Attached files
file | filename |
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EX-31.1 - EXHIBIT 31.1 - Salamander Innisbrook, LLC | v360130_ex31-1.htm |
EX-31.2 - EXHIBIT 31.2 - Salamander Innisbrook, LLC | v360130_ex31-2.htm |
EXCEL - IDEA: XBRL DOCUMENT - Salamander Innisbrook, LLC | Financial_Report.xls |
EX-32.2 - EXHIBIT 32.2 - Salamander Innisbrook, LLC | v360130_ex32-2.htm |
EX-32.1 - EXHIBIT 32.1 - Salamander Innisbrook, LLC | v360130_ex32-1.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark one)
þ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2013
OR
¨ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
COMMISSION FILE NUMBER: 333-147447
SALAMANDER INNISBROOK, LLC
(Exact name of registrant as specified in its charter)
Florida | 26-0442888 | |
(State of incorporation) | (IRS employer identification no.) |
36750 US Highway 19 North, Palm Harbor, FL 34684
(Address of principal executive offices)
727-942-2000
(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 540 condominium rental pool units owned by approximately 399 condominium owners as of October 28, 2013.
INDEX
Page | |
PART I — FINANCIAL INFORMATION | |
Item 1. Financial Statements | |
Salamander Innisbrook, LLC | |
Condensed Balance Sheets as of September 30, 2013 (Unaudited) and December 31, 2012 | 4 |
Condensed Statements of Operations and Changes in Member’s Equity (Unaudited) for the three and nine months ended September 30, 2013 and 2012 | 5 |
Condensed Statements of Cash Flows (Unaudited) for the nine months ended September 30, 2013 and 2012 | 6 |
Notes to Condensed Financial Statements (Unaudited) | 7 |
Innisbrook Rental Pool Lease Operation | |
Condensed Balance Sheets as of September 30, 2013 (Unaudited) and December 31, 2012 | 11 |
Condensed Statements of Operations (Unaudited) for the three and nine months ended September 30, 2013 and 2012 | 12 |
Condensed Statements of Changes in Participants’ Fund Balances (Unaudited) for the three and nine months ended September 30, 2013 and 2012 | 13 |
Notes to Condensed Financial Statements (Unaudited) | 14 |
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations | 15 |
Item 3. Quantitative and Qualitative Disclosures about Market Risk | 16 |
Item 4. Controls and Procedures | 16 |
PART II — OTHER INFORMATION | |
Item 1. Legal Proceedings | 17 |
Item 1A. Risk Factors | 17 |
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds | 17 |
Item 3. Defaults Upon Senior Securities | 17 |
Item 4. Mine Safety Disclosures | 17 |
Item 5. Other Information | 17 |
Item 6. Exhibits | 18 |
Signatures | 19 |
EX-31.1 | |
EX-31.2 | |
EX-32.1 | |
EX-32.2 |
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. 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 annual report are forward-looking statements. You can generally identify forward-looking statements as statements containing the words “appears,” “believe,” “expect,” “hope,” “may,” “will,” “anticipate,” “intend,” “estimate,” “project,” “assume” or other similar expressions. Certain factors that might cause such a difference include the following: changes in general economic conditions; including changes that may influence group conference and guests’ vacation plans; changes in travel patterns; changes in consumer tastes in destinations or accommodations for group conferences and vacations; changes in Rental Pool participation by the current condominium owners; our ability to continue to operate the Innisbrook Resort and Golf Club, or the “Resort” under our management contracts; and the resale of condominiums to owners who elect neither to participate in the Rental Pool nor to become members of the Resort. 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 Securities Exchange Commission. 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 annual 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
Item 1. Financial Statements
SALAMANDER INNISBROOK, LLC
CONDENSED BALANCE SHEETS
September 30, | December 31, | |||||||
2013 | 2012 | |||||||
