The InterGroup(INTG) - 2023 Q3 - Quarterly Report

PART I PART I - FINANCIAL INFORMATION This section presents the company's condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures. Item 1. Condensed Consolidated Financial Statements The company reported a net income of $752,000 for the nine months ended March 31, 2023, a significant turnaround from a prior-year net loss, driven by a 41% revenue increase to $44.6 million, primarily from hotel operations, while assets slightly decreased and liabilities remained stable Condensed Consolidated Balance Sheet Highlights | Balance Sheet Items | March 31, 2023 (unaudited) | June 30, 2022 | | :--- | :--- | :--- | | Total Assets | $124,889,000 | $126,046,000 | | Cash and cash equivalents | $6,670,000 | $14,367,000 | | Total Liabilities | $208,748,000 | $209,050,000 | | Total Shareholders' Deficit | ($83,859,000) | ($83,004,000) | Condensed Consolidated Statements of Operations Highlights | Metric | Three Months Ended Mar 31, 2023 | Three Months Ended Mar 31, 2022 | Nine Months Ended Mar 31, 2023 | Nine Months Ended Mar 31, 2022 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $14,362,000 | $10,458,000 | $44,623,000 | $31,593,000 | | Net Income (Loss) | ($614,000) | ($873,000) | $752,000 | ($6,022,000) | | Net Income (Loss) Attributable to InterGroup | ($356,000) | ($466,000) | $1,335,000 | ($4,630,000) | | Basic EPS | ($0.16) | ($0.21) | $0.60 | ($2.09) | Condensed Consolidated Statements of Cash Flows Highlights (Nine Months Ended March 31) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | ($2,427,000) | ($8,871,000) | | Net cash used in investing activities | ($3,921,000) | ($3,771,000) | | Net cash (used in) provided by financing activities | ($3,902,000) | $11,526,000 | | Net change in cash, cash equivalents, and restricted cash | ($10,250,000) | ($1,116,000) | Notes to the Condensed Consolidated Financial Statements These notes detail the company's structure, including its 75.6% ownership of Portsmouth Square, Inc., disclose liquidity challenges, revenue sources, segment performance, related party transactions, and a legal dispute over a pedestrian bridge removal - As of March 31, 2023, InterGroup owns approximately 75.6% of the outstanding common shares of Portsmouth Square, Inc., which operates the Hilton San Francisco Financial District[25] - The company is actively working to secure a new loan to replace its current first mortgage and mezzanine debt, which matures on January 1, 2024, and management anticipates a successful refinancing[36][75] Hotel Revenue Disaggregation (Nine Months Ended March 31) | Revenue Stream | 2023 | 2022 | | :--- | :--- | :--- | | Hotel rooms | $28,020,000 | $16,285,000 | | Food and beverage | $1,905,000 | $934,000 | | Garage | $2,148,000 | $2,352,000 | | Other operating departments | $559,000 | $214,000 | | Total hotel revenues | $32,632,000 | $19,785,000 | Segment Performance (Nine Months Ended March 31, 2023) | Segment | Revenues | Net Income (Loss) | | :--- | :--- | :--- | | Hotel Operations | $32,632,000 | ($639,000) | | Real Estate Operations | $11,991,000 | $3,319,000 | | Investment Transactions | $0 | $627,000 | | Corporate | $0 | ($2,555,000) | | Total | $44,623,000 | $752,000 | - Subsequent to March 31, 2023, the Company listed its St. Louis, Missouri property for sale[81] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes improved financial results to hospitality industry recovery, with hotel revenues up 65% year-over-year, leading to a net income turnaround, supported by gains on marketable securities and insurance recovery, while actively pursuing hotel debt refinancing - The company's business continues to be affected by the COVID-19 pandemic, but has seen a robust recovery in leisure demand and an acceleration in group and business transient demand through 2022, though a potential economic slowdown in 2023 poses a risk to this momentum[84] - The company is actively seeking to refinance its hotel's first mortgage and mezzanine debt, which matures on January 1, 2024, and management anticipates a successful outcome[117] - As of March 31, 2023, the company had cash, cash equivalents, and restricted cash of $13.1 million and net marketable securities of $16.1 million, with management believing its cash position is adequate to meet requirements for at least the next twelve months[112][118] Results of Operations For the nine months ended March 31, 2023, the company achieved a net income of $752,000, a significant improvement from a prior-year loss, primarily due to a 65% increase in hotel revenues and improved hotel performance metrics, supplemented by gains on marketable securities and insurance recovery Hotel Performance Metrics (Three Months Ended March 31) | Metric | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Average Daily Rate (ADR) | $234 | $149 | +$85 | | Average Occupancy % | 78% | 74% | +4% | | RevPAR | $183 | $110 | +$73 | Hotel Performance Metrics (Nine Months Ended March 31) | Metric | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Average Daily Rate (ADR) | $221 | $143 | +$78 | | Average Occupancy % | 85% | 76% | +9% | | RevPAR | $188 | $109 | +$79 | - For the nine months ended March 31, 2023, the company recorded a net gain on marketable securities of $1,440,000, compared to a net loss of $3,613,000 in the prior year period[104] - Real estate revenues for the nine-month period increased slightly to $12.0 million from $11.8 million, aided by a one-time $404,000 storm damage insurance claim[105] Marketable Securities As of March 31, 2023, the company's $17.0 million marketable securities portfolio is diversified across 11 equity positions, with significant allocations to REITs and U.S. Treasury notes, and a 30% holding in American Realty Investors, Inc Marketable Securities Portfolio Composition (March 31, 2023) | Industry Group | Fair Value | % of Total | | :--- | :--- | :--- | | REITs and real estate companies | $6,443,000 | 38.0% | | Treasury notes | $5,055,000 | 29.8% | | Financial services | $1,065,000 | 6.3% | | Technology | $1,139,000 | 6.7% | | Communications Services | $804,000 | 4.7% | | Other | $2,461,000 | 14.5% | | Total | $16,967,000 | 100.0% | - The portfolio's largest security position is a 30% holding in American Realty Investors, Inc. (NYSE: ARL), and the second largest is a 29.8% holding in U.S. government treasury notes[109] Financial Condition and Liquidity The company's liquidity includes $13.1 million in cash and restricted cash and $16.1 million in net marketable securities as of March 31, 2023, with a primary focus on refinancing hotel debt maturing in January 2024, and management anticipates sufficient cash for the next twelve months - The company renewed its revolving line of credit with CIBC Bank USA in July 2022 for a reduced amount of $2,000,000, which remains fully available as of March 31, 2023[116] - Portsmouth, a subsidiary, has a note payable to InterGroup for $14.2 million as of March 31, 2023, under a $16 million funding agreement, with no additional funding currently anticipated[114] Material Financial Obligations Summary (as of March 31, 2023) | Obligation | Total | Due in Year 2024 | | :--- | :--- | :--- | | Mortgage note payable | $193,087,000 | $108,417,000 | | Related party notes payable | $3,096,000 | $567,000 | | Interest | $29,043,000 | $5,640,000 | | Total | $225,226,000 | $114,624,000 | Item 3. Quantitative and Qualitative Disclosures About Market Risk The company is a smaller reporting company and, as such, is not required to provide the information for this item - As a smaller reporting company, The Intergroup Corporation is not required to provide information regarding quantitative and qualitative disclosures about market risk[127] Item 4. Controls and Procedures Management, including the CEO and Principal Financial Officer, concluded that the company's disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting during the quarter - Management concluded that the Company's disclosure controls and procedures were effective as of the end of the quarterly period covered by the report[128] - No changes in the Company's internal control over financial reporting occurred during the last quarter that have materially affected, or are reasonably likely to materially affect, these controls[129] PART II PART II - OTHER INFORMATION This section covers legal proceedings, risk factors, unregistered sales of equity securities, and exhibits. Item 1. Legal Proceedings The company is in a dispute with the City and County of San Francisco regarding the removal of a pedestrian bridge connected to its Hilton Hotel, disputing the legality of the permit revocation and its financial responsibility for estimated costs exceeding $2 million - The City of San Francisco has revoked a permit and directed the company to remove a pedestrian bridge connecting its hotel to Portsmouth Square at the company's expense[131] - The company disputes the legality of the permit revocation and its obligation to pay for the removal, stating that City representatives had previously agreed the City would pay for the costs[131] - Early cost estimates for the bridge removal plan exceed $2 million, and discussions with the City are expected to continue well into 2023[131] Item 1A. Risk Factors As a smaller reporting company, The Intergroup Corporation is not required to provide the information requested under this item - The company is a smaller reporting company and is not required to provide risk factor information in its Form 10-Q[133] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds There were no events required to be reported under this item during the period - There have been no unregistered sales of equity securities or use of proceeds to report[134] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, which include CEO and CFO certifications (Rule 13a-14(a) and 18 U.S.C. Section 1350) and Inline XBRL data files - Exhibits filed include certifications from the Principal Executive Officer and Principal Financial Officer as required by securities regulations[139] - The filing includes Inline XBRL documents for interactive data submission[139]