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Table of Contents
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 September 30, 2009
OR
¨ | 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: 333-147447
SALAMANDER INNISBROOK, LLC
(Exact name of registrant as specified in its charter)
Florida | 26-0442888 | |
(State of incorporation) | (IRS employer identification no.) |
36750 US Highway 19 North, Palm Harbor, FL 34684
(Address of principal executive offices)
727-942-2000
(Registrants telephone number, including area code)
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 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 the Regulation S-T (229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). 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 definition of large accelerated filer accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | ¨ | 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
The Rental Pool operated by the Registrant has 603 Participants.
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Cautionary Note Regarding Forward-Looking Statements
The following report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the Exchange Act). Forward-looking statements are statements that predict or describe future events or trends and that do not relate solely to historical matters. All of our projections in this quarterly report are forward-looking statements. You can generally identify forward-looking statements as statements containing the words believe, expect, will, anticipate, intend, estimate, project, assume or other similar expressions. You should not place undue reliance on our forward-looking statements because the matters they describe are subject to known (and unknown) risks, uncertainties and other unpredictable factors, many of which are beyond our control. Our forward-looking statements are based on the limited information currently available to us and speak only as of the date on which this report was filed with the SEC. Our continued internet posting or subsequent distribution of this dated report does not imply continued affirmation of the forward-looking statements included in it. We undertake no obligation, and we expressly disclaim any obligation, to issue any updates to our forward-looking statements, even if subsequent events cause our expectations to change regarding the matters discussed in those statements. Future events are inherently uncertain. Moreover, it is particularly difficult to predict business activity levels at the Resort with any certainty. Accordingly, our projections in this quarterly report are subject to particularly high uncertainty. Our projections should not be regarded as legal promises, representations or warranties of any kind whatsoever. Over time, our actual results, performance or achievements will likely differ from the anticipated results, performance or achievements that are expressed or implied by our forward-looking statements, and such differences might be significant and harmful to your interests.
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PART I FINANCIAL INFORMATION
Item 1. | Financial Statements |
September 30, 2009 |
December 31, 2008 | |||||
(Unaudited) | ||||||
Assets | ||||||
Current assets: |
||||||
Cash |
$ | 457,765 | $ | 1,081,096 | ||
Accounts receivable trade, net |
1,487,711 | 2,746,240 | ||||
Inventories and supplies |
1,069,485 | 1,061,977 | ||||
Prepaid expenses and other |
648,564 | 345,295 | ||||
Total current assets |
3,663,525 | 5,234,608 | ||||
Property, buildings and equipment, net |
46,142,149 | 42,260,243 | ||||
Intangibles, net |
10,276,120 | 12,151,661 | ||||
Other Assets |
134,563 | 411,099 | ||||
Total assets |
$ | 60,216,357 | $ | 60,057,611 | ||
Liabilities and Members Equity | ||||||
Current liabilities: |
||||||
Accounts payable |
$ | 136,908 | $ | 2,205,480 | ||
Accrued liabilities |
2,319,941 | 1,812,441 | ||||
Deposits and deferred revenue |
2,083,230 | 3,128,063 | ||||
Current portion long-term refurbishment |
561,348 | 2,239,077 | ||||
Current portion of capital lease obligations |
113,545 | 149,362 | ||||
Due to affiliates |
103,860 | 88,515 | ||||
Total current liabilities |
5,318,832 | 9,622,938 | ||||
Deferred revenue |
1,033,093 | 893,458 | ||||
Refurbishment obligation, net of current portion |
67,896 | 84,871 | ||||
Capital lease obligations, net of current portion |
164,323 | 300,100 | ||||
Total liabilities |
6,584,144 | 10,901,367 | ||||
Members Equity: |
53,632,213 | 49,156,244 | ||||
Total liabilities and members equity |
$ | 60,216,357 | $ | 60,057,611 | ||
See accompanying notes to unaudited condensed financial statements.
