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 September 30, 2000
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 - 2,513,480 shares outstanding at
September 30, 2000.
<PAGE>
PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 AND MARCH 31, 2000
($000'S omitted, except share and per share data)
------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
September 30, March 31,
2000 2000
----------- -----------
<S> <C> <C>
ASSETS
------
Current Assets:
Cash and Cash Equivalents $ 1,782 $ 258
Receivables 786 394
Other Current Assets 170 320
---------- ---------
Total Current Assets 2,738 972
Real Estate Investments:
Real Estate Properties
Operating Properties, net -- 1,106
Land Held for Sale, net 1,416 1,806
Investment in Unconsolidated
Hotel Entities, net 2,000 2,000
---------- ---------
Total Real Estate Investments 3,416 4,912
Management Contracts, net 1,940 2,192
Other Assets, net 76 167
---------- ---------
Total Assets $ 8,170 $ 8,243
========== =========
</TABLE>
The accompanying notes are an integral part of
these consolidated balance sheets.
2
<PAGE>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 AND MARCH 31, 2000
($000'S omitted, except share and per share data)
------------------------------------------------
<TABLE>
<CAPTION>
(Unaudited)
September 30, March 31,
2000 2000
------------ ------------
<S> <C> <C>
LIABILITIES:
-----------
Current Liabilities:
Current Maturities of Long-Term Debt $ - $ 37
Accounts Payable 453 284
Accrued Salaries, Bonuses and Other Compensation 325 172
Accrued Property Tax Expense 16 39
Accrued Interest and Other Liabilities 547 524
---------- ---------
Total Current Liabilities 1,341 1,056
Accrued Pension Liability 520 520
Deferred Curtailment Gain on Pension Liability 374 374
Long-Term Debt 1,933 4,553
---------- ---------
Total Liabilities 4,168 6,503
---------- ---------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' INVESTMENT:
Series A Convertible Cumulative Preferred Stock, $1 par
value, 1,000,000 shares authorized, 450,000 shares issued and
outstanding 450 450
Common Stock, $.01 par value, 5,000,000 shares authorized,
2,513,480 shares issued and outstanding 25 25
Paid-in surplus 17,671 17,671
Accumulated deficit (14,144) (16,406)
--------------------------- ---------- ---------
Total Shareholders' Investment 4,002 1,740
---------- ---------
Total Liabilities and Shareholders' Investment $ 8,170 $ 8,243
========== =========
</TABLE>
The accompanying notes are an integral part of these
consolidated balance sheets.
3
<PAGE>
RIDGEWOOD HOTELS, INC AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
($000's omitted, except per share data)
Unaudited
---------
<TABLE>
<CAPTION>
For the Three Months Ended For the Six Months Ended
-------------- ------------- ------------- ------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
-------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
REVENUES:
Revenues from hotel operations ..................... $ 414 $ 528 $ 1,185 $ 1,213
Revenues from hotel management ..................... 666 415 1,337 690
Sales of real estate properties .................... - 159 5,525 235
Equity in net income of unconsolidated entities..... 63 14 126 57
Interest income .................................... 23 23 24 27
Other .............................................. 3 3 6 3
--------- --------- --------- ---------
Total Revenues 1,169 1,142 8,203 2,225
--------- --------- --------- ---------
COSTS AND EXPENSES:
Expenses of real estate properties ................. 490 556 1,312 1,145
Costs of real estate sold .......................... - 20 2,879 96
Depreciation and amortization ...................... 131 181 284 271
Interest expense ................................... 64 87 147 172
General, administration and other .................. 694 614 1,319 1,225
--------- --------- --------- ---------
Total Costs and Expenses 1,379 1,458 5,941 2,909
--------- --------- --------- ---------
NET (LOSS) PROFIT .................................. (210) (316) 2,262 (684)
PREFERRED DIVIDENDS ................................ (90) (90) (180) (180)
--------- --------- --------- ---------
NET (LOSS) PROFIT APPLICABLE TO $ (300) $ (406) $ 2,082 $ (864)
COMMON SHAREHOLDERS ................................ --------- --------- --------- ---------
(LOSS) EARNINGS PER COMMON SHARE:
Basic .............................................. $ (0.12) $ (0.27) $ 0.83 $ (0.57)
Diluted ............................................ (0.12) (0.27) 0.54 (0.57)
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of
these consolidated financial statements.
