Company Quick10K Filing
First Hartford
Price2.45 EPS3
Shares2 P/E1
MCap6 P/FCF-13
Net Debt-9 EBIT18
TEV-3 TEV/EBIT-0
TTM 2018-07-31, in MM, except price, ratios
10-Q 2018-07-31 Filed 2018-09-28
10-K 2018-04-30 Filed 2018-07-30
10-Q 2018-01-31 Filed 2018-03-29
10-Q 2017-10-31 Filed 2017-12-28
10-Q 2017-07-31 Filed 2017-10-10
10-K 2017-04-30 Filed 2017-07-31
10-Q 2017-01-31 Filed 2017-04-24
10-Q 2016-10-31 Filed 2017-01-17
10-Q 2016-07-31 Filed 2016-10-07
10-K 2016-04-30 Filed 2016-08-05
10-Q 2016-01-31 Filed 2016-04-05
10-Q 2015-10-31 Filed 2015-12-28
10-Q 2015-07-31 Filed 2015-09-29
10-K 2015-04-30 Filed 2015-08-05
10-Q 2015-01-31 Filed 2015-04-15
10-Q 2014-10-31 Filed 2015-02-04
10-Q 2014-07-31 Filed 2014-12-12
10-K 2014-04-30 Filed 2014-10-27
10-Q 2014-01-31 Filed 2014-08-07
10-Q 2013-10-31 Filed 2014-06-10
10-Q 2013-07-31 Filed 2014-05-09
10-K 2013-04-30 Filed 2014-03-25
10-Q 2013-01-31 Filed 2013-03-29
10-Q 2012-10-31 Filed 2012-12-19
10-Q 2012-07-31 Filed 2012-10-05
10-K 2012-04-30 Filed 2012-09-06
10-Q 2012-01-31 Filed 2012-04-20
10-Q 2011-10-31 Filed 2012-01-27
10-Q 2011-07-31 Filed 2011-12-14
10-K 2011-04-30 Filed 2011-11-02
10-Q 2011-01-31 Filed 2011-03-31
10-Q 2010-10-31 Filed 2011-01-11
10-Q 2010-07-31 Filed 2010-10-06
10-K 2010-04-30 Filed 2010-08-05
10-Q 2010-01-31 Filed 2010-03-26
10-Q 2009-10-31 Filed 2010-01-13
8-K 2018-10-19

FHRT 10Q Quarterly Report

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
EX-31 exhibit311.htm
EX-31 exhibit312.htm
EX-32 exhibit321.htm

First Hartford Earnings 2015-07-31

Balance SheetIncome StatementCash Flow
2501951408530-252013201520172019
Assets, Equity
352719113-42013201520172019
Rev, G Profit, Net Income
1593-3-9-152013201520172019
Ops, Inv, Fin

10-Q 1 form10q1.htm Prepared by edgarx.com

  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 July 31, 2015.

[  ]     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                                  to                                                        

Commission File Number:                   0-8862                                                                     

 

 

First Hartford Corporation

(Exact name of registrant as specified in its charter)

 

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

(Registrant’s 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 X            No

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 issuer’s classes of common stock as of the latest practicable date.

2,409,840 as of September 29, 2015


 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES

 

INDEX

PART I.

FINANCIAL INFORMATION

PAGE

 

Item 1.

Financial Statements (Unaudited)

 

                             

 

Condensed Consolidated Balance Sheets

                              July 31, 2015 and April 30, 2015

 

 

3 - 4

 

Condensed Consolidated Statements of Operations for the

                              Three Months Ended July 31, 2015 and 2014

 

 

5

 

Condensed Consolidated Statements of Comprehensive Income (Loss) for

                the Three Months Ended July 31, 2015 and 2014

 

6

 

Condensed Consolidated Statements of Cash Flows for the

                              Three Months Ended July 31, 2015 and 2014

 

 

7 - 8

 

Notes to Condensed Consolidated Financial Statements

 

9 - 14       

Item 2.

Management’s Discussion and Analysis of Financial Condition

                              and Results of Operations

 

 

15 - 19

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

 

19

Item 4.

Controls and Procedures

 

20

PART II.

OTHER INFORMATION

 

 

Item 1.

Legal Proceedings

 

21

Item 1A.

Risk Factors

 

21

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

 

21

Item 3.

Defaults Upon Senior Securities

 

21

Item 4.

