<PAGE>
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 ACT OF 1934
For quarterly period ended March 31, 1999
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: 333-61433
EPIC RESORTS, LLC
(Exact name of registrant as specified in its charter)
DELAWARE 23-2888968
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
1150 FIRST AVENUE, SUITE 900 19407
KING OF PRUSSIA, PA (Zip Code)
(Address of principal executive offices)
(610) 992-0100
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former 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
As of March 31, 1999, 1,118,000 membership interests of the registrant
were outstanding.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EPIC RESORTS, LLC
INDEX
<TABLE>
<CAPTION>
PART I. FINANCIAL INFORMATION PAGE
<S> <C>
ITEM 1. Consolidated Financial Statements (unaudited)
Consolidated Balance Sheets - March 31, 1999 and
December 31, 1998....................................................................................3
Consolidated Statements of Operations - Three Months Ended
March 31, 1999 and 1998..............................................................................4
Consolidated Statements of Cash Flows - Three Months Ended
March 31, 1999 and 1998..............................................................................5
Notes to Consolidated Financial Statements...........................................................6
ITEM 2. Management's Discussion and Analysis of Consolidated Financial Condition
and Results of Operations............................................................................7
ITEM 3. Quantitative and Qualitative Disclosures About Market Risk..........................................11
PART II. OTHER INFORMATION
ITEM 6. Exhibits and Reports on Form 8-K....................................................................11
SIGNATURES....................................................................................................12
EXHIBIT INDEX ................................................................................................13
</TABLE>
2
<PAGE>
PART I. - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
EPIC RESORTS, LLC
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
March 31, December 31,
1999 1998
---- ----
<S> <C> <C>
ASSETS
------
Cash and cash equivalents $ 11,994,000 $ 16,095,000
Cash in escrow 8,779,000 8,586,000
Investment in residual interests 17,356,000 15,223,000
Mortgages receivable, net of allowance of $1,523,000 and $991,000 as of March 31, 1999 16,598,000 11,771,000
and December 31, 1998, respectively
Inventory 71,583,000 73,042,000
Property and equipment, net 12,986,000 11,909,000
Deferred financing costs, net 6,347,000 6,823,000
Other assets 3,812,000 3,324,000
---------------- ----------------
$ 149,455,000 $ 146,773,000
---------------- ----------------
---------------- ----------------
Total assets
LIABILITIES AND MEMBER'S EQUITY
-------------------------------
Accounts payable $ 1,550,000 $ 1,154,000
Accrued expenses 653,000 1,743,000
Accrued interest payable 4,961,000 736,000
Advance deposits 94,000 76,000
Deferred revenue 405,000 268,000
Notes payable 620,000 621,000
Senior secured notes payable 127,530,000 127,432,000
---------------- ----------------
Total liabilities 135,813,000 132,030,000
---------------- ----------------
Commitments and contingencies -- --
Warrants 2,757,000 2,757,000
Member's equity 10,885,000 11,986,000
---------------- ----------------
Total liabilities and member's equity $ 149,455,000 $ 146,773,000
---------------- ----------------
---------------- ----------------
</TABLE>
The accompanying notes and management assumptions are an integral part of
these financial statements.
