Attached files
file | filename |
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EX-32 - EXHIBIT 32 - HMG COURTLAND PROPERTIES INC | ex32.htm |
EX-31.B - EXHIBIT 31B - HMG COURTLAND PROPERTIES INC | ex31b.htm |
EX-31.A - EXHIBIT 31A - HMG COURTLAND PROPERTIES INC | ex31a.htm |
EXCEL - IDEA: XBRL DOCUMENT - HMG COURTLAND PROPERTIES INC | Financial_Report.xls |
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
WASHINGTON,
D.C. 20549
FORM
10-Q
(Mark
One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For
the Quarterly period ended June 30,
2011
|
|
OR | |
o | 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 1-7865 |
HMG/COURTLAND PROPERTIES, INC. | ||
(Exact name of small business issuer as specified in its charter) | ||
Delaware
|
59-1914299
|
|
(State
or other jurisdiction of
|
(I.R.S.
Employer
|
|
incorporation
or organization)
|
Identification
No.)
|
|
1870 S. Bayshore Drive,
Coconut Grove, Florida
|
33133
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
|
305-854-6803
|
||
(Registrant’s
telephone number, including area code)
|
||
Not Applicable
|
||
(Former
name, former address and former fiscal year, if
changed since last report)
|
Indicate
by check mark whether the issuer (1) has filed all reports
required to be filed by Sections 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 o
Indicate
by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and
posted pursuant to Rule 405 of Regulation S-T (§232.405
of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and
post such files).
Yes
o No
o
Indicate
by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a
smaller reporting company. See definitions of “large
accelerated filer,” “accelerated filer” and
“smaller reporting company” in Rule 12b-2 of the
Exchange Act.
Large
accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer o
|
Smaller
reporting company x
|
(Do not check if a smaller reporting company) |
Indicate
by check mark whether the registrant is a shell company (as
defined in Rule 12b-2 of the exchange Act).
Yes
o No
x
APPLICABLE
ONLY TO CORPORATE ISSUERS:
State
the number of shares outstanding of each of the
issuer’s classes of common equity, as of the latest
practicable date. 1,010,426 Common shares were outstanding as
of August 15, 2011.
HMG/COURTLAND
PROPERTIES, INC.
Index
PAGE
NUMBER
|
|||||
PART I. Financial Information | |||||
Item 1.
|
Financial
Statements
|
||||
1
|
|||||
2
|
|||||
3
|
|||||
4
|
|||||
12
|
|||||
16
|
|||||
16
|
|||||
17
|
|||||
17
|
|||||
17
|
|||||
17
|
|||||
17
|
|||||
17
|
|||||
18
|
Cautionary
Statement. This Form 10-Q contains certain statements
relating to future results of the Company that are considered
“forward-looking statements” within the meaning
of the Private Litigation Reform Act of 1995. Actual results
may differ materially from those expressed or implied as a
result of certain risks and uncertainties, including, but not
limited to, changes in political and economic conditions;
interest rate fluctuation; competitive pricing pressures
within the Company’s market; equity and fixed income
market fluctuation; technological change; changes in law;
changes in fiscal, monetary, regulatory and tax policies;
monetary fluctuations as well as other risks and
uncertainties detailed elsewhere in this Form 10-Q or from
time-to-time in the filings of the Company with the
Securities and Exchange Commission. Such forward-looking
statements speak only as of the date on which such statements
are made, and the Company undertakes no obligation to update
any forward-looking statement to reflect events or
circumstances after the date on which such statement is made
or to reflect the occurrence of unanticipated events.
HMG/COURTLAND
PROPERTIES, INC. AND SUBSIDIARIES
June
30,
|
December
31,
|
|||||||
2011
|
2010
|
|||||||
(UNAUDITED)
|
||||||||
ASSETS
|
||||||||
Investment
properties, net of accumulated depreciation:
|
||||||||
Commercial
properties
|
$ | 7,181,986 | $ | 7,259,225 | ||||
Hotel,
club and spa facility
|
3,552,216 | 3,649,217 | ||||||
Marina
properties
|
1,999,626 | 2,110,445 | ||||||
Land
held for development
|
27,689 | 27,689 | ||||||
Total
investment properties, net
|
12,761,517 | 13,046,576 | ||||||
Cash
and cash equivalents
|
3,449,015 | 3,618,200 | ||||||
Cash
and cash equivalents-restricted
|
— | 2,379,947 | ||||||
Investments
in marketable securities
|
1,923,382 | 2,093,109 | ||||||
Other
investments
|
3,709,571 | 3,769,417 | ||||||
Investment
in affiliate
|
2,834,264 | 2,813,634 | ||||||
Loans,
notes and other receivables
|
537,099 | 742,411 | ||||||
Notes
and advances due from related parties
|
703,100 | 698,341 | ||||||
Deferred
taxes
|
530,000 | 480,000 | ||||||
Goodwill
|
5,628,627 | 5,628,627 | ||||||
Other
assets
|
640,752 | 657,541 | ||||||
TOTAL
ASSETS
|
$ | 32,717,327 | $ | 35,927,803 | ||||
LIABILITIES
|
||||||||
Mortgages
and notes payable
|
$ | 14,909,158 | $ | 17,509,155 | ||||
Accounts
payable, accrued expenses and other
liabilities
|
854,248 | 894,894 | ||||||
Interest
rate swap contract payable
|
1,380,000 | 1,462,000 | ||||||
TOTAL
LIABILITIES
|
17,143,406 | 19,866,049 | ||||||
STOCKHOLDERS’
EQUITY
|
||||||||
Excess
common stock, $1 par value; 100,000 shares
authorized: no shares issued
|
— | — | ||||||
Common
stock, $1 par value; 1,200,000 shares authorized and
1,023,955 issued
|
1,023,955 | 1,023,955 | ||||||
Additional
paid-in capital
|
24,313,341 | 24,313,341 | ||||||
Less:
Treasury stock at cost (13,529 shares as of June 30,
2011 and December 31, 2010)
|
(60,388 | ) | (60,388 | ) | ||||
Undistributed
gains from sales of properties, net of losses
|
41,572,120 | 41,572,120 | ||||||
Undistributed
losses from operations
|
(53,832,005 | ) | (53,443,832 | ) | ||||
Accumulated
other comprehensive loss
|
(690,000 | ) | (731,000 | ) | ||||
Total
stockholders’ equity
|
12,327,023 | 12,674,196 | ||||||
Non
controlling interest
|
3,246,898 | 3,387,558 | ||||||
TOTAL
EQUITY
|
15,573,921 | 16,061,754 | ||||||
TOTAL
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
$ | 32,717,327 | $ | 35,927,803 |
See
notes to the condensed consolidated financial
statements
1
HMG/COURTLAND
PROPERTIES, INC. AND SUBSIDIARIES
For
the three months ended
|
For
the six months ended
|
|||||||||||||||
June
30,
|
June
30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
REVENUES
|
||||||||||||||||
Real
estate rentals and related revenue
|
$ | 464,209 | $ | 457,238 | $ | 927,561 | $ | 920,860 | ||||||||
Food
& beverage sales
|
1,607,675 | 1,649,699 | 3,295,691 | 3,143,611 | ||||||||||||
Marina
revenues
|
402,480 | 438,698 | 815,379 | 870,797 | ||||||||||||
Spa
revenues
|
97,678 | 106,976 | 209,797 | 215,591 | ||||||||||||
Total
revenues
|
2,572,042 | 2,652,611 | 5,248,428 | 5,150,859 | ||||||||||||
EXPENSES
|
||||||||||||||||
Operating
expenses:
|
||||||||||||||||
Rental
and other properties
|
165,994 | 153,983 | 347,997 | 318,246 | ||||||||||||
Food
and beverage cost of sales
|