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CONDENSED STATEMENTS OF OPERATIONS AND CHANGES IN MEMBERS EQUITY
(Unaudited)
For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
Resort revenues |
$ | 4,851,243 | $ | 5,757,972 | $ | 26,121,474 | $ | 28,202,773 | ||||||||
Costs and Expenses: |
||||||||||||||||
Operating costs and expenses |
3,179,684 | 3,465,719 | 12,198,354 | 13,224,890 | ||||||||||||
General and administrative |
4,236,401 | 4,582,589 | 14,909,104 | 15,593,074 | ||||||||||||
Depreciation and amortization |
1,278,250 | 1,229,837 | 3,834,612 | 3,689,513 | ||||||||||||
Total costs and expenses |
8,694,335 | 9,278,145 | 30,942,070 | 32,507,477 | ||||||||||||
Loss before interest |
(3,843,092 | ) | (3,520,173 | ) | (4,820,596 | ) | (4,304,704 | ) | ||||||||
Interest (income) expense, net |
(16,548 | ) | 48,742 | 131,205 | 181,778 | |||||||||||
Net loss |
(3,826,544 | ) | (3,568,915 | ) | (4,951,801 | ) | (4,486,482 | ) | ||||||||
Members equity, beginning of period |
54,952,100 | 43,382,355 | 49,156,244 | 42,028,207 | ||||||||||||
Member contribution |
2,506,657 | 6,288,785 | 9,427,770 | 8,560,500 | ||||||||||||
Members equity, end of period |
$ | 53,632,213 | $ | 46,102,225 | $ | 53,632,213 | $ | 46,102,225 | ||||||||
See accompanying notes to unaudited condensed financial statements.
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CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
For the nine months ended September 30, | ||||||||
2009 | 2008 | |||||||
Cash flows from operating activities: |
||||||||
Net loss |
$ | (4,951,801 | ) | $ | (4,486,482 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: |
||||||||
Bad debt expense |
34,047 | 36,071 | ||||||
Depreciation and amortization |
3,834,612 | 3,689,513 | ||||||
Other changes in operating assets and liabilities |
(1,520,799 | ) | 903,450 | |||||
Net cash provided by operating activities |
(2,603,941 | ) | 142,552 | |||||
Cash flows used in investing activities: |
||||||||
Capital expenditures |
(5,501,906 | ) | (8,075,235 | ) | ||||
Intangibles |
(78,956 | ) | | |||||
Net cash used in investing activities |
(5,580,862 | ) | (8,075,235 | ) | ||||
Cash flows from financing activities: |
||||||||
Member contributions |
9,427,770 | 8,560,500 | ||||||
Repayment of capital lease obligations |
(171,594 | ) | (342,000 | ) | ||||
Repayment of refurbishment obligations: |
(1,694,704 | ) | (1,274,288 | ) | ||||
Net cash provided by financing activities |
7,561,472 | 6,944,212 | ||||||
Net decrease in cash |
$ | (623,331 | ) | $ | (988,471 | ) | ||
Cash at beginning of period |
1,081,096 | 2,195,089 | ||||||
Cash at end of period |
$ | 457,765 | $ | 1,206,618 | ||||
Supplemental disclosure of cash flow information: |
See accompanying notes to unaudited condensed financial statements.
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NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Nature of Business, Basis of Presentation and Summary of Significant Accounting Policies
Nature of business
On July 16, 2007, Salamander Innisbrook, LLC (the Company, we, or the Successor), together with its affiliates, Salamander Securities, LLC. and Salamander Innisbrook Condominium, LLC, completed the purchase of the Innisbrook Resort and Golf Club (the Resort) and all of the equity interest in Golf Host Securities, Inc. from Golf Trust of America, Inc. and its subsidiaries and affiliates. The Resort is a 72-hole destination golf and conference facility located near Tampa, Florida. The Resort features 1216 condominium rooms, all of which are owned by third parties or affiliates. Approximately 603 condominium owners participate in a rental pool (the Rental Pool) operated by the Company.
Basis of presentation
The accompanying condensed financial statements and related notes have been prepared in accordance with accounting principles generally accepted in the United States of America and the instructions of Quarterly Report on Form 10-Q, consequently, do not include all disclosures normally provided in the Companys Annual Report on Form 10-K. Accordingly, these condensed financial statements and related notes should be read in conjunction with the Companys Annual Report on Form 10-K for the year ended December 31, 2008.
In the opinion of management, the condensed financial statements reflect all adjustments which are necessary for a fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature. These results are not necessarily indicative of results for any other period or for a full year. It is important to note that the Companys business is seasonal.