(unaudited) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash | $ | 421,198 | $ | 1,585,902 | ||||
Accounts receivable, net | 1,012,843 | 1,672,136 | ||||||
Inventories and supplies | 777,249 | 784,137 | ||||||
Prepaid expenses and other | 846,500 | 728,952 | ||||||
Due from affiliates | - | - | ||||||
Total current assets | 3,057,790 | 4,771,127 | ||||||
Property, buildings and equipment, net | 37,439,952 | 38,767,414 | ||||||
Intangibles, net | 4,598,109 | 5,402,432 | ||||||
Deposits and other assets | 270,345 | 285,601 | ||||||
Total assets | $ | 45,366,196 | $ | 49,226,574 | ||||
Liabilities and Member's Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 523,880 | $ | 1,532,143 | ||||
Accrued liabilities | 2,392,749 | 2,206,234 | ||||||
Deferred revenue | 2,188,093 | 2,752,467 | ||||||
Due to affiliates | 83,179 | 47,633 | ||||||
Total current liabilities | 5,187,901 | 6,538,477 | ||||||
Deferred revenue | 974,306 | 1,106,631 | ||||||
Total liabilities | 6,162,207 | 7,645,108 | ||||||
Member's equity | 39,203,989 | 41,581,466 | ||||||
Total liabilities and member’s equity | $ | 45,366,196 | $ | 49,226,574 |
See accompanying notes to unaudited condensed financial statements.
4 |
SALAMANDER INNISBROOK, LLC
CONDENSED STATEMENTS OF OPERATIONS AND CHANGES IN MEMBER’S EQUITY
(Unaudited)
Three months ended Sepmtember 30, | Nine months ended September 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
Resort revenues | $ | 5,863,479 | $ | 5,893,065 | $ | 28,287,642 | $ | 27,046,513 | ||||||||
Costs and expenses: | ||||||||||||||||
Operating costs and expenses | 3,136,838 | 3,142,704 | 12,205,962 | 11,881,356 | ||||||||||||
General and administrative | 4,009,667 | 4,003,993 | 14,114,128 | 13,660,198 | ||||||||||||
Depreciation and amortization | 787,813 | 832,494 | 2,439,628 | 2,499,826 | ||||||||||||
Total costs and expenses | 7,934,318 | 7,979,191 | 28,759,718 | 28,041,380 | ||||||||||||
Operating loss | (2,070,839 | ) | (2,086,126 | ) | (472,076 | ) | (994,867 | ) | ||||||||
Interest income (expense), net | (4,288 | ) | 11,299 | (11,714 | ) | (12,250 | ) | |||||||||
Net loss | (2,075,127 | ) | (2,074,827 | ) | (483,790 | ) | (1,007,117 | ) | ||||||||
Member's equity, beginning of period | 40,881,100 | 43,732,268 | 41,581,466 | 44,921,298 | ||||||||||||
Member's contributions (distributions) | 398,016 | (11,311 | ) | (1,893,687 | ) | (2,268,051 | ) | |||||||||
Member's equity, end of period | $ | 39,203,989 | $ | 41,646,130 | $ | 39,203,989 | $ | 41,646,130 |
See accompanying notes to unaudited condensed financial statements.
5 |
SALAMANDER INNISBROOK, LLC
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine months ended September 30, | ||||||||
2013 | 2012 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (483,790 | ) | $ | (1,007,117 | ) | ||
Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
Provision for bad debts | 51,556 | 3,546 | ||||||
Depreciation and amortization | 2,439,626 | 2,499,826 | ||||||
Deposits and other assets | 15,256 | 22,607 | ||||||
Other changes in operating assets and liabilities | (985,823 | ) | 574,899 | |||||
Net cash provided by operating activities | 1,036,825 | 2,093,761 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of property and equipment | (307,842 | ) | (162,661 | ) | ||||
Net cash used in investing activities | (307,842 | ) | (162,661 | ) | ||||
Cash flows from financing activities: | ||||||||
Member distributions | (1,893,687 | ) | (2,268,051 | ) | ||||
Repayment of capital lease obligations | - | (30,532 | ) | |||||
Repayment of refurbishment obligation | - | (21,661 | ) | |||||
Net cash used in financing activities | (1,893,687 | ) | (2,320,244 | ) | ||||
Net change in cash | (1,164,704 | ) | (389,144 | ) | ||||
Cash, beginning of period | 1,585,902 | 943,216 | ||||||
Cash, end of period | $ | 421,198 | $ | 554,072 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid for interest | $ | 11,714 | $ | 12,250 |
See accompanying notes to unaudited condensed financial statements.
