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| HMG > SEC Filings for HMG > Form 10-Q on 13-Nov-2008 | All Recent SEC Filings |
13-Nov-2008
Quarterly Report
RESULTS OF OPERATIONS
The Company reported net losses of approximately $762,000 (or $.74 per share)
and approximately $1,030,000 (or $1.01 per share) for the three and nine months
ended September 30, 2008, respectively. This is as compared with net losses of
approximately $456,000 (or $.45 per share) and $238,000 (or $.23 per share) for
the three and nine months ended September 30, 2007, respectively.
As discussed below, total revenues for the three and nine months ended September 30, 2008 as compared with the same periods in 2007, increased by approximately $179,000 (8%) and $685,000 (9%), respectively. Total expenses for the three and nine months ended September 30, 2008, as compared with the same periods in 2007, increased by approximately $96,000 (3%) and $216,000 (2%), respectively.
REVENUES
Rentals and related revenues for the three and nine months ended September 30,
2008 as compared with the same periods in 2007 increased by $54,000 (14%) and
$89,000 (8%). The increases were primarily due to increased rental revenue from
the Monty's retail space.
Restaurant operations:
Summarized statements of income for the Company's Monty's restaurant for the
three and nine months ended September 30, 2008 and 2007 is presented below:
For the three months For the nine months
ended September 30, ended September 30,
2008 2007 2008 2007
Revenues:
Food and Beverage Sales $ 1,350,000 $ 1,334,000 $ 5,206,000 $ 4,762,000
Expenses:
Cost of food and beverage sold 371,000 367,000 1,391,000 1,280,000
Labor and related costs 324,000 292,000 1,020,000 918,000
Entertainers 54,000 61,000 165,000 164,000
Other food and beverage direct costs 64,000 48,000 213,000 173,000
Other operating costs 66,000 89,000 222,000 244,000
Repairs and maintenance 60,000 53,000 158,000 175,000
Insurance 77,000 78,000 232,000 250,000
Management and accounting fees 47,000 52,000 104,000 284,000
Utilities 66,000 53,000 194,000 147,000
Rent (as allocated) 143,000 143,000 530,000 486,000
Total Expenses 1,272,000 1,236,000 4,229,000 4,121,000
Income before depreciation and minority
interest $ 78,000 $ 98,000 $ 977,000 $ 641,000
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Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
The following table summarizes the amounts on the table above as a percentage of
sales:
All amounts as a percentage of sales For the three months For the nine months
ended September 30, ended September 30,
2008 2007 2008 2007
Revenues:
Food and Beverage Sales 100 % 100 % 100 % 100 %
Expenses:
Cost of food and beverage sold 27 % 27 % 27 % 27 %
Labor and related costs 24 % 22 % 20 % 19 %
Entertainers 4 % 5 % 3 % 4 %
Other food and beverage direct costs 5 % 4 % 4 % 4 %
Other operating costs 5 % 7 % 4 % 5 %
Repairs and maintenance 4 % 4 % 3 % 4 %
Insurance 6 % 5 % 4 % 5 %
Management fees 3 % 4 % 2 % 6 %
Utilities 5 % 4 % 4 % 3 %
Rent (as allocated) 11 % 11 % 10 % 10 %
Total Expenses 94 % 93 % 81 % 87 %
Income before depreciation and minority
interest 6 % 7 % 19 % 13 %
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For the three and nine months ended September 30, 2008 as compared with the same periods in 2007 restaurant sales increased by approximately $16,000 (or 1%) and $444,000 (or 9%), respectively.
For the three and nine months ended September 30, 2008 labor and related costs as a percentage of sales was 24% and 20%, respectively, as compared to 22% and 19% for the three and nine months ended September 30, 2007, respectively. These increases are primarily a result of higher management wages.
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
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 For the nine months
ended September 30, ended September 30,
2008 2007 2008 2007
Marina Revenues:
Monty's dockage fees and related income $ 310,000 $ 290,000 $ 949,000 $ 937,000
Grove Isle marina slip owners dues and
dockage fees 137,000 119,000 378,000 354,000
Total marina revenues 447,000 409,000 1,327,000 1,291,000
Marina Expenses:
Labor and related costs 57,000 50,000 177,000 168,000
Insurance 51,000 50,000 148,000 150,000
Management fees 19,000 19,000 58,000 54,000
Utilities, net of tenant reimbursement 9,000 15,000 3,000 48,000
Rent and bay bottom lease expense 59,000 56,000 181,000 178,000
Repairs and maintenance 24,000 45,000 94,000 124,000
Other 25,000 10,000 73,000 69,000
Total marina expenses 244,000 245,000 734,000 791,000
Income before depreciation and minority
interest $ 203,000 $ 164,000 $ 593,000 $ 500,000
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Marina revenues for the three and nine months ended September 30, 2008 as compared to the same periods in 2007 increased by 9% and 3%, respectively, primarily as a result of increased dues at the Grove Isle marina. Marina expenses for the nine months ended September 30, 2008 as compared to the same period in 2007 decreased by approximately $57,000 (or 7%) primarily due to decreased repairs and maintenance expenses.
