<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark one)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
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: No 1934 act file number assigned
(1933 act file no. 2-65481)
SADDLEBROOK RESORTS, INC.
(Exact name of registrant as specified in its charter)
Florida 59-1917822
(State of incorporation) (IRS employer identification no.)
5700 Saddlebrook Way, Wesley Chapel, Florida 33543-4499
(Address of principal executive offices)
813-973-1111
(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
------ ------
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date:
Not Applicable*
---------------
* Registrant has no common stock subject to this annual report.
Page 1 of 13
<PAGE> 2
INDEX
PART I - FINANCIAL INFORMATION
<TABLE>
Page
----
<S> <C>
Item 1. Financial Statements
Saddlebrook Resorts, Inc.
Balance Sheets at September 30, 1995 and December 31, 1994 3
Statements of Operations for the three months and nine months ended
September 30, 1995 and 1994 4
Statements of Cash Flows for the nine months ended September 30, 1995 and 1994 5
Notes to Financial Statements 6
Saddlebrook Rental Pool Operation
Balance Sheets at September 30, 1995 and December 31, 1994 8
Statements of Operations for the three months and nine months ended
September 30, 1995 and 1994 9
Statements of Changes in Participants' Fund Balance for the nine months
ended September 30, 1995 and 1994 10
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Saddlebrook Resorts, Inc. 11
Saddlebrook Rental Pool Operation 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 12
Item 6. Exhibits and Reports on Form 8-K 13
</TABLE>
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SADDLEBROOK RESORTS, INC.
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
----------- ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 249,144 $ 595,502
Escrowed cash deposits 45,553 120,010
Escrowed short-term investments 582,464 382,648
Accounts receivable, net 2,941,116 2,314,631
Related parties receivable 39,354 117,827
Inventory and supplies 1,429,417 1,327,484
Prepaid expenses and other assets 508,580 445,800
----------- -----------
Total current assets 5,795,628 5,303,902
Escrowed long-term investments 399,591 399,407
Property, buildings and equipment, net 22,339,381 21,549,219
Intangible assets and deferred charges, net 284,061 304,075
----------- -----------
$28,818,661 $27,556,603
=========== ===========
Liabilities and Shareholder's Equity
Current liabilities:
Current portion of notes payable $ 995,077 $ 1,231,547
Escrowed deposits 1,027,608 902,065
Accounts payable 948,737 997,904
Accrued rental distribution 520,419 1,265,856
Accrued payroll and related expenses 516,716 678,330
Accrued interest 131,665 120,686
Accrued taxes 408,050 36,519
Guest deposits 492,897 724,761
Other liabilities and accrued expenses 811,402 1,256,145
Due to related parties 2,149,778 1,324,099
----------- -----------
Total current liabilities 8,002,349 8,537,912
Notes payable due after one year 17,279,469 16,212,522
----------- -----------
Total liabilities 25,281,818 24,750,434
----------- -----------
Shareholder's equity:
Common stock, $1.00 par value, 100,000 shares
authorized and outstanding 100,000 100,000
Additional paid-in capital 1,013,127 1,013,127
Accumulated earnings 2,423,716 1,693,042
----------- -----------
Total shareholder's equity 3,536,843 2,806,169
----------- -----------
$28,818,661 $27,556,603
=========== ===========
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of these financial statements
3
<PAGE> 4
SADDLEBROOK RESORTS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenues $6,053,516 $6,177,654 $28,069,436 $25,063,889
---------- ---------- ----------- -----------
Costs and expenses:
Operating costs 4,742,017 4,713,973 18,680,675 16,724,338
Sales and marketing 643,588 550,719 2,261,952 1,916,192
General and administrative 862,350 795,088 2,649,994 2,449,735
Depreciation and amortization 363,040 285,533 984,752 820,710
Interest 402,547 324,162 1,063,398 881,631
---------- ---------- ----------- -----------
Total costs and expenses 7,013,542 6,669,475 25,640,771 22,792,606
---------- ---------- ----------- -----------
Net income (loss) (960,026) (491,821) 2,428,665 2,271,283
Distribution to shareholder (300,536) (126,901) (1,697,991) (760,526)
Accumulated earnings at
beginning of period 3,684,278 2,912,668 1,693,042 783,189
---------- ---------- ----------- -----------
Accumulated earnings at
end of period $2,423,716 $2,293,946 $ 2,423,716 $ 2,293,946