6 |
SALAMANDER INNISBROOK, LLC
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
Note 1. Nature of Business, Basis of Presentation and Summary of Significant Accounting Policies
Nature of business
Salamander Innisbrook, LLC (the “Company”, “we”, “us”, or “our”), together with our affiliates, Salamander Innisbrook Securities, LLC, and Salamander Innisbrook Condominium, LLC owns and operates the Innisbrook Resort and Golf Club (the “Resort”).
The Company controls and operates the Rental Pool Lease Operation (the “Rental Pool”); 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 440 units or 547 hotel rooms participate at any given time). Pursuant to the Amended and Restated Innisbrook Rental Pool Master Lease Agreement, dated January 1, 2004 (the “Master Lease” or “MLA”), the Company is obligated to make quarterly distributions of a percentage of room revenues. 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 to Quarterly Report on Form 10-Q. Consequently, they 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, 2012.
In the opinion of management, the condensed financial statements reflect all adjustments which are necessary for a fair presentation of the interim financial information. All such adjustments are of a normal recurring nature.
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
Accounts receivable consist of the following as of September 30, 2013 and December 31, 2012:
September 30, 2013 | December 31, 2012 | |||||||
Trade accounts receivable | $ | 980,329 | $ | 1,401,447 | ||||
Other receivables | 153,001 | 382,523 | ||||||
Less allowance for bad debts | (120,487 | ) | (111,834 | ) | ||||
$ | 1,012,843 | $ | 1,672,136 |
7 |
Note 3. Property, Buildings and Equipment
Property, buildings and equipment consist of the following as of September 30, 2013 and December 31, 2012:
September 30, 2013 | December 31, 2012 | |||||||
Land and land improvements | $ | 16,801,012 | $ | 16,801,012 | ||||
Buildings | 24,974,410 | 24,974,410 | ||||||
Furniture, fixtures and equipment | 8,106,322 | 8,106,324 | ||||||
Contruction in progress | 489,500 | 181,657 | ||||||
50,371,244 | 50,063,403 | |||||||
Less accumulated depreciation | (12,931,292 | ) | (11,295,989 | ) | ||||
$ | 37,439,952 | $ | 38,767,414 |
Note 4. Intangibles
Intangible assets represent the value of the following assets acquired in connection with the acquisition of the Resort:
September 30, | December 31, | |||||||||
Intangible Assets | Amortization Period | 2013 | 2012 | |||||||
Water Contract | None since renewable in perpetuity | $ | 2,030,000 | $ | 2,030,000 | |||||
Rental Pool | 77.5 months | 9,481,717 | 9,481,717 | |||||||
Trade Name | None since renewable in perpetuity | 2,300,000 | 2,300,000 | |||||||
13,811,717 | 13,811,717 | |||||||||
Less accumulated amortization | (9,213,608 | ) | (8,409,285 | ) | ||||||
$ | 4,598,109 | $ | 5,402,432 |
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.
Note 6. Commitments and Contingencies
Contingencies
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 do not believe this matter will 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, 2013 for the effects of this matter.
PGA TOUR Event
During this quarter, Valspar, a leader in the paint and coatings industry, and the PGA Tour announced a four year agreement to become title sponsor of the Tampa Bay Championship. The PGA TOUR event on the Copperhead Course at Innisbrook Resort, March 13 – 16, 2014, has been renamed the Valspar Championship. Simultaneously the PGA Tour and Copperhead Charities also announced that BB&T has signed a four year agreement to become the tournament’s local presenting sponsor.
