UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-Q/A
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[X] QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 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 _________.
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Commission File Number: 000-24331
Raintree Resorts International, Inc.
CR Resorts Capital S. de R.L. de C.V. *
(Exact name of Registrant as Specified in its Charter)
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Nevada 76-0549149
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
10000 Memorial Drive, Suite 480
Houston, Texas 77024
(Address of principal executive offices, including zip code)
(713) 613-2800
(Registrant's telephone number, including area code)
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 [ ]
As of March 31, 2000, the Registrant had 10,766,300 shares of Common Stock
outstanding and Warrants to purchase 2,369,962 shares of Common Stock.
*CR Resorts Capital, S. de R.L. de C.V., a subsidiary of Raintree Resorts
International, Inc., is a co-registrant, formed under the laws of the United
Mexican States (Mexican tax identification number CRC 970811E5A).
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RAINTREE RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES
TABLE OF CONTENTS
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PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS:
Consolidated Balance Sheets as of
December 31, 1999 and March 31, 2000 (Unaudited) ............................................... 3
Consolidated Statements of Operations and Comprehensive Loss
for the Three Months ended March 31, 1999 and 2000 (Unaudited) ................................. 4
Consolidated Statements of Cash Flows
for the Three Months ended March 31, 1999 and 2000 (Unaudited).................................. 5
Notes to Consolidated Financial Statements (Unaudited) .............................................. 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS........................................................ 13
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK....................................... 18
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS................................................................................ 19
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS........................................................ 19
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.................................................................. 19
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.............................................. 19
ITEM 5. OTHER INFORMATION ............................................................................... 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K................................................................. 19
SIGNATURES.................................................................................................... 20
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PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
RAINTREE RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(in thousands except share and per share data)
(Unaudited)
December 31, March 31,
1999 2000
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<S> <C> <C>
Assets
Cash and cash equivalents ................................................ $ 8,311 $ 8,698
Vacation Interval receivables and other trade receivables, net............ 61,232 70,346
Inventories .............................................................. 896 763
Refundable Mexican taxes ................................................. 4,521 3,063
Facilities and office furniture and equipment, net ....................... 5,255 5,014
Land held for vacation ownership development ............................. 24,119 24,338
Equity investments........................................................ 3,532 3,482
Cost of unsold vacation ownership intervals and related club memberships.. 23,605 22,721
Retained interest in hotel cash flows .................................... 4,000 4,000
Deferred loan costs, net ................................................. 7,342 6,987
Prepaid and other assets ................................................ 3,058 3,333
----------- ------------
Total assets ................................................................. $ 145,871 $ 152,745
=========== ============
Liabilities and Shareholders' Investment
Liabilities
Accounts payable and accrued liabilities ................................ $ 14,098 $ 19,558
Notes payable ........................................................... 44,787 43,221
Senior Notes, due 2004, net of unamortized original issue discount of
$6,574 and $6,240 at December 31, 1999 and March 31, 2000, respectively 93,426 93,760
Taxes payable ........................................................... 1,101 752
Unearned services fees ................................................... 2,028 6,201
----------- ------------
Total liabilities ........................................................... 155,440 163,492
Commitments and Contingencies
Redeemable Preferred Stock
Pay-in-Kind preferred stock; par value $.001; 5,000,000 shares authorized,
52,250 shares issued and outstanding at March 31, 2000; aggregate
liquidation preference: $5,343 at March 31, 2000 ...................... 5,143 5,266
Convertible preferred stock; $100 per share liquidation value;
5,775 shares issued and outstanding at December 31, 1999 .............. 811 --
----------- ------------
5,954 5,266
Shareholders' Deficit
Common stock; par value $.001; 45,000,000 shares authorized, 10,766,300
shares issued and outstanding at December 31, 1999 and March 31, 2000.. 11 11
Additional paid-in capital ............................................... 2,003 1,883
Warrants to purchase, 2,369,962 shares of common stock at December 31,
1999 and March 31, 2000 ............................................... 9,331 9,331
Accumulated deficit ...................................................... (26,998) (27,351)
Cumulative translation adjustment ........................................ 130 113
----------- ------------
Total shareholders' deficit .................................................. (15,523) (16,013)
----------- ------------
Total liabilities and shareholders' deficit .................................. $ 145,871 $ 152,745
=========== ============
The accompanying notes are an integral part of these financial statements.
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RAINTREE RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(in thousands except per share data)
(Unaudited)
Three Months Ended
March 31,
------------------------------------
1999 2000
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<S> <C> <C>
Statement of Operations
Revenues
Vacation Interval sales ..................................................... $ 17,042 $ 18,010
Rental and service fee income ............................................... 2,293 2,479
Interest income on Vacation Interval receivables............................. 2,077 2,263
Other income ................................................................ 869 680
--------- ---------
Total revenues ............................................................ 22,281 23,432
Costs and operating expenses
Cost of Vacation Interval sales.............................................. 4,337 4,218
Provision for doubtful accounts ............................................. 1,177 1,420
Advertising, sales and marketing ............................................ 7,525 7,604
Maintenance and energy ...................................................... 2,107 2,824
General and administrative .................................................. 2,780 2,681
Depreciation ................................................................ 224 343
Amortization of goodwill .................................................... 1,096 --
--------- ---------
Total costs and operating expenses ........................................ 19,246 19,090
--------- ---------
Operating income ............................................................... 3,035 4,342
Interest expense, net ....................................................... 4,376 5,357
Equity in losses on equity investments....................................... 96 76
Foreign currency exchange (gains)/losses, net................................ (529) (778)
--------- ---------
Net loss before taxes .......................................................... (908) (313)
Foreign income and asset taxes............................................... 256 40
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Net loss before preferred dividends ............................................ (1,164) (353)
Preferred stock dividends ................................................... 207 120
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Net loss available to common shareholders ...................................... $ (1,371) $ (473)
========= =========
Net loss per share (Basic and Diluted) $ (.11) $ (.04)
Weighted average number of common shares (Basic and Diluted) 12,636 12,636
Comprehensive loss
Net loss before preferred stock dividends ...................................... $ (1,164) $ (353)
Other comprehensive income, net of tax:
Foreign currency translation adjustment ..................................... 65 (17)
--------- ---------
Comprehensive loss ............................................................. $ (1,099) $ (370)
========= =========
The accompanying notes are an integral part of these financial statements.
