SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended November 30, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______________ to ______________
Commission file number 0-14019
Ridgewood Hotels, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 58-1656330
- ------------------------------- ------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2859 Paces Ferry Road, Suite 700
Atlanta, Georgia
30339
- -------------------------------------------------------------
(Address of principal executive offices)
(Zip Code)
(770) 434-3670
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(Registrant's telephone number, including area code)
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(Former name, former address and former fiscal year,
if changed since last report)
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 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 _____
Common stock, par value $.01 per share - 1,513,480 shares
outstanding at November 30, 1999.
PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
---------------------------
NOVEMBER 30, 1999 AND AUGUST 31, 1999
-------------------------------------
($000'S omitted, except per share data)
---------------------------------------
(Unaudited)
November 30, August 31,
ASSETS 1999 1999
------ ----------- -----------
Current Assets:
Cash and Cash Equivalents $ 310 $ 471
Receivables 244 241
Other Current Assets 360 394
------------ ------------
Total Current Assets 914 1,106
Real Estate Investments:
Real Estate Properties
Operating Properties, net 1,145 1,172
Land Held for Sale, net 2,033 2,028
Investment in Unconcolidated
Hotel Entities 3,200 1,016
----------- -----------
Total Real Estate Investments 6,378 4,216
Other Assets 423 588
------------ ------------
$ 7,715 $ 5,910
============ ============
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</FN>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
NOVEMBER 30, 1999 AND AUGUST 31, 1999
-------------------------------------
($000's omitted, except per share data)
---------------------------------------
(Unaudited)
November 30, August 31,
LIABILITIES: 1999 1999
----------- ------------ ------------
Current Liabilities:
Current Maturities of Long-Term Debt $ 37 $ 40
Accounts Payable 317 246
Accrued Salaries, Bonuses and
Other Compensation 82 84
Accrued Property Tax Expense 34 111
Accrued Interest and Other Liabilities 411 338
------------ ------------
Total Current Liabilities 881 819
Accrued Pension Liability 912 893
Long-Term Debt 4,566 2,642
------------ ------------
Total Liabilities 6,359 4,354
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' INVESTMENT:
Series A Convertible Cumulative Preferred Stock,
$1 par value, 1,000,000 shares authorized, 450,000
shares issued and outstanding 450 450
Common Stock, $.01 par value, 5,000,000
shares authorized, 1,513,480 shares
issued and outstanding 15 15
Paid-in surplus 15,681 15,681
Accumulated deficit since December 30, 1985 (14,790) (14,590)
------------ ------------
Total Shareholders' Investment 1,356 1,556
------------ ------------
$ 7,715 $ 5,910
============ ============
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</FN>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
($000's omitted, except per share data)
---------------------------------------
Unaudited
---------
For the Three Months Ended
-----------------------------
Nov. 30, Nov. 30,
1999 1998
------------ ------------
REVENUES:
Revenues from wholly-owned hotel operations ....... $ 510 $ 609
Revenues from hotel management .................... 421 306
Sales of real estate properties ................... 226 10
Equity in net income of unconsolidated
entities ........................................ 53 47
Interest income ................................... 1 8
Other ............................................. 2 --
------------- -------------
1,213 980
------------- -------------
COSTS AND EXPENSES:
Expenses of wholly-owned real estate properties ... 537 571
Costs of real estate sold ......................... 3 5
Depreciation and amortization ..................... 88 94
Interest expense .................................. 124 85
General, administration and other ................. 618 467
Business development .............................. 43 36
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1,413 1,258
------------- -------------
NET (LOSS) ............................................ $ (200) $ (278)
============= =============
BASIC AND DILUTED LOSS PER COMMON SHARE ............... $ (0.13) $ (0.24)
============= =============
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
($000's Omitted)
----------------
Unaudited
---------
For the Three Months Ended
------------------------
Nov. 30, Nov. 30,
1999 1998
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Cash flows from operating activities:
Net income (loss) ............................................. $ (200) $ (278)
