Attached files
file | filename |
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EX-31.1 - EXHIBIT 31.1 - Salamander Innisbrook, LLC | v240722_ex31-1.htm |
EX-32.1 - EXHIBIT 32.1 - Salamander Innisbrook, LLC | v240722_ex32-1.htm |
EX-32.2 - EXHIBIT 32.2 - Salamander Innisbrook, LLC | v240722_ex32-2.htm |
EX-31.2 - EXHIBIT 31.2 - Salamander Innisbrook, LLC | v240722_ex31-2.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark one)
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þ
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the quarterly period ended September 30, 2011
OR
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¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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For the transition period from to
COMMISSION FILE NUMBER: 333-147447
SALAMANDER INNISBROOK, LLC
(Exact name of registrant as specified in its charter)
Florida
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26-0442888
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(State of incorporation)
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(IRS employer identification no.)
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36750 US Highway 19 North, Palm Harbor, FL 34684
(Address of principal executive offices)
727-942-2000
(Registrant’s 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 x
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 þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ¨ NO þ
The Rental Pool operated by the Registrant has 594 Participants.
Page
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PART I — FINANCIAL INFORMATION
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4 |
Item 1. Financial Statements
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4 |
Salamander Innisbrook, LLC
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Condensed Balance Sheets as of September 30, 2011 (Unaudited) and December 31, 2010
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4
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Condensed Statements of Operations and Changes in Member’s Equity (Unaudited) for the three and nine months ended September 30, 2011 and 2010
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5
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Condensed Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2011 and 2010
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6
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Notes to Condensed Financial Statements (Unaudited)
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7
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Innisbrook Rental Pool Lease Operation
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Condensed Balance Sheets as of September 30, 2011 (Unaudited) and December 31, 2010
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11
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Condensed Statements of Operations (Unaudited) for the three and nine months ended September 30, 2011 and 2010
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12
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Condensed Statements of Changes in Participants’ Fund Balance (Unaudited) for the nine months ended September 30, 2011 and 2010
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13
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Notes to Condensed Financial Statements (Unaudited)
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14
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
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15 |
Item 3. Quantitative and Qualitative Disclosures about Market Risk
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16
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Item 4T. Controls and Procedures
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17
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PART II — OTHER INFORMATION
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17 |
Item 1. Legal Proceedings
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17
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Item 1A. Risk Factors
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17
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
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17
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Item 3. Defaults Upon Senior Securities
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17
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Item 4. Removed and Reserved
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17
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Item 5. Other information
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18
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Item 6. Exhibits
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18
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Signature
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19
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EX-31.1
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EX-31.2
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EX-32.1
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EX-32.2
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2
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.
3
PART I — FINANCIAL INFORMATION
CONDENSED BALANCE SHEETS
September 30,
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December 31,
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|||||||
2011
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2010
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(Unaudited)
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||||||||
Assets
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||||||||
Current assets:
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||||||||
Cash
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$ | 124,731 | $ | 1,168,250 | ||||
Accounts receivable trade, net
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1,079,923 | 1,812,522 | ||||||
Inventories and supplies
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812,119 | 850,562 | ||||||
Prepaid expenses and other
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815,689 | 806,701 | ||||||
Due from affiliates
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183,887 | 80,507 | ||||||
Total current assets
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3,016,349 | 4,718,542 | ||||||
Property, buildings and equipment, net
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41,123,279 | 42,627,245 | ||||||
Intangibles, net
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6,742,969 | 7,547,292 | ||||||
Deposits and other assets
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328,664 | 270,115 | ||||||
Total assets
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$ | 51,211,261 | $ | 55,163,194 | ||||
Liabilities and Member's Equity
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Current liabilities:
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Accounts payable
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$ | 447,728 | $ | 947,478 | ||||
Accrued liabilities
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1,919,453 | 1,862,232 | ||||||
Deferred revenue
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2,510,710 | 2,579,403 | ||||||
Current portion of long term-refurbishment
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33,597 | 27,761 | ||||||
Current portion of capital lease obligations
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60,389 | 116,387 | ||||||
Total current liabilities
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4,971,877 | 5,533,261 | ||||||
Deferred revenue
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1,178,285 | 1,170,612 | ||||||
Refurbishment obligation, net of current portion
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9,725 | 35,365 | ||||||
Capital lease obligations, net of current portion
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- | 20,431 | ||||||
Total liabilities
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6,159,887 | 6,759,669 | ||||||
Member's equity
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45,051,374 | 48,403,525 | ||||||
Total liabilities and member’s equity
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$ | 51,211,261 | $ | 55,163,194 |
See accompanying notes to unaudited condensed financial statements.
