SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
10-Q
(Mark
One)
|
[X]
|
QUARTERLY
REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
|
|
For
the quarterly period ended:
March 31,
2009
|
|
|
|
[ ]
|
TRANSITION REPORT UNDER SECTION
13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
|
|
|
For
the transition period from ____________________ to
_____________
|
|
Commission
file number
__________________________
|
|
LANDMARK LAND COMPANY, INC.
(Exact
Name of Registrant as specified in its Charter)
|
|
DELAWARE
(State
or Other Jurisdiction of Incorporation or Organization)
|
77-0024129
(I.R.S.
Employer Identification No.)
|
|
2817 Crain Highway, Upper Marlboro,
Maryland
(Address
of Principal Executive Offices)
|
20774
(Zip
Code)
|
|
(301) 574-3330
(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 required 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
|
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 the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reported 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 [√]
|
|
Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).
|
[ ]
Yes [√] No
|
APPLICABLE
ONLY TO CORPORATE ISSUERS
The
number of shares outstanding of the issuer's common stock, $0.50 par value as of
May 12, 2009 was 7,567,530.
Landmark
Land Company, Inc.
INDEX
TO QUARTERLY REPORT ON FORM 10-Q
QUARTER
ENDED MARCH 31, 2009
|
PART
I
|
FINANCIAL
INFORMATION
|
Page
Number
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Financial Statements
|
3
|
|
|
|
|
|
Condensed
Consolidated Balance Sheets as of March 31, 2009 (unaudited) and December
31, 2008
|
4
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Operations (unaudited) for the three
months ended March 31, 2009 and 2008, respectively
|
6
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Comprehensive Income (unaudited) for the three
months ended March 31, 2009 and 2008, respectively
|
7
|
|
|
|
|
|
|
|
|
Condensed
Consolidated Statements of Cash Flows (unaudited) for the three months
ended March 31, 2009 and 2008, respectively
|
8
|
|
|
|
|
|
|
|
|
Notes
to Condensed Consolidated Financial Statements
|
9
|
|
|
|
|
|
|
|
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
15
|
|
|
|
|
|
Quantitative
and Qualitative Disclosures about Market Risk
|
18
|
|
|
|
|
|
Controls
and Procedures
|
18
|
|
|
|
PART
II
|
OTHER
INFORMATION
|
|
|
|
|
|
|
|
|
Legal
Proceedings
|
18
|
|
|
|
|
|
Risk
Factors
|
18
|
|
|
|
|
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
18
|
|
|
|
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|
Defaults
Upon Senior Securities
|
18
|
|
|
|
|
|
Submission
of Matters to a Vote of Security Holders
|
18
|
|
|
|
|
|
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|
|
Other
Information
|
18
|
|
|
|
|
|
|
|
|
Exhibits
|
19
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
IMPORTANT
ADVISORY NOTE REGARDING FORWARD-LOOKING
STATEMENTS
|
This
report and the documents incorporated into this report contain forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 ("PSLRA"), including, but not limited to, statements relating to the
company's business objectives and strategy. Such forward-looking statements are
based on current expectations, management beliefs, certain assumptions made by
the company's management, and estimates and projections about the company's
industry. Words such as "anticipates," "expects," "intends," "plans,"
"believes," "seeks," "estimates," "forecasts," "is likely," "predicts,"
"projects," "judgment," variations of such words and similar expressions are
intended to identify such forward-looking statements. These statements are not
guarantees of future performance and are subject to certain risks, uncertainties
and assumptions that are difficult to predict with respect to timing, extent,
likelihood and degree of occurrence. Therefore, actual results and outcomes may
differ materially from those expressed, forecasted, or contemplated by any such
forward-looking statements.
Factors
that could cause actual events or results to differ materially include, but are
not limited to, the following: the company's limited cash flow from
operations; early terminations of existing golf course management
agreements; the company's ability to expand its golf management business;
general demand for the company's services or products, intense competition from
other golf course managers and residential developers/builders; changes in laws
and regulations affecting the company and/or its services; the outcomes of
future litigation and contingencies; trends in the golf and housing industry;
changes in local, national and international economies; the current war against
terrorism; risks arising from natural disasters; risks involved in
doing business in foreign countries; and risks inherent in and associated with
doing business in a recreational and/or interest rate sensitive industry. Given
these uncertainties, investors are cautioned not to place undue reliance on any
such forward-looking statements.
Unless
required by law, the company undertakes no obligation to update publicly any
forward-looking statements, whether as a result of new information, future
events or otherwise. However, readers should carefully review the risk factors
set forth in other reports or documents that the company files from time to time
with the Securities and Exchange Commission (the "SEC"), particularly Annual
Reports on Form 10-K, Quarterly Reports on Form 10-Q and any Current Reports on
Form 8-K.
PART I – FINANCIAL
INFORMATION
Item
1.
Condensed
Consolidated Financial Statements
|
|
|
|
Condensed
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
March
31,
|
|
|
December
31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Assets
|
|
(Unaudited)
|
|
|
|
|
|
Current
assets
|
|
|
Cash
and cash equivalents
|
|
$
|
393,314
|
|
|
$
|
270,278
|
|
|
Accounts
receivable
|
|
|
298,714
|
|
|
|
302,804
|
|
|
Receivable
from affiliates
|
|
|
728,851
|
|
|
|
1,265,250
|
|
|
Inventories
|
|
|
115,444
|
|
|
|
118,441
|
|
|
Other
current assets
|
|
|
234,607
|
|
|
|
259,523
|
|
|
Total
current assets
|
|
|
1,770,930
|
|
|
|
2,216,296
|
|
|
|
|
|
Real
estate and golf management contract rights acquired,
|
|
|
|
|
|
|
|
|
|
net
of accumulated amortization of $961,726 in 2009 and 2008
|
|
|
2,323,861
|
|
|
|
2,323,861
|
|
|
|
|
|
Real
Estate
|
|
|
Real
estate held for sale
|
|
|
3,096,146
|
|
|
|
3,163,498
|
|
|
Real
estate held for or under development
|
|
|
12,907,035
|
|
|
|
12,366,236
|
|
|
Total
real estate
|
|
|
16,003,181
|
|
|
|
15,529,734
|
|
|
|
|
|
Property and equipment,
net of accumulated depreciation
|
|
|
of
$1,373,833 and $1,213,198 in 2009 and 2008, respectively
|
|
|
5,930,672
|
|
|
|
6,091,385
|
|
|
|
|
|
Other
assets
|
|
|
Investment
in unconsolidated affiliates
|
|
|
15,344,424
|
|
|
|
15,734,327
|
|
|
Receivable
from affiliates, non-current
|
|
|
542,321
|
|
|
|
548,551
|
|
|
Deposits
|
|
|
85,357
|
|
|
|
80,181
|
|
|
Deferred
tax assets, non-current
|
|
|
4,400,000
|
|
|
|
4,400,000
|
|
|
Total
other assets
|
|
|
20,372,102
|
|
|
|
20,763,059
|
|
|
|
|
|
Total
assets
|
|
$
|
46,400,746
|
|
|
$
|
46,924,335
|
|
The
accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these financial statements.
