<PAGE>
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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
- --- Exchange Act of 1934 for the quarterly period ended January 31, 2000.
OR
Transition Report Pursuant to Section 13 or 15(d) of the Securities
- --- Exchange Act of 1934 for the transition period from to .
-------- --------
Commission File Number 333-31025
KSL RECREATION GROUP, INC.
(Exact name of Registrant as specified in its charter)
DELAWARE 33-0747103
-------- ------------------------
(State or other jurisdiction of (IRS Employer ID Number)
incorporation or organization)
55-880 PGA Boulevard
La Quinta, California 92253
- ---------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
760/564-8000
------------
(Registrant's telephone number, including area code)
N/A
-------
(Former name, address and fiscal year, if changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X , No .
--- ---
Shares outstanding of the Registrant's common stock
as of March 15, 2000
1,000
Class
Common Stock, $0.01 par value
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<PAGE>
KSL RECREATION GROUP, INC.
INDEX
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Page
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
Condensed consolidated statements of operations for the three
months ended January 31, 2000 and 1999....................................3
Condensed consolidated balance sheets, January 31, 2000 and
October 31, 1999..........................................................4
Condensed consolidated statements of cash flows for the three months
ended January 31, 2000 and 1999...........................................6
Notes to condensed consolidated financial statements........................8
Item 2. Management's discussion and analysis of financial condition and
results of operations......................................................11
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders..................14
Item 6. Exhibits and Reports on Form 8-K.....................................14
Signatures....................................................................15
</TABLE>
2
<PAGE>
KSL RECREATION GROUP, INC.
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDED
(AMOUNTS IN THOUSANDS, JANUARY 31,
EXCEPT PER SHARE DATA) 2000 1999
--------- ---------
<S> <C> <C>
REVENUES:
Rooms $ 39,598 $ 27,552
Food and beverage 24,943 22,564
Golf fees 8,048 10,994
Dues and fees 5,115 7,507
Merchandise 5,162 4,799
Spa 5,368 3,374
Other 13,374 9,699
Real estate 2,270 33
--------- ---------
Total revenues 103,878 86,522
EXPENSES:
Payroll and benefits 35,522 30,774
Cost of real estate 2,182 26
Other expenses 37,311 32,712
Depreciation and amortization 11,899 11,772
Corporate fee 2,555 2,583
--------- ---------
Total expenses 89,469 77,867
--------- ---------
INCOME FROM OPERATIONS 14,409 8,655
OTHER INCOME (EXPENSE):
Interest income 615 575
Interest expense (12,696) (11,010)
--------- ---------
Other expense, net (12,081) (10,435)
INCOME (LOSS) BEFORE MINORITY INTERESTS
AND INCOME TAXES 2,328 (1,780)
MINORITY INTERESTS IN LOSS OF SUBSIDIARY -- 106
--------- ---------
INCOME (LOSS) BEFORE INCOME TAXES 2,328 (1,674)
INCOME TAX (EXPENSE) BENEFIT (931) 650
--------- ---------
NET INCOME (LOSS) $ 1,397 $ (1,024)
========= =========
BASIC AND DILUTED EARNINGS (LOSS) PER SHARE $ 1,397 $ (1,024)
========= =========
WEIGHTED AVERAGE NUMBER OF
COMMON SHARES 1,000 1,000
========= =========
</TABLE>
See accompanying notes to condensed consolidated financial statements.
