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Previous: BABSON D L TAX FREE INCOME FUND INC, 497, 1995-08-11 |
Next: MESA ROYALTY TRUST/TX, 10-Q, 1995-08-11 |
<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 June 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
<TABLE>
<CAPTION>
Page
----
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Saddlebrook Resorts, Inc.
Balance Sheets at June 30, 1995 and December 31, 1994 3
Statements of Operations for the three months and six months ended
June 30, 1995 and 1994 4
Statements of Cash Flows for the six months ended June 30, 1995 and 1994 5
Notes to Financial Statements 6
Saddlebrook Rental Pool Operation
Balance Sheets at June 30, 1995 and December 31, 1994 8
Statements of Operations for the three months and six months ended
June 30, 1995 and 1994 9
Statements of Changes in Participants' Fund Balance for the six months
ended June 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>
June 30, December 31,
1995 1994
----------------- -----------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,207,287 $ 595,502
Escrowed cash deposits 63,851 120,010
Escrowed short-term investments 382,648 382,648
Accounts receivable, net 2,880,187 2,314,631
Related parties receivable 6,338 117,827
Inventory and supplies 1,183,989 1,327,484
Prepaid expenses and other assets 358,663 445,800
----------- -----------
Total current assets 7,082,963 5,303,902
Escrowed long-term investments 399,407 399,407
Property, buildings and equipment, net 22,461,061 21,549,219
Intangible assets and deferred charges, net 289,473 304,075
----------- -----------
$30,232,904 $27,556,603
=========== ===========
Liabilities and Shareholder's Equity
Current liabilities:
Current portion of notes payable $ 1,498,464 $ 1,231,547
Escrowed deposits 845,906 902,065
Accounts payable 444,881 997,904
Accrued rental distribution 1,475,358 1,265,856
Accrued payroll and related expenses 765,801 678,330
Accrued interest 120,357 120,686
Accrued taxes 336,697 36,519
Guest deposits 356,293 724,761
Other liabilities and accrued expenses 687,006 1,256,145
Due to related parties 1,455,430 1,324,099
----------- -----------
Total current liabilities 7,986,193 8,537,912
Notes payable due after one year 17,449,306 16,212,522
----------- -----------
Total liabilities 25,435,499 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 3,684,278 1,693,042
----------- -----------
Total shareholder's equity 4,797,405 2,806,169
----------- -----------
$30,232,904 $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 Six months ended
June 30, June 30,
------------------------------ -----------------------------
1995 1994 1995 1994
------------- ------------- ------------ ------------
<S> <C> <C> <C> <C>
Revenues $9,446,759 $7,700,968 $22,015,920 $18,886,235
---------- ---------- ----------- -----------
Costs and expenses:
Operating costs 6,408,727 5,545,949 13,938,658 12,010,365
Sales and marketing 825,049 680,906 1,618,364 1,365,473
General and administrative 900,779 821,801 1,787,644 1,654,647
Depreciation and amortization 328,219 275,267 621,712 535,177
Interest 335,167 276,399 660,851 557,469
---------- ---------- ----------- -----------
Total costs and expenses 8,797,941 7,600,322 18,627,229 16,123,131
---------- ---------- ----------- -----------
Net income 648,818 100,646 3,388,691 2,763,104
Distribution to shareholder (1,087,773) (522,003) (1,397,455) (633,625)
Accumulated earnings at
beginning of period 4,123,233 3,334,025 1,693,042 783,189
---------- ---------- ----------- -----------
Accumulated earnings at
end of period $3,684,278 $2,912,668 $ 3,684,278 $ 2,912,668
========== ========== =========== ===========
</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>
Six months ended
June 30,
-------------------------------
1995 1994
-------------- -------------
<S> <C> <C>
Operating activities:
Net income $3,388,691 $2,763,104
Non-cash items included in net income:
Provision for doubtful accounts 15,500 3,100
Depreciation and amortization 621,712 535,177
(Increase) decrease in:
Accounts receivable (581,056) 277,300
Inventory and supplies 143,495 136,037
Prepaid expenses 87,137 175,388
Increase (decrease) in:
Accounts payable (553,023) (67,951)
Accrued expenses (340,785) (317,022)
Net payable to related parties 242,820 (355,633)
---------- ----------
3,024,491 3,149,500
---------- ----------
Investing activities:
Capital expenditures (1,491,152) (871,725)
---------- ----------