447,991 | 436,555 | 921,679 | 853,537 | ||||||||||||
Food
and beverage labor and related costs
|
340,129 | 357,504 | 685,631 | 721,161 | ||||||||||||
Food
and beverage other operating costs
|
526,091 | 536,609 | 1,063,951 | 1,011,418 | ||||||||||||
Marina
expenses
|
224,365 | 244,772 | 443,146 | 488,215 | ||||||||||||
Spa
expenses
|
107,078 | 96,892 | 209,898 | 192,027 | ||||||||||||
Depreciation
and amortization
|
236,448 | 228,819 | 617,742 | 510,429 | ||||||||||||
Adviser’s
base fee
|
255,000 | 255,000 | 510,000 | 510,000 | ||||||||||||
General
and administrative
|
78,916 | 121,573 | 172,959 | 217,126 | ||||||||||||
Professional
fees and expenses
|
109,204 | 113,891 | 196,330 | 188,673 | ||||||||||||
Directors’
fees and expenses
|
21,306 | 23,762 | 45,306 | 52,975 | ||||||||||||
Total
operating expenses
|
2,512,522 | 2,569,360 | 5,214,639 | 5,063,807 | ||||||||||||
Interest
expense
|
218,461 | 271,782 | 470,650 | 531,704 | ||||||||||||
Total
expenses
|
2,730,983 | 2,841,142 | 5,685,289 | 5,595,511 | ||||||||||||
Loss
before other income and income taxes
|
(158,941 | ) | (188,531 | ) | (436,861 | ) | (444,652 | ) | ||||||||
Net
realized and unrealized (losses) gains from
investments in marketable securities
|
(30,978 | ) | (156,303 | ) | 31,980 | (28,823 | ) | |||||||||
Net
income from other investments
|
35,978 | 19,910 | 45,312 | 218,186 | ||||||||||||
Realized
loss on interest rate swap agreement
|
— | — | (198,400 | ) | — | |||||||||||
Other
than temporary impairment losses from other
investments
|
(86,707 | ) | (50,000 | ) | (86,707 | ) | (50,000 | ) | ||||||||
Interest,
dividend and other income
|
30,135 | 59,900 | 126,022 | 177,981 | ||||||||||||
Total
other (loss) income
|
(51,572 | ) | (126,493 | ) | (81,793 | ) | 317,344 | |||||||||
Loss
before income taxes
|
(210,513 | ) | (315,024 | ) | (518,654 | ) | (127,308 | ) | ||||||||
Benefit
from income taxes
|
(59,000 | ) | (90,000 | ) | (50,000 | ) | (18,000 | ) | ||||||||
Net
loss
|
(151,513 | ) | (225,024 | ) | (468,654 | ) | (109,308 | ) | ||||||||
Less:
Net (income) loss attributable to noncontrolling
interest in consolidated entities
|
(30,529 | ) | (62,403 | ) | 80,481 | (81,395 | ) | |||||||||
Net
loss attributable to the Company
|
$ | (182,042 | ) | $ | (287,427 | ) | $ | (388,173 | ) | $ | (190,703 | ) | ||||
Other
comprehensive income (loss):
|
||||||||||||||||
Unrealized
(loss) gain on interest rate swap agreement
|
$ | (89,500 | ) | $ | (217,000 | ) | $ | 41,000 | $ | (271,000 | ) | |||||
Total
other comprehensive (loss) income
|
(89,500 | ) | (217,000 | ) | 41,000 | (271,000 | ) | |||||||||
Comprehensive
loss
|
$ | (271,542 | ) | $ | (504,427 | ) | $ | (347,173 | ) | $ | (461,703 | ) | ||||
Net
loss Per Common Share:
|
||||||||||||||||
Basic
and diluted
|
$ | (0.18 | ) | $ | (0.28 | ) | $ | (0.38 | ) | $ | (0.19 | ) | ||||
Weighted
average common shares outstanding-Basic and
diluted
|
1,010,426 | 1,021,383 | 1,010,426 | 1,021,383 |
See
notes to the condensed consolidated financial
statements
2
HMG/COURTLAND
PROPERTIES, INC. AND SUBSIDIARIES
For
the six months
|
||||||||
ended
June 30,
|
||||||||
2011
|
2010
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES:
|
||||||||
Net
loss attributable to the Company
|
$ | (388,173 | ) | $ | (190,703 | ) | ||
Adjustments
to reconcile net loss attributable to the Company to
net cash provided by operating activities:
|
||||||||
Depreciation
and amortization
|
617,742 | 510,429 | ||||||
Net
income from other investments, excluding impairment
losses
|
(45,312 | ) | (218,186 | ) | ||||
Other
than temporary impairment loss from other
investments
|
86,707 | 50,000 | ||||||
Net
(gain) loss from investments in marketable
securities
|
(31,980 | ) | 28,823 | |||||
Realized
loss on interest rate swap agreement
|
198,400 | — | ||||||
Net
(loss) income attributable to non controlling
interest
|
(80,481 | ) | 81,395 | |||||
Deferred
income tax benefit
|
(50,000 | ) | (18,000 | ) | ||||
Changes
in assets and liabilities:
|
||||||||
Other
assets and other receivables
|
52,477 | (161,878 | ) | |||||
Accounts
payable, accrued expenses and other
liabilities
|
(43,084 | ) | 127,887 | |||||
Total
adjustments
|
704,469 | 400,470 | ||||||
Net
cash provided by operating activities
|
316,296 | 209,767 | ||||||
CASH
FLOWS FROM INVESTING ACTIVITIES:
|
||||||||
Purchases
and improvements of properties
|
(163,057 | ) | (90,137 | ) | ||||
Decrease
in notes and advances from related parties
|
(4,759 | ) | 7,710 | |||||
Collections
of mortgage loans and notes receivables
|
— | 163,975 | ||||||
Distributions
from other investments
|
119,222 | 233,064 | ||||||
Contributions
to other investments
|
(118,963 | ) | (108,577 | ) | ||||
Net
proceeds from sales and redemptions of
securities
|
641,788 | 2,632,920 | ||||||
Purchase
of marketable securities
|
(440,081 | ) | (825,889 | ) | ||||
Net
cash provided by investing activities
|
34,150 | 2,013,066 | ||||||
CASH
FLOWS FROM FINANCING ACTIVITIES:
|
||||||||
Repayment
of mortgages and notes payables
|
(2,599,997 | ) | (426,669 | ) | ||||
Partial
settlement of interest rate swap contract
|
(198,400 | ) | — | |||||
Withdrawals
from (deposits to) restricted cash
|
2,379,947 | (839,424 | ) | |||||
Distributions
to minority partners
|
(101,181 | ) | (13,551 | ) | ||||
Net
cash used in financing activities
|
(519,631 | ) | (1,279,644 | ) | ||||
Net
(decrease) increase in cash and cash
equivalents
|
(169,185 | ) | 943,189 | |||||
Cash
and cash equivalents at beginning of the year
|
3,618,200 | 1,909,218 | ||||||
Cash
and cash equivalents at end of the year
|
$ | 3,449,015 | $ | 2,852,407 | ||||
SUPPLEMENTAL
DISCLOSURE OF CASH FLOW INFORMATION:
|
||||||||
Cash
paid during the period for interest
|
$ | 471,000 | $ | 532,000 | ||||
Cash
paid during the period for income taxes
|
$ | — | $ | — |
See
notes to the condensed consolidated financial
statements
3
HMG/COURTLAND
PROPERTIES, INC. AND SUBSIDIARIES
(Unaudited)
1.
CONDENSED
CONSOLIDATED FINANCIAL STATEMENTS
In
the opinion of the Company, the accompanying unaudited
condensed consolidated financial statements prepared in
accordance with instructions for Form 10-Q, include all
adjustments (consisting only of normal recurring accruals)
which are necessary for a fair presentation of the results
for the periods presented. Certain information and footnote
disclosures normally included in the financial statements
prepared in accordance with accounting principles generally
accepted in the United States of America have been condensed
or omitted. It is suggested that these condensed consolidated
financial statements be read in conjunction with the
Company’s Annual Report for the year ended December 31,
2010. The balance sheet as of December 31, 2010 was derived
from audited financial statements as of that date. The
results of operations for the three and six months ended June
30, 2011 are not necessarily indicative of the results to be
expected for the full year.