Mine Safety Disclosures

 

21

Item 5.

Other Information

 

21

Item 6.

Exhibits

21

 

 

Signatures

22

 

 

Exhibits

23 - 25

 

2


 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

 

ASSETS

 

July 31, 2015

 

April 30, 2015

 

 

Real estate and equipment:

 

 

 

     Developed properties and property under construction (including
          $72,874,272 in July and $72,621,441 in April for VIEs)

$213,950,949

 

$211,318,882

     Equipment and tenant improvements (including $2,358,162 in July and
          $2,353,355 in April for VIEs)                                                           

3,664,340

 

3,663,080

 

217,615,289

 

214,981,962

 

 

 

 

     Less accumulated depreciation and amortization (including $12,293,712 in
          July and $11,786,480 in April for VIEs)

38,736,893

 

39,149,517

 

178,878,396

 

175,832,445

 

 

 

 

 

Property held for sale

7,411,714

 

342,175

 

Cash and cash equivalents (including $1,504,672 in July and $1,067,182 in
     April for VIEs)

6,927,574

 

9,698,341

 

 

 

 

Cash and cash equivalents – restricted (including $411,444 in July and
     $418,110 in April for VIEs)

1,518,410

 

948,721

 

 

 

 

Marketable securities (including $1,774,428 in July and $2,029,684 in April
     for VIEs)

1,774,428

 

3,964,398

 

 

 

 

Accounts and notes receivable, less allowance for doubtful accounts of

     $689,154 as of July 31, 2015 and $694,849 as of April 30, 2015 (including
     $983,087 in July and $687,468 in April for VIEs)

4,964,537

 

4,848,217

 

 

 

 

Other receivables

6,189,973

 

12,080,979

 

 

 

 

Deposits and escrows (including $5,070,609 in July and $5,125,568 in April
     for VIEs)

9,176,572

 

9,671,401

 

 

 

 

Prepaid expenses (including $427,994 in July and $275,419 in April for VIEs)

1,521,601

 

1,184,170

 

 

 

 

Deferred expenses (including $1,397,428 in July and $1,420,572 in April for  VIEs)

4,707,459

 

6,004,980

 

 

 

 

Investments in affiliates

100

 

100

 

 

 

 

Due from related parties and affiliates

164,909

 

664,909

 

 

Deferred tax asset

2,835,436

 

2,802,007

 

 

Total assets

$226,071,109

 

$228,042,843

 

See accompanying notes.

3


FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS (continued)
(Unaudited)

 

LIABILITIES AND SHAREHOLDERS’ EQUITY (DEFICIENCY)

 

 

July 31, 2015

 

April 30, 2015

Liabilities:

 

 

 

Mortgages and notes payable:

 

    Construction loans payable

$61,700,222

 

$55,553,207

    Mortgages payable (including $57,171,752 in July and $57,364,872 in April for
        VIEs)

142,051,910

 

146,507,036

    Notes payable (including $1,704,697 in July and $1,704,697 in April for VIEs)

1,744,697

 

1,744,697

 

205,496,829

 

203,804,940

 

 

 

 

Accounts payable (including $1,192,037 in July and $1,224,988 in April for VIEs)

4,497,434

 

3,399,900

Other payables

7,386,813

 

13,588,295

Accrued liabilities (including $3,805,534 in July and $3,178,121 in April for VIEs)

6,190,564

 

5,852,198

Accrued cost of derivatives

2,036,460

 

2,515,330

Deferred income (including $239,556 in July and $241,216 in April for VIEs)

641,420

 

546,313

Other liabilities

1,888,790

 

1,961,212

Due to related parties and affiliates (including $419,349 in July and $415,018 in
    April for VIEs)

491,201

 

486,951

 

228,629,511

 

232,155,139

 

 

 

 

Shareholders’ Equity (Deficiency):

 

 

 

First Hartford Corporation:

 

 

 

Preferred stock, $1 par value; $.50 cumulative and convertible; authorized
      4,000,000 shares; no shares issued and outstanding

-0-

 

-0-

Common stock, $1 par value; authorized 6,000,000 shares; issued 3,298,609

      shares; outstanding 2,409,840 shares as of July 31, 2015 and April 30, 2015

3,298,609

 

3,298,609

Capital in excess of par

5,198,928

 

5,198,928

Accumulated deficit

(7,969,025)

 

(10,368,421)

Accumulated other comprehensive income

98,590

 

95,815

Treasury stock, at cost, 888,769 shares as of July 31, 2015 and April 30, 2015

  (4,970,082)

 

(4,970,082)

Total First Hartford Corporation

(4,342,980)

 

(6,745,151)

Noncontrolling interests

1,784,578

 

2,632,855

 

 

 

 

Total shareholders’ equity (deficiency)

(2,558,402)

 

(4,112,296)

 

 

 

 

Total liabilities and shareholders’ equity (deficiency)

$226,071,109

 

$228,042,843

 

See accompanying notes.