Note 2. Accounts Receivable
September 30, 2009 (Unaudited) |
December 31, 2008 |
|||||||
Trade accounts receivable |
$ | 1,138,478 | $ | 2,258,156 | ||||
Less allowance for bad debts |
(57,449 | ) | (20,007 | ) | ||||
Other receivables |
406,682 | 508,091 | ||||||
$ | 1,487,711 | $ | 2,746,240 | |||||
Note 3. Property, Buildings and Equipment
September 30, 2009 (Unaudited) |
December 31, 2008 |
|||||||
Land and land improvements |
$ | 17,007,645 | $ | 15,520,401 | ||||
Buildings |
23,463,125 | 17,274,568 | ||||||
Furniture, fixtures and equipment |
9,705,278 | 7,094,331 | ||||||
Construction in progress |
273,936 | 5,058,778 | ||||||
50,449,984 | 44,948,078 | |||||||
Less accumulated depreciation |
(4,307,834 | ) | (2,687,835 | ) | ||||
$ | 46,142,150 | $ | 42,260,243 | |||||
Note 4. Intangibles
Intangible assets represent the value of contractual arrangements assumed as of July 16, 2007, including trade names, water contract, rental pool, club memberships and future bookings. The intangible assets are being amortized over the specific term or benefit period of each related contract.
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SALAMANDER INNISBROOK, LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS(Continued)
(Unaudited)
Note 5. Long-term Obligations
Leases - Leases, which transfer substantially all of the benefits and risks of ownership of property, are classified as capital leases. Assets and liabilities are recorded at amounts equal to the present value of the minimum lease payments at the beginning of the lease term. Interest expense relating to the lease liabilities is recorded to affect constant rates of interest over the terms of the leases.
Leases, which do not transfer substantially all of the benefits and risks of ownership of property, are classified as operating leases, and the related rentals are charged to expense as incurred.
Master Lease Refurbishment Program On July 16, 2007, the Company assumed a liability to certain condominium owners under the refurbishment program committed to in the Rental Pool Master Lease Agreement (MLA). The liability of $629,244 represents the Companys obligation to pay certain Rental Pool participants an amount equal to 25% or 50% of the cost to refurbish their respective units. Principal and interest payments are due quarterly for the five year repayment period of the program.
Note 6. Due to Affiliate
Due to affiliates represents non interesting bearing advances due to affiliates and are payable on demand.
RENTAL POOL LEASE OPERATIONS
The operation of the Rental Pool is tied closely to the Resort Operation. The MLA provides for quarterly distribution of a percentage of the Company room revenues to participating condominium owners (Participants). Because the participants share a percentage of the Companys room revenue, the condominium units allowing Rental Pool participation are deemed securities. However, there is no market for these securities other than the normal real estate market. Since the security is real estate, no dividends have been paid or will be. However, Participants are entitled to a contractual distribution paid quarterly, as defined in the lease agreements, for the Companys right to use the Participants condominium units in resort operations.
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INNISBROOK RENTAL POOL OPERATION
DISTRIBUTION FUND
September 30, 2009 |