4
<PAGE>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
($000's Omitted)
Unaudited
---------
<TABLE>
<CAPTION>
For the six months ended
September 30, September 30,
2000 1999
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net profit (loss) ....................................................... 2,262 (685)
Adjustments to reconcile net income (loss) to net cash used by
operating activities:
Depreciation and amortization ........................................... 284 271
Increase in allowance for doubtful account .............................. 28 --
Gain from sales of real estate properties ............................... (2,646) (139)
(Increase) decrease in other assets ..................................... (461) 155
Increase in accounts payable and accrued liabilities .................... 322 101
------------- -------------
Total adjustments ....................................................... (2,473) 388
------------- -------------
Net cash used by operating activities ................................... (211) (297)
Cash flows from investing activities:
Proceeds from sales of real estate ...................................... 4,392 204
Additions to real estate properties ..................................... -- (16)
Investment in unconsolidated entity ..................................... -- (2,184)
------------- -------------
Net cash received by investing activities ............................... 4,392 (1,996)
Cash flows from financing activities:
(Repayments) issuance of notes payable .................................. (2,657) 1,902
Payment received from officer for purchase of common stock .............. -- 75
------------- -------------
Net cash (used) received in financing activities ........................ (2,657) 1,977
------------- -------------
Net increase (decrease) in cash and cash equivalents .................... 1,524 (316)
Cash and cash equivalents at beginning of period ........................ 258 639
------------- -------------
Cash and cash equivalents at end of period .............................. 1,782 323
============= =============
Supplemental disclosure of cash flow information and non-cash activity 2000 1999
------------- ------------
Interest paid ........................................................... 147 172
Income Taxes Paid........................................................ 18 --
</TABLE>
The accompanying notes are an integral part of these
consolidated financial statements
5
<PAGE>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2000 AND SEPTEMBER 30, 1999
(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's common stock is listed in the National Association of
Securities Dealers (NASDAQ) over-the-counter bulletin board service. On January
10, 2000, the Company entered into a management agreement ("Management
Agreement") with Fountainhead Development Corp., a Georgia corporation
("Fountainhead"), to perform management services at Chateau Elan Winery and
Resort, one of Fountainhead's properties, for a period of five years beginning
on March 24, 2000. In consideration of the Management Agreement, the Company
issued to Fountainhead 1,000,000 shares of common stock ("Fountainhead Shares").
The determined market value of the management contract was $2,000,000 at the
time of the transaction. In connection with the issuance of the Fountainhead
Shares, the number of directors constituting the full Board of Directors of the
Company was increased from three to seven members, effective on February 3,
2000. See also note 6.
On January 11, 2000, one of the principal stockholders and President of the
Company, N. Russell Walden ("Walden"), sold 650,000 shares of the common stock
to Fountainhead and a new President of the Company was elected. Another
principal shareholder, ADT Security Services, Inc. ("ADT"), sold 450,000 shares
of preferred stock of the Company to Fountainhead. Through the issuance of the
common stock pursuant to the Management Agreement and the acquisitions of the
Walden common stock and ADT preferred stock, Fountainhead has obtained
beneficial ownership of approximately 79% of the common stock. Fountainhead is
engaged principally in the business of owning and operating hotel, resort, and
other real estate properties. See also note 6.
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 flows 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
6
<PAGE>
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
March 31, 2000. The results of operations for the six months ended September 30,
2000 are not necessarily indicative of the results to be expected for the fiscal
year ending March 31, 2001.
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
inter-company amounts.
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 inter-company
transactions.
In February 2000, the Company began leasing a hotel in Lubbock, Texas. All
revenues and expenses of the hotel are included in the Consolidated Statements
of Operations.
On March 28, 2000, the Company changed its fiscal year from August 31 to
March 31.
Certain prior year amounts have been reclassified to conform with the
current presentation.
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133 "Accounting for Derivative and Hedging
Activities" ("SFAS No. 133"). SFAS No. 133 requires companies to record
derivatives on the balance sheet as assets or liabilities at fair value. It is
effective for financial statements for fiscal years beginning after June 15,
2000, as amended by SFAS No. 137. In June 2000, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 138,
"Accounting for Certain Derivative Instruments and Certain Hedging Activities"
("SFAS No. 138"). This Statement establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded in
other contracts and for hedging activities. SFAS No. 138 also addresses issues
when implementing SFAS No. 133. This Statement should be adopted concurrently
with SFAS 133 and is effective for fiscal years beginning after June 15, 2000.