========== ========== =========== ===========
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of these financial statements
4
<PAGE> 5
SADDLEBROOK RESORTS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine months ended
September 30,
-------------------------
1995 1994
---------- ----------
<S> <C> <C>
Operating activities:
Net income $2,428,665 $2,271,283
Non-cash items included in net income:
Provision for doubtful accounts 24,800 12,400
Loss on sale of assets 8,252 --
Depreciation and amortization 984,752 820,710
(Increase) decrease in:
Accounts receivable (651,285) (383,798)
Inventory and supplies (101,933) 11,980
Prepaid expenses and other assets (62,780) 157,088
Increase (decrease) in:
Accounts payable (49,167) 408,983
Accrued expenses (1,201,148) (594,123)
Net payable to related parties 904,152 238,721
---------- ----------
2,284,308 2,943,244
---------- ----------
Investing activities:
Proceeds from sale of assets 3,384 --
Capital expenditures (1,720,629) (1,567,517)
---------- ----------
(1,717,245) (1,567,517)
---------- ----------
Financing activities:
Notes payable borrowings 2,426,284 640,000
Payments on notes payable (1,595,807) (1,014,572)
Financing costs (45,907) (33,542)
Distribution to shareholder (1,697,991) (760,526)
---------- ----------
(913,421) (1,168,640)
---------- ----------
Net increase in cash (346,358) 207,087
Cash at beginning of period 595,502 302,872
---------- ----------
Cash at end of period $ 249,144 $ 509,959
========== ==========
Cash paid for interest $1,127,417 $871,558
========== ==========
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
5
<PAGE> 6
SADDLEBROOK RESORTS, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. Basis of Presentation
The accompanying balance sheets and statements of operations and cash flows are
unaudited but reflect all adjustments which are, in the opinion of management,
necessary for a fair presentation of the results for the interim periods
presented. All such adjustments are of a normal recurring nature.
The Registrant's business is seasonal. Therefore, the results of operations for
the interim periods shown in this report are not necessarily indicative of
results to be expected for the fiscal year.
These financial statements and related notes are presented for interim periods
in accordance with the requirements of Form 10-Q and consequently, do not
include all disclosures normally provided in the Registrant's Annual Report on
Form 10-K. Accordingly, these financial statements and related notes should be
read in conjunction with the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1994.
Note 2. Accounts Receivable
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Trade accounts receivable $3,056,005 $2,414,321
Less reserve for bad debts (114,889) (99,690)
---------- ----------
$2,941,116 $2,314,631
========== ==========
</TABLE>
Note 3. Fixed Assets
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Land and land improvements $ 4,478,982 $ 4,478,982
Buildings and recreational facilities 18,670,924 17,129,142
Furnishings and equipment 7,529,963 5,614,055
Construction in progress 6,432 1,766,654
---------- ----------
30,686,301 28,988,833
Less accumulated depreciation (8,346,920) (7,439,614)
---------- ----------
$ 22,339,381 $ 21,549,219
========== ==========
</TABLE>
6
<PAGE> 7
Note 4. Intangible assets and deferred charges
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------ ------------
<S> <C> <C>
Noncompete agreement with prior owner $ 1,000,000 $ 1,000,000
Management contract with prior owner 500,000 500,000
Acquisition costs 41,577 41,577
Refinancing costs 469,921 424,014
------- -------
2,011,498 1,965,591
Less accumulated amortization (1,727,437) (1,661,516)
---------- ----------
$ 284,061 $ 304,075
============ ============
</TABLE>
Note 5. Notes Payable
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
----------- -----------
<S> <C> <C>
Note payable to bank, variable rate currently 8.75% $18,226,920 $15,651,000
Note payable to bank -- 323,800
Note payable to bank -- 1,383,008
Capital leases 47,626 86,261
----------- -----------
18,274,546 17,444,069
Less current portion (995,077) (1,231,547)
----------- -----------
$17,279,469 $16,212,522
=========== ===========
</TABLE>
In July 1995, the Registrant consolidated its outstanding loans and
line-of-credit draws into its primary debt instrument. Principal payments on
the primary debt remain at $950,000 annually in 1996 and 1997, and the balance
due in 1998.