December 31, 2008 | |||||
ASSETS | ||||||
Receivable from Salamander Innisbrook, LLC for distribution |
$ | 385,673 | $ | 528,644 | ||
Interest receivable from Rental Pool Escrow Fund |
4,514 | 10,509 | ||||
$ | 390,187 | $ | 539,153 | |||
LIABILITIES AND PARTICIPANTS FUND BALANCES | ||||||
Due to Participants for distribution |
$ | 215,443 | $ | 391,628 | ||
Due to Maintenance Escrow fund |
174,744 | 147,525 | ||||
$ | 390,187 | $ | 539,153 | |||
MAINTENANCE ESCROW FUND
September 30, 2009 |
December 31, 2008 | |||||
ASSETS | ||||||
Cash |
$ | 136,246 | $ | 206,118 | ||
Cash equivalents |
1,715,000 | 1,425,000 | ||||
Receivable from Distribution fund |
174,912 | 147,525 | ||||
Receivable from Salamander Innisbrook, LLC |
952 | 5,877 | ||||
Inventory |
| 4,098 | ||||
Interest receivable |
2,855 | 11,372 | ||||
$ | 2,029,965 | $ | 1,799,990 | |||
LIABILITIES AND PARTICIPANTS FUND BALANCES | ||||||
Accounts payable |
$ | | $ | 98,682 | ||
Interest payable to Distribution fund |
2,851 | 11,603 | ||||
Carpet Care reserve |
110,945 | 82,650 | ||||
Participants fund balances |
1,916,169 | 1,607,055 | ||||
$ | 2,029,965 | $ | 1,799,990 | |||
See accompanying notes to unaudited financial statements
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INNISBROOK RENTAL POOL OPERATION
CONDENSED STATEMENTS OF OPERATIONS
(Unaudited)
For the three months ended September 30, | For the nine months ended September 30, | ||||||||||||||
2009 | 2008 | 2009 | 2008 | ||||||||||||
GROSS REVENUES |
$ | 1,132,650 | $ | 1,557,365 | 6,913,330 | $ | 8,132,169 | ||||||||
DEDUCTIONS: |
|||||||||||||||
Agents commissions |
19,157 | 24,050 | 183,764 | 245,358 | |||||||||||
Credit card fees |
32,082 | 43,876 | 213,416 | 229,562 | |||||||||||
Audit fees |
45,000 | 11,250 | 72,500 | 33,750 | |||||||||||
Uncollectible room rents |
| 13,637 | 517 | 13,637 | |||||||||||
Linen replacements |
22,338 | 22,454 | 64,967 | 45,292 | |||||||||||
Rental pool complimentary fees |
2,507 | 2,442 | 14,676 | 9,562 | |||||||||||
121,084 | 117,709 | 549,840 | 577,161 | ||||||||||||
ADJUSTED GROSS REVENUES |
1,011,566 | 1,439,656 | 6,363,490 | 7,555,008 | |||||||||||
AMOUNT RETAINED BY LESSEE |
(606,939 | ) | (863,794 | ) | (3,818,094 | ) | (4,533,005 | ) | |||||||
GROSS INCOME DISTRIBUTION |
404,627 | 575,862 | 2,545,396 | 3,022,003 | |||||||||||
ADJUSTMENTS TO GROSS INCOME DISTRIBUTION: |
|||||||||||||||
General pooled expense |
(1,257 | ) | (3,818 | ) | (6,306 | ) | (8,047 | ) | |||||||
Miscellaneous pooling adjustments |
(88 | ) | | 2,585 | | ||||||||||
Corporate complimentary occupancy fees |
4,877 | 19,895 | 22,053 | 41,822 | |||||||||||
Interest |
(2,876 | ) | (3,024 | ) | (4,871 | ) | (9,073 | ) | |||||||
Occupancy fees |
(174,744 | ) | (208,696 | ) | (788,075 | ) | (823,229 | ) | |||||||
Advisory Committee expenses |
(28,906 | ) | (29,850 | ) | (89,973 | ) | (96,831 | ) | |||||||
NET INCOME DISTRIBUTION |
201,633 | 350,369 | 1,680,809 | 2,126,645 | |||||||||||
ADJUSTMENTS TO NET INCOME DISTRIBUTION: |
|||||||||||||||
Occupancy fees |
174,744 | 208,696 | 788,075 | 823,229 | |||||||||||
Hospitality suite fees |
231 | 252 | 2,845 | 4,170 | |||||||||||
Associate room fees |
9,065 | 9,898 | 42,091 | 42,287 | |||||||||||
AVAILABLE FOR DISTRIBUTION TO PARTICIPANTS |
385,673 | 569,215 | 2,513,820 | 2,996,331 | |||||||||||
See accompanying notes to the unaudited financial statements.
