FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
For Quarter Ended March 31, 2002
Commission File no. 2-64309
GOLF HOST RESORTS, INC.
| Colorado | 84-0631130 | |
|
|
||
| (State or other jurisdiction of incorporation or organization) |
(I.R.S. Employer Identification No.) |
36750 US 19 N., Palm Harbor, Florida 34684
(727) 942-2000
Indicate by check mark whether the registrant (1) has filed all reports required to Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding twelve months, and (2) has been subject to the filing requirements for the past 90 days. — Yes x No o
Issuer has no common stock subject to this report.
Page 1 of 23
PART I — FINANCIAL INFORMATION
GOLF HOST RESORTS, INC. AND SUBSIDIARY
(a wholly owned subsidiary of Golf Hosts, Inc.)
CONSOLIDATED BALANCE SHEETS
ASSETS
(Substantially all pledged)
| March 31, | December 31, | |||||||||
| 2002 | 2001 | |||||||||
| (unaudited) | ||||||||||
CURRENT ASSETS: |
||||||||||
Cash |
$ | 2,807,795 | $ | 665,402 | ||||||
Restricted cash |
517,421 | 1,413,326 | ||||||||
Accounts receivable, net |
4,393,182 | 2,056,232 | ||||||||
Other receivables |
46,419 | 37,530 | ||||||||
Inventories and supplies |
981,532 | 1,070,280 | ||||||||
Prepaid expenses and other assets |
649,639 | 613,962 | ||||||||
Total current assets |
9,395,988 | 5,856,732 | ||||||||
INTANGIBLES, net |
13,155,744 | 13,323,572 | ||||||||
PROPERTY AND EQUIPMENT, net |
39,504,089 | 40,180,206 | ||||||||
OTHER ASSETS |
516,535 | 509,215 | ||||||||
| $ | 62,572,356 | $ | 59,869,725 | |||||||
The accompanying notes are an integral part of these consolidated financial statements.
Page 2
GOLF HOST RESORTS, INC. AND SUBSIDIARY
(a wholly owned subsidiary of Golf Hosts, Inc.)
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND SHAREHOLDER’S DEFICIT
| March 31, | December 31, | |||||||||
| 2002 | 2001 | |||||||||
| (unaudited) | ||||||||||
CURRENT LIABILITIES: |
||||||||||
Debt due within one year |
$ | 79,533,089 | $ | 79,562,698 | ||||||
Accounts payable |
7,306,287 | 7,762,297 | ||||||||
Accrued payroll costs |
976,179 | 772,296 | ||||||||
Accrued interest |
7,794,837 | 2,263,163 | ||||||||
Other payables |
3,717,202 | 2,775,026 | ||||||||
Deposits and prepaid fees |
2,228,010 | 2,695,273 | ||||||||
Due to related parties |
64,384 | 48,428 | ||||||||
Total current liabilities |
101,619,988 | 95,879,181 | ||||||||
DEBT DUE AFTER ONE YEAR |
— | 51,213 | ||||||||
OTHER LONG-TERM LIABILITIES |
9,015,009 | 12,205,203 | ||||||||
DEFERRED INCOME TAXES |
1,255,000 | 1,255,000 | ||||||||
Total liabilities |
111,889,997 | 109,390,597 | ||||||||
SHAREHOLDER’S DEFICIT |
||||||||||
Common stock, $1 par, 5,000 shares
authorized, issued, and outstanding |
5,000 | 5,000 | ||||||||
5.6% cumulative preferred stock, $1 par,
4,577,000 shares authorized, issued,
and outstanding |
4,577,000 | 4,577,000 | ||||||||
Paid-in capital |
(8,487,323 | ) | (8,487,323 | ) | ||||||
Accumulated deficit |
(45,412,318 | ) | (45,615,549 | ) | ||||||
Total shareholder’s deficit |
(49,317,641 | ) | (49,520,872 | ) | ||||||
Total liabilities and shareholder’s
deficit |
$ | 62,572,356 | $ | 59,869,725 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
Page 3
GOLF HOST RESORTS, INC. AND SUBSIDIARY
(a wholly owned subsidiary of Golf Hosts, Inc.)
