HYATT REGENCY PITTSBURGH INTERNATIONAL AIRPORT (Accounts Maintained by Hyatt Corporation) Financial Statements and Supplemental Schedule

Transcription

1 Financial Statements and Supplemental Schedule December 31, 2011 and 2010 (With Independent Auditors Report Thereon) 53108CHI

2 Table of Contents Page Independent Auditors Report 1 Financial Statements: Statements of Assets and Liabilities 3 Statements of Revenue and Expenses 4 Statements of Cash Flows 5 Notes to Financial Statements 6 Supplemental Schedule Schedule of Transactions with Hyatt Corporation and its Affiliates 10

3 KPMG LLP 303 East Wacker Drive Chicago, IL Independent Auditors Report The Members Dauphin County General Authority and Hyatt Corporation: We have audited the accompanying statements of assets and liabilities of the Hyatt Regency Pittsburgh International Airport (accounts maintained by Hyatt Corporation), a hotel owned by Dauphin County General Authority (the Owner), as of December 31, 2011 and 2010, and the related statements of revenue and expenses and cash flows for the years then ended (prepared pursuant to the Management Agreement dated May 15, 1998, as amended, between Dauphin County General Authority and Hyatt Corporation, as described in note 1 to the financial statements). These financial statements are the responsibility of the management of Hyatt Corporation. 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Owner s or Hyatt Corporation s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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. The accompanying financial statements were prepared for the purpose of complying with the Management Agreement between Dauphin County General Authority and Hyatt Corporation as described in note 1, and are not intended to be a presentation in conformity with U.S. generally accepted accounting principles. In our opinion, the financial statements referred to above present fairly, in all material respects, the assets and liabilities of the Hyatt Regency Pittsburgh International Airport (accounts maintained by Hyatt Corporation) as of December 31, 2011 and 2010, and the revenue, expenses, and cash flows for the years then ended, on a basis of accounting described in note 1. Our audits were conducted for the purpose of forming an opinion on the financial statements referred to above as a whole. The supplementary information included on page 10 in the Schedule of Transactions with Hyatt Corporation and its Affiliates is presented for purposes of additional analysis and is not a required part of the financial statements prepared pursuant to the Management Agreement. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative ( KPMG International ), a Swiss entity.

4 of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements referred to above. This report is intended solely for the information and use of the members of Dauphin County General Authority and management of Hyatt Corporation, and is not intended to be and should not be used by anyone other than these specified parties. March 14,

5 Statements of Assets and Liabilities December 31, 2011 and 2010 Assets Cash and cash equivalents: House banks $ 35,000 35,000 Demand deposits 118, ,311 Temporary cash investments 843, ,604 Total cash and cash equivalents 996, ,915 Accounts receivable, less allowance for doubtful accounts of $18,400 and $19,662, respectively 524, ,515 Other receivables 2,648 Inventories 38,873 41,077 Operating equipment 47,758 38,321 Prepaid expenses 29,689 25,762 Other assets Total assets $ 1,637,343 1,242,010 Liabilities and Control Due to Hyatt, net $ 618, ,062 Accounts payable 568, ,413 Other payables 8,162 Accrued expenses 507, ,282 Advance deposits 98,472 45,796 Due to Fund, net 74,036 75,060 Total liabilities 1,874,737 1,673,613 Control (237,394) (431,603) Total liabilities and control $ 1,637,343 1,242,010 See accompanying notes to financial statements. 3

6 Statements of Revenue and Expenses Years ended December 31, 2011 and Revenue: Rooms $ 12,085,290 11,216,943 Food and beverage 6,212,911 6,183,708 Other operated departments 151,384 55,619 Rentals and other income 209, ,669 Total revenue 18,659,028 17,738,939 Departmental expenses: Rooms 3,191,315 3,077,690 Food and beverage 3,958,735 4,052,253 Other operated departments 79,927 39,443 Total departmental expenses 7,229,977 7,169,386 Total departmental income 11,429,051 10,569,553 Undistributed operating expenses: Administrative and general 1,758,242 1,601,567 Sales and marketing 1,420,392 1,378,539 Property operation and maintenance 577, ,188 Utilities 732, ,000 Total undistributed operating expenses 4,488,373 4,342,294 Gross operating profit 6,940,678 6,227,259 Management fees 1,038,513 1,000,388 Income before fixed charges 5,902,165 5,226,871 Fixed charges: Rent 20,491 20,462 Insurance 94,054 79,799 Total fixed charges 114, ,261 Net operating income 5,787,620 5,126,610 Less replacement reserves 1,093,836 1,038,895 Adjusted net operating income $ 4,693,784 4,087,715 See accompanying notes to financial statements. 4