8 |
Note 7. Related Party Transactions
We paid management fees to an affiliate of $175,632 and $176,703 for the three months ended September 30, 2013 and 2012, respectively and $848,357 and $811,717 for the nine months ended September 30, 2013 and 2012, respectively. These fees are included in general and administrative expenses in the Condensed Statements of Operations.
At September 30, 2013 and December 31, 2012, amounts due to affiliates were $83,179 and $47,633, respectively, which balances are non-interest bearing, unsecured and due on demand.
The Innisbrook Rental Pool Lease Operation paid us $164,833 and $91,388 for the three months ended September 30, 2013 and 2012, respectively and $353,533 and $275,631 for the nine months ended September 30, 2013 and 2012, respectively as reimbursement for maintenance and housekeeping labor, use of the telephone lines and other supplies. These reimbursements are included in general and administrative expenses in the Condensed Statements of Operations.
9 |
RENTAL POOL LEASE OPERATION
The operation of the Rental Pool is tied closely to the Resort’s operations. The Rental Pool Master Lease Agreement provides for a quarterly distribution of a percentage of the Company’s room revenues to participating condominium owners (“Participants”), as defined in the agreement (see Note 1 of the Rental Pool Lease Operation financial statements). Because the Rental Pool participants share in a percentage of the room revenues, the condominium units allowing Rental Pool participation are deemed to be securities. However, there is no market for such securities other than the normal real estate market. Since the security is real estate, no dividends have been paid or will be paid.
The Company is a single-member limited liability company, wholly owned by Salamander Farms, LLC. There is no established market for the Member’s interest.
10 |
INNISBROOK RENTAL POOL LEASE OPERATION
CONDENSED BALANCE SHEETS
September 30, | December 31, | |||||||
2013 | 2012 | |||||||
(unaudited) | ||||||||
DISTRIBUTION FUND | ||||||||
ASSETS | ||||||||
RECEIVABLE FROM SALAMANDER INNSIBROOK, LLC | ||||||||
FOR DISTRIBUTION | $ | 591,942 | $ | 603,993 | ||||
INTEREST RECEIVABLE FROM MAINTENANCE | ||||||||
ESCROW FUND | 706 | 1,740 | ||||||
$ | 592,648 | $ | 605,733 | |||||
LIABILITIES AND PARTICIPANTS' FUND BALANCES | ||||||||
DUE TO PARTICIPANTS FOR DISTRIBUTION | $ | 592,648 | $ | 512,461 | ||||
DUE TO MAINTENANCE ESCROW FUND | - | 93,272 | ||||||
$ | 592,648 | $ | 605,733 | |||||
MAINTENANCE ESCROW FUND | ||||||||
ASSETS | ||||||||
CASH | $ | 152,356 | $ | 255,488 | ||||
CASH EQUIVALENTS | 1,020,000 | 1,100,000 | ||||||
RECEIVABLE FROM DISTRIBUTION FUND | - | 93,272 | ||||||
RECEIVABLE FROM GENERAL POOLED | 45 | - | ||||||
INTEREST RECEIVABLE | 6,577 | 6,097 | ||||||
$ | 1,178,978 | $ | 1,454,857 | |||||
LIABILITIES AND PARTICIPANTS' FUND BALANCES | ||||||||
ACCOUNTS PAYABLE | $ | 120,460 | $ | 42,111 | ||||
INTEREST PAYABLE TO DISTRIBUTION FUND | 706 | 1,740 | ||||||
ACCRUED INTEREST | 450 | - | ||||||
TOTAL LIABILITIES | 121,616 | 43,851 | ||||||
CARPET CARE RESERVE | 56,382 | 61,734 | ||||||
PARTICIPANTS' FUND BALANCES | 1,000,980 | 1,349,272 | ||||||
$ | 1,178,978 | $ | 1,454,857 |
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, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
GROSS REVENUES | $ | 1,671,532 | $ | 1,876,501 | $ | 7,787,374 | $ | 7,447,717 | ||||||||
DEDUCTIONS: | ||||||||||||||||
Agents' commissions | 51,300 | 73,106 | 235,187 | 232,580 | ||||||||||||
Credit card fees | 47,257 | 52,749 | 219,179 | 208,743 | ||||||||||||
Audit fees | 15,000 | 15,000 | 45,000 | 45,000 | ||||||||||||
