Memo. Hot Springs Village Property Owners Association Board of Directors Report

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1 Hot Springs Village Property Owners Association Board of Directors Report Memo To: David Twiggs, COO, and HSV Board of Directors From: Lesley Nalley, CFO LAN Date: November 18, 2015 Re: October 2015 Financial Report I am pleased to report that the Total e/microsoft GP conversion efforts are producing more in depth data from which to prepare monthly financials. Through new general ledger drill down functionality and real time Point of Sale data capture, we are better equipped to analyze results, provide year end projections, and more accurately project assessments and delinquency rates. In this month s financial report you will find updated good standing vs. delinquent/non-productive lot statistics. You will also see an additional column on the Statement of Revenue & Expense designed to forecast year end results. The following items are attached: Executive Summary Financial Dashboard Statement of Financial Position Statement of Revenue and Expenses Statement of Capital Additions

2 Hot Springs Village POA Executive Summary BALANCE SHEET CASH: HSVPOA ended the month with $2.6mil (1) of cash/cash equivalents, of which $1.6 mil is held by Multi Bank Securities in long term brokered CDs. The $1.9 mil decrease from the 2014 balance reflects cash used to pay for the water plant, as well as emergency sewer and fleet spending and operational variances. As of current operating results, $356,500 is held for building failure reserves. No funds have been drawn on the line of credit as of this board meeting, but management expects to do so by the end of November. ASSESSMENTS RECEIVABLE: $16.3mil (2) of assessments are currently outstanding, which is a $2.7mil increase from October $15.8mil (2) is estimated to be uncollectible, unless some portion of the $7.78mil judgement against CS Paradiso is recovered. Efforts to collect from this and other seriously delinquent accounts continue. POA LOTS: The POA currently owns 2,482 unimproved residential lots. In total there are 10,626 delinquent or unproductive lots representing $3.5mil+ in potential annual assessment revenue. The number of POA owned lots at December 2011, 2012, 2013, and 2014 was 993; 1,850; 2,189; and 2,363, respectively. LIABILITIES: Total liabilities equal $5.7mil (3), with $1.2mil (3a) relating to 2015 prepaid annual passes and assessments being spread across the remaining months of the year, $693k relating to refundable deposits, $2.3mil (4) in outstanding operating liabilities, and $1.5mil (5) in bond debt. A $280k principle payment was made on bond debt during October. NET WORTH: HSV s current net worth is $70.4mil (18), compared to $73.7mil in The year over year difference predominately relates to the improvements towards capturing all liabilities, as well as the additional year of asset depreciation and decline in cash. INCOME STATEMENT REVENUE: YTD Gross Revenues total $25.3mil (6). Operational revenue accounts for $12.7mil, with assessment revenue making up the remainder. $2.7mil (7) has been accrued for assessment bad debt, which represents 23% of the amount billed and brings net YTD revenue to $22.5mil or 77% of budget. As noted on the Comparative Statements of Revenue & Expense, I m forecasting missing budget by 3% or a net of $1.1mil due to golf and assessment revenue declines, offset by increases in water and sewer revenue. NOTE: 2015 revenue reflects both operational variances and accounting methodology differences. These four accounting methodology changes impact year over year differences and should not be considered as operational variances: 1. Assessment revenue and bad debt provision each reflect elimination of interest and an increase in late fee, as well as the late fee now being assessed on the 31 st day. 2. Elimination of assessment calculations on POA-owned lots 3. The 2014 unbilled revenue was reversed 1/1/15. The 2015 entry will be made in December. 4. Golf & Recreation will recognize annual pass revenue over 12 months

3 The Statement of Revenue and Expense was not restated to account for these changes. To compare apples to apples when looking at YTD 2014 revenues, $400k should be subtracted from golf, and $50k should be subtracted from Recreation. $350k should be added to Public Work s 2015 revenue. GOLF REVENUE: YTD Golf revenue totals $5mil (12), reflecting 208,341 rounds and an ADR of $ By comparison, 227,234 rounds were played as of this point in 2014 with an ADR of $24.44, resulting in $5.6mil in revenue. This year over year revenue decline results mainly from fewer annual greens fee and cart pass purchases. There were 134 fewer greens fee passes amounting to $458k in revenue. There were 74 fewer cart passes amounting to $106k in revenue. While group and outside play has increased over 2014 levels, the guest mix did not overcome the decrease in member play. EXPENSE: YTD Operational Expenses total $21.1mil (13), or 83% of the annual budget. While some of the departments are showing increases over 2014 spending levels, all departments besides Administration are tracking behind budget. When comparing year over year Administration expenses, it should be noted that the change in overhead allocations (specifically $207k allocated to capital projects during 2014) is the main contributor to the variance. Additional contributors were increased spending in building and vehicle maintenance, due to emergency repairs, and additional litigation expenses. Administration s forecasted excess over budget relates to emergency building and vehicle repairs, unplanned legal fees, and mid-year overhead allocation changes. Public Work s forecasted excess over budget mainly relates to emergency repairs. NET OPERATING RESULTS: Net excess before depreciation and capital was $1.375mil (14), as compared to $3.1mil in The main driver of this difference is the decreased golf and assessment revenue, as we all changes in how assessments, annual amenity passes, outstanding liabilities, and unbilled utility revenues are recognized. STATEMENT OF CAPITAL ADDITIONS CAPITAL: Capital Spending totals $1.8mil (15) of the $4.6mil budgeted for 2015 and $57k(16) carried forward from 2014.

