Attached files
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EXCEL - IDEA: XBRL DOCUMENT - FIRST HARTFORD CORP | Financial_Report.xls |
EX-32 - FIRST HARTFORD CORP | ex32.htm |
EX-31 - FIRST HARTFORD CORP | ex31-2.htm |
EX-31 - FIRST HARTFORD CORP | ex31-1.htm |
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 October 31, 2013.
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934For the transition period from | to |
Commission File Number: |
0-8862 |
First Hartford Corporation |
|
(Exact name of registrant as specified in its character) |
|
Maine |
01-0185800 |
(State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
149 Colonial Road, Manchester, CT |
06042 |
(Address of principal executive offices) |
(Zip Code) |
(860) 646-6555 |
|
(Registrants telephone number including area code) |
|
(Former name, former address and former fiscal year if changed since last report) |
Indicate by check mark whether the registrant (1) has filed all reports to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes No X
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 during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes No X
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 definition of large accelerated filer, accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
Accelerated filer |
Non-accelerated filer (Do not check if a smaller reporting company) |
Smaller reporting company X |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes No X
APPLICABLE ONLY TO CORPORATE ISSUERS
Indicate the number of shares outstanding of each of the issuers classes of common stock as of the latest practicable date.
2,412,611 as of April 25, 2014
1
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
INDEX
PART I. |
FINANCIAL INFORMATION |
PAGE
|
Item 1. |
Financial Statements (Unaudited)
|
|
|
Condensed Consolidated Balance Sheets
|
3 - 4 |
|
Condensed Consolidated Statements of Operations for the
|
5 |
|
Condensed Consolidated Statements of Comprehensive Income
(Loss) for
|
6 |
|
Condensed Consolidated Statements of Cash Flows for the
|
7 - 8 |
|
Notes to Condensed Consolidated Financial Statements
|
9 - 13 |
Item 2. |
Managements Discussion and Analysis of Financial Condition and Results of Operations
|
14 - 17 |
Item 3. |
Quantitative and Qualitative Disclosures about Market Risk
|
17 |
Item 4. |
|
17 |
PART II. |
OTHER INFORMATION
|
|
Item 1. |
|
18 |
Item 1A. |
|
18 |
Item 2. |
Unregistered Sales of Equity Securities and Use of Proceeds
|
18 |
Item 3. |
Defaults Upon Senior Securities
|
18 |
Item 4. |
|
18 |
Item 5. |
|
18 |
Item 6. |
18
|
|
|
19
|
|
|
Exhibits |
20 - 22 |
2
RST HARTFORD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
ASSETS
|
October 31, 2013 |
April 30, 2013 |
|
|
|||
Real estate and equipment: |
|
|
|
Developed properties (including $71,019,095 in October and $70,735,840 in April for VIEs) |
$200,480,139 |
$202,050,054 |
|
Equipment and tenant improvements (including $2,217,558 in October and $2,084,461 in April for VIEs) |
3,586,296 |
3,458,587 |
|
|
204,066,435 |
205,508,641 |
|
Less accumulated depreciation and amortization (including $8,772,935 in October and $7,781,281 in April for VIEs) |
34,203,340 |
31,695,129 |
|
|
169,863,095 |
173,813,512 |
|
|
|
|
|
Property under construction (including $391,905 in October and April for VIEs) |
613,037 |
613,200 |
|
|
170,476,132 |
174,426,712 |
|
|
|
|
|
Cash and cash equivalents (including $709,964 in October and $2,052,427 in April for VIEs) |
6,236,211 |
8,346,956 |
|
|
|
|
|
Cash and cash equivalents restricted (including $420,861 in October and $412,518 in April for VIEs) |
551,135 |
1,272,924 |
|
|
|
|
|
Marketable securities (including $2,465,312 in October and $1,424,072 in April for VIEs) |
5,058,952 |
4,846,778 |
|
|
|
|
|
Accounts and notes receivable, less allowance for doubtful accounts of
$212,900
as of October 31, 2013 and $508,700 as of April 30, 2013 |
4,405,443 |
3,684,774 |
|
|
|
|
|
Other receivables |
13,056,354 |
8,744,470 |
|
|
|
|
|
Deposits and escrows (including $2,363,348 in October and $2,824,785 in April for VIEs) |
5,363,896 |
5,222,827 |
|
|
|
|
|
Prepaid expenses (including $374,210 in October and $178,762 in April for VIEs) |
1,100,235 |
571,775 |
|
|
|
|
|
Deferred expenses (including $1,072,667 in October and $1,091,734 in April for VIEs) |
3,374,952 |
2,983,819 |
|
|
|
|
|
Investments in affiliates |
100 |
100 |
|
|
|
|
|
Due from related parties and affiliates |
165,106 |
165,188 |
|
|
|||
Total Assets |
$209,788,516 |
$210,266,323 |
See accompanying notes.