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RAINTREE RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Three Months Ended
March 31,
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1999 2000
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<S> <C> <C>
Operating activities
Net loss ........................................................................ $ (1,164) $ (353)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization .............................................. 1,653 677
Amortization of deferred loan costs ........................................ 326 378
Provision for doubtful accounts ............................................ 1,177 1,420
Equity in losses on equity investments ..................................... 96 76
Changes in other operating assets and liabilities:
Vacation Interval receivables and other trade receivables ................ (8,702) (10,429)
Cost of unsold vacation ownership intervals and related club memberships . 2,953 890
Prepaid and other assets ................................................. (378) (277)
Accounts payable and accrued liabilities ................................. 5,538 5,469
Taxes payable/refundable ................................................. (694) 1,112
Unearned services fees.................................................... 3,454 4,174
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Net cash provided by operating activities ....................................... 4,259 3,137
Investing activities
Purchase of land and other assets held for vacation ownership development .... (885) (246)
Additions to facilities and office furniture and equipment ................... (265) (105)
---------- ----------
Net cash used in investing activities ........................................... (1,150) (351)
Financing activities
Additional bank and other loans, net of related expenses .................... 2,013 2,648
Repayment of bank loans ..................................................... (2,333) (4,229)
Dividend payments of and redemption of preferred stock...................... -- (808)
---------- ----------
Net cash used in financing activities ........................................... (320) (2,389)
Increase in cash and cash equivalents ........................................... 2,789 397
Effect of exchange rate changes on cash ......................................... 30 (10)
Cash and cash equivalents, at beginning of the period ........................... 2,960 8,311
---------- ----------
Cash and cash equivalents, at end of the period ................................. $ 5,779 $ 8,698
========== ==========
Supplemental disclosures of cash flow information
Cash paid during the period for interest .................................... $ 366 $ 1,008
Cash paid (received) during the period for income and asset taxes ........... 628 (955)
Non-cash investing and financing activities
Stock dividends accrued and accretion of preferred stock .................... 401 120
The accompanying notes are an integral part of these financial statements.
</TABLE>
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RAINTREE RESORTS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
March 31, 2000
NOTE 1. GENERAL INFORMATION
General
The financial statements include the accounts of Raintree Resorts
International, Inc., a Nevada corporation, (the "Ultimate Parent") and all of
its wholly owned subsidiaries (collectively, the "Company"). The Company
develops, markets, and operates vacation ownership resorts in North America with
resorts in Mexico, Canada and the United States. The Company's headquarters are
located in Houston, Texas with administrative offices in Mexico City, Mexico and
Whistler, British Columbia, Canada.
Liquidity
On August 18, 1997, Raintree Resorts International, Inc. (formerly Club
Regina Resorts, Inc.) purchased all of the stock of Desarrollos Turisticos
Regina S. de R.L. de C.V. and its subsidiaries (the "Purchase Transaction")
representing net vacation ownership assets of approximately $86.8 million. Prior
to August 18, 1997 the Company did not have significant operations or revenues.
In connection with the Purchase Transactions, the Company borrowed
approximately $83 million and replaced such borrowing with its Senior Notes. At
March 31, 2000, the Company is, and will continue to be, highly leveraged, with
substantial debt service requirements. A significant portion of the Company's
assets is pledged against existing borrowings. The Company has a shareholder's
deficit, has incurred losses since its inception and expects to incur a net loss
for fiscal 2000. To achieve profitable operations, the Company is dependent on a
number of factors, including its ability to reduce its debt service
requirements, to increase its Vacation Interval inventory through development
projects and through the acquisition of existing resort properties, and its
ability to continually sell Vacation Intervals on an economical basis, taking
into account the cost of such intervals and related marketing and selling
expenses. The Company expects that its existing credit capacity combined with
additional credit, capacity which must be negotiated during 2000, will be
sufficient to enable the Company to meet its debt service obligations, including
interest payments on its Senior Notes through the first quarter of 2001. The
Company also expects to be able to fund capital requirements from anticipated
capital project financings which have not yet been negotiated. However, should
the Company not be able to successfully negotiate additional credit capacity,
there is no assurance that the Company would be able to meet all of its debt
service obligations. The Company has historically incurred debt and issued
equity securities to fund negative cash flows from operating activities and to
make debt payments on previously incurred debt obligations.
Basis of Presentation
The information contained in the following notes to the accompanying
consolidated financial statements is condensed from that which would appear in
the annual audited financial statements. Accordingly, the consolidated financial
statements included herein should be reviewed in conjunction with the
consolidated financial statements and related notes thereto contained in the
Form 10-K Annual Report for the year ended December 31, 1999, filed by the
Company with the Securities and Exchange Commission.
The condensed consolidated financial statements included herein have been
prepared by the Company, pursuant to the rules and regulations of the Securities
and Exchange Commission (the "SEC"). Pursuant to such regulations, certain
information and footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted in the
United States have been condensed or omitted. The Company believes the
presentation and disclosures herein are adequate to make the information not
misleading. The financial statements reflect all elimination entries and normal
adjustments that are necessary for a fair presentation of the results for the
three-month periods ended March 31, 1999 and 2000.
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Use of Estimates
The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Certain items in the March 31, 1999 financial statements have been
reclassified to conform to the March 31, 2000 presentation.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Foreign Currency Fluctuations
The Company maintains its Mexican accounting records and prepares its
financial statements for its Mexican subsidiaries in Mexican pesos. The Mexican
pesos are translated to U.S. dollars for financial reporting purposes using the
U.S. dollar as the functional currency, and exchange gains and losses are
reported in income and expense. The net gains and losses are primarily related
to the increases or declines in the value of the peso to the U.S. dollar during
such periods. As a result, the Company had a net exchange gain for the three
months ended March 31, 1999, of $529,000, and a net exchange gain for the
corresponding three months in 2000 of $778,000.
Exchange rates Pesos US Dollar
December 31, 1998..................... 9.865 = $1.00
March 31, 1999........................ 9.516 = $1.00
June 30, 1999......................... 9.488 = $1.00
September 30, 1999.................... 9.358 = $1.00
December 31, 1999..................... 9.522 = $1.00
March 31, 2000........................ 9.233 = $1.00
The future valuation of the Mexican peso related to the U.S. dollar cannot
be determined, estimated or projected.