4 Hot Springs Village POA Financial Dashboard At a Glance Comparison of Select Financial Data 2014 YTD 2015 YTD Inc/(Decr) %Change $ 8,761,845 $ 8,800,591 Assessments Received $ 38, % $ 13,378,973 $ 13,076,873 Operational Revenue (restated*) $ (302,100) -2.26% $ 20,558,504 $ 21,196,477 Operating Expenses $ 637, % $ 4,540,575 $ 1,852,350 Capital Spending $ (2,688,225) % $ 4,631,533 $ 2,683,278 Cash and Cash Equivalents $ (1,948,254) % 2,358 2,482 POA Owned Lots % 227, ,341 Golf Rounds (18,893) -8.31% $ $ Average Golf Rate $ (0.11) -0.46% New Dwelling Permits % 1,176 1,060 Residential Additions (116) -9.86% *Both 2014 & 2015 were restated to show an apples to apples comparison as described in the Executive Summary Property & Population Statistics Total Residential & Commercial Subject to Assessment 34,438 Cooper's Reserved Property-no voting rights, pays a square footage fee 8 Percentage Productive Delinquent/ Unproductive Total Good Standing Unimproved Lots Not Owned by the POA 22,687 65% 14,849 7,838 Improved Lots 8,981 97% 8, Unimproved Lots Owned by the POA 2,482 2,482 Platted Lots 34,150 69% 23,524 10,626 Time share units Good Samaritan Units Mt Carmel Units Multi-unit facilities TOTAL 23,812 10,626 Water Meters Billed: Population Estimate: Sanitation Billed Residential 8,719 Residential Meters 8,719 Res-House 628 Commercial 152 GAC Population Formula 1.6 Res-Curb 8,091 Assisted Living 2 13,950 Commercial 152 Sprinkler 74 Assisted Living 2 POA 115 Sprinkler 74 Construction 27 POA 115 Total 9,089 Construction 27 Total 9,089

5 Cash & Cash Equivalent Balance~ $ 2,683,278 Maximum Line of Credit Draw Down $ 975,000 Petty Cash & Act 833 Funds (53,285) Outstanding Accounts Payable (1,105,956) Accrued 2015 Cash Spendingv (915,606) Projected Remaining Cash Yield from Operations 1,179,109 Remaining 2015 Budgeted Capital (2,932,898) Building Failure Reserve Remaining (356,500) Bond Reserve ($280k principle payment made in October) - Estimated 2015 Excess/(Deficit) for Reserves (526,858) ~-$1.6mil is held by Multi Bank Securities in bond investments v - Mainly relates to accrued payroll, insurance, and property taxes Hot Springs Village POA Financial Dashboard Reconciliation of Projected Cash Usage Assessments Received & Cash Trending 3 Year Comparison $2,100,000 $1,600,000 $1,100,000 $600,000 $100,000 January February March April May June July August September October November December 2013 $1,626,021 $719,069 $834,990 $876,381 $656,413 $936,276 $1,132,871 $623,734 $733,083 $812,278 $584,739 $2,176, $1,525,960 $728,173 $822,844 $866,220 $627,975 $900,293 $1,120,375 $599,342 $766,794 $803,869 $519,045 $1,981, $1,790,439 $671,554 $832,520 $855,393 $624,844 $952,435 $1,072,029 $591,670 $651,072 $758,635

6 HOT SPRINGS VILLAGE POA Comparative Statement of Financial Position ASSETS CASH AND CASH EQUIVALENTS (1) $ 2,683,278 $ 4,631,533 MEMBERSHIP ASSESSMENT RECEIVABLE GROSS ASSESSMENTS BILLED (2) 16,350,985 13,607,605 LESS ALLOWANCE FOR DOUBTFUL ACCOUNTS (2) (15,827,968) (13,295,747) OTHER MEMBERSHIP RECEIVABLES 1,352,039 1,215,183 OTHER RECEIVABLES 5,948 6,163 INVENTORIES 427, ,074 PREPAID EXPENSES 197, ,585 REAL ESTATE HELD FOR SALE, NET REALIZABLE VALUE 1,861,500 2,079,627 RECOVERABLE ELECTRIC COSTS GROSS 8,000,000 8,000,000 LESS ALLOWANCE FOR UNCOLLECTIBILITY (4,000,000) (4,000,000) PROPERTY AND EQUIPMENT, Net of Accumulated Depr. 65,146,705 67,027,218 TOTAL ASSETS $ 76,197,877 $ 79,972,241 LIABILITIES AND MEMBERSHIP EQUITY LIABILITIES ACCOUNTS PAYABLE (4) $ 1,105,956 $ 402,949 ACCRUED EXPENSES (4) 1,200,649 1,708,937 PREPAID MEMBERSHIP ASSESSMENTS AND OTHER FEES (3a) 1,222,010 1,133,607 SECURITY DEPOSITS & OTHER DEPOSITS 693,872 1,157,441 BONDS PAYABLE (5) 1,535,000 1,815,000 TOTAL LIABILITIES (3) 5,757,486 6,217,934 MEMBERSHIP EQUITY UNDESIGNATED 70,083,890 71,914,279 DESIGNATED FOR FUTURE REPAIRS & REPLACEMENT 356,500 1,840,028 TOTAL MEMBERSHIP EQUITY (18) 70,440,390 73,754,307 TOTAL LIABILITIES AND MEMBERSHIP EQUITY $ 76,197,877 $ 79,972,241

