NC STATE UNIVERSITY CENTENNIAL DEVELOPMENT, LLC FINANCIAL REPORT. JUNE 30, 2009 and 2008

Transcription

1 NC STATE UNIVERSITY CENTENNIAL DEVELOPMENT, LLC FINANCIAL REPORT JUNE 30, 2009 and 2008

2 CONTENTS INDEPENDENT AUDITOR S REPORT ON THE FINANCIAL STATEMENTS 1 FINANCIAL STATEMENTS Statements of financial position 2 Statements of activities 3 Statements of cash flows 4 Notes to financial statements 5-8 OTHER INFORMATION Independent Auditor s Communication with the Board of Directors 9-10

3 INDEPENDENT AUDITOR S REPORT To the Board of Directors NC State University Centennial Development, LLC Raleigh, North Carolina We have audited the accompanying statements of financial position of NC State University Centennial Development, LLC (a nonprofit organization) as of June 30, 2009 and 2008 and the related statements of activities and cash flows for the years then ended. These financial statements are the responsibility of the Organization s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of NC State University Centennial Development, LLC as of June 30, 2009 and 2008, and the changes in its member's equity and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Raleigh, North Carolina August 26,

4 Statements of Financial Position June 30, 2009 and ASSETS Current assets: Cash $ 146,642 $ 1,695 Trade receivable 38,353 - Sales tax receivable 58,882 - Due from others 5, Inventories 29,187 - Total current assets 278,704 2,330 Property and equipment: Modern greens 512,319 - Less: accumulated depreciation (17,077) - Golf course 10,222,633 - Construction in process - 5,228,675 Leased equipment 533,433 - Less: accumulated amortization (27,938) - Total property and equipment 11,223,370 5,228,675 Total assets $ 11,502,074 $ 5,231,005 LIABILITIES AND MEMBER'S EQUITY Current liabilities: Current installments of capital lease obligations $ 151,959 $ - Accounts payable 340, ,907 Deferred revenue 181,701 - Due to others - 2,000 Total current liabilities 673, ,907 Long-term liabilities: Capital lease obligations, less current installments 344,910 - Note payable 4,994, ,000 Total long-term liabilities 5,339, ,000 Member's equity 5,489,295 4,142,098 Total liabilities and member's equity $ 11,502,074 $ 5,231,005 See Notes to Financial Statements. 2

5 Statements of Activities For the Years Ended June 30, 2009 and Operating income: Marketing revenue $ 12,000 $ - Merchandise sales 10,716 - Greens fees income 9,385 - Golf cart income 1,052 - Food and beverage sales Total gross operating income 33,479 - Cost of Sales 6,938 - Total net operating income 26,541 - Operating expenses: Marketing 6,900 - Salaries 28,196 - General and administrative 17,131 - Clubhouse 15,273 - Repairs and maintenance 14,196 - Rental for equipment 21,699 - Office supplies 1,689 - Depreciation 17,077 - Amortization 27,938 - Insurance 7,095 - Interest 3,413 - Other current services 5,794 - Total expenses $ 166,401 $ - Net operating loss (139,860) - Other revenue and expenses: Contributions 1,421,456 2,945,200 Contributed materials and services 65,601 1,049,253 Total contributions 1,487,057 3,994,453 Other expenses - 2,200 Change in member's equity 1,347,197 3,992,253 Beginning 4,142, ,845 Ending $ 5,489,295 $ 4,142,098 See Notes to Financial Statements. 3

6 Statements of Cash Flows For the Years Ended June 30, 2009 and Cash flows from operating activities: Change in member's equity $ 1,347,197 $ 3,992,253 Adjustments to reconcile change in members equity to net cash provided by operating activities: Depreciation and amortization 45,015 - (Increase) in accounts receivable (97,235) - (Increase) in inventory (29,186) - (Increase) in due from others (5,005) (635) Increase in accounts payable 158, ,032 Increase in deferred revenue 181,701 - (Decrease) increase in due to others (2,000) 1,747 Net cash provided by operating activities 1,598,694 4,138,397 Cash flows from investing activities: (Increase) in fixed assets (11,268,386) (5,043,276) Decrease in construction in process 5,228,675 - Increase in lease liabilities 496,869 - Net cash used in investing activities (5,542,842) (5,043,276) Cash flows from financing activities: Increase in note payable 4,089, ,000 Net cash provided by financing activities 4,089, ,000 Net increase in cash and cash equivalents 144, Cash and cash equivalents Beginning 1,695 1,574 Ending $ 146,642 $ 1,695 Supplemental disclosures of nonoperating activities Donated materials and services $ 65,601 $ 1,049,253 See Notes to Financial Statements. 4