3
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(Unaudited)
LIABILITIES AND EQUITY (DEFICIENCY)
|
October 31, 2013 |
April 30, 2013 |
|
Liabilities: |
|||
Mortgages and notes payable: |
|||
Construction loans payable |
$51,231,893 |
$52,847,132 |
|
Mortgages payable (including $53,888,286 in October
and $54,335,209 in April |
146,938,755 |
146,327,723 |
|
Notes payable (including $1,704,697 in October and in April for VIEs) |
1,704,697 |
3,534,301 |
|
|
199,875,345 |
202,709,156 |
|
|
|
|
|
Accounts payable (including $766,488 in October and $434,309 in April for VIEs) |
1,862,592 |
1,853,976 |
|
Other payables |
10,782,793 |
6,832,367 |
|
Accrued liabilities (including $2,772,058 in October and $2,648,075 in April for VIEs) |
5,240,681 |
4,866,430 |
|
Accrued cost of derivatives |
2,722,363 |
3,656,380 |
|
Deferred income (including $247,856 in October and in April for VIEs) |
566,232 |
455,475 |
|
Other liabilities |
2,022,408 |
2,198,045 |
|
Due to related parties and affiliates (including $937,384
in October and $377,775 |
463,111 |
449,757 |
|
|
223,535,525 |
223,021,586 |
|
|
|
|
|
Equity (Deficiency): |
|
|
|
First Hartford Corporation: |
|
|
|
Preferred stock, $1 par value; $.50 cumulative and
convertible; authorized |
-0- |
-0- |
|
Common stock, $1 par value; authorized 6,000,000 shares; issued 3,298,609 Shares; outstanding 2,414,925 shares as of October 2013
and 2,416,825 as |
3,298,609 |
3,298,609 |
|
Capital in excess of par |
5,198,928 |
5,198,928 |
|
Accumulated deficit |
(22,282,449) |
(22,553,780) |
|
Accumulated other comprehensive income (loss) |
22,147 |
146,666 |
|
Treasury stock, at cost, 883,684 and 881,784 shares as of
October 31, 2013 and |
(4,957,859) |
(4,952,574) |
|
Total First Hartford Corporation |
(18,720,624) |
(18,862,151) |
|
Noncontrolling interests |
4,973,615 |
6,106,888 |
|
|
|
|
|
Total Shareholders Equity (Deficiency) |
(13,747,009) |
(12,755,263) |
|
|
|
|
|
Total Liabilities and Shareholders Equity (Deficiency) |
$209,788,516 |
$210,266,323 |
See accompanying notes.
4
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
|
Three Months Ended |
Six Months Ended |
|
|||||
|
Oct. 31, 2013 |
Oct. 31, 2012 |
Oct. 31, 2013 |
Oct. 31, 2012 |
|
|||
|
|
|
(Restated) |
|
|
(Restated) |
|
|
Operating revenues: |
|
|
|
|
|
|
|
|
Rental income |
$7,629,233 |
$7,072,851 |
|
$14,535,885 |
|
$14,017,352 |
|
|
Service income |
1,573,780 |
1,939,596 |
2,569,294 |
4,026,067 |
|
|||
Sales of real estate |
1,090,000 |
-0- |
2,902,596 |
-0- |
|
|||
Other income |
328,680 |
189,925 |
653,840 |
433,396 |
|
|||
|
10,621,693 |
9,202,372 |
20,661,615 |
18,476,815 |
|
|||
|
|
|
|
|
|
|
|
|
Operating costs and expenses: |
|
|
|
|
|
|
|
|
Rental expenses |
5,009,589 |
4,851,918 |
9,566,210 |
|
9,259,558 |
|
||
Service expenses |
958,026 |
1,221,500 |
1,688,770 |
2,661,558 |
|
|||
Cost of real estate sales |
1,070,399 |
-0- |
2,270,300 |
-0- |
|
|||
Selling, general and administrative expenses |
1,317,297 |
1,075,953 |
2,480,484 |
2,085,026 |
|
|||
|
8,355,311 |
7,149,371 |
16,005,764 |
14,006,142 |
|
|||
|
|
|
|
|
|
|||
Income from operations |
2,266,382 |
2,053,001 |
4,655,851 |
4,470,673 |
|
|||
|
|
|
|
|
|
|||
Non-operating income (expense): |
|
|
|
|
|
|||
Interest expense |
(2,782,186) |
(2,740,728) |
(5,487,329) |
(5,474,043) |
|
|||
Other income |
121,447 |
93,245 |
201,447 |
173,025 |
|
|||
Loss on defeasance |
(243,602) |
-0- |
(243,602) |
-0- |
|
|||
Gain (loss) on derivatives |
209,228 |
158,605 |
934,017 |
(286,836) |
|
|||
Equity in earnings of unconsolidated subsidiaries |
110,687 |
117,630 |
275,638 |
226,264 |
|
|||
|
(2,584,426) |
(2,371,248) |
(4,319,829) |
(5,361,590) |
|
|||
|
|
|||||||
(Loss) income before income taxes |
(318,044) |
(318,247) |
336,022 |
(890,917) |
|
|||
|
|
|
|
|
|
|||
Income taxes |
500 |
8,975 |
23,922 |
17,492 |
|
|||
|
|
|
|
|
|
|||
Consolidated net (loss) income |
(318,544) |
(327,222) |
312,100 |
(908,409) |
|
|||
|
|
|
|
|
|
|||
Net loss attributable to noncontrolling interests |
45,012 |
98,333 |
(40,769) |
300,142 |
|
|||
|
|
|
|
|
|
|||
Net income (loss) attributable to First Hartford Corporation |
$(273,532) |
$(228,889) |
$271,331 |
$(608,267) |
|
|||
|
|
|
|
|
|
|||
Net (loss) income per share basic |
$(0.11) |
$(0.09) |
$0.11 |
$(0.25) |
|
|||
|
|
|
|
|
|
|||
Net (loss) income per share diluted |
$(0.11) |
$(0.09) |
$0.11 |
$(0.25) |
|
|||
|
|
|
|
|
|
|||
Shares used in basic per share computation |
2,418,863 |
2,418,863 |
2,419,333 |
2,419,333 |
|
|||
|
|
|
|
|
|
|||
Shares used in diluted per share computation |
2,418,863 |
2,418,863 |
2,576,584 |
2,419,333 |
|
See accompanying notes.