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
| Quarters Ended March 31, | |||||||||
| 2002 | 2001 | ||||||||
REVENUES: |
|||||||||
Resort facilities |
$ | 5,018,165 | $ | 7,780,255 | |||||
Food and beverage |
3,593,430 | 5,334,599 | |||||||
Golf |
4,556,741 | 5,784,160 | |||||||
Other |
1,302,492 | 1,926,638 | |||||||
| 14,470,828 | 20,825,652 | ||||||||
COST AND OPERATION EXPENSES: |
|||||||||
Resort facilities |
3,340,963 | 4,851,535 | |||||||
Food and beverage |
2,392,376 | 3,215,893 | |||||||
Golf |
1,585,600 | 1,970,617 | |||||||
Other |
2,424,139 | 2,902,072 | |||||||
General and administrative |
1,217,178 | 1,606,649 | |||||||
Depreciation and amortization |
872,829 | 968,284 | |||||||
| 11,833,085 | 15,515,050 | ||||||||
INCOME BEFORE LOSS ON LEASED
ASSET |
2,637,743 | 5,310,602 | |||||||
LOSS ON LEASED ASSET |
— | 664,681 | |||||||
INTEREST, NET |
2,370,435 | 2,421,198 | |||||||
NET INCOME |
267,308 | 2,224,723 | |||||||
DIVIDEND REQUIREMENTS ON
PREFERRED STOCK |
64,077 | 64,077 | |||||||
NET INCOME AVAILABLE
TO COMMON SHAREHOLDER |
$ | 203,231 | $ | 2,160,646 | |||||
The accompanying notes are an integral part of these consolidated financial statements.
Page 4
GOLF HOST RESORTS, INC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF SHAREHOLDER’S DEFICIT
| $1 Par Value | 5.6% Cumulative | |||||||||||||||||||||||||||
| Common Stock | Preferred Stock | Total | ||||||||||||||||||||||||||
| Paid-In | Retained | Shareholder's | ||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | Capital | Deficit | Deficit | ||||||||||||||||||||||
Balance, December 31, 2000 |
5,000 | $ | 5,000 | 4,577,000 | $ | 4,577,000 | $ | (13,557,000 | ) | $ | (33,744,244 | ) | $ | (42,719,244 | ) | |||||||||||||
Net loss allocated to
common shareholder |
— | — | — | — | — | (10,610,891 | ) | (10,610,891 | ) | |||||||||||||||||||
Forgiveness of operating deficits |
— | — | — | — | 5,069,677 | — | 5,069,677 | |||||||||||||||||||||
Contribution from shareholder |
— | — | — | — | — | 2,667,921 | 2,667,921 | |||||||||||||||||||||
Distribution to shareholder |
— | — | — | — | — | (3,928,335 | ) | (3,928,335 | ) | |||||||||||||||||||
Balance, December 31, 2001 |
5,000 | 5,000 | 4,577,000 | 4,577,000 | (8,487,323 | ) | (45,615,549 | ) | (49,520,872 | ) | ||||||||||||||||||
Net income allocated to
common shareholder |
— | — | — | — | — | 203,231 | 203,231 | |||||||||||||||||||||
Balance, March 31, 2002 (unaudited) |
5,000 | $ | 5,000 | 4,577,000 | $ | 4,577,000 | $ | (8,487,323 | ) | $ | (45,412,318 | ) | $ | (49,317,641 | ) | |||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
Page 5
GOLF HOST RESORTS, INC. AND SUBSIDIARY
(a wholly owned subsidiary of Golf Hosts, Inc.)
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31,
(unaudited)
| 2002 | 2001 | |||||||||
CASH FLOWS FROM OPERATING ACTIVITIES: |
||||||||||
Net income before dividend requirements
on preferred stock |
$ | 267,308 | $ | 2,224,723 | ||||||
Adjustments to reconcile net income to net cash
provided by operations: |
||||||||||
Depreciation and amortization |
872,829 | 968,284 | ||||||||
Provision for bad debts |
223,933 | 149,063 | ||||||||
Changes in operating working capital |
1,018,607 | (2,113,984 | ) | |||||||
Cash provided by operations |
2,382,677 | 1,228,086 | ||||||||
CASH FLOWS FROM INVESTING ACTIVITIES: |
||||||||||
(Increase)/decrease in other assets |
(7,320 | ) | 369,801 | |||||||
Purchases of property and equipment |
(28,886 | ) | (214,793 | ) | ||||||
Cash (used in)/provided by investing activities |
(36,206 | ) | 155,008 | |||||||
CASH FLOWS FROM FINANCING ACTIVITIES: |
||||||||||
Repayment of existing debt |
(80,822 | ) | (88,761 | ) | ||||||
Repayment of line of credit |
— | (667,141 | ) | |||||||
(Decreases)/increases in other long-term liabilities |
(123,256 | ) | 71,056 | |||||||
Cash used in financing activities |
(204,078 | ) | (684,846 | ) | ||||||
NET INCREASE IN CASH |
2,142,393 | 698,248 | ||||||||
CASH, BEGINNING OF PERIOD |
665,402 | 565,400 | ||||||||
CASH, END OF PERIOD |
$ | 2,807,795 | $ | 1,263,648 | ||||||
NONCASH FINANCING AND INVESTING
ACTIVITIES: |
||||||||||
The Company satisfied its preferred
stock dividend liability to GHI
through the intercompany account |
$ | 64,077 | $ | 64,077 | ||||||
The accompanying notes are an integral part of these consolidated financial statements.
