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 June 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 June 30, 2000.
<TABLE>
PART I. FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
-----------------------------
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
JUNE 30, 2000 AND MARCH 31, 2000
--------------------------------
($000'S omitted, except share and per share data)
------------------------------------------------
<CAPTION>
(Unaudited)
June 30, March 31,
ASSETS 2000 2000
------ ----------- -----------
<S> <C> <C>
Current Assets:
Cash and Cash Equivalents $ 1,927 $ 258
Receivables 611 394
Other Current Assets 56 320
------------ ------------
Total Current Assets 2,594 972
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 2,066 2,192
Other Assets, net 47 167
------------ ------------
$ 8,123 $ 8,243
============ ============
<FN>
The accompanying notes are an integral part of these consolidated
balance sheets.
</FN>
</TABLE>
<TABLE>
RIDGEWOOD HOTELS, INC. AND SUBSIDIARIES
---------------------------------------
CONSOLIDATED BALANCE SHEETS
---------------------------
JUNE 30, 2000 AND MARCH 31, 2000
--------------------------------
($000's omitted, except share and per share data)
-------------------------------------------------
<CAPTION>
(Unaudited)
June 30, March 31,
LIABILITIES: 2000 2000
----------- ------------ ------------
<S> <C> <C>
Current Liabilities:
Current Maturities of Long-Term Debt $ -- $ 37
Accounts Payable 281 284
Accrued Salaries, Bonuses and
Other Compensation 271 172
Accrued Property Tax Expense 24 39
Accrued Interest and Other Liabilities 510 524
------------ ------------
Total Current Liabilities 1,086 1,056
Accrued Pension Liability 520 520
Deferred Curtailment Gain on Pension Liability 374 374
Long-Term Debt 1,933 4,553
------------ ------------
Total Liabilities 3,913 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 (13,936) (16,406)
------------ ------------
Total Shareholders' Investment 4,210 1,740
------------ ------------
$ 8,123 $ 8,243
============ ============
<FN>
The accompanying notes are an integral part of these consolidated
balance sheets.
</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
---------------------
June 30, June 30,
2000 1999
-------- --------
<S> <C> <C>
REVENUES:
Revenues from hotel operations ........... $ 771 $ 685
Revenues from hotel management ........... 670 275
Sales of real estate properties .......... 5,525 76
Equity in net income of unconsolidated
entities ............................... 63 43
Interest income .......................... 1 4
Other .................................... 3 --
--------- ---------
7,033 1,083
--------- ---------
COSTS AND EXPENSES:
Expenses of real estate properties ....... 822 589
Costs of real estate sold ................ 2,879 76
Depreciation and amortization ............ 153 90
Interest expense ......................... 83 85
General, administration and other ........ 626 611
--------- ---------
4,563 1,451
--------- ---------
NET PROFIT (LOSS) ........................... $ 2,470 $ (368)
PREFERRED DIVIDENDS ......................... $ (90) $ (90)
--------- ---------
NET PROFIT (LOSS) APPLICABLE TO $ 2,380 $ (458)
COMMON SHAREHOLDERS ...................... --------- ---------
EARNINGS (LOSS) PER COMMON SHARE:
Basic .................................... $ 0.95 $ (0.30)
Diluted .................................. 0.61 (0.30)
========= =========
<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 Three Months Ended
--------------------------
June 30, June 30,
2000 1999
------------- -------------
<S> <C> <C>
Cash flows from operating activities:
Net profit (loss) ............................................. $ 2,470 $ (368)
Adjustments to reconcile net income (loss) to net
cash used by operating activities:
Depreciation and amortization ............................. 153 90
Gain from sales of real estate property ................... (2,646) --
(Increase) decrease in other assets ....................... (110) 129
Increase (decrease) in accounts payable and
accrued liabilities ..................................... 67 (15)
------------- -------------
Total adjustments ......................................... (2,536) 204
------------- -------------
Net cash used by operating activities ..................... (66) (164)
Cash flows from investing activities:
Proceeds from sales of real estate .......................... 4,392 65
Additions to real estate properties ......................... -- (17)
Investment in unconsolidated entity ......................... -- --
------------- -------------
Net cash received by investing activities ................. 4,392 48
Cash flows from financing activities:
Repayments of notes payable ................................. (2,657) (17)
Payment of dividends on preferred stock ..................... -- --
Payment received from officer for purchase of common stock .. -- 75
------------- -------------
Net cash (used) received in financing activities .......... (2,657) 58
------------- -------------
Net increase (decrease) in cash and cash equivalents ............ $ 1,669 $ (58)
Cash and cash equivalents at beginning of period ................ 258 639
------------- -------------
Cash and cash equivalents at end of period ...................... $ 1,927 $ 581
============= =============
Supplemental disclosure of cash flow information and 2000 1999
non-cash activity: ------------ ------------
Interest paid ............................................... 83,000 85,000
<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
JUNE 30, 2000 AND JUNE 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 Securitiy
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 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 March 31, 2000. The results of operations
for the three months ended June 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 intercompany
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 intercompany 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 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.