The
condensed consolidated financial statements include the
accounts of HMG/Courtland Properties, Inc. (the
“Company”) and entities in which the Company owns
a majority voting interest or controlling financial interest.
All material transactions and balances with consolidated and
unconsolidated entities have been eliminated in consolidation
or as required under the equity method.
2.
RECENT
ACCOUNTING PRONOUNCEMENTS
Recently
Adopted Accounting Standards
In
December 2010, the Financial Accounting Standards Board
(“FASB”) amended its existing guidance for
goodwill and other intangible assets. This authoritative
guidance modifies Step 1 of the goodwill impairment test for
reporting units with zero or negative carrying amounts. For
those reporting units, an entity is required to perform Step
2 of the goodwill impairment test if there are qualitative
factors indicating that it is more likely than not that a
goodwill impairment exists. The qualitative factors are
consistent with the existing guidance which requires goodwill
of a reporting unit to be tested for impairment between
annual tests if an event occurs or circumstances change that
would more likely than not reduce the fair value of a
reporting unit below its carrying amount. This authoritative
guidance becomes effective for the Company in fiscal 2012.
The implementation of this authoritative guidance is not
expected to have a material impact on the Company’s
consolidated financial position or results of
operations.
In
April 2011, the FASB issued new guidance clarifying when a
debt restructuring by a creditor constitutes a troubled debt
restructuring, which is effective July 1, 2011 for all
restructurings that occurred on or after January 1, 2011.
Specifically, the guidance clarifies that a troubled debt
restructuring only exists when a creditor makes a concession
in interest rates or payment terms to a debtor experiencing
financial difficulties. It provides additional guidance on
determining what constitutes a concession, and on the use of
probability in determining if a debtor could be experiencing
financial difficulty prior to defaulting on payments. The
adoption of this new guidance is not expected to have a
material impact on the Company’s consolidated financial
position or results of operations.
In
May 2011, the FASB issued Accounting Standard Update
(“ASU”) 2011-04, which generally aligns the
principles for fair value measurements contained in
Accounting Standard Codification (“ASC”) 820, and
the related disclosures under U.S. GAAP and International
Financial Reporting Standards (“IFRS”). The
amendments to ASC 820 generally relate to changes to a
principle or requirement for measuring fair value,
clarifications of the FASB’s intent regarding the
application of existing requirements and additional
disclosure requirements. This ASU is effective in interim and
annual periods beginning after December 15, 2011. Early
adoption is not permitted. The Company is presently
evaluating the impact, if any of this ASU on its consolidated
financial statements.
In
June 2011, the FASB issued ASU 2011-05 amending ASC Topic 220
related to comprehensive income. The amendment to ASC 220
requires companies to present items of net income, items of
other comprehensive income (“OCI”) and total
comprehensive income in one continuous statement or two
separate but consecutive statements. Companies will no longer
be allowed to present OCI in the statement of
stockholders’ equity. The reclassification adjustments
between OCI and net income will be presented separately on
the face of the financial statements. This ASU is effective
in interim and annual periods beginning after December 15,
2011. Early adoption is permitted. The Company is presently
evaluating the impact, if any, of this ASU on its
consolidated financial statements.
4
3.
RESULTS
OF OPERATIONS FOR MONTY’S RESTAURANT, MARINA AND
OFFICE/RETAIL PROPERTY, COCONUT GROVE, FLORIDA
The
Company, through two 50%-owned entities, Bayshore Landing,
LLC (“Landing”) and Bayshore Rawbar, LLC
(“Rawbar”), (collectively,
“Bayshore”) owns a restaurant, office/retail and
marina property located in Coconut Grove (Miami), Florida
known as Monty’s (the “Monty’s
Property”).
In
March 2011 Bayshore amended its loan agreement with the same
bank. Effective March 11, 2011 the principal balance of the
loan was paid down by approximately $1.6 million to $8.8
million with the proceeds of the restricted cash balance and
the remaining restricted cash balances were released by the
bank. The loan is to be repaid in monthly installments of
approximately $81,500 including principal and interest.
Interest remains at the same terms, and the swap agreement
remains in place for the reduced balance. The note is due,
with a balloon payment on August 19, 2020. The agreement with
the bank contains certain covenants with which the Company is
in compliance. In conjunction with this loan amendment
Bayshore was required to pay down the interest rate swap
contract liability by $198,400, as discussed in Note 7
below.
Summarized
combined statements of income for Landing and Rawbar for the
three and six months ended June 30, 2011 and 2010 are
presented below (Note: the Company’s ownership
percentage in these operations is 50%):
Summarized
Combined statements of income
Bayshore
Landing, LLC and
Bayshore
Rawbar, LLC
|
For
the three months ended
June
30, 2011
|
For
the three months ended
June
30, 2010
|
For
the six
months
ended
June
30, 2011
|
For
the six
months
ended
June
30, 2010
|
||||||||||||
Revenues:
|
||||||||||||||||
Food
and Beverage Sales
|
$ | 1,608,000 | $ | 1,650,000 | $ | 3,296,000 | $ | 3,144,000 | ||||||||
Marina
dockage and related
|
271,000 | 315,000 | 557,000 | 619,000 | ||||||||||||
Retail/mall
rental and related
|
147,000 | 144,000 | 294,000 | 296,000 | ||||||||||||
Total
Revenues
|
2,026,000 | 2,109,000 | 4,147,000 | 4,059,000 | ||||||||||||
Expenses:
|
||||||||||||||||
Cost
of food and beverage sold
|
448,000 | 437,000 | 922,000 | 854,000 | ||||||||||||
Labor
and related costs
|
292,000 | 308,000 | 590,000 | 626,000 | ||||||||||||
Entertainers
|
48,000 | 49,000 | 96,000 | 95,000 | ||||||||||||
Other
food and beverage related costs
|
150,000 | 158,000 | 307,000 | 295,000 | ||||||||||||
Other
operating costs
|
28,000 | 61,000 | 70,000 | 131,000 | ||||||||||||
Repairs
and maintenance
|
108,000 | 68,000 | 214,000 | 121,000 | ||||||||||||
Insurance
|
130,000 | 143,000 | 254,000 | 285,000 | ||||||||||||
Management
fees
|
76,000 | 65,000 | 160,000 | 126,000 | ||||||||||||
Utilities
|
70,000 | 72,000 | 124,000 | 125,000 | ||||||||||||
Ground
rent
|
224,000 | 210,000 | 446,000 | 419,000 | ||||||||||||
Interest
|
166,000 | 218,000 | 367,000 | 424,000 | ||||||||||||
Depreciation
and amortization (a)
|
168,000 | 177,000 | 483,000 | 360,000 | ||||||||||||
Realized
loss on interest rate swap (Note 7)
|
— | — | 198,000 | — | ||||||||||||
Total
Expenses
|
1,908,000 | 1,966,000 | 4,231,000 | 3,861,000 | ||||||||||||
Net
income (loss)
|
$ | 118,000 | $ | 143,000 | $ | (84,000 | ) | $ | 198,000 |
(a)
|
Includes
approximately $145,000 loan costs which were fully
amortized in conjunction with the Monty’s loan
modification in March 2011.
|
4.
INVESTMENTS
IN MARKETABLE SECURITIES
Investments
in marketable securities consist primarily of large capital
corporate equity and debt securities in varying industries or
issued by government agencies with readily determinable fair
values. These securities are stated at market value, as
determined by the most recent traded price of each security
at the balance sheet date. Consistent with the
Company’s overall current investment objectives and
activities its entire marketable securities portfolio is
classified as trading.