7 Statements of Cash Flows Years ended December 31, 2011 and Cash flows from operating activities: Adjusted net operating income $ 4,693,784 4,087,715 Funding for replacement of and additions to furnishings and equipment paid by Owner 1,094,860 1,037,360 Adjustments to reconcile adjusted net operating income to net cash provided by operating activities: Accounts receivable (15,525) (2,002) Other receivables 2,648 2,012 Inventories 2,204 1,022 Operating equipment (9,437) (5,469) Prepaid expenses (3,927) 4,123 Other assets 563 5,241 Accounts payable 177,305 71,813 Other payables 8,162 Accrued expenses (42,281) (37,146) Advance deposits 52,676 (50,412) Due to Hyatt, net 6, ,353 Due to Fund, net (1,024) 1,535 Net cash provided by operating activities 5,966,294 5,292,145 Cash flows from financing activities: Contributions by Owner 15,782,842 14,383,571 Distributions to Owner (21,012,580) (19,978,756) Payments made on behalf of Owner (364,697) (68,753) Net cash used in financing activities (5,594,435) (5,663,938) Increase (decrease) in cash and cash equivalents 371,859 (371,793) Cash and cash equivalents beginning of year 624, ,708 Cash and cash equivalents end of year $ 996, ,915 See accompanying notes to financial statements. 5

8 Notes to Financial Statements December 31, 2011 and 2010 (1) Summary of Significant Accounting Policies (a) Basis of Financial Statements The accompanying financial statements have been prepared pursuant to the provisions of a Management Agreement dated May 15, 1998, as amended (Management Agreement), between Hyatt Corporation (Hyatt) and Dauphin County General Authority (the Owner), the owner of the Hyatt Regency Pittsburgh International Airport (the Hotel). Accordingly, the statements of assets and liabilities do not include all of the assets and liabilities of the Owner, but only those assets and liabilities carried on the books and records of the Hotel, which are maintained by employees of Hyatt. Assets and liabilities not reflected herein may include, but are not limited to, property, building, furniture and equipment, and mortgages payable. In addition, the statements of revenue and expenses do not include depreciation or interest expense or any expenses paid directly by the Owner, except as noted or any provision for income taxes, since such taxes, if any, are the liability of the Owner. However, the statements of revenue and expenses do include current charges for the provision for replacement of and additions to furnishings and equipment calculated in accordance with the Management Agreement. The Management Agreement is for a period commencing with the opening of the Hotel and expiring on June 28, (b) (c) (d) (e) (f) Description of Business The Hotel is a 336-room business hotel located in Pittsburgh, Pennsylvania. Hyatt manages the Hotel under the Management Agreement with Dauphin County General Authority, the owner of the Hotel. Use of Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents include cash on hand (House Banks), demand deposits, and temporary cash investments. Temporary cash investments are those investments of a demand nature or that have maturities within 90 days at the time of purchase. Inventories Inventories, consisting primarily of food and beverage, are stated at the lower of cost or market. Cost is determined generally by the first-in, first-out method. Operating Equipment Operating equipment includes linen, china, glassware, silver, and uniforms. Monthly routine replacement purchases are recorded as assets and expensed over the expected period of consumption of one year. Bulk purchases of operating equipment done in conjunction with a significant renovation are recorded as assets and expensed over the respective expected period of consumption. 6 (Continued)