Cash and Cash Equivalents
The Company considers demand accounts and short-term investments with
maturities of three months or less when purchased to be cash equivalents. Cash
and cash equivalents include $1.1 million in restricted funds at March 31, 2000.
Land Held for Vacation Ownership Development
The Company owns a parcel of undeveloped beachfront property located in
Cozumel, Mexico and a parcel of land adjacent to its Regina Resort located in
Cabo San Lucas, Mexico. The Company plans to construct additional vacation
ownership facilities on these parcels of land. Although preliminary
architectural and engineering planning has commenced, no commitments have been
made regarding these planned expansion projects. Further work on the Cozumel
property will not occur prior to 2001 or later.
Land held for vacation ownership development includes the cost of land, and
additionally, development costs and capitalized interest. Interest related to
these developmental properties of $ 0.1 million and $0.2 million was capitalized
during the three months ended March 31, 1999 and 2000, respectively.
The Company capitalizes interest on expenditures incurred for land and
development when activities have commenced necessary to get the asset ready for
its intended use. The capitalization period ends when the asset is placed in
service or progress to complete the project is substantially suspended.
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Loss Per Share
Basic per share results are computed by dividing income available to common
shareholders by the weighted average number of common shares outstanding for the
period. Additionally, shares issuable for little or no consideration are
considered common shares and are included in the computation of basic earnings
per share. On December 5, 1997 in conjunction with the issue of Senior Notes,
the Company issued warrants to purchase 1,869,962 shares of common stock at a
conversion price of $.01 per share. Since the 1,869,962 common shares issuable
under the Senior Notes warrants can be purchased for little or no cash
consideration and these warrants were fully vested upon issuance, they are
included in the computation of basic earnings per share as of the date they were
issued.
At March 31, 2000, the Company had outstanding 634,000 stock options with a
weighted-average exercise price of $4.22 per share, 500,000 common stock
warrants with an exercise price of $5.00 per share and preferred stock with
$5,225,000 of Liquidation Preference convertible upon redemption at the
Company's option into shares of common stock valued at the Liquidation
Preference. These warrants, common stock options and preferred stock were not
included in diluted earnings per share as the exercise prices exceeded the
estimated fair value of common stock. The Senior Notes warrants were included in
both the computation of basic and diluted earnings per share.
Goodwill
On July 24, 1998, the Company acquired the assets and assumed certain
liabilities of Whiski Jack Resorts Ltd. ("Whiski Jack") for approximately $6.6
million. The acquisition was accounted for as a purchase and, accordingly, the
results of operations are included in the financial statements only for the
periods subsequent to the date of acquisition. The purchase price has been
allocated to the assets and liabilities assumed based upon the fair values at
the date of acquisition. The excess purchase price over the fair values of the
net assets acquired has been recorded as goodwill, totaling approximately $4.5
million, to be amortized pro rata as the individual weeks acquired in the
acquisition are sold. Amortization expense was $1.1 million for the quarter
ended March 31, 1999 and was fully amortized by the end of 1999.
NOTE 3. VACATION INTERVAL RECEIVABLES AND OTHER TRADE RECEIVABLES
Vacation Interval receivables and other trade receivables were as follows
(in thousands):
<TABLE>
<CAPTION>
December 31, March 31,
1999 2000
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<S> <C> <C>
Vacation Interval receivables ................................ $ 63,875 $ 68,249
Other trade receivables ...................................... 5,424 10,658
Less - allowances for uncollectible accounts ................. (8,067) (8,561)
--------- ---------
Total ................................................ $ 61,232 $ 70,346
========= =========
</TABLE>
Allowances for uncollectible accounts increased by $1.4 million for
additional estimated reserves, and decreased by $0.9 million for receivable
write-offs net of recoveries during the first three months of 2000.
The Company estimates that at December 31, 1999 and at March 31, 2000,
approximately 53% and 52%, respectively, of all of the Vacation Interval
receivables were U.S. dollar denominated, 31% and 33%, respectively, of Vacation
Interval receivables were denominated in UDIs, an obligation denominated in
pesos which is adjusted for Mexican inflation ("UDI"), 9% during both periods of
Vacation Interval receivables were denominated in Mexican pesos, and 7% and 6%,
respectively, of Vacation Interval receivables were denominated in Canadian
dollars.
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NOTE 4. NOTES PAYABLE
Summary of Notes Payable (in thousands) -
December 31, March 31,
1999 2000
------------------ -----------------
Notes Payable to a Bank.......... $ 278 $ 562
Cabos West Notes Payable ........ 2,350 2,350
Credit Agreement Notes and Loans.. 38,772 36,129
Mortgages Payable ................ 3,387 4,180
------------------ -----------------
$ 44,787 $ 43,221
================== =================
Notes Payable to a Bank - The notes payable to a bank at December 31, 1999 and
March 31, 2000 had interest payable at 8.50%. The notes are due in full
throughout 2000.
Cabos West Notes Payable - On September 17, 1998, in connection with the Cabos
West land purchase, the Company entered into notes payable secured by the land.
The notes bear interest at approximately 10% and are due on demand.
Credit Agreement Notes - The November 1998, amended credit agreement with FINOVA
Capital Corporation, includes a receivables based credit facility of $20 million
and a $16.5 million inventory based credit facility. The aggregate borrowing
limit under the credit agreement is $34 million. FINOVA will lend 90% on pledged
notes receivable denominated in United States dollars and held by United States
or Canadian residents. These notes are assigned to the lender and as payments
are received, they are applied to this loan. The outstanding receivables loan
balance bears interest at a fluctuating base rate plus 175 basis points, which
was 10.25% and 10.5% per annum at December 31, 1999 and March 31, 2000,
respectively. The outstanding inventory loan balance bears interest at a
fluctuating base rate plus 225 basis points, which was 10.75% and 11.0% per
annum at December 31, 1999 and March 31, 2000, respectively. Interest under the
notes is due monthly. The fluctuating base rate is the "Corporate Base" rate of
Citibank, N.A., New York, which the bank publicly announces from time to time,
and is a rate charged by the bank to it's most creditworthy commercial
borrowers. Also, the agreement requires the Company to maintain certain minimum
financial ratios including a minimum capital requirement. The receivables line
of credit matures 84 months from the date of the last advance made against it,
and the inventory based credit facility matures on June 30, 2001. As of December
31, 1999 and March 31, 2000, the outstanding balance of the receivables line of
credit was $9,760,000 and $9,787,000, respectively and of the inventory based
credit facility was $15,159,000 and $14,004,000, respectively.