Adjustments to reconcile net income (loss) to net
cash used by operating activities:
Depreciation and amortization ............................. 88 94
Gain from sales of real estate property ................... (223) (5)
Decrease (increase) in other assets ....................... 152 (14)
Increase in accounts payable and
accrued liabilities ..................................... 84 46
------------- -------------
Total adjustments ......................................... 101 121
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Net cash used by operating activities ..................... (99) (157)
Cash flows from investing activities:
Proceeds from sales of real estate .......................... 84 9
Additions to real estate properties ......................... (10) (33)
Investment in unconsolidated entity ......................... (124) --
------------- -------------
Net cash used by investing activities ..................... (50) (24)
Cash flows from financing activities:
Repayments of notes payable ................................. (12) (15)
Payment of dividends on preferred stock ..................... -- (90)
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Net cash used in financing activities ..................... (12) (105)
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Net decrease in cash and cash equivalents ....................... $ (161) $ (286)
Cash and cash equivalents at beginning of period ................ 471 1,255
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Cash and cash equivalents at end of period ...................... $ 310 $ 969
============= =============
Supplemental disclosure of cash flow information and 1999 1998
non-cash activity: ------------ ------------
Notes payable issued in conjunction with additional
investment in Louisville Hotel, LLC ....................... $ 1,933,000 $ --
Transfer of 10% ownership interest in Houston Hotel, LLC
for additional investment in Louisville Hotel, LLC......... 443,000 --
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1999 AND NOVEMBER 30, 1998
(Unaudited)
1. GENERAL:
Ridgewood Hotels, Inc. (the "Company") is primarily
engaged in the business of acquiring, developing, operating and
managing hotel properties in the Southeast and "Sunbelt" areas.
Additionally, the Company owns several land parcels which are held
for sale. The Company was incorporated under the laws of the State
of Delaware on October 29, 1985. In January 1997, the Company
changed its name from Ridgewood Properties, Inc. to Ridgewood Hotels,
Inc. Prior to December 31, 1985, the Company operated under the name
CMEI, Inc.
The Company's common stock is listed in the National
Association of Securities Dealers (NASDAQ) over-the-counter bulletin
board service. Of the Company's issued and outstanding shares of
common stock, 51% of the common stock is owned by the Company's
President, N. Russell Walden. All of the Company's issued and
outstanding shares of preferred stock are owned by Alarmguard
Holdings, Inc.
The accompanying financial statements of the Company
present the historical cost basis amount of assets, liabilities and
shareholders' investment of the real estate business for the periods
presented. The consolidated financial statements include the
accounts of the Company, its wholly-owned subsidiaries and its
investments in unconsolidated entities after the elimination of all
intercompany amounts.
2. BASIS OF PRESENTATION:
The accompanying consolidated financial statements have
been prepared by the Company, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. In the
opinion of management, the consolidated financial statements reflect
all adjustments, consisting of normal recurring adjustments, which
are necessary to present fairly the financial position, results of
operations and changes in cash flow for the interim periods covered
by this report. Although certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations,
management believes that the disclosures are adequate to make the
information presented not misleading. These financial statements
should be read in conjunction with the audited consolidated financial
statements and notes thereto included in the Company's annual report
for the fiscal year ended August 31, 1999. The results of operations
for the three months ended November 30, 1999 are not necessarily
indicative of the results to be expected for the fiscal year ending
August 31, 2000.
The Company has net operating loss carryforwards for both
book and tax purposes which may be used to offset future taxable
income.
For the purpose of the Statement of Cash Flows, cash
includes cash equivalents which are highly liquid investments with
maturity of three months or less.
The Company accounts for its investments in
unconsolidated entities under the equity method of accounting after
the elimination of all intercompany transactions.
Certain prior year amounts have been reclassified
to conform with the current presentation.