4
SALAMANDER INNISBROOK, LLC
(Unaudited)
For the three months ended September 30,
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For the nine months ended September 30,
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|||||||||||||||
2011
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2010
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2011
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2010
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Resort revenues
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$ | 4,883,543 | $ | 4,581,132 | $ | 26,421,028 | $ | 25,014,626 | ||||||||
Costs and expenses:
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Operating costs and expenses
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2,878,701 | 2,641,930 | 11,739,647 | 11,097,974 | ||||||||||||
General and administrative
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3,788,762 | 3,696,788 | 13,768,378 | 13,544,194 | ||||||||||||
Depreciation and amortization
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850,658 | 996,941 | 2,572,928 | 3,060,525 | ||||||||||||
Total costs and expenses
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7,518,121 | 7,335,659 | 28,080,953 | 27,702,693 | ||||||||||||
Operating loss
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(2,634,578 | ) | (2,754,527 | ) | (1,659,925 | ) | (2,688,067 | ) | ||||||||
Interest expense, net
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(4,524 | ) | (6,188 | ) | (16,168 | ) | (24,656 | ) | ||||||||
Net loss
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(2,639,102 | ) | (2,760,715 | ) | (1,676,093 | ) | (2,712,723 | ) | ||||||||
Member's equity, beginning of period
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47,490,475 | 51,917,311 | 48,403,525 | 52,761,136 | ||||||||||||
Member's contributions/(distributions)
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200,001 | 156,084 | (1,676,058 | ) | (735,733 | ) | ||||||||||
Member's equity, end of period
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$ | 45,051,374 | $ | 49,312,680 | $ | 45,051,374 | $ | 49,312,680 |
See accompanying notes to unaudited condensed financial statements.
5
SALAMANDER INNISBROOK, LLC
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended September 30,
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||||||||
2011
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2010
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Operating activities:
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Net loss
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$ | (1,676,093 | ) | $ | (2,712,723 | ) | ||
Adjustments to reconcile net income to net cash provided by operating activities:
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Provision for bad debt expense
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27,810 | 9,000 | ||||||
Depreciation and amortization
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2,572,928 | 3,060,525 | ||||||
Loss on disposal of property & equipment
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- | 18,317 | ||||||
Deposits and other assets
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(58,549 | ) | - | |||||
Other changes in operating assets and liabilities
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127,314 | 583,082 | ||||||
Net cash provided by operating activities
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993,410 | 958,201 | ||||||
Cash flows from investing activities:
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Capital expenditures
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(264,638 | ) | (260,406 | ) | ||||
Net cash used in investing activities
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(264,638 | ) | (260,406 | ) | ||||
Cash flows from financing activities:
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Member distributions
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(1,676,058 | ) | (735,733 | ) | ||||
Repayment of capital lease obligations
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(76,429 | ) | (84,976 | ) | ||||
Repayment of refurbishment obligation
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(19,804 | ) | (17,036 | ) | ||||
Net cash used in financing activities
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(1,772,291 | ) | (837,745 | ) | ||||
Net change in cash
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(1,043,519 | ) | (139,950 | ) | ||||
Cash at beginning of period
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1,168,250 | 997,652 | ||||||
Cash at end of period
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$ | 124,731 | $ | 857,702 | ||||
Supplemental disclosure of cash flow information:
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Cash paid for interest
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$ | 16,168 | $ | 24,656 |
See accompanying notes to unaudited condensed financial statements.