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INNISBROOK RENTAL POOL OPERATION
CONDENSED STATEMENTS OF CHANGES IN PARTICIPANTS FUND BALANCES
(Unaudited)
DISTRIBUTION FUND
For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
BALANCE, beginning of period |
$ | | $ | | $ | | $ | | ||||||||
ADDITIONS: |
||||||||||||||||
Amounts available for distribution |
385,673 | 569,215 | 2,513,750 | 2,996,332 | ||||||||||||
Interest received or receivable from Maintenance Escrow Fund |
4,514 | 14,831 | 32,668 | 53,099 | ||||||||||||
REDUCTIONS: |
||||||||||||||||
Amounts withheld for Maintenance Escrow Fund |
(174,744 | ) | (187,827 | ) | (729,046 | ) | (737,647 | ) | ||||||||
Amounts accrued or paid to participants |
(215,443 | ) | (396,219 | ) | (1,817,372 | ) | (2,311,784 | ) | ||||||||
BALANCE, end of period |
$ | | $ | | $ | | $ | | ||||||||
MAINTENANCE ESCROW FUND
For the three months ended September 30, | For the nine months ended September 30, | |||||||||||||||
2009 | 2008 | 2009 | 2008 | |||||||||||||
BALANCE, beginning of period |
$ | 1,840,932 | $ | 2,462,098 | $ | 1,639,345 | $ | 2,185,657 | ||||||||
ADDITIONS: |
||||||||||||||||
Amounts withheld from occupancy fees |
174,912 | 187,827 | 729,213 | 737,647 | ||||||||||||
Interest earned |
2,851 | 14,831 | 30,481 | 53,099 | ||||||||||||
Charges to participants to establish or restore escrow balances |
115,056 | 152,802 | 295,196 | 481,431 | ||||||||||||
REDUCTIONS: |
||||||||||||||||
Maintenance charges |
(175,816 | ) | (209,792 | ) | (651,921 | ) | (735,079 | ) | ||||||||
Carpet care reserve deposit |
(6,787 | ) | (7,304 | ) | (28,295 | ) | (28,735 | ) | ||||||||
Interest accrued or paid to Distribution Fund |
(2,851 | ) | (14,831 | ) | (30,481 | ) | (53,099 | ) | ||||||||
Refunds to participants as prescribed by the master lease agreements |
(24,886 | ) | (41,914 | ) | (60,127 | ) | (97,204 | ) | ||||||||
BALANCE, end of period |
$ | 1,923,411 | $ | 2,543,717 | $ | 1,923,411 | $ | 2,543,717 | ||||||||
See accompanying notes to the unaudited financial statements.
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INNISBROOK RENTAL POOL LEASE OPERATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Rental Pool Lease Operations
Organization and operations
The Company follows accounting policies that require estimates that are based on assumptions and judgment, which affect revenues, expenses, assets, liabilities and disclosure of contingencies in our financial statements. These estimates and assumptions are based on historical experience and various other factors that are believed to be reasonable under the circumstances. However, actual results may differ from these estimates due to different conditions.
The Rental Pool consists of condominiums at the Resort which are leased by the Company from their owners and used as hotel accommodations for the Resort. The Company has assumed the Master Lease Agreement (MLA) from the predecessor owner which provides that on an annual basis each Participant may elect to participate in the Rental Pool for the following year by signing an Annual Lease Agreement (ALA). Any condominium unit owner who does not sign the ALA is not permitted to participate in the Rental Pool for the following year. Under the MLA, 40% of the Adjusted Gross Revenues, as defined in the MLA, are distributed to the Rental Pool Participants and the remaining 60% is retained by the Company.
The Lessors Advisory Committee (LAC), consists of nine Participants who are elected by the Participants to advise the Company of Rental Pool Matters and to negotiate amendments to the lease agreement, the Annual Lease Agreement (ALA) and the MLA.
The Rental Pool consists of two funds: the Distribution Fund and the Maintenance Escrow Fund. The Distribution Fund balance sheet primarily reflects amounts receivable from the Company for the Rental Pool distribution payable to Participants and amounts due to the Maintenance Escrow Fund. The operations of the Distribution Funds reflect Participants earnings in the Rental Pool. The Maintenance Escrow Fund reflects the accounting for certain escrowed assets of the Participants and, therefore, has no operations. It consists primarily of amounts escrowed by Participants or due to the Distribution Fund to meet escrow requirements, fund the carpet care reserve and maintain the interior of the units.
In addition, the MLA provided to the Participants a reimbursement of an amount up to 50% of the actual unit refurbishments costs, plus interest at a rate of 5% per annum on such amounts. For newly refurbished units entering the Rental Pool during 2005, the Company assumed the obligation to reimburse the Participants an amount up to 25% of the actual unit refurbishment costs, plus interest at a rate of 2.5% per annum. The obligation to reimburse the refurbishment costs and pay interest thereon applies only if certain minimum participation thresholds are maintained.
Maintenance Escrow Fund Accounts
The MLA generally provides that 90% of the occupancy fees earned by each Participant are ultimately deposited in that Participants Maintenance Escrow Fund account. The account provides funds for payment of amounts that are due from all Participants for maintenance and refurbishment services for or related to their condominium unit. In the event that a Participants balance falls below the amount necessary to pay for maintenance and replacements in the Participants unit, the Participant is required to restore the escrow balance to a defined minimum level. The MLA requires specific fund balances be maintained, by unit type, size and age of refurbishment.
The LAC, subject to the restriction in the MLA, invests the Maintenance Escrow Fund on behalf of the Participants. Income earned on the investments of the Maintenance Escrow Funds is allocated proportionately to the respective Maintenance Escrow Fund accounts and paid quarterly through the Distribution Fund. The funds are held in certificates of deposits.