5
Net
realized and unrealized gain (loss) from investments in
marketable securities for the three and six months ended June
30, 2011 and 2010 is summarized below:
Three
months ended
June
30,
|
Six
months ended
June
30,
|
|||||||||||||||
Description
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Net
realized (loss) gain from sales of securities
|
$ | (2,000 | ) | $ | 7,000 | $ | 78,000 | $ | 253,000 | |||||||
Unrealized
net loss in trading securities
|
(29,000 | ) | (163,000 | ) | (46,000 | ) | (282,000 | ) | ||||||||
Total
net (loss) gain from investments in marketable
securities
|
$ | (31,000 | ) | $ | (156,000 | ) | $ | 32,000 | $ | (29,000 | ) |
For
the three and six months ended June 30, 2011 net unrealized
losses from trading securities were $29,000 and $46,000,
respectively. This is compared to net unrealized losses of
$163,000 and $282,000 for the three and six months ended June
30, 2010, respectively.
For
the three months ended June 30, 2011 net realized loss from
sales of marketable securities of approximately $2,000, and
consisted of approximately $10,000 of gross losses net of
$9,000 of gross gains. For the six months ended June 30, 2011
net realized gain from sales of marketable securities of
approximately $78,000, and consisted of approximately
$103,000 of gross gains net of $25,000 of gross
losses.
For
the three and six months ended June 30, 2010 net realized
gain from sales of marketable securities of approximately
$7,000, and consisted of approximately $170,000 of gross
gains net of $163,000 of gross losses. For the six months
ended June 30, 2010 net realized gain from sales of
marketable securities of approximately $253,000, and
consisted of approximately $437,000 of gross gains net of
$184,000 of gross losses.
Investment
gains and losses on marketable securities may fluctuate
significantly from period to period in the future and could
have a significant impact on the Company’s net
earnings. However, the amount of investment gains or losses
on marketable securities for any given period has no
predictive value and variations in amount from period to
period have no practical analytical value.
5.
OTHER
INVESTMENTS
As
of June 30, 2011, the Company’s portfolio of other
investments had an aggregate carrying value of approximately
$3.7 million. The Company has committed to fund an additional
$614,000 as required by agreements with the investees. The
carrying value of these investments is equal to contributions
less distributions and loss valuation adjustments. During the
three months ended June 30, 2011 the Company committed to a
new investment of approximately $37,000. This investment was
a feeder fund for an existing real estate fund which spun off
an individual property. Total cash contributions to other
investments for the three and six months ended June 30, 2011
were approximately $64,000 and $119,000, respectively. Total
cash distributions from other investments for the three and
six months ended June 30, 2011 were approximately $89,000 and
$119,000, respectively. These distributions were primarily
from investments in partnerships owning diversified operating
companies.
Net
income from other investments for the three and six months
ended June 30, 2011 and 2010, is summarized below (excluding
other than temporary impairment loss):
Three
months ended June 30,
|
Six
months ended June 30,
|
|||||||||||||||
Description
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Partnership
owning diversified businesses
|
$ | 25,000 | $ | — | $ | 25,000 | $ | 180,000 | ||||||||
Technology
and related
|
— | 2,000 | 2,000 | |||||||||||||
Income
from investment in 49% owned affiliate (T.G.I.F.
Texas, Inc.)
|
11,000 | 18,000 | 20,000 | 36,000 | ||||||||||||
Total
net income from other investments (excluding other
than temporary impairment losses)
|
$ | 36,000 | $ | 20,000 | $ | 45,000 | $ | 218,000 |
Other
than temporary impairment losses from other investments for
the three and six months ended June 30, 2011 and 2010, are
summarized below:
Three
months ended June 30,
|
Six
months ended June 30,
|
|||||||||||||||
Description
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Real
estate and related (a)
|
$ | (84,000 | ) | $ | (50,000 | ) | $ | (84,000 | ) | $ | (50,000 | ) | ||||
Other
|
(3,000 | ) | — | (3,000 | ) | — | ||||||||||
Total
other than temporary impairment losses from other
investments
|
$ | (87,000 | ) | $ | (50,000 | ) | $ | (87,000 | ) | $ | (50,000 | ) |
(a)
|
In
June 2011 the Company recognized an impairment loss
of approximately $84,000 from an investment in a
partnership which operates and leases executive
suites in Miami, Florida. The Company has funded
$120,000 to date in this investment and the losses
incurred were associated with the initial start up of
the venture in 2010.
|
6
The
following tables present gross unrealized losses and fair
values for those investments that were in an unrealized loss
position as of June 30, 2011 and December 31, 2010,
aggregated by investment category and the length of time that
investments have been in a continuous loss position:
As
of June 30, 2011
|
||||||||||||||||||||||||
Less
than 12 Months
|
Greater
than 12 Months
|
Total
|
||||||||||||||||||||||
Investment
Description
|
Fair
Value
|
Unrealized
Loss
|
Fair
Value
|
Unrealized
Loss
|
Fair
Value
|
Unrealized
Loss
|
||||||||||||||||||
Partnerships
owning investments in technology related
industries
|
$ | 324,000 | $ | (13,000 | ) | $ | 43,000 | $ | (44,000 | ) | $ | 367,000 | $ | (57,000 | ) | |||||||||
Partnerships
owning diversified businesses
|
— | — | 626,000 | (89,000 | ) | 626,000 | (89,000 | ) | ||||||||||||||||
Partnerships
owning real estate and related investments
|
— | — | 302,000 | (49,000 | ) | 302,000 | (49,000 | ) | ||||||||||||||||
Total
|
$ | 324,000 | $ | (13,000 | ) | $ | 971,000 | $ | (182,000 | ) | $ | 1,295,000 | $ | (195,000 | ) |
As
of December 31, 2010
|
||||||||||||||||||||||||
Less
than 12 Months
|
Greater
than 12 Months
|
Total
|
||||||||||||||||||||||
Investment
Description
|
Fair
Value
|
Unrealized
Loss
|
Fair
Value
|
Unrealized
Loss
|
Fair
Value
|
Unrealized
Loss
|
||||||||||||||||||
Partnerships
owning investments in technology related
industries
|
— | — | $ | 52,000 | $ | (34,000 | ) | $ | 52,000 | $ | (34,000 | ) | ||||||||||||
Partnerships
owning diversified businesses
|
— | — | 737,000 | (104,000 | ) | 737,000 | (104,000 | ) | ||||||||||||||||
investments
|
— | — | 398,000 | (105,000 | ) | 398,000 | (105,000 | ) | ||||||||||||||||
Total
|
— | — | $ | 1,187,000 | $ | (243,000 | ) | $ | 1,187,000 | $ | (243,000 | ) |
When
evaluating the investments for other-than-temporary
impairment, the Company reviews factors such as the length of
time and extent to which fair value has been below cost
basis, the financial condition of the issuer and any changes
thereto, and the Company’s intent to sell, or whether
it is more likely than not it will be required to sell, the
investment before recovery of the investment’s
amortized cost basis.
In
accordance with ASC Topic 320-10-65, Recognition and
Presentation of Other-Than-Temporary Impairments
(“OTTI”) as of June 30, 2011 OTTI impairment
valuation adjustments totaled $87,000 primarily from an
investment in a real estate partnership which leases
executive suites in Miami, Florida (as discussed above). As
of June 30, 2010 OTTI impairment valuation adjustments
totaled $50,000 primarily from an investment in a real estate
fund.
6. FAIR VALUE OF FINANCIAL
INSTRUMENTS
In
accordance with ASC Topic 820, the Company discloses the fair
value of its financial instruments in a hierarchy that
prioritizes the inputs to valuation techniques used to
measure the fair value. The hierarchy gives the highest
priority to valuations based upon unadjusted quoted prices in
active markets for identical assets or liabilities (level
1measurements), and gives the lowest priority to valuations
based upon unobservable inputs that are significant to the
valuation (level 3 measurements). Level 2 inputs include
quoted prices for similar assets and liabilities in active
markets, and inputs that are observable for the asset and
liability, either directly or indirectly, for substantially
the full term on the financial instrument.