Page 6
GOLF HOST RESORTS, INC. AND SUBSIDIARY
(a wholly owned subsidiary of Golf Hosts, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) BASIS OF PRESENTATION
| The financial statements for December 31, 2001 were prepared assuming the Company will continue as a going concern. As discussed in the notes to consolidated financial statements on Form 10-K dated December 31, 2001, the Company has suffered recurring losses from operations, has negative working capital and has a shareholder’s deficit that raise substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also discussed in the footnotes. Additionally, as described in Note 7 of the notes to consolidated financial statements on Form 10-K, the Company has defaulted under the terms of its debt agreement and Golf Host, Inc. (the Company’s parent company) is a defendant to a class action lawsuit. These financial statements do not include any adjustments that might result from the outcome of the uncertainties. | |
| These financial statements and related notes are presented for interim periods in accordance with the requirements of Form 10-Q and, consequently, do not include all disclosures normally provided in the Company’s Annual Report on Form 10-K. Accordingly, these 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, 2001. | |
| The accompanying consolidated balance sheet for March 31, 2002, and consolidated statements of operations and cash flows for the periods ended March 31, 2002 and 2001, are unaudited but reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature. | |
| The Company’s business is seasonal. Therefore, the results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the fiscal years. |
(2) INTANGIBLE ASSETS
| The Company recorded at closing in 1997, a resort intangible asset of approximately $30,400,000. This intangible related to the purchase of the Innisbrook Resort, which contained an existing rental pool agreement and a recently executed management agreement with Westin Hotels. The intangible is being amortized over twenty years on a straight-line basis. Amortization expense for all intangible assets was approximately $168,000 and $386,000 for the three months ended March 31, 2002 and March 31, 2001, respectively. | |
| As noted in the Company’s 10-K for December 31, 2001, management had determined that due to declining demand in the resort business and reduced rental pool participation which led to declines in operating results, impairment had occurred. At December 31, |
Page 7
GOLF HOST RESORTS, INC. AND SUBSIDIARY
(a wholly owned subsidiary of Golf Hosts, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(2) INTANGIBLE ASSETS
| 2000, an impairment charge of $7,441,000 was recorded. As a result of the continued decline in destination golf resort business during 2001 and the events of September 11, 2001, the Company determined that further impairment had occurred and consequently had recognized an additional $3,000,000 impairment charge during the quarter ended September 30, 2001. |
(3) DEBT
| Debt consists of the following: |
| March 31, | December 31, | |||||||
| 2002 | 2001 | |||||||
Participating mortgage note at varying pay
rates maturing in 2027 (in default) |
$ | 69,975,000 | $ | 69,975,000 | ||||
$9,000,000 participation mortgage
note credit facility (in default) |
9,000,000 | 9,000,000 | ||||||
Capital leases |
558,089 | 638,911 | ||||||
| 79,533,089 | 79,613,911 | |||||||
Less current maturities |
(79,533,089 | ) | (79,562,698 | ) | ||||
| $ | — | $ | 51,213 | |||||
(4) CONTINGENCIES
| Golf Hosts, Inc., the Company’s parent, has been named as a defendant in a consolidated class action lawsuit whereby the plaintiffs allege breaches of contract, including breaches in connection with the Rental Pool Master Lease Agreement. The plaintiffs are seeking unspecified damages and declaratory judgment stating that the plaintiffs are entitled to participate in the rental pool if one exists and a limitation of golf course access to persons who are either condominium owners, members, their accompanied guests, or guests of the resort. Deposition of class members and others, including depositions of prior executives of Golf Host Resorts, have been taken and additional discovery remains. The previously scheduled trial date of February 3, 2002 has been postponed by the Court; a new trial date has not yet been set. As this litigation continues, the Company is not yet able to determine whether the resolution of this matter will have a material adverse effect on the Company’s financial condition or results of operations although the Company believes Golf Hosts, Inc. has successful defenses based upon consultations with legal counsel and intends to vigorously defend this action. |
Page 8
GOLF HOST RESORTS, INC. AND SUBSIDIARY
(a wholly owned subsidiary of Golf Hosts, Inc.)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(5) TAMARRON’S RESULTS OF OPERATIONS
| The Company assumed responsibility for the net income (loss) of Tamarron under the terms of the lease agreement between the Company and Golf Host II, Inc. entered into during 2000. The net loss is as follows and is included in loss on leased asset in the statement of operations: |
| Quarter ended | |||||
| March 31, 2001 | |||||
Revenue: |
|||||
Hotel |
$ | 654,127 | |||
Food and beverage |
513,680 | ||||
Golf |
169,449 | ||||
Other |
499,100 | ||||
| 1,836,356 | |||||
Costs & operating expense: |
|||||
Hotel |
276,496 | ||||
Food and beverage |
361,835 | ||||
Golf |
97,668 | ||||
Other |
664,511 | ||||
General and administrative |
1,071,205 | ||||
Interest expense |
29,322 | ||||
| 2,501,037 | |||||
Net loss |
$ | (664,681 | ) | ||
| On November 19, 2001, GH II, an affiliated company and lessor of Tamarron, sold Tamarron for $9,500,000. A portion of the proceeds were contributed to the Company as a capital contribution and were used to settle the remaining balance due under the $5,000,000 mortgage note from the previous owners. |
Page 9
GOLF HOST RESORTS, INC.