5
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)
|
Three Months Ended |
|
Six Months Ended |
||||
|
Oct. 31, 2013 |
Oct. 31, 2012 |
|
Oct. 31, 2013 |
Oct. 31, 2012 |
||
|
(Restated) |
(Restated) |
|||||
|
|||||||
Consolidated net (loss) income |
$(318,544) |
$(327,222) |
$312,100 |
$(908,409) |
|||
|
|
|
|
|
|||
Other comprehensive income, net of income taxes: |
|
|
|
|
|||
Unrealized (losses) gains on marketable securities |
(1,545) |
135,100 |
(449,935) |
217,162 |
|||
|
|
|
|
|
|||
Other comprehensive loss |
(320,089) |
(192,122) |
(137,835) |
(691,247) |
|||
|
|
|
|
|
|||
Amounts attributable to noncontrolling interests: |
|
|
|
|
|||
Net loss (income) |
45,012 |
98,333 |
(40,769) |
300,142 |
|||
Unrealized gain on marketable securities |
51,577 |
41,626 |
325,416 |
68,763 |
|||
|
|
|
|
|
|||
|
96,589 |
139,959 |
284,647 |
368,905 |
|||
Comprehensive Income (loss) attributable to First Hartford Corporation |
$(223,500) |
$(52,163) |
$146,812 |
$(322,342) |
See accompanying notes.
6
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
|
Six Months Ended |
||
|
October 31, 2013 |
October 31, 2012 |
|
|
(Restated) |
||
Operating activities: |
|||
Consolidated net income (loss) |
$312,100 |
$(908,409) |
|
Adjustments to reconcile consolidated net loss to net cash provided by operating activities: |
|
|
|
Equity in earnings of unconsolidated subsidiaries, net of distributions of $100,000 in 2013 and $132,000 in 2012 |
(175,637) |
(137,765) |
|
Gain on sale of property |
(632,296) |
-0- |
|
Depreciation |
2,571,556 |
2,609,548 |
|
Amortization |
221,426 |
312,505 |
|
Changes in operating assets and liabilities: |
|
|
|
Accounts, notes and other receivables |
(5,032,553) |
(341,619) |
|
Deposits and escrows |
(141,069) |
2,975,764 |
|
Prepaid expenses |
(528,460) |
(281,031) |
|
Deferred expenses |
(612,559) |
(388,764) |
|
Cash and cash equivalents restricted |
721,789 |
8,484 |
|
Accrued liabilities |
374,251 |
(197,478) |
|
Accrued cost of derivatives |
(934,017) |
286,836 |
|
Deferred income |
110,757 |
180,457 |
|
Accounts and other payables |
3,959,042 |
(1,752,364) |
|
|
|
|
|
Net cash provided by operating activities |
214,330 |
2,366,164 |
|
|
|||
Investing activities: |
|||
Distributions form affiliates |
-0- |
200,000 |
|
Investments in marketable securities |
(665,466) |
(925,672) |
|
Purchase of equipment and tenant improvements |
(127,709) |
(491,193) |
|
Proceeds from sale of real estate |
2,902,596 |
-0- |
|
Consolidation of formerly nonconsolidated entity |
-0- |
(11,409) |
|
Additions to developed properties and properties under construction |
(763,567) |
(2,245,004) |
|
|
|
|
|
Net cash provided by (used in) investing activities |
1,345,854 |
(3,473,278) |
See accompanying notes.
