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 May 31, 1997
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 _____
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Indicate by check mark whether the registrant has filed all
documents and reports required to be filed by Section 12, 13 or
15(d) of the Securities Exchange Act of 1934 subsequent to the
distribution of securities under a plan confirmed by a court.
Yes _____ No _____
PART I. FINANCIAL INFORMATION
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ITEM 1. FINANCIAL STATEMENTS
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RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
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CONSOLIDATED BALANCE SHEETS
---------------------------
MAY 31, 1997 AND AUGUST 31, 1996
--------------------------------
($000'S omitted, except per share data)
---------------------------------------
(Unaudited)
May 31, August 31,
ASSETS 1997 1996
------ ----------- -----------
Real Estate Investments:
Real Estate Properties
Operating Properties $ 1,346 $ 1,383
Land Held for Sale or
Future Development 6,861 9,769
------------ ------------
8,207 11,152
Mortgage Loans 3 5
------------ ------------
Total real estate investments 8,210 11,157
Allowance for Possible Losses (3,544) (4,700)
------------ ------------
Net real estate investments 4,666 6,457
Investment in Limited Partnership 876 957
Cash and Cash Equivalents 1,919 298
Other Assets 1,505 1,012
------------ ------------
$ 8,966 $ 8,724
============ ============
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</FN>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
MAY 31, 1997 AND AUGUST 31, 1996
--------------------------------
($000's omitted, except per share data)
---------------------------------------
(Unaudited)
May 31, August 31,
LIABILITIES AND SHAREHOLDERS' INVESTMENT 1997 1996
---------------------------------------- ------------ ------------
Accounts Payable $ 105 $ 103
Accrued Salaries, Bonuses and
Other Compensation 841 782
Accrued Property Tax Expense 87 151
Accrued Interest and Other Liabilities 329 389
Term Loans 2,819 2,858
------------ ------------
Total Liabilities 4,181 4,283
------------ ------------
Commitments and Contingencies
Shareholders' Investment
Series A Convertible Preferred Stock,
$1 par value, 1,000,000 shares authorized, 450,000
shares issued and outstanding at May 31, 1997
and August 31, 1996, liquidation preference
and callable at $3,600,000. 450 450
Common Stock, $.01 par value, 5,000,000
shares authorized, 1,538,480 and 1,088,480 shares
issued and outstanding at May 31, 1997 and
August 31, 1996, respectively. 15 11
Paid-in Surplus 16,423 16,202
Accumulated Deficit since December 30, 1985 (12,103) (12,222)
------------ ------------
4,785 4,441
------------ ------------
$ 8,966 $ 8,724
============ ============
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</FN>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
-----------------------------------------
STATEMENTS OF CONSOLIDATED INCOME (LOSS)
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FOR THE THREE AND NINE MONTHS ENDED MAY 31, 1997 AND MAY 31, 1996
-----------------------------------------------------------------
($000's omitted, except per share data)
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For the Three Months Ended For the Nine Months Ended
----------------------------- -----------------------------
May 31, May 31, May 31, May 31,
1997 1996 1997 1996
------------ ------------ ------------ ------------
REVENUES:
Operating revenues ................................ $ 874 $ 819 $ 2,367 $ 2,070
Revenues from hotel management .................... 302 230 800 461
Sales of real estate properties ................... 1,496 399 3,508 457
Equity in net income (loss) of partnership ........ 8 -- (44) --
Income from loans and temporary investments ....... 8 4 18 40
Consulting fee .................................... -- -- 398 --
------------- ------------- ------------- -------------
2,688 1,452 7,047 3,028
------------- ------------- ------------- -------------
COSTS AND EXPENSES:
Operating expenses ................................ 640 650 1,801 1,763
Expenses of hotel management ...................... 190 232 576 491
Expenses of real estate sales ..................... 1,344 390 2,224 319
Depreciation and amortization ..................... 65 54 192 133
Interest expense .................................. 86 86 257 255
General, administration and other ................. 354 339 1,034 1,010
Business development .............................. 774 64 844 147
------------- ------------- ------------- -------------
3,453 1,815 6,928 4,118
------------- ------------- ------------- -------------
NET INCOME (LOSS) ..................................... $ (765) $ (363) $ 119 $ (1,090)
============= ============= ============= =============
LOSS PER COMMON AND
COMMON EQUIVALENT SHARE ............................. $ (0.56) $ (0.38) $ (0.08) $ (1.17)
============= ============= ============= =============
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
FOR THE NINE MONTHS ENDED MAY 31, 1997 AND MAY 31, 1996
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Decrease in Cash and Cash Equivalents
-------------------------------------
($000's Omitted)
----------------
1997 1996