The November 1999, $10 million receivables loan facility with Textron
Financial Corporation ("Textron") is collateralized by the Company's notes
receivable, with a limit of up to 30% of those notes denominated in Mexican
pesos of which Textron will lend 80% on pledged notes, and the remainder in U.S.
dollars on which Textron will lend 85% on pledged notes. The entire outstanding
loan balance is to be paid in full on or before December 1, 2004. The loan bears
a variable interest rate of the Chase Manhattan Bank prime rate plus 200 basis
points that is adjusted on the first day of each month, with an interest rate of
10.5% and 10.75% as of December 31, 1999 and March 31, 2000, respectively. As of
December 31, 1999 and March 31, 2000, the outstanding balance of the loan
facility was $7,103,000 and $5,902,000, respectively.
The November 1999, $7 million loan agreement with Bancomer, is
collateralized by all of the Company's UDI denominated notes receivable. The
loan agreement extends credit to the Company for a fixed 30-month term from
November 29, 1999 to May 29, 2002. Furthermore, the agreement requires the
Company to pay back the principal in UDI's in 30 equal monthly installments plus
accrued interest in the U.S. dollar equivalent amount of approximately $233,000
beginning on December 29, 1999. Also, the loan bears simple interest at a rate
of 12% per annum, and as of December 31, 1999 and March 31, 2000, the
outstanding balance was $6,750,000 and $6,437,000, respectively.
Mortgages Payable - Mortgages payable consist of the assignment of specific
Whiski Jack Vacation Interval receivables to related and third party buyers and
are payable in monthly installments including interest over periods ranging from
twelve months to ten years. The average interest rates were 10.7% and 11.0% at
December 31, 1999 and March 31, 2000, respectively.
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NOTE 5. OPERATIONS BY INDUSTRY SEGMENT AND GEOGRAPHIC AREA
The Company has only one line of business, which develops, markets and
operates luxury vacation ownership resorts in three geographic areas; Mexico,
Canada and the United States. The United States operations are carried out
through a joint venture accounted for on the equity method of accounting. The
Company's reportable segments are based on geographic area. The reportable
segments are managed separately due to their geographic location with managers
focused on improving and expanding each segment's operations. However resource
allocation is not based on individual country results, but based on the best
location for future resorts in order to enhance the Company's overall ability to
sell timeshare under a club concept. Revenues are attributed to countries based
on the location of the vacation ownership resorts.
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The following table presents segment information (in thousands):
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Corporate
Mexico Canada and Other Total
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<S> <C> <C> <C> <C>
As of and for the three months ended March 31, 2000
Revenues from external customers .................. $ 20,687 $ 2,678 $ 67 $ 23,432
Depreciation and amortization...................... 938 38 79 1,055
Operating income (loss) ........................... 4,832 143 (633) 4,342
Income tax expense................................. 20 20 -- 40
Total assets ...................................... 133,246 12,542 6,957 152,745
Capital expenditures .............................. 286 32 33 351
Corporate
Mexico Canada and Other Total
------------- ------------- -------------- ------------
As of and for the three months ended March 31, 1999
Revenues from external customers .................. $ 19,067 $ 3,210 $ 4 $ 22,281
Depreciation and amortization...................... 78 1,122 779 1,979
Operating income (loss) ........................... 4,627 (723) (869) 3,035
Income tax expense................................. 100 156 -- 256
Total assets ...................................... 123,729 10,392 3,593 137,714
Capital expenditures .............................. 385 65 700 1,150
</TABLE>
Corporate and Other
The amounts shown as an operating loss under the column heading "Corporate
and Other" consist primarily of general and administrative costs that are not
allocated to the segments. Also, the U. S. joint venture is included in
corporate operations and had equity losses of $0.1 million for the three months
ended March 31, 1999 and 2000.
NOTE 6. REDEEMABLE PREFERRED STOCK
Pay-in-Kind Preferred Stock
On July 1, 1999, all 37,500 shares of the Class A Preferred Stock of the
Company were exchanged for 50,000 shares of a new class of Pay-in-Kind Preferred
Stock (Pay-in-Kind Preferred) plus 500,000 five-year Warrants to purchase the
Company's common stock at $5.00 per share. Additionally, as of July 1, 1999, the
Class A Preferred Stock had cumulative unpaid dividends totaling approximately
$1.2 million that were deemed paid-in-kind as part of the Exchange. The
Pay-in-Kind Preferred requires that annual dividends be paid either in cash
equaling 9% of the Pay-in-Kind Preferreds' $100 per share Liquidation
Preference, or in an equivalent number of shares of Pay-in-Kind Preferred valued
at the Liquidation Preference. Furthermore, the Pay-in-Kind Preferred is
redeemable at any time before December 1, 2004, at which time redemption is
mandatory. As of March 31, 2000 the cumulative unpaid dividends on the
Pay-in-Kind Preferred were $117,600.
Convertible Preferred Stock
In connection with the purchase of Whiski Jack, the Company issued 20,775
shares of redeemable convertible preferred stock (Convertible Preferred Stock)
through its wholly owned subsidiary, Raintree Resorts International
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Canada, Ltd. (Raintree Canada). During January and February 2000, all shares had
been redeemed. The shares accrued dividends at the rate of 10% per annum and
dividends totaling $0.2 million were paid during 2000.
NOTE 7. CONTINGENCIES AND COMMITMENTS
General
The Company is subject to various claims arising in the ordinary course of
business, and is a party to various legal proceedings, which constitute ordinary
routine litigation incidental to the Company's business. In the opinion of
management, all such matters are either adequately covered by insurance or are
not expected to have a material adverse effect on the Company.
Canadian Condominium Acquisitions
The Company has committed to purchase 9 condominium units in Whistler,
British Columbia at an aggregate purchase price of $1.5 million. Deposits of
$0.2 million have been paid as of March 31, 2000, with the balance to be paid
during 2000, or thereafter, based on completion of construction and transfer of
ownership.
NOTE 8. DEVELOPMENT AND CONSTRUCTION
The Teton Club, LLC ("Teton Club"), a joint venture between the Company and
JHSC Properties, Inc., has financing between FINOVA and the Teton Club
consisting of $33.3 million for construction financing, $7.5 million for
pre-sale working capital requirements and $20 million for receivables financing.