7
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
|
Six Months Ended |
||
|
October 31, 2013 |
October 31, 2012 |
|
|
(Restated) |
||
Financing activities: |
|
|
|
Contributions from noncontrolling interests limited partners |
$-0- |
$5,066,943 |
|
Distributions to noncontrolling interests |
(845,269) |
(649,466) |
|
Purchase of treasury stock |
(5,285) |
(8,312) |
|
|
|
|
|
Proceeds from: |
|
|
|
Construction loans payable |
-0- |
3,510,210 |
|
Mortgage loans payable |
59,630 |
-0- |
|
Principal payments on: |
|
|
|
Construction loans payable |
(1,615,239) |
(2,965,085) |
|
Mortgage loans payable |
(1,278,202) |
(1,197,464) |
|
Notes payable |
-0- |
(509,619) |
|
Advances to related parties and affiliates, net |
13,436 |
9,211 |
|
|
|||
Net cash provided by financing activities |
(3,670,929) |
3,256,418 |
|
|
|
|
|
Net change in cash and cash equivalents |
(2,110,745) |
2,149,304 |
|
|
|
|
|
Cash and cash equivalents, beginning of period |
8,346,956 |
6,599,325 |
|
|
|
|
|
Cash and cash equivalents, end of period |
$6,236,211 |
$8,748,629 |
|
|
|
|
|
Cash paid during the period for interest |
$5,393,468 |
$5,211,369 |
|
|
|
|
|
Cash paid during the period for income taxes |
$133,829 |
$18,938 |
|
|
|
|
|
|
|
|
|
Debt refinancing: |
|
|
|
New mortgage loan |
$6,200,000 |
|
|
Debt reduced |
(6,140,370) |
|
|
Net cash from refinancing |
$59,630 |
|
|
|
|
See accompanying notes.
8
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Business and Significant Accounting Policies:
Business
First Hartford Corporation was incorporated in Maine in 1909 and is engaged in the purchase, development, ownership, management and sale of real estate, all of which is considered a single segment. The Company has a second segment Fee for Service in which the Company is engaged as a preferred developer for CVS. (see Service Income to follow).
Principles of Consolidation
The accompanying unaudited condensed consolidated financial statements include the accounts of First Hartford Corporation (the Company), its wholly owned subsidiaries, and all other entities in which the Company has a controlling financial interest, including those where the Company has been determined to be a primary beneficiary of a variable interest entity or meets certain criteria as a sole general partner or managing member in accordance with the consolidation guidance of the Financial Accounting Standards Board Accounting Standards Codification. As such, included in the unaudited condensed consolidated financial statements are the accounts of Rockland Place Apartments Limited Partnership and Clarendon Hill Somerville Limited Partnership. The Companys ownership percentage in these variable interest entity partnerships is nominal. All significant intercompany balances and transactions have been eliminated.
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Rule 8.03 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by U.S. generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals and adjustments to previously accrued loss provisions) considered necessary for a fair presentation have been included. Operating results for the interim periods are not necessarily indicative of the results that may be expected for the entire year. The condensed consolidated balance sheet as of April 30, 2013 was derived from the audited financial statements for the year then ended. For further information, refer to the consolidated financial statements and footnotes thereto included in the Companys annual report on Form 10-K for the fiscal year ended April 30, 2013.
Because the Company is engaged in the development and sale of real estate at various stages of construction, the operating cycle may extend beyond one year. Accordingly, following the usual practice of the real estate industry, the accompanying condensed consolidated balance sheets are unclassified.
Currently, there are no Accounting Standards Update (ASUs) that the Company is required to adopt which are likely to have a material effect on its financial statements.
Net Loss Per Common Share
Basic net income (loss) per share amounts are determined using the weighted average number of shares of common stock outstanding during the reporting period. Diluted earnings (loss) per share amounts include the weighted average outstanding common shares as well as dilutive common stock options of 157,408 and 157,251 shares for the three and six month periods ended October 31, 2013. Common stock options of 104,193 and 75,236 for three and six month periods ended October 31, 2012 were anti-dilutive.
9
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. Business and Significant Accounting Policies (concluded):
Financial Instruments and Fair Value
The Companys financial instruments include cash and cash equivalents, accounts receivable, marketable securities, accounts payable, accrued expenses, and debt. The fair values of accounts receivable, accounts payable and accrued expenses are estimated to approximate their carrying amounts because of their relative short-term nature. In general, the carrying amount of variable rate debt approximates its fair value. Further, the carrying amount of fixed rate debt approximates fair value since the interest rates on the debt approximates the Companys current incremental borrowing rate. Marketable securities consist of equity securities and are stated at fair value based on the last sale of the period obtained from recognized stock exchanges (i.e. Level 1). Net unrealized gains of $50,033 and $124,519 for the three and six month periods ended October 31, 2013 are included in accumulated other comprehensive income.