3
<PAGE>
EPIC RESORTS, LLC
UNAUDITED CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
For the Three Months Ended March 31
1999 1998
---- ----
<S> <C> <C>
Revenue:
Sales of vacation ownership interests $ 15,651,000 $ 7,413,000
Resort operations 3,450,000 1,497,000
Gain on sales of receivables 1,780,000 --
Other income 720,000 1,999,999
---------------- ----------
21,601,000 10,109,000
---------------- ----------
Costs and expenses:
Cost of sales of vacation ownership interests 3,127,000 1,795,000
Resort operations 3,680,000 938,000
Selling and marketing costs 6,648,000 2,903,000
General and administrative 3,298,000 793,000
Provision for doubtful accounts 735,000 327,000
Depreciation 212,000 198,000
Financing and closing costs 140,000 222,000
Interest expense 4,799,000 1,017,000
---------------- ---------------
22,639,000 8,194,000
---------------- ---------------
(Loss) income before minority interest (1,038,000) 1,915,000
Minority interest -- 543,000
------------------ ---------------
Net (loss) income $ (1,038,000) $ 1,372,000
------------------ ---------------
------------------ ---------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
EPIC RESORTS, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited)
<TABLE>
<CAPTION>
For the three months ended
March 31,
1999 1998
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (1,038,000) $ 1,372,000
Adjustments to reconcile net income (loss) to net cash used in operating activities-
Depreciation 212,000 198,000
Amortization of financing costs 573,000 43,000
Provision for doubtful accounts 735,000 327,000
Gain on sales of receivables (1,780,000) --
Minority interest -- 543,000
Change in assets and liabilities--
Mortgages receivable (10,896,000) (3,738,000)
Inventory of vacation ownership intervals 1,459,000 731,000
Other assets (488,000) (491,000)
Accounts payable 396,000 (167,000)
Accrued expenses (1,090,000) 159,000
Accrued interest payable 4,225,000 (56,000)
Advance deposits 18,000 216,000
Deferred revenue 137,000 --
---------------- ----------------
Net cash used in operating activities (7,537,000) (863,000)
---------------- ----------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment (1,288,000) (223,000)
Investment in residual interests (2,133,000) --
---------------- ----------------
Net cash used in investing activities (3,421,000) (223,000)
---------------- ----------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from notes payable -- 5,340,000
Payments on notes payable (1,000) (3,908,000)
Payment of deferred financing costs -- (559,000)
Interest escrows (193,000) (149,000)
Proceeds from sales of receivables 7,121,000 --
Contributions from sole member -- 163,000
Distributions to sole member (70,000) --
---------------- ----------------
Net cash provided by financing activities 6,857,000 887,000
---------------- ----------------
NET DECREASE IN CASH AND CASH EQUIVALENTS (4,101,000) (199,000)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 16,095,000 248,000
---------------- ----------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 11,994,000 $ 49,000
---------------- ----------------
---------------- ----------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid $ 1,000 $ 1,005,000
---------------- ----------------
---------------- ----------------
</TABLE>
The accompanying notes are an integral part of these financial statements
5
<PAGE>
EPIC RESORTS, LLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1999 AND 1998
1. BASIS OF PRESENTATION:
The consolidated financial statements have been prepared by the
Registrant, pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although the Registrant believes that the disclosures are adequate
to make the information presented not misleading. It is suggested that these
consolidated financial statements be read in conjunction with the audited
financial statements and the notes thereto included in the Registrant's latest
annual report on Form 10-K. In the opinion of the Registrant, all adjustments,
consisting only of normal recurring adjustments, necessary to present fairly the
consolidated financial position and the consolidated results of its operations
and its cash flows, have been included. The results of operations for such
interim periods are not necessarily indicative of the results for the full year.
2. NATURE OF BUSINESS:
Epic Resorts, LLC (a sole-member Delaware Limited Liability Company)
and its wholly-owned subsidiaries (the "Company") generate revenue from the sale
and financing of vacation ownership interests in its resorts. Customers acquire
the right to use a fully-furnished vacation residence, generally for a one-week
period each year, in perpetuity ("Vacation Ownership Interests"). The Company's
principal operations consist of (i) acquiring, developing and operating vacation
ownership resort locations, (ii) marketing and selling Vacation Ownership
Interests in its resorts, and (iii) providing customer financing to individual
purchasers of Vacation Ownership Interests at its resorts. The Company also
generates income from the transient rental of resort accommodations.
Beginning in the first quarter of 1999, the Company began selling
membership interests into Epic Vacation Club (the "Club"), a Delaware nonprofit
mutual benefit corporation formed in 1998, at all of its resorts. The Club was
formed for the specific purpose of owning and managing the real property
conveyed to it by the Company and its resort subsidiaries. The Club provides
purchasers significant flexibility in their vacation planning, a wider variety
of vacation options and easier access to the Company's network of resorts. The
Club sells points, which entitle the customer to reserve units at any of the
Company's six resorts in increments as short as one day. The number of
points required to stay one day at one of the Company's resorts varies depending
upon the particular resort, the size of the unit, the season and the day of the
week.
3. RELATED PARTY TRANSACTIONS:
The Company has accrued $1,071,000 and $829,000 as of March 31, 1999
and December 31, 1998, respectively, as a receivable from various homeowners'
associations at its resorts. The Company generally accrues receivables from
homeowners' associations for management fees and certain other expenses paid on
behalf of the homeowners' associations. This receivable is included in other
assets in the accompanying consolidated balance sheets.
