Ultimate Escapes 10-K Annual Report

By: Destination Club News
Date: April 27, 2010

Earlier this month, Ultimate Escapes filed their 10-K Annual Report in tandem with a conference call discussing their fourth quarter and year end results. As the world's first publicly-traded destination club, Ultimate Escapes has ushered in a new level of transparency to the industry, disclosing their revenues, new membership growth, and even executive compensation. On the call, CEO and President Jim Tousignant and CFO Philip Callaghan read their prepared remarks and answered questions from listeners. Since then, the club has also hosted a member only conference call, added the Waldorf Astoria Orlando to their portfolio, and sent two lucky members to the 2010 NFL Draft. A busy month for the world's second largest destination club is an understatement.

We dove into the club's 10-K Annual Report on your behalf and below you will find excerpts of the more notable pieces of information disclosed by the club.

Indebtedness: Pg. 15
"We have a substantial amount of indebtedness. As of December 31, 2009, we had total debt of approximately $123 million, consisting of $99 million of borrowings under our senior secured credit facility and $24 million of additional debt obligations secured by destination club properties. Our senior secured credit facility is an amended and restated $110 million revolving credit facility with CapitalSource, secured by our real estate assets, which will mature on April 30, 2011, subject to extension by us for up to two one-year periods. The revolving credit facility includes financial and operational covenants that limit our ability to incur additional indebtedness and pay dividends as well as purchase or dispose of significant assets. Covenants in the revolving credit facility include obligations to maintain either a restricted cash balance of not less than six months of debt service or a debt service coverage ratio of 1.25 to 1, to maintain a leverage ratio between debt and consolidated net worth of no more than 3.5 to 1, to comply with specified ratios of number of club properties to club members, to have a net loss of no more than $10 million in fiscal 2009 and $5 million in fiscal 2010, and to have net income in each year thereafter (as adjusted in each year for the non-refundable portion of new member initiation fees not yet recognized in income and, in 2009, for non-cash stock-based compensation), and to maintain a consolidated debt ratio of no more than 80%...In addition, we have approximately $23 million in additional indebtedness secured by real estate assets with various first and second mortgage lenders. In the event we default on our secured debt obligations, the lenders could enforce their rights under the loan agreements, which would impair our ability to conduct our business and have a material adverse effect on our business, financial condition and results of operations. If we are unable to make payments on one or more mortgages on the properties or otherwise default on our debt obligations, the lenders could foreclose on such properties, which would have a material adverse effect on our business, financial condition and results of operations. We may also incur significant additional indebtedness in the future."

Properties: Pg. 29-31
"The majority of our club properties are owned by us, and certain club properties are leased on either a long or short term basis. All of the properties owned by us are subject to one or more mortgages. We intend to sell certain club properties and those properties are classified as Held For Sale* in our consolidated balance sheet. Of the 37 properties leased by us as of December 31, 2009, 27 were subject to long-term leases and ten were subject to short-term leases (including two short-term leases in which PE Holdings, an affiliate of ours, is the lessor)."

*Properties listed: Signature Candlewood, Signature Carlsbad, Signature Chicago, Signature Scottsdale, Premiere Carlsbad, Premiere Lake Tahoe, Premiere Steamboat Springs, Signature Bahamas,

Mortgages and Other Loans: Pg. 95
"We have 10 loans that have either matured or will mature within the next twelve months. The current portion of these loans is $3,773 at December 31, 2009. These loans are collateralized by various properties and bear interest rates ranging from 6% to 15%. The notes mature at various dates through 2010. For those notes that matured before year end, the company is in negotiations to renew."

"Included in these current loans is $234 for the remaining outstanding principal balance of $936 related to a $3.75 million loan from Kederike, LLC, an entity in which Richard Keith, our Chairman, is a 50% owner. Upon the consummation of the transaction with Private Escapes on September 15, 2009, we assumed this related party liability for $234, the remainder was assumed by an entity controlled by Mr. Keith. The maturity date of the loan was October 15, 2009; however, the parties have renegotiated an extension of the maturity date until June 30, 2010 on substantially the same terms."

"We currently have 13 long term loans with an outstanding balance of $10,524. These loans are collateralized by various properties and bear interest rates ranging from 3.375% to 13.5%. The notes mature at various dates ranging from August 2011 through January 2038."

Like many other documents pertaining to a public company, Ultimate Escapes' 10-K form touched on crucial issues such as the state of the real estate and travel markets to the mundane, such as how weather patterns could impact the club. Well north of 100 pages, the report does give a thorough break down of nearly every functional element of the club, ranging from revenue recognition to the geographical distribution of international members.

If you would like to learn more about the destination club concept, including the benefits and drawbacks of membership, or if you would like to see the club's 10-K Annual Report in its entirety, request a free copy of our Destination Club Guide.