The Registrant is also the guarantor of amounts that are owed by its sole
shareholder and an affiliated company of $470,000 and $729,000, respectively,
at September 30, 1995.
Note 6. Income Taxes
The Registrant has elected S Corporation status. Accordingly, the Registrant
has had no income tax expense since the election as the tax is assessed at the
shareholder level.
7
<PAGE> 8
SADDLEBROOK RENTAL POOL OPERATION
BALANCE SHEETS
(Unaudited)
DISTRIBUTION FUND
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------ -----------
<S> <C> <C>
Assets
Receivable from Saddlebrook Resorts, Inc. $ 651,572 $ 1,267,078
========== ===========
Liabilities and Participants' Fund Balance
Due to participants $ 557,514 $ 1,042,311
Due to maintenance escrow fund 94,058 224,767
Participants' fund balance -- --
---------- -----------
$ 651,572 $ 1,267,078
========== ===========
</TABLE>
MAINTENANCE ESCROW FUND
<TABLE>
<CAPTION>
September 30, December 31,
1995 1994
------------- ------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 19,253 $ 101,335
Investments 982,055 782,055
Receivables:
Distribution fund 94,058 224,767
Interest 28,477 9,106
Prepaid maintenance 251,979 69,317
----------- -----------
$ 1,375,822 $ 1,186,580
=========== ===========
Liabilities and Participants' Fund Balance
Accounts payable $ 255,208 $ 187,224
Participants' fund balance 1,120,614 999,356
----------- -----------
$ 1,375,822 $ 1,186,580
=========== ===========
</TABLE>
8
<PAGE> 9
SADDLEBROOK RENTAL POOL OPERATION
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
--------------------------- ---------------------------
1995 1994 1995 1994
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Rental pool revenue $ 1,693,711 $ 1,913,874 $ 10,563,250 $ 9,096,088
------------ ------------ ------------ ------------
Deductions:
Marketing expense 127,028 143,541 792,243 682,207
Management expense 211,714 239,234 1,320,406 1,137,011
Travel agent commissions 100,238 72,415 524,280 362,554
Credit card expense 15,811 18,122 109,665 97,487
------------ ------------ ------------ ------------
454,791 473,312 2,746,594 2,279,259
------------ ------------ ------------ ------------
Net rental income 1,238,920 1,440,562 7,816,656 6,816,829
Less operator share of net rental income (557,514) (648,253) (3,517,495) (3,067,573)
Other revenues (expenses):
Complimentary room revenues 16,827 12,341 81,578 64,479
Minor repairs and replacements (46,661) (38,639) (113,015) (96,132)
------------ ------------ ------------ ------------
Amount available for distribution $ 651,572 $ 766,011 $ 4,267,724 $ 3,717,603
============ ============ ============ ============
</TABLE>
9
<PAGE> 10
SADDLEBROOK RENTAL POOL OPERATION
STATEMENTS OF CHANGES IN PARTICIPANTS' FUND BALANCE
(Unaudited)
DISTRIBUTION FUND
<TABLE>
<CAPTION>
Nine months ended
September 30,
-----------------------------
1995 1994
------------ ------------
<S> <C> <C>
Balance at beginning of period $ -- $ --
Additions:
Amount available for distribution 4,267,724 3,717,603
Reductions:
Amount withheld for maintenance escrow fund (750,229) (650,030)
Amount accrued of paid to participants (3,517,495) (3,067,573)
------------ ------------
Balance at end of period $ -- $ --
============ ============
</TABLE>
MAINTENANCE ESCROW FUND
<TABLE>
<CAPTION>
Nine months ended
September 30,
-------------------------------
1995 1994
-------------- --------------
<S> <C> <C>
Balance at beginning of period $ 999,356 $ 1,048,576
Additions:
Amount withheld from distribution fund 750,229 650,030
Unit owner payments 85,386 90,561
Interest earned 36,477 18,802
Reductions:
Escrow account refunds (357,336) (351,491)
Maintenance charges (262,528) (121,204)
Major unit upgrades (51,577) (254,933)
Linen replacement (79,393) (50,270)
-------------- --------------