3
<PAGE>
KSL RECREATION GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS) JANUARY 31, OCTOBER 31,
2000 1999
------------ ------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 17,110 $ 9,369
Restricted cash 10,459 10,421
Trade receivables, net of allowance for doubtful
receivables of $750 and $712, respectively 23,019 21,855
Inventories 13,503 12,467
Current portion of notes receivable 4,055 4,015
Other receivables 2,479 6,048
Prepaid expenses and other current assets 3,138 4,593
Deferred income taxes 1,523 1,523
------------ ------------
Total current assets 75,286 70,291
REAL ESTATE UNDER DEVELOPMENT 9,260 8,947
PROPERTY AND EQUIPMENT, net of accumulated
depreciation of $111,931 and $102,378, respectively 745,360 736,254
NOTES RECEIVABLE, less current portion 3,738 3,754
RESTRICTED CASH, less current portion 8,068 8,150
EXCESS OF COST OVER NET ASSETS OF
ACQUIRED ENTITIES, net of accumulated
amortization of $21,081 and $22,863 respectively 104,559 105,775
OTHER ASSETS, net 91,494 92,897
------------ ------------
$ 1,037,765 $ 1,026,068
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
4
<PAGE>
KSL RECREATION GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS, JANUARY 31, OCTOBER 31,
EXCEPT PER SHARE DATA) 2000 1999
------------ ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES:
Accounts payable $ 10,969 $ 13,411
Income taxes payable 10,028 10,441
Accrued liabilities 25,275 28,572
Accrued interest payable 4,705 1,642
Current portion of long-term debt 1,000 1,000
Current portion of obligations under capital leases 1,171 1,303
Customer and other deposits 21,933 18,173
Deferred income and other 5,907 2,732
------------ ------------
Total current liabilities 80,988 77,274
LONG-TERM DEBT, less current portion 551,000 549,000
OBLIGATIONS UNDER CAPITAL LEASES,
less current portion 32,626 32,806
OTHER LIABILITIES 1,759 1,705
MEMBER DEPOSITS 96,899 92,187
DEFERRED INCOME TAXES 16,286 16,286
STOCKHOLDER'S EQUITY:
Common stock, $.01 par value, 25,000 shares authorized, 1000
outstanding -- --
Additional paid-in capital 256,810 256,810
Retained earnings 1,397 --
------------ ------------
Total stockholder's equity 258,207 256,810
------------ ------------
$ 1,037,765 $ 1,026,068
============ ============
</TABLE>
See accompanying notes to condensed consolidated financial statements.
5
<PAGE>
KSL RECREATION GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDED
JANUARY 31,
(AMOUNTS IN THOUSANDS) 2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 1,397 $ (1,024)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization 11,899 11,772
Amortization of debt issuance costs 254 249
Provision for losses on trade receivables 131 159
Minority interests in loss of subsidiary -- (106)
Changes in operating assets and liabilities, net of effects
from investments in subsidiaries:
Restricted cash 44 (12,597)
Trade receivables (1,295) (3,101)
Inventories (1,036) (925)
Prepaid expenses and other current assets 1,455 (1,283)
Other receivables 3,569 (33)
Notes receivable 744 37
Other assets 21 (585)
Accounts payable (2,442) (737)
Income taxes payable (413) --
Accrued liabilities (3,298) (1,574)
Accrued interest payable 3,063 3,162
Customer and other deposits 3,760 7,040
Deferred income and other current liabilities 3,175 4,142
Other liabilities 54 69
------------ ------------
Net cash provided by operating activities 21,082 4,665
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of businesses, net of cash acquired -- (105,149)
Investment in real estate under development (313) (2,639)
Purchases of property and equipment (18,660) (7,410)
Collections on member notes receivable 978 1,086
Notes receivable from affiliate, net -- (476)
Proceeds from sales of property and equipment -- 23
------------ ------------
Net cash used in investing activities (17,995) (114,565)
</TABLE>
See accompanying notes to condensed consolidated financial statements.
6
<PAGE>
KSL RECREATION GROUP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED) (CONTINUED)
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDED
JANUARY 31,
(AMOUNTS IN THOUSANDS) 2000 1999
------------ ------------
<S> <C> <C>
CASH FLOWS FROM FINANCING ACTIVITIES:
Capital contributions from Parent $ -- $ 110,000
Revolving line of credit, net 2,000 (3,500)
Member deposits 4,589 3,180
Member refunds (1,623) (669)
Principal payments on long-term debt and obligations
under capital leases (312) (716)
------------ ------------
Net cash provided by financing activities 4,654 108,295
------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 7,741 (1,605)
CASH AND CASH EQUIVALENTS, beginning of period 9,369 5,248
------------ ------------
CASH AND CASH EQUIVALENTS, end of period $ 17,110 $ 3,643
============ ============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid (net of amounts capitalized) $ 10,235 $ 6,452
============ ============
Income taxes paid $ 1,344 $ 615
============ ============
NONCASH INVESTING AND FINANCING ACTIVITIES:
Obligations under capital leases $ -- $ 2,577
Notes receivable issued for member deposits 1,748 1,778
Trade-in of equipment under capital lease -- 517
Capital contribution of minority interest from Parent -- 9,178
Assumption of debt of acquired properties -- 275,000
</TABLE>
See accompanying notes to condensed consolidated financial statements.