Management’s Discussion and Analysis
of Financial Condition and Results of Operations
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
| Results of Operations | |
| The comparative results for 2001 exclude the activities of the Tamarron Resort, which the Company assumed responsibility for the net income (loss) under the terms of a lease agreement entered into between the Company and Golf Host II during 2000. Golf Host II sold the Tamarron Resort on November 19, 2001. The exclusion of Tamarron’s results allows for an appropriate comparison on a period to period basis for the Innisbrook property. | |
| During the first quarter of 2002, business results reflect our customers’ increased caution and concerns about travel subsequent to the 9/11 tragedy. Total room nights at the Innisbrook property were down 9,055 or 23.7% as a result of our contingency of business segment having postponed or reduced their travel budget and plans. This decrease was primarily driven by our group business sector as the actual group room nights were down 8,834 or 29.5%. Group meeting planners are scheduling meetings for shorter durations and the booking window has been reduced from 12 to 18 months to 6 to 12 months. It is also more difficult to get these customers to commit to booking time at the resort due to their perception of the uncertain U.S. economy. Coupled with the reduction in room nights, average guest spending dropped from $544.87 to $496.15 per room night for the comparative periods. The combination of reduced room nights and spending per room night produced gross revenue reductions of $6,355,000 or 30.5%. In an effort to respond to these unsatisfactory changes, the Company aggressively reduced operating expenses, in the aggregate of $3,682,000 or 23.7%, in order to manage performance for the first quarter of 2002. The reduction in revenue and the Company’s inability to offset its fixed costs of operating the Innisbrook property resulted in a net reduction of operating income before income (loss) leased assets of $2,638,000. | |
| Interest expense of approximately $2,370,000 in 2002 is relatively consistent with the 2001 amount of $2,421,000. The Company continues to accrue its monthly interest liability associated with the Golf Trust of America participating mortgage even though it has been unable to make the cash payments of principal and interest beginning with the October 1, 2001 due date. The Company is still negotiating with Golf Trust and expects to arrive at an amicable solution before the end of first half of 2003. Note 7 of the Company’s 2001 10-K and the Financial Condition and Liquidity discussion provide a more detailed description regarding this mortgage. | |
| During the quarter, the Company has set aside $580,000 to be utilized for capital improvements. Expenditures during the quarter include $109,000 that have been utilized to fund golf cart, golf course equipment, computer equipment and food & beverage equipment leases. In addition, $19,000 was used for maintenance and minor repairs on the food and beverage facilities. | |
| Financial Condition and Liquidity | |
| The Company’s working capital position inclusive of loans in default in the amount of $78,975,000, has decreased to approximately $89,157,000 as of March 31, 2002. An $865,000 improvement in working capital from the December 31, 2001 deficit of $90,022,000 is primarily the result of net income after interest of $203,000. | |
| The Company experiences seasonal fluctuations in operations, which impact its net working capital position. Fluctuations in working capital have been managed in the past through the utilization of a $3,000,000 accounts receivable revolving credit line. As described below, the company has defaulted on its mortgage obligation to Golf Trust of America (“GTA”). As a result of that default, Wells Fargo Business Credit, Inc. elected to terminate their credit line with Golf Host Resorts effective May 23, 2002. While the company has utilized this credit line to facilitate short-term cash needs in past years, its utilization during 2002 has been limited. The Resort will attempt to develop a replacement facility upon completion of the loan settlement agreement. Management believes that the Company will have to restructure the GTA loan for the economic viability of the Resort. |
Page 10
GOLF HOST RESORTS, INC.