Segment Information
The factors used by the Company to identify reportable segments include differences in products and services and segregated operations within the Company. The first segment, Real Estate Operations participates in the purchase, development, management, ownership and the sale of real estate. Within its second segment, Fee for Service, the Company provides preferred developer services to CVS and Cumberland Farms Inc. in certain geographic areas. Summary financial information for the two reportable segments are approximately as follows:
|
Three Months Ended |
Six Months Ended |
|||||
|
October 31, |
October 31, |
|||||
|
2013 |
2012 |
2013 |
2012 |
|||
|
|
|
|
|
|
|
|
Real Estate Operations |
$9,172,000 |
|
$8,132,000 |
|
$18,334,000 |
|
$16,671,000 |
Fee for Service |
1,450,000 |
|
1,070,000 |
|
2,328,000 |
|
1,806,000 |
Total |
$10,622,000 |
|
$9,202,000 |
|
$20,662,000 |
|
$18,477,000 |
|
|
|
|
|
|
|
|
Operating Cost and Expense: |
|
|
|
|
|
|
|
Real Estate Operations |
$6,080,000 |
|
$5,289,000 |
|
$11,837,000 |
|
$10,517,000 |
Fee for Service |
958,000 |
|
785,000 |
|
1,689,000 |
|
1,404,000 |
SGA |
1,317,000 |
|
1,075,000 |
|
2,480,000 |
|
2,085,000 |
Total |
$8,355,000 |
|
$7,149,000 |
|
$16,006,000 |
|
$14,006,000 |
All cost after operating expenses are cost of the real estate operation.
The only assets in the balance sheet belonging to the Fee for Service segment is restricted cash of approximately $139,000 on October 31, 2013 and $860,000 on April 30, 2013 and receivables of approximately $8,124,000 on October 31, 2013 and $6,533,000 on April 30, 2013.
10
FIRST
HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. Restatement
The Company has restated its October 31, 2012 consolidated financial statements by adding four joint ventures into its consolidated results. Upon reanalyzing its agreements, it was determined that the Company was the controlling partner of the ventures which triggers a requirement to consolidate. The ventures are:
(1) Cranston Parkade, LLC which owns a retail shopping center 259,600 sq. ft.
(2) CP Associates, LLC which owns two 60,000 sq. ft commercial buildings plus land leased to a third party.
(3) Hartford Lubbock Limited Partnership which owns a retail shopping center 160,555 sq. ft.
(4) Trolley Barn Associates which owns approximately 7 acres of vacant land.
The Company owns 50% of (1), (2) & (4) and 2% of (3), and formerly accounted for them on the equity method. Previously, the investment in Trolley Barn Associates, which is 50% supported by the Company, was not considered material and was not consolidated. The advances were considered loans. The Company has determined that Trolley Barn qualifies as a Variable Interest Entity (VIE) and is consolidated as required.
The effects on the Companys previously issued financial statements are summarized as follows:
Balance Sheet October 31, 2012
Previously Reported |
Increase |
Restatement | |||
|
|
|
|
||
Real Estate and Equipment Net | $133,901,099 | $41,703,715 | $175,604,814 | ||
Cash | 6,378,412 | 3,211,623 | 9,590,035 | ||
Investment in Marketable Securities | 1,092,735 | 2,057,062 | 3,149,797 | ||
Accounts and notes receivable | 2,660,631 | 2,086,687 | 4,747,318 | ||
Other receivable | 8,132,605 | -0- | 8,132,605 | ||
Deposits, escrows & prepaid & deferred expenses net | 6,895,119 | 2,568,833 | 9,463,952 | ||
Investment in affiliate | 9,665 | (9,665) | -0- | ||
Due from related parties and affiliates | 529,729 | (362,470) | 167,259 | ||
Total Assets | $159,599,995 | $51,255,785 | $210,855,780 | ||
|
|
|
|
||
Mortgage & notes payables | $142,019,440 | $62,636,589 | $204,656,029 | ||
Payables and accrued liabilities | 10,971,632 | 1,232,149 | 12,203,781 | ||
Accrued cost of derivatives | -0- | 4,299,878 | 4,299,878 | ||
Deferred income | 743,460 | (82,325) | 661,135 | ||
Other liabilities | 3,708,375 | (1,392,222) | 2,316,153 | ||
Due to related parties | 102,752 | 335,503 | 438,255 | ||
Total liabilities | 157,545,659 | 67,029,572 | 224,575,231 | ||
Stockholders Deficit | 2,054,336 | (15,773,787) | (13,719,451) | ||
Total Liabilities and Shareholder Deficit | $159,599,995 | $51,255,785 | $210,855,780 |
11
FIRST HARTFORD
CORPORATION AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
2. Restatement (concluded):
Statement of Operations Three Months Ended October 31, 2012
Previously Reported | Increase (Decrease) | Restatement | |||
|
|
|
|
||
Revenues |
$6,782,274 | $2,420,098 | $9,202,372 | ||
Operating cost |
5,994,543 | 1,154,828 | 7,149,371 | ||
Income from operations |