3. INCOME TAXES:
The Company's income tax provision for the three
months ended November 30, 1999 and November 30, 1998 is as follows:
For the Three
Months Ended
-------------
Nov. 30, Nov. 30,
1999 1998
-------- ---------
Income tax provision $ -- $ --
Utilization of net operating
loss carryforwards -- --
-------- --------
Net income tax provision -- --
======== ========
4. SHAREHOLDERS' INVESTMENT:
Loss Per Share --
The following table sets forth the computation of basic
and diluted loss per share:
For the Three
Months Ended
--------------------------
Nov. 30, Nov. 30,
1999 1998
-------- --------
Net loss $ (200,000) $ (278,000)
Less preferred
dividends -- (90,000)
---------- ----------
Net loss available
to common share-
holders $ (200,000) $ (368,000)
Weighted average
shares outstanding -
basic and diluted 1,513,000 1,513,000
========== ==========
Net loss per share -
basic and diluted $ (0.13) $ (0.24)
========== ==========
The effect of the Company's stock options and convertible securities
was excluded from the computations for November 30, 1999 and 1998 as
it is antidilutive. Accordingly, for the periods presented, diluted
net loss per share is the same as basic net loss per share.
5. INVESTMENT IN UNCONSOLIDATED ENTITY
On September 30, 1999, the Company purchased additional equity
in Louisville Hotel, LLC. The Company increased its ownership from
10% to 80%. The consideration issued to acquire the increased
ownership was $2,500,000, composed of the following:
Transfer of 10% ownership interest in
Houston Hotel, LLC $443,000
Cash payment (1) 124,000
Promissory note to Louisville Hotel, L.P.
secured by the Company's ownership
interest in Louisville Hotel, LLC(2) 1,333,000
Promissory note to Louisville Hotel, L.P.
secured by the Company's Phoenix,
Arizona land(2) 300,000
Promissory note to Louisville Hotel, L.P.
secured by one parcel of the Company's
Longwood, Florida land (2) 300,000
----------
Total additional equity in Louisville Hotel,
LLC $2,500,000
==========
(1) The cash to make this payment was obtained from Louisville
Hotel, LLC in connection with a modification of the management
contract of the hotel. This amount represents the unamortized
portion of the original $200,000 participation fee paid to
Louisville Hotel, LLC to acquire the management contract of the
hotel.
(2) The three promissory notes are cross defaulted. The three
promissory notes bear interest at 13% and mature on September
30, 2002.
With 80% ownership, the Company is now the Managing Member of
Louisville Hotel, LLC. Louisville Hotel, L.P. now has 20% ownership in
Louisville Hotel, LLC and is the Non-Managing Member.
Income or loss allocated to the Company is based upon the formula for
distributing cash.
Distributable cash is defined as the net cash realized from
operations but after payment of management fees, principal and interest,
capital improvements and other such retentions as the managing member
determines to be necessary. Distributions of distributable cash from
Louisville Hotel, LLC shall be made as follows:
- First, to the Company in an amount equal to the cumulative interest
paid on the acquisition loans of $1,333,000, $300,000 and $300,000.
The Company would then use these funds to pay Louisville Hotel, L.P.
- Second, a 13% preferred return to Louisville Hotel, L.P. on their
original $3,061,000 investment.
- Third, a 13% preferred return to the Company on its capital
contribution of $1,207,000.
- Fourth, 80% to the Company and 20% to Louisville Hotel, L.P.
Cash from a sale or refinancing would be distributed 10% to Louisville
Hotel, L.P. and 90% to the Company. If a sale or refinancing occurs after
September 30, 2000 but before September 30, 2001, then the distribution
would change to 15% and 85%, respectively.
On November 18, 1999, RW Hotel Partners, L.P. sold the partnership's
remaining hotel in Thomasville, Georgia at a loss. The partnership will
be dissolved, and the Company will neither receive cash nor be required to
pay out cash related to the partnership.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1999
COMPARED TO THE THREE MONTHS ENDED
NOVEMBER 30, 1998
LIQUIDITY AND CAPITAL RESOURCES --
In June 1995, the Company entered into a loan with a commercial
lender to refinance the Ramada Inn in Longwood, Florida. The loan
proceeds are $2,800,000. The loan is for a term of 20 years with an
amortization period of 25 years, at the rate of 10.35%. Principal and
interest payments are approximately $26,000 per month beginning August 1,
1995. In addition, the Company is required to make a repair escrow
payment comprised of 4% of estimated revenues, as well as real estate tax
and insurance escrow payments. The total amount for these items will be a
payment of approximately $22,000 per month and can be adjusted annually.