Management’s Discussion and Analysis
of Finanical Condition and Results of Operations
ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations Continued
| In order to preserve its legal position, GTA has asserted its right to accelerate payments of the total outstanding principal and interest amounts and continues to negotiate a settlement as described below. As of January, 2003. The Company is seeking to negotiate a Settlement Agreement with GTA. In connection with the proposed Settlement Agreement, the Company would transfer to GTA the resort property, three condominium properties located at the Innisbrook Resort, the Company’s GTA stock interests, and all rights, title and interests of the Company under existing contracts and agreements. In addition, the Company would provide a limited indemnity to defend and hold harmless GTA (and its affiliates) from and against any and all costs, liabilities, claims, losses, judgments or damages arising out of or in connection with the Class Action Lawsuit, as well as liabilities accruing on or before the closing date related to employee benefits and liabilities for contracts or agreements not disclosed by the Company to GTA. In return, it is anticipated the GTA would deliver to the Company a duly executed release. No Settlement Agreement has yet been signed and no terms are definite. Neither GTA nor any of its affiliates is under any obligation to continue negotiating with the Company or to execute the Settlement Agreement and could initiate foreclosure proceedings and pursue its other remedies at any time. | |
| As noted in the Company’s 10-K for December 31, 2001, management determined that due to declining demand in the hotel golf resort business and reduced rental pool participation which led to declines in operating results, impairment had occurred. At December 31, 2000, an impairment charge of $7,441,000 was recorded. As a result of the continued decline in destination golf resort business during 2001 and the events of September 11, 2001, the Company determined that further impairment had occurred and, consequently, recognized an additional $3,000,000 impairment during the quarter ended September 30, 2001. |
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk
| The Registrant does not have significant market risk with respect to foreign currency exchanges or other market rates. The Registrant’s debt has a fixed contractual interest rate through the year 2027 and, accordingly, fluctuations in interest rates are not expected to affect financial results. |
ITEM 4. Controls and Procedures
| Within the 90 days prior to the date of this report, the Registrant’s management, including the Chief Executive Officer, the Principal Financial Officer and the Registrant’s agent (Westin North American Management Company), carried out an evaluation of the effectiveness of the design and operation of the disclosure controls and procedures pursuant to Exchange Act Rule 13a-14. Based upon the evaluation, the Registrant’s Chief Executive Officer and the Principal Financial Officer concluded that the Registrant’s disclosure controls and procedures are effective in timely alerting them to material information to be included in the Registrant’s periodic SEC filings. | |
| There have been no significant changes in the Registrant’s internal controls or in other factors that could significantly affect internal controls subsequent to the date the Chief Executive Officer and the Principal Financial Officer carried out this evaluation. |
Page 11
PART II — OTHER INFORMATION
Item 1. Legal Proceedings
| Golf Hosts, Inc. the Company’s parent, has been named as a defendant in a consolidated class action lawsuit whereby the plaintiffs allege breaches of contract, including breaches in connection with the Rental Pool Master Lease Agreement. The plaintiffs are seeking unspecified damages and declaratory judgment stating that the the plaintiffs are entitled to participate in the rental pool if one exists and a limitation of golf course access to persons who are either condominium owners, members, their accompanied guest, or guests of the resort. Deposition of class members and others, including depositions of prior executives of Golf Host Resorts, have been taken and additional discovery remains. The previously scheduled trial date of February 3, 2002 has been postponed by the Court; a new trial date has not yet been set. As this litigation continues, the Company is not yet able to determine whether the resolution of this matter will have a material adverse effect on the Company’s financial condition or results of operations although the Company believes Golf Hosts, Inc. has successful defenses based upon consultations with legal counsel and intends to vigorously defend this action. |
Item 2. Changes in Securities and Use of Proceeds
| Not applicable. |
Item 3. Defaults Upon Senior Securities
| Not applicable |
Item 4. Submission of Matters to a Vote of Security Holders
| Not applicable |
Item 5. Other Information
| Pursuant to an agreement with the SEC staff, included in the 10-Q filing are unaudited financial statements of the Innisbrook Rental Pool Lease Operation for the quarters ended March 31, 2002 and 2001 and of the Tamarron Rental Pool Lease Operation for the quarter ended March 31, 2001. |
Item 6. Exhibits and Reports on Form 8-K
| (a) The following exhibits are included in this Form 10-Q: |
| 99.1 | President Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002. | |
| 99.2 | Principal Financial Officer Certification pursuant to Section 906 of Sarbanes-Oxley Act of 2002. |
| (b) The Registrant did not file Form 8-K during the three months ended March 31, 2002. |
Page 12
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.
GOLF HOST RESORTS, INC.
| Date: March 6, 2003 | By: | /s/ Merrick Kleeman | ||
| Merrick Kleeman President |
||||
| Date: March 6, 2003 | By: | /s/ R. Keith Wilt | ||
| R. Keith Wilt Vice President and Treasurer (Principal Financial Officer) |
Page 13
RENTAL POOL LEASE OPERATION
The following unaudited financial statements of the Innisbrook Rental Pool Lease Operation (the Rental Pool) are for the quarters ended March 31, 2002 and 2001.
The operation of the Rental Pool is tied closely to that of Golf Host Resorts, Inc. (the Company), and provide for distribution of a percentage of the Company’s room revenues, as defined in the Rental Pool Master Lease Agreements (“MLA”), to participating condominium owners (Participants).