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Cash flows from operating activities:
Net income (loss) ............................................. $ 119 $ (1,090)
Adjustments to reconcile net income (loss) to net
cash used by operating activities:
Depreciation and amortization ............................. 192 133
Gain from sales of real estate property ................... (1,285) (138)
Increase in other assets .................................. (240) (173)
Increase (decrease) in accounts payable and
accrued liabilities ..................................... (63) 96
------------- -------------
Total adjustments ......................................... (1,396) (82)
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Net cash used by operating activities ..................... (1,277) (1,172)
Cash flows from investing activities:
Principal payments received on mortgage loans ............... 2 39
Proceeds from sales of real estate .......................... 3,037 481
Additions to real estate properties ......................... (58) (292)
Investment in limited partnership ........................... 81 (539)
------------- -------------
Net cash received (used) from investing activities ........ 3,062 (311)
Cash flows from financing activities:
Repayments of notes payable ................................. (39) (31)
Payment of dividends on preferred stock ..................... (225) (90)
Issuance of common stock .................................... 100 --
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Net cash used by financing activities ..................... (164) (121)
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Net increase (decrease) in cash and cash equivalents ............ $ 1,621 $ (1,604)
Cash and cash equivalents at beginning of period ................ 298 1,880
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Cash and cash equivalents at end of period ...................... $ 1,919 $ 276
============= =============
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED STATEMENT OF CASH FLOWS
------------------------------------
FOR THE NINE MONTHS ENDED MAY 31, 1997 AND MAY 31, 1996
-------------------------------------------------------
Decrease in Cash and Cash Equivalents
-------------------------------------
($000's Omitted)
----------------
1997 1996
------------- ----------
Supplemental disclosure of cash flow information
and non-cash activity:
Issuance of 125,000 shares of common stock at $.01 par value
in conjunction with purchase of hotel management company ... $ -- $ 1,250
Assumption of notes payable in conjunction with
purchase of hotel management company ....................... $ -- $ 106,000
Decrease in allowance for possible losses
due to sale of parcel of land ............................. $ 1,156,000 --
During the second quarter of fiscal year 1997, the
Company's President and Chief Financial Officer exercised
their stock options for 450,000 shares of the Company's
common stock. In conjunction with the exercise, a promissory
note and cash were received by the Company and common stock
issued as follows:
Cash received from Company's President ................... $ 375,000 --
Promissory note received from
Chief Financial Officer ................................ $ 75,000 --
Issuance of 450,000 shares of common stock
at $.01 par value ...................................... $ 4,500 --
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1997 AND MAY 31, 1996
(Unaudited)
1. GENERAL:
Ridgewood Hotels, Inc. (the "Company") is primarily
engaged in the business of acquiring, developing, operating and
selling real estate property in the Southeast and "Sunbelt"
areas. Additionally, the Company, through its investment in a
limited partnership, is engaged in acquiring and managing hotel
properties in the Southeast, as well as managing other hotels
throughout the country. The Company also owns and operates a
hotel in Longwood, Florida. All of the Company's other
properties are land properties held for sale, and no additional
development is currently anticipated for the land. 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 currently listed in the
broker-dealer "Pink Sheets" and trades in the over-the-counter
market. 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. On April 15, 1997, Security Systems Holdings,
Inc. merged with Triton Group, Ltd., the owner of the preferred
stock. The newly combined entity was named 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 joint venture investments 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,
1996. The results of operations for the nine months ended May
31, 1997 are not necessarily indicative of the results to be
expected for the fiscal year ending August 31, 1997.
The Company has net operating loss carryforwards for
both book and tax purposes which may be used to offset future
taxable income. In September 1993, the Company adopted SFAS
109. The adoption of SFAS 109 did not have a material effect on
the Company's consolidated financial position or results of
operations.
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 investment in the limited
partnership under the Equity Method of Accounting after the
elimination of all intercompany transactions, including
management fees.
Certain prior year amounts have been reclassified to
conform with the current presentation.
