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, 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.
------------------------------------------------------
(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
----------------------------------------------------
(Registrant's telephone number, including area code)
----------------------------------------------------
(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 May 31, 1999.
<TABLE>
PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
MAY 31, 1999 AND AUGUST 31, 1998
--------------------------------
($000'S omitted, except per share data)
---------------------------------------
<CAPTION>
(Unaudited)
May 31, August 31,
ASSETS 1999 1998
------ ----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 686 $ 1,255
Other 660 722
------------ ------------
Total current assets 1,346 1,977
REAL ESTATE INVESTMENTS, NET 4,223 4,423
OTHER ASSETS 734 880
------------ ------------
$ 6,303 $ 7,280
============ ============
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<TABLE>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
MAY 31, 1999 AND AUGUST 31, 1998
--------------------------------
($000's omitted, except per share data)
---------------------------------------
<CAPTION>
(Unaudited)
May 31, August 31,
LIABILITIES AND SHAREHOLDERS' INVESTMENT 1999 1998
---------------------------------------- ------------ ------------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 175 $ 260
Accrued salaries, bonuses and
other compensation 87 107
Accrued interest and other liabilities 537 405
Current maturities of long-term obligations 45 65
------------ ------------
Total current liabilities 844 837
LONG-TERM OBLIGATIONS 2,651 2,679
ACCRUED PENSION EXPENSE 875 820
------------ ------------
Total liabilities 4,370 4,336
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 May 31, 1999
and August 31, 1998, liquidation preference
and callable at $3,600,000. 450 450
Common Stock, $.01 par value, 5,000,000
shares authorized, 1,513,480 shares
issued and outstanding at May 31,
1999 and August 31, 1998 15 15
Note receivable from officer for
purchase of common stock -- (75)
Paid-in surplus 15,591 15,861
Accumulated deficit since December 30, 1985 (14,123) (13,307)
------------ ------------
Total shareholders' investment 1,933 2,944
------------ ------------
$ 6,303 $ 7,280
============ ============
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<TABLE>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED STATEMENTS OF OPERATIONS
-------------------------------------
($000's omitted, except per share data)
---------------------------------------
Unaudited
---------
<CAPTION>
For the Three Months Ended For the Nine Months Ended
----------------------------- -----------------------
May 31, May 31, May 31, May 31,
1999 1998 1999 1998
------------ ------------ --------- ---------
<S> <C> <C> <C> <C>
REVENUES:
Revenues from wholly-owned hotel operations ....... $ 806 $ 817 $ 2,142 $ 2,383
Revenues from hotel management .................... 302 285 837 761
Sales of real estate properties ................... 428 55 438 1,630
Equity in net income of unconsolidated
entities ........................................ 38 93 119 93
Interest income ................................... 1 19 11 39
Other ............................................. -- 47 -- 107
------------- ------------- ---------- ----------
1,575 1,316 3,547 5,013
------------- ------------- ---------- ----------
COSTS AND EXPENSES:
Expenses of wholly-owned real estate properties ... 613 607 1,805 1,799
Costs of real estate sold ......................... 354 55 358 909
Depreciation and amortization ..................... 90 73 277 168
Interest expense .................................. 85 85 255 253
General, administration and other ................. 567 488 1,557 1,539
Business development .............................. 34 119 111 273
------------- ------------- ---------- ----------
1,743 1,427 4,363 4,941
------------- ------------- ---------- ----------
NET INCOME (LOSS) ..................................... $ (168) $ (111) $ (816) $ 72
============= ============= ========== ==========
BASIC AND DILUTED LOSS PER COMMON SHARE ............... $ (0.17) $ (0.13) $ (0.72) $ (0.13)
============= ============= ========== ==========
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
<TABLE>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS
-------------------------------------
($000's Omitted)
----------------
Unaudited
---------
<CAPTION> For the Nine Months Ended
------------------------
May 31, May 31,
1999 1998
