UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K/A
Amendment No. 1
(Amending Item 7)
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): April 2001
Ridgewood Hotels, Inc.
(Exact name of registrant as specified in its charter)
Delaware 0-14019_ 58-1656330
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification
incorporation) Number)
1106 Highway 124, Hoschton, Georgia 30548
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 867-9497
Explanatory Note: This Amendment No. 1 on Form 8-K/A amends the Current Report
on Form 8-K filed by Ridgewood Hotels, Inc., a Delaware corporation
("Ridgewood"), on July 2, 2001 with respect to Ridgewood's acquisition of
100% of the membership interests in RW Louisville Hotel Associates, LLC, which
owns a hotel in Louisville, Kentucky. This Amendment No. 1 is being filed to set
forth the audited financial statements of RW Louisville Hotel Associates, LLC
for the years ended December 31, 2000 and 1999 and the unaudited pro forma
consolidated financial statements of Ridgewood as of and for the year ended
March 31, 2001.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
(a) Financial Statements of Business Acquired. Included in this Current
Report (see "Index to Financial Statements" attached hereto) are the
following financial statements of RW Louisville Hotel Associates, LLC
for the years ended December 31, 2000 and 1999, together with the
notes thereto, which have been audited by Arthur Andersen LLP, whose
opinion thereon is included herein:
(1) Balance Sheets as of December 31, 2000 and 1999;
(2) Statements of Operations for the years ended December 31, 2000
and 1999;
(3) Statements of Members' Deficit for the years ended December 31,
2000 and 1999; and
(4) Statements of Cash Flows for the years ended December 31, 2000
and 1999.
(b) Pro Forma Financial Information. Included in this Current Report (see
"Index to Financial Statements" attached hereto) are the following
unaudited pro forma consolidated financial statements of Ridgewood as
of March 31, 2001, together with the notes thereto (the "Pro Forma
Statements"):
(1) Unaudited pro forma consolidated balance sheet as of March 31,
2001; and
(2) Unaudited pro forma consolidated statement of income for the
fiscal year ended March 31, 2001.
The Pro Forma Statements should be read in conjunction with the historical
consolidated financial statements of Ridgewood and the historical financial
statements of RW Louisville Hotel Associates, LLC and the related notes thereto.
(c) Exhibits
23.1 Consent of Arthur Andersen LLP
-2-
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the Registrant has duly caused this Report to be signed on its behalf
by the undersigned, thereunto duly authorized.
RIDGEWOOD HOTELS, INC.
By: /s/ Peter Conboy
----------------------------------
Peter Conboy
Director of Finance & Accounting
Dated as of October 18, 2001
-3-
EXHIBIT INDEX
23.1 Consent of Arthur Andersen LLP
INDEX TO FINANCIAL STATEMENTS
Pages
Audited Financial Statements:
Report of Independent Public Accountants....................................F-1
Balance Sheets as of December 31, 2000 and 1999.............................F-2
Statements of Operations for the years
ended December 31, 2000 and 1999.........................................F-3
Statements of Members' Deficit for the years ended
December 31, 2000 and 1999...............................................F-4
Statements of Cash Flows for the years
ended December 31, 2000 and 1999.........................................F-5
Notes to Audited Financial Statements.......................................F-6
Unaudited Pro Forma Consolidated Financial Statements:
Introduction to pro forma financial information.............................F-11
Unaudited pro forma consolidated balance sheet
as of March 31, 2001.....................................................F-12
Notes to unaudited pro forma consolidated balance
sheet as of March 31, 2001...............................................F-13
Unaudited pro forma consolidated statement of income
for the year ended March 31, 2001........................................F-14
Notes to unaudited pro forma consolidated statement of
income for the year ended March 31, 2001.................................F-15
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To RW Louisville Hotel Associates, LLC:
We have audited the accompanying balance sheets of RW LOUISVILLE HOTEL
ASSOCIATES, LLC as of December 31, 2000 and 1999 and the related statements of
operations, members' deficit, and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of RW Louisville Hotel Associates,
LLC as of December 31, 2000 and 1999 and the results of its operations and
its cash flows for the years then ended in conformity with accounting principles
generally accepted in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 6 to the
financial statements, the Company has been severely affected by the terrorist
attacks of September 11, 2001, which raises substantial doubt about its ability
to continue as a going concern. Management's plans in regard to these matters
are also described in Note 6. The financial statements do not include any
adjustment that might result from the outcome of this uncertainty.