|
Landmark
Land Company, Inc.
|
|
|
Condensed
Consolidated Balance Sheets
|
|
|
|
|
|
|
|
March
31,
|
|
|
December
31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Liabilities
and Stockholders' Equity
|
|
(Unaudited)
|
|
|
|
|
|
Current
liabilities
|
|
|
Current
portion of notes payable to others
|
|
$
|
13,993,018
|
|
|
$
|
13,644,621
|
|
|
Current
portion of liabilities to affiliates
|
|
|
1,208,965
|
|
|
|
1,192,074
|
|
|
Accounts
payable and accrued expenses
|
|
|
877,441
|
|
|
|
1,165,343
|
|
|
Accrued
payroll and related expenses
|
|
|
372,427
|
|
|
|
404,373
|
|
|
Accrued
interest due affiliates
|
|
|
1,018,041
|
|
|
|
971,905
|
|
|
Accrued
interest due others
|
|
|
379,617
|
|
|
|
367,082
|
|
|
Other
liabilities and deferred credits
|
|
|
248,074
|
|
|
|
97,947
|
|
|
Dividends
payable
|
|
|
58,407
|
|
|
|
8,407
|
|
|
Current
income taxes
|
|
|
10,461
|
|
|
|
5,061
|
|
|
Total
current liabilities
|
|
|
18,166,451
|
|
|
|
17,856,813
|
|
|
|
|
|
Long
term liabilities
|
|
|
Notes
payable to others, due after one year
|
|
|
3,543,627
|
|
|
|
3,542,310
|
|
|
Notes
payable to affiliates, due after one year
|
|
|
1,200,000
|
|
|
|
200,000
|
|
|
Total
liabilities payable after one year
|
|
|
4,743,627
|
|
|
|
3,742,310
|
|
|
|
|
|
Total
liabilities
|
|
|
22,910,078
|
|
|
|
21,599,123
|
|
|
|
|
|
Stockholders'
equity
|
|
|
Preferred
stock, Series C, non-voting, $.50 par value; $100
|
|
|
|
|
|
|
|
|
|
liquidation
value; $10 cumulative annual dividend;
|
|
|
|
|
|
|
|
|
|
50,000
shares authorized; 20,000 shares issued and outstanding,
|
|
|
|
|
|
|
|
|
|
stated
at liquidation value
|
|
|
2,000,000
|
|
|
|
2,000,000
|
|
|
Common
stock, $.50 par value; 20,000,000 shares authorized;
|
|
|
|
|
|
|
|
|
|
8,804,468
shares issued; 7,567,530 shares outstanding
|
|
|
4,402,234
|
|
|
|
4,402,234
|
|
|
Additional
paid-in capital
|
|
|
30,463,468
|
|
|
|
30,449,470
|
|
|
Treasury
stock, at cost, 1,236,938 shares
|
|
|
(1,299,820
|
)
|
|
|
(1,299,820
|
)
|
|
Accumulated
deficit
|
|
|
(12,019,520
|
)
|
|
|
(10,167,890
|
)
|
|
Accumulated
other comprehensive loss
|
|
|
(55,694
|
)
|
|
|
(58,782
|
)
|
|
Total
stockholders' equity
|
|
|
23,490,668
|
|
|
|
25,325,212
|
|
|
|
|
|
Total
liabilities and stockholders' equity
|
|
$
|
46,400,746
|
|
|
$
|
46,924,335
|
|
The
accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these financial statements.
|
|
|
|
Condensed
Consolidated Statements of
Operations
|
|
|
Three
Months ended March 31, 2009 and 2008
|
|
|
(Unaudited)
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Revenues
|
|
|
Real
estate sales
|
|
$
|
134,320
|
|
|
$
|
1,557,127
|
|
|
Real
estate services revenue
|
|
|
315,159
|
|
|
|
255,019
|
|
|
Golf
course revenue
|
|
|
379,104
|
|
|
|
437,188
|
|
|
Golf
merchandise sales
|
|
|
57,766
|
|
|
|
74,480
|
|
|
Food
and beverage sales revenue
|
|
|
188,053
|
|
|
|
111,460
|
|
|
Management
and consulting revenue
|
|
|
393,088
|
|
|
|
1,106,081
|
|
|
Reimbursement
of out-of-pocket expenses
|
|
|
508,339
|
|
|
|
400,966
|
|
|
Total
|
|
|
1,975,829
|
|
|
|
3,942,321
|
|
|
|
|
|
Costs
of revenues
|
|
|
Cost
of real estate sold
|
|
|
76,391
|
|
|
|
999,781
|
|
|
Real
estate operating expenses
|
|
|
542,570
|
|
|
|
706,658
|
|
|
Cost
of golf merchandise sold
|
|
|
42,687
|
|
|
|
50,982
|
|
|
Cost
of food and beverage sold
|
|
|
81,373
|
|
|
|
49,914
|
|
|
Golf
operating expenses
|
|
|
483,416
|
|
|
|
474,461
|
|
|
Out-of-pocket
expenses
|
|
|
508,339
|
|
|
|
400,966
|
|
|
Management
and consulting payroll and related expenses
|
|
|
1,067,204
|
|
|
|
1,050,759
|
|
|
Depreciation
and amortization
|
|
|
160,391
|
|
|
|
184,326
|
|
|
Total costs
of revenue
|
|
|
2,962,371
|
|
|
|
3,917,
847
|
|
|
|
|
|
Operating
(loss) income
|
|
|
(986,542
|
)
|
|
|
24,474
|
|
|
|
|
|
General,
administrative and other expenses
|
|
|
(260,376
|
)
|
|
|
(589,802
|
)
|
|
|
|
|
Other
income (expenses)
|
|
|
Equity
in (loss) profit of unconsolidated affiliates
|
|
|
(397,120
|
)
|
|
|
5,302,481
|
|
|
Interest
income
|
|
|
310
|
|
|
|
34,027
|
|
|
Interest
expense
|
|
|
(152,202
|
)
|
|
|
(176,536
|
)
|
|
Total
other (expenses) income
|
|
|
(549,012
|
)
|
|
|
5,159,972
|
|
|
|
|
|
Net
(loss) income before income taxes
|
|
|
(1,795,930
|
)
|
|
|
4,594,644
|
|
|
|
|
|
Federal
and state income taxes
|
|
|
(5,700
|
)
|
|
|
(273,432
|
)
|
|
|
|
|
Net
(loss) income
|
|
$
|
(1,801,630
|
)
|
|
$
|
4,321,212
|
|
|
|
|
|
Basic
(loss) income per common share
|
|
$
|
(0.24
|
)
|
|
$
|
0.57
|
|
|
|
|
|
Basic
weighted average shares outstanding
|
|
|
7,567,530
|
|
|
|
7,567,530
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
(loss) income per common share
|
|
$
|
(0.24
|
)
|
|
$
|
0.57
|
|
|
|
|
|
Diluted
weighted average shares outstanding
|
|
|
7,567,530
|
|
|
|
7,567,530
|
|
The
accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these financial statements.
