10-Q 1 hg10q601.txt 10Q601 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549-1004 FORM 10-Q Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities Exchange Act of 1934 For the Quarterly Period Ended June 30, 2001 Commission File Number 0-7205 HOLIDAY-GULF HOMES, INC. (Exact name of registrant as specified in its charter) Minnesota 41-0916277 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 4804 Mile Stretch Drive, Holiday, Florida 34690 (Address of principal executive office) (Zip Code) Registrant's telephone number, including area code (727) 937-3293 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 X NO Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of June 30, 2001. Common Stock, $.01 Par Value - 1,903,853 shares as of June 30, 2001. INDEX HOLIDAY-GULF HOMES, INC. AND SUBSIDIARIES PAGE PART 1. - FINANCIAL INFORMATION NUMBER Item 1. Financial Statements: (Unaudited) Consolidated Balance Sheets - June 30, 2001 and December 31, 2000........................................... 3-4 Consolidated Statements of Operations - For the three months ended June 30, 2001 and 2000 and for the six months ended June 30, 2000 and 1999...................... 5-6 Consolidated Statements of Shareholders' Equity - For the year ended December 31, 2000 and the six months ended June 30, 2001............................... 7 Consolidated Statements of Cash Flows - For the six months ended June 30, 2001 and 2000.......................... 8 Notes to Consolidated Financial Statements..................... 9-15 Accountants' Report............................................ 16 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations..........................17-18 PART II. - OTHER INFORMATION Item 1. Legal Proceedings............................................. 19 Item 2. Changes in Securities......................................... 19 Item 3. Defaults upon Senior Securities............................... 19 Item 4. Submission of Matters to a Vote of Security Holders........... 19 Item 5. Other Information............................................. 19 Item 6. Exhibits and Reports on Form 8-K.............................. 20 SIGNATURES 21 PART 1. FINANCIAL INFORMATION HOLIDAY-GULF HOMES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

HOLIDAY-GULF HOMES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

HOLIDAY-GULF HOMES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS

HOLIDAY-GULF HOMES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY FOR THE YEAR ENDED DECEMBER 31, 2000 AND THE SIX MONTHS ENDED JUNE 30, 2001

HOLIDAY-GULF HOMES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS

HOLIDAY-GULF HOMES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Organization-- The Company consists of two utility companies and a land development company. These companies are located in Pasco County, Florida. The utility companies generate revenues by selling water, garbage and streetlight services. These companies bill customers on a monthly basis for these services. The utility companies contract with outside parties to provide the garbage services. The rates charged by the utility companies are set by the Florida Public Service Commission. The land development company owns an office building/warehouse rental operation. There are no plans in the future to develop anything. Principles of Consolidation-- The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. Basis of Presentation-- The accompanying unaudited consolidated financial statements have been prepared in accordance with generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the six month period ended June 30, 2001 are not necessarily indicative of the results that may be expected for the year ended December 31, 2001. 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 year ended December 31, 2000. Recognition of Income from Utility Operations-- The majority of the Company's revenues are generated by two Utility Companies. These Companies recognize revenues on a monthly basis. The use is based on actual meter readings by an outside independent contractor. The independent contractor also provides services for other utility companies in the area. The independent contractors fees are based on a set amount per customer plus any additional repairs. Since the meter reading is not done on the last day of the month, there is some unbilled revenue not recorded. HOLIDAY-GULF HOMES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED) Depreciation-- Depreciation included in the accompanying financial statements has been provided by the straight-line method at rates calculated to amortize the cost of the assets over their estimated useful lives as follows: YEARS Utility Plant and Equipment 5 - 40 Building