Atlanta, Georgia
August 31, 2001
(except with respect to the matter
discussed in Note 6, as to which
the date is October 18, 2001)
F-1
RW LOUISVILLE HOTEL ASSOCIATES, LLC
BALANCE SHEETS
DECEMBER 31, 2000 AND 1999
ASSETS 2000 1999
------ ------------ ------------
CURRENT ASSETS:
Cash and cash equivalents $ 53,969 $ 14,101
Escrowed funds 445,665 284,454
Accounts receivable, net of allowance for
doubtful accounts of $8,972 and $7,931 in
2000 and 1999, respectively 267,876 296,465
Other current assets 80,498 162,718
------------ ------------
Total current assets 848,008 757,738
------------ ------------
PROPERTY AND EQUIPMENT, at cost:
Land 6,154,534 6,154,534
Building 14,053,482 14,041,762
Furniture, fixtures, and equipment 2,043,890 1,930,718
------------ ------------
22,251,906 22,127,014
Less accumulated depreciation (2,079,299) (1,212,805)
------------ ------------
Property and equipment, net 20,172,607 20,914,209
------------ ------------
FRANCHISE COSTS, net of accumulated amortization
of $26,551 and $14,001 in 2000 and 1999,
respectively 57,888 45,838
------------ ------------
DEFERRED FINANCING COSTS, net of accumulated
amortization of $105,152 and $64,448 in 2000
and 1999, respectively 301,848 342,552
------------ ------------
Total assets $ 21,380,351 $ 22,060,337
============ ============
LIABILITIES AND MEMBERS' DEFICIT 2000 1999
-------------------------------- ------------ ------------
ACCOUNTS PAYABLE AND ACCRUED LIABILITIES:
Trade accounts payable $ 136,810 $ 177,888
Accrued interest and other liabilities 244,108 339,613
Accrued compensation 214,595 148,124
Accrued taxes 44,901 46,147
------------ ------------
Total current liabilities 640,414 711,772
------------ ------------
MORTGAGE NOTE PAYABLE (Note 2) 17,856,406 18,148,379
LONG-TERM DEBT WITH RELATED PARTY (Note 2) 3,433,226 3,621,486
------------ ------------
Total liabilities 21,930,046 22,481,637
------------ ------------
COMMITMENTS AND CONTINGENCIES
(Note 5)
MEMBERS' DEFICIT (549,695) (421,300)
------------ ------------
Total liabilities and members'
deficit $ 21,380,351 $ 22,060,337
============ ============
The accompanying notes are an integral part of these balance sheets.
F-2
RW LOUISVILLE HOTEL ASSOCIATES, LLC
STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
2000 1999
--------- ---------
REVENUES:
Rooms $6,183,347 $5,980,743
Food and beverage 2,342,969 2,291,748
Telephone 86,054 99,022
Other 59,744 32,941
---------- ----------
Total revenues 8,672,114 8,404,454
---------- ----------
EXPENSES:
Rooms 1,374,700 1,330,939
Food and beverage 1,444,471 1,323,863
Telephone 48,444 43,788
Administrative and general 1,033,090 929,595
Advertising, marketing, and promotion 770,223 742,796
Repairs and maintenance 468,663 444,856
Utilities 285,860 280,389
Property insurance and taxes 293,914 289,778
Management fees (Note 4) 303,822 349,168
Other fixed expenses 42,804 63,981
---------- ---------
Total expenses 6,065,991 5,799,153
---------- ---------
INCOME BEFORE INTEREST, DEPRECIATION AND
AMORTIZATION, AND CUMULATIVE EFFECT
OF CHANGE IN ACCOUNTING PRINCIPLE 2,606,123 2,605,301
INTEREST EXPENSE 1,814,770 1,839,384
DEPRECIATION AND AMORTIZATION 919,748 841,864
---------- ----------
LOSS BEFORE CUMULATIVE EFFECT OF CHANGE IN
ACCOUNTING PRINCIPLE (128,395) (75,947)
CUMULATIVE EFFECT OF CHANGE IN ACCOUNTING PRINCIPLE 0 (325,517)
---------- ----------
NET LOSS $(128,395) $(401,464)
========== ==========
The accompanying notes are an integral part of these statements.