Uncollected room rents | - | - | 2,515 | - | ||||||||||||
Linen replacements | 35,348 | 7,002 | 79,872 | 62,616 | ||||||||||||
Rental pool complimentary fees | 4,425 | 2,472 | 18,881 | 16,104 | ||||||||||||
153,330 | 150,329 | 600,634 | 565,043 | |||||||||||||
ADJUSTED GROSS REVENUES | 1,518,202 | 1,726,172 | 7,186,740 | 6,882,674 | ||||||||||||
AMOUNT RETAINED BY LESSEE | (910,921 | ) | (1,035,703 | ) | (4,312,044 | ) | (4,129,605 | ) | ||||||||
GROSS INCOME DISTRIBUTION | 607,281 | 690,469 | 2,874,696 | 2,753,069 | ||||||||||||
ADJUSTMENTS TO GROSS INCOME DISTRIBUTION: | ||||||||||||||||
General pooled expense | (881 | ) | (1,156 | ) | (4,221 | ) | (3,488 | ) | ||||||||
Miscellaneous pool adjustments | (31 | ) | 81 | 688 | (687 | ) | ||||||||||
Corporate complimentary occupancy fees | 1,576 | 1,551 | 8,490 | 7,407 | ||||||||||||
Occupancy fees | (278,608 | ) | (253,090 | ) | (988,520 | ) | (929,510 | ) | ||||||||
Advisory Committee expenses | (27,854 | ) | (32,546 | ) | (95,102 | ) | (91,674 | ) | ||||||||
NET INCOME DISTRIBUTION | 301,483 | 405,309 | 1,796,031 | 1,735,117 | ||||||||||||
ADJUSTMENTS TO NET INCOME | ||||||||||||||||
DISTRIBUTION: | ||||||||||||||||
Occupancy fees | 278,608 | 253,090 | 988,520 | 929,510 | ||||||||||||
Hospitality suite fees | 1,757 | 441 | 2,914 | 2,162 | ||||||||||||
Associate room fees | 10,094 | 7,889 | 29,988 | 43,218 | ||||||||||||
AVAILABLE FOR DISTRIBUTION TO PARTICIPANTS | $ | 591,942 | $ | 666,729 | $ | 2,817,453 | $ | 2,710,007 |
See accompanying notes to unaudited condensed financial statements.
12 |
INNISBROOK RENTAL POOL LEASE OPERATION
CONDENSED STATEMENTS OF CHANGES IN PARTICIPANTS' FUND BALANCES
(unaudited)
DISTRIBUTION FUND
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
BALANCE, beginning of period | $ | - | $ | - | $ | - | $ | - | ||||||||
ADDITIONS: | ||||||||||||||||
Amounts available for distribution | 591,942 | 666,729 | 2,817,453 | 2,710,007 | ||||||||||||
Interest received or receivable from Maintenance Escrow Fund | 706 | 1,260 | 2,504 | 4,225 | ||||||||||||
REDUCTIONS: | ||||||||||||||||
Amounts withheld for Maintenance | ||||||||||||||||
Escrow Fund | - | (101,236 | ) | - | (371,803 | ) | ||||||||||
Amounts accrued or paid to participants | (592,648 | ) | (566,753 | ) | (2,819,957 | ) | (2,342,429 | ) | ||||||||
BALANCE, end of period | $ | - | $ | - | $ | - | $ | - |
MAINTENANCE ESCROW FUND
Three months ended September 30, | Nine months ended September 30, | |||||||||||||||
2013 | 2012 | 2013 | 2012 | |||||||||||||
BALANCE, beginning of period | $ | 1,199,658 | $ | 1,641,781 | $ | 1,349,272 | $ | 1,814,692 | ||||||||
ADDITIONS: | ||||||||||||||||
Amounts withheld from occupancy fees | - | 101,237 | - | 371,805 | ||||||||||||
Interest earned | 6,577 | 6,394 | 18,863 | 18,724 | ||||||||||||
Charges to participants to establish or restore escrow balances | 74,581 | 43,318 | 291,553 | 205,002 | ||||||||||||
REDUCTIONS: | ||||||||||||||||
Maintenance charges | (264,340 | ) | (454,518 | ) | (600,933 | ) | (970,205 | ) | ||||||||
Interest accrued or paid to Distribution Fund | (6,577 | ) | (6,394 | ) | (18,863 | ) | (18,724 | ) | ||||||||
Refunds to participants as prescribed by the master lease agreements | (8,919 | ) | (24,831 | ) | (38,912 | ) | (114,307 | ) | ||||||||
BALANCE, end of period | $ | 1,000,980 | $ | 1,306,987 | $ | 1,000,980 | $ | 1,306,987 |
See accompanying notes to unaudited condensed financial statements.
13 |
INNISBROOK RENTAL POOL LEASE OPERATION
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1. Rental Pool Lease Operation
Organization and Operations