and Improvements 5 - 30 Maintenance and repairs of property and equipment are charged to expense as incurred, whereas renewals and betterments are capitalized. When properties are replaced, retired, or otherwise disposed of, the cost and related accumulated depreciation are removed from the accounts. Any gain or loss is credited or charged to operations in the year of disposal. Amortization-- The Contribution in Aide of Construction (CIAC) costs are being amortized over a period of sixteen years using the straight-line method. CIAC represents $1,325 received in 1995 from a utility customer to help pay for the cost of the new asset. Cash and Cash Equivalents-- For the purpose of the statement of cash flows, cash includes cash on hand, cash in checking and money market accounts, and Certificates of Deposit.The company considers all certificates of deposit with a maturity of one year or less as a current cash or cash equivalent. Accounts Receivable-- The accounts receivable represent amounts due from customers for monthly streetlight, garbage and water service. Based on managements review of accounts receivable, no allowance for doubtful accounts is considered necessary. Concentration of Credit Risk-- Management does not believe a credit risk for accounts receivable exists because the amounts are due from a large number of customers for very small amounts, and past performance has shown the accounts receivable will be collected. HOLIDAY-GULF HOMES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (1) - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED) Deferred Income-- Deferred income represents monies prepaid by customers which have not been earned. Allocation of Dividends-- To the extent dividends were paid in excess of current years earnings and profits, they have been allocated against paid in capital. Income Taxes-- The Company and its subsidiaries file consolidated Federal and State Income Tax Returns. Deferred income taxes are provided on temporary differences between book and tax income, arising primarily from the use of different methods of depreciation, valuing inventory and providing an allowance for doubtful accounts and notes receivable for financial statement purposes. Deferred income tax benefits are recognized for operating losses, if available, to offset future federal income taxes. An allowance is provided if it is more likely than not that the Company will not realize the benefits of a deferred tax asset. Earnings Per Share-- Earnings per share of Common Stock is computed based upon weighted average number of shares outstanding for the period (1,903,853 shares in 2000 and for the first six months of 2001). (2) - LONG-TERM DEBT: There was no debt as of June 30, 2001 or December 31, 2000. (3) - STOCK OPTION PLAN: The Company has adopted a qualified stock option plan whereby options may be granted to key employees to purchase a maximum 50,000 shares of the Company's common stock at not less than 10% of the fair market value of the shares at date of grant. The options are exercisable in installments of not more than 20% of the shares covered thereby during any one-year period, subject to the right of cumulation. The options expire five years from the date of grant. No options have been granted under this plan. HOLIDAY-GULF HOMES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (4) - PROPERTY AND EQUIPMENT: The property and equipment accounts consisted of the following at June 30, 2001 and December 31, 2000: June 30, December 31, 2001 2000 Land, Buildings, Office Equipment and Furniture $ 76,973 $ 76,432 Water, Plant and Equipment 324,179 322,987 CIAC, Net of Amortization (828) (869) ------------ ---------- Total Property and Equipment $ 400,324 $ 398,550 Less: Accumulated Depreciation (321,738) (316,852) ------------ ---------- Net Property and Equipment $ 78,586 $ 81,698 ============ ========== (5) - RELATED PARTY TRANSACTIONS: There were no related party transactions during the six months ended June 30, 2001 and 2000. (6) - LEASE AND LEASE COMMITMENTS: The Company is leasing office space in Knollwood Plaza under a three- year lease expiring in October, 2002. The lease is $530 per month. The rent paid as of June 30, 2001 and 2000 was $3,180 and $3,180 respectively. The following is a schedule of future minimum lease payments: December 31, 2001 $ 3,180 December 31, 2002 5,300 -------- Total $ 8,480 ======== The Company owns an office/warehouse rental facility consisting of three tenants. Two have month to month leases. The other lease is a five-year lease which was renewed in June, 1995 and will expire June, 2000. The property is currently listed for rent or sale. HOLIDAY-GULF HOMES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (6) - LEASES