Financial Statements and Accountant s Compilation Report For the Three Months Ended March 31, 2012
Table of Contents Page Accountant s Compilation Report 1 Basic Financial Statements Balance Sheet 2-3 Statements of Revenues, Expenses, and Changes in Net Assets 4 Statement of Cash Flows 5-6 Supplemental Information Hotel Occupancy, Average Daily Rate, and RevPAR 7
Accountant s Compilation Report Board of Directors Austin Convention Enterprises, Inc. Austin, Texas I have compiled the accompanying balance sheet of Austin Convention Enterprises, Inc. (the Company) as of March 31, 2012, and the related statements of revenues, expenses and changes in net assets and cash flows for the three months then ended. I have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or provide any assurance about whether the financial statements are in accordance with account principles generally accepted in the United States of America. Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America and for designing, implementing, and maintaining internal control relevant to the preparation and fair presentation of the financial statements. My responsibility is to conduct the compilation in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. The objective of a compilation is to assist management in presenting financial information in the form of financial statements without undertaking to obtain or provide any assurance that there are no material modifications that should be made to the financial statements. The supplemental information on page 7 has been prepared by the Company and is presented only for supplementary analysis purposes. I have not reviewed or audited the supplementary information and, accordingly, assume no responsibility for it. Management has elected to omit all of the disclosures required by accounting principles generally accepted in the United States of America. If the omitted disclosures were included in the financial statements, they might influence the user's conclusions about the Company's financial position, results of operations, and cash flows. Accordingly, these financial statements are not designed for those who are not informed about such matters. I am not independent with respect to the Company. May 1, 2012
Basic Financial Statements
Balance Sheet March 31, 2012 ASSETS CURRENT ASSETS Cash in bank $ 7,494,407 Accounts receivable, net of allowance of $16,899 3,439,827 Inventories 928,700 Other current assets 808,070 Total Current Assets 12,671,004 NONCURRENT ASSETS Investments - restricted 2006 Available revenue fund 4 2006 Tax and insurance fund 520,713 2006 Administrative fee fund 7,920 2006 Renewal and replacement fund 7,598,326 2006A Debt service fund 5,263,171 2006A Debt service reserve fund 5,886,025 2006B Debt service fund 1,804,338 2006B Debt service reserve fund 10,000,040 2006AB Cash trap fund 5,000,020 2006AB Operating reserve fund 8,000,032 2006 Excess revenue prepayment fund 4,794,169 Total Investments 48,874,758 Capital assets, net of accumulated depreciation of $58,953,565 165,815,037 Other assets 79,935 2006 Prepaid surety insurance, net 6,538,895 2006 Debt issuance costs, net 5,774,013 Total Noncurrent Assets 227,082,638 TOTAL ASSETS $ 239,753,642 Accountant s compilation report should be read with this financial statement -2-
Balance Sheet (Continued) March 31, 2012 LIABILITIES CURRENT LIABILITIES Accounts payable and accrued expenses $ 6,623,882 First tier debt service accrued interest 1,947,825 Second tier debt service accrued interest 1,325,891 Third tier debt service accrued interest 467,025 Bonds payable - current maturities 4,695,000 Total Current Liabilities 15,059,623 NONCURRENT LIABILITIES Loss of defeasance of 2001A and 2001B series bonds, net (22,324,698) Series 2006A bonds payable 153,690,000 Series 2006B bonds payable 90,315,000 Series 2001C-1 bonds payable 9,820,000 Series 2001C-2 bonds payable 8,650,001 Premium/discount on Series 2006A bonds payable, net 6,627,804 Premiums on Series 2006B bonds payable, net 3,329,461 Total Noncurrent Liabilities 250,107,568 Total Liabilities 265,167,191 NET ASSETS Net assets-invested in capital assets, net of related debt (82,448,636) Unrestricted 57,035,087 Total Net Assets (25,413,549) TOTAL LIABILITIES AND NET ASSETS $ 239,753,642 Accountant s compilation report should be read with this financial statement -3-