The receivable financing is a hypothecation line-of-credit and will be used to
repay the construction and pre-sale loans and to fund operating expenses. Also,
the agreement requires the Teton Club to maintain certain minimum financial and
operating ratio requirements. As part of the financing arrangement, the Company
is directly obligated for $8.3 million of the construction loan, $1.9 million of
the pre-sale working capital loan and $5 million of the receivables loan.
Additionally, the Company is responsible for any working capital deficits at the
Teton Club. As of March 31, 2000, $13 million had been drawn on the construction
portion of the financing, and $3 million had been drawn on the working capital
portion of the financing.
NOTE 9. SUBSEQUENT EVENT
On May 3, 2000, a newly formed subsidiary of the Company entered into a
project development, management and sales agreement whereby the Company assumes
full operating control and management of Cimarron Resorts in Palm Springs,
California from the project owners, Royale Mirage Partners, L.P. ("RMP"). Under
the agreement, the Company is entitled to all revenues from sales of Cimarron
Resorts Vacation Intervals and is responsible for all sales and marketing as
well as management and customer services. The Company will record the gross
receipts from the sale of Vacation Intervals since the Company is required to
indemnify RMP for any sale that is cancelled and take ownership of the Vacation
Interval. The Company has not acquired any ownership interest in RMP, ownership
of the time-share property or assumed any obligation under the RMP construction
loan. Should the cost of construction exceed RMP's construction loan borrowing
capacity, the Company would be required to assume such liabilities.
The Company purchases Vacation Intervals from RMP as they are sold by the
Company to Vacation Interval purchasers or are acquired for Company inventory
purposes. Also, the Company will provide development management of project
construction. The Company has acquired sales and administrative assets of
$590,000 and assumed payment of unpaid liabilities of $777,000 with the excess
of the liabilities assumed over the assets acquired to be recorded as an
intangible asset. Under the agreement, the Company is required to pay RMP
$2,346,000, and will recorded this as an accrued liability and an intangible
asset (Exclusivity Agreement). The Company will repay the RMP obligation by
payment of $575 for each interval it acquires from RMP or on June 30, 2003 the
unpaid balance of the $2,346,000. Even if the Company is unable to sell all
Vacation Intervals in the first phase by June 30, 2003, any remaining balance
will still be due to RMP. The Company will recognize the expense associated with
these intangible assets through amortization to cost of sales equal to the
greater of (1) the aggregate amortization based on equal monthly charges through
June 30, 2003, or (2) the aggregate amortization based on a ratable per Vacation
Interval charge for each of the 4,080 Vacation Intervals to be sold in the first
phase. The Company will recorded the transaction as a purchase.
11
<PAGE>
Cimarron Resorts consists of approximately 35 acres of land adjacent to two
18-hole golf courses developed and managed by OB Sports of Seattle, Washington
and when fully developed will consist of 242 two-bedroom condominium units or
12,342 weekly intervals. Forty of such units are under development, and
completed in July 2000. A commitment for a development loan by Textron has been
received by the project owner for the development of the second 40 two-bedroom
units and this construction is expected to begin during late 2000. The Company
has the option to extend its agreement for the next construction stage
consisting of 36 units no later than December 31, 2002 and it may thereafter
exercise its option in succeeding stages of 42, 44 and 40 units on or before
March 31, 2004, June 30, 2005 and September 30, 2006, respectively. The
agreement terminates if an option for any succeeding stage is not selected and
upon the completion of any stage selected but not completed. The Company placed
Cimarron Resorts into its Club Regina operations to be sold as Club Regina
two-bedroom inventory, and for exchange purposes into its planned Raintree
Vacation Club.
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<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
This report contains forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended, which represent
the Company's expectations and beliefs concerning future events that involve
risks and uncertainties, including those associated with the effects of (i)
international, national and regional economic conditions and conditions in the
international tourism and vacation ownership markets, (ii) the Company's
capacity to integrate acquisitions that it has made, and (iii) the availability
of capital resources necessary for the Company to execute its business strategy.
Investors are cautioned that all forward-looking statements involve risks and
uncertainty. Discussions containing such forward-looking statements may be found
in the material set forth under "Management's Discussion and Analysis of
Financial Condition and Results of Operations" as well as elsewhere herein.
Actual results may differ materially from those projected in the forward-looking
statements. Although the Company believes that the assumptions underlying the
forward-looking statements contained herein are reasonable, any of the
assumptions could be inaccurate, and therefore, there can be no assurance that
the forward-looking statements included in this report will prove to be
accurate. Important factors that could cause actual results to differ materially
from the Company's expectations are disclosed in this report. Considering the
significant uncertainties inherent in the forward-looking statements included
herein, the inclusion of such information should not be regarded as a
representation by the Company or any other person that the objectives and plans
of the Company will be achieved. The following discussion should be read in
conjunction with the financial statements of Raintree Resorts International,
Inc. and related notes thereto, the management's discussion and analysis related
thereto, all of which are included in the Form 10-K Annual Report for the year
ended December 31, 1999, filed by the Company with the Securities and Exchange
Commission and the financial statements and notes thereto contained herein.
COMPARISONS OF THE THREE MONTHS ENDED MARCH 31, 1999 TO THE THREE MONTHS ENDED
MARCH 31, 2000.
Segment Results
General. The Company has only one line of business, which develops, markets
and operates luxury vacation ownership resorts in three geographic areas;
Mexico, Canada and the United States. The United States operations are carried
out through a joint venture accounted for on the equity method of accounting.