F-3
RW LOUISVILLE HOTEL ASSOCIATES, LLC
STATEMENTS OF MEMBERS' DEFICIT
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
BALANCE, January 1, 1999 $(19,836)
Net loss--1999 (401,464)
---------
BALANCE, December 31, 1999 (421,300)
Net loss--2000 (128,395)
---------
BALANCE, December 31, 2000 $(549,695)
=========
The accompanying notes are an integral part of these statements.
F-4
RW LOUISVILLE HOTEL ASSOCIATES, LLC
STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999
2000 1999
---------- ----------
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $(128,395) $(401,464)
---------- ----------
Adjustments to reconcile net loss to net cash provided by operating
activities:
Depreciation and amortization 919,748 841,864
Cumulative effect of change in accounting principle 0 325,517
Changes in assets and liabilities:
Escrowed funds (161,211) 1,988
Accounts receivable, net 28,589 (3,548)
Other current assets 82,220 (65,381)
Franchise costs (24,600) 0
Trade accounts payable (41,078) (21,031)
Accrued interest and other liabilities (95,505) 195,378
Accrued compensation 66,471 30,365
Accrued taxes (1,246) (16,104)
---------- ----------
Total adjustments 773,388 1,289,048
---------- ----------
Net cash provided by operating activities 644,993 887,584
---------- ----------
CASH FLOWS USED IN INVESTING ACTIVITIES:
Capital expenditures (124,892) (705,251)
---------- ----------
CASH FLOWS USED IN FINANCING ACTIVITIES:
Payments on mortgage note payable (291,973) (236,257)
Payments on long-term note with related party (188,260) (2,204)
---------- ----------
Net cash used in financing activities (480,233) (238,461)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 39,868 (56,128)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 14,101 70,229
---------- ----------
CASH AND CASH EQUIVALENTS AT END OF YEAR $53,969 $14,101
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid for interest during the year $1,930,259 $1,723,895
========== ==========
The accompanying notes are an integral part of these statements.
F-5
RW LOUISVILLE HOTEL ASSOCIATES, LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2000 AND 1999
1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization and Operations
RW Louisville Hotel Associates, LLC (the "Company") is a Delaware limited
liability company organized on May 13, 1998 to own and manage a 271-room Holiday
Inn hotel in Hurstbourne (the "Hotel"). The Company is owned by RW Louisville
Hotel Investors, L.L.C. ("Investors") (99%), a Delaware limited liability
company which is the non-managing member, and RW Hurstbourne Hotel, Inc., (1%),
a Delaware corporation which is the managing member of the Hotel. Investors is
owned by Ridgewood Georgia, Inc. (1%), a Georgia corporation which is the
managing member of Investors, and RW Hotel Investment Associates, L.L.C. (99%),
which is the non-managing member of Investors. RW Hotel Investment Associates,
L.L.C was owned by Farallon Capital Management, L.L.C. until April 2001.
In April 2001, Ridgewood Georgia, Inc. entered in an assignment and assumption
agreement (the "Assignment Agreement") with RW Hotel Investment Associates, LLC.
("Transferee") pursuant to which Transferee assigned to Ridgewood Georgia, Inc.
Transferee's 99% membership interest in Investors. As a result, Ridgewood
Georgia, Inc., which previously owned the remaining 1% membership interest in
Investors, owns 100% of the membership interest in Investors. Ridgewood Georgia,
Inc. and RW Hurstbourne Hotel, Inc. are wholly-owned subsidiaries of Ridgewood
Hotels, Inc. As a result, the Company is indirectly 100% owned by Ridgewood
Hotels, Inc.
Cash and Cash Equivalents
For purposes of reporting cash flows, the Company considers cash on hand,
deposits in banks, and short-term investments with original maturities of 90
days or less to be cash and cash equivalents.
Inventories
Inventories consist of the Hotel's food, beverage, and retail stocks and are
stated at the lower of cost (first-in, first-out method) or market.
Property and Equipment
Property and equipment are recorded at cost. Repairs and maintenance costs are
expensed in the period incurred. Major improvements to existing property and
equipment that increase the usefulness or useful life of the property or
equipment are capitalized.