7
Assets
and liabilities measured at fair value on a recurring basis
are summarized below by hierarchy as of June 30 2011 and
December 31, 2010:
Fair
value measurement at reporting date using
|
||||||||||||||||
Total
June 30, |
Quoted
Prices in Active Markets for Identical Assets
|
Significant
Other Observable Inputs
|
Significant
Unobservable Inputs
|
|||||||||||||
Description
|
2011
|
(Level
1)
|
(Level
2)
|
(Level
3)
|
||||||||||||
Assets:
|
||||||||||||||||
Cash
equivalents:
|
||||||||||||||||
Time
deposits
|
$ | 54,000 | — | $ | 54,000 | — | ||||||||||
Money
market mutual funds
|
2,107,000 | $ | 2,107,000 | — | — | |||||||||||
Marketable
securities:
|
||||||||||||||||
Corporate
debt securities
|
527,000 | — | 527,000 | — | ||||||||||||
Marketable
equity securities
|
1,396,000 | 1,396,000 | — | — | ||||||||||||
Total
assets
|
$ | 4,084,000 | $ | 3,503,000 | $ | 581,000 | $ | — | ||||||||
Liabilities:
|
||||||||||||||||
Interest
rate swap contract
|
1,380,000 | — | 1,380,000 | — | ||||||||||||
Total
liabilities
|
$ | 1,380,000 | — | $ | 1,380,000 | — |
Fair
value measurement at reporting date using
|
||||||||||||||||
Total
December 31, |
Quoted
Prices in Active Markets for Identical Assets
|
Significant
Other Observable Inputs
|
Significant
Unobservable Inputs
|
|||||||||||||
Description
|
2010
|
(Level
1)
|
(Level
2)
|
(Level
3)
|
||||||||||||
Assets:
|
||||||||||||||||
Cash
equivalents:
|
||||||||||||||||
Time
deposits
|
$ | 53,000 | — | $ | 53,000 | — | ||||||||||
Money
market mutual funds
|
2,450,000 | $ | 2,450,000 | — | — | |||||||||||
Cash
equivalents – restricted:
|
||||||||||||||||
Money
market mutual funds
|
2,380,000 | 2,380,000 | — | — | ||||||||||||
Marketable
securities:
|
||||||||||||||||
Corporate
debt securities
|
730,000 | — | 730,000 | — | ||||||||||||
Marketable
equity securities
|
1,364,000 | 1,364,000 | — | — | ||||||||||||
Total
assets
|
$ | 6,977,000 | $ | 6,194,000 | $ | 783,000 | — | |||||||||
Liabilities:
|
||||||||||||||||
Interest
rate swap contract
|
1,462,000 | — | 1,462,000 | — | ||||||||||||
Total
liabilities
|
$ | 1,462,000 | — | $ | 1,462,000 | — |
8
Assets
measured at fair value on a nonrecurring basis are summarized
below by hierarchy as of June 30, 2011 and December 31,
2010:
Fair
value measurement at reporting date
using
|
||||||||||||||||||||
Total
June 30, |
Quoted
Prices in Active Markets for Identical Assets
|
Significant
Other Observable Inputs
|
Significant
Unobservable Inputs
|
Total
losses for the three and six months ended
|
||||||||||||||||
Description
|
2011
|
(Level
1)
|
(Level
2) (a)
|
(Level
3) (b)
|
6/30/2011
|
|||||||||||||||
Assets:
|
||||||||||||||||||||
Other
investments by investment focus:
|
||||||||||||||||||||
Technology
& Communication
|
$ | 468,000 | $ | — | $ | 468,000 | $ | — | $ | (3,000 | ) | |||||||||
Diversified
businesses
|
1,416,000 | — | 1,416,000 | — | — | |||||||||||||||
Real
estate and related
|
1,526,000 | — | 545,000 | 981,000 | (84,000 | ) | ||||||||||||||
Other
|
300,000 | — | — | 300,000 | — | |||||||||||||||
$ | 3,710,000 | $ | — | $ | 2,429,000 | $ | 1,281,000 | $ | (87,000 | ) | ||||||||||
Goodwill
(Bayshore)
|
5,628,000 | 5,628,000 | ||||||||||||||||||
Total
assets
|
$ | 9,338,000 | $ | — | $ | 2,429,000 | $ | 6,909,000 | $ | (87,000 | ) |
Fair
value measurement at reporting date
using
|
||||||||||||||||||||
Total
December 31, |
Quoted
Prices in Active Markets for Identical Assets
|
Significant
Other Observable Inputs
|
Significant
Unobservable Inputs
|
Total
gains (losses) for year ended
|
||||||||||||||||
Description
|
2010
|
(Level
1)
|
(Level
2) (a)
|
(Level
3) (b)
|
12/31/2010
|
|||||||||||||||
Assets:
|
||||||||||||||||||||
Other
investments by investment focus:
|
||||||||||||||||||||
Technology
& Communication
|
$ | 469,000 | $ | — | $ | 469,000 | $ | — | $ | (44,000 | ) | |||||||||
Diversified
businesses
|
1,461,000 | — | 1,461,000 | — | 187,000 | |||||||||||||||
Real
estate and related
|
1,539,000 | — | 539,000 | 1,000,000 | (45,000 | ) | ||||||||||||||
Other
|
300,000 | — | — | 300,000 | $ | 14,000 | ||||||||||||||
$ | 3,769,000 | $ | — | $ | 2,469,000 | $ | 1,300,000 | $ | 112,000 | |||||||||||
Goodwill
(Bayshore)
|
5,628,000 | 5,628,000 | (2,100,000 | ) | ||||||||||||||||
Total
assets
|
$ | 9,397,000 | $ | — | $ | 2,469,000 | $ | 6,928,000 | $ | (1,988,000 | ) |
The
inputs or methodology used for valuing securities are not
necessarily an indication of the risk associated with
investing in those securities.
For
the six months ended June 30, 2011 and 2010, respectively,
$87,000 and $50,000 of OTTI adjustments were recognized. No
OTTI adjustments were recognized for the three months ended
March 31, 2011 and 2010.
The
OTTI loss for the three months ended June 30, 2011 primarily
consists of a recognized impairment loss of approximately
$84,000 in an investment in a partnership which operates and
leases executive suites in Miami, Florida. The Company has
funded $120,000 to date in this investment and the losses
incurred were primarily associated with the initial start up
of the venture in 2010.
(a)
|
This
class of other investments above which are measured
on a nonrecurring basis using Level 2 input or recent
observable information. These include investments in
certain entities that calculate net asset value per
share (or its equivalent such as member units or an
ownership interest in partners’ capital to
which a proportionate share of net assets is
attributed, “NAV”). This class primarily
consists of private equity funds that have varying
investment focus. These investments can never be
redeemed with the funds. Instead, the nature of the
investments in this class is that distributions are
received through the liquidation of the underlying
assets of the fund. If these investments were held it
is estimated that the underlying assets of the fund
would be liquidated over 5 to 10 years. As of June
30, 2011 and December 31, 2010, it is probable that
all of the investments in this class will be sold at
an amount different from the NAV of the
Company’s ownership interest in partners’
capital. Therefore, the fair values of the
investments in this class have been estimated using
recent observable information such as audited
financial statements and/or statements of
partners’ capital obtained directly from
investees on a quarterly or other regular basis. As
of June 30, 2011 and December 31, 2010 the amount of
the Company’s unfunded commitments related to
the aforementioned investments is approximately
$610,000 and $665,000, respectively.
|
9
(b)
|
This
class of other investments above which are measured
on a nonrecurring basis using Level 3 unobservable
inputs consist of investments primarily in
commercial real estate in Florida through private
partnerships and two investments in the stock of
private banks in Florida and Texas. The Company
does not know when it will have the ability to
redeem the investments and has categorized them as
a Level 3 fair value measurement. The Level 3 real
estate and related investments of approximately $1
million primarily consist of one investment in a
commercial building located near the
Company’s offices purchased in 2005. This
investment is measured using primarily inputs
provided by the managing member of the partnerships
with whom the Company has done similar transactions
in the past and is well known to management. The
fair values of these real estate investments have
been estimated using the net asset value of the
Company’s ownership interest in
partners’ capital. There have been no gains
or losses realized or unrealized relating to these
investments. The investments in private bank stocks
include a private bank and trust located in Coral
Gables, Florida in the amount of $250,000 made in
2009, and a $50,000 investment in a bank located in
El Campo, Texas made in 2010. The fair values of
these bank stock investments have been estimated
using the cost method less distributions received
and other than temporary impairments. This
investment is valued using inputs provided by the
management of the banks.
|
The
following table includes a roll-forward of the investments
classified within level 3 of the fair value hierarchy for the
six months ended June 30, 2011:
Level
3 Investments:
|
||||
Balance
at January 1, 2011
|
$ | 1,300,000 | ||
Additional
investment in limited partnership
|
30,000 | |||
Other
than temporary impairment loss
|
(87,000 | ) | ||
Transfers
from Level 2
|
38,000 | |||
Balance
at June 30, 2011
|
$ | 1,281,000 |
For
the six months ended June 30, 2011 the Company transferred
approximately $38,000 from level 2 to level 3 to correct a
misclassification of an investment in a real estate
partnership as of December 31, 2010.