|
Landmark
Land Company, Inc.
|
|
|
Condensed
Consolidated Statements of Comprehensive
Income
|
|
|
Three
months ended March 31, 2009 and 2008
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
Net
(loss) income
|
|
$
|
(1,801,630
|
)
|
|
$
|
4,321,212
|
|
|
|
|
|
Other
comprehensive income
|
|
|
Foreign
currency translation adjustments
|
|
|
3,088
|
|
|
|
9,825
|
|
|
|
|
|
Comprehensive
(loss) income
|
|
$
|
(1,798,542
|
)
|
|
$
|
4,331,037
|
|
The
accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these financial statements.
|
Landmark
Land Company, Inc.
|
|
|
Condensed
Consolidated Statements of Cash
Flows
|
|
|
Three
months ended March 31, 2009 and 2008
|
|
|
(Unaudited)
|
|
|
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Cash
flows from operating activities
|
|
|
Net
(loss) income for the period
|
|
$
|
(1,801,630
|
)
|
|
$
|
4,321,212
|
|
|
Adjustments
to reconcile net income to net cash
|
|
|
provided
(used) by operating activities:
|
|
|
Depreciation
and amortization
|
|
|
160,391
|
|
|
|
184,326
|
|
|
Stock
options expensed
|
|
|
13,998
|
|
|
|
21,179
|
|
|
Loss
on disposal of property and equipment
|
|
|
1,085
|
|
|
|
700
|
|
|
Equity
in loss (income) of unconsolidated affiliates
|
|
|
397,120
|
|
|
|
(5,302,481
|
)
|
|
(Increase)
decrease in
|
|
|
Accounts
receivable
|
|
|
4,090
|
|
|
|
(48,796
|
)
|
|
Receivable
from affiliates
|
|
|
555,392
|
|
|
|
(279,531
|
)
|
|
Inventories
|
|
|
2,997
|
|
|
|
(552
|
)
|
|
Other
current assets
|
|
|
24,916
|
|
|
|
(59,577
|
)
|
|
Deposits
|
|
|
(5,176
|
)
|
|
|
-
|
|
|
Deferred
tax assets
|
|
|
-
|
|
|
|
268,000
|
|
|
Increase
(decrease) in
|
|
|
Accounts
payable and accrued expenses
|
|
|
(287,902
|
)
|
|
|
(51,428
|
)
|
|
Accrued
payroll and related expenses
|
|
|
(31,946
|
)
|
|
|
(32,720
|
)
|
|
Accrued
interest
|
|
|
58,671
|
|
|
|
63,543
|
|
|
Other
liabilities and deferred credits
|
|
|
150,127
|
|
|
|
10,500
|
|
|
Current
income taxes
|
|
|
5,400
|
|
|
|
5,432
|
|
|
Net
cash (used) by operating activities
|
|
|
(752,467
|
)
|
|
|
(900,193
|
)
|
|
|
|
|
Cash
flows from investing activities
|
|
|
Purchase
of property and equipment
|
|
|
(763
|
)
|
|
|
(35,320
|
)
|
|
Purchase
and development of real estate inventory
|
|
|
(550,519
|
)
|
|
|
(926,900
|
)
|
|
Sale
of real estate inventory
|
|
|
77,072
|
|
|
|
1,024,837
|
|
|
Net
cash (used) provided by investing activities
|
|
|
(474,210
|
)
|
|
|
62,617
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
Proceeds
from debt to others
|
|
|
479,598
|
|
|
|
567,410
|
|
|
Repayments
on debt to others
|
|
|
(129,885
|
)
|
|
|
(804,305
|
)
|
|
Proceeds
from debt to affiliates
|
|
|
1,000,000
|
|
|
|
-
|
|
|
Cash
dividends on common stock
|
|
|
-
|
|
|
|
(188,516
|
)
|
|
Cash
dividends on preferred stock
|
|
|
-
|
|
|
|
(25,000
|
)
|
|
Net
cash provided (used) by financing activities
|
|
|
1,349,713
|
|
|
|
(450,411
|
)
|
|
|
|
|
Net
increase (decrease) in cash during period
|
|
|
123,036
|
|
|
|
(1,287,987
|
)
|
|
|
|
|
Cash
balance, beginning of period
|
|
|
270,278
|
|
|
|
4,934,820
|
|
|
|
|
|
Cash
balance, end of period
|
|
$
|
393,314
|
|
|
$
|
3,646,833
|
|
|
|
|
|
Supplemental
disclosure of cash flow information:
|
|
|
Cash
paid for interest. No cash was paid for interest
to
|
|
|
|
|
|
|
|
|
|
affiliates
in 2009 or 2008
|
|
$
|
206,152
|
|
|
$
|
263,481
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
paid for income taxes
|
|
$
|
300
|
|
|
$
|
-
|
|
The
accompanying Notes to Condensed Consolidated Financial Statements are an
integral part of these financial statements.
Landmark
Land Company, Inc.
Notes
to Condensed Consolidated Financial Statements
Landmark
Land Company, Inc.
Notes
To Condensed Consolidated Financial Statements
(Unaudited)
1. Basis
of Presentation
The
accompanying unaudited financial statements have been prepared in accordance
with generally accepted accounting principles for condensed interim financial
information and with the instructions to Form 10-Q and Article 3 of Regulation
S-X promulgated by the Securities and Exchange
Commission. Accordingly, they do not include all of the information
and footnotes normally included in annual financial statements. In
the opinion of management, all adjustments considered necessary for a fair
presentation have been included. Operating results for the
three-month period ended March 31, 2009 are not necessarily indicative of the
results that may be expected for the fiscal year ending December 31,
2009. There have been no significant changes to accounting policies
or critical estimates during the first quarter of 2009. For further
information, please refer to the audited financial statements and footnotes
thereto included in the company’s Form 10-K for the year ended December 31,
2008, as filed with the Securities and Exchange Commission.
The
accompanying financial statements include the assets, liabilities, revenues and
expenses of Landmark Land Company, Inc. and its wholly-owned subsidiaries,
Landmark of Spain, Inc., DPMG, Inc., LML Caribbean, LTD., Lake Presidential
Beverage Company, Inc., South Padre Island Development, L.P., South Padre Island
Realty, LLC, and SPIBS, LLC. The three entities related to the South
Padre project, South Padre Island Development, L.P., South Padre Island Realty,
LLC, and SPIBS, LLC, are sometimes collectively referred to as “South
Padre”. All significant inter-company accounts and transactions have
been eliminated in consolidation.