6
SALAMANDER INNISBROOK, LLC
(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”, “us”, or “our”), together with its affiliates, Salamander Innisbrook Securities, LLC, and Salamander Innisbrook Condominium, LLC (collectively, the “Buyer”) completed the purchase of the Innisbrook Resort and Golf Club (the “Resort”) and all of the equity interest in Golf Host Securities, Inc.
We assumed control and operation of the Rental Pool Lease Operations (the “Rental Pool”) which is a securitized pool of condominiums owned by participating condominium owners (the “Participating Owners”) and rented as hotel rooms to guests of the Resort; an average of 429 owners or 594 hotel rooms participate at any given time. The Rental Pool obligated the Company to make quarterly distributions of a percentage of room revenues under the Amended and Restated Innisbrook Rental Pool Master Lease Agreement, dated January 1, 2004 (the “Master Lease” or “MLA”). As described in Note 5, the MLA also entitled Participating Owners to 50% reimbursement of the refurbishment costs of their units during Phase I through IV and 25% for Phase V refurbishments (the “Refurbishment Program”). Other resort facilities include four 18-hole golf courses, four restaurants, three convention facilities, a health spa, fitness center, tennis and recreation facilities, themed water park and five swimming pools.
Basis of presentation
The accompanying interim 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 Company’s Annual Report on Form 10-K. Accordingly, these condensed financial statements and related notes should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2010.
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 Company’s business is seasonal.
As a destination golf resort, open year round, the Resort’s performance is sensitive to weather conditions and seasonality as well as general trends in the economy, with any economic downturn adversely affecting operating results. Our 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.
Note 2. Accounts Receivable
September 30, 2011
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December 31, 2010
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|||||||
(Unaudited)
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||||||||
Trade accounts receivable
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$ | 763,360 | $ | 1,576,821 | ||||
Less allowance for bad debts
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(106,071 | ) | (91,519 | ) | ||||
Other receivables
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422,634 | 327,220 | ||||||
$ | 1,079,923 | $ | 1,812,522 |
7
Note 3. Property, Buildings and Equipment
September 30, 2011
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December 31, 2010
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(Unaudited)
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Land and land improvements
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$ | 16,555,594 | $ | 16,555,593 | ||||
Buildings
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24,948,272 | 24,948,272 | ||||||
Furniture, fixtures and equipment
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7,628,231 | 7,754,059 | ||||||
Construction in progress
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410,887 | 20,421 | ||||||
49,542,984 | 49,278,345 | |||||||
Less accumulated depreciation
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(8,419,705 | ) | (6,651,100 | ) | ||||
$ | 41,123,279 | $ | 42,627,245 |
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.
September 30,
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December 31,
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|||||||||
Intangible Assets
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Amortization Period
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2011
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2010
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(Unaudited)
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Water Contract
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None since renewable in perpetuity
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$ | 2,030,000 | $ | 2,030,000 | |||||
Rental Pool
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77.5 months
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9,481,717 | 9,481,717 | |||||||
Guest Bookings
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36 months
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1,378,000 | 1,378,000 | |||||||
Club Memberships
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41.5 months
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1,268,000 | 1,268,000 | |||||||
Trade Name
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None since renewable in perpetuity
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2,300,000 | 2,300,000 | |||||||
16,457,717 | 16,457,717 | |||||||||
Less accumulated amortization
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(9,714,748 | ) | (8,910,425 | ) | ||||||
$ | 6,742,969 | $ | 7,547,292 |
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 $43,322 represents the Company’s obligation to pay certain Rental Pool participants an amount equal to 25% 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. Commitments and Contingencies
Claims and Lawsuits
In the normal course of our operations, we are subject to claims and lawsuits. Our former insurance carrier has requested reimbursement of monies from us that they paid in 2010 to settle certain claims asserted against us. We believe the request for reimbursement has no basis and, through our legal counsel, have denied the insurance carrier’s request for reimbursement and we intend to fully defend our position. The outcome of this matter cannot be determined at this time. We believe this matter will not have a material effect on our financial condition and results of operations, and accordingly, there have been no adjustments to the accompanying condensed financial statements as of September 30, 2011 for the effects of this matter.
