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VLG » Topics » Our financial statements reflect assets, liabilities and results of several entities controlled by our Chairman and in which we have no economic interest.

This excerpt taken from the VLG 10-K filed Sep 28, 2006.
Our financial statements reflect assets, liabilities and results of several entities controlled by our Chairman and in which we have no economic interest.
 
We have been required under recently adopted accounting principles to consolidate in our financial statements the financial results and position of several entities controlled by Gary E. West, Chairman of our Board of Directors and our largest shareholder. Although we do not have any equity interest in these entities, this consolidation causes us to report:
 
  •  less operating, distribution and administrative expense because the rent expense we pay to these entities is reduced in consolidation;
 
  •  more interest and depreciation expense because the properties these entities hold are financed and generate considerable depreciation;
 
  •  more other income because we report the rental income that these entities generate;
 
  •  higher balances of buildings and equipment representing the principal asset of these entities; and
 
  •  higher indebtedness because of the outstanding mortgage loans on those properties.
 
Our financial ratios and our ability to comply with the financial covenants contained in credit and other agreements could be adversely affected by the inclusion of the results of operations of these entities and the asset and liability balances they hold, our financial results could be more volatile and difficult to understand and some forms of financing (such as asset-backed securitization) may become less available or more costly to us because of this consolidation.
 
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