Balance at end of period $ 1,120,614 $ 1,030,071
============== ==============
</TABLE>
10
<PAGE> 11
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
The Registrant's operations are seasonal with the highest volume of sales
occurring during the first quarter of each calendar year. The third quarter has
historically had the lowest volume of sales of the fiscal period and the second
and fourth quarters have historically had marginal financial performance.
Accordingly, the Registrant experienced a minor improvement in its financial
condition as of September 30, 1995 when compared with its fiscal year-end of
December 31, 1994. The primary effect of this seasonal period was an increase
in accounts receivable, fixed assets and accumulated earnings.
The Registrant completed the construction of a renovation and expansion of its
hotel lobby, lobby terrace and Polo Lounge at a total cost of approximately
$1,430,000. The project has been funded by financing from the Registrant's
line-of-credit for capital additions discussed below. Several other smaller
capital improvements have been completed. However, there were no other major
capital additions or improvements during the nine months ended September 30,
1995. No other significant capital projects are anticipated in the remaining
fiscal period. Future operating costs and planned expenditures for minor
additions and improvements are expected to be funded by the resort operations
of the Registrant or by additional financing within the terms of the
Registrant's debt agreement.
The Registrant's debt agreement includes a line-of-credit of $1,500,000 which
is limited to the value of certain accounts receivable, inventories and
equipment of the Registrant and an affiliate. As of September 30, 1995, this
full line-of-credit was unrestricted and no draws were outstanding. The
Registrant has obtained an additional line-of-credit from the same lender of
$3,500,000 which may be used to finance capital additions. As of September 30,
1995, $1,765,000 is undrawn on this line-of-credit (see Note 5. Notes Payable
of the Notes to the Financial Statements in Part I, Item 1 of this Form 10-Q,
which is incorporated herein by reference).
The Registrant has additional financing that is available related to the matter
that is discussed in Part II, Item 1. Legal Proceedings of this Form 10-Q,
which is incorporated herein by reference.
Results of Operations
Total revenues decreased $124,000 or 2% for the third quarter of 1995 when
compared with the same period in 1994. Although the Registrant had a 10%
increase in its average daily rate, it was offset by fewer occupied unit nights
and number of guests in the hotel for the current quarter compared to the same
quarter in 1994. Total revenues increased $3,006,000 or 12% for the first nine
months of 1995 when compared with the prior year. This improvement is a result
of increases in occupied unit nights and average daily rate for the current
period over the same period in 1994. Anticipated occupied unit nights for the
remainder of 1995 are not expected to exceed the prior year's level.
Anticipated occupied unit nights for subsequent fiscal periods are expected to
maintain the resort's current volume of business.
The net loss for the third quarter of 1995 increased $468,000 or 95% from the
net loss for the same period in 1994. This was a direct result of reduced
revenues combined with increased depreciation and interest expense that are
related to recent capital improvements. Net income increased $157,000 or 7% for
the first nine months of 1995 when compared with the prior year. This
improvement is primarily due to the increased revenues offset by increases in
the aforementioned depreciation and interest expense along with increased
general costs of operation.