Management's Discussion and Analysis of Financial
Condition and Results of Operations (continued)
Spa operations:
Below are summarized statements of income for Grove Isle spa operations. The
Company owns 50% of the Grove Isle Spa with the other 50% owned by an affiliate
of the Noble House Resorts, the tenant of the Grove Isle Resort:
Nine Nine
Three months Three months months months
ended ended ended ended
Summarized statements of income of spa September 30, September 30, September September
operations 2008 2007 30, 2008 30, 2007
Revenues:
Services provided $ 215,000 $ 143,000 $ 612,000 $ 496,000
Membership and other 13,000 13,000 40,000 40,000
Total spa revenues 228,000 156,000 652,000 536,000
Expenses:
Cost of sales (commissions and other) 86,000 38,000 201,000 141,000
Salaries, wages and related 64,000 66,000 185,000 208,000
Other operating expenses 91,000 81,000 179,000 203,000
Management and administrative fees 11,000 9,000 31,000 34,000
Other non-operating expenses (15,000 ) 11,000 9,000 38,000
Total Expenses 237,000 205,000 605,000 624,000
(Loss) income before interest,
depreciation and
minority interest $ (9,000 ) $ (49,000 ) $ 47,000 $ (88,000 )
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Spa revenues for the three and nine months ended September 30, 2008 as compared with the same periods in 2007 increased by $72,000 (or 46%) and $116,000 (or 22%). The spa is benefiting from increased occupancy and overall improved operations at the Grove Isle resort during 2008.
Net (loss) gain from investments in marketable securities:
Net loss from investments in marketable securities for the three and nine months
ended September 30 2008 was approximately $689,000 and $904,000, respectively,
as compared with a net gain from investments in marketable securities of
approximately $118,000 and $368,000 for the same comparable periods in 2007. For
further details refer to Note 4 to Condensed Consolidated Financial Statements
(unaudited).
Net income from other investments:
Net income from other investments for the three and nine months ended September
30, 2008 was approximately $7,000 and $165,000, respectively, as compared with
net income of approximately $24,000 and $766,000 for the same comparable periods
in 2007. The decrease in income was primarily from a non-recurring 2007 cash
distribution from an investment in a bank and in a partnership owning
diversified businesses. For further details refer to Note 5 to Condensed
Consolidated Financial Statements (unaudited).
Interest, dividend and other income:
Interest and dividend income for the three and nine months ended September 30,
2008 was approximately $73,000 and $409,000, respectively, as compared with
approximately $124,000 and $368,000, for the same periods in 2007. The decrease
from last year in the three month periods of $51,000 (or 41%), was primarily due
to lower interest rates and lower dividend income. The increase from last year
in the nine month periods of $41,000 (or 11%) was primarily the result of real
estate commission earned by Courtland Houston, Inc. of approximately $168,000 in
June 2008, partially offset by lower interest and dividend income.
Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
EXPENSES
Expenses for rental and other properties for the three and nine months ended
September 30, 2008 were consistent with that for the three and nine months ended
September 30, 2007.
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.
Adviser's base fee for the three and nine months ended September 30, 2008 as compared to the same periods in 2007 increased by $30,000 (or 13%) and $90,000 (or 13%). This was the result of the amendment to the Advisory Agreement effective January 1, 2008, as previously reported.
Professional fees for the three months ended September 30, 2008 as compared to the same period in 2007 increased by $18,000 (or 22%), primarily due to legal costs related to loan restructuring. Professional fees decreased for the nine months ended September 30, 2008 primarily due to non-recurring restaurant consulting fees of approximately $28,000 paid in May 2007.
Interest expense for the three and nine months ended September 30, 2008 as compared to the same periods in 2007 decreased by $74,000 (or 18%) and $194,000 (or 16%). This was primarily due to lower interest rates in 2008 versus 2007.
Minority partner's interest in operating (gains) losses for the three and nine months ended September 30, 2008 as compared to the same periods in 2007 decreased by $30,000 (or 15%) and $288,000 (or 98%). This was primarily the result of increased operating gains from the Monty's operations and from the Grove Isle Spa operations.
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 in 2008 primarily consist of maturities of debt obligations of approximately $4 million and commitments to fund private capital investments of approximately $1.3 million due upon demand. The funds necessary to meet these obligations are expected to be available from the proceeds of sales of properties or investments, refinancing, distributions from investments and available cash. The majority of maturing debt obligations for 2008 is a note payable to the Company's 49% owned affiliate, T.G.I.F. Texas, Inc. ("TGIF") of approximately $3.7 million. This amount is due on demand. The obligation due to TGIF will be paid with funds available from distributions from the Company's investment in TGIF and from available cash.
Management's Discussion and Analysis of Financial Condition and Results of Operations (continued)
MATERIAL COMPONENTS OF CASH FLOWS
For the nine months ended September 30, 2008, net cash provided by operating
activities was approximately $837,000 primarily due to improved restaurant and
spa operations.
For the nine months ended September 30, 2008, net cash provided by investing activities was approximately $478,000. This consisted primarily of approximately $3.1 million in net proceeds from sales of marketable securities and collections of notes receivable of approximately $500,000, partially offset by increased investments in marketable securities of $2.3 million, contributions to other investments of $495,000 and improvements to the Monty's property of approximately $554,000.
For the nine months ended September 30, 2008, net cash used in financing activities was approximately $1.5 million consisting of $2 million restricted cash relating to the loan modification discussed in Note 7. $1 million of this restricted cash was contributed by the Company 50% partner in the Monty's property. Repayments of loans accounted for the other $508,000 cash used in financing activities.
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