7.
INTEREST
RATE SWAP CONTRACT
The
Company is exposed to interest rate risk through its
borrowing activities. In order to minimize the effect of
changes in interest rates, the Company has entered into an
interest rate swap contract under which the Company agrees to
pay an amount equal to a specified rate of 7.57% times a
notional principal approximating the outstanding loan
balance, and to receive in return an amount equal to 2.45%
plus the one-month LIBOR Rate times the same notional amount.
The Company designated this interest rate swap contract as a
cash flow hedge.
In
conjunction with amendment of the Bayshore bank loan in March
2011 (Note 3), the interest rate swap contract liability was
paid down by $198,400 (in the same proportion as the amount
of the loan principal paid down). This amount represents a
previously unrealized loss which upon pay down of the swap
was reclassified from accumulated other comprehensive income
and recorded as a realized loss on interest rate swap
contract within the condensed consolidated statements of
comprehensive income for the six months ended June 30,
2011.
10
As
of June 30, 2011 the fair value of this hedge was an
unrealized loss of approximately $1,380,000, as compared with
an unrealized loss of $1,462,000 as of December 31, 2010
which resulted in an unrealized gain of $82,000 (or $41,000,
net of non controlling interest) for the six months ended
June 30, 2011. This amount has been recorded as other
comprehensive income and will be reclassified to interest
expense over the life of the contract.
The
following tables present the required disclosures in
accordance with ASC Topic 815-10:
Liability Derivative | |||||||||||
June
30, 2011
|
December
31, 2010
|
||||||||||
Fair
Values of Derivative Instruments:
|
Balance
Sheet Location
|
Fair
Value
|
Balance
Sheet Location
|
Fair
Value
|
|||||||
Derivatives
designated as hedging instruments:
|
|||||||||||
Interest
rate swap contract
|
Liabilities
|
$ | 1,380,000 |
Liabilities
|
$ | 1,462,000 | |||||
Total
derivatives designated as hedging instruments under
ASC Topic 815
|
$ | 1,380,000 | $ | 1,462,000 |
The
Effect of Derivative Instruments on the Statements of
Comprehensive Income
Amount
of Gain or (Loss) Recognized in OCI on
|
||||||||||||||||
Derivative
(Effective Portion)
|
||||||||||||||||
For
the three
|
For
the three
|
For
the six
|
For
the six
|
|||||||||||||
Months
ended
|
Months
ended
|
Months
ended
|
Months
ended
|
|||||||||||||
June
30, 2011
|
June
30, 2010
|
June
30, 2011
|
June
30, 2010
|
|||||||||||||
Interest
rate swap contracts
|
$ | (89,500 | ) | $ | (217,000 | ) | $ | 41,000 | $ | (271,000 | ) | |||||
Total
|
$ | (89,500 | ) | $ | (217,000 | ) | $ | 41,000 | $ | (271,000 | ) |
11
8.
SEGMENT
INFORMATION
The
Company has three reportable segments: Real estate rentals;
Food and Beverage sales; and Other investments and related
income. The Real estate and rentals segment primarily
includes the leasing of its Grove Isle property, marina dock
rentals at both Monty’s and Grove Isle marinas, and the
leasing of office and retail space at its Monty’s
property. The Food and Beverage sales segment consists of the
Monty’s restaurant operation. Lastly, the Other
investment and related income segment includes all of the
Company’s other investments, marketable securities,
loans, notes and other receivables and the Grove Isle spa
operations which individually do not meet the criteria as a
reportable segment.
Three
months ended
|
Six
months ended
|
|||||||||||||||
June
30,
|
June
30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Net
Revenues:
|
||||||||||||||||
Real
estate and marina rentals
|
$ | 867,000 | $ | 896,000 | $ | 1,743,000 | $ | 1,792,000 | ||||||||
Food
and beverage sales
|
1,607,000 | 1,650,000 | 3,295,000 | 3,144,000 | ||||||||||||
Spa
revenues
|
98,000 | 107,000 | 210,000 | 216,000 | ||||||||||||
Total
net revenues
|
$ | 2,572,000 | $ | 2,653,000 | $ | 5,248,000 | $ | 5,152,000 | ||||||||
Income
(loss) before income taxes:
|
||||||||||||||||
Real
estate and marina rentals
|
$ | 239,000 | $ | 298,000 | $ | 495,000 | $ | 441,000 | ||||||||
Food
and beverage sales
|
56,000 | 40,000 | 114,000 | 43,000 | ||||||||||||
Other
investments and related income
|
(536,000 | ) | (715,000 | ) | (1,047,000 | ) | (693,000 | ) | ||||||||
Total
net loss attributalbe to the Company before income
taxes
|
$ | (241,000 | ) | $ | (377,000 | ) | $ | (438,000 | ) | $ | (209,000 | ) |
9.
INCOME
TAXES
We
adopted the provisions of ASC Topic 740-10, “Accounting
for Uncertainty in Income Taxes” on January 1, 2007.
This topic clarifies the accounting for uncertainty in income
taxes recognized in an enterprise’s financial
statements in accordance with ASC Topic 740,
“Accounting for Income Taxes”, and prescribes a
recognition threshold and measurement process for financial
statement recognition and measurement of a tax position taken
or expected to be taken in a tax return. The guidance
requires that the Company determine whether the benefits of
the Company’s tax positions are more likely than not of
being sustained upon audit based on the technical merits of
the tax position. Topic 740-10 also provides guidance on
derecognition, classification, interest and penalties,
accounting in interim periods, disclosure and
transition.
Based
on our evaluation, we have concluded that there are no
significant uncertain tax positions requiring recognition in
our consolidated financial statements. Our evaluation was
performed for the tax years ended December 31, 2007, 2008,
2009 and 2010, the tax years which remain subject to
examination by major tax jurisdictions as of June 30,
2011.
We
may from time to time be assessed interest or penalties by
major tax jurisdictions, although any such assessments
historically have been minimal and immaterial to our
financial results. In the event we have received an
assessment for interest and/or penalties, it has been
classified in the consolidated financial statements as
selling, general and administrative expense.
Management’s
Discussion and Analysis of Financial Condition
and Results of Operations
|
RESULTS
OF OPERATIONS
For
the three and six months ended June 30, 2011 the Company
reported a net loss of approximately $182,000 ($.18 per
share) and $388,000 ($.38 per share), respectively. For the
three and six months ended June 30, 2010 the Company reported
a net loss of approximately $287,000 ($.28 per share) and
$191,000 ($.19 per share), respectively.
Total
revenues for the six months ended June 30, 2011 as compared
with the same period in 2010, increased by approximately
$98,000 or 2%. Total revenues for the three months ended June
30, 2011 as compared with the same period in 2010, decreased
by approximately $81,000 or 3%.
Total
expenses for the six months ended June 30, 2011, as compared
with the same periods in 2010, increased by approximately
$90,000 or 2%. Total expenses for the three months ended June
30, 2011, as compared with the same periods in 2010,
decreased by approximately $110,000 or 4%.
REVENUES
Rentals
and related revenues for the three and six months ended June
30, 2011 as compared with the same periods in 2010 increased
by $7,000 (1%) and $7,000 (1%).