7
<PAGE>
KSL RECREATION GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
(AMOUNTS IN THOUSANDS)
NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES
KSL Recreation Group, Inc. and its subsidiaries (collectively, the Company)
is engaged in the ownership and management of resorts, spas, golf courses,
private clubs, and activities related thereto.
The unaudited interim condensed consolidated financial statements presented
herein have been prepared in accordance with the rules and regulations of the
Securities and Exchange Commission for reporting on Form 10-Q and do not include
all of the information and note disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles.
In the opinion of management, these condensed consolidated financial statements
contain all adjustments (consisting of normal recurring accruals) necessary to
present fairly the Company's consolidated financial position, results of
operations and cash flows. These unaudited interim condensed consolidated
financial statements should be read in conjunction with the other disclosures
contained herein and with the Company's audited consolidated financial
statements and notes thereto contained in the Company's Form 10-K for the year
ended October 31, 1999. Operating results for interim periods are not
necessarily indicative of results that may be expected for the entire fiscal
year. Certain reclassifications have been made in the consolidated financial
statements to conform to the 2000 presentation.
The preparation of financial statements in conformity with generally
accepted accounting principles necessarily requires management to make estimates
and assumptions that affect the 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 periods. Actual results could differ from these estimates.
The Company has adopted AICPA Statement of Position (SOP) 98-5, "Reporting
on the Costs of Start-Up Activities," effective November 1, 1999. The adoption
of SOP 98-5 did not have a material impact on the Company's consolidated
financial statements.
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities", which establishes accounting and reporting
standards for derivative instruments, including certain derivative instruments
imbedded in other contracts, and for hedging activities. It requires that an
entity recognizes all derivatives as either assets or liabilities in the
statements of financial position and measures those instruments at fair value.
The Company is required to adopt SFAS No. 133 in fiscal 2001. The Company is in
the process of evaluating the adoption of this standard, but does not believe
that it will have a material effect on the consolidated financial statements.
8
<PAGE>
KSL RECREATION GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
(AMOUNTS IN THOUSANDS)
NOTE 2. ACQUISITIONS
On December 29, 1998, the Company, through a wholly-owned subsidiary,
acquired substantially all the assets and certain liabilities of the Grand
Wailea Resort Hotel & Spa (Grand Wailea), a 779-room resort in Maui, Hawaii for
approximately $372,775 (exclusive of closing costs), including the assumption of
approximately $275,000 in mortgage financing. The acquisition was accounted for
using the purchase method of accounting. Accordingly, the operating results of
the Grand Wailea have been included in the Company's consolidated financial
statements since acquisition. The excess of the purchase price over the debt
assumed, acquisition related costs, and working capital were funded with a
$110,000 equity investment by the Parent to the Company.
The following are the Company's unaudited consolidated results of
operations for the three months ended January 31, 2000, compared to the pro
forma consolidated results of operations for the three months ended January
31,1999, which assume the Grand Wailea transaction occurred as of November 1,
1998:
<TABLE>
<CAPTION>
(In thousands, except per share data)
2000 1999
---- ----
<S> <C> <C>
Revenues $103,878 $ 98,497
Net income (loss) before income taxes 2,328 (4,979)
Net income (loss) 1,397 (4,329)
Net income (loss) per share 1,397 (4,329)
</TABLE>
The unaudited pro forma results do not necessarily represent results which
would have occurred if the acquisitions had taken place as of the beginning of
the fiscal periods presented, nor do they purport to be indicative of the
results that will be obtained in the future.
NOTE 3. LONG-TERM DEBT AND RESTRICTED CASH
The Company has a revolving credit line which allows maximum borrowings of
$275,000. The Company's outstanding borrowings under the revolving credit line
were $54,000 at January 31, 2000. The terms of the Company's credit facility,
including the revolving credit line, contain certain financial covenants. The
Company is in compliance with the required financial covenants of the credit
facility and other debt instruments at January 31, 2000.
In March 1999, the Company entered into interest rate swap agreements in
which $270,000 of variable rate debt was swapped for fixed rate debt bearing a
LIBOR rate of 5.57%. The agreements mature in November 2002. The amounts to be
received or paid pursuant to these agreements are accrued and recognized through
an adjustment to interest expense in the accompanying consolidated statements of
operations over the life of the agreement. The estimated fair value of the
agreement as of January 31, 2000 is $9,942.
