Attached files
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2011
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 0-8463
PISMO COAST VILLAGE, INC.
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(Exact name of registrant as specified in its charter)
California 95-2990441
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
165 South Dolliver Street, Pismo Beach, California 93449
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(Address of principal executive offices) (Zip Code)
(805) 773-5649
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(Registrant's telephone number, including area code)
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(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 [X] No [ ]
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Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any,
every Interactive Data File required to be submitted and posted
pursuant to Rule 405 of Regulation S-T (Subsection 232.405 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.
[ ] Large accelerated filer [ ] Non-accelerated filer
[ ] Accelerated filer [X] 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 [X]
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: 1,787
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
The following financial statements and related information are
included in this Form 10-Q, Quarterly Report.
1. Accountant's Review Report
2. Balance Sheets
3. Statements of Income and Retained Earnings
4. Statements of Cash Flows
5. Notes to Financial Statements (Unaudited)
The financial information included in Part I of this Form 10-Q
has been reviewed by Brown Armstrong Accountancy Corporation, the
Company's Certified Public Accountants, and all adjustments and
disclosures proposed by said firm have been reflected in the data
presented. The information furnished reflects all adjustments
which, in the opinion of management, are necessary to a fair
statement of the results for the interim periods.
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
STATEMENT ON FORWARD-LOOKING INFORMATION
Certain information included herein contains statements that may
be considered forward-looking statements, such as statements
relating to anticipated expenses, capital spending, and financing
sources. Such forward-looking information involves important
risks and uncertainties that could significantly affect
anticipated results in the future and, accordingly, such results
may differ from those expressed in any forward-looking statements
made herein. These risks and uncertainties include, but are not
limited to, those relating to competitive industry conditions,
California tourism and weather conditions, dependence on existing
management, leverage and debt service, the regulation of the
recreational vehicle industry, domestic or global economic
conditions, and changes in federal or state tax laws or the
administration of such laws.
OVERVIEW
The Company continues to promote and depend upon recreational
vehicle camping as the primary source of revenue. The rental of
campsites to the general public provides income to cover
expenses, complete capital improvements, and allow shareholders
up to forty-five free nights camping annually. Additional
revenues come from RV storage and spotting, RV service and
repair, on-site convenience store, and other ancillary activities
such as laundromat, arcade, and bike rental.
The Company has been fortunate not to have significant impact due
to the current economy. The RVing public actively seeks
accommodations on the Central Coast despite volatile fuel prices
and personal financial uncertainties. RVing offers an affordable
outdoor recreational experience, and the Company provides quality
facilities and services in a highly popular location. Total site
occupancy is down 1.4% compared to this time last year due to
Spring weather conditions and the current economy. Occupancy
projections look equal to last year throughout the remainder of
the fiscal year. Revenues from ancillary operations such as the
store, arcade, laundromat, and bike rental are flat to slightly
down year-to-date, and management feels this is directly related
to the economy, and this trend will continue throughout the
remainder of the fiscal year.
RV storage continues to be a major source of revenue for the
Company, however, demand has slowed due to the economy's impact
on disposable income. RV storage provides numerous benefits to
the customer including: no stress of towing, no need to own a tow
vehicle, use of RV by multiple family members, and convenience.
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Ongoing investment in resort improvements has assured resort
guests and shareholders a top quality up-to-date facility. This
quality and pride of ownership was evident when the National
Association of RV Parks and Campgrounds Park of the Year was
awarded to the resort for 2007-08. In addition, in 2008 the
resort was the only industry rated "A" park in California for
customer satisfaction.
The Company's commitment to quality, value, and enjoyment is
underscored by the business's success due to word of mouth and
referrals from guests. In addition, investment for online
marketing, ads in the two leading national directories, and trade
magazine advertising formulates most of the business marketing
plan.
RESULTS OF OPERATIONS
The Company develops its income from two sources: (a) Resort
Operations, consisting of revenues generated from RV site
rentals, from RV storage space operations, and from lease
revenues from laundry and arcade operations by third party
lessees; and (b) Retail Operations, consisting of revenues from
General Store operations and from RV parts and service
operations.
