8-K/A 1 d27102_8-ka.txt AMENDMENT NO. 1 TO FORM 8-K 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