9 Notes to Financial Statements December 31, 2011 and 2010 (g) (h) Advertising Advertising costs are expensed as incurred and are included in sales and marketing expenses in the accompanying statements of revenue and expenses. Revenue Revenue is recognized when the services are provided. Additionally, the Hotel collects sales, use, occupancy, and similar taxes, which are presented on a net basis (excluded from revenue) on the statements of revenue and expenses. Included within rentals and other income in the accompanying statements of revenue and expenses are room cancellation and attrition penalties of $29,024 and $19,562 for the years ended December 31, 2011 and 2010, respectively. (2) Management Fees The annual management fee is $983,000 for the tenth year of operations (through June 28, 2010), $1,017,400 for the eleventh year of operations (through June 28, 2011), $1,059,158 for the twelfth year of operations (through June 28, 2012) and increases on each anniversary date thereafter as prescribed in the Management Agreement up to $1,167,500. The annual management fee may be increased only to the extent the Consumer Price Index for United States City Averages for All Urban Consumers annual increase exceeds 3.5%. The management fee expense was $1,038,513 and $1,000,388 for the years ended December 31, 2011 and 2010, respectively. (3) Replacement Reserves The Management Agreement requires that a fund for replacement of and additions to furnishings and equipment be established (the Fund). An interest-bearing account, not recorded on the Hotel s records, is maintained for the Fund and held by the Owner. A summary of activity in this account for the years ended December 31, 2011 and 2010 is as follows: Balance, beginning of year $ 2,205,919 1,543,345 Receipt of amount owed to the fund from the prior year 75,060 73,525 Provision for the year 1,093,836 1,038,895 Interest earned 2,111 1,363 Expenditures (358,329) (376,149) Proceeds from the sale of FF&E 8,969 Net amount owed to the fund at the end of the year (74,036) (75,060) Balance, end of year $ 2,953,530 2,205,919 The amount charged to operations is equal to 6% of gross receipts, as defined. 7 (Continued)

10 Notes to Financial Statements December 31, 2011 and 2010 (4) Control Activity in the Owner s control account for the years ended December 31, 2011 and 2010 is as follows: Balance, beginning of year $ (431,603) 107,260 Adjusted net operating income 4,693,784 4,087,715 Funding for replacement of and additions to furnishings and equipment 1,094,860 1,037,360 Contributions from Owner 15,782,842 14,383,571 Distributions to Owner (21,012,580) (19,978,756) Payments made on behalf of Owner (364,697) (68,753) Balance, end of year $ (237,394) (431,603) (5) Subsequent Events Subsequent to December 31, 2011 and through March 14, 2012, the date through which management evaluated subsequent events and on which date the financial statements were issued, the Hotel did not identify any subsequent events. 8

11 SUPPLEMENTAL SCHEDULE

12 Schedule of Transactions with Hyatt Corporation and its Affiliates December 31, 2011 and 2010 In addition to management fees earned by Hyatt, the Hotel incurred charges for services, programs, and allocated costs from Hyatt and certain of its subsidiaries and affiliates for the years ended December 31, 2011 and 2010 as follows: Chain allocation $ 356, ,474 Coordinated marketing services 50,338 78,761 Gold Passport program 184, ,675 Employees benefit plans (includes employee contributions) 810, ,334 Insurance 140, ,568 Data processing services 170, ,159 Other 387, ,285 At December 31, 2011 and 2010, amounts included in liabilities related to the above transactions were $530,085 and $527,279, respectively. Additionally, the Hotel reimburses Hyatt for salary, related benefits, and employment costs of Hyatt employees who work for the Hotel. Hyatt also provides an aggregate of twelve complimentary rooms per year (on a space available basis) to employees who have completed one year of employment with Hyatt or any Hyatt hotel. The maximum number of complimentary room nights per employee in any one hotel is three nights per year. Each Hyatt hotel must generally reserve 1% of its room inventory for employee complimentary rooms. Furthermore, Hyatt and its affiliates directly or indirectly own or have interests in certain Hyatt hotels. Such Hyatt hotels are allocated costs on the same basis as any other Hyatt hotel. The following supplemental disclosures describe additional transactions, of which Hyatt is aware, with other entities, although not considered affiliates, in which Hyatt or its affiliates hold a minority, noncontrolling interest: Avendra LLC (Avendra), a purchasing company in which an affiliate of Hyatt holds a minority, noncontrolling interest, provides purchasing services to Hyatt Hotels for certain food, nonalcoholic beverage, operating equipment, and supplies. The Hotel made payments to Avendra for replenishment orders and/or purchasing fees of $14,019 in 2011 and $0 in In addition, Avendra reported that it earned an estimated $37,190 in 2011 and $33,777 in 2010 in commissions directly from manufacturers, distributors, and other vendors related to purchases for the Hotel. Pursuant to Hyatt s purchasing services agreement with Avendra, the aggregate amount of purchasing fees paid by the Hotel and commissions received directly by Avendra in excess of certain percentages of annual purchasing volume, if any, will be credited to Hyatt. Hyatt advised Avendra to remit all excess amounts, if any, directly to the Hotel, and accordingly, the Hotel received $26,950 in 2011 and $21,474 in 2010 from Avendra. See accompanying independent auditors report. 10