Salamander Innisbrook, LLC (the “Company”) follows accounting policies that require estimates that are based on assumptions and judgments, 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 is highly dependent upon the operations of the Resort, and likewise, the Resort is also dependent upon the continued participation of condominium owners in the Rental Pool. Additionally, the Rental Pool and Resort are both impacted by the general economic conditions related to the destination resort industry.
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 ALA and 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 such participants and 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, pursuant to the MLA provided to the Participants who refurbished units and entered the Rental Pool during 2005, the Company assumed the obligation to reimburse the Participants an amount up to 25% of the actual unit refurbishment costs, plus interest at a rate of 2.5% per annum.
The MLA generally provides that 90% of the occupancy fees earned by each Participant are ultimately deposited in that Participant’s Maintenance Escrow Fund account. The occupancy fee percentage deposited into the Fund was reduced from 40% in 2012 to 0% in 2013 as was agreed to and amended by the 2013 Annual Lease Agreement. The account provides funds for payments 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 their unit, the Participant is required to restore the escrow balance to a defined minimum level. The MLA requires specific fund balances be maintained, by unit type, size and age of refurbishment.
The LAC, subject to the restriction in the MLA, invests the Maintenance Escrow Fund on behalf of the Participants. Income earned on the investments of the Maintenance Escrow Funds is allocated proportionately to the respective Maintenance Escrow Fund accounts and paid quarterly through the Distribution Fund. The funds are held in certificates of deposits.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
General
We operate Innisbrook Resort and Golf Club (the “Resort”) in Palm Harbor, Florida, containing 1,216 condominium units, all of which have been sold to third parties or to affiliates of the Company. 540 of the condominium units are hotel accommodations that participate in a rental-pooling program (the “Rental Pool”) that provides owners with a percentage distribution of related room revenues minus certain fees and expenses. The remainder of the condominium units are 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, 2013 and 2012(unaudited)
Resort Revenues | $ | 5,863,479 | 100.0 | % | $ | 5,893,065 | 100.0 | % | $ | (29,586 | ) | -0.5 | % | |||||||||||
Costs and Expenses: | ||||||||||||||||||||||||
Operating costs and expenses | 3,136,838 | 53.5 | % | 3,142,704 | 53.3 | % | (5,866 | ) | -0.2 | % | ||||||||||||||
General and administrative | 4,009,667 | 68.4 | % | 4,003,993 | 67.9 | % | 5,674 | 0.1 | % | |||||||||||||||
Depreciation and amortization | 787,813 | 13.4 | % | 832,494 | 14.1 | % | (44,681 | ) | -5.4 | % | ||||||||||||||
Total costs and expenses | 7,934,318 | 135.3 | % | 7,979,191 | 135.4 | % | (44,873 | ) | -0.6 | % | ||||||||||||||
Income before interest | (2,070,839 | ) | -35.3 | % | (2,086,126 | ) | -35.4 | % | 15,287 | -0.7 | % | |||||||||||||
Interest (expense), net | (4,288 | ) | -0.1 | % | 11,299 | -0.2 | % | (15,587 | ) | 138.0 | % | |||||||||||||
Net loss | $ | (2,075,127 | ) | -35.4 | % | $ | (2,074,827 | ) | -35.2 | % | $ | (300 | ) | 0.0 | % |
For the third quarter of 2013, Resort Revenues again remained relatively flat to that of the prior year. The Corporate Group market segment increased 35% year over year which helped offset declines in both the Transient and Golf Packages market segment.