Income from Resort Operations for the three-month period ended
June 30, 2011, increased $45,257, or 3.4%, above the same period
in 2010. Resort Income for the nine months ended June 30, 2011,
increased $55,378, or 1.8%, from the same period ended June 30,
2010. This increase in the quarter ending June 30, 2011, is due
primarily to a $33,244, or 3.3%, increase in paid site revenue,
despite a 2.4% decrease in paid site occupancy. The site revenue
increase was due to a site rental rate increase effective January
1, 2011. The quarterly increase also reflects a 4.5%, or $12,994,
increase in the Company's RV storage program due to new storage
customers. The increase in Resort Operations Income for the
nine-month period reflects increases in site rental of $22,828,
and $34,184, in storage activity for the reasons mentioned above.
Management feels these increases in revenue reflect ongoing
loyalty from return customers that appreciate the Resort's
location and commitment to quality guest services.
Seasonal fluctuations within this industry are expected, and
management projects that income for the fourth quarter will be
approximately 40% of its annual revenue. This approximation is
based on historical information.
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Income from Retail Operations for the three-month period ended
June 30, 2011, increased $8,541, or 2.9%, above the same period
in 2010. This increase reflects a $8,297, or 7.6%, increase in
the RV Service operation. The General Store revenue increased by
0.13%, which reflects the business due to decreased site
occupancy and the current economy. The RV Service business is
accessible to the public and fortunate to not be dependent upon
the resort's occupancy. Income from Retail Operations for the
nine-month period ending June 30, 2011, increased by $9,075, or
1.3%, above the same period ended June 30, 2010. This reflects a
$18,899, or 6.2%, increase in RV Service income and a $9,824, or
2.5%, decrease in General Store income. Management feels this
decrease in revenue from retail operations is a symptom of the
economy and customer's reluctance to spend. The Company
anticipates similar activity in both income from resort
operations and retail operations through the remainder of Fiscal
Year 2011.
Operating Expenses for the quarter ended June 30, 2011, increased
$69,619, or 7.9%, from the same period in 2010. This increase in
expense is primarily a result of labor and labor related expenses
such as medical and worker's compensation insurance, vehicle
expense, and property taxes. Operating Expenses for the
nine-month period ended June 30, 2011, increased $71,694, or
2.6%, from the same period in 2010. This increase is primarily
due to employee medical insurance, workers' compensation
insurance, legal expenses, electricity, RV storage lot
maintenance, and vehicle expense.
Cost of Goods Sold for 2011 are within projected levels at 44.4%
of retail sales for the quarter and 46.5% year-to-date. Cost of
Goods Sold for 2010 were 51.6% and 50.3% respectively.
Interest Expense for the three-month and nine-month periods ended
June 30, 2011, is $58,437 and $181,976, respectively, compared to
$67,880 and $198,103 the previous year. This expense reflects the
financing due to acquiring new RV storage properties which closed
escrow January 11, 2006, April 6, 2006, and May 9, 2008.
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Net Income for the quarter ending June 30, 2011, increased by
$36,917, or 15.2%, compared with the same period ending June 30,
2010. This quarterly increase in Net Income is primarily due to
increased income in resort and retail operations, and decreased
cost of goods and depreciation. Net Income for the nine months
ending June 30, 2011, decreased by $23,917, or 10.4%, compared
with the same period ending June 30, 2010. This decrease in Net
Income is a result of an increase in operating expenses,
depreciation, and the gain on the sale of an asset the previous
year. The last quarter of 2011 is expected to provide adequate
resources for continuing business and provide for planned capital
expenditures.
Management has introduced various marketing promotions with
reduced rates to increase revenues during low occupancy periods.
However, due to the nature of business and economic cycles and
trends, rates may be adjusted accordingly, if deemed necessary.
Although the supply-demand balance generally remains favorable,
future operating results could be adversely impacted by weak
demand. This condition could limit the Company's ability to pass
through inflationary increases in operating costs as higher
rates. Increases in transportation and fuel costs or sustained
recessionary periods could also unfavorably impact future
results. However, the Company believes that its financial
strength and market presence will enable it to remain extremely
competitive.