Management is evaluating the impact of SFAS No. 133 and SFAS No. 138 on the
Company's future earnings and financial position, but does not expect it to be
material.
7
<PAGE>
3. INCOME TAXES:
The Company has net operating loss carry-forwards for both book and tax
purposes which may be used to offset future taxable income. However, due to the
change of control of the Company discussed in note 1 above, there are
limitations on the amount of net operating loss carry-forwards that may be
utilized each year to offset taxable income.
The Company's income tax provision for the six months ended September 30,
2000 and September 30, 1999 is as follows:
<TABLE>
<CAPTION>
For the Six
Months Ended
--------------------------
Sept. 30, Sept. 30,
2000 1999
--------- ---------
<S> <C> <C>
Income Tax Provision $ 894 $ --
Utilization of Net Operating
Loss Carry-forwards (894) --
--------- ---------
Regular Income Tax Provision -- --
Alternative Minimum Income Tax
Provision 70 --
Deferred Income Tax Benefit
from AMT Tax Credit (70) --
--------- ---------
Net Income Tax Provision $ -- $ --
========= =========
</TABLE>
A taxable gain resulted from the sale of the Ramada property. Net operating
losses generated in prior years were sufficient to offset this gain for regular
Federal and state tax purposes. However for fiscal year ending March 31, 2001,
the Company is subject to Federal alternative minimum tax resulting from this
sale.
8
<PAGE>
4. SHAREHOLDERS' INVESTMENT:
Earnings Per Share --
The following table sets forth the computation of basic and diluted (loss)
earnings per share:
<TABLE>
<CAPTION>
For the Three Months Ended For the six months ended
------------- ------------- ------------- -------------
September 30, September 30, September 30, September 30,
2000 1999 2000 1999
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Net (loss) profit $ (210,000) $ (316,000) $ 2,262,000 $ (684,000)
Less undeclared
preferred dividends (90,000) (90,000) (180,000) (180,000)
---------- ---------- ---------- ----------
Net profit (loss)
applicable to common shareholders $ (300,000) $ (406,000) $ 2,082,000 $ (864,000)
---------- ---------- ---------- ----------
Weighted average shares outstanding
basic 2,513,480 1,513,480 2,513,480 1,513,480
diluted 2,513,480 1,513,480 3,863,480 1,513,480
========= ========= ========= =========
Net profit (loss) per share --
basic $ (0.12) $ (0.27) $ 0.83 $ (0.57)
diluted (0.12) (0.27) 0.54 (0.57)
========= ========= ========= =========
</TABLE>
As of September 30, 2000 there are $570,000 of preferred stock dividends in
arrears. The effect of the Company's stock options and convertible securities
was excluded from the computations for the three months ended September 30, 1999
and 2000 as it is antidilutive.
Options Granted -
On June 13, 2000 the Company granted options to purchase 25,000 shares of
common stock at a price of $2.25 per share to one of its directors. The options
expire in five years.
The Compensation Committee has authorized the Company to grant options to
purchase 250,000 shares of common stock at a price of $2.00 per share to its key
employees under the Ridgewood Hotels, Inc. 1993 Stock Option Plan. Certain
employees' options vest over a four-year period in 25% increments while certain
others vest over a four-year period with 10% the first year, 25% the second
year, 50% the third year and 100% the fourth year. All options expire ten years
from the date of grant, unless earlier by reason of death, disability,
termination of employment, or for other reasons outlined in the Plan.
Options Expired -
In 1993 the company granted options to certain key employees to purchase
shares of common stock at a price of approximately $1.83 per share. 210,000 of
these options have recently expired as individuals to whom these were issued are
no longer with the Company, and the time allotted post employment to exercise
these options has expired.