The Company depreciates property and equipment using the straight-line method
over the estimated useful lives of such assets, which are generally 30 years for
building and 5 years for furniture, fixtures, and equipment. Depreciation
expense for 2000 and 1999 was $866,494 and $795,020, respectively.
F-6
Deferred Financing Costs
In connection with the underwriting of the mortgage note payable (Note 2), the
Company incurred deferred financing costs which are being amortized on a
straight-line basis over 10 years. As further discussed in Note 2, the mortgage
note has a stated maturity of 25 years; however, certain terms of the mortgage
note change significantly after July 2008, which leads management to believe
that the Company may seek to refinance this note on or before July 2008. The
amortization expense for deferred financing costs in 2000 and 1999 was $40,704.
Income Taxes
No provisions for income taxes have been made in the accounts of the Company,
since the Members report their respective shares of taxable income and loss in
their individual tax returns.
Fair Value of Financial Instruments
The recorded values of financial instruments including cash, escrowed funds,
accounts receivable, other assets, accounts payable and accrued liabilities
reflected in the financial statements are representative of their fair value due
to the short-term nature of the instruments.
Use of Estimates
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Organizational Costs
In April 1998, the American Institute of Certified Public Accountants issued
Statement of Position ("SOP") No. 98-5, "Reporting on the Costs of Start-Up
Activities." This SOP requires costs of start-up activities and organizational
costs to be expensed as incurred. The Company adopted this SOP effective January
1, 1999.
Organizational costs of $366,609 were being amortized over five years until
January 1, 1999, when SOP No. 98-5 was adopted. The effect of the change in 1999
was to decrease net loss before change in accounting principle by $73,322. The
adjustment of $325,517 to retroactively apply SOP No. 98-5 is included in net
loss of 1999.
2. LONG-TERM DEBT
Mortgage Note
On May 21, 1998, the Company entered into a mortgage note agreement with Column
Financial Inc. for $18,500,000 to fund the purchase of the Hotel. The note bears
interest at 7.39% per annum. Beginning July 2008, in addition to the fixed rate
of 7.39%, the note shall accrue a second tranche of interest at a rate equal to
the lesser of (i) the positive excess (if any) of the 20-year treasury rate plus
2% over 7.39%, or (ii) 5%. In 2000 and 1999, the Company recognized interest
expense on the mortgage note of approximately $1,353,000 and $1,366,000,
respectively. Beginning July 1, 1998, interest and principal are due monthly,
based on a 25-year amortization schedule, with all remaining unpaid principal
and
F-7
interest being due on July 1, 2023. The note is collateralized by the Company's
interest in the Hotel. At December 31, 2000 and 1999, $17,856,406 and
$18,148,379 was outstanding on the note, respectively.
The principal outstanding at December 31, 2000 matures as follows:
2001 $ 297,120
2002 320,163
2003 344,993
2004 368,062
2005 400,293
Thereafter 16,125,775
-----------
$17,856,406
===========
The carrying value of the mortgage note approximates its fair value as of
December 31, 2000 and 1999.
Related-Party Note
On July 20, 1998, the Company entered into a promissory note agreement with
Louisville Hotel, LLC for $3,623,690 (the "Louisville Note"). The 80% owner and
managing member of Louisville Hotel, LLC is Ridgewood Hotels, Inc. The note
matures on June 20, 2008 and requires that the monthly net revenue from the
Hotel, as defined in the note agreement, be paid to Louisville Hotel, LLC. to
be applied to the interest and then to the principal of the Louisville Note. The
Louisville Note is secured by the Company's monthly net revenue, which none of
the Company's members have the right to pledge or transfer. The Louisville Note
is also secured by Ridgewood Georgia, Inc. and RW Hotel Investment Associates,
LLC's interests in Investors. The interest is 13% per annum from July 20,
1998. In 2000 and 1999, the Company recognized interest expense on the
Louisville Note of approximately $462,000 and $473,000, respectively. As of
December 31, 2000 and 1999, the principal outstanding on this note was
$3,433,226 and $3,621,486, respectively.
The carrying value of the Louisville note approximates its fair value as of
December 31, 2000 and 1999.
3. FRANCHISE AGREEMENT
On August 15, 1995, Ridgewood Hotels, Inc. entered into a 10-year renewable
franchise agreement with Holiday Hospitality Franchising, Inc. ("Holiday
Hospitality") that allowed the Company to operate the Hotel under a Holiday Inn
franchise. The Company incurred $316,423 and $299,624 under this franchise
agreement in 2000 and 1999, respectively.