LIQUIDITY
The Company planned capital expenditures of approximately
$526,000 in fiscal year 2011 to further enhance the resort
facilities and services. These projects include: renovation of 26
campsites, major road paving, a two-door freezer for the General
Store, and continued Wi-Fi upgrade. Funding for these projects is
expected to be from normal operating cash flows and, if
necessary, supplemented with outside financing. These capital
expenditures are expected to increase the resort's value to its
shareholders and the general public. With the exception of the
freezer for the General Store which was withdrawn, all other 2011
projects were completed on time and within budget.
The Company's current cash position as of June 30, 2011, is
$1,800,837, which is 6.1% more than the previous year. This
increase in cash reflects a decrease in capital expenditures
compared to the previous year. The present level of cash is being
maintained in anticipation of large capital expenditures in the
upcoming fiscal year.
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Capital projects are designed to enhance the marketability of the
camping sites and enhance support facilities. Recognizing the age
of the Resort and increased demands resulting from modern
recreational vehicles, the Board has directed management to
provide plans to update and improve accommodations of the Resort.
Future renovation would include new utilities, larger sites,
improved site access, new restroom facilities, and additional
amenities.
Accounts Receivable for the period ending June 30, 2011 increased
$2,553 above June 30, 2010, and reflects additional business from
new storage customers.
Rental Deposits increased $25,151, or 1.8%, compared to the same
period last year due to site rental rate increases effective
January 1, 2011.
Accounts Payable and accrued liabilities increased $4,434 to an
amount of $145,212 for June 30, 2011, compared to the same period
ending 2010. This increase was primarily due to timing of payment
of monthly liabilities. All undisputed payables have been paid in
full according to the Company's policy.
The Company has consistently demonstrated an ability to optimize
revenues developed from Resort and Retail Operations during the
summer season. During other less revenue producing periods, RV
storage space and site rentals are paid for in advance and used
for Resort improvements and cash reserves. The Company has a
revolving line of credit for $500,000 to augment operating or
capital expenditure cash needs during off season periods. The
Company considers its financial position sufficient to meet its
anticipated future financial requirements. The foregoing
information is forward-looking, based upon certain assumptions of
future performance which may not come to fruition.
DISCLOSURE CONCERNING WEBSITE ACCESS TO COMPANY REPORTS
The Company makes available on its website,
www.pismocoastvillage.com, access to its annual report on Form
10-K, quarterly reports on Form 10-Q, current reports on Form
8-K, and all amendments to those reports as soon as reasonably
practicable after such material is electronically filed with or
furnished to the Securities and Exchange Commission (SEC).
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The public may read and copy any of the materials filed with the
SEC at the SEC's Public Reference Room located at 100 F Street,
N. E., Washington, D.C. 20549. Information on the operation of
the Public Reference Room may be obtained by calling the SEC at
1-800-SEC-0330. The SEC maintains an Internet site
(http://www.sec.gov) that contains reports, proxy statements, and
other information that the Company files with the SEC.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT
MARKET RISK.
Not Applicable.
ITEM 4T. CONTROLS AND PROCEDURES
DISCLOSURE CONTROLS AND PROCEDURES
As required by Rule 13a-15 under the Securities Exchange Act of
1934 (the "1934 Act"), as of June 30, 2011, we carried out an
evaluation of the effectiveness of the design and operation of
our disclosure controls and procedures. This evaluation was
carried out under the supervision and with the participation of
our Chief Executive Officer/General Manager (our principal
executive officer) and our Chief Financial Officer (our principal
financial officer). Based upon and as of the date of that
evaluation, our Chief Executive Officer and Chief Financial
Officer concluded that our disclosure controls and procedures
were effective as described in Item 8A(T) included with our
Annual Report on Form 10-K for the year ended September 30, 2010.
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 1934
Act is recorded, processed, summarized, and reported within the
time periods specified in the SEC's 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 1934 Act is accumulated
and communicated to our management, including our principal
executive officer and our principal financial officer, as
appropriate, to allow timely decisions regarding required
disclosure.