7 Notes to Financial Statements For the years ended June 30, 2009 and 2008 Note 1. Nature of Activities Nature of activities: The NC State University Centennial Development, LLC (the "LLC") was organized on January 25, 2002 to further the purposes of its sole member, the NC State Partnership Corporation. These purposes are exclusively charitable within the meaning of paragraph 501(c)(3) of the Internal Revenue Code of More specifically, the purposes of the LLC are to: (i) (ii) (iii) develop, construct, own and otherwise deal with a nonprofit conference center and hotel, golf course, Centennial Development and related facilities located on the North Carolina State University Centennial Campus in Raleigh, North Carolina (the Facilities ), and enter into any related agreements with any Person(s); finance, manage and operate the Facilities; and transact any and all lawful business for which the LLC may be organized under the North Carolina law that is incident, necessary and appropriate to accomplish the foregoing. The LLC shall carry on only those activities permitted to be carried on by an organization or entity which is exempt from taxation under the provision of paragraph 501(c)(3) of the Internal Revenue Code. The Lonnie Poole Golf Course began limited operations on June 23, 2009 and was fully operational and open to the public on July 1, During fiscal year 2009, the majority of financial activity was attributable to the design and construction of the golf course. Note 2. Significant Accounting Policies Basis of accounting: The financial statements of the LLC have been prepared on the accrual basis of accounting. Under this method, revenues are recorded when earned and expenses are recorded at the time the liabilities are incurred. Cash: Cash consists of an account with SunTrust Bank. At times the LLC places deposits with SunTrust that may be in excess of federal insurance limits. Contributions: Contributions are received from the NC State University Foundation and are recorded when received. Estimates: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Income taxes: The LLC is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code. Inventories: Inventories are accounted for using the average cost method and are made up of merchandise for the golf shop and food and beverage items for the snack bar. 5

8 Notes to Financial Statements (continued) For the years ended June 30, 2009 and 2008 Property, plant, and equipment: Property and equipment are stated at cost. Depreciation is computed using the straight-line method, half-year convention. Estimated useful lives range from 3-5 years for leased equipment to 15 years for the modern greens. Note 3. Accounts Receivable For the year ended June 30, 2009, accounts receivable consists primarily of trade receivables and sales tax refunds due to the LLC from the North Carolina Department of Revenue. We believe all accounts are collectible at June 30, Note 4. Due from Others For the years ended June 30, 2009 and June 30, 2008, the amount of due from others was $5,640 and $635, respectively. The balance for the current fiscal year was made up of fees paid by NC State University Centennial Development, LLC on behalf of the member. Note 5. Inventories Merchandise, food, and beverage inventory was accounted for using the average cost method and consisted of the following: Merchandise $ 28,693 $ - Food and beverage T otal inventory $ 29,187 $ - Note 6. Property and Equipment At June 30, 2009, the LLC owned the following property: Modern Greens $ 512,319 $ - Golf Course 10,222,633 - T otal $ 10,734,952 $ - The modern greens were constructed during fiscal year 2009 and have a useful life of 15 years with accumulated depreciation of $17,077 in Depreciation was calculated using the straight line method, half-year convention. The Golf Course construction was completed in June 2009, and the cost of the course includes contributed materials and services in the amount of $1,114,854. The amount of interest capitalized during the fiscal year totaled $77,472. 6

9 Notes to Financial Statements (continued) For the years ended June 30, 2009 and 2008 Note 7. Capital Leases The LLC has entered into capital leases of certain equipment. The gross amount of assets recorded under capitalized leases totaled $533,433 for the year ended June 30, 2009 and are included in property and equipment. The assets are amortized over the lower of their related lease terms or their estimated useful lives. The accumulated amortization on these leased assets was $27,938 as of June 30, Future minimum lease payments, gross of taxes, under capital leases at June 30, 2009 are as follows: Year ending June 30: , , , , , ,530 Less: imputed interest (11,661) Present value of net minimum lease payments $ 496,869 Note 8. Operating leases During fiscal year 2009, the LLC entered into operating leases of golf carts and maintenance equipment. Future minimum lease payments under the noncancelable operating leases are as follows: Year ending June 30: 2010 $ 89, , , , ,765 $ 340,831 Note 9. Ground Lease Effective June 14, 2007, the LLC has a 99-year ground lease with North Carolina State University for the development of the golf course. 7