787,731 | 1,265,270 | 2,053,001 | ||
Interest expenses |
(1,792,357) | (948,371) | (2,740,728) | ||
Other Income |
93,245 | -0- | 93,245 | ||
Gain (Loss) on Derivatives |
-0- | 158,605 | 158,605 | ||
Equity in earnings of unconsolidated subsidiaries |
224,539 | (106,909) | 117,630 | ||
Loss before income tax |
(686,842) | 368,595 | (318,247) | ||
Income Taxes |
117 | 8,858 | 8,975 | ||
Consolidated Net Loss |
(686,959) | 359,737 | (327,222) | ||
Net (income) loss attributable to non-controlling interest |
358,608 | (260,275) | 98,333 | ||
Net Loss attributable to First Hartford |
$(328,351) | $99,462 | $(228,889) | ||
|
|||||
|
|||||
|
Previously Reported |
Increase (Decrease) |
Restatement |
||
|
|
|
|
||
Revenues |
$13,751,961 | $4,724,854 | $18,476,815 | ||
Operating cost |
11,886,381 | 2,119,761 | 14,006,142 | ||
Income from operations |
1,865,580 | 2,605,093 | 4,470,673 | ||
Interest expenses |
(3,568,456) | (1,905,587) | (5,474,043) | ||
Other Income |
173,025 | -0- | 173,025 | ||
Gain (Loss) on Derivatives |
-0- | (286,836) | (286,836) | ||
Equity in earnings of unconsolidated subsidiaries |
590,259 | (363,995) | 226,264 | ||
Loss before income tax |
(939,592) | 48,675 | (890,917) | ||
Income Taxes |
8,134 | 9,358 | 17,492 | ||
Consolidated Net Loss |
(947,726) | 39,317 | (908,409) | ||
Net (income) loss attributable to non-controlling interest |
594,053 | (293,911) | 300,142 | ||
Net Loss attributable to First Hartford |
$(353,673) | $(254,594) | $(608,267) |
The increased profit or (loss) attributable to the Company for the three and six months ended October 31, 2012 was mainly due to differences in accounting between equity method and consolidation.
12
FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
3. Consolidated Variable Interest Entities and Investments in Affiliated Partnerships:
The Company has consolidated both Rockland and Clarendon based on the express legal rights and obligations provided to it by the underlying partnership agreements and its control of their business activity. The assets of these partnerships that can only be used to settle their obligations and their liabilities for which creditors (or beneficial interest holders) do not have recourse to the general credit of the Company are shown parenthetically in the line items of the consolidated balance sheets. A summary of the assets and liabilities of Rockland and Clarendon included in the Companys condensed consolidated balance sheets follows:
|
October 31, 2013 |
April 30, 2013 |
|
|
|
|
|
Real estate and equipment, net |
$67,452,952 |
$68,084,169 |
|
Other assets |
7,552,395 |
8,096,778 |
|
Total assets |
75,005,347 |
76,180,947 |
|
Intercompany profit elimination |
(3,004,411) |
(3,045,149) |
|
Total assets |
$72,000,936 |
$73,135,798 |
|
|
|
|
|
Mortgages and other notes payable |
$55,592,983 |
$56,039,906 |
|
Other liabilities |
3,774,539 |
3,330,240 |
|
Total liabilities |
$59,367,522 |
$59,370,146 |
The Company accounts for its 50% ownership interest in Dover Parkade, LLC under the equity method of accounting. A summary of the operating results for this entity follows:
|
Three Months Ended |
|
Six Months Ended |
||||
|
October 31, 2013 |
|
October 31, 2012 |
|
October 31, 2013 |
|
October 31, 2012 |
Dover Parkade, LLC |
|
|
|
|
|
|
|
Revenue |
$646,891 |
|
$640,373 |
$1,415,473 |
|
$1,280,976 |
|
Expenses |
535,520 |
|
495,112 |
1,064,198 |
|
1,005,447 |
|
Net income |
$111,371 |
|
$145,261 |
$351,275 |
|
$275,529 |
For the years prior to May 1, 2009, the Company was committed to provide funding to CP Associates, LLC, Cranston Parkade LLC and Dover Parkade LLC. Although the Company no longer considers itself liable for their obligations it had not previously discontinued applying the equity method on these investments since the Company had previously considered itself to be committed to providing financial support to them. The Companys investment in them was recorded at cost and subsequently adjusted for their gains, losses and distributions. The resulting carrying value of these investments is ($2,022,408) as of October 31, 2013 and ($2,198,045) as of April 30, 2013 is included in other liabilities.
4. Income Taxes:
As of October 31, 2013 the Company has Federal net operating loss carryforwards totaling approximately $15,400,000 that are available to offset future Federal taxable income through various periods expiring between 2016 and 2028. The Company has concluded that it is more likely than not that it will not realize any deferred income tax assets in the near term.