4. SEGMENT AND GEOGRAPHIC INFORMATION:
The Company operates in one industry segment, which includes the
development, acquisition, marketing, selling, financing, and management of
vacation ownership resorts. The Company does not operate outside of the
United States. The Company's customers are not concentrated in any specific
geographic region and no single customer accounts for a significant amount of
the Company's sales.
6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
THIS QUARTERLY REPORT MAY CONTAIN "FORWARD-LOOKING STATEMENTS" WITHIN
THE MEANING OF SECTION 27A OF THE SECURITIES ACT OF 1933. ALL STATEMENTS THAT
ADDRESS OPERATING PERFORMANCE, EVENTS OR DEVELOPMENTS THAT MANAGEMENT
ANTICIPATES WILL OCCUR IN THE FUTURE, INCLUDING STATEMENTS RELATED TO FUTURE
SALES, PROFITS, EXPENSES, INCOME AND EARNINGS OR STATEMENTS EXPRESSING GENERAL
OPTIMISM ABOUT FUTURE RESULTS, ARE FORWARD-LOOKING STATEMENTS. IN ADDITION,
WORDS SUCH AS "EXPECTS," "ANTICIPATES," "INTENDS," "PLANS," "BELIEVES," AND
"ESTIMATES," AND VARIATIONS OF SUCH WORDS AND SIMILAR EXPRESSIONS ARE INTENDED
TO IDENTIFY FORWARD-LOOKING STATEMENTS.
BECAUSE FORWARD-LOOKING STATEMENTS ARE BASED ON A NUMBER OF BELIEFS,
ESTIMATES AND ASSUMPTIONS BY MANAGEMENT THAT COULD ULTIMATELY PROVE INACCURATE,
THERE IS NO ASSURANCE THAT FORWARD-LOOKING STATEMENTS WILL PROVE TO BE CORRECT.
ANY NUMBER OF FACTORS COULD AFFECT FUTURE OPERATIONS AND RESULTS, INCLUDING THE
FOLLOWING: INCREASING COMPETITION; FLUCTUATIONS IN CONSUMER DEMAND AND
CONFIDENCE; FLUCTUATIONS IN COSTS AND EXPENSES; THE EFFECTIVENESS OF
ADVERTISING, MARKETING AND PROMOTIONAL PROGRAMS; WEATHER CONDITIONS THAT AFFECT
THE GEOGRAPHIC AREAS WHERE THE COMPANY'S RESORTS ARE LOCATED; THE EFFECTIVENESS
OF THE INTEGRATION OF THE COMPANY'S RECENTLY ACQUIRED RESORTS; THE TIMING,
QUALITY AND COMPLETION OF CONSTRUCTION AND DEVELOPMENT ACTIVITIES AT THE
COMPANY'S RESORTS; THE TIMING AND AVAILABILITY OF GOVERNMENTAL PERMITS AND
AUTHORIZATIONS REGARDING THE COMPANY'S RESORTS; THE CONTINUED AVAILABILITY AND
TERMS OF FINANCING; AND OTHER GENERAL ECONOMIC CONDITIONS, SUCH AS THE RATE OF
EMPLOYMENT, INFLATION AND INTEREST RATES. THIS LIST OF FACTORS IS NOT EXCLUSIVE.
FORWARD-LOOKING STATEMENTS ARE SUBJECT TO THE SAFE HARBORS CREATED IN
THE SECURITIES ACT. EPIC RESORTS UNDERTAKES NO OBLIGATION TO UPDATE PUBLICLY ANY
FORWARD-LOOKING STATEMENTS, WHETHER AS A RESULT OF NEW INFORMATION, FUTURE
EVENTS OR OTHERWISE.
EPIC RESORTS, LLC
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
OVERVIEW
Epic Resorts, LLC, a Delaware limited liability company (the "Company"), was
formed in June 1998 to merge with Epic Resorts, Inc., which had been formed to
combine the ownership of the London Bridge Resort and the Daytona Beach Regency,
and their vacation ownership acquisition and development businesses. London
Bridge Resort was acquired in 1986 by London Bridge Resort, Inc., a Delaware
corporation wholly-owned by Thomas F. Flatley, the Company's President. In 1991,
the conversion of the London Bridge Resort into a vacation ownership resort was
completed and sales of Vacation Ownership Interests at such resort commenced. In
April 1996, the Daytona Beach Regency was acquired by Daytona Beach Regency,
Ltd. and sales of Vacation Ownership Interests commenced at such resort in
November 1996. In connection with the private placement of the Company's $130
million Senior Secured Redeemable Notes due 2005 (the "Notes") in July 1998,
Epic Resorts, Inc. was merged into Epic Resorts, LLC and certain of its
subsidiaries were merged into limited liability companies. Mr. Flatley
simultaneously contributed his membership interests in certain of such
subsidiaries to the Company.