LML Caribbean, LTD
owns one
third interest in Apes Hill Development SRL (“Apes Hill”) and accounts for its
investment on the equity basis. Apes Hill’s functional currency is
the Barbados dollar. Apes Hill reported the following results
for periods shown below, converted to US dollars at the exchange rate of two
Barbados dollars to one US dollar:
|
|
|
Three
Months Ended March 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Revenue
|
|
$
|
423,653
|
|
|
$
|
28,533,432
|
|
|
Gross
profit
|
|
$
|
218,543
|
|
|
$
|
17,154,976
|
|
|
(Loss)
profit from continuing operations
|
|
$
|
(1,169,711
|
)
|
|
$
|
16,478,472
|
|
|
Net
(loss) income
|
|
$
|
(1,169,711
|
)
|
|
$
|
16,478,472
|
|
Apes Hill
closed 1 lot sale in the first quarter of 2009 generating US $424,000 in
revenue. At March 31, 2009, Apes Hill reported 16 lots and 2 villas
under contract with a total sales value of approximately US $29
million.
The
company has a receivable from Apes Hill in the amount of $0.6 million at March
31, 2009 representing unpaid management fees and out-of-pocket
expenses. The amount is reported in the Condensed Consolidated
Balance Sheets as Receivable from affiliates.
Landmark of Spain, Inc.
owns a
50% interest in a Spanish company, Landmark Developments of Spain, SL (“Landmark
Spain”). Landmark of Spain, Inc. accounts for its investment on the
equity basis. Landmark Spain’s functional currency is the
Euro. Landmark Spain reported the following results for the periods
shown below, converted to US dollars at the approximate average rate of exchange
during each period:
|
|
|
Three
Months Ended March 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Revenue
|
|
$
|
34,816
|
|
|
$
|
309
|
|
|
Gross
(loss) profit
|
|
$
|
(14,433
|
)
|
|
$
|
(380,686
|
)
|
|
(Loss)
from continuing operations
|
|
$
|
(14,433
|
)
|
|
$
|
(380,686
|
)
|
|
Net
(loss)
|
|
$
|
(14,433
|
)
|
|
$
|
(380,686
|
)
|
Landmark
Land Company, Inc.
Notes
to Condensed Consolidated Financial Statements
The
company has a receivable from this affiliate of $0.5 million as of March 31,
2009. The company has recorded cumulative losses from this investment
of $62,000 in excess of its capital investment of $1.3 million and this excess
loss is reported as a reduction to the company's receivable from the
affiliate.
DPMG owns
7.45% of
Presidential Golf
Club, LLC
, a Maryland limited liability company
(“Presidential”). Presidential has developed an 18-hole championship
golf course, Lake Presidential Golf Club, on approximately 240 acres of land in
Upper Marlboro, Maryland. The course was opened for play on May 1,
2008. The company accounts for its investment under the cost
method. The company has receivables from Presidential totaling
$173,000 at March 31, 2009, representing unpaid management fees, out-of-pocket
expenses, short-term working capital loans, and accrued interest. The
amount is reported in the Condensed Consolidated Balance Sheets as Receivable
from affiliates.
Lake Presidential Beverage Company,
LLC
is a wholly owned subsidiary of the company formed on November 7,
2007 to hold the alcoholic beverage license for the Lake Presidential Golf
Club.
2.
Liquidity and capital resources
Liquidity
needs for the final three
quarters of 2009
are expected to exceed amounts available or
committed to be available at March 31, 2009. The company’s Condensed
Consolidated Balance Sheet at March 31, 2009 reports current assets totaling
$1.8 million and current liabilities totaling $18.2 million for a $16.4 million
excess of current liabilities over current assets. Approximately
$13.2 million of the current liabilities is due to two Texas banks that have
funded the company’s South Padre real estate development for the last ten
years. Both banks have agreed to renew the company’s lines of
credit into 2010 on substantially the same terms, except for a $1 million
reduction in the maximum amount, reducing the total lines available to $13.4
million. We do not expect the change to have any significant impact
on the company’s real estate operations. Additionally, approximately
$2.2 million of the current liabilities is owed to affiliates who have
previously advanced funds for working capital and are not expected to demand
repayment until the company’s liquidity position improves.
The
company expects profits from its Barbados affiliate in 2009, but expects losses
from its domestic operations. The profits in Barbados are projected
to be used to repay bank loans and/or to be reinvested in continuing development
of the Apes Hill property and accumulated profits are not expected to be
available for distribution to the owners until 2010 or 2011. To
reduce the anticipated 2009 cash flow shortfall from domestic operations, the
company has reduced operating expenses, including reductions in personnel and,
effective April 1, 2009, is deferring payment of 20% of certain company
executives’ salaries until cash is available to pay the deferred
amounts. Current staffing levels remain adequate to service
additional projects that the company is pursuing. To meet the
remaining cash flow shortfall, the company has applied for new lines of credit
from banks operating in the Caribbean and expects funding from those banks
before additional funds are required to pay 2009 operating costs; however, there
is no guarantee that such commitments and funding will be
received. If such loans are not received, the company could be
required to make further reductions in personnel and to liquidate real estate or
other assets at prices less than would be expected under normal operating
conditions. The Condensed Consolidated Financial Statements do not
reflect any adjustments that might result from the outcome of these
uncertainties.
Landmark
Land Company, Inc.
Notes
to Condensed Consolidated Financial Statements
3. Earnings
Per Share
Earnings
per share (EPS) are computed using weighted average number of common shares
outstanding during the year. Diluted earnings per share reflect the
common stock options granted to employees, directors and legal counsel in 2006
and 2007. The following is a reconciliation of the numerators and
denominators used in the calculation of earnings per share:
|
|
|
Three
Months Ended March 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
Net
(loss) income
|
|
$
|
(1,801,630
|
)
|
|
$
|
4,321,212
|
|
|
Less: Preferred
dividends
|
|
|
(50,000
|
)
|
|
|
(25,000
|
)
|
|
Net
(loss) income available to common stockholders
|
|
$
|
(1,851,630
|
)
|
|
$
|
4,296,212
|
|
|
Weighted
average common shares outstanding
|
|
|
7,567,530
|
|
|
|
7,567,530
|
|
|
Incremental
shares from assumed exercise of dilutive options
|
|
|
-
|
|
|
|
-
|
|
|
Diluted
weighted average common shares outstanding
|
|
|
7,567,530
|
|
|
|
7,567,530
|
|
|
Basic
(loss) income per common share
|
|
$
|
(0.24
|
)
|
|
$
|
0.57
|
|
|
Diluted
(loss) income per common share
|
|
$
|
(0.24
|
)
|
|
$
|
0.57
|
|
The
dilutive effect of the employee stock options and directors’ options is reported
using the treasury stock method.