The Company's reportable segments are based on geographic area. The reportable
segments are managed separately due to their geographic location with managers
focused on improving and expanding each segment's operations. However resource
allocation is not based on individual country results, but based on the best
location for future resorts in order to enhance the Company's overall ability to
sell timeshare under a club concept. Revenues are attributed to countries based
on the location of the vacation ownership resorts. The following presents
segment data in thousands:
<TABLE>
<CAPTION>
For the Three Months ended March 31,
------------------------------------------------------------------------------------------
Operating
Net Income Capital
Sales % (Loss) % Expenditures %
----------- --------- ------------ ----------- -------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
2000 -
Mexico $ 20,687 88.3% $ 4,832 111.3% $ 286 81.5%
Canada 2,678 11.4% 143 3.3% 32 9.1%
Corporate and other 67 0.3% (633) (14.6)% 33 9.4%
-------- --------- ---------- ------------ -------------- --------
Total $ 23,432 100.0% $ 4,342 100.0% $ 351 100.0%
======== ========= ========== ============ ============== ========
1999 -
Mexico $ 19,067 85.6% $ 4,627 152.5% $ 385 33.5%
Canada 3,210 14.4% (723) (23.8)% 65 5.7%
Corporate and other 4 0.0% (869) (28.7)% 700 60.8%
-------- --------- ---------- ------------ -------------- --------
Total $ 22,281 100.0% $ 3,035 100.0% $ 1,150 100.0%
======== ========= ========== ============ ============== ========
</TABLE>
Mexico's Segment Results - Comparison of the three months ended March 31,
2000 to the three months ended March 31, 1999. Net sales increased 1.6 million,
or 8.5%, and operating income increased $0.2 million or 4.4% during the first
quarter 2000. The increases in net sales and operating income result from an
overall increase in Vacation Interval sales prices and the number of weeks sold.
The average price per week sold increased
13
<PAGE>
by $1,060, or 8.1%, and the number of weeks sold increased 29, or 2.6%. The
average price per week sold increased in response to a price increase beginning
the third week of December 1999.
Canada's Segment Results - Comparison of the three months ended March 31,
2000 to the three months ended March 31, 1999. Net sales decreased $0.5 million
primarily as the number of weeks sold decreased 22.7%. The decrease in weeks
sold is reflective of the 22% decrease in tour flow primarily at its on-site
sales office and owner referrals. However, operating income increased by $0.9
million because of the elimination of goodwill in the first quarter of 2000 as
goodwill was fully amortized by the end of 1999.
Corporate and other - Comparison of the three months ended March 31, 2000
to the three months ended March 31, 1999. The operating loss consist primarily
of general and administrative costs that are not allocated to the segments.
Also, the U. S. joint venture, the Teton Club, is included in corporate
operations and had equity losses of $0.1 million for the three months ended
March 31, 1999 and 2000. The Teton Club is developing a 37-unit timeshare
property, which will be completed in the second half of 2000, at which time the
recording of sales by the Teton Club will commence.
Consolidated Results
Comparison of the three months ended March 31, 2000 to the three months
ended March 31, 1999.
The Company believes that the following analysis is helpful to understand
the changes in the activity levels between 1999 and 2000 (in thousands):
<TABLE>
<CAPTION>
Percentage
Increase Increase
Three Months Ended March 31, 1999 2000 (Decrease) (Decrease)
-------------- ------------- -------------- -----------------
<S> <C> <C> <C> <C>
Revenues:
Vacation Interval sales ............ $ 17,042 $ 18,010 $ 968 5.7 %
Interest Income on Vacation Interval
Receivables, rental and service
fee income, and other income .... 5,239 5,422 183 3.5%
--------- --------- ---------
Total ......................... 22,281 23,432 1,151 5.2 %
========= ========= =========
Costs and operating expenses:
Cost of Vacation Interval sales .... 4,337 4,218 (119) (2.7)%
Provision for doubtful accounts..... 1,177 1,420 243 20.6%
Advertising, sales and marketing.... 7,525 7,604 79 1.0%
Maintenance and energy ............. 2,107 2,824 717 34.0%
Depreciation and amortization....... 224 343 119 53.1%
General and administrative.......... 2,780 2,681 (99) (3.6)%
Amortization of goodwill............ 1,096 -- (1,096) (100.0)%
--------- --------- ---------
Total ......................... $ 19,246 $ 19,090 $ (156) (0.8)%
--------- --------- ---------
Operating income ................... $ 3,035 $ 4,342 $ 1,307 43.1%
========= ========= =========
</TABLE>
Vacation Interval sales increased by approximately $1.0 million, or 5.7%,
from approximately $17.0 million for the three months ended March 31, 1999 to
approximately $18.0 million for the three months ended March 31, 2000. Vacation
Interval sales increased as the average price per interval sold increased $905
per interval, or 6.9%, from $13,100 for the three months ended March 31, 1999,
to $14,005 for the three months ended March 31, 2000. This increase was in
response to an approximate 9% net price increase in Mexico beginning in the
third week of December 1999.
Cost of Vacation Interval sales decreased by approximately $0.1 million, or
2.7%, from approximately $4.3 million for the three months ended March 31, 1999,
to approximately $4.2 million for the three months ended March 31, 2000. The
decrease in cost of sales results from the addition of lower average cost
inventory, the Villa Vera, in Mexico. This addition was the primary factor
reducing cost of sales as a percent of revenue from 25% in the first quarter of
1999 to 23% in the comparable 2000 period.
14
<PAGE>
Provision for doubtful accounts increased by approximately $0.2 million, or
20.6%, from approximately $1.2 million for the three months ended March 31,
1999, to approximately $1.4 million for the three months ended March 31, 2000.
This increase is in response to an increase in customer financing in the first
quarter of 2000 compared to the prior year first quarter. The Company computes a
provision for doubtful accounts to achieve a balance sheet reserve of around 12%
of Vacation Interval receivables. The Company believes that this reserve
provides adequate coverage of default risk under current market conditions.
Advertising, sales and marketing expense increased approximately $0.1
million, or 1.0%, from approximately $7.5 million for the three months ended
March 31, 1999, to approximately $7.6 million for three months ended March 31,
2000. The Company held costs at levels comparable to the prior year level during
a period when upward pressure was being realized from inflation in Mexico and
the strengthening of the Mexican peso to the U.S. dollar. See "Mexico's
Inflation and Currency Changes" discussed below.
Maintenance and energy expenses increased approximately $0.7 million, or
34.0%, from approximately $2.1 million for the three months ended March 31,
1999, to approximately $2.8 million for the three months ended March 31, 2000.
The increase in expenses was caused by the impact of inflation and change in the
value of the peso on the peso based operating expenses of the timeshare
properties in Mexico and an overall increase in the number of club members.
General and administrative expenses decreased approximately $0.1 million,
or 3.6%, from approximately $2.8 million for the three months ended March 31,
1999, to approximately $2.7 million for the three months ended March 31, 2000.
The Company held costs at levels comparable to the prior year level during a
period when upward pressure was being realized from inflation in Mexico and the
strengthening of the Mexican peso to the U.S. dollar. See "Mexico's Inflation
and Currency Changes" discussed below.