7 HOT SPRINGS VILLAGE POA Comparative Statements of Revenue and Expenses Months ended October 31, 2015 and October 31, (As Originally Stated)* Increase Budget Proj. Budget Budget Oct-15 Oct-14 (Decrease) Remaining Excess (Deficit) Membership Assessment Revenue* 15,377,638 12,009,177 12,617,883 (608,707) 3,368,461 (467,000) Assessment Penalties & Other 1,024, , ,647 (227,563) 389,916 (125,000) Provision for future Bad Debt (7) (3,453,080) (2,797,905) (3,420,002) (622,097) 655,175 Net Assessment Revenue 12,948,558 9,845,355 10,059,528 Administration~ REVENUE 512, , ,450 26, ,260 (135,260) EXPENSE (3,602,974) (3,275,914) (2,713,144) 562, ,060 (292,940) Net Administration (3,090,874) (2,974,074) (2,437,694) Public Safety REVENUE 755, , ,490 18,070 55,060 64,940 EXPENSE (4,249,271) (3,483,017) (3,487,503) (4,486) 766,254 Net Public Safety (3,493,651) (2,782,457) (2,805,013) Public Works~ REVENUE* 6,827,970 5,465,673 5,729,106 (263,432) 1,362, ,406 EXPENSE (6,571,237) (5,511,617) (5,100,958) 410,659 1,059,620 (118,380) Net Public Works 256,733 (45,944) 628,147 Planning & Inspection REVENUE 140, , ,482 (18,218) 17,736 EXPENSE (400,270) (269,914) (314,407) (44,493) 130,356 70,356 Net Planning & Inspection (260,270) (147,650) (173,925) Food & Beverage REVENUE 244, , ,682 5,008 30,710 EXPENSE (402,560) (304,607) (343,314) (38,706) 97,953 Net Food & Beverage (158,160) (90,918) (134,632) Golf Actual YTD REVENUE*(12) 6,501,540 5,089,084 5,697,276 (608,192) 1,412,456 (830,456) EXPENSE (7,669,548) (6,290,083) (6,592,182) (302,098) 1,379, ,465 Net Golf (1,168,008) (1,200,999) (894,906) Recreation REVENUE* 1,058, , ,488 (36,726) 225,124 EXPENSE (2,564,022) (2,061,324) (2,006,997) 54, ,698 Net Recreation (1,505,137) (1,227,562) (1,136,509) 15 Budget 15 Actual 14 Actual Inc/(Decr) Budg. Rem. Gross Revenue* (6) $ 32,442,153 $ 25,370,133 $ 27,083,503 $ (1,713,369) 7,072,020 Bad Debt Expense (3,453,080) (2,797,905) (3,420,002) (622,097) 655,175 Operational Expense (13) (25,459,882) (21,196,477) (20,558,504) 637,972 4,263,405 Excess (Deficit) Before Depr. (14) $ 3,529,191 $ 1,375,752 $ 3,104,996 2,153,439 Depreciation $ (3,000,249) $ (2,834,570) $ 165,680 ~In August, Building Maintenance was moved from Public Works to Administration. *The 2015 accounting methodology change for assessments, annual fees, and unbilled revenue is creating a year over year difference. See the Executive Summary for details.

8 HOT SPRINGS VILLAGE POA Statement of Capital Additions 2015 Annual Budget Spending Budget Remaining 2014 Projects $ 57,000 $ 57,000 $ - Administration* 575, , ,221 Public Safety 60,508 58,000 (2,508) Emergency Reserve - Cortez Roof 55,287 - Public Works* 341, ,500 (51,941) Club Services and Facilities 88,671 2,211,000 2,122,329 Golf 386, , ,744 Parks and Recreation 258, ,500 47,344 Construction 28, , ,710 Total Capital Additions (15) $ 1,852,350 $ 4,729,961 $ 2,932,898 Projects carried over from 2014: PW Striping Machine $ 5,000 IT - Total e Budgeted but not yet billed 35,000 Recreation Bridge Project 17,000 Total 2014 Capital to be Carried forward to 2015 (16) 57,000 *Building Maintenance Department was moved from Public Works to Administration as of August.

Memo. Hot Springs Village Property Owners Association Board of Directors Report

Memo. Hot Springs Village Property Owners Association Board of Directors Report Hot Springs Village Property Owners Association Board of Directors Report Memo To: David Twiggs, COO From: Lesley Nalley, CFO LAN Date: April 15, 2015 Re: March 2015 Financial Report The March 2015 financial