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Item 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations |
General
The Company operates Innisbrook Resort and Golf Club (the Resort) in Innisbrook, Florida, which contains 1216 condominium units of which all have been sold to third parties or to affiliates of the Company. The majority of the condominium units, 603, are hotel accommodations that participate in a rental-pooling program (the Rental Pool) that provides its owners with a percentage distribution of related room revenues minus certain fees and expenses; the remainder of the condominium units is owner-occupied. Other resort property owned by the Company and its affiliates include golf courses, restaurants, tennis courts, a spa and fitness center, swimming pools, conference center facilities as well as administrative offices.
Results of Operations
The Resort is a destination golf resort that appeals to group and transient guests within all market segments. The Resort provides condominium accommodations, food and beverage dining locations (three restaurants, room service, banquet and/or catering options) and recreational entertainment to members, business meetings, group guests, leisure guests and their families. The Resort offers room-only rates, golf packages, and family vacation packages.
As a destination golf resort, open year round, the Resorts performance is sensitive to weather conditions and seasonality as well as general trends in the economy, with any economic downturn adversely affecting operating results. The Companys operations are seasonal with the highest volume of revenue generated in the first two quarters of each calendar year. Due to the seasonal business of the Company, the results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the full fiscal year.
Results of operations for the three months ended September 30, 2009 and 2008 (unaudited)
For the three months ended September 30, (unaudited) |
|||||||||||||||||||||
2009 | 2008 | Increase (Decrease) |
Percentage Change |
||||||||||||||||||
Resort revenues |
$ | 4,851,243 | 100.0 | % | $ | 5,757,972 | 100.0 | % | $ | (906,729 | ) | -15.7 | % | ||||||||
Costs and Expenses: |
|||||||||||||||||||||
Operating costs and expenses |
3,179,684 | 65.5 | % | 3,465,719 | 60.2 | % | (286,035 | ) | -8.3 | % | |||||||||||
General and administrative |
4,236,401 | 87.3 | % | 4,582,589 | 79.6 | % | (346,188 | ) | -7.6 | % | |||||||||||
Depreciation and amortization |
1,278,250 | 26.3 | % | 1,229,837 | 21.4 | % | 48,413 | 3.9 | % | ||||||||||||
Total costs and expenses |
8,694,335 | 179.2 | % | 9,278,145 | 161.1 | % | (583,810 | ) | -6.3 | % | |||||||||||
Loss before interest |
(3,843,092 | ) | -79.2 | % | (3,520,173 | ) | -61.1 | % | (322,919 | ) | 9.2 | % | |||||||||
Interest (income) expense, net |
(16,548 | ) | -0.3 | % | 48,742 | 0.8 | % | (65,290 | ) | -134.0 | % | ||||||||||
Net loss |
$ | (3,826,544 | ) | -78.9 | % | $ | (3,568,915 | ) | -62.0 | % | $ | (257,629 | ) | 7.2 | % |
The recent global recession continues to negatively impact the results of the overall hotel market and has impacted Innisbrook during the quarter. For the three-month period ended September 30, 2009, resort revenues were $4,851,000 down 15.7% or $907,000 when compared to the third quarter in 2008. Transient and golf group travelers continued to be consistent with prior year trends and picked up where group declined in the third quarter.
Costs and Expenses for the three-month period were $8,694,336 which was 179.2% of revenues resulting in a loss before interest of $3,843,092 or -79.2% of revenues. Interest expense, realized a credit of 16,548, resulting in net loss for the three month period of $3,826,544.
Given the current business environment, Innisbrooks marketing division continues to focus on a feasible marketing mix as well as strategies that could help the resort reap the most benefit while keeping a rein on spending. These strategies, which include increased print and electronic advertising and the use of third party distribution channels are all continuing elements of our efforts to offset the group market downturn.