The Company generates revenues from the sale and financing of membership
interests in Epic Vacation Club, Vacation Ownership Interests at its resorts, as
well as from resort operations which include commercial rentals, food and
beverage sales, greens fees, rentals of suites available at the Company's
resorts and from fees associated with managing the vacation ownership resorts.
The Company recognizes revenue from Vacation Ownership Interest sales when a
minimum of 10% of the sales price has been received in cash, the refund or
rescission period has expired, collectibility of the receivable representing
the remainder of the sales price is reasonably assured and the Company has
completed substantially all of its obligations with respect to any
development relating to the Vacation Ownership Interests sold.
7
<PAGE>
The Company has been dedicating greater resources to the acquisition and
development of vacation ownership projects. Costs associated with the
acquisition and development of vacation ownership resorts, including carrying
costs, are capitalized as inventory and allocated to cost of sales as the
respective revenue is recognized.
At each of the Company's existing resort properties currently in operation, a
Homeowners Association (each an "Association") is established. Each Association
is a not-for-profit corporation and operates primarily to collect the
assessments from its members and remit to the developer of the property the
Association's pro-rata share of direct and allocated expenditures including real
estate taxes, property insurance, grounds maintenance, utility costs and
housekeeping services. Typically, the Association reimburses the developer or
property manager for the Association's pro-rata share of such expenditures.
RESULTS OF OPERATIONS
The following analysis by the management of the Company summarizes the
significant changes in the results of operations presented in the statements of
operations for the three months ended March 31, 1999 and 1998, and presents an
analysis of the financial condition of the Company as of March 31, 1999.
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1999 TO THE THREE MONTHS ENDED
MARCH 31, 1998
REVENUES. For the three months ended March 31, 1999, the Company generated total
revenues of $21.6 million compared to $10.1 million for the three months ended
March 31, 1998, an increase of $11.5 million, or 113.9%. This increase is
primarily the result of an $8.3 million increase in sales of Vacation Ownership
Interests to $15.7 million in 1999 from $7.4 million in 1998, an increase of
112.2%. Sales of Vacation Ownership Interests include the new sales activities
at Scottsdale Links, Desert Paradise, Island Links and Palm Springs Marquis
Resorts of $5.7 million for the three months ended March 31, 1999 and an
increase of $2.6 million at the Company's existing resorts.
Resort operations revenue increased 130.3% to $3.5 million for the three months
ended March 31, 1999 from $1.5 million for the comparable period in 1998, as a
result of $2.2 million of additional resort revenues from the recently acquired
resorts.
Gain on sales of receivables increased to $1.8 million for the three months
ended March 31, 1999 from $-0- for the comparable prior period. This increase
is attributable to the Receivables Facility entered into in October 1998.
Other income decreased 64.0% to $0.7 million for the three months ended March
31, 1999 from $2.0 million for the comparable period in 1998 due to the
Company's change from the practice of hypothecating receivables to selling
receivables under the Company's Receivables Facility. Other income includes
$1.8 million for the three months ended March 31, 1998.
COST OF SALES. Cost of sales for Vacation Ownership Interests as a percentage of
sales of Vacation Ownership Interests decreased to 20.0% for the three months
ended March 31, 1999 from 24.2% for the comparable period in 1998. This decrease
was attributable to the increase in the average sales price of Vacation
Ownership Interests at the resorts.
8
<PAGE>
RESORT OPERATIONS EXPENSE. Resort operations expense increased 311.1% to $3.7
million for the three months ended March 31, 1999 from $0.9 million for the
comparable period in 1998, reflecting increased expenses such as housekeeping,
maintenance and utilities to operate Scottsdale Links, Desert Paradise and Palms
Springs Marquis resorts.
SELLING AND MARKETING. Selling and marketing expenses (including commissions) as
a percentage of Sales of Vacation Ownership Interests increased to 42.5% for the
three months ended March 31, 1999 from 39.2% for the comparable period in 1998.
