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, 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
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(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 - 1,538,480 shares
outstanding at November 30, 1997.
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
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NOVEMBER 30, 1997 AND AUGUST 31, 1997
-------------------------------------
($000'S omitted, except per share data)
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(Unaudited)
Nov. 30, August 31,
ASSETS 1997 1997
------ ----------- -----------
Real Estate Investments:
Real Estate Properties
Operating Properties, net $ 1,322 $ 1,325
Land Held for Sale 6492 6661
------------ ------------
Total real estate investments 7,814 7,986
Allowance for Possible Losses (3,544) (3,544)
------------ ------------
Net real estate investments 4,270 4,442
Investment in Limited Partnership, net 772 772
Cash and Cash Equivalents 1,316 1,596
Other Assets 1,869 1,456
------------ ------------
$ 8,227 $ 8,266
============ ============
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</FN>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
NOVEMBER 30, 1997 AND AUGUST 31, 1997
-------------------------------------
($000's omitted, except per share data)
---------------------------------------
(Unaudited)
Nov. 30, August 31,
LIABILITIES AND SHAREHOLDERS' INVESTMENT 1997 1997
---------------------------------------- ------------ ------------
Accounts Payable $ 84 $ 159
Accrued Salaries, Bonuses and
Other Compensation 862 863
Accrued Property Tax Expense 137 118
Accrued Interest and Other Liabilities 236 284
Term Loans 2,790 2,804
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Total Liabilities 4,109 4,228
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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 at November 30, 1997
and August 31, 1997, liquidation preference
and callable at $3,600,000. 450 450
Common Stock, $.01 par value, 5,000,000
shares authorized, 1,538,480 shares issued
and outstanding at November 30, 1997 and
August 31, 1997. 15 15
Note receivable from officer for
purchase of common stock (75) (75)
Paid-in Surplus 16,243 16,333
Accumulated Deficit since December 30, 1985 (12,515) (12,685)
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4,118 4,038
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$ 8,227 $ 8,266
============ ============
<FN>
The accompanying notes are an integral part of these consolidated
financial statements.
</FN>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
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STATEMENTS OF CONSOLIDATED INCOME
---------------------------------
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1997 AND NOVEMBER 30, 1996
------------------------------------------------------------------
($000's omitted, except per share data)
---------------------------------------
For the Three Months Ended
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Nov. 30, Nov. 30,
1997 1996
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REVENUES:
Revenues from wholly-owned hotel operations ....... $ 701 $ 636
Revenues from hotel management .................... 254 254
Sales of real estate properties ................... 725 1,945
Equity in net income of partnership ............... -- 3
Income from loans and temporary investments ....... 13 (1)
Other ............................................. 3 --
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1,696 2,837
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COSTS AND EXPENSES:
Expenses of wholly-owned real estate properties ... 578 565
Expenses of hotel management ...................... 173 190
Costs of real estate sold ......................... 274 866
Depreciation and amortization ..................... 47 62
Interest expense .................................. 84 85
General, administration and other ................. 330 309
Business development .............................. 40 32
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1,526 2,109
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NET INCOME ............................................ $ 170 $ 728
============= =============
EARNINGS PER COMMON SHARE ............................. $ 0.05 $ 0.52
============= =============
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
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CONSOLIDATED STATEMENT OF CASH FLOWS
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FOR THE THREE MONTHS ENDED NOVEMBER 30, 1997 AND NOVEMBER 30, 1996
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Decrease in Cash and Cash Equivalents
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($000's Omitted)
----------------
1997 1996
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Cash flows from operating activities:
Net income .................................................... $ 170 $ 728
Adjustments to reconcile net income to net
cash used by operating activities:
Depreciation and amortization ............................. 47 62
Gain from sales of real estate property ................... (451) (1,079)
Increase in other assets .................................. (427) (213)
Decrease in accounts payable and
accrued liabilities ..................................... (105) (206)
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Total adjustments ......................................... (936) (1,436)
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Net cash used by operating activities ..................... (766) (708)
Cash flows from investing activities:
Proceeds from sales of real estate .......................... 646 1,644
Additions to real estate properties ......................... (56) (22)
Investment in limited partnership ........................... -- 10
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Net cash received from investing activities ............... 590 1,632
Cash flows from financing activities:
Repayments of notes payable ................................. (14) (10)
Payment of dividends on preferred stock ..................... (90) (45)
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Net cash used by financing activities ..................... (104) (55)
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Net increase (decrease) in cash and cash equivalents ............ $ (280) $ 869
Cash and cash equivalents at beginning of period ................ 1,596 298
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Cash and cash equivalents at end of period ...................... $ 1,316 $ 1,167
============= =============
Supplemental disclosure of cash flow information
and non-cash activity:
Decrease in allowance for possible losses due to
sale of parcel of land ...................................... $ 1,156,000
=============
<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, 1997 AND NOVEMBER 30, 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 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 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, 1997. The results of operations for the
three months ended November 30, 1997 are not necessarily
indicative of the results to be expected for the fiscal year
ending August 31, 1998.