INTERNAL CONTROL OVER FINANCIAL REPORTING
There have not been any changes in our internal control over
financial reporting (as defined in Rules 13a-15(f) and 15d-15(f)
promulgated by the SEC under the 1934 Act) during the nine-months
ended June 30, 2011, that have materially affected, or are
reasonably likely to materially affect, our internal control over
financial reporting.
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PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
No pending legal proceedings against the Company other than
routine litigation incidental to the business.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
PROCEEDS
Not Applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 5. OTHER INFORMATION
Not Applicable
ITEM 6. EXHIBITS
Exhibit Sequential
Number Item Description Page Number
------- ------------------------------------------ -----------
27 Financial Data Schedule
99 Accountant's Review Report
31.1 Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (Jerald Pettibone,
President and Chairman of the Board)
31.2 Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (Jay Jamison, Chief
Executive Officer and principal executive officer)
31.3 Certification Pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002 (Jack Williams, Chief
Financial Officer, principal financial officer and
principal accounting officer)
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32.1 Certification Pursuant to 18 U. S. C. Subsection
1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (Jerald Pettibone,
President and Chairman of the Board)
32.2 Certification Pursuant to 18 U. S. C. Subsection
1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (Jay Jamison, Chief
Executive Officer and principal executive officer)
32.3 Certification Pursuant to 18 U. S. C. Subsection
1350, as Adopted Pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 (Jack Williams, Chief
Financial Officer, principal financial officer and
principal accounting officer)
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SIGNATURES
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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.
PISMO COAST VILLAGE, INC.
Date: August 12, 2011
Signature: /s/ JERALD PETTIBONE
Jerald Pettibone, President and Chairman of the Board
Date: August 12, 2011
Signature: /S/ JACK WILLIAMS
Jack Williams, V.P. Finance/Chief Financial Officer
(principal financial officer and principal
accounting officer)
Date: August 12, 2011
Signature: /S/ JAY JAMISON
Jay Jamison, General Manager/Chief Executive Officer
(principal executive officer)
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REPORT OF INDEPENDENT REGISTERED
--------------------------------
PUBLIC ACCOUNTING FIRM
----------------------
To the Board of Directors
Pismo Coast Village, Inc.
165 South Dolliver Street
Pismo Beach, California 93449
We have reviewed the accompanying balance sheet of Pismo Coast
Village, Inc. (Company), as of June 30, 2011 and 2010, and the
related statements of income and retained earnings and cash flows
for the three-month and nine-month periods ended June 30, 2011
and 2010. These interim financial statements are the
responsibility of the Company's management.
We conducted our review in accordance with the standards of the
Public Company Accounting Oversight Board (United States). A
review of interim financial information consists principally of
applying analytical procedures and making inquiries of persons
responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance
with the standards of the Public Company Accounting Oversight
Board, the objective of which is the expression of an opinion
regarding the 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 interim
financial statements for them to be in conformity with accounting
principles generally accepted in the United States of America.
BROWN ARMSTRONG ACCOUNTANCY CORPORATION
Bakersfield, California
August 12, 2011
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PISMO COAST VILLAGE, INC.