9
<PAGE>
KSL RECREATION GROUP, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)
(AMOUNTS IN THOUSANDS)
NOTE 4. REAL ESTATE TRANSACTION
During the three month period ended January 31, 2000, the Company sold
four single family detached units for $2,270. Forty-six units have been sold
out of a total of sixty-eight single family detached units that have been
completed or are under construction on a site adjacent to La Quinta Resort
& Club in California. An additional thirty units are planned. During the
three month period ended January 31, 2000, marketing and project management
expenses of $233 have been incurred by the Company with an affiliate in
connection with this development.
NOTE 5. SEGMENT INFORMATION
The Company's reportable operating segments include the Resort segment and
the Real Estate segment. The Resort segment provides service-based recreation
through resorts, spas, golf courses, private clubs and activities related
thereto. The Real Estate segment develops and sells real estate in and around
the Company's Resort operations. The Company's Real Estate segment exists to
support and enhance growth of the Company's Resort segment. The Company utilizes
the expertise of an affiliate in determining real estate projects to undertake.
The Company evaluates segment performance based on income from
operations. Because the Company does not evaluate performance based on net
income at the operating segment level, the Company's other income and
expenses and income taxes are not tracked internally by segment. Therefore,
such information is not presented.
Operating segment data for the three months ended January 31, are as
follows:
<TABLE>
<CAPTION>
RESORT REAL ESTATE CONSOLIDATED
<S> <C> <C> <C>
Quarter ended January 31, 2000
Revenues $ 101,366 $ 2,512 $ 103,878
Income from operations 14,202 207 14,409
Quarter ended January 31, 1999
Revenues 86,489 33 86,522
Income (loss) from operations 8,672 (17) 8,655
</TABLE>
The Real Estate segments' identifiable assets were $10,416 and $13,918 at
January 31, 2000 and October 31, 1999, respectively. All of the remaining assets
of the Company are related to the Resort segment, other than the deferred income
taxes which is considered a corporate asset and is not identifiable to either
segment. Substantially all of the depreciation and amortization expense relates
to the Resort segment.
10
<PAGE>
KSL RECREATION GROUP, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(AMOUNTS IN THOUSANDS)
THREE MONTHS ENDED JANUARY 31, 2000 (2000 FIRST QUARTER) AS COMPARED TO THE
THREE MONTHS ENDED JANUARY 31, 1999 (1999 FIRST QUARTER).
REVENUES - Revenues increased by $17,356 or 20.1%, from $86,522 in the
1999 First Quarter to $103,878 in the 2000 First Quarter. Of this increase,
$7,104 reflects the increase in revenues at operations owned throughout both
the 2000 First Quarter and the 1999 First Quarter, although $2,237 of this
increase relates to real estate operations, resulting in an overall increase
in revenue in resort operations of 7% for these properties. The remainder of
the change in revenue was a $19,197 increase attributable to the acquisition
of the Grand Wailea Resort Hotel & Spa (the Addition), offset by a decrease
of $8,945 attributable to the disposition of Fairways (Disposition) during
fiscal year 1999.
During the 2000 First Quarter, the Company was engaged in ongoing
capital improvements at many of its resorts, which the Company believes will
add to future revenues. These capital improvements include: at Desert
Resorts, the completion of the Greg Norman golf course; at Doral, the ongoing
construction of a member clubhouse, and the renovation of the White golf
course by Greg Norman; at The Claremont, extensive room and common area
renovations, and construction of a new spa; and at Lake Lanier and Grand
Traverse, substantial room renovations. These projects are to be completed at
various times in fiscal 2000. While management believes they will enhance the
guest experience and provide future revenue growth, their short-term impact
has included some disruption in normal business levels and hence, dampened
revenue growth as these properties.
EXPENSES - Expenses of operations increased by $11,602, or 14.9%, from
$77,867 in the 1999 First Quarter to $89,469 in the 2000 First Quarter.
Approximately $15,031 of the increase was due to the Addition, offset by
$9,682 associated with the Disposition. Real estate operations accounted for
an increase of $2,255 or 19.4% of the overall increase in expenses. Excluding
the effect of the Addition, Disposition, and real estate, expenses of resort
operations increased 6.8%, primarily due to an increase in expanded services,
from the 1999 First Quarter to the 2000 First Quarter.