8
Transitions Optical Sponsorship – PGA TOUR
It was recently announced that Transitions Optical, presenting sponsor of the PGA TOUR event held at Innisbrook for the past two years, did not exercise its option as sponsor beyond the March, 2012 event. Because the Innisbrook Resort event is so highly regarded by the United States and foreign-based TOUR players (strength of the Copperhead Golf Course, superior accommodations, place in the PGA TOUR's "Florida Swing" schedule), those associated with the event are confident that a viable sponsor will be in place well in advance of the 2013 event. It should be noted that the combined resources of the PGA TOUR, the Copperheads and Salamander Hotels and Resorts/Innisbrook Resort have been deployed in a concerted effort to secure a new partner. Innisbrook Resort has been the site of a PGA TOUR event since 1990 and we fully expect to continue to be the site of a TOUR event for many years to come.
Because the PGA TOUR event is held in March, our peak demand month, management does not anticipate any adverse financial impact in the unlikely event that the PGA TOUR event is not held at Innisbrook in future years.
Note 7. Related Party Transactions
We paid management fees to an affiliate of $146,490 and $137,504 for the three months ended; $792,623 and $750,509 for the nine months ended September 30, 2011 and 2010, respectively, which is included in general and administrative expense.
At September 30, 2011 and December 31, 2010, the amounts due from affiliates were $183,887 and $80,507, respectively, which are due on demand.
Note 8. Subsequent Events
Over the past couple of months, we have been in negotiations with different golf cart providers for the replacement of our expiring fleet of lease vehicles. On November 1, 2011, we entered a master lease agreement with Agricredit Acceptance LLC for vehicles supplied by Club Car, LLC. The agreement provides for two leases, golf carts and utility vehicles, commencing the on the 1st day of the month after borrows’ signature on the Delivery and Acceptance Certificate. The term of the lease is 48 months and the monthly lease payments will be approximately $20,750 and $10,058, respectively.
9
RENTAL POOL LEASE OPERATIONS
The operation of the Rental Pool is tied closely to the Resort Operation. The MLA provides for quarterly distribution of a percentage of the Company room revenues to participating condominium owners (“Participants”). Because the participants share a percentage of the Company’s room revenue, the condominium units allowing Rental Pool participation are deemed securities. However, there is no market for these securities other than the normal real estate market. Since the security is real estate, no dividends have been paid or will be. However, Participants are entitled to a contractual distribution paid quarterly, as defined in the lease agreements, for the Company’s right to use the Participants’ condominium units in resort operations.