Effective January 1, 2002, the Company replaced the MLA, which expired on December 31, 2001, with a new Mater Lease Agreement (“NMLA”). The NMLA provides for Adjusted Gross Revenues, as defined, to be divided 40% to the Innisbrook participants and 60% to the Company. At December 31, 2001, 605 condominium owners had elected to participate in the NMLA while 13 had elected to participate or remain in the Guaranteed Distribution Master Lease Agreement (“GMLA”).
The Innisbrook Rental Pool Operation is party to lease agreements with an affiliated entity, whose ability to continue as a going concern is in substantial doubt.
The operation of the Rental Pool is more fully discussed in Form 10-K, for the fiscal year ended December 31, 2001 (file No. 2-64309).
Page 14
INNISBROOK RENTAL POOL LEASE OPERATION
BALANCE SHEETS
DISTRIBUTION FUND
| March 31, | ||||||||
| 2002 | December 31, | |||||||
| (unaudited) | 2001 | |||||||
ASSETS |
||||||||
RECEIVABLE FROM GOLF HOST RESORTS, INC.
FOR DISTRIBUTION |
$ | 1,790,798 | $ | 948,703 | ||||
INTEREST RECEIVABLE FROM MAINTENANCE
ESCROW FUND |
15,856 | 17,408 | ||||||
| $ | 1,806,654 | $ | 966,111 | |||||
LIABILITIES AND PARTICIPANTS’ FUND BALANCES |
||||||||
DUE TO PARTICIPANTS FOR DISTRIBUTION |
1,480,977 | 763,301 | ||||||
DUE TO MAINTENANCE ESCROW FUND |
325,677 | 202,810 | ||||||
| $ | 1,806,654 | $ | 966,111 | |||||
MAINTENANCE ESCROW FUND |
||||||||
ASSETS |
||||||||
CASH AND CASH EQUIVALENTS |
$ | 2,806,956 | $ | 1,242,415 | ||||
SHORT-TERM INVESTMENTS |
2,185,000 | 1,330,000 | ||||||
RECEIVABLE FROM DISTRIBUTION FUND |
325,677 | 202,810 | ||||||
CONSTRUCTION WORK IN PROGRESS |
7,284 | — | ||||||
CARPET CARE RECEIVABLE |
23,576 | 13,692 | ||||||
INTEREST RECEIVABLE |
9,012 | 13,925 | ||||||
| $ | 5,357,505 | $ | 2,802,842 | |||||
LIABILITIES AND PARTICIPANTS’ FUND BALANCES |
||||||||
ACCOUNTS PAYABLE |
$ | 2,820 | $ | 58,976 | ||||
INTEREST PAYABLE TO DISTRIBUTION FUND |
15,856 | 17,408 | ||||||
PARTICIPANTS’ FUND BALANCES |
5,338,829 | 2,726,458 | ||||||
| $ | 5,357,505 | $ | 2,802,842 | |||||
These statements were prepared from the books and records of the Rental Pool without audit and, in the opinion of the Rental Pool Operation, include all adjustments which are necessary for a fair presentation.
Page 15
INNISBROOK RENTAL POOL LEASE OPERATION
STATEMENTS OF OPERATIONS
FOR THE QUARTERS ENDED MARCH 31, 2002 AND 2001
(unaudited)
DISTRIBUTION FUND
| Year-to-Date | |||||||||
| 2002 | 2001 | ||||||||
GROSS REVENUES |
$ | 4,927,742 | $ | 7,267,850 | |||||
DEDUCTIONS: |
|||||||||
Agents’ commissions |
194,790 | 298,642 | |||||||
Credit card fees |
116,319 | 51,265 | |||||||
Audit fees |
4,562 | 3,625 | |||||||
Uncollectable room rents |
16,132 | — | |||||||
Linen replacements |
42,921 | — | |||||||
Rental pool complimentary fees |
795 | — | |||||||
| 375,519 | 353,532 | ||||||||
ADJUSTED GROSS REVENUES |
4,552,223 | 6,914,318 | |||||||
MANAGEMENT FEE |
(2,728,932 | ) | (3,446,207 | ) | |||||
GROSS INCOME DISTRIBUTION |
1,823,291 | 3,468,111 | |||||||
ADJUSTMENTS TO GROSS INCOME
DISTRIBUTION: |
|||||||||
Management fee |
(1,412 | ) | (378,788 | ) | |||||
Marketing fee |
(770 | ) | (206,612 | ) | |||||
Miscellaneous pooled expense |
(92 | ) | (22,130 | ) | |||||
Corporate complimentary occupancy fees |
3,818 | 10,796 | |||||||
Interest (Paragraph 3.1 (3)) |
(3,183 | ) | — | ||||||
Westin Associate room fees |
22,736 | 24,059 | |||||||
Occupancy fees |
(361,863 | ) | (484,363 | ) | |||||
Advisory Committee expenses |
(55,451 | ) | (36,626 | ) | |||||
NET INCOME DISTRIBUTION |
1,427,074 | 2,374,447 | |||||||
ADJUSTMENTS TO NET INCOME DISTRIBUTION: |
|||||||||
Occupancy fees |
361,863 | 484,363 | |||||||
Hospitality suite fees |
1,861 | — | |||||||
Greens fees |
— | 3,874 | |||||||
Additional participation credit |
— | 720 | |||||||
AMOUNT AVAILABLE FOR DISTRIBUTION
TO PARTICIPANTS |
$ | 1,790,798 | $ | 2,863,404 | |||||
Average daily distribution |
$ | 35.32 | $ | 49.76 | |||||
Average room rate |
$ | 168.96 | $ | 190.15 | |||||
Occupied room nights |
29,166 | 38,221 | |||||||
Available room nights |
50,707 | 57,549 | |||||||
Occupancy percentage |
57.5 | % | 66.4 | % | |||||
Average number of available units |
563 | 639 | |||||||
These statements were prepared from the books and records of the Rental Pool without audit and, in the opinion of the Rental Pool Operation, include all adjustments which are necessary for a fair presentation.