4. Stock
Option Plans
The 2006
Landmark Land Company, Inc. Incentive Stock Option Plan (“Plan”) was adopted by
the Board of Directors on April 29, 2006 and approved by the shareholders on
November 18, 2006. Generally, options must be granted within ten
years of the plan adoption date, vest five years from the date of grant, and be
exercised within five years from the date of vesting.
A summary
of options issued to employees under the company’s incentive stock option plan
as of March 31, 2009, and changes during the three months then ended is
presented below:
|
Options
|
|
Shares
|
|
Weighted-Average
Grant-Date
Fair
Value
|
|
Outstanding
at January 1, 2009
|
|
606,000
|
|
$0.65
|
|
Granted
|
|
-
|
|
-
|
|
Vested
|
|
-
|
|
-
|
|
Forfeited
|
|
-
|
|
-
|
|
Outstanding
at March 31, 2009
|
|
606,000
|
|
$0.65
|
|
Exercisable
at March 31, 2009
|
|
-
|
|
-
|
During
the first quarter of 2009, the company recognized share-based compensation costs
in the amount of $14,000. As of March 31, 2009, there was $175,000 of
total unrecognized compensation costs related to non-vested share-based
compensation arrangements granted under the plan. That cost is
expected to be recognized over the remaining 3.7 years vesting period for
outstanding grants under the plan.
The
company has also entered into agreements with its outside directors and legal
counsel under which it granted options to purchase the company’s common
shares. Options to purchase a total of 300,000 shares have been
granted under these agreements with an exercise price equal to the fair market
value at the time of grant. These options vest immediately and expire
five years from the date of grant.
Landmark
Land Company, Inc.
Notes
to Condensed Consolidated Financial Statements
A summary
of options issued under the agreements with directors and legal counsel as of
March 31, 2009, and changes during the three months then ended is presented
below:
|
Options
|
Shares
|
|
Weighted-Average
Exercise Price
|
|
Weighted-
Average Remaining Contractual Term
|
|
Aggregate
Intrinsic Value
|
|
Outstanding
at January 1, 2009
|
300,000
|
|
$2.23
|
|
|
|
|
|
Granted
|
-
|
|
-
|
|
|
|
|
|
Exercised
|
-
|
|
-
|
|
|
|
|
|
Forfeited
or expired
|
-
|
|
-
|
|
|
|
|
|
Outstanding
at March 31, 2009
|
300,000
|
|
$2.23
|
|
2.4
years
|
|
-
|
|
Exercisable
at March 31, 2009
|
300,000
|
|
$2.23
|
|
2.4
years
|
|
-
|
There was
no related unrecognized cost related to the directors and legal counsel options
as of March 31, 2009.
5. Reclassifications
Certain
reclassifications have been made in the 2008 financial statements to conform to
the 2009 presentation. These changes had no effect on net
income.
6. Commitments
The
company’s subsidiary, South Padre, provides a one-year latent defects warranty
and a ten-year structural warranty on the houses it builds. The
accompanying financial statements include a provision for warranty expense
calculated as approximately .5% of gross house sales. The summary of
warranty accruals for the first quarter of 2009 and 2008 follows:
|
|
|
2009
|
|
|
2008
|
|
|
Warranty
accrual balance January 1,
|
|
$
|
90,897
|
|
|
$
|
132,165
|
|
|
Provision
for warranty
|
|
|
-
|
|
|
|
6,525
|
|
|
Payments
|
|
|
(12,666
|
)
|
|
|
(13,999
|
)
|
|
Warranty
accrual balance March 31,
|
|
$
|
78,231
|
|
|
$
|
124,691
|
|
7. Income
Taxes
The
company reported a net loss before income taxes of $1.8 million for the
three-month period ended March 31, 2009. The provision for federal and state
income taxes totals $5,700 and is comprised of estimated state taxes of
$5,700. The deferred tax benefit generated by the current period loss
was offset by an increase in the deferred tax asset valuation allowance in the
amount of $0.6 million.
It should
be noted that the estimated net future benefit available to the company from all
its deferred tax positions is approximately $48.4 million at March 31, 2009;
however, realization of that benefit is dependent on the company’s ability to
generate taxable income in the future. Based on a current evaluation
of historical and prospective earnings, the company has increased the deferred
tax asset valuation allowance by approximately $0.6 million to a balance of $44
million, reducing the net tax benefit to $4.4 million as of March 31,
2009.
The
company had no material unrecognized tax benefits at March 31, 2009, nor does it
expect any significant change in that status during the next 12
months. No accrued interest or penalties on uncertain tax positions
have been included on the statements of operations or the statement of financial
condition as of the date of implementation. Should the company adopt
tax positions for which it would be appropriate to accrue interest and
penalties, such costs would be reflected in the tax expense for the period in
which such costs accrued. The company is subject to U.S. federal
income tax and to several state and foreign jurisdictions. Returns
filed for tax periods ending after December 31, 2004 are still open to
examination by those relevant taxing authorities.
Landmark
Land Company, Inc.
Notes
to Condensed Consolidated Financial Statements
8.