3. INCOME TAXES:
The Company has net operating loss carryforwards 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 carryforwards that may be utilized each year to offset taxable
income.
The Company's income tax provision for the three months ended
June 30, 2000 and June 30, 1999 is as follows:
<TABLE>
<CAPTION>
For the Three
Months Ended
--------------------------
June 30, June 30,
2000 1999
-------- --------
<S> <C> <C>
Income Tax Provision $ 894 $ --
Utilization of Net Operating
Loss Carryforwards $ (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, the
Company is subject to Federal alternative minimum tax resulting from
this sale.
4. SHAREHOLDERS' INVESTMENT:
Earnings Per Share --
The following table sets forth the computation of basic and
diluted profit (loss) per share:
<TABLE>
<CAPTION>
For the Three
Months Ended
--------------------------
June 30, June 30,
2000 1999
-------- --------
<S> <C> <C>
Net profit (loss) $2,470,000 $ (368,000)
Less undeclared
preferred dividends (90,000) (90,000)
---------- ----------
Net profit (loss)
applicable to common
shareholders $2,380,000 $ (458,000)
Weighted average
shares outstanding
-- basic 2,513,000 1,513,000
-- diluted 3,883,000 1,513,000
========== ==========
Net profit (loss) per share --
-- basic $ 0.95 $ (0.30)
-- diluted 0.61 (0.30)
========== ==========
</TABLE>
As of June 30, 2000, there are $480,000 of dividends in arrears.
The effect of the Company's stock options and convertible securities
was excluded from the computations for June 30, 1999 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.
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
writedown of $1,200,000 on its investment in Louisville Hotel, LLC.
This writedown 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 the hotel's franchise agreement, the franchisor of the 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 would be required to make
approximately $1,858,000 of improvements by year end of 2002. The
proposal by the franchisor has not been accepted at this time and
will be negotiated by Louisville Hotel, LLC.
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.
8. SUBSEQUENT EVENTS
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.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FOR THE THREE MONTHS ENDED JUNE 30, 2000
COMPARED TO THE THREE MONTHS ENDED
JUNE 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 three months
ending June 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 a
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 increased approximately $86,000,
or 13%, for the three months ended June 30, 2000 compared to the
three months ended June 30, 1999 due to revenues received from the
hotel in Texas the Company leased beginning February 1, 2000.
Revenues from hotel management increased approximately $395,000,
or 144% for the three months ended June 30, 2000 compared to the
three months ended June 30, 1999 due to overall increased revenues at
the hotels managed by the Company and a larger number of hotels under
management.
Equity in net income of unconsolidated entities was $63,000 and
$43,000, respectively, during the three months ended June 30, 2000
compared to the three months ended June 30, 1999. The equity for the
three months ended June 30, 2000 was received from Louisville Hotel,
LLC.
During the three months ended June 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
Company's hotel in Longwood, Florida and $12,000 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 increased $233,000, or 40%,
for the three months ended June 30, 2000 compared to the three months
ended June 30, 1999. The increase was due to the expenses associated
with the leased hotel in Texas.
Depreciation and amortization expense increased approximately
$63,000, or 70%, for the three months ended June 30, 2000 compared to
the three months ended June 30, 1999. The increase is due to the
amortization of the $2,000,000 Management Agreement with Fountainhead
Development Corp.
General, administration and other expenses increased
approximately $15,000, or 2% for the three months ended June 30, 2000
compared to the three months ended June 30, 1999 due primarily to
increased payroll expenses.
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. While
the Company intends to seek management opportunities with other
Fountainhead properties, 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. The Company also currently has 15 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.
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 reports on Form 8-K were filed during the
three months ended June 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: August 11, 2000