4

 


 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

 

 

Three Months Ended

 

July  31, 2015

July  31, 2014

Operating revenues:

 

 

 

  Rental income

$7,418,559

 

$7,587,625

  Service income

1,632,036

 

2,121,557

  Sales of real estate

1,104,160

 

-0-

  Other income

894,674

 

618,066

 

11,049,429

 

10,327,248

 

 

 

 

Operating costs and expenses:

 

 

 

  Rental expenses

5,052,987

 

5,201,961

  Service expenses

1,426,594

 

1,096,280

  Cost of real estate sales

936,212

 

-0-

  Selling, general and administrative expenses

1,915,531

 

1,340,364

 

9,331,324

 

7,638,605

 

Income from operations

1,718,105

 

2,688,643

 

 

 

 

Non-operating income (expense):

 

 

 

  Interest expense

(2,395,977)

 

(2,502,915)

  Gain on voluntary foreclosure

2,649,850

 

-0-

  Other income

106,705

 

152,998

  Gain (loss) on derivatives

441,139

 

(47,240)

  Equity in earnings of unconsolidated subsidiaries

162,422

 

283,889

 

964,139

 

(2,113,268)

 

Income before income taxes

2,682,244

 

575,375

 

 

 

 

Income taxes

39,885

 

61,937

 

 

 

 

Consolidated net income

2,642,359

 

513,438

 

 

 

 

Net (income) loss attributable to noncontrolling interests

(242,963)

 

269,872

 

 

 

 

Net income attributable to First Hartford Corporation

$2,399,396

 

$783,310

 

 

 

 

Net income per share – basic

$1.00

 

$0.32

 

 

 

 

Net income per share – diluted

$1.00

 

$0.32

 

 

 

 

Shares used in basic per share computation

2,409,840

 

2,412,002

 

 

 

 

Shares used in diluted per share computation

2,409,840

 

2,412,002

 

See accompanying notes.

5

 


 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
  CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)
(Unaudited)

 

 

 

Three Months Ended

 

July  31, 2015

 

 

July 31, 2014

Consolidated net income

$2,642,359

 

$513,438

 

 

 

 

Other comprehensive income, net of income taxes:

 

 

 

      Unrealized gain (loss) on marketable securities

(3,848)

 

118,006

 

 

 

 

      Total comprehensive income

2,638,511

631,444

 

 

 

 

Amounts attributable to noncontrolling interests:

 

 

 

      Net loss (income)

(242,963)

 

269,872

      Unrealized (gain) loss on marketable securities

(6,623)

 

(72,368)

 

 

 

 

 

(249,586)

 

197,504

 

 

 

 

Comprehensive income attributable to First Hartford Corporation

$2,388,925

 

$828,948

 

 

 

 

 

 

 

 

 

 

 

 

 

See accompanying notes.

6

 


 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

 

 

Three Months Ended

 

July 31, 2015

 

July 31, 2014

Operating activities:

 

 

 

 

 

 

 

  Consolidated net income

$2,642,359

 

$513,438

 

 

 

 

  Adjustments to reconcile consolidated net income to net cash provided  by
     operating activities:

 

 

 

         Equity in earnings of unconsolidated subsidiaries, net of distributions of

                                $90,000 in 2015 and $600,000 in 2014

(72,422)

 

316,112

            Gain on voluntary foreclosure

(2,649,850)

 

-0-

            Gain on sale of property

(167,948)

 

-0-

            Depreciation

1,208,363

 

1,275,295

            Amortization

91,979

 

100,035

            Deferred income taxes

(33,429)

 

-0-

 

 

 

 

  Changes in operating assets and liabilities:

 

 

 

            Accounts, notes and other receivables

5,759,922

 

5,064,417

            Deposits and escrows

301,512

 

35,116

            Prepaid expenses

(343,373)

 

(196,129)