9
<PAGE>
5. INVESTMENT IN UNCONSOLIDATED ENTITY:
On September 30, 1999, the Company purchased additional equity in
Louisville Hotel, LLC. The Company increased its ownership from 10% to 80%. The
consideration issued to acquire the increased ownership was $2,500,000. In March
2000, the Company recognized a write-down of $1,200,000 on its investment in
Louisville Hotel, LLC. This write-down was due to the anticipated shortfall of
the Company's return of equity as a result of the decreased operating
performance of the hotel. Per this hotel's franchise agreement, the franchisor
of this hotel determined that an ownership change occurred in conjunction with
Fountainhead's purchase of the majority shares of the Company. In turn, a
Property Improvement Plan (the "Plan") was developed by the franchisor. Under
the Plan, the hotel will be required to make approximately $1,858,000 of
improvements by year end of 2002.
6. MANAGEMENT AGREEMENT:
On January 10, 2000, the Company entered into the Management Agreement with
Fountainhead (see note 1), pursuant to which Fountainhead retained the Company
to perform management services at Chateau Elan Winery and Resort, one of
Fountainhead's properties, for a period of five years beginning on March 24,
2000. In consideration of Fountainhead's agreement to enter into the Management
Agreement and a payment of $10,000 by Fountainhead to the Company, the Company
issued to Fountainhead 1,000,000 shares of common stock at a fair market value
of $2.00 per share. In the Management Agreement, Fountainhead agreed to pay the
Company a base management fee equal to 2% of the gross revenues of the
properties being managed, plus an annual incentive management fee to be
determined each year based on the profitability of the properties being
managed during that year.
The Management Agreement has a term of five years but is terminable upon
the transfer by Fountainhead of all or a material portion of the properties
covered by the Management Agreement. If the Management Agreement is terminated
upon such a transfer or upon the occurrence of an event of default by
Fountainhead, Fountainhead shall pay to the Company a portion of the projected
fees owed to the Company under the agreement, with adjustments based on the term
of the Management Agreement remaining. In such event, Fountainhead may elect to
surrender to the Company shares of common stock in lieu of a cash payment.
7. SALE OF OPERATING PROPERTY:
On May 31, 2000, the Company sold its hotel in Longwood, Florida for
$5,100,000. Approximately $3,500,000 of the sales proceeds were used to pay off
the mortgage and defeasance penalty on the hotel. The Company recognized
approximately $2,634,000 in profit on the sale before tax.
10
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS FOR THE SIX MONTHS ENDED SEPTEMBER 30, 2000 COMPARED TO
THE SIX MONTHS ENDED SEPTEMBER 30, 1999
The following discussion and analysis provides information that management
believes is relevant to an assessment and understanding of the consolidated
results of operations and financial condition of Ridgewood Hotels, Inc. and its
subsidiaries (collectively, the "Company"). The discussion should be read in
conjunction with the Company's consolidated financial statements for the six
months ending September 30, 2000.
Certain statements included in this document are forward-looking, such as
statements relating to estimates of operating and capital expenditure
requirements, future revenue and operating income, and cash flow and liquidity.
Such forward-looking statements are based on the Company's current expectations,
estimates and projections about the Company's industry, Management's beliefs and
certain assumptions made by the Company, and are subject to number of risks and
uncertainties that could cause actual results in the future to differ
significantly from results expressed or implied in any such forward-looking
statements. These risks and uncertainties include, but are not limited to,
uncertainties relating to economic and business conditions, governmental and
regulatory policies, and the competitive environment in which the Company
operates. Words such as "anticipates," "expects," "intends," "plans,"
"believes," "may," "will," or similar expressions are intended to identify
forward-looking statements. In addition, any statements that refer to
expectations, projections or other characterizations of future events or
circumstances, including any underlying assumptions, are forward-looking
statements. Such statements are not guarantees of future performance and are
subject to the risks and uncertainties referred to above. Therefore, the
Company's actual results could differ materially and adversely from those
expressed in any forward-looking statements as a result of various factors. The
Company undertakes no obligation to revise or update publicly any
forward-looking statements for any reason. The information contained in this
document is not a complete description of the Company's business or the risks
associated with an investment in the Company's common stock. The Company urges
you to carefully review and consider the various disclosures made in this report
and in the Company's other reports filed with the Securities and Exchange
Commission.