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BALANCE SHEETS
--------------
JUNE 30, 2011 AND 2010 AND SEPTEMBER 30, 2010
---------------------------------------------
June 30, September 30, June 30,
-------- ------------- --------
2011 2010 2010
---- ---- ----
(Unaudited) (Audited) (Unaudited)
----------- ----------- -----------
ASSETS
------
Current Assets
--------------
Cash and cash equivalents $ 1,800,837 $ 1,727,123 $ 1,697,089
Accounts receivable 24,584 24,584 22,031
Inventory 171,600 127,904 142,493
Current deferred taxes 76,500 73,300 74,900
Prepaid income taxes 112,300 - 103,900
Prepaid expenses 10,418 33,992 24,432
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Total current assets 2,196,239 1,986,903 2,064,845
Pismo Coast Village Recreational
--------------------------------
Vehicle Resort and Related Assets -
-----------------------------------
Net of accumulated depreciation 14,121,932 13,966,429 14,037,715
Other Assets 28,157 31,451 32,550
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Total Assets $16,346,328 $15,984,783 $16,135,110
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
Current Liabilities
-------------------
Accounts payable and
accrued expenses $ 145,212 $ 161,663 $ 140,778
Accrued salaries and vacation 61,102 170,279 63,484
Rental deposits 1,382,292 771,211 1,357,141
Income taxes payable - 41,800 -
Current portion of
long-term debt 143,568 114,054 116,587
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Total current liabilities 1,732,174 1,259,007 1,677,990
Long-Term Liabilities
---------------------
Long-term deferred taxes 609,300 506,200 496,400
N/P Donahue Transportation 38,197 42,821 44,299
N/P Santa Lucia Bank 4,165,235 4,528,128 4,551,475
----------- ----------- -----------
Total liabilities 6,544,906 6,336,156 6,770,164
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Shareholders' Equity
--------------------
Common stock - no par value,
1,800 shares issued,
1,787 shares and 1,789 shares
outstanding at June 30, 2011 and
September 30, 2010 respectively 5,606,919 5,613,194 5,613,194
Retained earnings 4,194,503 4,035,433 3,751,752
----------- ----------- -----------
Total stockholders' equity 9,801,422 9,648,627 9,364,946
----------- ----------- -----------
Total Liabilities and
Shareholders' Equity $16,346,328 $15,984,783 $16,135,110
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
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PISMO COAST VILLAGE, INC.
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STATEMENTS OF INCOME AND RETAINED EARNINGS
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(UNAUDITED)
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THREE AND NINE MONTHS ENDED JUNE 30, 2011 AND 2010
--------------------------------------------------
Three Months Nine Months
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Ended June 30, Ended June 30,
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2011 2010 2011 2010
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Income
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Resort operations $1,370,665 $1,325,408 $3,209,443 $3,154,065
Retail operations 303,554 295,013 712,508 703,433
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Total income 1,674,219 1,620,421 3,921,951 3,857,498
---------- ---------- ---------- ----------
Cost and Expenses
-----------------
Operating expenses 951,059 881,440 2,789,056 2,717,362
Cost of goods sold 134,755 152,267 331,351 354,014
Depreciation 80,768 84,413 252,922 242,394
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Total cost and expenses 1,166,582 1,118,120 3,373,329 3,313,770
---------- ---------- ---------- ----------
Income from operations 507,637 502,301 548,622 543,728
---------- ---------- ---------- ----------
Other Income (Expense)
----------------------
Gain on sale of fixed assets 2,170 - 2,170 58,034
Interest and dividend income 955 3,671 4,179 14,053
Interest expense (58,437) (67,880) (181,976) (198,103)
---------- ---------- ---------- ----------
Total other income (expense) (55,312) (64,209) (175,627) (126,016)
---------- ---------- ---------- ----------
Income Before Provision for
Income Tax 452,325 438,092 372,995 417,712
Income Tax Expense 172,084 194,768 167,200 188,000
---------- ---------- ---------- ----------
Net Income $ 280,241 $ 243,324 205,795 229,712
========== ==========
Retained Earnings
-----------------
Beginning of Period 4,035,433 3,547,402
---------- ----------
Redemption of Stock (46,725) (25,362)
-------------------
End of Period $4,194,503 $3,751,752
========== ==========
Net Income Per Share $ 156.82 $ 136.01 $ 115.16 $ 128.40
========== ========== ========== ==========
The accompanying notes are an integral part of these financial statements.
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PISMO COAST VILLAGE, INC.