AND LEASE COMMITMENTS: (CONTINUED) There are no payments under this lease. The rental real estate held for lease is located in New Port Richey Florida. The company's investment in this rental property is as follows at June 30, 2001: Warehouse and Office Building $ 29,323 Improvements 43,390 -------- $ 72,713 Less: Accumulated Depreciation (56,978) -------- $ 15,735 ======== (7) - INCOME TAXES: Deferred income taxes (benefits) are provided for certain income and expenses which are recognized in different periods for tax and financial reporting purposes. Sources of temporary differences and the resulting tax assets and liabilities are as follows: June 30, December 31, 2001 2000 Net Operating Loss Carryforwards $ 789 $ 6,752 --------- ---------- Applicable Tax Rate (15% Federal, 5.5% State) $ 160 $ 1,370 Valuation Allowance - - --------- ---------- Amount Per Balance Sheet $ 160 $ 1,370 ========= ========== HOLIDAY-GULF HOMES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (7) - INCOME TAXES: (CONTINUED) The provision (benefit) for income taxes consist of the following: June 30, December 31, 2001 2000 Current $ - $ - Deferred $ 160 $ 1,370 Income Tax Expense Consisted of the following: June 30, December 31, 2001 2000 Provision for income taxes: Federal Income Tax $ 1,087 $ 3,025 State Income Tax 123 885 Deferred Tax Benefit - (1,781) --------- --------- $ 1,210 $ 2,129 ========= ========= The reconciliation of income tax computed at the U.S. federal statutory tax rates (34%) to income tax expense for the six months ended June 30, 2001 and the year ended December 31, 2000 is: June 30, 2001 December 31, 2000 AMOUNT PERCENT AMOUNT PERCENT Tax at U.S. Statutory Rates $ 2,463 34.00 $ 6,940 34.00 Surtax exemption (1,376) (19.00) (4,137) (20.28) State income tax- net of federal tax benefits 123 1.70 885 4.34 Permanent differences and other - - 222 1.09 Deferred Tax Benefit - - (1,781) (8.71) -------- ------ -------- ------ $ 1,210 16.70 $ 2,129 10.44 ======== ====== ======== ====== HOLIDAY-GULF HOMES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (7) - INCOME TAXES: (CONTINUED) Operating Loss Carryforwards-- The Company has loss carryforwards at December 31, 2000 totaling $789 that may be offset against future taxable income. If not used, the carryforward will expire as follows: Year Year Originated Expired 1991 2006 $ 789 ----- $ 789 ===== (8) - DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS: The carrying value of cash, cash equivalents, receivables and payables approximate fair values. (9) - SEGMENT INFORMATION: Holiday Gulf Homes, Inc. operates two utility companies and a rental facility. The utility companies are reported as operating revenues and the rental property is reported as other income. Management has specified in the Consolidated Balance Sheets and Consolidated Statements of Income the breakdown of both the utility and rental properties. Disclosure of Segment Profit and Segment Assets: 6/30/01 2000 6/30/01 2000 6/30/01 2000 6/30/01 2000 Water Water Garbage Garbage Street Street Totals Totals Service Service Pick-Up Pick-Up Lights Lights Revenues 71,497 144,750 53,418 107,126 17,248 34,747 142,163 286,623 Depreciation 3,922 8,328 - - - - 3,922 8,328 & Amortization Segment Profit (442) (3,839) 9,536 21,920 8,217 19,146 17,311 37,227 Segment Assets 324,179 322,987 - - - - 324,179 322,987 Expenditures for Segment Assets 1,192 3,680 - - - - 1,192 3,680 ACCOUNTANTS' REPORT To the Board of Directors Holiday-Gulf Homes, Inc. and Subsidiaries Holiday, Florida We have reviewed the accompanying consolidated condensed balance sheets of Holiday-Gulf Homes, Inc. (a Minnesota corporation) and subsidiaries as of June 30, 2001 and the related consolidated condensed statements of operations for the three-month and six-month period ended June 30, 2001 and 2000, and the consolidated condensed statements of shareholders' equity for the period ended June 30, 2001 and the consolidated condensed statement of cash flows for the six-month periods ended June 30, 2001 and 2000. These consolidated condensed financial statements are the responsibility of the management of Holiday Gulf Homes, Inc.. We conducted our review in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the consolidated condensed financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our review, we are not aware of any material modifications that should be made to the accompanying June 30, 2001 consolidated condensed financial statements in order for them to be in conformity with generally accepted accounting principles. The financial statements for the year ended December 31, 2000, were audited by us, and we expressed an unqualified opinion on them in our report dated January 20, 2001, but we have