This increase was primarily a result of the marketing costs incurred to generate
leads as sales commenced at the Scottsdale Links, Desert Paradise and Palm
Springs Marquis resorts.
GENERAL AND ADMINISTRATIVE. General and administrative expenses increased to
$3.3 million for the three months ended March 31, 1999 from $0.8 million for the
comparable period in 1998. As a percentage of Sales of Vacation Ownership
Interests and resort operations revenue, general and administrative expenses
increased to 17.3% for the three months ended March 31, 1999 from 8.9% for the
comparable period in 1998 primarily as a result of increased staffing and costs
incurred to properly support the newly acquired resorts.
INTEREST EXPENSE. Interest expense increased to $4.8 million for the three
months ended March 31, 1999 from $1.0 million for the comparable period in 1998
reflecting additional interest on the Company's notes.
PROVISION FOR DOUBTFUL ACCOUNTS. Provision for doubtful accounts as a percentage
of sales of Vacation Ownership Interests increased to 4.7% for the three months
ended March 31, 1999 from 4.4% for the comparable period in 1998 which reflects
the increased number of financed sales at the Company's resorts.
LIQUIDITY AND CAPITAL RESOURCES
The Company generates cash from operations through the sale and financing of
membership interests in Epic Vacation Club, Vacation Ownership Interests, resort
operations, transient rental of resort accommodations and management fees. With
respect to the sale of Vacation Ownership Interests, the Company generates cash
from operations from customer downpayments and third party financing of customer
mortgages receivable in amounts typically equal to 90% of the related customer
mortgages receivable. The Company generates additional cash from the financing
of Vacation Ownership Interests equal to the difference between the interest
charged on the customer mortgages receivable and the interest paid on the notes
payable secured by the Company's pledge of such customer mortgages receivable.
The Company expects to generate additional cash flow from its Vacation Ownership
Interests Receivable portfolio through receipt of the spread between the yield
on such portfolio and the cost of the Company's new receivables facility upon
completion of securitizations of such receivables.
The Company requires funds to finance the acquisition and development of resorts
and related inventory, and to finance customer purchases of Vacation Ownership
Interests. These funds are provided by the Company's non-recourse, $75 million
vacation ownership loan participation facility. Under this facility, the Company
sells Vacation Ownership Interest Receivables to a limited purpose, bankruptcy
remote subsidiary of the Company, and a financial institution purchases from the
subsidiary participation interests in such receivables. The proceeds from the
sale of the participation interests are paid to the
9
<PAGE>
Company as consideration for the receivables sold to the subsidiary. The
Receivables Facility provides for advance rates of 88% of the lesser of (i)
unpaid principal balance of the receivables sold to the subsidiary or (ii) the
market value of such receivables as determined by the financial institution.
Borrowings under the Receivables Facility bear interest at LIBOR plus 1.50%,
reset daily. The Receivables Facility provides non-recourse interim funding for
the Vacation Ownership Interests Receivable pending their permanent funding
through receivables securitization transactions. The Company expects to be able
to fund a significant portion of its future development from funds provided by
the Receivables Facility.
The Company's capital resources are provided from the following sources: (i)
cash flows from operations, (ii) proceeds from the Receivables Facility and
(iii) proceeds from the offering of the Notes designated for working capital
and general corporate purposes. In addition, $8.5 million representing an
amount equal to one interest payment under the Notes, is held in an escrow
account to be held by an escrow agent for the benefit of the holders of the
Notes to pay interest on the Notes. The escrow funds may be disbursed to the
extent necessary to make the interest payment on the Notes. The Company must
at all times maintain escrow funds in an escrow account sufficient to make
the next required interest payment on the Notes.
The Company intends to pursue a growth-oriented strategy; accordingly, the
Company may, from time to time acquire, among other things, additional vacation
ownership resorts and additional land upon which vacation ownership resorts may
be developed, and companies operating quality resorts or having vacation
ownership assets, management, sales or marketing expertise commensurate with the
Company's operations in the vacation ownership industry.
The Company believes that the net proceeds to the Company from the offering of
the notes designated for working capital and general corporate purposes,
together with cash generated from operations and future borrowings, will be
sufficient to meet the Company's working capital and capital expenditure needs
through December 1999. The Company may, in future, require additional credit
facilities or issuances of other corporate debt or equity securities in
connection with acquisitions or otherwise. Any debt incurred or issued by the
Company may be secured or unsecured, at fixed or variable rates of interest and
may be subject to such terms as management deems prudent.