            Deferred expenses

1,200,633

 

(84,797)

            Cash and cash equivalents – restricted

(569,689)

 

169,179

            Accrued liabilities

338,366

 

(141,557)

            Accrued cost of derivatives

(478,870)

 

47,240

            Deferred income

                  133,124

 

              (321,259)

            Accounts and other payables

(5,103,948)

 

(3,767,851)

 

 

 

 

Net cash provided by operating activities

2,256,729

 

3,009,239

 

 

 

 

Investing activities:

 

  Investments in marketable securities

(1,977,342)

 

(114,095)

  Proceeds from sale of marketable securities

4,163,462

 

-0-

  Purchase of equipment and tenant improvements

(1,260)

 

(11,462)

  Proceeds from sale of real estate

1,104,160

 

-0-

  Property under construction – held for sale

(387,363)

 

-0-

  Additions to developed properties and properties under construction

(13,605,447)

 

(6,795,541)

 

 

 

 

  Net cash used in investing activities

(10,703,790)

 

(6,921,098)

 

See accompanying notes.

 

7


 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(Unaudited)

 

 

Three Months Ended

 

July 31, 2015

 

July 31, 2014

Financing activities:

 

 

 

  Distributions to noncontrolling interests

$(1,084,615)

 

$(622,420)

 

 

 

 

Proceeds from:

 

 

 

      Construction loans payable

6,147,015

 

4,696,958

      Mortgage loans payable

1,312,500

 

-0-

      Notes payable

-0-

 

-0-

Principal payments on:

 

 

 

      Construction loans payable

-0-

 

-0-

      Mortgage loans payable

(1,202,856)

 

(713,085)

      Notes payable

-0-

 

-0-

Repayments from related parties and affiliates, net

504,250

 

3,259

 

 

 

 

Net cash provided by financing activities

5,676,294

 

3,364,712

 

 

 

 

Net change in cash and cash equivalents

(2,770,767)

 

(547,147)

 

 

 

 

Cash and cash equivalents, beginning of period

9,698,341

 

6,500,885

 

 

 

 

Cash and cash equivalents, end of period

$6,927,574

 

$5,953,738

 

 

 

 

Cash paid during the period for interest

$2,140,339

 

$2,537,560

 

 

 

 

Cash paid during the period for income taxes

$467,013

 

$112,313

 

 

 

 

Debt refinancing in 1st quarter:
      New mortgage loans

$39,000,000

 

$-0-

      Debt reduced

(39,723,828)

 

(-0-)

      Net cash from refinancing in 1st quarter

$(723,828)

 

$-0-

 

See accompanying notes.

8

 


 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.       Business and Significant Accounting Policies:

Business

First Hartford Corporation, which was incorporated in Maine in 1909, and its subsidiaries (the Company), is engaged in two business segments: 1) the purchase, development, ownership, management and sale of real estate and 2) providing preferred developer services for two corporate franchise operators (i.e., “Fee for Service”).

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts of 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 Company’s 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) 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, 2015 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 Company’s annual report on Form 10-K for the fiscal year ended April 30, 2015.

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 Updates (ASUs) that the Company is required to adopt which are likely to have a material effect on its financial statements. For further discussions on Accounting Standard Updates, refer to the Company’s annual report on Form 10-K for the fiscal year ended April 30, 2015.

 

 

9


 

 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.       Business and Significant Accounting Policies (continued):

Net Income (Loss) Per Common Share

Basic income (loss) per share is computed by dividing the net income (loss) attributable to the common stockholders (the numerator) by the weighted average number of shares of common stock outstanding (the denominator) during the reporting periods.  Diluted income (loss) per share is computed by increasing the denominator by the weighted average number of additional shares that could have been outstanding from securities convertible into common stock, such as stock options and warrants (using the “treasury stock” method).

There were no common stock equivalents outstanding at July 31, 2015 or July 31, 2014. 

Financial Instruments and Fair Value

The Company’s 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 Company’s 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). Accumulated other comprehensive (loss) income consists solely of unrealized gains (losses) on marketable securities.