RESULTS OF OPERATIONS --
Revenues from hotel operations decreased approximately $114,000 (22%) for
the three months ended September 30, 2000 compared to the three months ended
September 30, 1999. Revenues decreased approximately $28,000 (2%) for the six
months ended September 30, 2000 compared to the six months ended September 30,
1999. In 1999, the hotel in Longwood, Florida (the "Longwood Property") was the
only source of revenue from hotel operations. This hotel was sold in May 2000;
however, the Company began leasing a hotel in Lubbock, Texas in February 2000
(the "Texas Property"). The Longwood Property provided approximately $357,000
in revenues until its sale in May, 2000 as compared to $1,213,000 during the
six month period ending September 30, 1999. The Texas Property provided
approximately $828,000 in the six month period ended September 30, 2000.
Revenues from hotel management increased approximately $251,000 (60%) for
the three months ended September 30, 2000 compared to the three months ended
11
<PAGE>
September 30, 1999. During the three month period ending September 30, 2000, the
Company realized $54,000 of revenue from a technical development agreement with
Fountainhead Development Corp. for a hotel development project in St. Andrews
Scotland. In addition, management of Fountainhead's Chateau Elan properties in
Georgia and Florida accounted for approximately $198,000 in management fees for
this three month period. For the six months ended September 30, 2000 as compared
to the six months ended September 30, 1999, hotel management revenues increased
$647,000 (94%) due to overall increased revenues at the hotels managed by the
Company and a larger number of hotels under management. A significant portion of
the increase in management revenues is attributed to the Company's management of
the Chateau Elan properties in Georgia and Florida which provided approximately
$430,000 during this period.
The Company entered into seven new management agreements during the six
months ended September 30, 2000. Included are (i) an agreement to continue
managing the Longwood Property which the Company sold in May, 2000, (ii) an
agreement which went into effect as of June 27 to manage a 131 room Ramada in
Duluth, Georgia, and (iii) agreements for four properties which began providing
revenues as of October 15, 2000. These four properties include a 346 room Ramada
Midtown Atlanta Hotel & Conference Center, a 224 room Ramada Inn in Spartanburg,
South Carolina, a 132 room Ramada Suites in Norcross, Georgia, and a 199 room
Howard Johnson Northeast Atlanta. The Company also entered into a management
agreement for a 416 room Ramada Hotel & conference center which is in
development and is scheduled to open in 2001.
The Company's management agreements with respect to five properties which
the Company derived approximately $126,000 and $ 269,000 of base management
revenues during the three and six month periods ending September 30, 2000,
respectively, have been terminated as follows: a 184 room hotel in Lackland,
Texas, as of July 1, a 176 room Hampton Inn in Houston, Texas, as of September
1, a 123 room Ramada Inn in Marietta, Georgia, as of October 17, a 324 room
Sheraton Four Points in San Antonio Texas, as of November 1, and a 243 room
Holiday Inn Select in Lynchburg, Virginia, as of November 1.
Equity in net income of unconsolidated entities for the three and six
months ended September 30, 2000 was received from Louisville Hotel, LLC. This
equity is offset, on a dollar for dollar basis, by interest payments on notes
outstanding with Louisville Hotel, LP, and is recorded as interest expense.
During the six months ending September 30, 2000, the Company had gains from
real estate sales of approximately $2,646,000. Approximately $2,634,000 of the
gain was due to the sale of the Longwood Property and $12,000 was due to the
sale of a parcel of land in Phoenix, Arizona. Gains or losses on sales are
dependent upon the specific assets sold in a particular period and the terms of
each sale.
Expenses of real estate properties decreased $66,000 (12%) for the three
months ended September 30, 2000 compared to the three months ended September 30,
1999. The leased property in Lubbock Texas incurred $490,000 in expenses in the
three months ended September 30, 2000 compared to expenses for the Longwood
Property of $556,000 for the same period in 1999. Expenses of real estate
properties increased $167,000 (15%) for the six months ended September 30, 2000
compared to the six months ended September 30, 1999. The changes in expenses for
real estate properties for these time periods is due to the timing of the
addition of the leased Texas Property and the sale of the Longwood Property.
12
<PAGE>
Depreciation and amortization expense decreased approximately $50,000 (28%)
and increased $13,000 (5%), respectively for the three and six months ended
September 30, 2000 compared to the three and six months ended September 30,
1999. These variances are due to the amortization of the $2,000,000 Management
Agreement with Fountainhead, and the elimination of depreciation on the Longwood
Property immediately following its sale.