Segment Information
The
company’s operations are comprised of four segments – real estate, golf,
management services, and corporate investments and
administration. The following table summarizes the three months ended
March 31, 2009 and 2008 operations by segment:
|
|
|
Three
Months Ended March 31, 2009
|
|
|
|
Real
Estate
|
|
|
Golf
|
|
|
Management
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
449,479
|
|
|
$
|
624,923
|
|
|
$
|
901,427
|
|
|
$
|
-
|
|
|
$
|
1,975,829
|
|
|
Costs
of revenue
|
|
|
(618,961
|
)
|
|
|
(607,476
|
)
|
|
|
(1,575,543
|
)
|
|
|
-
|
|
|
|
(2,801,980
|
)
|
|
Depreciation
and amortization
|
|
|
(15,531
|
)
|
|
|
(36,086
|
)
|
|
|
(7,131
|
)
|
|
|
(101,643
|
)
|
|
|
(160,391
|
)
|
|
Operating (loss)
|
|
|
(185,013
|
)
|
|
|
(18,639
|
)
|
|
|
(681,247
|
)
|
|
|
(101,643
|
)
|
|
|
(986,542
|
)
|
|
General
and administrative
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(260,376
|
)
|
|
|
(260,376
|
)
|
|
Other (expenses)
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(549,012
|
)
|
|
|
(549,012
|
)
|
|
Federal
& state income taxes
|
|
|
60,492
|
|
|
|
6,094
|
|
|
|
222,742
|
|
|
|
(295,028
|
)
|
|
|
(5,700
|
)
|
|
Net (loss)
|
|
$
|
(124,521
|
)
|
|
$
|
(12,545
|
)
|
|
$
|
(458,505
|
)
|
|
$
|
(1,206,059
|
)
|
|
$
|
(1,801,630
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived
assets
|
|
$
|
17,384,381
|
|
|
$
|
1,542,553
|
|
|
$
|
1,984,816
|
|
|
$
|
23,718,066
|
|
|
$
|
44,629,816
|
|
|
Other
assets
|
|
|
493,906
|
|
|
|
272,847
|
|
|
|
918,247
|
|
|
|
85,930
|
|
|
|
1,770,930
|
|
|
Total
assets
|
|
$
|
17,878,287
|
|
|
$
|
1,815,400
|
|
|
$
|
2,903,063
|
|
|
$
|
23,803,996
|
|
|
$
|
46,400,746
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three
Months Ended March 31, 2008
|
|
|
|
Real
Estate
|
|
|
Golf
|
|
|
Management
|
|
|
Corporate
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenue
|
|
$
|
1,812,146
|
|
|
$
|
623,128
|
|
|
$
|
1,507,047
|
|
|
$
|
-
|
|
|
$
|
3,942,321
|
|
|
Costs
of revenue
|
|
|
(1,706,439
|
)
|
|
|
(575,357
|
)
|
|
|
(1,451,725
|
)
|
|
|
-
|
|
|
|
(3,733,521
|
)
|
|
Depreciation
and amortization
|
|
|
(7,639
|
)
|
|
|
(30,699
|
)
|
|
|
(44,345
|
)
|
|
|
(101,643
|
)
|
|
|
(184,326
|
)
|
|
Operating
income (loss)
|
|
|
98,068
|
|
|
|
17,072
|
|
|
|
10,977
|
|
|
|
(101,643
|
)
|
|
|
24,474
|
|
|
General
and administrative
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
(589,802
|
)
|
|
|
(589,802
|
)
|
|
Other
income
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
5,159,972
|
|
|
|
5,159,972
|
|
|
Federal
& state income taxes
|
|
|
(5,836
|
)
|
|
|
(1,016
|
)
|
|
|
(653
|
)
|
|
|
(265,927
|
)
|
|
|
(273,432
|
)
|
|
Net
income
|
|
$
|
92,232
|
|
|
$
|
16,056
|
|
|
$
|
10,324
|
|
|
$
|
4,202,600
|
|
|
$
|
4,321,212
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Long-lived
assets
|
|
$
|
14,726,152
|
|
|
$
|
1,055,045
|
|
|
$
|
3,736,820
|
|
|
$
|
17,737,729
|
|
|
$
|
37,255,746
|
|
|
Other
assets
|
|
|
785,198
|
|
|
|
414,552
|
|
|
|
692,472
|
|
|
|
3,619,878
|
|
|
|
5,512,100
|
|
|
Total
assets
|
|
$
|
15,511,350
|
|
|
$
|
1,469,597
|
|
|
$
|
4,429,292
|
|
|
$
|
21,357,607
|
|
|
$
|
42,767,846
|
|
Landmark
Land Company, Inc.
Notes
to Condensed Consolidated Financial Statements
9.
Recent Accounting Pronouncements
In
December 2008, the FASB issued FSP No. FAS 132(R)-1,
Employers’ Disclosures about
Postretirement Benefit Plan Assets
. FSP No. FAS 132(R)-1 amends SFAS
No. 132(R),
Employers’
Disclosures about Pensions and Other Postretirement Benefits
, to require
additional disclosures about plan assets held in an employer’s defined benefit
pension or other postretirement plan, to provide users of financial statements
with an understanding of (i) how investment allocation decisions are made,
including the factors that are pertinent to an understanding of investment
policies and strategies, (ii) the major categories of plan assets,
(iii) the inputs and valuation techniques used to measure the fair value of
plan assets including the level within the fair value hierarchy, using the
guidance in SFAS No. 157, and (iv) significant concentrations of risk
within plan assets. FSP No. FAS 132(R)-1 is effective for financial statements
issued for fiscal years ending after December 15, 2009. The company does
not expect the adoption of FSP No. FAS 132(R)-1 to have a significant impact on
its financial position, results of operations, or cash flows.
In April
2009, the FASB issued FSP No. FAS 157-4,
Determining Fair Value When the
Volume and Level of Activity for the Asset or the Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly
. FSP No. FAS
157-4 amends SFAS No. 157 to provide additional guidance on
(i) estimating fair value when the volume and level of activity for an
asset or liability have significantly decreased in relation to normal market
activity for the asset or liability, and (ii) circumstances that may
indicate that a transaction is not orderly. FSP No. FAS 157-4 also requires
additional disclosures about fair value measurements in interim and annual
reporting periods. FSP No. FAS 157-4 is effective for interim and annual
reporting periods ending after June 15, 2009. The company does not
expect the adoption of FSP No. FAS 157-4 to have a significant impact on its
financial position, results of operations, or cash flows.
In April
2009, the FASB issued FSP No. FAS 115-2 and FAS 124-2,
Recognition and Presentation of
Other-Than-Temporary Impairme
nts (“FSP No. FAS 115-2”). FSP No. FAS 115-2
provides additional guidance on the timing of impairment recognition and greater
clarity about the credit and noncredit components of impaired debt securities
that are not expected to be sold. FSP No. FAS 115-2 also requires additional
disclosures about impairments in interim and annual reporting periods. FSP No.
FAS 115-2 is effective for interim and annual reporting periods ending after
June 15, 2009. The company does not expect the adoption of FSP No. FAS
115-2 to have a significant impact on its financial position, results of
operations, or cash flows.
In April
2009, the FASB issued FSP No. FAS 107-1 and APB 28-1,
Interim Disclosures about Fair
Value of Financial Instruments.
FSP No. FAS 107-1 and APB 28-1 amends
SFAS No. 107,
Disclosures
about Fair Value of Financial Instruments,
to require disclosures about
fair value of financial instruments in interim as well as in annual financial
statements. This FSP also amends Accounting Principles Board (“APB”) Opinion
No. 28,
Interim Financial
Reporting
, to require those disclosures in all interim financial
statements. FSP No. FAS 107-1 and APB 28-1 is effective for interim reporting
periods ending after June 15, 2009. The company does not expect
the adoption of FSP No. FAS 107-1 and APB 28-1 to have a significant impact on
its financial position, results of operations, or cash flows.
Item
2.
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
Overview
The
company, through subsidiaries, owns and manages for others, interests in real
estate and golf oriented real estate developments. After a long
period of relative dormancy, the company acquired its first operating companies
in 2003 and has continued to rebuild its business through acquisitions and
expansion. The company’s consolidated statements of operations and
cash flows for the three months ended March 31, 2009 and 2008 include the
operations of the company and its subsidiaries identified in Note 1 to the
Condensed Consolidated Financial Statements. Year to year comparisons should be
analyzed carefully and historical results should not be assumed to be indicative
of the company’s future operations.