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 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 is as follows:

 

 

Three Months Ended

 

July 31,

 

2015

 

2014

Revenues:

 

 

 

Real Estate Operations

$9,505,518

 

$8,311,089

Fee for Service

1,543,911

 

2,016,159

Total

$11,049,429

 

$10,327,248

 

 

 

 

Operating Costs & Expenses:

 

 

 

Real Estate Operations

$6,101,497

 

$5,201,961

Fee for Service

1,314,296

 

1,096,280

Administrative Expenses

1,915,531

 

1,340,364

Total

$9,331,324

 

$7,638,605

 

10

 


 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.       Business and Significant Accounting Policies (concluded):

Segment Information (concluded):

All costs after operating expenses are costs of the real estate operation.

The only assets in the balance sheet belonging to the Fee for Service segment is restricted cash of $1,106,966 on July 31, 2015 and $530,611 on April 30, 2015 and receivables of $6,189,973 on July 31, 2015 and $12,080,979 on April 30, 2015.

2.       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 Company’s condensed consolidated balance sheets follows:

 

 

July 31, 2015

 

April 30, 2015

 

 

 

Real estate and equipment, net

$65,453,990

 

$65,746,701

Other assets

11,567,862

 

11,041,856

Total assets

77,021,852

 

76,788,557

Intercompany profit elimination

(2,945,237)

 

(2,974,130)

Total assets

$74,076,615

 

$73,814,427

 

Mortgages and other notes payable

$58,876,449

 

$59,069,569

Other liabilities

5,219,895

 

4,644,325

Total liabilities

$64,096,344

 

$63,713,894

 

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

 

July 31,

 

2015

 

2014

Dover Parkade, LLC:

 

 

 

        Revenue

$668,169

 

$642,144

        Expenses

(523,324)

 

(475,054)

Defeasance & refinancing

                  -0-

 

(799,313)

Net Income (Loss)

$144,845

 

($632,223)

 

 

 

 

11


 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

3.       Income Taxes:

In the quarter ended July 31, 2015, the Company had taxable income but has sufficient loss carryforwards so income tax expense is minimal.  The gain on voluntary foreclosure was not income for tax purposes.

In the quarter ended July 31, 2014, the Company had significant net operating loss carryforwards so it was not expected to pay Federal income taxes in the near term.

4.       Litigation:

There has been no change in litigation since April 30, 2015.

5.       Refinancings:

Cranston, RI – Refinance: On May 28, 2015, the Company refinanced the mortgage on their shopping center in Cranston, RI in the amount of $33,500,000.  A prior mortgage with a remaining balance of $30,235,368 with an interest rate of 5.603% was paid from the proceeds.  The new mortgage has a variable interest rate of 30 day LIBOR plus 1.90% (2.09% at July 31, 2015) and calls for 119 monthly principal payments of $57,279 (along with interest) and one final lump-sum payment of $26,683,779 in May 2025.  Simultaneously, the Company entered into a floating-to-fixed interest rate swap agreement with the bank fixing the interest rate at 4.15%.

CP Associates – Refinance: On June 9, 2015, the Company refinanced a mortgage on their Career Education building in Cranston, RI in the amount of $5,500,000.  A prior mortgage with a remaining balance of $9,442,011 with an interest rate of 1.25% plus 30 day LIBOR (fixed at an effective interest rate of 6.11% through a floating-to-fixed interest rate swap agreement that was also retired) was paid from the proceeds and cash on-hand.  The new mortgage has a fixed interest rate of 3.00% through November 8, 2018, after which it adjusts to be a variable rate equal to 2.50% plus 30 day LIBOR.  Principal payments of $250,000 are due quarterly, with interest payable monthly.  The final payment is due on June 9, 2020, if not sooner paid (there is no prepayment penalty).

6.       Purchase of Land:

New Orleans, LA – Land Purchase: On May 29, 2015, the Company purchased a parcel of land in New Orleans, LA, for $7,999,901 including closing costs.  The Company plans to subdivide this lot and oversee construction of a shopping plaza with the goal of either leasing or selling these parcels shortly after construction is completed.  This purchase was financed with advances from new promissory notes of $4,383,502 and working capital of $3,616,399.  Key terms of the construction loans, which in total amount to $13,210,000, are as follows:

 

12

 


 

 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

 

6.       Purchase of Land (concluded):

 

Note #1

Note #2

Note Amount:

$7,436,645

$5,773,355

 

   

Initial Term Maturity Date:

April 28, 2016

May 28, 2017

 

   

Interest Rate:

Lesser of a) thirty day LIBOR plus
 applicable margin (3.50% prior to
 subdivision of land, 2.50% after) or
b) highest lawful rate, as defined. 