12
Restaurant
operations:
Summarized
statements of income for the Company’s Monty’s
restaurant for the three and six months ended June 30, 2011
and 2010 is presented below:
For
the three months
|
For
the six months
|
|||||||||||||||
ended
June 30,
|
ended
June 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Revenues:
|
||||||||||||||||
Food
and Beverage Sales
|
$ | 1,608,000 | $ | 1,650,000 | $ | 3,296,000 | $ | 3,144,000 | ||||||||
Expenses:
|
||||||||||||||||
Cost
of food and beverage sold
|
448,000 | 437,000 | 922,000 | 854,000 | ||||||||||||
Labor
and related costs
|
292,000 | 308,000 | 590,000 | 626,000 | ||||||||||||
Entertainers
|
48,000 | 49,000 | 96,000 | 95,000 | ||||||||||||
Other
food and beverage direct costs
|
64,000 | 68,000 | 131,000 | 129,000 | ||||||||||||
Other
operating costs
|
86,000 | 90,000 | 176,000 | 166,000 | ||||||||||||
Repairs
and maintenance
|
35,000 | 49,000 | 80,000 | 86,000 | ||||||||||||
Insurance
|
81,000 | 68,000 | 157,000 | 139,000 | ||||||||||||
Management
and accounting fees
|
26,000 | 22,000 | 64,000 | 57,000 | ||||||||||||
Utilities
|
65,000 | 65,000 | 128,000 | 123,000 | ||||||||||||
Rent
(as allocated)
|
170,000 | 175,000 | 328,000 | 312,000 | ||||||||||||
Total
Expenses
|
1,315,000 | 1,331,000 | 2,672,000 | 2,587,000 | ||||||||||||
Income
before depreciation and non controlling
interest
|
$ | 293,000 | $ | 319,000 | $ | 624,000 | $ | 557,000 |
Amounts
above are presented as a percentage of sales below:
|
For
the three months
|
For
the six months
|
||||||||||||||
ended
June 30,
|
ended
June 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Revenues:
|
||||||||||||||||
Food
and Beverage Sales
|
100 | % | 100 | % | 100 | % | 100 | % | ||||||||
Expenses:
|
||||||||||||||||
Cost
of food and beverage sold
|
28 | % | 26 | % | 28 | % | 27 | % | ||||||||
Labor
and related costs
|
18 | % | 19 | % | 18 | % | 20 | % | ||||||||
Entertainers
|
3 | % | 3 | % | 3 | % | 3 | % | ||||||||
Other
food and beverage direct costs
|
4 | % | 4 | % | 4 | % | 4 | % | ||||||||
Other
operating costs
|
5 | % | 6 | % | 5 | % | 5 | % | ||||||||
Repairs
and maintenance
|
2 | % | 3 | % | 2 | % | 3 | % | ||||||||
Insurance
|
5 | % | 4 | % | 5 | % | 4 | % | ||||||||
Management
fees
|
2 | % | 1 | % | 1 | % | 2 | % | ||||||||
Utilities
|
4 | % | 4 | % | 4 | % | 4 | % | ||||||||
Rent
(as allocated)
|
11 | % | 11 | % | 11 | % | 10 | % | ||||||||
Total
Expenses
|
82 | % | 81 | % | 81 | % | 82 | % | ||||||||
Income
before depreciation and non-controlling
interest
|
18 | % | 19 | % | 19 | % | 18 | % |
For
the six months ended June 30, 2011 as compared with the same
period in 2010 restaurant sales increased by approximately
$152,000 (5%), with food sales increasing by $158,000 (or 8%)
and beverage sales decreasing $6,000 (or less than
1%).
For
the three months ended June 30, 2011 as compared with the
same period in 2010 restaurant sales decreased by
approximately $42,000 (or 2%), with food sales increasing by
$14,000 (1%) and beverage sales decreasing $56,000
(8%).
For
the three and six months ended June 30, 2011 as compared with
the same periods in 2010 cost of sales increased by $11,000
(3%) and $68,000 (8%), respectively. This was due to higher
food costs.
13
Marina
operations:
Summarized
and combined statements of income for marina
operations:
(The
Company owns 50% of the Monty’s marina and 95% of the
Grove Isle marina)
For
the three months ended
June 30, |
For
the six months ended
June 30, |
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Marina
Revenues:
|
||||||||||||||||
Monty’s
dockage fees and related income
|
$ | 290,000 | $ | 315,000 | $ | 591,000 | $ | 619,000 | ||||||||
Grove
Isle marina slip owners dues and dockage fees
|
113,000 | 124,000 | 224,000 | 252,000 | ||||||||||||
Total
marina revenues
|
403,000 | 439,000 | 815,000 | 871,000 | ||||||||||||
Marina
Expenses:
|
||||||||||||||||
Labor
and related costs
|
60,000 | 68,000 | 131,000 | 131,000 | ||||||||||||
Insurance
|
21,000 | 50,000 | 43,000 | 99,000 | ||||||||||||
Management
fees
|
18,000 | 19,000 | 36,000 | 39,000 | ||||||||||||
Utilities,
net of tenant reimbursement
|
(2,000 | ) | (2,000 | ) | (18,000 | ) | (13,000 | ) | ||||||||
Rent
and bay bottom lease expense
|
54,000 | 61,000 | 110,000 | 119,000 | ||||||||||||
Repairs
and maintenance
|
54,000 | 19,000 | 95,000 | 56,000 | ||||||||||||
Other
|
22,000 | 30,000 | 48,000 | 57,000 | ||||||||||||
Total
marina expenses
|
227,000 | 245,000 | 445,000 | 488,000 | ||||||||||||
Income
before depreciation and non controlling
interest
|
$ | 176,000 | $ | 194,000 | $ | 370,000 | $ | 383,000 |
Marina
revenues for the three and six months ended June 30, 2011 as
compared to the same periods in 2010 decreased by $36,000
(8%) and $56,000 (6%). This was primarily due to decreased
transient dockage rental at both marinas.
Spa
operations:
Below
are summarized statements of income for Grove Isle spa
operations for the three and six months ended June 30, 2011
and 2010. The Company owns 50% of the Grove Isle Spa with the
other 50% owned by an affiliate of Grand Heritage, the tenant
of the Grove Isle Resort:
Summarized
statements of income of spa operations
|
Three
months ended June 30, 2011
|
Three
months ended June 30, 2010
|
Six
months ended June 30, 2011
|
Six
months ended June 30, 2010
|
||||||||||||
Revenues:
|
||||||||||||||||
Services
provided
|
$ | 78,000 | $ | 88,000 | $ | 172,000 | $ | 178,000 | ||||||||
Membership
and other
|
20,000 | 19,000 | 38,000 | 38,000 | ||||||||||||
Total
spa revenues
|
98,000 | 107,000 | 210,000 | 216,000 | ||||||||||||
Expenses:
|
||||||||||||||||
Cost
of sales (commissions and other)
|
16,000 | 17,000 | 34,000 | 29,000 | ||||||||||||
Salaries,
wages and related
|
33,000 | 31,000 | 65,000 | 68,000 | ||||||||||||
Other
operating expenses
|
47,000 | 41,000 | 91,000 | 71,000 | ||||||||||||
Management
and administrative fees
|
5,000 | 5,000 | 11,000 | 11,000 | ||||||||||||
Other
non-operating expenses
|
6,000 | 3,000 | 9,000 | 14,000 | ||||||||||||
Total
Expenses
|
107,000 | 97,000 | 210,000 | 193,000 | ||||||||||||
Income
(loss) before interest, depreciation and
non-controlling interest
|
$ | (9,000 | ) | $ | 10,000 | $ | -0- | $ | 23,000 |
There
were no significant changes in Spa operations for the three
and six months ended June 30, 2011 as compared with the same
periods in 2010.