OTHER INCOME (EXPENSE) - Other income (expense) increased $1,646 from
net expense of $10,435 for the 1999 First Quarter to net expense of $12,081
for the 2000 First Quarter. Interest expense increased $5,651 related to debt
assumed with the Addition. This increase was offset by interest reductions of
$1,768 and $2,197 related to the reduction of debt from the Disposition and
the reduction of debt by the ongoing operations, respectively.
NET INCOME (LOSS) - Net income increased by $2,421 from a net loss of
$1,024 in the 1999 First Quarter to net income of $1,397 in the 2000 First
Quarter. Excluding the Addition and Disposition, the Company's 2000 First
Quarter net income before income taxes was $4,893, an increase of $2,834 or
138%, as compared to the 1999 First Quarter. Income tax expense increased by
$1,581 from an income tax benefit of $650 in the 1999 First Quarter to an
income tax expense of $931 in the 2000 First Quarter, reflecting the lack of
loss carryforwards in Fiscal Year 2000.
ADJUSTED EBITDA - Adjusted EBITDA increased by $6,150 or 25.3%, from
$24,257 in the 1999 First Quarter to $30,407 in the 2000 First Quarter.
Adjusted Net Membership Deposits increased by $374 or 10.2% from $3,654 in the
1999 First Quarter to $4,028 in the 2000 First Quarter, due to the Addition.
11
<PAGE>
KSL RECREATION GROUP, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(AMOUNTS IN THOUSANDS) (CONTINUED)
The foregoing discussion includes comparative financial information on the
Company's Adjusted EBITDA, which is defined as net income before income tax
expense (benefit), net interest expense, depreciation and amortization,
extraordinary items, non-recurring charges and non-cash items, plus Adjusted Net
Membership Deposits. Adjusted Net Membership Deposits is defined as Net
Membership Deposits, excluding Net Membership Deposits which were paid in
connection with the initial conversion of members to new membership plans, and
excluding Net Membership Deposits (and subsequent refunds of such deposits) that
are purchased as part of an acquisition. Net Membership Deposits is defined as
the amount of refundable membership deposits paid by new and upgraded resort
club members and by existing members who have converted to new membership plans,
in cash, plus principal payments in cash received on notes in respect thereof,
minus the amount of any refunds paid in cash with respect to such deposits.
Information regarding Adjusted EBITDA has been provided because the Company
believes that it assists in understanding the Company's operating results. The
Company views cash flow from membership sales as an important component of
operating cash flow measure, as membership sales are recurring in nature as
clubs build the membership and replace the natural turnover. Also, the
significant payroll and operating expenses necessary to create, sell and
maintain private club operations are treated as ongoing expenses in the
Company's Statements of Operations and therefore recognizing the cash flow from
sales is an appropriate match in determining the overall performance of the club
operation. It is important to note that the membership cash flow included in
Adjusted EBITDA is only the cash amount collected, net of financed sales and
refunds. From the Company's perspective, EBITDA and net membership cash flow
together, which along with certain non-cash items comprise Adjusted EBITDA,
provide the most accurate measure of the recurring cash flow performance of the
operations. As structured, these private club membership sales are not treated
as revenue for Generally Accepted Accounting Principles ("GAAP") purposes and
therefore do not appear in the Company's Statements of Operations, but are
reflected in the Company's Statements of Cash Flows.
RECONCILIATIONS OF CONSOLIDATED NET INCOME (LOSS) TO ADJUSTED EBITDA
<TABLE>
<CAPTION>
FOR THE
THREE MONTHS ENDED
JANUARY 31,
2000 1999
---------- ----------
<S> <C> <C>
Net income (loss) $ 1,397 $ (1,024)
Adjustments to net income (loss):
Income tax expense (benefit) 931 (650)
Net interest expense 12,081 10,435
Depreciation and amortization 11,899 11,772
---------- ----------
EBITDA 26,308 20,533
---------- ----------
Adjustments to EBITDA:
Net Membership Deposits 3,944 3,597
Excluded Membership Refunds 84 57
---------- ----------
Adjusted Net Membership Deposits 4,028 3,654
Non-cash items 71 70
---------- ----------
Adjusted EBITDA $ 30,407 $ 24,257
========== ==========
</TABLE>
Adjusted EBITDA should not be construed as an indicator of the Company's
operating performance or as an alternative to operating income as determined in
accordance with GAAP. Additionally, Adjusted EBITDA should not be construed by
investors as a measure of the Company's liquidity or ability to meet all cash
needs or as an alternative to cash flows from operating, investing and financing
activities as determined in accordance with GAAP, nor should Adjusted EBITDA be
construed by investors as an alternative to any other determination under GAAP.