Cost and Expenses almost mirrored last year’s results, indicating that the Company continues to control expenditures. The net loss reflects a minor improvement.
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Results of operations for the nine months ended September 30, 2013 and 2012(unaudited)
Nine months ended | Nine months ended | |||||||||||||||||||||||
September 30, 2013 | % | September 30, 2012 | % | Inc/(dec) | % Chg | |||||||||||||||||||
Resort Revenues | $ | 28,287,642 | 100.0 | % | $ | 27,046,513 | 100.0 | % | $ | 1,241,129 | 4.6 | % | ||||||||||||
Costs and Expenses: | ||||||||||||||||||||||||
Operating costs and expenses | 12,205,962 | 43.1 | % | 11,881,356 | 43.9 | % | 324,606 | 2.7 | % | |||||||||||||||
General and administrative | 14,114,128 | 49.9 | % | 13,660,198 | 50.5 | % | 453,930 | 3.3 | % | |||||||||||||||
Depreciation and amortization | 2,439,628 | 8.6 | % | 2,499,826 | 9.2 | % | (60,198 | ) | -2.4 | % | ||||||||||||||
Total costs and expenses | 28,759,718 | 101.7 | % | 28,041,380 | 103.7 | % | 718,338 | 2.6 | % | |||||||||||||||
Income before interest | (472,076 | ) | -1.7 | % | (994,867 | ) | -3.7 | % | 522,791 | -52.5 | % | |||||||||||||
Interest expense, net | (11,714 | ) | 0.0 | % | (12,250 | ) | 0.0 | % | 536 | -4.4 | % | |||||||||||||
Net loss | $ | (483,790 | ) | -1.7 | % | $ | (1,007,117 | ) | -3.7 | % | $ | 523,327 | -52.0 | % |
For the nine month period ended September 30, 2013, Resort Revenues increased $1,241,129 over the same period last year reflecting a positive growth 4.6% year over year. Costs and Expenses have been contained to a moderate increase of 2.6% which resulted in a decrease to net loss of $523,327 or an approximate 2 point improvement to the bottom line.
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 funding from our sole member or affiliates’ current cash reserves.
Our revenue stream is not considered to be dependent on any individual or small group of customers.
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, 2012, and there have been no material changes during the nine months ended September 30, 2013.
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.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and 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.
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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. However, 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, 2013 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
Item 1. Legal Proceedings
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.
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 financial statements as of September 30, 2013 for the effects of this matter.
Item 1A. Risk Factors
Not required
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Not applicable
Item 3. Defaults Upon Senior Securities
Not applicable
Item 4. Mine Safety Disclosures
Not applicable
Item 5. Other information
Not applicable
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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 | |
101 | Interactive Data Files |
* This exhibit shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 of the Securities Exchange Act of 1934, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.
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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 14, 2013 | /s/ Prem Devedas | |
Prem Devedas | ||
Manager | ||
(Chief Executive Officer) | ||
Date: November 14, 2013 | /s/ Dale Pelletier | |
Dale Pelletier | ||
Chief Financial Officer | ||
(Principal Financial and Accounting | ||
Officer) |
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