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) ............................................. $ (816) $ 72
Adjustments to reconcile net income (loss) to net
cash used by operating activities:
Depreciation and amortization ............................. 277 168
Gain from sales of real estate property ................... (80) (721)
Decrease (increase) in other assets ....................... 104 23
Decrease in accounts payable and
accrued liabilities ..................................... (179) (142)
------------- -------------
Total adjustments ......................................... 122 (672)
------------- -------------
Net cash used by operating activities ..................... (694) (600)
Cash flows from investing activities:
Proceeds from sales of real estate .......................... 413 1,503
Additions to real estate properties ......................... (60) (83)
Investment in unconsolidated entities ....................... -- (316)
------------- -------------
Net cash provided by investing activities ................. 353 1,104
Cash flows from financing activities:
Repayments of notes payable ................................. (48) (44)
Payment of dividends on preferred stock ..................... (180) (270)
Repurchase of common stock .................................. -- (112)
------------- -------------
Net cash used in financing activities ..................... (228) (426)
------------- -------------
Net (decrease) increase in cash and cash equivalents ............ $ (569) $ 78
Cash and cash equivalents at beginning of period ................ 1,255 1,596
------------- -------------
Cash and cash equivalents at end of period ...................... $ 686 $ 1,674
============= =============
Supplemental disclosure of cash flow information and 1999 1998
non-cash activity: ------------ ------------
Decrease in allowance for possible losses due to
sale of parcel of land $ 128,000 $ 97,000
============= =============
<FN>
The accompanying notes are an integral part of these consolidated financial statements.
</FN>
</TABLE>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
MAY 31, 1999 AND MAY 31, 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,
1998. The results of operations for the nine months ended May
31, 1999 are not necessarily indicative of the results to be
expected for the fiscal year ending August 31, 1999.
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 and
nine months ended May 31, 1999 and May 31, 1998 is as follows:
<TABLE>
For the Three For the Nine
Months Ended Months Ended
------------- ------------
<CAPTION>
May 31, May 31, May 31, May 31,
1999 1998 1999 1998
-------- --------- -------- ---------
<S> <C> <C> <C> <C>
Income tax provision -- $ -- -- $29,000
Utilization of net operating
loss carryforwards -- -- -- (29,000)
-------- -------- -------- ---------
Net income tax provision -- -- -- --
======== ======== ======== =========
</TABLE>
4. SHAREHOLDERS' INVESTMENT:
Loss Per Share --
The following table sets forth the computation of basic
and diluted loss per share:
<TABLE>
<CAPTION>
For the Three For the Nine
Months Ended Months Ended
-------------------------- ----------------------
May 31, May 31, May 31, May 31,
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net income (loss) $ (168,000) $ (111,000) $ (816,000) $ 72,000
Less preferred
dividends (90,000) (90,000) (270,000) (270,000)
---------- ---------- --------- --------
Net loss available
to common share-
holders $ (258,000) $ (201,000) $(1,086,000) $(198,000)
Weighted average
shares outstanding -
basic and diluted 1,513,000 1,514,000 1,513,000 1,530,000
========== ========== ========== =========
Net loss per share -
basic and diluted $ (0.17) $ (0.13) $ (0.72) $ (0.13)
========== ========== =========== =========
</TABLE>
The effect of the Company's stock options and convertible securities
was excluded from the computations for May 31, 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.
The $90,000 preferred dividend due May 1, 1999 is
outstanding.
The $75,000 promissory note due from the Chief Financial
Officer was paid in full on April 2, 1999.
5. INVESTMENT IN UNCONSOLIDATED ENTITIES
On November 24, 1998, RW Hotel Partners, L.P., a limited
partnership of which the Company is the sole general partner, sold
one of its remaining two hotels. The only remaining hotel in the
partnership is in Thomasville, Georgia. The Company did not receive
any cash upon the sale of the hotel and, based upon management's
estimate, the Company will not receive cash upon the sale of the
remaining hotel. As of May 31, 1999, the carrying value of the
Company's investment in the partnership is -0-.