10
INNISBROOK RENTAL POOL LEASE OPERATION
CONDENSED BALANCE SHEETS
September 30,
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December 31,
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|||||||
2011
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2010
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|||||||
(unaudited)
|
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DISTRIBUTION FUND
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ASSETS
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RECEIVABLE FROM SALAMANDER INNSIBROOK, LLC | ||||||||
FOR DISTRIBUTION
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$ | 456,607 | $ | 489,077 | ||||
INTEREST RECEIVABLE FROM RENTAL POOL | ||||||||
ESCROW FUND
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2,468 | 2,462 | ||||||
$ | 459,075 | $ | 491,539 | |||||
LIABILITIES AND PARTICIPANTS' FUND BALANCES
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DUE TO PARTICIPANTS FOR DISTRIBUTION
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$ | 459,075 | $ | 313,617 | ||||
DUE TO MAINTENANCE ESCROW FUND
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- | 177,922 | ||||||
$ | 459,075 | $ | 491,539 | |||||
MAINTENANCE ESCROW FUND
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||||||||
ASSETS
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CASH
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$ | 593,168 | $ | 185,231 | ||||
CASH EQUIVALENTS
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1,720,000 | 2,035,000 | ||||||
RECEIVABLE FROM DISTRIBUTION FUND
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- | 177,922 | ||||||
RECEIVABLE FROM SALAMANDER INNISBROOK LLC
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- | 6,227 | ||||||
INTEREST RECEIVABLE
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4,017 | 3,432 | ||||||
$ | 2,317,185 | $ | 2,407,812 | |||||
LIABILITIES AND PARTICIPANTS' FUND BALANCES
|
||||||||
ACCOUNTS PAYABLE
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$ | 64,224 | $ | 87,805 | ||||
INTEREST PAYABLE TO DISTRIBUTION FUND
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2,468 | 2,462 | ||||||
TOTAL LIABILITIES
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66,692 | 90,267 | ||||||
CARPET CARE RESERVE
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77,343 | 87,914 | ||||||
PARTICIPANTS' FUND BALANCES
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2,173,150 | 2,229,631 | ||||||
$ | 2,317,185 | $ | 2,407,812 |
See accompanying notes to unaudited condensed financial statements.
11
INNISBROOK RENTAL POOL LEASE OPERATION
CONDENSED STATEMENTS OF OPERATIONS
DISTRIBUTION FUND
(unaudited)
Three months ended September 30,
|
Nine months ended September 30,
|
|||||||||||||||
2011
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2010
|
2011
|
2010
|
|||||||||||||
GROSS REVENUES
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$ | 1,292,348 | $ | 1,062,417 | $ | 7,148,856 | $ | 6,420,391 | ||||||||
DEDUCTIONS:
|
||||||||||||||||
Agents' commissions
|
23,620 | 12,260 | 189,512 | 181,289 | ||||||||||||
Credit card fees
|
36,541 | 30,054 | 201,715 | 181,052 | ||||||||||||
Audit fees
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15,000 | 26,175 | 45,000 | 78,525 | ||||||||||||
Uncollectible/model room rents
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1,554 | - | 1,554 | 2,000 | ||||||||||||
Linen replacements
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9,686 | 13,232 | 48,485 | 44,037 | ||||||||||||
Rental pool complimentary fees
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4,212 | 4,063 | 19,028 | 19,340 | ||||||||||||
90,613 | 85,784 | 505,294 | 506,243 | |||||||||||||
ADJUSTED GROSS REVENUES
|
1,201,735 | 976,633 | 6,643,562 | 5,914,148 | ||||||||||||
AMOUNT RETAINED BY LESSEE
|
(721,041 | ) | (585,980 | ) | (3,986,137 | ) | (3,548,490 | ) | ||||||||
GROSS INCOME DISTRIBUTION
|
480,694 | 390,653 | 2,657,425 | 2,365,658 | ||||||||||||
ADJUSTMENTS TO GROSS INCOME DISTRIBUTION:
|
||||||||||||||||
General pooled expense
|
(650 | ) | 50,446 | (3,560 | ) | 48,497 | ||||||||||
Miscellaneous pool adjustments
|
95 | (275 | ) | (730 | ) | 1,400 | ||||||||||
Corporate complimentary occupancy fees
|
3,320 | 2,447 | 9,201 | 8,082 | ||||||||||||
Occupancy fees
|
(227,092 | ) | (176,166 | ) | (955,186 | ) | (829,300 | ) | ||||||||
Advisory Committee expenses
|
(35,548 | ) | (28,283 | ) | (98,692 | ) | (89,724 | ) | ||||||||
NET INCOME DISTRIBUTION
|
220,819 | 238,822 | 1,608,458 | 1,504,613 | ||||||||||||
ADJUSTMENTS TO NET INCOME DISTRIBUTION:
|
||||||||||||||||
Occupancy fees
|
227,092 | 176,166 | 955,186 | 829,300 | ||||||||||||
Hospitality suite fees
|
121 | 121 | 1,879 | 2,424 | ||||||||||||
Associate room fees
|
8,575 | 7,644 | 39,053 | 34,937 | ||||||||||||
AVAILABLE FOR DISTRIBUTION TO PARTICIPANTS
|
$ | 456,607 | $ | 422,753 | $ | 2,604,576 | $ | 2,371,274 |
See accompanying notes to the unaudited condensed financial statements.