10 Notes to Financial Statements (continued) For the years ended June 30, 2009 and 2008 Note 10. Accounts Payable For the years ended June 30, 2009 and June 30, 2008, accounts payable totaled $340,114 and $181,907, respectively. The balance for the current fiscal year was comprised primarily of outstanding invoices for golf course operations at June 30, The balance for June 30, 2008 was for expenses related to construction of the course. Note 11. Deferred revenue During fiscal year 2009, the LLC collected unearned dues and fees of $181,701. Of this amount, $140,400 was paid by the Lonnie Poole Golf Course Charter Partners in exchange for certain benefits at the golf course including discounts on cart fees, unlimited driving range balls, and the ability to make tee time reservations in advance of other players. $1,725 represented a deposit for an upcoming event, and $39,576 represented monies collected online for golf rounds yet to be played. Note 12. Due to Others For the year ended June 30, 2009, there were no amounts due to others. For the year ended June 30, 2008, the amount due to others was $2,000. Note 13. Note Payable The LLC has an open end revolving line of credit with SunTrust Bank and may borrow at any time through December 31, 2009, an aggregate principal amount up to the loan amount of $5,000,000. The Endowment Fund Board of Trustees agreed to guarantee the loan in the event that the LLC could not meet its loan payback. As of June 30, 2009, the LLC has made no investment requests to the Endowment Fund for this purpose. The interest rate on the line of credit is LIBOR plus.50% per annum, which was.91813% at June 30, 2009, and has a maturity date of December 31, The amount owed on the note for the years ended June 30, 2009 and June 30, 2008 were $4,994,095 and $905,000, respectively. During the fiscal year ended June 30, 2008, The Endowment Fund Board of Trustees agreed to invest up to $5,000,000 in the NC State University Centennial Development, LLC for the Lonnie Poole Golf Course in the event the LLC could not meet its loan payback or should the LLC desire to pay off the loan prior to receipt of expected cash flow. As of June 30, 2009, there have been no investment requests by the LLC. Note 14. Subsequent Event Effective August 1, 2009, the LLC entered into a lease with National City for golf course equipment. The duration of the lease is 54 months, and the property lease payment equals $623 before taxes. 8

11 August 26, 2009 To the Board of Directors NC State University Centennial Development, LLC Raleigh, North Carolina We have audited the financial statements of NC State University Centennial Development, LLC for the year ended June 30, 2009, and have issued our report thereon dated August 26, Professional standards require that we provide you with information about our responsibilities under generally accepted auditing standards, as well as certain information related to the planned scope and timing of our audit. We have communicated such information in our engagement letter to you dated May 28, Professional standards also require that we communicate to you the following information related to our audit. Significant Audit Findings Management is responsible for the selection and use of appropriate accounting policies. The significant accounting policies used by NC State University Centennial Development, LLC are described in Note 2 to the financial statements. New accounting policies were adopted and the application of existing policies was not changed during fiscal year end June 30, We noted no transactions entered into by the Organization during the year for which there is a lack of authoritative guidance or consensus. All significant transactions have been recognized in the financial statements in the proper period. Accounting estimates are an integral part of the financial statements prepared by management and are based on management s knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ significantly from those expected. Difficulties Encountered in Performing the Audit We encountered no significant difficulties in dealing with management in performing and completing our audit. Corrected and Uncorrected Misstatements Professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that are trivial, and communicate them to the appropriate level of management. No material misstatements were found throughout the audit, and as such, no adjustments were necessary. 9

12 Disagreements with Management For purposes of this letter, professional standards define a disagreement with management as a financial accounting, reporting, or auditing matter, whether or not resolved to our satisfaction, that could be significant to the financial statements or the auditor s report. We are pleased to report that no such disagreements arose during the course of our audit. Management Representations We have requested certain representations from management that are included in the management representation letter dated August 26, Management Consultations with Other Independent Accountants In some cases, management may decide to consult with other accountants about auditing and accounting matters, similar to obtaining a second opinion on certain situations. If a consultation involves application of an accounting principle to the Organization s financial statements or a determination of the type of auditor s opinion that may be expressed on those statements, our professional standards require the consulting accountant to check with us to determine that the consultant has all the relevant facts. To our knowledge, there were no such consultations with other accountants. Other Audit Findings or Issues We generally discuss a variety of matters, including the application of accounting principles and auditing standards, with management each year prior to retention as the Organization s auditors. However, these discussions occurred in the normal course of our professional relationship and our responses were not a condition to our retention. Closing We are happy to respond to any questions you may have concerning this communication. We appreciate the opportunity to continue to serve the NC State University Centennial Development, LLC. This information is intended solely for the use of the Board of Directors and management of NC State University Centennial Development, LLC and is not intended to be and should not be used by anyone other than these specified parties. 10