The first three months of 1999 amortization of goodwill relates to the
goodwill resulting from the acquisition of Whiski Jack, which was fully
amortized during 1999.
Interest expense was approximately $1.0 million more in the first three
months of 2000 as compared to the first three months of 1999 due primarily to
interest cost associated with a higher level of debt outstanding between the
periods, which average debt outstanding increased $29.5 million between periods.
Foreign currency exchange gain totaled approximately $0.8 million during
the first three months of 2000 compared to a gain of approximately $0.5 million
during the first three months of 1999. The increase in the gain between periods
occurred due to a stronger peso against the U.S. dollar during the three months
of 2000 compared to the comparable prior year period.
MEXICO'S INFLATION AND CURRENCY CHANGES
Management believes that in interpreting the comparisons of operational
results discussed above, two factors are of importance: currency exchange rates
and inflation. Changes in costs between prior year and current year periods
could be the result of increases or decreases in the peso exchange rate or
inflation in Mexico. In particular, the average monthly peso exchange rate for
the three months ended March 31, 2000 strengthened when compared to the average
monthly peso exchange rate for the three months ended March 31, 1999. The
Company estimates that current period costs settled in Mexican pesos increased
by approximately 5% because of fluctuations in the average peso exchange rate
between periods. In addition, the Company estimates that inflation in Mexico was
approximately 11% since March 1999. Expenditures in Mexico for advertising,
sales and marketing, maintenance and energy, and for general and administrative
expenses are primarily settled in pesos, and were negatively impacted by the
combined effects of inflation and peso changes.
15
<PAGE>
COMPARISONS OF MARCH 31, 2000 BALANCE SHEET AMOUNTS TO DECEMBER 31, 1999 BALANCE
SHEET AMOUNTS
Vacation Interval receivables and other trade receivables increased
approximately $9.1 million from approximately $61.2 million as of December 31,
1999 to approximately $70.3 million as of March 31, 2000. The increase was
attributable to the annual service fee billing issued during the first quarter
of 2000 and the increase in the level of sales financing with approximately 400
additional loans.
Cost of unsold vacation ownership intervals and related club memberships
(unit inventory) decreased approximately $0.8 million from approximately $23.6
million as of December 31, 1999 to approximately $22.7 million as of March 31,
2000. The sale of units reduced unit inventory by approximately $4.2 million,
which was offset by purchases by Whiski Jack in Canada of approximately $2.7
million and the remainder primarily for reinstatement of inventory from
defaulting owners in Mexico.
Accounts payable and accrued liabilities increased approximately $5.5
million from approximately $14.1 million as of December 31, 1999 to
approximately $19.6 million as of March 31, 2000. The variance is caused by an
increase in accrued interest payable of $3.6 million, and an overall increase in
accrued liabilities.
Unearned service fees increased approximately $4.2 million from
approximately $2.0 million as of December 31, 1999 to approximately $6.2 million
as of March 31, 2000. This balance was higher at the end of March 2000 as
compared to December 1999 because a majority of the related fees are typically
invoiced at the beginning of each year and then earned during the remainder of
that year.
LIQUIDITY AND CAPITAL RESOURCES
The Company generates cash for operations primarily from the sale of
Vacation Intervals, receipt of payments on the Vacation Interval receivables,
and the receipt of service fees charged to members. With respect to the sale of
Vacation Intervals, the Company generates cash from all-cash sales and from
receipt of down payments on financed Vacation Interval sales.
The Company generates cash through principal collections and interest
income from Vacation Interval receivables financing of Vacation Interval sales.
Additionally, the Company uses Vacation Interval receivables as collateral in
order to obtain loans. At March 31, 2000, the Company had $67.6 million of
Vacation Interval receivables of which approximately (i) 58% of all of the
Vacation Interval receivables were U.S. or Canadian dollar denominated (ii) 33%
of all Vacation Interval receivables were denominated in UDI's, an obligation
denominated in pesos which is adjusted for Mexican inflation, and (iii) 9% of
all Vacation Interval receivables were denominated in pesos.
As of March 31, 2000 and December 31, 1999, the Company had outstanding
$100 million of 13% Senior Notes due 2004. Under the FINOVA credit line
("FINOVA"), $23.8 million and $24.9 million was outstanding with approximate
interest rates of 10.8% and 10.6% at March 31, 2000 and December 31, 1999,
respectively. The Textron credit line had an outstanding balance of $5.9 million
and $7.1 million with interest rates of 10.75% and 10.5% at March 31, 2000 and
December 31, 1999, respectively. The Bancomer loan which bears an interest rate
of 12%, had an outstanding balance of $6.4 million and $6.8 million at March 31,
2000 and December 31, 1999, respectively. Bank debt and other debt which bore an
average interest rate of 9.7%, had an outstanding balance of $2.9 million and
$2.6 million at March 31, 2000 and December 31, 1999, respectively. Mortgages
payable had an outstanding balance of $4.2 million and $3.4 million, with
interest rates of 11.0% and 10.7% at March 31, 2000 and December 31, 1999,
respectively.
At June 30, 2000, the Company had outstanding $100 million of 13% Senior
Notes due 2004, $22.1 million outstanding under the FINOVA credit line
("FINOVA"), which at period end bears interest at 11.5%, $9.4 million
outstanding under the Textron credit line, which at period end bears interest at
11.5%, $5.3 million outstanding under the Bancomer loan, which at period end
bears interest at 12%, $8.5 million of other debt bearing interest averaging
10.5%.
The Company's borrowing capacity under the FINOVA credit facility currently
includes a $20 million accounts receivable based credit facility and a $16.5
million inventory based non-revolving line of credit; the combined credit
facility provides an aggregate borrowing limit of $34 million. The Company's
borrowing capacity under the Textron credit facility is $10 million. The Company
estimates that based on Vacation Interval receivables not currently
16
<PAGE>
pledged, approximately $8.2 million at March 31, 2000 and $2.0 million, $1.4
million and $0.6 million under the Finova and Textron lines of credit,
respectively at June 30, 2000, were available for borrowing under the current
credit facilities.
Additionally, as part of the Teton Club financing arrangement with FINOVA,
the Company is directly obligated for $8.3 million of the construction loan,
$1.9 million of the pre-sale working capital loan and $5.0 million of the
receivables loan, and is also responsible for any working capital deficits at
the Teton Club.