3. ALLOWANCE FOR POSSIBLE LOSSES:
The allowance for possible losses decreased by
$1,156,000 during the nine months ended May 31, 1997 due to the
sale of a portion of the land in Dallas, Texas, for which a
reserve had previously been established.
4. DEPOSITS ON FUTURE HOTEL ACQUISITIONS:
During the third quarter of fiscal year 1997, the
Company forfeited $675,000 of non-refundable deposits on the
unsuccessful purchase of a hotel in Atlanta, Georgia. The
Company is continuing to pursue alternatives that may allow it
to buy the hotel.
5. INCOME TAXES:
The Company's income tax provision for the three and
nine months ended May 31, 1997 and May 31, 1996 is as follows:
For the Three For the Nine
Months Ended Months Ended
------------- ------------
May 31, May 31, May 31, May 31,
1997 1996 1997 1996
-------- -------- -------- --------
Income tax provision -- -- $ 48,000 --
Utilization of net
operating loss
carryforwards -- -- (48,000) --
-------- -------- -------- --------
Net income tax provision -- -- -- --
======== ======== ======== ========
6. SHAREHOLDERS' INVESTMENT:
Gain (Loss) Per Common Share --
Gain (loss) per common share is calculated based upon the
weighted average number of shares outstanding of approximately
1,538,000 and 1,286,000 for the three and nine months ended May 31,
1997, respectively, and 1,088,000 and 1,044,000 for the three and
nine months ended May 31, 1996, respectively. Dividends paid or
accrued on preferred stock were $90,000 and $225,000, respectively,
for the three and nine months ended May 31, 1997; and $45,000 and
$135,000, respectively, for the three and nine months ended May 31,
1996. These dividends were deducted from the net income (and added
to the net loss) for purposes of computing the earnings (loss) per
common share.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED MAY 31, 1997
COMPARED TO THE THREE AND NINE MONTHS ENDED
MAY 31, 1996
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 $20,000 per
month and can be adjusted annually. The escrow funds will be used as
tax, insurance and repair needs arise. As of May 31, 1997, there was
approximately $218,000 of escrowed funds related to this loan
agreement.
During the first nine months of fiscal year 1997, the
Company sold land in Florida, Texas and Georgia for net proceeds of
approximately $2,556,000, $432,000 and $50,000, respectively.
The Company has signed contracts for the sale of portions
of its land in Ohio and Florida, and the majority of its land in
Georgia. Total net proceeds from all of the sales would be
approximately $800,000. The sales are scheduled to close in August
and September 1997, but the contracts have several contingencies
which allow the buyers to withdraw at any time.
In January 1997, the Company's President and Chief
Financial Officer exercised their stock options for 450,000 shares of
the Company's common stock. In conjunction with the exercise, a
$75,000 promissory note and $375,000 cash was received in exchange
for the Company's common stock.
During the third quarter of fiscal year 1997, the Company
forfeited $675,000 of non-refundable deposits on the unsuccessful
purchase of a hotel in Atlanta, Georgia. The Company is continuing
to pursue alternatives that may allow it to buy the hotel. The
Company also continues to look for ways to raise additional capital
to pursue other hotel acquisitions.
On August 16, 1995, RW Hotel Partners, L.P. was organized
as a limited partnership (the "Partnership") under the laws of the
State of Delaware. Concurrently, the Company formed Ridgewood
Georgia, Inc. (formerly Ridgewood Hotels, Inc.), a Georgia
corporation ("Ridgewood Georgia") which became the sole general
partner in the Partnership with RW Hotel Investments Associates,
L.L.C. ("Investor") as the limited partner. Ridgewood Georgia has a
1% base distribution percentage versus 99% for the Investor.
However, distribution percentages do vary depending on certain
defined preferences and priorities pursuant to the Partnership
Agreement ("Agreement") which are discussed below. The partnership
was originally formed to acquire a hotel property in Louisville,
Kentucky. The partnership consists of six hotel properties at May
31, 1997. The terms of this partnership will serve as a guideline
for other potential acquisitions with the Investor or other
investors.
Income and loss are allocated to the Company and the
limited partner based upon the formula for allocating distributable
cash as described below but subject to an annual limitation which
would result in no more than 88% of partnership income or loss (as
defined) being allocated to the limited partner.
Distributable Cash is defined as the net income from the
property before depreciation plus any net sale proceeds and net
financing proceeds less capital costs. Distributions of
Distributable Cash shall be made as follows:
- First, to the Investor until there has been distributed
to the Investor an amount equal to a 15% cumulative internal rate of
return on the Investor's investment.