5. Litigation:
There has been no change in Litigation since April 30, 2013.
13
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The financial and business analysis below provides information which the Company believes is relevant to an assessment and understanding of the Companys financial position, results of operations and cash flows. This analysis should be read in conjunction with the condensed consolidated financial statements and related notes.
The following discussion and certain other sections of this Report on Form 10-Q contain statements reflecting the Companys views about its future performance and constitute forward-looking statements under the Private Securities Litigation Reform Act of 1995. These views may involve risk and uncertainties that are difficult to predict and may cause the Companys actual results to differ materially from the results discussed in such forward-looking statements. Readers should consider how various factors including changes in general economic conditions, cost of materials, interest rates and availability of funds, and the nature of competition and relationship with key tenants may affect the Companys performance. The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or other.
Results of Operations
Critical Accounting Policies
There have been no significant changes in the Companys critical accounting policies from those included in Item 7 of its Annual Report on Form 10-K for the year ended April 30, 2013 under the subheading Critical Accounting Policies and Estimates.
Rental Income:
Rental Income by type of tenant follows:
|
Three Months Ended |
|
Six Months Ended |
||||
|
October 31, 2013 |
|
October 31, 2012 |
|
October 31, 2013 |
|
October 31, 2012 |
|
|
|
|
|
|
|
|
Residential |
$2,790,893 |
|
$2,805,940 |
|
$5,525,338 |
|
$5,545,084 |
Commercial |
4,838,340 |
|
4,266,911 |
|
9,010,547 |
|
8,472,268 |
|
$7,629,233 |
|
$7,072,851 |
|
$14,535,885 |
|
$14,017,352 |
Service Income
|
Three Months Ended |
|
Six Months Ended |
||||
|
October 31, 2013 |
|
October 31, 2012 |
|
October 31, 2013 |
|
October 31, 2012 |
|
|
|
|
|
|
|
|
Construction Services |
-0- |
|
$766,580 |
|
-0- |
|
$1,966,138 |
Management Fees |
124,052 |
|
102,554 |
|
241,218 |
|
254,251 |
Preferred developer Fees |
1,449,728 |
|
1,070,472 |
|
2,328,076 |
|
1,805,688 |
|
$1,573,780 |
|
$1,939,606 |
|
$2,569,294 |
|
$4,026,077 |
|
|
|
|
|
|
|
|
14
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(continued):
Results of Operations (continued):
Sales of Real Estate
In the three month period ended October 31, 2013, the Company sold two outparcels from our shopping center in Edinburg, Texas for $1,090,000. In the six months ended October 31, 2013, the Company sold a total of three outparcels in our Edinburg shopping center for a total of $1,682,000 as well as a parcel in Houston, Texas to Aldi Supermarkets for $1,220,000.
Other Income
Included in other income are the sales of a store in our North Adams shopping center selling beer and wine. A small restaurant will be opened as part of the same facility. The Company hopes to get a full liquor license in 2014. The beer and wine portion opened in mid-September, 2013 and has sales revenue of approximately $119,000 to October 31, 2013.
Revenue from the movie theater in North Adams, Massachusetts, was approximately $144,000 and $398,000 for the three and six month periods ended October 31, 2013 and $134,000 and $324,000 for the three and six months of 2012 respectively.
Operating Cost and Expenses
Rental Expenses
|
Three Months Ended |
|
Six Months Ended |
||||
|
October 31, 2013 |
|
October 31, 2012 |
|
October 31, 2013 |
|
October 31, 2012 |
|
|
|
|
|
|
|
|
Residential |
$2,585,320 |
|
$2,442,528 |
|
$4,915,741 |
|
$4,718,600 |
Commercial |
2,424,269 |
|
2,409,390 |
|
4,650,469 |
|
4,540,958 |
|
$5,009,589 |
|
$4,851,918 |
|
$9,566,210 |
|
$9,259,558 |
Service Expenses
Included in service expense in the three and six month period ended October 31, 2012, is approximately $786,000 and $1,404,000 of construction costs. In the period ended October 31, 2013, there were no construction costs. All remaining service expense, other than the construction cost, is cost of the preferred development program.
Selling, General and Administrative
For the three and six month periods ended October 31, 2013 SG&A expenses increased approximately $241,000 and $395,000 respectively over the three and six month periods ended October 31, 2012. Of that increase approximately $158,000 and $176,000 was due to operations (including certain startup cost) and cost of goods sold for the wine and beer store described above. A major part of the balance was due to salary and medical insurance cost.