(1,491,152) (871,725)
---------- ----------
Financing activities:
Notes payable borrowings 2,426,284 --
Payments on notes payable (922,583) (830,528)
Financing costs (27,800) --
Distribution to shareholder (1,397,455) (633,625)
---------- ----------
78,446 (1,464,153)
---------- ----------
Net increase in cash 1,611,785 813,622
Cash at beginning of period 595,502 302,872
---------- ----------
Cash at end of period $2,207,287 $1,116,494
========== ==========
Cash paid for interest $ 733,959 $ 561,270
========== ==========
</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>
June 30, December 31,
1995 1994
----------------- -----------------
<S> <C> <C>
Trade accounts receivable 2,985,776 2,414,321
Less reserve for bad debts (105,589) (99,690)
---------- ----------
$2,880,187 $2,314,631
========== ==========
</TABLE>
Note 3. Fixed Assets
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
----------------- -----------------
<S> <C> <C>
Land and land improvements 4,478,982 4,478,982
Buildings and recreational facilities 17,674,581 17,129,142
Furnishings and equipment 7,244,029 5,614,055
Construction in progress 1,082,176 1,766,654
----------- -----------
30,479,768 28,988,833
Less accumulated depreciation (8,018,707) (7,439,614)
---------- -----------
$22,461,061 $21,549,219
=========== ===========
</TABLE>
6
<PAGE> 7
Note 4. Intangible assets and deferred charges
<TABLE>
<CAPTION>
June 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 451,814 424,014
---------- ----------
1,993,391 1,965,591
Less accumulated amortization (1,703,918) (1,661,516)
---------- -----------
$ 289,473 $ 304,075
========== ==========
</TABLE>
Note 5. Notes Payable
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
----------------- -----------------
<S> <C> <C>
Note payable to bank, variable rate currently 8.125% 14,862,500 15,651,000
Note payable to bank, variable rate currently 8.125% 305,800 323,800
Line of credit at bank, variable rate currently 8.125% 3,220,120 1,383,008
Line of credit at bank, variable rate currently 10% 500,000 --
Capital leases 59,350 86,261
----------- -----------
18,947,770 17,444,069
Less current portion (1,498,464) (1,231,547)
----------- -----------
$17,449,306 $16,212,522
=========== ===========
</TABLE>
The Registrant is also currently the guarantor of amounts that are owed by its
sole shareholder and an affiliated company of $500,000 and $737,500,
respectively.
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>
June 30, December 31,
1995 1994
----------------- -----------------
<S> <C> <C>
Assets
Receivable from Saddlebrook Resorts, Inc. $1,459,915 $1,267,078
========== ==========
Liabilities and Participants' Fund Balance
Due to participants $1,194,560 $1,042,311
Due to maintenance escrow fund 265,355 224,767
Participants' fund balance -- --
---------- ----------
$1,459,915 $1,267,078
========== ==========
</TABLE>
MAINTENANCE ESCROW FUND
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
----------------- -----------------
<S> <C> <C>
Assets
Cash and cash equivalents $ 70,976 $ 101,335
Investments 782,055 782,055
Receivables:
Distribution fund 265,355 224,767
Interest 5,122 9,106
Prepaid maintenance 212,458 69,317
---------- ---------
$1,335,966 $1,186,580
========== ==========
Liabilities and Participants' Fund Balance
Accounts payable $ 205,216 $ 187,224
Participants' fund balance 1,130,750 999,356
---------- ----------
$1,335,966 $1,186,580
========== ==========
</TABLE>
8
<PAGE> 9
SADDLEBROOK RENTAL POOL OPERATION
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------------ ------------------------------
1995 1994 1995 1994
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Rental pool revenue $3,551,001 $2,930,633 $8,869,539 $7,182,214
---------- ---------- ---------- ----------
Deductions:
Marketing expense 266,325 219,797 665,215 538,666
Management expense 443,875 366,329 1,108,692 897,777
Travel agent commissions 141,859 96,379 424,042 290,139
Credit card expense 44,364 41,522 93,854 79,365
---------- ---------- ---------- ----------
896,423 724,027 2,291,803 1,805,947
---------- ---------- ---------- ----------
Net rental income 2,654,578 2,206,606 6,577,736 5,376,267
Less operator share of net rental income (1,194,560) (992,973) (2,959,981) (2,419,320)
Other revenues (expenses):
Complimentary room revenues 32,901 21,991 64,751 52,138
Minor repairs and replacements (33,004) (30,515) (66,354) (57,493)
---------- ---------- ---------- ----------