12
INNISBROOK RENTAL POOL LEASE OPERATION
CONDENSED STATEMENTS OF CHANGES IN PARTICIPANTS' FUND BALANCES
(unaudited)
Three months ended September 30,
|
Nine months ended September 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
BALANCE, beginning of period
|
$ | - | $ | - | $ | - | $ | - | ||||||||
ADDITIONS:
|
||||||||||||||||
Amounts available for distribution
|
456,607 | 422,753 | 2,604,576 | 2,371,274 | ||||||||||||
Interest received or receivable from Maintenance Escrow Fund
|
2,468 | 2,753 | 7,599 | 9,015 | ||||||||||||
REDUCTIONS:
|
||||||||||||||||
Amounts withheld for Maintenance Escrow fund
|
- | (158,659 | ) | - | (751,792 | ) | ||||||||||
Amounts accrued or paid to participants
|
(459,075 | ) | (266,847 | ) | (2,612,175 | ) | (1,628,497 | ) | ||||||||
BALANCE, end of period
|
$ | - | $ | - | $ | - | $ | - | ||||||||
MAINTENANCE ESCROW FUND
|
||||||||||||||||
Three months ended September 30,
|
Nine months ended September 30,
|
|||||||||||||||
2011 | 2010 | 2011 | 2010 | |||||||||||||
BALANCE, beginning of period
|
$ | 1,982,635 | $ | 2,283,430 | $ | 2,229,631 | $ | 1,955,469 | ||||||||
ADDITIONS:
|
||||||||||||||||
Amounts withheld from occupancy fees
|
- | 158,659 | - | 751,794 | ||||||||||||
Interest earned
|
1,817 | 2,753 | 4,017 | 9,015 | ||||||||||||
Charges to participants to establish or restore escrow balances
|
813,594 | 42,907 | 965,350 | 152,851 | ||||||||||||
REDUCTIONS:
|
||||||||||||||||
Maintenance charges
|
(605,817 | ) | (273,499 | ) | (942,055 | ) | (599,388 | ) | ||||||||
Carpet care reserve deposit
|
- | (2,643 | ) | - | (12,495 | ) | ||||||||||
Interest accrued or paid to Distribution Fund
|
(1,817 | ) | (2,753 | ) | (4,017 | ) | (9,015 | ) | ||||||||
Refunds to participants as prescribed by the master lease agreements
|
(17,262 | ) | (20,627 | ) | (79,776 | ) | (60,004 | ) | ||||||||
BALANCE, end of period
|
$ | 2,173,150 | $ | 2,188,227 | $ | 2,173,150 | $ | 2,188,227 |
See accompanying notes to the unaudited condensed financial statements.
13
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, for Participants who refurbished units entering the Rental Pool during 2005, under the MLA, 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.
Beginning Fall of 2011 the Resort will initiate a Phase One Turnkey Refurbishment Program of condominiums that participated in the Phase One Turnkey Refurbishment Program in 2000. The improvement of furnishings, soft goods and fixtures plus other upgrades in bathrooms and living areas will bring these rooms to the overall quality level of more recent phases of room renovations. This project, when combined with the $26 million investment Salamander has made to modernize the Resort and the Innisbrook Condominium Association’s lobby and hallway renovation program, will provide an even greater number of quality accommodations for all overnight clientele thereby continuing to enhance Innisbrook’s growing reputation as one of the finest resorts in Florida.