In conjunction with the initial franchise agreement and subsequent amendment,
the Company incurred application fees of $84,439 that have been capitalized and
are being amortized over the life of the franchise agreement. The amortization
expense for 2000 and 1999 was $12,550 and $9,139, respectively.
On April 28, 2001, the Company entered into a revised franchise agreement with
Holiday Hospitality. The Company's obligations under this revised franchise
agreement are guaranteed by Ridgewood Hotels, Inc. The maturity of the revised
franchise agreement is August 15, 2005. The main components of the franchise fee
under the revised franchise agreement are as follows:
o A royalty equal to 5% of the gross rooms revenue; and
F-8
o A service contribution equal to 2.5% of the gross room revenue.
In the event that the franchise agreement is terminated as a result of a breach
of the franchise agreement by the Company, the Company would be subject to
liquidated damages equal to approximately 36 times the monthly franchise fees.
In conjunction with the revised franchise agreement, the Hotel is subject to a
property improvement plan (the "Plan"). Under the Plan, the Company is required
to make certain improvements by December 31, 2002, with certain interim
milestones. Management estimates that the cost of these improvements is
approximately $1,858,000. As of August 31, 2001, the Company had spent
approximately $124,000 on improvements and had approximately $343,000 in escrow
to spend on improvements.
Management has not determined whether the Company will be able to fund the
remainder of the Plan within the required timeframe. If the Company is unable to
fund the remainder of the Plan, Ridgewood Hotels, Inc. may be required to
complete the Plan pursuant to its guaranty of the Company's obligations under
the revised franchise agreement. If Ridgewood Hotels, Inc. did fund the Plan,
the Company would be obligated to reimburse Ridgewood Hotels, Inc. for any
amount of the Plan funded by Ridgewood Hotels, Inc. However, management has not
determined whether Ridgewood Hotels, Inc. would have sufficient liquidity to
fulfill the Company's obligations within the required timeframe. As a result,
management is currently evaluating all of its options, including a potential
sale of the Hotel prior to December 31, 2002.
4. RELATED-PARTY TRANSACTIONS
Ridgewood Hotels, Inc., which indirectly owns 100% of the Company since April
2001, manages the Hotel under a 10-year management agreement dated April 30,
1998. Management fees paid by the Company to Ridgewood Hotels, Inc. consist of
the following:
o A base management fee equal to 1.5% of annual gross revenues.
o An incentive management fee equal to 1.5% of annual revenues for each
year in which the actual net operating income exceeds 85% of the
budgeted amount for that year.
o A super incentive management fee determined as a percentage of annual
gross revenues for each year in which the actual net operating income
exceeds budget.
Management fee expense for 2000 and 1999 was $260,176 and $270,570,
respectively.
Ridgewood Hotels, Inc. also provides workers' compensation and property and
casualty insurance to the Company, based on a pro rata of the total insurance
premium incurred by Ridgewood Hotels, Inc. The amount allocated to the Company
for the years ended December 31, 2000 and 1999 was $93,639 and $112,498,
respectively.
5. COMMITMENTS AND CONTINGENCIES
The Company is involved in legal proceedings and claims, which arise in the
ordinary course of business. In the opinion of management, the amount of
ultimate liability, with respect to these actions, will not materially affect
the financial position or results of operations of the Company.
F-9
6. SEPTEMBER 11, 2001 TERRORIST ATTACKS
As a consequence of the September 11, 2001 terrorist attacks, the Hotel
experienced numerous cancellations in September 2001, which resulted in an
estimated $155,000 shortfall in revenue for that month. Also, more than 10% of
the Hotel's room reservations traditionally come from airline companies. The
Company is currently negotiating with the airlines but anticipates that revenues
from these clients will decrease significantly in the foreseeable future.
Management prepared a new forecast for 2001 showing significantly negative cash
flow anticipated from September through December 2001. The uncertainty relating
to the continued effects of the September 11 attacks as well as otherwise normal
reduction in the Hotel's revenue in the months of November and December raise a
substantial doubt as to the Company's ability to continue to fund its
obligations during this period. To preserve assets, the Company intends to
reduce or suspend its payments on the Louisville Note until the monthly net
revenue from the Hotel is sufficient to allow payments to resume. Management is
also studying contingency plans including plans to reduce expenses. Management
is also considering other strategic alternatives including the possible sale of
the Hotel.
