,506 | 5,605,611 | ||||||||||||||||||
See accompanying notes.
ShoLodge, Inc. and Subsidiaries
Consolidated Statements of Cash Flows (unaudited)
| 40 weeks ended | |||||||||||
| October 6, 2002 | October 7, 2001 | ||||||||||
Cash flows from operating activities |
|||||||||||
(Loss) earnings from continuing operations |
$ | (1,302,619 | ) | $ | 1,659,851 | ||||||
Adjustments
to reconcile net (loss) earnings from continuing operations to net
cash used in operating activities: |
|||||||||||
Gain from discontinued operations |
164,990 | 70,833 | |||||||||
Depreciation and amortization |
3,383,156 | 3,442,386 | |||||||||
Write-off of goodwill and other intangible assets |
6,808,635 | — | |||||||||
Amortization of deferred charges recorded as interest expense |
462,757 | 496,360 | |||||||||
Accretion of debt recorded as interest expense |
201,852 | — | |||||||||
Recognition of previously deferred gains |
(178,175 | ) | (255,148 | ) | |||||||
Gain on sale of property and other assets |
(596,897 | ) | (3,797,066 | ) | |||||||
Gain
on sale of available-for-sale securities |
(314,998 | ) | — | ||||||||
Gain on early extinguishments of debt |
(2,605,218 | ) | (847,859 | ) | |||||||
Increase in minority interest in equity of consolidated subsidiaries
and partnerships |
38,271 | 44,951 | |||||||||
Changes in assets and liabilities: |
|||||||||||
Trade receivables |
(629,043 | ) | (286,280 | ) | |||||||
Construction contract receivables |
(1,910,615 | ) | (1,709,577 | ) | |||||||
Costs and estimated earnings in excess of billings on
construction contracts |
2,662,183 | (6,070,625 | ) | ||||||||
Income and other taxes receivable and payable |
(2,710,282 | ) | 603,753 | ||||||||
Prepaid expenses |
(296,020 | ) | (164,690 | ) | |||||||
Other assets |
167,791 | 413,158 | |||||||||
Accounts payable and accrued expenses |
(5,295,184 | ) | 4,821,774 | ||||||||
Net cash used in operating activities |
(1,949,416< | ||||||||||