not performed any auditing procedures since that date. ARNOLD AND CO., P.A. Ocala, Florida July 22, 2001 HOLIDAY-GULF HOMES, INC. AND SUBSIDIARIES Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations: RESULTS OF OPERATIONS: Utility operating revenues decreased 3.48% in the second quarter of 2001 to $71,468 down $2,574 from the second quarter of 2000. For the first six months utility operating revenues of $142,163 were down $2,878 or 1.98% lower than the same period in 2000. The decrease in revenues for the second quarter and year to date, are due primarily to an decrease in water usage. The gross profit percentages for the second quarter and year to date of 2001 compared to the same periods of the prior year were maintained due to the stability in the number of customers. General and administrative expenses in 2001 decreased, as a percentage of utility revenues due to a bonus given management in the 2000 year. General and administrative expenses as a percentage of utility revenues were approximately 36.64% and 34.18% for the three and six month periods ended June 30, 2001 as compared to 36.30% and 35.65% for the comparable periods of 2000. The loss from other operations increased 170.99% in the second quarter of 2001 to $(7,428), up $4,687 from the second quarter of 2000. For the first six months the loss from other operations of $(13,563) was $10,915 or 416.44% higher than the same period in 2000. The decrease in revenues is due primarily to a decrease in interest income and the loss of the office complex tenant. General and administrative expenses from other operations have increased as a percentage of income from other operations due to office complex warehouse expenses for repairs and maintenance, electric and the lack of a tenant in the complex. General and administrative expenses from other operations as a percentage of income from other operations were approximately 468.05% and 423.00% for the three and six month periods ended June 30, 2001 as compared to 121.06% and 107.12% for the comparable periods of 2000. Net income decreased 80.19% in the second quarter of 2001 to $1,241 down $5,024 over the second quarter of 2000. For the first six months, net income of $6,035 was $8,842 or 59.43% lower than the same period in 2000. The decrease in net income in the second quarter was due primarily to the loss of the tenant in the complex. HOLIDAY-GULF HOMES, INC. AND SUBSIDIARIES Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations: (Continued) LIQUIDITY AND SOURCES OF CAPITAL: The Company maintains 56.36% of its assets in cash and other current assets. At present there are no plans for expansion and no material repairs are anticipated for the utility companies. The company has been maintaining the water lines and meters on a regular basis. OTHER MATTERS: The Y2K Issue: The Company installed a new computer and software during the 1999 year. The Company is up and running on the new system and has not encountered any Y2K problems. PART II. OTHER INFORMATION HOLIDAY-GULF HOMES, INC. AND SUBSIDIARIES Item 1. Legal Proceedings. There were no reportable events for the quarter ended June 30, 2001 nor have there been any material developments during the quarter. Item 2. Changes in Securities. The rights of the holders of registered securities have not been materially modified, limited or qualified by the issuance or modification of any class of securities. There are no working capital restrictions or other limitations upon payment of dividends. Item 3. Defaults upon Senior Securities. There have been no defaults in the payment of principal, interest or any other material liabilities. Item 4. Submission of Matters to a Vote of Security Holders. (a) Annual Meeting of stockholders was held on June 24, 2000. (b) Elected directors and executive officers were: Linda Emerick - President and Director Thomas L. Burkett - Vice President and Director Ronnie L. Mohr - Secretary and Director Eileen Falla - Treasurer (c) Other matters voted upon and the number of affirmative votes and negative votes cast with respect to each such matter. None Item 5. Other Information. The Company declared and distributed a dividend of $.05 per share in February, 2000. The declared dividend required the use of $95,193 cash. PART II. OTHER INFORMATION, CONTINUED HOLIDAY-GULF HOMES, INC. AND SUBSIDIARIES Item 6. Exhibits and Reports on Form 8-K. DESCRIPTION (a) Exhibits Ex-27 (b) Report on Form 8-K None SIGNATURES HOLIDAY-GULF HOMES, INC. AND SUBSIDIARIES 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. HOLIDAY-GULF HOMES, INC. (Registrant) DATE: ___August 15, 2001__________ ___________________________________ LINDA EMERICK, PRESIDENT - PRINCIPAL FINANCIAL OFFICER

HOLIDAY GULF HOMES INC 10-Q