YEAR 2000
The Year 2000 issue is a flaw in many electronic data processing
systems which prevents them from processing year-date data accurately beyond the
year 1999. This is the result of using a two-digit representation for the year,
for example "99" for "1999." This approach assumed that the first two digits of
the abbreviated date are "19." However, when the computer reaches 2000 it may
interpret "00" as the year 1900 possibly causing inaccurate data processing or
processing to stop altogether.
The Company is addressing the Year 2000 issue with a corporate wide
initiative led by the Director of Information Systems and involving the
Company's Risk Manager. The initiative includes ascertaining that each of the
software packages in use have been certified as Year 2000 compliant.
The Company has conducted tests of its existing computer hardware and
software and determined that they are Year 2000 compliant. Because of most of
its computer hardware and software is less than two years old, and the fact that
each of the software packages have already been certified as compliant, the
Company believes that its exposure to Year 2000 problems with respect to this
hardware and software is minimal. The Company is actively working with its
suppliers and third party
10
<PAGE>
service providers, including its receivable servicing providers and the vacation
ownership exchange networks with which it is affiliated, to assess their
compliance efforts, as well as the Company's potential exposure to the failure
of such suppliers and third party service providers to become Year 2000
compliant. In the case of its receivables servicing providers, the Company has
received representations that they have completed their remediation program and
will be providing a certificate that the Company is Year 2000 compliant.
At each of the Company's resort locations, the general manager has been
advised that the resort's suppliers are Year 2000 compliant or that such
suppliers have taken the necessary steps to become compliant before the end of
1999.
While the Company believes that its exposure to risks involving the
Year 2000 problem is minimal, there can be no assurance that the systems of
suppliers or third party service providers are Year 2000 compliant, or that the
failure of such suppliers or third party providers to be Year 2000 compliant
will not have an effect on the Company. The Company believes that its reasonably
likely worst case scenario regarding Year 2000 noncompliance is that certain
functions currently performed by its computer systems will have to be performed
manually. The Company has not made any material expenditures regarding the Year
2000 issue and has utilized its internal staff to make all required Year 2000
upgrades and conversions. These costs are not separately tracked.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company is not exposed to interest rate risk in the near term, as
substantially all of its indebtedness is at fixed rates (principally the $130
million of notes which bear interest at a fixed rate of 13.0%). The Company does
not maintain a trading account for any class of financial instrument, has never
purchased any derivative instruments, and is not directly subject to any foreign
currency exchange or commodity price risk.
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) The following Exhibits are included in this Quarterly Report on
Form 10-Q:
Exhibit 27 - Financial Data Schedule.
(b) No reports on Form 8-K were filed during the quarter ended March
31, 1999.
11
<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.
EPIC RESORTS, LLC
Dated: MAY 13, 1999 By: /s/ Scott J. Egelkamp
---------------------------- -----------------------------------
Scott J. Egelkamp
President and Chief Financial Officer
(Duly Authorized Principal Financial
Officer)
<PAGE>
EXHIBIT INDEX
EXHIBIT 27. FINANCIAL DATA SCHEDULE
13
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001068052
<NAME> EPIC RESORTS LLC
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<CASH> 20,773,000
<SECURITIES> 17,356,000
<RECEIVABLES> 18,121,000
<ALLOWANCES> 1,523,000
<INVENTORY> 71,583,000
<CURRENT-ASSETS> 10,159,000
<PP&E> 17,501,000
<DEPRECIATION> 4,515,000
<TOTAL-ASSETS> 149,455,000
<CURRENT-LIABILITIES> 8,283,000
<BONDS> 130,287,000
0
0
<COMMON> 0
<OTHER-SE> 10,885,000
<TOTAL-LIABILITY-AND-EQUITY> 149,455,000
<SALES> 15,651,000
<TOTAL-REVENUES> 21,601,000
<CGS> 3,127,000
<TOTAL-COSTS> 13,455,000
<OTHER-EXPENSES> 3,650,000
<LOSS-PROVISION> 735,000
<INTEREST-EXPENSE> 4,799,000
<INCOME-PRETAX> (1,038,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,038,000)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,038,000)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