15
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(continued):
Results of Operations (concluded):
Non-operating Income (Expense)
Interest Expense
Interest expense breaks out as follows:
|
Three Months Ended |
|
Six Months Ended |
||||
|
October 31, 2013 |
|
October 31, 2012 |
|
October 31, 2013 |
|
October 31, 2012 |
|
|
|
|
|
|
|
|
Residential |
$2,132,840 |
|
$2,012,538 |
|
$4,126,329 |
|
$3,990,743 |
Commercial |
637,840 |
|
698,376 |
|
1,325,307 |
1,415,318 |
|
Other |
11,506 |
29,814 |
35,693 |
67,982 |
|||
|
$2,782,186 |
|
$2,740,728 |
|
$5,487,329 |
$5,474,043 |
Loss on Defeasance
Loss on Defeasance was caused by an early refinancing and repayment of the mortgage on the Plainfield Parkade. Details of the refinances were included in a form 8-K filed on October 8, 2013.
Gain (Loss) on Derivatives
For the three and six month periods ended October 31, 2013 the Company recorded gains of $209,228 and $934,017 respectively. Of that amount, 50% was reduced through the non-controlling interest.
Equity in Earnings of Unconsolidated Subsidiary
Equity in earnings of the unconsolidated subsidiary increased approximately $53,000 on a period over period basis for the six months ended October 31, 2013. During the same periods the amounts distributed from a 50% owned investee were lower than the prior periods by approximately $125,000. Such distributions are in excess of net assets of the 50% owned investee since its accumulated net losses (including significant amounts for depreciation, amortization and gain or losses from derivatives which are noncash) have exceeded capital contributions.
While the Company has a policy of recording distributions in excess of basis as income, it does not control the rate of distributions of the investee partnership. Cash flow in excess of distribution is held at the partnership level. Please refer to the financial statements of the Companys investee partnerships which are included in the Companys Form 10-K for the year ended April 30, 2013.
Income Taxes
The Company has significant net operating loss carryforwards, so it will likely not be required to pay Federal income taxes in the near term.
16
Item 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
(concluded):
Capital Resources and Liquidity
The Company ended the six month period of October 31, 2013 with approximately $11,295,000 of unrestricted cash, cash equivalents and marketable securities. This includes approximately $8,843,000 belonging to partnership entities in which the Companys financial interests range from .01% (VIEs) to 50%. Funds received from CVS, which are to be paid out in connection with CVS developments, amounted to approximately $130,000 and tenant security deposits held by VIEs of approximately $421,000 are included in restricted cash and cash equivalents.
The Company believes it has sufficient cash and cash resources to fund operations and debt maturities in the next fiscal year without any new bank borrowings through April 30, 2014. Borrowings for new construction loans or property purchases are unclear at this time.
Item 3. QUANTATIVE AND QUALLITATIVE DISCLOSURES ABOUT MARKET RISK
Smaller reporting companies are not required to provide the information required by this item.
Item 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures, as such term is defined in Rule 13a-15(e) under the Securities Exchange Act of 1934 (the Exchange Act), that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission rules and forms, and that such information is accumulated and communicated to our management, including our President and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. We conducted an evaluation (the Evaluation), under the supervision and with the participation of our President and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (Disclosure Controls) as of the end of the period covered by this report pursuant to Rule 13a-15b of the Exchange Act. Based on the Evaluation, our President and Treasurer concluded that because of weaknesses in our control environment, our disclosure controls were not effective as of the end of the period covered by this report. Notwithstanding weaknesses in our control environment, as of October 31, 2013, we believe that the condensed consolidated financial statements contained in this report present fairly the Companys financial condition, results of operations and cash flows for the periods presented.
Changes in Internal Control Over Financial Reporting
As of the end of the period covered by this report, there have been no changes in internal control over financial reporting (as defined in Rule 13a-15(f) of the Exchange Act) during the period covered by this report, that materially affected, or are reasonably likely to materially affect, the Companys internal control over financial reporting.
17
PART II | ||
Item 1. | ||
There has been no change in litigation since April 30, 2013. |
||
Item 1A. | ||
Smaller reporting companies are not required to provide the information required by this item. |
||
Item 2. | ||
None |
||
Item 3. | ||
None |
||
Item 4. | ||
Not applicable |
||
Item 5. |
OTHER INFORMATION |
|
|
||
None |
||
|
||
None |
||
|
||
Item 6. | ||
a) Exhibits: |
||
Exhibit 31.1 |
Certification of Chief Executive Officer, pursuant to Rule 13a-14(c) under the Securities Exchange Act of 1934. | |
|
||
|
||
Exhibit 31.2 |
Certification of Chief Financial Officer, pursuant to Rule 13a-14(c) under the Securities Exchange Act of 1934. | |
|
||
|
||
Exhibit 32.1 |
Certification of Chief Executive Officer and Chief Financial Officer, pursuant to 18 U.S.C. Section 1350. |
18
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.
First Hartford Corporation |
||
(Registrant) |
||
/s/ Neil H. Ellis |
||
June 4, 2014 |
|
|
Date |
Neil H. Ellis President and |
|
Chief Executive Officer |
||
|
||
/s/ Stuart I. Greenwald |
||
June 4, 2014 |
|
|
Date |
Stuart I. Greenwald Treasurer |
|
and Chief Financial Officer |
19