F-10
INTRODUCTION TO
PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma consolidated balance sheet as of March
31, 2001 and unaudited pro forma consolidated statement of income for the fiscal
year ended March 31, 2001 (collectively, the "Pro Forma Statements") are based
on the audited historical Consolidated Financial Statements of Ridgewood Hotels,
Inc. ("Ridgewood"), included in Ridgewood's Annual Report on Form 10-K, and the
unaudited historical financial statements of RW Louisville Hotel Associates, LLC
adjusted to give effect to the acquisition of RW Louisville Hotel Associates,
LLC using the purchase method of accounting and the assumptions and adjustments
in the accompany Notes to the Pro Forma Statements. The pro forma consolidated
balance sheet gives effect to the transaction as if it occurred on March 31,
2001 and the pro forma consolidated statement of income gives effect to the
transaction as if it occurred on April 1, 2000, the first day of Ridgewood's
2001 fiscal year.
The pro forma adjustments are based upon available information and certain
assumptions that Ridgewood believes are reasonable. The Pro Forma Statements are
provided for informational purposes only and do not purport to represent what
Ridgewood's financial position and results of operations would actually have
been had the RW Louisville Hotel Associates, LLC acquisition in fact occurred on
such dates or to project Ridgewood's financial position or results of operations
for any future period. Furthermore, the allocation of the purchase price is
preliminary and subject to revision when additional information regarding asset
and liability valuations is obtained.
The Pro Forma Statements and the Notes thereto should be read in
conjunction with the historical Consolidated Financial Statements of Ridgewood
and Notes thereto included in Ridgewood's Annual Report on Form 10-K for the
year ended March 31, 2001 and the historical Financial Statements of RW
Louisville Hotel Associates, LLC and Notes thereto for the year ended December
31, 2000 included elsewhere in this report on Form 8-K/A.
F-11
RIDGEWOOD HOTELS, INC.
UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 2001
(in thousands, except per share amounts)
RW Louisville
Ridgewood Hotel Assoc. Pro Forma Pro Forma
Hotels, Inc. LLC Total Adjustments Consolidated
------------ ------------- --------- ----------- ------------
Cash and cash equivalents $ 1,478 $ 128 $ 1,606 $ -- $ 1,606
Receivables from affiliates 402 -- 402 -- 402
Other operating receivables 407 329 736 (39)(a) 697
Notes receivables 250 -- 250 -- 250
Other current assets 109 725 834 -- 834
------------ ------------- --------- ----------- ------------
Total current assets 2,646 1,182 3,828 (39) 3,789
------------ ------------- --------- ----------- ------------
Operating properties -- 19,973 19,973 736(b) 20,709
Land held for sale 1,400 -- 1,400 -- 1,400
Investment in Louisville Hotel, LLC -- -- -- -- --
------------ ------------- --------- ----------- ------------
Total real estate investments 1,400 19,973 21,373 736 22,109
------------ ------------- --------- ----------- ------------
Management contracts 1,688 -- 1,688 -- 1,688
Other assets 37 347 384 -- 384
------------ ------------- --------- ----------- ------------
Total assets $ 5,771 $ 21,502 $ 27,273 $ 697 $ 27,970
============ ============= ========= =========== ============
Accounts payable $ 296 $ 477 $ 773 $ (39)(a) $ 734
Payables to affiliates 206 -- 206 -- 206
Accrued compensation 101 157 258 -- 258
Accrued legal and audit fees 207 -- 207 -- 207
Lease commitment for vacated office 94 -- 94 -- 94
Accrued interest and other liabilities 310 432 742 -- 742
------------ ------------- --------- ----------- ------------
Total current liabilities 1,214 1,066 2,280 (39) 2,241
------------ ------------- --------- ----------- ------------
Accrued pension liability 894 -- 894 894
Other long-term liabilites 30 -- 30 -- 30
Long- term debt 1,933 21,172 23,105 -- 23,105
------------ ------------- --------- ----------- ------------
Total long-term liabilites 2,857 21,172 24,029 -- 24,029
------------ ------------- --------- ----------- ------------
Total liabilities 4,071 22,238 26,309 (39) 26,270
------------ ------------- --------- ----------- ------------
Preferred stock 450 -- 450 -- 450
Common stock 25 -- 25 -- 25
Paid-in-surplus 17,671 -- 17,671 -- 17,671
Accumulated deficit (16,446) (736) (17,182) 736(b) (16,446)
------------ ------------- --------- ----------- ------------
Total shareholder's investment 1,700 (736) 964 736 1,700
------------ ------------- --------- ----------- ------------
Total liabilities and shareholders'
investment $ 5,771 $ 21,502 $ 27,273 $ 697 $ 27,970
============ ============= ========= =========== ============
F-12
RIDGEWOOD HOTELS, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEET
MARCH 31, 2001
The following adjustments reflect the acquisition as if it was consummated
on March 31, 2001 and using the purchase method of accounting. The total
purchase price for the acquisition of RW Louisville Hotel Associates, LLC has
been preliminarily allocated to assets and liabilities based upon management's
estimate of their respective fair market values. The allocation of the purchase
price is subject to revisions when additional information concerning asset and
liability valuations is obtained.