11
<PAGE> 12
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Due to the seasonal business of the Registrant, the results of operations for
the interim periods shown in this report are not necessarily indicative of
results to be expected for the full fiscal period.
Saddlebrook Rental Pool Operation
The results of the Saddlebrook Rental Pool Operation (the "Rental Pool") are
directly related to the hotel operations of the Registrant. The Registrant
operates the Rental Pool which provides for the distribution of a percentage of
net rental income to participating condominium owners. Rental pool income is
shared according to the provisions of an agreement and the level of the
Registrant's occupancy directly impacts revenues and expenses used to determine
this income.
The average occupancies for the quarters ended September 30, 1995 and 1994 were
38% and 46%, respectively. The average distributions of net rental income per
participating condominium unit for the same periods were $1,200 and $1,426,
respectively. This decrease in average net rental income was primarily due to
the decrease in average occupancy.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
On May 12, 1989, the Circuit Court of the Sixth Judicial Circuit in and for
Pasco County, Florida, in the lawsuit, James H. Porter and Martha Porter,
Trustees, et al v. Saddlebrook Resorts, Inc. and the County of Pasco, Florida,
Case No. 83-1860, entered a judgment against Registrant in the amount of
$8,082,000 relating to damages to adjacent property for surface water effects.
In addition, an injunction was entered to remediate damages relating thereto.
In December 1990, the trial court vacated the jury verdict and ordered a new
trial on the basis of false testimony of the Porter's expert in the 1989 trial.
On October 14, 1989, the Registrant and Pittway Corporation (the former owner
of the Registrant) entered into an agreement and on July 16, 1993 an amended
agreement, to split equally the costs of the defense of the litigation, the
ultimate judgment and the mandated remedial work. The agreements provide for
Pittway Corporation to make subordinated loans to Registrant, if required, to
enable Registrant to pay for its half of these costs.
On March 18, 1992, the Florida Second District Court of Appeal issued an
opinion reversing and vacating the jury verdict and judgment against Registrant
and ordering a new trial. On December 22, 1993, the Registrant filed a motion
for summary judgment in the trial court on grounds that the findings in
Registrant's favor by an administrative law judge in a related proceeding bar
further litigation of this matter. An order granting the summary judgment and
dismissing the action was entered on January 7, 1995. An appeal of said order
is presently pending. Management currently believes that the Registrant's
position in further litigation would be meritorious.
The Registrant is involved in other litigation in the ordinary course of
business. In the opinion of management, these matters are adequately covered by
insurance or indemnification from other third parties. The effect, if any, of
these claims is, in management's opinion, immaterial to the Registrant's
financial condition and results of operations.
12
<PAGE> 13
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 27 - Financial Data Schedule (for SEC use only)
(b) The Registrant was not required to file a Form 8-K during the nine
months ended September 30, 1995.
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.
SADDLEBROOK RESORTS, INC.
-------------------------
(Registrant)
Date: November 10, 1995 /s/ Donald L. Allen
------------------- --------------------------------
Donald L. Allen
Vice President and Treasurer
(Principal Financial and
Accounting Officer)
13
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<CASH> 249,144
<SECURITIES> 982,055
<RECEIVABLES> 3,056,005
<ALLOWANCES> 114,889
<INVENTORY> 1,429,417
<CURRENT-ASSETS> 5,795,628
<PP&E> 30,686,301
<DEPRECIATION> 8,346,920
<TOTAL-ASSETS> 28,818,661
<CURRENT-LIABILITIES> 8,002,349
<BONDS> 0
<COMMON> 100,000
0
0
<OTHER-SE> 1,013,127
<TOTAL-LIABILITY-AND-EQUITY> 28,818,661
<SALES> 28,069,436
<TOTAL-REVENUES> 28,069,436
<CGS> 0
<TOTAL-COSTS> 24,577,373
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,063,398
<INCOME-PRETAX> 2,428,665
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,428,665
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,428,665
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