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 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. INCOME TAXES:
The Company's income tax provision for the three
months ended November 30, 1997 and November 30, 1996 is as
follows:
For the Three
Months Ended
-------------
Nov. 30, Nov. 30,
1997 1996
-------- --------
Income tax provision 80,000 292,000
Utilization of net operating
loss carryforwards (80,000) (292,000)
-------- --------
Net income tax provision -- --
======== ========
4. SHAREHOLDERS' INVESTMENT:
Gain Per Common Share --
Gain per common share is calculated based upon the
weighted average number of shares outstanding of approximately
1,538,000 for the three months ended November 30, 1997.
The calculation of earnings per common and common
equivalent share as of November 30, 1996 includes certain stock
options. A value of $1.13 per share was used in the calculations,
which was calculated on the average of the bid and ask prices of the
common stock during the three months ended November 30, 1996. The
bid and ask prices were used due to the absence of an established
public trading market in the stock.
Dividends paid or accrued on preferred stock were $90,000
for the three months ended November 30, 1997 and $45,000 for the
three months ended November 30, 1996, respectively. These dividends
were deducted from the net income for purposes of computing the
earnings per common share.
5. SUBSEQUENT EVENTS:
Subsequent to the end of the first quarter in fiscal year
1998, the Company sold property in Ohio and Florida for net proceeds
of approximately $667,000 and $149,000, respectively. The Company
also purchased a 10% interest in a hotel in Houston, Texas which
required a cash outlay of approximately $316,000. The total purchase
price of the hotel was $12,800,000. The Company also receives a
management fee for managing the hotel.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED NOVEMBER 30, 1997
COMPARED TO THE THREE MONTHS ENDED
NOVEMBER 30, 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 November 30, 1997,
there was approximately $342,000 of escrowed funds related to this
loan agreement.
During the first three months of fiscal year 1998, the
Company sold land in Florida, Ohio and Georgia for net proceeds of
approximately $156,000, $172,000 and $318,000, respectively.
Subsequent to the end of the first quarter in fiscal year 1998, the
Company sold property in Ohio and Florida for net proceeds of
approximately $667,000 and $149,000, respectively.
On December 31, 1997 the Company purchased a 10% interest
in a hotel in Houston, Texas which required a cash outlay of
approximately $316,000. The Company also receives a management fee
for managing the hotel.
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., a wholly-owned Georgia corporation ("Ridgewood Georgia") which
became the sole general partner in the Partnership with RW Hotel
Investments, 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 November 30, 1997. The terms of this partnership will
serve as a guideline for other potential acquisitions with this 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 November 30,
1997, Ridgewood Georgia had contributed approximately $772,000).
- 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.
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 $772,000 invested in
the Partnership. As of November 30, 1997, the Company has recorded
approximately $199,000 equity in the income of the Partnership, but
has recorded a provision for possible losses of approximately
$199,000 as there is no indication that the Company will be able to
recover the equity income in the Partnership given the provisions of
the partnership agreement regarding the distribution of cash to the
partners upon liquidation. In August 1995, 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. Including the sale of land in Ohio and
Florida subsequent to November 30, 1997 of approximately $816,000 and
the cash outlay of approximately $316,000 for the hotel in Houston,
Texas, there is available cash of approximately $1.6 million. This
available cash will be used to fund operating losses until new
sources of income can be generated. The Company also intends to
aggressively pursue the acquisition of hotels and hotel management
contracts through similar partnerships as described above which would
provide additional cash flow. Currently, the Company has a letter
proposal with another company to locate and assist in the acquisition
of hotel properties for that company. Additionally, as hotel
properties are acquired, the Company would receive management
contracts to manage those properties. 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, has 1% ownership interest in six
other hotels and 10% ownership in another which it also manages and
currently has four other hotels which it manages but has no
ownership. 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 --
The Company had gains from real estate sales of
approximately $451,000 for the three months ended November 30, 1997.
During the three months ended November 30, 1996, the Company had
gains from real estate sales of approximately $1,079,000. 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 $65,000, or 10%
for the three months ended November 30, 1997 compared to the three
months ended November 30, 1996 due to increased revenues at the
Company's hotel in Longwood, Florida. Both occupancy and the average
daily rate have increased at the hotel, thus increasing revenues.
Expenses of hotel management decreased by approximately
$17,000, or 9%, for the three months ended November 30, 1997 compared
to November 30, 1996 due to less hotel management staff than in the
prior year's quarter ending November 30, 1996.
Operating expenses during the three months ended November
30, 1997 increased $13,000, or 2%, compared to the three months ended
November 30, 1996 due to increased business at the Company's hotel in
Florida.
General, administrative and other expenses increased
approximately $21,000, or 7%, for the three months ended November 30,
1997 compared to the three months ended November 30, 1996 as a result
of overall slightly increased overhead.
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, 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 HOTELS, INC.
By: /s/ N. R. Walden
N. Russell Walden
President
By: /s/ Karen S. Hughes
Karen S. Hughes
Vice President,
Chief Accounting Officer
Date: January 13, 1998