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STATEMENTS OF CASH FLOWS (UNAUDITED)
------------------------------------
NINE MONTHS ENDED JUNE 30, 2011 AND 2010
----------------------------------------
2011 2010
----------------------- ----------------------
Cash Flows From Operating Activities
------------------------------------
Net Income $ 205,795 $ 229,712
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation $ 249,628 $ 242,394
Gain on sale of property (2,170) (58,034)
Accounts receivable - (123)
Inventory (43,696) (10,339)
Current deferred taxes (3,200) (800)
Prepaid income taxes (112,300) (103,900)
Prepaid expenses 23,574 37,059
Amortization 3,294 3,294
Accounts payable and accrued expenses (16,451) (40,143)
Accrued salaries and vacation (109,177) (121,762)
Rental deposits 611,081 589,653
Income taxes payable (41,800) (51,000)
Deferred taxes 103,100 5,300
---------- ----------
Total adjustments 661,883 491,599
---------- ----------
Net cash provided by
operating activities 867,678 721,311
Cash Flows Used in Investing Activities
---------------------------------------
Capital Expenditures (405,213) (592,724)
Proceeds from sale of property 2,250 186,686
Net cash used in investing
activities (402,963) (406,038)
Cash Flows Used in Financing Activities
---------------------------------------
Redemption of stock (53,000) (28,500)
Borrowings on long-term debt 48,844
Principal payments on note payable (338,001) (310,573)
---------- ----------
Net cash (used in)
financing activities (391,001) (290,229)
---------- -----------
Net increase in cash
and cash equivalents 73,714 25,044
Cash and Cash Equivalents -
---------------------------
Beginning of Period 1,727,123 1,672,045
------------------- ---------- ----------
Cash and Cash Equivalents -
---------------------------
End of Period $1,800,837 $1,697,089
------------- ========== ==========
Schedule of Payments of Interest and Taxes
------------------------------------------
Payments for interest $ 181,976 $ 198,103
Payments for income tax $ 63,000 $ 278,379
The accompanying notes are an integral part of these financial statements.
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PISMO COAST VILLAGE, INC.
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NOTES TO FINANCIAL STATEMENTS
-----------------------------
JUNE 30, 2011 AND 2010 (UNAUDITED) AND SEPTEMBER 30, 2010 (AUDITED)
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Note 1 - Summary of Significant Accounting Policies
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Nature of Business
------------------
Pismo Coast Village, Inc., (Company) is a recreational vehicle camping resort.
Its business is seasonal in nature with the fourth quarter, the summer, being
its busiest and most profitable.
Inventory
---------
Inventory has been valued at the lower of cost or market on a first-in,
first-out basis. Inventory is comprised primarily of finished goods in the
general store and parts in the RV repair shop.
Depreciation and Amortization
-----------------------------
Depreciation of property and equipment is computed using an accelerated method
based on the cost of the assets, less allowance for salvage value, where
appropriate. Depreciation rates are based upon the following estimated useful
lives:
Building and resort improvements 5 to 40 years
Furniture, fixtures, equipment, and
leasehold improvements 5 to 31.5 years
Transportation equipment 5 to 10 years
Earnings Per Share
------------------
The earnings per share are based on the weighted-average number of shares
outstanding at the end of the period. The financial statements report only
basic earnings per share, as there are no potentially dilutive shares
outstanding.
Cash and Cash Equivalents
-------------------------
For purposes of the statement of cash flows, the Company considers all highly
liquid investments including certificates of deposit with maturities of three
months or less when purchased, to be cash equivalents.
Concentration of Credit Risk
----------------------------
At June 30, 2011, the Company had cash deposits in excess of the $250,000
federally insured limit with Santa Lucia Bank of $1,506,131; however, in the
past the Company has used an Excess Deposit Insurance Bond which secures
deposits up to $1,500,000. It has recently been stated by bank regulators that
this insurance bond is not enforceable. The FDIC's Temporary Transaction
Account Guarantee Program provides unlimited coverage for non-interest bearing
accounts until December 31, 2013. Santa Lucia Bank is participating in the
Temporary Liquidity Guarantee Program which is a requirement to obtain the
non-interest bearing coverage.
Use of Estimates
----------------
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires the
Company to make estimates and assumptions that affect certain reported amounts
and disclosures. Accordingly, actual results could differ from those
estimates.
Revenue and Cost Recognition
----------------------------
The Company's revenue is recognized on the accrual basis as earned based on
the date of stay. Expenditures are recorded on the accrual basis whereby
expenses are recorded when incurred, rather than when paid.