Management’s
analysis of the company’s operations during the first quarters of 2009 and 2008
and comments on its current financial condition are as follows:
Liquidity
and capital resources
Liquidity
needs for the final three
quarters of 2009
are expected to exceed amounts available or
committed to be available at March 31, 2009. The company’s Condensed
Consolidated Balance Sheet at March 31, 2009 reports current assets totaling
$1.8 million and current liabilities totaling $18.2 million for a $16.4 million
excess of current liabilities over current assets. Approximately
$13.2 million of the current liabilities is due to two Texas banks that have
funded the company’s South Padre real estate development for the last ten
years. Both banks have agreed to renew the company’s lines of
credit into 2010 on substantially the same terms, except for a $1 million
reduction in the maximum amount, reducing the total lines available to $13.4
million. We do not expect the change to have any significant impact
on the company’s real estate operations. Additionally, approximately
$2.2 million of the current liabilities is owed to affiliates who have
previously advanced funds for working capital and are not expected to demand
repayment until the company’s liquidity position improves.
The
company expects profits from its Barbados affiliate in 2009, but expects losses
from its domestic operations. The profits in Barbados are projected
to be used to repay bank loans and/or to be reinvested in continuing development
of the Apes Hill property and accumulated profits are not expected to be
available for distribution to the owners until 2010 or 2011. To
reduce the anticipated 2009 cash flow shortfall from domestic operations, the
company has reduced operating expenses, including reductions in personnel and,
effective April 1, 2009, is deferring payment of 20% of certain company
executives’ salaries until cash is available to pay the deferred
amounts. Current staffing levels remain adequate to service
additional projects that the company is pursuing. To meet the
remaining cash flow shortfall, the company has applied for new lines of credit
from banks operating in the Caribbean and expects funding from those banks
before additional funds are required to pay 2009 operating costs; however, there
is no guarantee that such commitments and funding will be
received. If such loans are not received, the company could be
required to make further reductions in personnel and to liquidate real estate or
other assets at prices less than would be expected under normal operating
conditions. The Consolidated Financial Statements do not reflect any
adjustments that might result from the outcome of these
uncertainties.
Current assets
total $1.8
million at March 31, 2009 compared to $2.2 million at December 31, 2008,
reflecting the reduction of approximately $0.5 million in receivables from
affiliates and use of most of the cash collected to pay operating
expenses.
Real estate and golf management
contract rights acquired
remained unchanged during the first three months
of 2009. The only contract in this asset group with significant
unamortized costs relates to a property in the Hudson Valley of New York
state. While no fees are currently being realized from that contract
as government approvals are pending for the proposed development, the company
expects to recover the remaining unamortized costs from future construction
supervision fees and profit incentive fees.
Real estate
held for either
development or sale totaled $16 million at March 31, 2009 compared to $15.5
million at December 31, 2008, reflecting, primarily, completion of the new
Hacienda model and 2 spec units.
Property and equipment
decreased approximately $161,000, reflecting depreciation recorded in the
first quarter of 2009.
Other assets
are comprised
primarily of
investments in
unconsolidated affiliates
which decreased approximately $391,000 in the
first quarter, reflecting losses recognized in Apes Hill in Barbados, and the
deferred tax assets
of
$4.4 million which is discussed in Note 7.
Liabilities
totaled $22.9
million at March 31, 2009 – a net increase of approximately $1.3 million from
December 31, 2008. The increase results primarily from $1.0 million
borrowed from an affiliate for working capital.
The
company has no
off-balance
sheet arrangements
that have or are reasonably likely to have a material
current or future effect on the company’s financial condition, changes in
financial condition, revenues or expenses, results of operations, liquidity,
capital expenditures, or capital resources.
Stockholders’ equity
decreased by approximately $1.8 million in the first three months of
2009, reflecting the company’s net loss of $1.8 million and $50,000 of dividends
declared on preferred stock, partially offset by the benefit of employee stock
option compensation in the amount of $14,000, and the unrealized gain from
currency translation in the amount of $3,000.
There
were no commitments regarding purchase or sale of the company's stock at March
31, 2009; however, see Note 4 to the Condensed Consolidated Financial Statements
regarding stock options outstanding.
Net
income
The
company reported a net loss of $1.8 million for the first quarter of
2009. In the comparable period of 2008, the company reported net
income of $4.3 million. The significant decrease results primarily
from lower real estate sales in the Barbados development and in South
Padre.
Revenue
Real estate sales
at South
Padre totaled 3 lots and no houses during the first quarter of 2009, generating
$134,000 in revenue. In the same period of 2008, South Padre reported
2 lot sales and 6 house sales generating $1.6 million in revenue. The
decrease in real estate sales reflects the dramatic slowdown in economic
activity during the current prolonged recession.
Real estate services revenue
includes fees and commissions earned on rental pool operations and landscape
services at South Padre. Expenses related to these services are
included in real estate operating expenses. Revenues and expenses for
the first quarter of 2008 have been reclassified for comparability, with no
effect on reported net income.
Golf
related revenue,
including food and beverage sold in the golf restaurant, totaled $0.6 million
during the first quarter of 2009. Paid golf rounds totaled
10,900. In the same period of 2008 South Padre reported $0.6 million
in golf revenue from 11,900 rounds played. Golf revenue during the
first quarter of 2009 includes approximately $98,000 of food and beverage sales
from Lake Presidential Beverage Company, Inc., which began operations in May
2008.
The golf
course is a public, daily fee course, but is operated primarily as an amenity
for the surrounding real estate development. The company anticipates
phased development of the land surrounding the golf course to meet future demand
in this long-term development property. While the company anticipates
a good long-term real estate market and increases in golf play as more golfers
move into the residential community, the current depressed real estate sales are
evidence that buyer psychology and other factors outside management’s control
often affect golf and real estate operations.
Management and consulting
agreements generated $393,000 in fee revenue in the quarter ended March 31, 2009
compared to $1.1 million during the same period of 2008. The company
was also reimbursed for out-of-pocket expenses related to its management
agreements during the three-month period in the amount of $508,000 in 2009 and
$401,000 in 2008. The decreased fees reflect reduced design and
planning fees earned in Barbados and consulting fees recognized in
Spain. The higher reimbursements reflect primarily, increased costs
paid on behalf of Apes Hill Development, the company’s unconsolidated affiliate
in Barbados.
Costs
of Revenues
Cost of real estate sold,
including land, development, construction and closing costs, totaled
$76,000 or 57% of real estate sales in the first quarter of
2009. During the same period of 2008 South Padre reported costs of
real estate sold totaling $1.0 million or 64% of real estate
sales. Gross profit margins differ among various subdivision
lot developments and various house models constructed; consequently, the gross
profit margin realized in any reporting period will vary according to the mix of
products sold during the period.
Real estate operating expenses
not included in
cost of
real estate sold
totaled $0.5 million for the first quarter of 2009 and
$0.7 million for the first quarter of 2008. The decrease reflects
primarily payroll cost savings resulting from fewer employees and reduction in
advertising and other marketing costs in 2009.