Maintenance Escrow Fund Accounts
These accounts 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 Participant’s 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.
14
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
General
We operate Innisbrook Resort and Golf Club (the “Resort”) in Innisbrook, Florida, which contains 1,216 condominium units of which all have been sold to third parties or to affiliates of the Company. A large number of the condominium units, 594, 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 Resort’s 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 Company’s 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, 2011 and 2010 (unaudited)
Three months
ended
|
Three months
ended
|
|||||||||||||||||||||||
September 30, 2011
|
%
|
September 30, 2010
|
%
|
Inc/(dec)
|
% Chg
|
|||||||||||||||||||
Resort Revenues
|
$ | 4,883,543 | 100.0 | % | $ | 4,581,132 | 100.0 | % | $ | 302,411 | 6.6 | % | ||||||||||||
Costs and Expenses:
|
||||||||||||||||||||||||
Operating costs and expenses
|
2,878,701 | 58.9 | % | 2,641,930 | 57.7 | % | 236,771 | 9.0 | % | |||||||||||||||
General and administrative
|
3,788,762 | 77.6 | % | 3,696,788 | 80.7 | % | 91,974 | 2.5 | % | |||||||||||||||
Depreciation and amortization
|
850,658 | 17.4 | % | 996,941 | 21.8 | % | (146,283 | ) | -14.7 | % | ||||||||||||||
Total costs and expenses
|
7,518,121 | 153.9 | % | 7,335,659 | 160.1 | % | 182,462 | 2.5 | % | |||||||||||||||
Income before interest
|
(2,634,578 | ) | -53.9 | % | (2,754,527 | ) | -60.1 | % | 119,949 | -4.4 | % | |||||||||||||
Interest expense, net
|
(4,524 | ) | -0.1 | % | (6,188 | ) | -0.1 | % | 1,664 | -26.9 | % | |||||||||||||
Net loss
|
$ | (2,639,102 | ) | -54.0 | % | $ | (2,760,715 | ) | -60.3 | % | $ | 121,613 | -4.4 | % |
For the fourth consecutive quarter, Innisbrook revenues improved over the same period of the previous year. For the third quarter of 2011, top line revenues of $4,883,543, exceeding 2010 third quarter revenue by $302,411 or 6.6%. The growth in the third quarter is a result of strong occupancies, up 30%, when compared to the same period in 2010. In spite of a softer average rate in the group segment, improved marketing efforts within all market segments drove overall hotel occupancy up 30% over the same period in 2010.
As a direct result of the increased business levels, Costs and Expenses were up for the three-month period at $7,518,121 but were down as a relative percentage of overall revenue. Due to the seasonal nature of the industry, this is typically the most financially challenging period for most Florida destinations. The Resort experienced a Net Loss (after interest, depreciation and amortization) of $2,639,102 for the three-month period. This figure reflected an improvement of $121,613 or 4.4% when compared to the same time last year and is consistent with the trend of greater operating efficiencies at the Resort. This improvement marks the Resorts eighth consecutive quarter of an improved “bottom line” versus the same period of the prior year.