The Company intends to pursue a growth-oriented strategy. From time to
time, the Company may acquire, among other things, additional vacation ownership
properties, resorts and completed vacation ownership units, land upon which
additional vacation ownership resorts may be built (which may require capital
expenditures by the Company) and/or other operations in the vacation ownership
industry. The Company is evaluating certain resort asset acquisition or
development opportunities, but it currently has no contracts or capital
commitments relating to any potential acquisitions or developments other than
those discussed below. However, the Company is actively pursuing financing for
development of the Los Cabos land. In addition, the Company is evaluating
several strategic partnership opportunities, but it likewise has no firm
agreements relating to any such potential strategic partnership opportunities.
To finance its growth strategy, in addition to accessing its lines of
credit, the Company may from time to time consider issuing debt, equity or other
securities, entering into traditional construction financing or credit
agreements, entering into joint venture or development agreements with respect
to its undeveloped property, or hypothecating additional Vacation Interval
receivables. The Company is highly leveraged and, under the Indenture, there are
limitations on the Company's ability to borrow funds and make certain equity
investments. Additionally, the Company is required under the credit agreements
to maintain certain financial covenants, including minimum equity levels.
Accordingly, there can be no assurance that the Company will be able to use debt
to finance any expansion plans beyond its plans to finance its current
commitments.
At March 31, 2000, the Company had remaining developed inventory of
vacation interval weeks of 4,271 at Club Regina and 1,083 at Whiski Jack, or 16%
and 11%, respectively, of the total weeks available. Additionally, under the
Cimarron agreement Mexico will have available two-bedroom inventory from
Cimarron Resorts to sell as Club Regina inventory that will further extend
availability of inventory at Club Regina. The Company plans to increase its
Vacation Interval inventory through development of additional properties and
making acquisitions in the short term, including acquiring condominiums in
Whistler, British Columbia, which includes the commitment to purchase 9
condominiums at an aggregate purchase price of approximately $1.5 million in the
second quarter 2000, developing the Teton Club joint venture, acquiring
intervals under the Cimarron project development, management and sales
agreement, developing its land in Los Cabos, developing its land in Cozumel, and
making acquisitions in Mexico, the United States and Canada.
The Company believes that its current financial position plus borrowings
available under the credit agreements will satisfy its currently planned 2000
capital expenditures of approximately $10.9 million. The 2000 planned
expenditures include the development activities in Los Cabos and the purchase of
Vacation Interval inventory in Whistler, British Columbia. The Los Cabos
development will require project financing before development can proceed and
the Company is negotiating for such financing with Mexican financial
institutions. However, no commitment has been received from such financial
institutions.
At March 31, 2000, the Company is, and will continue to be, highly
leveraged, with substantial debt service requirements. A significant portion of
the Company's assets is pledged against existing borrowings. The Company has a
shareholder's deficit, has incurred losses since its inception and expects to
incur a net loss for fiscal 2000. To achieve profitable operations, the Company
is dependent on a number of factors, including its ability to reduce its debt
service requirements, to increase its Vacation Interval inventory through
development projects and through the acquisition of existing resort properties,
and its ability to continually sell Vacation Intervals on an economical basis,
taking into account the cost of such intervals and related marketing and selling
expenses. The Company expects that its existing credit capacity combined with
additional credit capacity which must be negotiated during 2000 will be
sufficient to enable the Company to meet its debt service obligations, including
interest payments on its Senior Notes through the first quarter of 2001. The
Company also expects to be able to fund capital requirements from anticipated
capital project financings which have not yet been negotiated. However, should
the Company be able to successfully negotiate additional credit capacity, there
is no assurance that the Company would be able to meet all of its short-term
debt service obligations. The Company has historically incurred debt or issued
equity securities to
17
<PAGE>
fund negative cash flows from operating activities and to make the payments on
previously incurred debt obligations.
In the short-term, from June 2000 the Company is working to increase
liquidity through hypothecation of its receivables. The Company anticipates it
will need approximately $8.5 million in new working capital borrowings over the
next 12 months. This will include expanding capacity under its current
facilities and, if necessary, obtaining credit lines from new sources. Emphasis
will be placed on the level of hypothecation of loans from Mexican buyers of
Club Regina Vacation Intervals. These receivables are denominated in US dollars,
Mexican pesos and Mexican UDI's. Currently the Company has a $10 million
receivables hypothecation facility with Textron. The receivable pool, which
provides the collateral for the Textron facility, is large enough to support a
credit facility of almost $20.5 million at a loan value ratio of 82.5%. The
company has begun discussions with Textron regarding the expansion of this
credit facility to $15 or $20 million and anticipates that the facility will be
expanded prior to the December 1st, 2000 and June 1st, 2001 Senior Notes
interest payments.
On a long-term basis, the Company has debt maturities of $8.2 million, $4.2
million, $103.0 million and $3.1 million in 2001, 2002, 2003, 2004 and
thereafter, respectively. In order to meet obligations in the long-term, the
Company will need to achieve profitable operations, reduce its high leverage
position and expand its current credit facilities. Should the Company not
achieve one or more of these requirements the Company's ability to continue to
operate would be jeopardized.
The Company is working to reduce its high leverage position. The Company
believes that there are several opportunities that may facilitate a capital
restructuring. While the Company intends to continue to pursue such
opportunities, there can be no assurance that a capital restructuring will occur
during the next year.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable
18
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
The following is a list of exhibits filed as part of this quarterly report.
Exhibit No. Description
10.1 -- Letter Agreement to First Amended and Restated Loan
and Security Agreement dated April 23, 1999.
27.1 -- Financial Data Schedule
(b) Reports on Form 8-K.
None
19
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the
Registrants, Raintree Resorts International, Inc. and CR Resorts Capital, S. de
R.L. de C.V., have duly caused this report to be signed on their behalf by the
undersigned, thereunto duly authorized.
RAINTREE RESORTS INTERNATIONAL, INC.
CR RESORTS CAPITAL, S. DE R.L. DE C.V.
Date: October 18, 2000 By /s/ GEORGE E. ALDRICH
George E. Aldrich
Senior Vice President - Finance
and Accounting
(Principal Accounting Officer)
20
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
----------- -----------------------
10.1* -- Letter Agreement to First Amended and Restated Loan
and Security Agreement dated April 23, 1999.
27.1+ -- Financial Data Schedule
* Previously filed
+ Filed herein
21
<PAGE>