The Company is currently receiving the 13% preferred
return, management and incentive fees, and also anticipates receiving
20% of distributable cash from its two unconsolidated entities,
Houston Hotel, LLC and RW Louisville Hotel Associates, LLC.
The Company's investment in unconsolidated entities is
included in real estate investments on the balance sheet.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE AND NINE MONTHS ENDED MAY 31, 1999
COMPARED TO THE THREE AND NINE MONTHS ENDED
MAY 31, 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 $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, 1999, there was
approximately $199,000 of escrowed funds related to this loan
agreement.
In March 1999, the Company sold a parcel of land in Ohio
for net proceeds of approximately $339,000. In April 1999, the
Company sold a parcel of land in Texas for net proceeds of
approximately $65,000.
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. The Company would recognize net profit on the sale of
approximately $4,000,000. There are numerous contingencies which
allow the seller to cancel the contract. Closing would occur
approximately 150 days from the contract date.
On December 9, 1997, Houston Hotel, LLC ("Houston Hotel")
was organized as a limited liability company under the laws of
the State of Delaware. The purpose which Houston Hotel was organized
is limited solely to owning and managing the Hampton Inn Galleria in
Houston, Texas. The Company contributed approximately $316,000 into
Houston Hotel which represents a 10% interest, and the other 90%
interest is owned by Houston Hotel, Inc. (the "Managing Member"), a
Nevada Corporation.
Income or loss allocated to the Company and the Managing
Member is based upon the formula for distributing cash.
Distributable cash is defined as the cash from operations
and capital contributions determined by the Manager to be available
for distribution. Cash from operations is defined as the net cash
realized from the operations of Houston Hotel after payment of all
cash expenditures of Houston Hotel including, but not limited to,
operating expenses, fees, payments of principal and interest on
indebtedness, capital improvements and replacements, and such
reserves and retentions as the Manager reasonably determines to be
necessary.
Distributions of distributable cash shall be made as
follows:
- First, 100% to the Manager until it has been
distributed an amount equal to its accrued but unpaid 13% preferred
return.
- Second, 100% to the Company until the Company has been
distributed an amount equal to its accrued but unpaid 13% preferred
return.
- Third, 80% to the Manager and 20% to the Company.
A Property Management Agreement exists between Houston
Hotel, LLC and the Company as Property Manager ("Property Manager")
for the purpose of managing the hotel. The Property Manager shall be
entitled to the following property management fees:
1) 1.5% of the gross revenues from the hotel property.
2) 1.5% of the gross revenues from the hotel property as
an incentive fee if 85% of the budgeted net operating income is met.
RW Louisville Hotel Associates, LLC
On May 13, 1998, RW Louisville Hotel Associates LLC ("RW
Louisville Hotel Associates") was organized as a limited liability
company under the laws of the State of Delaware. The purpose which
RW Louisville Hotel Associates was organized is limited solely to
owning and managing the Holiday Inn ("the Hotel") in Louisville,
Kentucky. The Company's investment in RW Hotel Partners, L.P. of
$337,500 (see above) was transferred to RW Louisville Hotel
Associates at its historical basis. Simultaneously, the Company
invested $362,000 into Louisville Hotel, LLC. The combined equity of
$699,500 represents a 10% interest in the Hotel. Louisville Hotel,
LLC loaned $3,620,000 to the Hotel.
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 managing member until the managing member
has been distributed an amount equal to its accrued but unpaid 13%
preferred return.
- Second, to the Company until the Company has been
distributed an amount equal to its accrued but unpaid 13% preferred
return.
- Third, 20% to the Company and 80% to the managing
member.
Cash from a sale or refinancing would be distributed 10%
to the Company and 90% to the managing member.
A Management Agreement exists between the Owner and the
Company as Property Manager ("Property Manager") for the purpose of
managing the hotel. The Property Manager shall be entitled to the
following property management fees:
(1) Base Management Fee equal to 1.5% of gross revenues
from the hotel property.