Page 16
INNISBROOK RENTAL POOL LEASE OPERATION
STATEMENTS OF CHANGES IN PARTICIPANTS’ FUND BALANCES
FOR THE QUARTERS ENDED MARCH 31, 2002 AND 2001
(unaudited)
DISTRIBUTION FUND
| Year-to-date | |||||||||
| 2002 | 2001 | ||||||||
BALANCE, beginning of period |
$ | — | $ | — | |||||
ADDITIONS: |
|||||||||
Amount available for distribution |
1,790,798 | 2,863,404 | |||||||
Interest received or receivable from
Maintenance Escrow Fund |
15,856 | 24,172 | |||||||
REDUCTIONS: |
|||||||||
Amounts withheld for Maintenance Escrow Fund |
(325,677 | ) | (432,074 | ) | |||||
Amounts accrued or paid to participants |
(1,480,977 | ) | (2,455,502 | ) | |||||
BALANCE, end of period |
$ | — | $ | — | |||||
MAINTENANCE ESCROW FUND |
|||||||||
BALANCE, beginning of period |
$ | 2,726,458 | $ | 1,929,901 | |||||
ADDITIONS: |
|||||||||
Amounts withheld from occupancy fees |
325,677 | 432,074 | |||||||
Interest earned |
15,856 | 24,172 | |||||||
Other cost reimbursement |
— | 397,412 | |||||||
Charges to participants to establish
or restore escrow balances |
4,176,234 | 222,168 | |||||||
REDUCTIONS: |
|||||||||
Maintenance charges |
(172,738 | ) | (161,024 | ) | |||||
Refurbishment Phase II |
(1,152,467 | ) | — | ||||||
Carpet care reserve deposit |
(14,475 | ) | (24,219 | ) | |||||
Interest accrued or paid to Distribution Fund |
(15,856 | ) | (24,172 | ) | |||||
Refunds to participants as prescribed by
the master lease agreements |
(549,860 | ) | (57,806 | ) | |||||
BALANCE, end of period |
$ | 5,338,829 | $ | 2,738,506 | |||||
These statements were prepared from the books and records of the Rental Pool without audit and, in the opinion of the Rental Pool Operation, include all adjustments which are necessary for a fair presentation.
Page 17
RENTAL POOL LEASE OPERATION
The following unaudited financial statements of the Tamarron Rental Pool Lease Operation (the Rental Pool) are for the quarter ended March 31, 2001.
The operation of the Rental Pool was tied closely to that of Golf Host Resorts, Inc. (the Company), and provided for distribution of a percentage of the Company’s room revenues, as defined in the Rental Pool Master Lease Agreement, to participating condominium owners (Participants).
On November 19, 2001, Golf Host II, Inc., owners of Tamarron, sold the Tamarron Resort for $9,500,000.
The operation of the Rental Pool is more fully discussed in Form 10-K, for the fiscal year ended December 31, 2001 (file No. 2-64309).
Page 18
TAMARRON RENTAL POOL LEASE OPERATION
BALANCE SHEETS
DISTRIBUTION FUND
| March 31, | |||||
| 2001 | |||||
| (unaudited) | |||||
ASSETS |
|||||
CASH |
$ | 1,000 | |||
RECEIVABLE FROM GOLF HOST RESORTS, INC.