Cost of golf merchandise sold and
food and beverage sold
in the three-month period ending March 31, 2009
totaled $124,000 (50% of sales) and $101,000 (54% of sales) for the same period
of 2008.
Golf operating expenses
totaled $483,000 in the first quarter of 2009 compared to $474,000 in the first
quarter of 2008.
Management and consulting payroll
and related expenses
remained relatively unchanged at $1.0 million in the
three-month periods ending March 31, 2009 and 2008.
Depreciation and amortization
included in the company’s consolidated statement of operations was $160,000 in
the three-month period ending March 31, 2009. In the same period of
2008, the company reported $184,000.
General,
administrative and other expense
General, administrative and other
expenses
totaled $260,000 in the first quarter 2009 compared to $590,000
in the same period of 2008, reflecting substantial reductions in airplane
operating cost. The plane flew approximately half as many hours in
the first quarter of 2009 as in the first quarter of 2008 and a higher
percentage of its costs were reimbursed by clients and affiliates.
Other
income and expense
Equity in profit ( loss) of
unconsolidated affiliates
reflects the company’s share of the operating
profits or losses of the following unconsolidated affiliates:
|
|
|
|
|
|
Three
Months Ended
March
31,
|
|
|
|
|
Ownership
|
|
|
2009
|
|
|
2008
|
|
|
Apes
Hill Development SRL
|
|
|
33%
|
|
|
$
|
(389,904
|
)
|
|
$
|
5,492,824
|
|
|
Landmark
Developments of Spain, S.L.
|
|
|
50%
|
|
|
$
|
(7,216
|
)
|
|
$
|
(190,343
|
)
|
|
|
|
|
|
|
|
$
|
(397,120
|
)
|
|
$
|
5,302,481
|
|
Interest income
decreased
from $34,000 in the first quarter of 2008 to $310 in the same period this year,
reflecting lower cash balances invested in overnight funds.
Interest expense
decreased
from $177,000 in the first quarter of 2008 to $152,000 in the same period this
year due to lower rates.
Federal
and state income taxes
The
company reported a net loss before income taxes of $1.8 million for the
three-month period ended March 31, 2009. The provision for federal
and state income taxes totals $5,700 and is described in Note 7. The
deferred tax benefit generated in the current period was offset by a $0.6
million increase in the deferred tax asset valuation
allowance. During the first quarter of 2008, the company reported
income before taxes in the amount of $4.6 million with a provision for income
taxes in the amount of $273,000.
Critical
accounting estimates
Future realization of the significant
deferred tax asset is dependent on the company’s ability to generate taxable
income in future years. The company has established a valuation
allowance to reduce the carrying value of the asset to an amount likely to be
realized. While estimates of future income are always uncertain, the
diversification of the company’s investments into foreign real estate
affiliates makes current estimates even more challenging. Realization
of the tax asset will be significantly affected by, among other factors, whether
the new investments are profitable and whether or when those profits are taxable
in the U.S. Any significant change in the various factors affecting
the company’s expectations of future taxable earnings could require a change in
the valuation allowance. Any change in the valuation allowance would be
reflected in the company’s operating statement for the period such change is
recognized.
Item 3 of this report on Form 10-Q is not
applicable.
Item
4.
Controls
and Procedures
The
company maintains disclosure controls and procedures designed to ensure that
information required to be disclosed in reports filed under the Securities
Exchange Act of 1934 (“Exchange Act”) is recorded, processed, summarized and
reported within the specified time periods. The company’s Chief
Executive Officer and its Chief Financial Officer (collectively, the “Certifying
Officers”) are responsible for maintaining disclosure controls for the
company. The controls and procedures established by the company are
designed to provide reasonable assurance that information required to be
disclosed by the issuer in the reports that it files or submits under the
Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the Commission’s rules and forms.
As of the
end of the period covered by this report, the Certifying Officers evaluated the
effectiveness of the company’s disclosure controls and
procedures. Based on the evaluation, the Certifying Officers
concluded that as of March 31, 2009, the company’s disclosure controls and
procedures were effective to provide reasonable assurance that information
required to be disclosed by us in the reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported, within the time
periods specified in the applicable rules and forms, and that it is accumulated
and communicated to our management, including the Certifying Officers, as
appropriate to allow timely decisions regarding required
disclosure.
The
Certifying Officers have also concluded that there was no change in the
company’s internal controls over financial reporting identified in connection
with the evaluation that occurred during the company’s first fiscal quarter that
has materially affected, or is reasonably likely to materially affect, the
company’s internal control over financial reporting.
PART
II – OTHER INFORMATION
Item
1.
Legal
Proceedings
The
company is not currently involved in any pending legal proceedings, except for
routine litigation that is incidental to the company's business.
Items
1A through 5 of this report on Form 10-Q are not
applicable.
Item
6.
Exhibits
|
|
31.1*
|
Certification
of the Chief Executive Officer filed pursuant to Section 302 of the
Sarbanes-Oxley Act of 2004
|
|
|
31.2*
|
Certification
of the Chief Financial Officer filed pursuant to Section 302 of the
Sarbanes-Oxley Act of 2004
|
|
|
32.1*
|
Certification
of the Chief Executive Officer filed pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2004
|
|
|
32.2*
|
Certification
of the Chief Financial Officer filed pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2004
|
|
|
__________________________
|
Signatures
and Certifications of the Chief Executive Officer and the Chief Financial
Officer of the Company
The
following pages include the Signatures page for this report and Exhibits
containing the Certifications of the Chief Executive Officer and the Chief
Financial Officer of the company.
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.
|
LANDMARK
LAND COMPANY, INC.
|
|
|
|
|
|
|
|
/s/ Gerald G. Barton
|
|
Gerald
G. Barton
|
|
Chairman
and Chief Executive Officer
|
|
May
14, 2009
|
|
LANDMARK
LAND COMPANY, INC.
|
|
|
|
|
|
|
|
/s/ Joe V. Olree
|
|
Joe
V. Olree
|
|
Senior
Vice President and Chief Financial Officer
|
|
May
14, 2009
|
LANDMARK
LAND COMPANY, INC.
FORM
10-Q
EXHIBIT
INDEX
Exhibit
Number
|
31.1*
|
Certification
of the Chief Executive Officer filed pursuant to Section 302 of the
Sarbanes-Oxley Act of 2004
|
|
|
|
|
31.2*
|
Certification
of the Chief Financial Officer filed pursuant to Section 302 of the
Sarbanes-Oxley Act of 2004
|
|
|
|
|
32.1*
|
Certification
of the Chief Executive Officer filed pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2004
|
|
|
|
|
32.2*
|
Certification
of the Chief Financial Officer filed pursuant to 18 U.S.C. Section 1350,
as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2004
|
______________________
* Filed
herewith