(a) The $39,000 pro forma adjustment relates to management fees which RW
Louisville Hotel Associates, LLC owes to Ridgewood for managing the
hotel.
(b) The $736,000 pro forma adjustment relates to the allocation of the
purchase price to RW Louisville Hotel Associates, LLC's tangible fixed
assets.
F-13
RIDGEWOOD HOTELS, INC.
UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE FISCAL YEAR ENDED MARCH 31, 2001
(in thousands, except per share amounts)
RW Louisville
Ridgewood Hotel Associates Pro Forma Pro Forma
Hotels, Inc. LLC Consolidated
Historical Historical Historical Adjustments Consolidated
---------- ---------- ---------- ----------- ------------
Revenues from wholly-owned
operations $ 1,789 $ 8,598 $ 10,387 $ -- $ 10,387
Revenues from hotel management 2,534 -- 2,534 (258)(a) 2,276
Sales of real estate properties 5,798 -- 5,798 -- 5,798
Equity in net income of unconsolidated
entities 251 -- 251 -- 251
Interest income 72 -- 72 -- 72
Other 22 -- 22 -- 22
---------- ---------- ---------- ----------- ------------
Total revenues 10,466 8,598 19,064 (258) 18,806
Expenses of wholly-owned real estate
properties 2,180 6,061 8,241 (258)(a) 7,983
Cost of real estate sold 2,922 -- 2,922 -- 2,922
Lease expense for vacated office 107 -- 107 -- 107
Depreciation and amortization 546 915 1,461 (217)(b) 1,244
Interest expense 273 1,810 2,083 -- 2,083
General and administrative 2,202 -- 2,202 -- 2,202
Provision for doubtful accounts 189 -- 189 -- 189
Business development 17 -- 17 -- 17
Writedown on hotel investment 2,000 -- 2,000 -- 2,000
---------- ---------- ---------- ----------- ------------
Total expenses 10,436 8,786 19,222 (475) 18,747
---------- ---------- ---------- ----------- ------------
Income (loss) before taxes 30 (188) (158) 217 59
Taxes (70) -- (70) -- (70)
---------- ---------- ---------- ----------- ------------
Net (loss) income before taxes (40) (188) (228) 217 (11)
Preferred dividends (360) -- (360) -- (360)
---------- ---------- ---------- ----------- ------------
Net (loss) income applicable to common
shareholders (400) (188) (588) 217 (371)
========== ========== ========== =========== ============
Basic and diluted (loss) income per
share $ (0.16) $ (0.07) $ (0.23) $ 0.09 $ (0.15)
F-14
RIDGEWOOD HOTELS, INC.
NOTES TO UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF INCOME
MARCH 31, 2001
The pro forma adjustments below give effect to the acquisition of RW
Louisville Hotel Associates, LLC as if it had been consummated on April 1, 2000,
the first day of the Ridgewood's 2001 fiscal year.
(a) The $258,000 pro forma adjustment relates to management fees which
Ridgewood recognized for managing the hotel.
(b) The $217,000 pro forma adjustment relates to the decrease in
depreciation related to the allocation of the purchase price to RW
Louisville Hotel Associates, LLC's tangible fixed assets.
F-15