FOR DISTRIBUTION |
263,981 | ||||
INTEREST RECEIVABLE FROM MAINTENANCE
ESCROW FUND |
1,123 | ||||
| $ | 266,104 | ||||
LIABILITIES AND PARTICIPANTS’ FUND BALANCES |
|||||
DUE TO PARTICIPANTS FOR DISTRIBUTION |
$ | 205,042 | |||
DUE TO MAINTENANCE ESCROW FUND |
61,062 | ||||
| $ | 266,104 | ||||
MAINTENANCE ESCROW FUND |
|||||
ASSETS |
|||||
CASH AND CASH EQUIVALENTS |
$ | 102,691 | |||
DUE FROM DISTRIBUTION FUND |
61,062 | ||||
INVENTORY: |
|||||
Linen |
45,343 | ||||
Materials and supplies |
6,597 | ||||
DEPOSITS |
4,829 | ||||
| $ | 220,522 | ||||
LIABILITIES AND PARTICIPANTS’ FUND BALANCES |
|||||
ACCOUNTS PAYABLE |
$ | 3,428 | |||
INTEREST PAYABLE TO DISTRIBUTION FUND |
1,123 | ||||
PARTICIPANTS’ FUND BALANCES |
215,971 | ||||
| $ | 220,522 | ||||
These statements were prepared from the books and records of the Rental Pool without audit and, in the opinion of the Rental Pool Operation, include all adjustments which are necessary for a fair presentation.
Page 19
TAMARRON RENTAL POOL LEASE OPERATION
STATEMENTS OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 2001
(unaudited)
DISTRIBUTION FUND
| Year-to-date | ||||||
| 2001 | ||||||
GROSS REVENUES |
$ | 607,826 | ||||
DEDUCTIONS: |
||||||
Agents’ commissions |
27,085 | |||||
Sales and marketing expenses |
45,587 | |||||
Audit fees |
3,255 | |||||
| 75,927 | ||||||
ADJUSTED GROSS REVENUES |
531,899 | |||||
MANAGEMENT FEE |
(265,949 | ) | ||||
GROSS INCOME DISTRIBUTION |
265,950 | |||||
ADJUSTMENTS TO GROSS INCOME
DISTRIBUTION: |
||||||
Corporate complimentary occupancy fees |
769 | |||||
Occupancy fees |
(98,032 | ) | ||||
Designated items |
(11,045 | ) | ||||
Advisory Committee expenses |
(2,174 | ) | ||||
POOLED INCOME |
155,468 | |||||
ADJUSTMENTS TO POOLED INCOME: |
||||||
Occupancy fees |
98,032 | |||||
NET INCOME DISTRIBUTION |
$ | 253,500 | ||||
Average daily distribution |
$ | 12.15 | ||||
Average room rate |
$ | 82.83 | ||||
Room nights |
7,338 | |||||
Available room nights |
20,856 | |||||
Occupancy percentage |
35.0 | % | ||||
Average number of available units |
233 | |||||
These statements were prepared from the books and records of the Rental Pool without audit and, in the opinion of the Rental Pool Operation, include all adjustments which are necessary for a fair presentation.
Page 20
TAMARRON RENTAL POOL LEASE OPERATION
STATEMENTS OF CHANGES IN PARTICIPANTS’ FUND BALANCES
FOR THE QUARTER ENDED MARCH 31, 2001
(unaudited)
DISTRIBUTION FUND
| Year-to-date | ||||||
| 2001 | ||||||
BALANCE, beginning of period |
$ | — | ||||
ADDITIONS: |
||||||
Amounts available for distribution |
253,500 | |||||
Interest received or receivable from
Maintenance Escrow Fund |
1,123 | |||||
REDUCTIONS: |
||||||
Amounts withheld for Maintenance Escrow Fund |
(49,581 | ) | ||||
Amounts accrued or paid to participants |
(205,042 | ) | ||||
BALANCE, end of period |
$ | — | ||||
MAINTENANCE ESCROW FUND |
||||||
BALANCE, beginning of period |
$ | 174,714 | ||||
ADDITIONS: |
||||||
Amounts withheld from occupancy fees |
49,016 | |||||
Interest earned |
1,123 | |||||
Reimbursement of designated items |
11,045 | |||||
Charges to participants to establish
or restore escrow balances |
27,772 | |||||
REDUCTIONS: |
||||||
Maintenance and inventory charges |
(33,005 | ) | ||||
Refurbishing charges |
— | |||||
Interest accrued or paid to
Distribution Fund |
(1,123 | ) | ||||
Designated items |
(11,045 | ) | ||||
Refunds to participants as prescribed
by Master Lease Agreement |
(2,526 | ) | ||||
BALANCE, end of period |
$ | 215,971 | ||||
These statements were prepared from the books and records of the Rental Pool without audit and, in the opinion of the Rental Pool Operation, include all adjustments which are necessary for a fair presentation.
Page 21