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Results of operations for the nine months ended September 30, 2009 and 2008 (unaudited)
For the nine months ended September 30, (unaudited) |
|||||||||||||||||||||
2009 | 2008 | Increase (Decrease) |
Percentage Change |
||||||||||||||||||
Resort revenues |
$ | 26,121,474 | 100.0 | % | $ | 28,202,773 | 100.0 | % | $ | (2,081,299 | ) | -7.4 | % | ||||||||
Costs and Expenses: |
|||||||||||||||||||||
Operating costs and expenses |
12,198,354 | 46.7 | % | 13,224,890 | 46.9 | % | (1,026,536 | ) | -7.8 | % | |||||||||||
General and administrative |
14,909,104 | 57.1 | % | 15,593,073 | 55.3 | % | (683,969 | ) | -4.4 | % | |||||||||||
Depreciation and amortization |
3,834,612 | 14.7 | % | 3,689,513 | 13.1 | % | 145,099 | 3.9 | % | ||||||||||||
Total costs and expenses |
30,942,070 | 118.5 | % | 32,507,476 | 115.3 | % | (1,565,406 | ) | -4.8 | % | |||||||||||
Loss before interest |
(4,820,596 | ) | -18.5 | % | (4,304,703 | ) | -15.3 | % | (515,893 | ) | 12.0 | % | |||||||||
Interest expense, net |
131,205 | 0.5 | % | 181,778 | 0.6 | % | (50,573 | ) | -27.8 | % | |||||||||||
Net loss |
$ | (4,951,801 | ) | -19.0 | % | $ | (4,486,481 | ) | -15.9 | % | $ | (465,320 | ) | 10.4 | % |
The Resort continues to experience very short booking windows as a result of the economy and weakening real estate market. For the nine month period ended September 30, 2009, resort revenues were $26,121,474 compared to $28,202,773 in the prior year. Costs and Expenses were $30,942,070, 118.5% of revenues, which resulted in a loss before interest of $4,820,596 or -18.5% of revenues. Interest expense related primarily to leases was $131,205 resulting in net loss of $4,951,801.
Liquidity and Capital Resources
Future operating costs and planned expenditures for capital additions and improvements are expected to be adequately funded by cash generated by the Resorts operations and its affiliates current cash reserves.
The operation of the Resort is not considered to be dependent on any individual of small group of customers, the loss of which could have a material adverse effect on the Companys business or financial condition.
Item 3. | Quantitative and Qualitative Disclosures About Market Risk |
Not applicable.
Item 4. | Controls and Procedures |
Disclosure Controls and Procedures
We carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) at September 30, 2009. Based upon that evaluation, the Companys Chief Executive Officer and the Chief Financial Officer concluded that the Companys disclosure controls and procedures were effective as of September 30, 2009 in timely alerting them to material information required to be included in the Companys periodic SEC filings.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act are recorded, processed, summarized and reported, within the time periods specified in the SECs rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, to allow timely decisions regarding required disclosure.
The Company has established disclosure controls and procedures to ensure that information disclosed in this annual report on Form 10-Q was properly recorded, processed, summarized and reported to the Companys Executive Committee. A control system, no matter how well conceived or operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
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Item 1. | Legal Proceedings |
In the normal course of our operations, we are subject to claims and lawsuits. We do not believe that the ultimate resolution of such matters will materially impair operations or have an adverse effect on our financial position and results of operations.
Tina Pipinos v. Salamander Innisbrook, LLC and Salamander Hospitality, LLC
Case No. 09-14563-CI, Division 07 F&H No. 017082-0001
A former employee filed a lawsuit against Salamander Innisbrook, LLC and Salamander Hospitality, LLC on or about August 18, 2009 for alleged unlawful employment practices in the Circuit Court of the Sixth Judicial Circuit in and for Pinellas County, Florida. Plaintiffs complaint alleges violations of the Family Medical Leave Act (FMLA), specifically that she was terminated for her absences while on intermittent FMLA leave. Plaintiff seeks reinstatement, equitable relief, damages for back pay and benefits, interest, liquidated damages, attorneys fees and costs.
Defendants answer and defenses was filed on October 23, 2009. The parties are engaged in discovery. Once written discovery and non-party discovery has concluded, we will take the Plaintiffs deposition.
Although it is impossible to predict the outcome of this case because of the uncertainty involved in litigating any matter, at this time, the likelihood of an unfavorable outcome is small. Salamander maintains that all employment actions were for legitimate, nondiscriminatory business reasons, that discrimination policies and procedures were implemented and followed, and is prepared to vigorously defend this matter.