Amount available for distribution $1,459,915 $1,205,109 $3,616,152 $2,951,592
========== ========== ========== ==========
</TABLE>
9
<PAGE> 10
SADDLEBROOK RENTAL POOL OPERATION
STATEMENTS OF CHANGES IN PARTICIPANTS' FUND BALANCE
(Unaudited)
DISTRIBUTION FUND
<TABLE>
<CAPTION>
Six months ended
June 30,
------------------------------
1995 1994
------------- -------------
<S> <C> <C>
Balance at beginning of period $ -- $ --
Additions:
Amount available for distribution 3,616,152 2,951,592
Reductions:
Amount withheld for maintenance escrow fund (656,171) (532,272)
Amount accrued of paid to participants (2,959,981) (2,419,320)
---------- ----------
Balance at end of period $ -- $ --
========== ==========
</TABLE>
MAINTENANCE ESCROW FUND
<TABLE>
<CAPTION>
Six months ended
June 30,
------------------------------
1995 1994
-------------- -------------
<S> <C> <C>
Balance at beginning of period $ 999,356 $1,048,576
Additions:
Amount withheld from distribution fund 656,171 532,272
Unit owner payments 53,310 42,614
Interest earned 24,267 12,914
Reductions:
Escrow account refunds (324,652) (300,076)
Maintenance charges (166,098) (79,891)
Major unit upgrades (51,577) (216,406)
Linen replacement (60,027) (26,693)
---------- ----------
Balance at end of period $1,130,750 $1,013,310
========== ==========
</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 an improvement in its financial
condition as of June 30, 1995 when compared with its fiscal year-end of
December 31, 1994. The primary effect of this seasonal period was an increase
in cash 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 six months ended June 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 June 30, 1995, this full
line of credit was unrestricted and a draw of $500,000 was 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 June 30, 1995,
$3,220,000 is outstanding 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 increased $1,746,000 or 23% for the second quarter of 1995 when
compared with the same period in 1994. Total revenues increased $3,130,000 or
17% for the first six months of 1995 when compared with the prior year. These
improvements are a result of increases in occupied unit nights, average daily
rates and number of guests in the hotel for the current periods over the same
periods in 1994. Anticipated occupied unit nights for the second half 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 current
volume of business.
Net income for the second quarter of 1995 increased $548,000 from the net
income for the same period in 1994. Net income increased $626,000 or 23% for
the first six months of 1995 when compared with the prior year. These
improvements are primarily due to the increased revenues offset by increased
general costs of operation. Net income also suffered from an increase in
interest expense due to draws for construction expenditures and higher interest
rates for the Registrant's debt which are related to an increase in the prime
lending rate for the current period when compared to the prior year.
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.
11
<PAGE> 12
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
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 June 30, 1995 and 1994 were 57%
and 50%, respectively. The average distributions of net rental income per
participating condominium unit for the same periods were $2,694 and $2,240,
respectively. This increase in average net rental income was primarily due to
the increase 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.
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 six
months ended June 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: August 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<CASH> 2,207,287
<SECURITIES> 782,055
<RECEIVABLES> 2,985,776
<ALLOWANCES> 105,589
<INVENTORY> 1,183,989
<CURRENT-ASSETS> 7,082,963
<PP&E> 30,479,768
<DEPRECIATION> 8,018,707
<TOTAL-ASSETS> 30,232,904
<CURRENT-LIABILITIES> 7,986,193
<BONDS> 0
<COMMON> 100,000
0
0
<OTHER-SE> 1,013,127
<TOTAL-LIABILITY-AND-EQUITY> 30,232,904
<SALES> 22,015,920
<TOTAL-REVENUES> 22,015,920
<CGS> 0
<TOTAL-COSTS> 17,966,378
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 660,851
<INCOME-PRETAX> 3,388,691
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,388,691
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,388,691
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
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