General, administration and other expenses increased approximately $79,000
(13%) and $93,000 (8%) respectively for the three and six months ended September
30, 2000 compared to the three and six months ended September 30, 1999 due in
part to increased payroll expenses and in part to the Company creating a reserve
of $28,000 as an allowance for possible losses. This reserve was based on
examination of accounts receivable at September 30, 2000 for which a reasonable
assumption of risk is applied.
LIQUIDITY AND CAPITAL RESOURCES --
On May 31, 2000, the Company sold its hotel in Longwood, Florida for
$5,100,000. Approximately $3,500,000 of the sales proceeds were used to pay off
the mortgage and defeasance penalty on the hotel. The Company recognized
approximately $2,634,000 in profit on the sale before tax.
In May 2000, the Company sold a parcel of land in Phoenix, Arizona for net
proceeds of approximately $381,000.
On January 10, 2000, the Company entered into the Management Agreement with
Fountainhead, pursuant to which Fountainhead retained the Company to perform
management services at Chateau Elan Winery and Resort, one of Fountainhead's
properties, for a period of five years. In consideration of Fountainhead's
agreement to enter into the Management Agreement and a payment of $10,000 by
Fountainhead to the Company, the Company issued to Fountainhead 1,000,000 shares
of common stock at a fair market value of $2.00 per share. In the Management
Agreement, Fountainhead agreed to pay the Company a base management fee equal to
2% of the gross revenues of the properties being managed, plus an annual
incentive management fee to be determined each year based on the profitability
of the properties being managed during that year.
The Management Agreement has a term of five years but is terminable upon
the transfer by Fountainhead of all or a material portion of the properties
covered by the Management Agreement. If the Management Agreement is terminated
upon such a transfer or upon the occurrence of an event of default by
Fountainhead, Fountainhead shall pay to the Company a portion of the projected
fees owed to the Company under the agreement, with adjustments based on the term
of the Management Agreement remaining. In such event, Fountainhead may elect to
surrender to the Company shares of common stock in lieu of a cash payment. The
Company's new management continues to seek new hotel management opportunities,
including possible opportunities to manage other properties being developed by
Fountainhead. In addition to Chateau Elan Georgia, the Company manages the
Chateau Elan Sebring which is a Fountainhead property located in Sebring,
Florida. The Company also entered an agreement with Fountainhead in August to
provide development and pre-opening services for a hotel development project in
St. Andrews Scotland. The Company will receive a total of $102,000 for these
13
<PAGE>
pre-opening services. The Company intends to seek management opportunities
with other Fountainhead properties; however, Fountainhead has no obligation to
enter into further management relationships with the Company, and there can be
no assurance that the Company will manage any Fountainhead properties in the
future.
The Company has an 80% economic interest in a hotel in Louisville,
Kentucky. Per this hotel's franchise agreement, the franchisor of this hotel
determined that an ownership change occurred in conjunction with Fountainhead's
purchase of the majority shares of the Company. In turn, a Property Improvement
Plan (the "Plan") was developed by the franchisor. Under the Plan, the hotel
will be required to make approximately $1,858,000 of improvements by year end of
2002.
The Company also currently has 17 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.
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<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On August 18, 2000, the Company held its Annual Meeting of Stockholders at
which Henk H. Evers, Luther A. Henderson, Anthony Mastandrea, Sheldon E. Misher,
Donald E. Panoz and Nancy C. Panoz were elected as directors of the Company.
Each nominee was elected by the affirmation vote of a majority of the shares
present at the Annual Meeting as follows:
<TABLE>
<CAPTION>
VOTES
-----
DIRECTOR NOMINEE FOR AGAINST ABSTAIN
---------------- --- ------- -------
<S> <C> <C> <C>
Henk H. Evers 2,253,770 -- 66,865
Luther A. Henderson 2,303,275 -- 17,360
Anthony Mastandrea 2,259,235 -- 61,400
Sheldon Misher 2,303,140 -- 17,495
Donald E. Panoz 2,303,140 -- 17,495
Nancy C. Panoz 2,301,220 -- 19,415
</TABLE>
No other matters were acted on at the Annual Meeting.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
A. Exhibits:
27 Financial Data Schedule
B. Reports on Form 8-K:
No reports on Form 8-K were filed during the three ended
September 30, 2000.
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/ Henk H. Evers
Henk H. Evers
President
By: /s/ David Chiodi
David Chiodi
Director of Finance &
Accounting
Date: November 14, 2000
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