Lesser of a) thirty day LIBOR plus applicable
margin (3.50% prior to subdivision of land,
2.75% after) or b) highest lawful rate, as
defined.

 

Renewal Option:

Initial Term Maturity Date shall be
renewed and extended at
borrower’s option to November 28,
2016 if agreed-upon conditions are
met.

Initial Term Maturity Date shall be renewed and
extended at borrower’s option to May 28, 2018
and again until May 28, 2019 if agreed-upon
conditions are met.

 

 

Austin, TX – Land Purchase: On July 30, 2015, the Company purchased a parcel of land in Austin, TX for $1,874,309 including closing costs.  The Company plans to oversee construction of a retail store with the goal of selling the property shortly after construction is completed.  This purchase was financed with a loan of $1,312,500 and working capital of $561,809.  Key terms of the mortgage loan are as follows:

 

Maturity Date:   

Balloon payment due January 2017

Interest Rate:

1.00% above the Prime Rate, as defined

Interest Payments:   

Monthly

Prepayment Penalty: 

None

Guarantee:   

Guaranteed by Chairman of the Company

 

7.       Gain on Voluntary Foreclosure:

Putnam, CT – Transfer to Lender: On November 1, 2014, a payment was due for the mortgage of the shopping center in Putnam, Connecticut in the amount of approximately $4,700,000.  The rentable space of the shopping center is 57,529 square feet, 46% of which was leased to one store.  That store informed the Company that they were not renewing their lease, which expired on January 31, 2015, and, as a result, the Company found it impossible to refinance the mortgage without finding a replacement tenant.  Therefore, on June 5, 2015, the Company agreed to transfer title of the property to the lender.  The Company recognized a gain of $2,649,850 since the mortgage was non-recourse and was in excess of the book value.  Pre-tax income for this shopping center was $44,645 and $51,837 for the quarters ended July 31, 2015 and 2014, respectively.

13

 


 

 

FIRST HARTFORD CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

8.       Subsequent Events:

Austin, TX – Property Sale: On August 6, 2015, the Company sold a property in Austin, TX for $10,246,021.  A mortgage loan with a balance of $6,106,873 was paid off with the proceeds.

Vernon, NJ – Land Purchase: On September 8, 2015, the Company purchased a parcel of land in Vernon, NJ, for $4,175,985 including closing costs.  The Company plans to oversee construction of a retail store with the goal of selling the property shortly after construction is completed.  This purchase was financed with an advance from a new construction loan of $2,959,018 and working capital of $1,216,967.  Key terms of the construction loan are as follows:

 

      

Maximum Loan Amount:          

$6,281,250

 

Maturity Date:       

September 1, 2026

 

Interest Rate:     

2.50% above the LIBOR rate, as defined, but in no event less than 2.90% through September 1, 2016.  Thereafter, 1.85% above the LIBOR rate, as defined.

 

Payments: 

Interest only payable monthly through September 1, 2016.  Thereafter, interest plus principal in the amount necessary to amortize the then outstanding principal balance in full over a 30 year period payable monthly.  If not sooner paid, all remaining interest and principal payable on September 1, 2026.

 

Prepayment Fee:   

0.50% prior to September 1, 2018.

 

 

 

 

 

 

14

 


 

Item 2.  MANAGEMENT’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s performance.  The Company undertakes no obligation to update publicly any forward-looking statements, whether as a result of new information, future events or other.

Critical Accounting Policies

There have been no significant changes in the Company’s critical accounting policies from those included in Item 7 of its Annual Report on Form 10-K for the year ended April 30, 2015 under the subheading “Critical Accounting Policies and Estimates”. 

Results of Operations
Rental Income:

Rental income for the quarters ended July 31, by type of tenant, follows:

 

Three Months Ended

 

July 31,

 

2015

 

2014

Residential

$3,046,112

 

$2,785,619

Commercial

4,372,447

 

4,802,006

 

$7,418,559

 

$7,587,625

 

The increase in residential rental income was primarily caused by an increase in the subsidy received for the Rockland, MA property, partially offset by increases in concessions and vacancies.

The decrease in commercial rental income was primarily caused by a favorable real estate tax adjustment to our tenants at our Cranston, RI property during the three months ended July 31, 2014 and, to a lesser extent, the impact of the voluntary foreclosure of the Putnam, CT property on June 5, 2015 (see Note 7 of the Financial Statements included within for discussion.)