(2) Incentive Management Fee equal to 1.5% of gross
revenues from the hotel in which the actual net operating income
exceeds 85% of the budgeted goal for the year.
(3) Super Incentive Management fee equal to: (a) .25%
of gross revenues from the hotel in which the net operating income
exceeds 106% of the budgeted goal for the year; (b) an additional
.25% of gross revenues in which the net operating income exceeds 112%
of the budgeted goal; and (c) an additional .50% of gross
revenues in which the net operating income exceeds 120% of the
budgeted goal.
The Company has a management agreement with the owner of
three hotels wherein it receives a management fee equal to 3% of
revenues plus 15% of the net operating income plus 5% of any profit
realized upon the sale of the hotels.
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. There is currently
approximately $470,000 of available cash. 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 entities
similar to those described above which would provide additional cash
flow. As hotel properties are acquired, the Company plans to enter
into management agreements 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 10% ownership interest in
two joint ventures that own two other hotels and has a 1% ownership
interest in another joint venture that owns one hotel. The Company
also currently has 12 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 $11,000, or 1%, and $241,000, or 10%, for the three and
nine months ended May 31, 1999, respectively, compared to the three
and nine months ended May 31, 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
$17,000, or 6%, and $76,000, or 10%, for the three and nine months
ended May 31, 1999, respectively, compared to the three and nine
months ended May 31, 1998 due to overall increased revenues at the
hotels managed by the Company.
Equity in net income of unconsolidated entities was
$38,000 and $119,000, respectively, during the three and nine months
ended May 31, 1999 compared to $93,000 during the three and nine
months ended May 31, 1998.
The Company had gains from real estate sales of
approximately $74,000 and $80,000, respectively, for the three and
nine months ended May 31, 1999. During the three and nine months
ended May 31, 1998, the Company had gains from real estate sales of
approximately -0- and $721,000, respectively. Gains or losses on
sales are dependent upon the specific assets sold in a particular
period and the terms of each sale.
During the three and nine months ended May 31, 1998, other
income was $47,000 and $107,000, respectively. For the three months
ended May 31, 1998, the Company recognized $47,000 of other income
for a dividend received from its property and liability insurer for a
low claims history. For the nine months ended May 31, 1998, the
Company also recognized other income of approximately $60,000 from
its investment in a small joint venture which develops residential
lots in Atlanta, Georgia.
Depreciation and amortization increased by $17,000, or
23%, and $109,000, or 65%, during the three and nine months ended May
31, 1999 compared to the three and nine months ended May 31, 1998 due
to the amortization of certain management agreements and
participation fees.
General, administration and other expenses increased
approximately $79,000, or 16%, and $18,000, or 1%, for the three and
nine months ended May 31, 1999 compared to the three and nine months
ended May 31, 1998 as a result of overall slightly increased
overhead.
Business development expenses decreased $85,000, or 71%,
and $162,000, or 59%, for the three and nine months ended May 31,
1999, respectively, compared to the three and nine months ended May
31, 1998. The decrease was due to certain due diligence costs
incurred on several hotels considered for acquisition but never
purchased during fiscal year ended 1998.
YEAR 2000 --
The Company has established policies and procedures to
coordinate changes to computer systems and applications necessary to
achieve a Year 2000 date conversion with no effect on customers or
disruption to business operations. These actions are necessary to
ensure that the systems and applications will recognize and process
the Year 2000 and beyond. Major areas of potential business impact
have been identified and conversion efforts have been completed or
are underway. The Company's primary operating and financial systems
are already Year 2000 compliant. The Company also is communicating
with suppliers, vendors, financial institutions and others with which
it does business to coordinate Year 2000 conversion. The total cost
of compliance and its effect on the Company's future results of
operations is being determined as part of the conversion planning,
but is not expected to be material.
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, 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/ N. R. Walden
N. Russell Walden
President
By: /s/ Karen S. Hughes
Karen S. Hughes
Vice President,
Chief Accounting Officer
Date: July 14, 1999