15
Nine months
ended
|
Nine months
ended
|
|||||||||||||||||||||||
September 30, 2011
|
%
|
September 30, 2010
|
%
|
Inc/(dec)
|
% Chg
|
|||||||||||||||||||
Resort Revenues
|
$ | 26,421,028 | 100.0 | % | $ | 25,014,626 | 100.0 | % | $ | 1,406,402 | 5.6 | % | ||||||||||||
Costs and Expenses:
|
||||||||||||||||||||||||
Operating costs and expenses
|
11,739,647 | 44.4 | % | 11,097,974 | 44.4 | % | 641,673 | 5.8 | % | |||||||||||||||
General and administrative
|
13,768,378 | 52.1 | % | 13,544,194 | 54.1 | % | 224,184 | 1.7 | % | |||||||||||||||
Depreciation and amortization
|
2,572,928 | 9.7 | % | 3,060,525 | 12.2 | % | (487,597 | ) | -15.9 | % | ||||||||||||||
Total costs and expenses
|
28,080,953 | 106.3 | % | 27,702,693 | 110.7 | % | 378,260 | 1.4 | % | |||||||||||||||
Income before interest
|
(1,659,925 | ) | -6.3 | % | (2,688,067 | ) | -10.7 | % | 1,028,142 | -38.2 | % | |||||||||||||
Interest expense, net
|
(16,168 | ) | -0.1 | % | (24,656 | ) | -0.1 | % | 8,488 | -34.4 | % | |||||||||||||
Net income/(loss)
|
$ | (1,676,093 | ) | -6.3 | % | $ | (2,712,723 | ) | -10.8 | % | $ | 1,036,630 | -38.2 | % |
Resort operations generated revenues of $26,421,028 for the nine-month period ended September 30, 2011 which continues to maintain its revenue growth of between 5-6%. Room occupancies for the nine-month period were up 15% while average room rate was down 3% from the prior year. As a result of increased business levels, Costs and Expenses were up.
The Resort’s Net Loss after interest, depreciation and amortization for the nine-month period was $1,676,903. This figure reflects a significant improvement of $1,036,630 (or 38%) over the first nine months of 2010.
Although many segments of the economy continues to struggle, Innisbrook management has continued to make improvements in forecasting the impact of these lagging economic conditions and has continued to implement efficiencies within the Resort operations.
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 Resort’s operations and its affiliates’ current cash reserves.
Our revenue is not considered to be dependent on any individual or small group of customers, the loss of which could have a material adverse effect on the Company’s business or financial condition.
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires us to make estimates and assumptions and select accounting policies that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. These accounting policies have been described on our Annual Report on Form 10-K for the year ended December 31, 2010, and there have been no material changes in the three and nine months ended September 30, 2011.
Recent Accounting Pronouncements
From time to time, new accounting pronouncements are issued by the FASB that are adopted by the company as of the specified effective date. Unless otherwise discussed, management believes that the impact of recently issued standards, which are not yet effective, will not have a material impact on the company’s financial statements upon adoption.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Not applicable.
16
Item 4T. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act (defined below)). Based upon that evaluation, our principal executive officer and principal financial officer concluded that, as of the end of the period covered in this report, our disclosure controls and procedures were effective to ensure that information required to be disclosed in reports filed under the Securities Exchange Act of 1934, as amended (the "Exchange Act") is recorded, processed, summarized and reported within the required time periods and is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
Our management, including our principal executive officer and principal financial officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all error or fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints and the benefits of controls must be considered relative to their costs. Due to the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, have been detected. Accordingly, management believes that the financial statements included in this report fairly present in all material respects our financial condition, results of operations and cash flows for the periods presented.
Changes in Internal Control Over Financial Reporting
In addition, our management with the participation of our Principal Executive Officer and Principal Financial Officer have determined that no change in our internal control over financial reporting occurred during or subsequent to the quarter ended September 30, 2011 that has materially affected, or is (as that term is defined in Rules 13(a)-15(f) and 15(d)-15(f) of the Securities Exchange Act of 1934) reasonably likely to materially affect, our internal control over financial reporting.
PART II — OTHER INFORMATION
In the normal course of operations, the Company is subject to claims and lawsuits. The Company does not believe that the ultimate resolution of such matters will materially impair operations or have an adverse effect on its financial position.
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. Removed and Reserved
Not applicable
17
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.
18
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SALAMANDER INNISBROOK, LLC
|
||
(Registrant)
|
||
Date: November 23, 2011
|
/s/
|
Prem Devedas
|
Prem Devedas
|
||
Manager
|
Date: November 23, 2011
|
/s/
|
Dale Pelletier
|
Dale Pelletier
|
||
Chief Financial Officer
|
||
(Principal Financial and Accounting
|
||
Officer)
|
19