Service Income

Service income for the quarters ended July 31 follows:

 

Three Months Ended

 

July 31,

 

2015

 

2014

Management fees

$88,125

 

$105,398

Preferred developer fees

1,543,911

 

2,016,159

 

$1,632,036

 

$2,121,557

15

 


 

Item 2.  MANAGEMENT’s DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                        OPERATIONS (continued):

Results of Operations (continued):

Service Income (continued):

The decrease in preferred developer fees reflected lower fees received from CVS; fees received from Cumberland Farms were flat to the prior year comparable quarter.  The prior fiscal year first quarter had the highest CVS fee income in the Company’s history, while CVS fee income in this fiscal year’s first quarter was in line with the last few quarters.

Sales (and Cost of Sales) of Real Estate

On May 28, 2015, the Company sold a parcel of land in Pearland, TX for $1,104,161 (cost of $936,212).  The Company did not sell any real estate in the three months ended July 31, 2014. 

Other Income

The increase in other income was primarily at the liquor store, which obtained a liquor license in December 2014.  Prior to obtaining the liquor license, the store only sold beer and wine. 

Operating Costs and Expenses:

Rental Expenses

Rental expenses for the quarters ended July 31, by type of tenant, follows:

 

Three Months Ended

 

July 31,

 

2015

 

2014

Residential

$2,522,162

 

$2,761,142

Commercial

  2,530,825

 

  2,440,819

 

$5,052,987

 

$5,201,961

 

The decrease in residential rental expenses were mainly from lower asbestos remediation expenses at the Clarendon property as these costs, which are ongoing, were capitalized in the first quarter of fiscal year 2016 as they were determined to improve the condition and safety of the property and mitigate and prevent environmental contamination that has yet to occur and that otherwise may result from future operations or activities.  Partially offsetting this decrease were higher voucher incentive payments made to Rockland’s tenants in an effort to maximize subsidy income.    

The increase in commercial rental expenses were mainly due to professional and legal expenses incurred as part of the initial effort to refinance the debt at the Cranston, RI shopping center (the refinancing ultimately happened via another lender - see Note 5 of the Financial Statements included within for discussion).

16

 


 

 

Item 2.  MANAGEMENT’s DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                          OPERATIONS (continued):

Results of Operations (continued):

Service Expenses

Service expenses for the quarters ended July 31 follows:

 

Three Months Ended

 

July 31,

 

2015

 

2014

Preferred Developer
Expenses and Fees

$1,314,296

 

$1,096,280

Construction and Other Cost

        112,298

 

                            -0-

 

$1,426,594

 

$1,096,280

 

The increase in preferred developer expenses and fees reflects the ramp-up to full staffing that occurred in the second half of fiscal year 2015, as well as salary increases. 

Selling, General and Administrative (“SG&A”)

The increase in SG&A expenses were largely the result of the expenses of the liquor store in North Adams, MA which did not obtain a liquor license until December 2014.  Prior to obtaining the liquor license, the store only sold beer and wine.  Also contributing to this increase was a higher proportion of certain employees’ time being allocated to asbestos abatement at Clarendon in the prior year first quarter versus SG&A activities.  

Non-Operating Income (Expense):

Interest Expense

Interest expense for the quarters ended July 31, by type of tenant, follows:

 

Three Months Ended

 

July 31,

 

2015

 

2014

Commercial

$1,783,361

 

$1,828,204

Residential

612,616

 

674,711

 

$2,395,977

 

$2,502,915

 

The decrease in commercial interest expense was the result of the voluntary foreclosure of the Putnam, CT property on June 5, 2015 (see Note 7 of the Financial Statements included within for discussion.)

The decrease in residential interest expense was the result of the refinancings at Rockland and Clarendon that occurred in February 2015.

17

 


 

Item 2.   MANAGEMENT’s DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                          OPERATIONS (continued):

Results of Operations (continued):

Gain on Voluntary Foreclosure

See Note 7 of the Financial Statements included within for discussion.

Other Income

Other income for the quarters ended July 31 follows:

 

Three Months Ended

 

July 31,

 

2015

 

2014

Edinburg EDC contributions

$-0-

 

$80,000

Investment Income

106,705

 

72,998

 

$106,705

 

$152,998

 

The Company does not expect any more Edinburg EDC contributions after April 30, 2015.  See Note 4 to the Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the year ended April 30, 2015 for further discussion.