Michael LeFave, et al. v. Salamander Innisbrook, LLC
USDC Case No. 8:09-CV-00432-T-JDW-EAJ / Lower Case No. 09-1603-CI, Division 7 F&H No. 017082-0002
Four former employee filed a lawsuit against Salamander Innisbrook, LLC on or about January 14, 2009, for alleged unlawful employment practices in the Circuit Court of the Sixth Judicial Circuit in and for Pinellas County, Florida. Plaintiffs complaint alleges violations of the Florida Civil Rights Act, specifically that they were each terminated on the basis of their age. On February 27, 2009, Plaintiffs filed an Amended Complaint additionally claiming violations under the Age Discrimination in Employment Act (ADEA) and to sue on behalf of themselves and others similarly situated. Plaintiffs seek conditional class certification, injunctive relief, damages for back pay and benefits, interest, front pay and benefits, compensatory damages for emotional pain and suffering, punitive damages, attorneys fees and costs.
On March 11, 2009, Defendant removed Plaintiffs claim to the United States District Court, Middle District of Florida, Tampa Division, on the basis of Plaintiffs amendment to include claims under the Federal statute (ADEA). Defendants answer and defenses was filed on April 7, 2009. On May 29, 2009, Plaintiffs filed Plaintiffs Motion to Create Conditional Opt-in Class and Motion to Authorize Notice to Putative Class Members. Defendant filed its motion in opposition on June 29, 2009. Magistrate Judge Elizabeth Jenkins entered a Report and Recommendation granting in part and denying in part Plaintiffs motion for conditional certification on October 9, 2009. Specifically, Magistrate Jenkins recommended the conditional certification of a collective class, but limited to former employees with claims that arose between August 18, 2007 and June 13, 2008. Plaintiffs filed objections to Magistrate Jenkins Report and Recommendation on October 19, 2009. Defendants response to Plaintiffs objections is due on Monday, November 16, 2009. In addition to the four named plaintiffs, twelve individuals have opted into the suit to date.
Although it is impossible to predict the outcome of this case because of the uncertainty involved in litigating any matter, at this time, the likelihood of an unfavorable outcome is small. Salamander maintains that all employment actions were for legitimate, nondiscriminatory business reasons, that discrimination policies and procedures were implemented and followed, and is prepared to vigorously defend this matter.
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Carolyn Boswell v. Salamander Innisbrook, LLC
USDC Case No. 8:09-CV-01704-T-SDM-MAP F&H No. 017082-0003
A former employee filed a lawsuit against Salamander Innisbrook, LLC on or about August 18, 2009, for alleged unlawful employment practices in the United States District Court, Middle District of Florida, Tampa Division. Plaintiffs complaint alleges violations of the Age Discrimination in Employment Act and Florida Civil Rights Act of 1992 pursuant to the Notice of Right to Sue issued by the Equal Employment Opportunity Commission on July 21, 2009.
Defendants answer and defenses to Plaintiffs Amended Complaint was filed on October 6, 2009. Pursuant to Federal Rule of Civil Procedure 16, counsel for the parties met and prepared the Case Management Report setting forth agreements to discovery and pretrial deadlines and suggesting to the Court that the parties could be available for trial any time after September 1, 2010. The Case Management Report was filed on October 28, 2009, however, the Court has yet to enter its Scheduling Order agreeing to the preliminary deadlines and setting the case on a trial docket.
Although it is impossible to predict the outcome of this case because of the uncertainty involved in litigating any matter, at this time, the likelihood of an unfavorable outcome is small. Salamander maintains that all employment actions were for legitimate, nondiscriminatory business reasons, that discrimination policies and procedures were implemented and followed, and is prepared to vigorously defend this matter.
Item 1A. | Risk Factors |
Not required
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Not applicable
Item 3. | Defaults Upon Senior Securities |
Not applicable
Item 4. | Submission of Matters to a Vote of Security Holders |
Not applicable
Item 5. | Other information |
Not applicable
Item 6. | Exhibits |
(a). Exhibits
Exhibit |
Item | |
31.1 | Certification of Principal Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 | |
31.2 | Certification of Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 | |
32.1* | Certification of Principal Executive Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 | |
32.2* | Certification of Principal Financial Officer pursuant to Section 302(a) of the Sarbanes-Oxley Act of 2002 |
* | This exhibit shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 of the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings. |
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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.
SALAMANDER INNISBROOK, LLC (Registrant) | ||
Date: November 16, 2009 | /S/ CHUCK POMERANTZ | |
Chuck Pomerantz | ||
Managing Director and Vice President | ||
Date: November 16, 2009 |
/S/ DALE PELLETIER | |
Dale Pelletier | ||
Chief Financial Officer |
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