Statements of Revenues, Expenses and Changes in Net Assets For the Three Months Ended March 31, 2012 Capital Assets Hotel Operations Total Operating Revenue $ - $ 19,192,045 $ 19,192,045 Operating Expenses Hotel Operating Expenses Direct operating expenses - 6,375,701 6,375,701 Sales and marketing - 1,010,467 1,010,467 Taxes and insurance - 139,508 139,508 General and administrative - 1,169,720 1,169,720 Management fees - 773,713 773,713 Operations monitor - 15,676 15,676 Depreciation expense - 1,499,677 1,499,677 Total Hotel Operating Expenses - 10,984,462 10,984,462 Surety insurance 75,160-75,160 Professional fees 52,120-52,120 Total Operating Expenses 127,280 10,984,462 11,111,742 Operating Income (Loss) (127,280) 8,207,583 8,080,303 Non-operating Income (Expenses) Amortization of debt issuance costs (66,368) - (66,368) Amortization of premiums on Series 2006B bonds 65,418-65,418 Accretion of premiums and discount on Series 2006A bonds, net 150,434-150,434 Litigation proceeds 1,353,000-1,353,000 City of Austin projects expense (269,902) - (269,902) Interest income 372-372 Interest expense (4,038,403) - (4,038,403) Total Non-operating Income (Expenses) (2,805,449) - (2,805,449) Change in Net Assets $ (2,932,729) $ 8,207,583 5,274,854 Net Assets at Beginning of Period (30,688,403) Net Assets at End of Period $ (25,413,549) Accountant s compilation report should be read with this financial statement -4-
Statement of Cash Flows For the Three Months Ended March 31, 2012 Cash Flows from Operating Activities Received from customers $ 17,361,956 Payments to employees for services (2,472,826) Payments to suppliers for goods and services (6,445,438) Net Cash Provided by Operating Activities 8,443,692 Cash Flows from Investing Activities Interest received 179 Investment purchases and sales, net 4,355,955 Net Cash Provided by Investing Activities 4,356,134 Cash Flows from Non-Capital Financing Activities Payments for City of Austin projects (269,902) Net Cash Used in Non-Capital Financing Activities (269,902) Cash Flows from Capital and Related Financing Activities Payments for capital assets (126,142) Principal payments on bonds payable (4,245,000) Litigation proceeds 1,353,000 Interest cost paid (7,611,325) Net Cash Used in Capital and Related Financing Activities (10,629,467) Net Increase in Cash 1,900,457 Cash at Beginning of Period 5,593,950 Cash at End of Period $ 7,494,407 Accountant s compilation report should be read with this financial statement -5-
Statement of Cash Flows (Continued) For the Three Months Ended March 31, 2012 Reconciliation of Change in Net Assets to Net Cash Provided by Operating Activities Operating income (loss) $ 8,080,303 Adjustment to reconcile change in net assets to net cash used in operating activities Bad debt expense (48,758) Depreciation expense 1,499,677 Amortization of prepaid surety insurance 75,160 Change in Net Assets and Liabilities Accounts receivable (1,830,089) Inventory 604 Other current assets (437,443) Other assets (12,402) Accounts payable and accrued expenses 1,116,640 Net Cash Provided by Operating Activities $ 8,443,692 Accountant s compilation report should be read with this financial statement -6-
Supplemental Information
Hotel Occupancy, Average Daily Rate, and RevPAR For the Three Months Ended March 31, 2012 and the Year Ended December 31, 2011 The following information is included to provide a summary of Hotel operations in comparison to the prior year. Description Three Months Ended March 31, 2012 Year Ended December 31, 2011 Occupancy Rate 82% 77% Average Daily Rate $213 $178 Revenue per available room (RevPAR) $175 $138 The following information is included to provide a summary of Hotel operations in comparison to the Competitive Set. The Competitive Set includes four hotels in the Hotel s immediate market area that are most comparable to the Hotel in quality, price, and market. The calculations related to the Competitive Set are based on the three months ended March 31, 2012. Description Hilton Austin Competitive Set Occupancy Rate 82% 80% Average Daily Rate $213 $167 Revenue per available room (RevPAR) $175 $134 Accountant s compilation report should be read with this supplemental information -7-