The escrow funds will be used as tax, insurance and repair needs arise.
As of November 30, 1999, there was approximately $177,000 of escrowed
funds related to this loan agreement.
In November 1999, the Company sold a parcel of land in Georgia
for net proceeds of approximately $84,000.
In June 1999, the Company entered into a contract for the sale
of its hotel and land in Longwood, Florida for approximately $6.1 million.
In November 1999, the contract was amended to include only the sale of the
hotel for $5,000,000. The Company would recognize net profit on the sale
of approximately $3,500,000. There are numerous contingencies which allow
the seller to cancel the contract. Closing would occur approximately 75
days from the amendment date.
Since the Company is not currently generating sufficient
operating cash to cover overhead and debt service, the Company must
continue to sell its real estate assets, seek alternative financing or
otherwise recapitalize the Company. The Company also intends to
aggressively pursue the acquisition of hotels and hotel management
contracts through entities similar to those described above which would
provide additional cash flow. However, given increased competition in the
hotel acquisition market, acquisitions of economically viable properties
are more difficult to identify and purchase.
The Company owns one hotel and has 80% ownership interest in a
joint venture that owns one hotel. The Company also currently has 15
other hotels which it manages but has no ownership interest. Under the
terms of franchise agreements, the Company is required to comply with
standards established by franchisors, including property renovations and
upgrades. The success of the Company's operations continues to be
dependent upon such unpredictable factors as the general and local
economic conditions to which the real estate and hotel industry is
particularly sensitive: labor, environmental issues, weather conditions,
consumer spending or general business conditions and the availability of
satisfactory financing.
RESULTS OF OPERATIONS --
Revenues from wholly-owned hotel operations decreased
approximately $99,000, or 16%, for the three months ended November 30,
1999 compared to the three months ended November 30, 1998 due to decreased
revenues at the Company's hotel in Florida. Several new hotels opened
near the hotel in Longwood, temporarily creating a very competitive
market.
Revenues from hotel management increased approximately
$115,000, or 38% for the three months ended November 30, 1999 compared to
the three months ended November 30, 1998 due primarily to several new
hotel management contracts.
Equity in net income of unconsolidated entities was $53,000
during the three months ended November 30, 1999 compared to $47,000 during
the three months ended November 30, 1998.
The Company had gains from real estate sales of approximately
$223,000 for the three months ended November 30, 1999. During the three
months ended November 30, 1998, the Company had gains from real estate
sales of approximately $5,000. Gains or losses on sales are dependent
upon the specific assets sold in a particular period and the terms of each
sale.
Interest expense increased $39,000, or 46%, for the three
months ended November 30, 1999 compared to the three months ended November
30, 1998. The increase was due to the additional interest paid on the
notes issued in conjunction with the additional investment in Louisville
Hotel, LLC.
General, administration and other expenses increased
approximately $151,000, or 32% for the three months ended November 30,
1999 compared to the three months ended November 30, 1998 . This increase
was primarily due to increased legal fees related to the Strassburger
lawsuit and the addition of several new employees in conjunction with the
increased number of management contracts.
Business development expenses increased $7,000, or 19% for the
three months ended November 30, 1999 compared to the three months ended
November 30, 1998. The increase was due to a slightly overall increase in
costs.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits:
27 Financial Data Schedule
B. Reports on Form 8-K:
No exhibits or reports on Form 8-K were filed
during the three months ended November 30, 1999.
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.
RIDGEWOOD HOTELS, INC.
By: /s/ Byron T. Cooper
Byron T. Cooper
Vice President
Planning & Construction
By: /s/ Karen S. Hughes
Karen S. Hughes
Vice President,
Chief Accounting Officer
Date: January 13, 2000