Gain (Loss) on Derivatives

The Company, through its 50% owned consolidated subsidiaries, has entered into two separate floating-to-fixed interest rate swap agreements with banks that expire in May 2025 and July 2031.  The Company has determined that these derivative instruments do not meet the requirements of hedge accounting and have therefore recorded the change in fair value of these derivative instruments through income.

Equity in Earnings of Unconsolidated Subsidiary

The equity in earnings of unconsolidated subsidiary for the quarters ended July 31 follows:

 

 

Three Months Ended

 

July 31,

 

2015

 

2014

Income from Operations

$72,422

 

$83,545

Defeasance and Refinancing

          -0-

 

(399,656)

Distributions

      90,000

 

      600,000

 

$162,422

 

$283,889

 

18


Item 2.  MANAGEMENT’s DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
                        OPERATIONS (continued):

Results of Operations (continued):

Equity in Earnings of Unconsolidated Subsidiary (continued):

The Company has an investment in an affiliated limited liability entity Dover Parkade, LLC, (Dover).  The Company has a 50% interest in Dover which owns a shopping center in Dover Township, NJ.  The operating and financial policies of Dover are not controlled by the Company.  For the years prior to May 1, 2009, the Company was committed to providing funding to this equity method investee.  The Company’s investment was recorded at cost and subsequently adjusted for its share of their net income and losses and distributions. To 2009, losses and distributions from Dover exceeded the Company’s investment.  Since then, distributions from Dover have been credited to income.  The Company does not control the rate of distributions of Dover.  Such distributions are in excess of Dover’s net assets since its accumulated net losses (including significant amounts for depreciation and amortization) have exceeded capital contributions.

During the three months ended July 31, 2014, the equity in earnings of Dover were charged $399,656, which represented 50% of the direct costs of defeasance on the refinancing of the prior mortgage plus some additional defeasance cost.  As a result of the refinancing, the Company received a distribution of $600,000. 

Income Taxes

In the quarter ended July 31, 2015, the Company had taxable income but has sufficient loss carryforwards so income tax expense is minimal.  The gain on voluntary foreclosure was not income for tax purposes.

In the quarter ended July 31, 2014, the Company had significant net operating loss carryforwards so it was not expected to pay Federal income taxes in the near term.

Capital Resource and Liquidity

At July 31, 2015, the Company had $6,927,574 of unrestricted cash and cash equivalents. This includes $3,884,418 belonging to partnership entities in which the Company’s 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 $1,106,966 and tenant security deposits held by VIEs of $411,444 are included in restricted cash and cash equivalents.

At July 31, 2015, the Company had $1,774,428 of investments in marketable securities, all of which belongs to partner entities.

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 July 31, 2016. Borrowings for new construction loans or property purchases are unclear at this time.

Item 3QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Smaller reporting companies are not required to provide the information required by this item.

 

 

19


 

 

Item 4CONTROLS 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 Chairman and Treasurer, as appropriate, to allow timely decisions regarding required disclosure.  We conducted an evaluation (the “Evaluation”), under the supervision and with the participation of our Chairman and Treasurer, 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 Chairman 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 July 31, 2015, we believe that the condensed consolidated financial statements contained in this report present fairly the Company’s 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 Company’s internal control over financial reporting.

 

 

 

 

 

 

 

 

20

 


 

PART II

OTHER INFORMATION

 

 

Item 1.

LEGAL PROCEEDINGS

 

There has been no change in litigation since April 30, 2015.

 

 

Item 1A.

RISK FACTORS

 

Smaller reporting companies are not required to provide the information required by this item.

 

 

Item 2.

 UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

 

None

 

 

Item 3.

DEFAULTS UPON SENIOR SECURITIES

 

None

 

 

Item 4.

MINE SAFETY DISCLOSURES

 

Not applicable

 

 

Item 5.

OTHER INFORMATION

 

None

 

 

 

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

 

None

 

 

Item 6.

EXHIBITS

 

 

 

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.

21

 


 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

   

First Hartford Corporation

   

(Registrant)

                

 

   

/s/ Neil H. Ellis

September 29, 2015

 

Neil H. Ellis, 

Date

 

Chairman of the Board

   

and Chief Executive Officer

     
   

 

   

/s/ Eric J. Harrington

September 29, 2015

 

Eric J. Harrington, Treasurer

Date

 

and Chief Financial Officer