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PISMO COAST VILLAGE, INC.
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NOTES TO FINANCIAL STATEMENTS
-----------------------------
JUNE 30, 2011 AND 2010 (UNAUDITED) AND SEPTEMBER 30, 2010 (AUDITED)
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PAGE 2
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Note 1 - Summary of Significant Accounting Policies (Continued)
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Advertising
-----------
The Company follows the policy of charging the costs of non-direct advertising
as incurred. Advertising expense was $39,189 and $33,246 for the nine months
ended June 30, 2011 and 2010, respectively. There was no advertising expense
capitalized in prepaid expense.
New Accounting Pronouncements
-----------------------------
Standards Adopted:
In January 2010, the Financial Accounting Standards Board (FASB) issued
Accounting Standards Update (ASU) No. 2010-06 "Improving Disclosures about
Fair Value Measurements." The ASU amends previously issued authoritative
guidance, requires new disclosures, clarifies existing disclosures, and is
effective for interim and annual reporting periods beginning after December
15, 2009, except for the disclosures about purchases, sales, issuances, and
settlements in the rollforward activity in Level 3 fair value measurements.
Those disclosures are effective for fiscal years beginning after December 15,
2010, and for interim periods within those fiscal years. As this requires only
additional disclosures, the guidance will have no impact on the Company's
financial position or results of operations.
Note 2 - Pismo Coast Village Recreational Vehicle Resort and Related Assets
---------------------------------------------------------------------------
At June 30, 2011, September 30, 2010, and June 30, 2010, property and
equipment included the following:
June 30, 2011 September 30, 2010 June 30, 2010
------------- ------------------ -------------
Land $ 9,957,263 $ 9,957,263 $ 9,957,263
Building and resort
improvements 10,652,446 10,242,392 9,920,916
Furniture, fixtures,
equipment and leasehold
improvements 526,033 517,485 807,274
Transportation equipment 472,478 477,278 489,899
Construction in progress 54,886 68,277 85,719
----------- ----------- -----------
21,663,106 21,262,695 21,261,071
Less: accumulated
depreciation (7,541,174) (7,296,266) (7,223,356)
----------- ----------- -----------
$14,121,932 $13,966,429 $14,037,715
=========== =========== ===========
Note 3 - Line of Credit
-----------------------
The Company renewed its revolving line of credit for $500,000, expiring March
2012. The interest rate is variable at one percent over West Coast Prime, with
an initial rate of 6.00 percent at June 30, 2011. The purpose of the loan is
to augment operating cash needs in off-season months. There was no outstanding
amount for the line of credit at June 30, 2011 and at June 30, 2010.
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PISMO COAST VILLAGE, INC.
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NOTES TO FINANCIAL STATEMENTS
-----------------------------
JUNE 30, 2011 AND 2010 (UNAUDITED) AND SEPTEMBER 30, 2010 (AUDITED)
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PAGE 3
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Note 4 - Notes Payable
----------------------
The Company secured permanent financing on the purchase of storage lot land in
Arroyo Grande with Santa Lucia Bank. The loan was refinanced on April 6, 2006
and consolidated with a note for the purchase of another storage lot in
Oceano. The total loan currently outstanding is $1,449,718.65 and was financed
over a period of ten years at a variable interest rate currently at 5.00%. The
lot in Oceano was formerly leased for $4,800 per month and was purchased for
$925,000. The payments are currently $12,760 per month interest and principal.
The Company also secured permanent financing on the purchase of another
storage lot in Arroyo Grande with Santa Lucia Bank. The loan was originated on
May 8, 2008. The total loan currently outstanding is $2,852,982.46 and
financed over a period of ten years at a variable interest rate currently at
5.0%. The payments are currently $15,416 per month interest and principal. The
Company secured a vehicle lease with Donahue Transportation Services Corp on a
2008 Tow Truck. The loan originated on December 9, 2009. The total loan
currently outstanding is $44,298.74 and financed over a period of seven years
at an interest rate of 8.39%. The payments are currently $799 per month
interest and principal.