Net
realized and unrealized (loss) gain from investments in
marketable securities:
Net
realized and unrealized loss from investments in marketable
securities for the three months ended June 30, 2011 and 2010
was approximately $31,000 and $156,000, respectively. Net
realized and unrealized gain (loss) from investments in
marketable securities for the six months ended June 30, 2011
and 2010 was approximately $32,000 and ($29,000),
respectively.
14
Net
income from other investments:
Net
income from other investments for the three and six months
ended June 30, 2011 was approximately $36,000 and $45,000,
respectively. This is as compared to gains of approximately
$20,000 and $218,000 for the three and six months ended June
30, 2010. Additionally, for the three and six months ended
June 30, 2011 and 2010 other than temporary impairment
valuation losses of $87,000 and $50,000, respectively, were
recognized. For further details refer to Note 5 to Condensed
Consolidated Financial Statements (unaudited).
Interest,
dividend and other income:
Interest,
dividend and other income for the three and six months ended
June 30, 2011 was approximately $30,000 and $126,000,
respectively. This is as compared to income of approximately
$60,000 and $178,000 for the three and six months ended June
30, 2010. The decreases in the three and six month comparable
periods were $30,000 (50%) and $52,000 (29%), respectively.
The decreases were primarily a result of reduced interest and
dividends due to decreased investments in marketable
securities.
EXPENSES
Expenses
for rental and other properties for the three and six months
ended June 30, 2011 were $165,000 and $348,000, respectively.
This is as compared to the same expenses of approximately
$154,000 and $319,000 for the three and six months ended June
30, 2010. These increases of $11,000 (7%) and $29,000 (9%)
respectively were primarily due to increased repairs and
maintenance expenses.
For
comparisons of all food and beverage related expenses refer
to Restaurant Operations (above) summarized statement of
income for Monty’s restaurant.
For
comparisons of all marina related expenses refer to Marina
Operations (above) for summarized and combined statements of
income for marina operations.
For
comparisons of all spa related expenses refer to Spa
Operations (above) for summarized statements of income for
spa operations.
Depreciation
and amortization expense for the three and six months ended
June 30, 2011 compared to the same periods in 2010 increased
by $7,000 (3%) and $107,000 (21%), respectively. This
increase was primarily due to the amortization $145,000 of
loan costs associated with the Monty’s loan
modification completed in March 2011. The increases in
amortization expense were partially offset by decreased
depreciation expense of approximately $33,000 as a result of
increased amount of fully depreciated fixed assets related to
Grove Isle.
General
and administrative expense for the three and six months ended
June 30, 2011 compared to the same periods in 2010 decreased
by approximately $43,000 (35%) and $44,000 (20%),
respectively. This was due to decreased corporate
administrative expenses.
Professional
fees and expenses for the six months ended June 30, 2011
compared to the same period in 2010 increased by $8,000 (4%).
Professional fees and expenses for the three months ended
June 30, 2011 compared to the same period in 2010 decreased
by $5,000 (4%). These changes were primarily due to legal
costs relating to ongoing Grove Isle litigation.
EFFECT
OF INFLATION:
Inflation
affects the costs of operating and maintaining the
Company’s investments. In addition, rentals under
certain leases are based in part on the lessee’s sales
and tend to increase with inflation, and certain leases
provide for periodic adjustments according to changes in
predetermined price indices.
LIQUIDITY,
CAPITAL EXPENDITURE REQUIREMENTS AND CAPITAL
RESOURCES
The
Company’s material commitments primarily consist of
maturities of debt obligations of approximately $6.4 million
in 2011 and contributions committed to other investments of
approximately $614,000 due upon demand. The funds necessary
to meet these obligations are expected from the proceeds from
the sales of properties or investments, bank construction
loan, refinancing of existing bank loans, distributions from
investments and available cash.
In
April 2011 the Company renewed and modified the existing bank
mortgage note payable on the Grove Isle property with the
same lender. In conjunction with the renewal and modification
the principal balance of the loan was paid down by $650,000.
As of June 30, 2011 the principal amount outstanding is $2.9
million. The loan matures on December 31, 2011 and calls for
the same monthly principal payments of $10,000 plus interest
calculated at the one-month LIBOR rate plus 3%. At maturity
we have an option to extend the loan to December 31, 2012
under essentially the same terms as the current loan
agreement.
15
Also
included in the maturing debt obligations for 2011 is a note
payable to the Company’s 49% owned affiliate, T.G.I.F.
Texas, Inc. (“TGIF”) of approximately $3.3
million due on demand. The obligation due to TGIF will be
paid with funds available from distributions from its
investment in TGIF and from available cash.
MATERIAL
COMPONENTS OF CASH FLOWS
For
the six months ended June 30, 2011, net cash provided by
operating activities was approximately $316,000. This was
primarily from the Company’s rental operations cash
flow.
For
the six months ended June 30, 2011, net cash provided by
investing activities was approximately $34,000. This
consisted primarily of approximately $642,000 in net proceeds
from sales of marketable securities and distributions from
other investment of $119,000. These sources of funds were
partially offset by purchases of marketable securities of
$440,000, contributions to other investments of $119,000 and
additions to fixed assets of $163,000.
For
the six months ended June 30, 2011, net cash used in
financing activities was approximately $520,000. This
primarily consisted of loan principal repayments of $2.6
million, interest rate swap contract partial settlement of
$198,000, and distributions to non controlling interests in
consolidated entities. These uses of funds were partially
offset sources of funds consisting of withdraws from
restricted cash accounts of $2.4 million in conjunction with
Bayshore loan amendment completed in March 2011 and after
which no restricted cash balance remains.
Quantitative
and Qualitative Disclosures about Market Risk
|
Not
applicable
Controls
and Procedures
|
|
(a)
Evaluation of Disclosure Controls and
Procedures.
|
Our
Chief Executive Officer and Chief Financial Officer, after
evaluating the effectiveness of our disclosure controls and
procedures (as defined in the Securities Exchange Act Rules
13a-15(e) and 15d-15(e)) as of the end of the period covered
by this Quarterly Report on Form 10-Q have concluded that,
based on such evaluation, our disclosure controls and
procedures were effective and designed to ensure that
material information relating to us and our consolidated
subsidiaries, which we are required to disclose in the
reports we file or submit under the Securities Exchange Act
of 1934, was made known to them by others within those
entities and reported within the time periods specified in
the SEC’s rules and forms.
|
(b)
Changes in Internal Control Over Financial
Reporting.
|
There
were no changes in the Company’s internal controls over
financial reporting identified in connection with the
evaluation of such internal control over financial reporting
that occurred during our last fiscal quarter which have
materially affected, or reasonably likely to materially
affect, our internal control over financial reporting.
16
Legal
Proceedings
|
The
Company was a co-defendant in two lawsuits in the circuit
court in Miami Dade County Florida. These cases arose from
claims by a condominium association and resident seeking a
declaratory judgment regarding certain provisions of the
declaration of condominium relating to the Grove Isle Club
and the developer. The claim by the association has been
dismissed as to all counts related to the Company however the
association has filed an appeal. The Company believes that
the claims are without merit and intends to vigorously defend
its position. The ultimate outcome of this litigation cannot
presently be determined. However, in management’s
opinion the likelihood of a material adverse outcome is
remote. Accordingly, adjustments, if any that might result
from the resolution of this matter have not been reflected in
the financial statements.
Unregistered
Sales of Equity Securities and Use of
Proceeds: None
|
Defaults
Upon Senior Securities: None.
|
Removed and
Reserved
|
Other
Information: None
|
Exhibits:
|
(a)
Certifications pursuant to 18 USC Section 1350-Sarbanes-Oxley
Act of 2002. Filed
herewith.
17
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.
HMG/COURTLAND
PROPERTIES, INC.
|
||
/s/
Lawrence Rothstein
|
||
Dated:
August 15, 2011
|
Lawrence
Rothstein
|
|
President,
Treasurer and Secretary
|
||
Principal
Financial Officer
|
/s/
Carlos Camarotti
|
||
Dated:
August 15, 2011
|
Carlos
Camarotti
|
|
Vice
President- Finance and Controller
|
||
Principal
Accounting Officer
|
18