- Second, to Ridgewood Georgia until the aggregate amount
received by Ridgewood Georgia equals the aggregate cash contributions
made by Ridgewood Georgia to the Partnership (as of May 31, 1997,
Ridgewood Georgia had contributed approximately $748,000).
- Third, 12% to Ridgewood Georgia and 88% to the Investor
until there has been distributed to the Investor an amount equal to a
25% cumulative internal rate of return on Investor's investment.
- Fourth, 75% of the residual to the Investor and 25% to
Ridgewood Georgia.
A Management Agreement exists between the Partnership and
the Company as Manager ("Manager") for the purpose of managing hotels
in Kentucky, Georgia and South Carolina. The Manager shall be
entitled to the following property management fees:
(1) 2.5% of the gross revenues from the hotel property.
(2) 1% of the gross revenues from the hotel property as
an incentive fee if distributable cash equals or exceeds 13.5% of
certain aggregate acquisition costs. No management fees were payable
with respect to the first 12-month period of management of the hotel
in Kentucky.
A Construction Management Agreement exists between the
Partnership and the Manager for the purpose of managing future
improvements to the properties.
The Company currently has approximately $748,000 invested
in the Partnership. Also, at May 31, 1997, the Company recorded
approximately $128,000 equity in the income of the Partnership,
bringing the total investment in the limited Partnership to
approximately $876,000. The Partnership purchased a hotel in
Louisville, Kentucky for approximately $16,000,000. In December 1995
and January 1996, the Partnership purchased four hotel properties in
Georgia for approximately $15,000,000 and a hotel in South Carolina
for $4,000,000, respectively. The Company may make future capital
contributions to the Partnership. Management expects to fund such
capital contributions through available cash or from loans from the
Partnership. Additionally, the Company may invest in other
partnerships to acquire hotels in the future.
Since the Company is not currently generating sufficient
operating cash to cover overhead and debt service, the Company must
continue to sell real estate, seek alternative financing or otherwise
recapitalize the Company. The Company also intends to aggressively
pursue the acquisition of hotels and hotel management contracts which
would provide additional cash flow.
RESULTS OF OPERATIONS --
The Company had gains from real estate sales of
approximately $152,000 and $1,285,000 for the three and nine months
ended May 31, 1997. During the three and nine months ended May 31,
1996, the Company had gains from real estate sales of approximately
$9,000 and $138,000. Gains or losses on sales are dependent upon the
specific assets sold in a particular period and the terms of each
sale.
Operating revenues increased approximately $55,000, or 7%,
and $297,000, or 14%, for the three and nine months ended May 31,
1997, respectively, compared to the three and nine months ended May
31, 1996 due to increased revenues at the Company's hotel in
Longwood, Florida.
Revenues from hotel management increased approximately
$72,000, or 31%, and $339,000, or 74%, for the three and nine months
ended May 31, 1997, respectively, compared to the three and nine
months ended May 31, 1996. The increase is due to the acquisition of
hotels and a hotel management company. In turn, expenses of hotel
management increased approximately $85,000, or 17%, for the nine
months ended May 31, 1997 compared to the nine months ended May 31,
1996. Expenses of hotel management decreased by approximately
$42,000, or 18%, for the three months ended May 31, 1997 compared to
May 31, 1996 due to less hotel management staff than in the prior
year's quarter ending May 31, 1996.
Due to the Company's investment in a limited partnership
during fiscal year 1996, the Company recognized equity in the gain
(loss) of the partnership of approximately $8,000 and ($44,000) for
the three and nine months ended May 31, 1997, respectively.
The Company received approximately $398,000 as a
consulting fee during the nine months ended May 31, 1997. This
consulting fee was earned by the Company for its involvement in the
negotiations and purchase of a large hotel by another hotel company.
During the three months ended May 31, 1997, the Company
forfeited $675,000 of non-refundable deposits on the unsuccessful
purchase of a hotel in Atlanta, Georgia. This amount was charged to
business development.
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 May 31, 1997.
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 PROPERTIES, INC.
By: /s/ N. Russell Walden
N. Russell Walden
President
By: /s/ Karen S. Hughes
Karen S. Hughes
Vice President,
Chief Accounting Officer
Date: July 11, 1997