Future minimum payments are as follows:
Period Ended June 30,
---------------------
2012 $ 143,568
2013 139,357
2014 146,736
2015 154,513
2016 1,140,964
Thereafter 2,621,862
----------
$4,347,000
==========
Note 5 - Common Stock
---------------------
Each share of stock is intended to provide the shareholder with free use of
the resort for a maximum of 45 days per year. If the Company is unable to
generate sufficient funds from the public, the Company may be required to
charge shareholders for services.
A shareholder is entitled to a pro rata share of any dividends as well as a
pro rata share of the assets of the Company in the event of its liquidation or
sale. The shares are personal property and do not constitute an interest in
real property. The ownership of a share does not entitle the owner to any
interest in any particular site or camping period.
The Company redeemed two shares of Common stock from a single shareholder in
the current quarter for $53,000. At this time the stock has not been retired.
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PISMO COAST VILLAGE, INC.
-------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
JUNE 30, 2011 AND 2010 (UNAUDITED) AND SEPTEMBER 30, 2010 (AUDITED)
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PAGE 4
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Note 6 - Income Taxes
---------------------
The provision for income taxes for the nine-month period is as follows:
June 30, 2011 June 30, 2010
------------- -------------
Income tax expense $167,200 $188,000
======== ========
The difference between the effective tax rate and the statutory tax rates is
due primarily to the effects of graduated tax rates, state taxes net of
federal benefit, nondeductible variable costs of shareholder usage and other
adjustments.
Under Income Taxes Topic of FASB Accounting Standards Codification (ASC),
income taxes are provided for the tax effect of transactions reported in the
financial statements and consist of taxes currently due plus deferred taxes.
The deferred tax assets and liabilities represent the future tax consequences
of differences between financial and income tax reporting, which will either
be taxable or deductible when the assets and liabilities are recovered or
settled.
ASC also requires, among other things, the recognition and measurement of
uncertain tax positions based on a "more likely than not" (likelihood greater
than 50%) approach. As of June 30, 2011, the Company did not maintain any
uncertain tax positions under this approach and, accordingly, all tax
positions have been fully recorded in the provision for income taxes. It is
the policy of the Company to consistently classify interest and penalties
associated with income tax expense separately from the provision for income
taxes. No interest or penalties associated with income taxes have been
included in this calculation, or separately in the Statement of Operations and
Retained Earnings, and no significant increases or decreases are expected
within the following twelve-month period. Although the Company does not
maintain any uncertain tax positions, tax returns remain subject to
examination by the Internal Revenue Service for fiscal years ending on or
after September 30, 2008 and by the California Franchise Tax Board for fiscal
years ending on or after September 30, 2007.
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PISMO COAST VILLAGE, INC.
-------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
JUNE 30, 2011 AND 2010 (UNAUDITED) AND SEPTEMBER 30, 2010 (AUDITED)
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PAGE 5
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Note 7 - Operating Leases
-------------------------
The Company leases two pieces of property to use as storage lots. One is
leased under a seven-year agreement beginning March 1, 2007, for $4,802 based
on the Consumer Price Index.
The second lot is located in Oceano and is leased at $2,933 per month. The
lease has converted to a month-to-month lease; however, the lessor is
considering a long-term renewal at this time.
The Company has a five-year lease obligation for a copier. Rental expense
under this operating lease is $432 per month.
Future minimum lease payments under the first property lease and an obligation
to lease equipment are as follows:
Year Ended June 30,
-------------------
2012 $ 62,808
2013 57,624
2014 38,416
2015 -
2016 -
Thereafter -
--------
$158,848
========
Rent expense under these agreements was $69,614 and $69,414 for the nine
months ended June 30, 2011 and 2010, respectively.
Note 8 - Employee Retirement Plans
----------------------------------
The Company is the sponsor of a 401(k) profit sharing pension plan, which
covers substantially all full-time employees. Employer contributions are
discretionary and are determined on an annual basis. The Company's matching
portion of the 401(k) safe harbor plan was $37,460 for the nine months ended
June 30, 2011. The contribution to the pension plan for the nine months ended
June 30, 2010 was $42,989.
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