The Company's Adjusted EBITDA may not be comparable to similarly titled measures
reported by other companies.
12
<PAGE>
KSL RECREATION GROUP, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(AMOUNTS IN THOUSANDS) (CONTINUED)
LIQUIDITY AND CAPITAL RESOURCES
During the 2000 First Quarter, cash flow provided by operating activities
was $21,082 compared to $4,665 for the 1999 First Quarter. This change was
primarily due to a decrease in usage of restricted cash of $12,641, primarily
related to the Grand Wailea acquisition, and a $3,602 change in collections of
other receivables ($4,145 relating to real estate activity). During the 2000
First Quarter, cash flow used in investing activities aggregated $17,995 for the
2000 First Quarter as compared to $114,565 for the 1999 First Quarter. This
change was primarily due to the Company's acquisition of the Grand Wailea Resort
Hotel & Spa causing a $105,149 outflow of cash in 1999 First Quarter, offset by
an increase in 2000 First Quarter of $11,250 in purchases of property and
equipment. Cash provided by financing activities was $4,654 in the 2000 First
Quarter compared to $108,295 in the 1999 First Quarter. This change is primarily
attributable to capital contributions of $110,000 in 1999 First Quarter, offset
by an increase of $5,500 in usage of the revolving line of credit in the 2000
First Quarter over the 1999 First Quarter usage.
The Company believes that its liquidity, capital resources and cash flows
from existing operations will be sufficient to fund capital expenditures,
working capital requirements and interest and principal payments on its
indebtedness for the foreseeable future. The Company currently expects that it
will acquire additional resorts, golf facilities or other recreational
facilities, and in connection therewith, expects to incur additional
indebtedness. There can be no assurances that additional indebtedness or funding
will be available in the future.
13
<PAGE>
KSL RECREATION GROUP, INC.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
(AMOUNTS IN THOUSANDS) (CONTINUED)
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
The statements in this Management's Discussion and Analysis of Financial
Condition and Results of Operations concerning future events, activities,
conditions and any and all statements that are not historical facts are
forward-looking statements. Actual results may differ materially from those
projected. Forward-looking statements involve risks and uncertainties. A change
in any one or a combination of factors could affect the Company's future
financial performance. Also, the Company's past performance is not necessarily
evidence of or an indication of the Company's future financial performance.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
By Unanimous Written Consent of Shareholders in Lieu of Annual Meeting,
dated as of November 10, 1999, the following individuals were elected
directors of the Company:
Henry R. Kravis
Paul E. Raether
Scott M. Stuart
Michael S. Shannon
George R. Roberts
Michael T. Tokarz
Alexander Navab, Jr.
Larry E. Lichliter
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27. (a) Financial Data Schedule for the period ended January 31, 2000.
(b) Reports on Form 8-K
None
14
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
KSL RECREATION GROUP, INC.
Dated: March 15, 2000 By: /s/ John K. Saer, Jr.
---------------------------------------
Vice President, Chief Financial Officer
and Treasurer
15
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM CONSOLIDATED
FINANCIAL STATEMENTS FOR THE PERIOD ENDED JANUARY 31, 2000 AND IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-2000
<PERIOD-START> NOV-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 17,110
<SECURITIES> 0
<RECEIVABLES> 23,769
<ALLOWANCES> 750
<INVENTORY> 13,503
<CURRENT-ASSETS> 75,286
<PP&E> 857,291
<DEPRECIATION> 111,931
<TOTAL-ASSETS> 1,037,765
<CURRENT-LIABILITIES> 80,988
<BONDS> 583,626
0
0
<COMMON> 0
<OTHER-SE> 258,207
<TOTAL-LIABILITY-AND-EQUITY> 1,037,765
<SALES> 32,375
<TOTAL-REVENUES> 103,878
<CGS> 11,712
<TOTAL-COSTS> 89,469
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 131
<INTEREST-EXPENSE> 12,081
<INCOME-PRETAX> 2,328
<INCOME-TAX> 931
<INCOME-CONTINUING> 1,397
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,397
<EPS-BASIC> 1,397
<EPS-DILUTED> 1,397
</TABLE>
