<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 March 31, 1996
--------------
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
----
PART I - FINANCIAL INFORMATION
<S> <C>
Item 1. Financial Statements
Saddlebrook Resorts, Inc.
Balance Sheets at March 31, 1996 and December 31, 1995 3
Statements of Operations for the three months ended
March 31, 1996 and 1995 4
Statements of Cash Flows for the three months ended
March 31, 1996 and 1995 5
Notes to Financial Statements 6
Saddlebrook Rental Pool Operation
Balance Sheets at March 31, 1996 and December 31, 1995 8
Statements of Operations for the three months ended
March 31, 1996 and 1995 9
Statements of Changes in Participants' Fund Balance for the
three months ended March 31, 1996 and 1995 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>
<PAGE> 3
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SADDLEBROOK RESORTS, INC.
BALANCE SHEETS
(Unaudited)
<TABLE>
March 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,365,214 $ 40,702
Escrowed cash deposits 195,166 106,096
Escrowed short-term investments 399,635 399,635
Accounts receivable, net 5,157,877 3,349,779
Related parties receivable 35,452 114,004
Inventory and supplies 1,391,918 1,472,689
Prepaid expenses and other assets 419,478 526,424
------------ ------------
Total current assets 9,964,740 6,009,329
Escrowed long-term investments 299,500 299,500
Property, buildings and equipment, net 22,517,008 22,580,998
Intangible assets and deferred charges, net 269,328 266,702
------------ ------------
$ 33,050,576 $ 29,156,529
============ ============
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of notes payable $ 975,599 $ 1,486,722
Escrowed deposits 894,301 805,231
Accounts payable 809,738 1,325,265
Accrued rental distribution 2,050,497 1,037,865
Accrued payroll and related expenses 604,578 743,077
Accrued interest 150,480 141,491
Accrued taxes 189,750 43,178
Guest deposits 424,571 798,444
Other liabilities and accrued expenses 754,272 676,566
Due to related parties 2,050,314 1,923,461
------------ ------------
Total current liabilities 8,904,100 8,981,300
Notes payable due after one year 18,816,920 17,276,920
------------ ------------
Total liabilities 27,721,020 26,258,220
------------ ------------
Shareholders' 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 4,216,429 1,785,182
------------ ------------
Total shareholders' equity 5,329,556 2,898,309
------------ ------------
$ 33,050,576 $ 29,156,529
============ ============
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
<PAGE> 4
SADDLEBROOK RESORTS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
---------------------------
1996 1995
------------ ------------
<S> <C> <C>
Revenues $ 12,340,859 $ 12,569,161
------------ ------------
Costs and expenses:
Operating costs 7,334,899 7,529,931
Sales and marketing 841,162 793,315
General and administrative 960,688 886,865
Depreciation and amortization 340,553 293,493
Interest 420,547 325,684
------------ ------------
Total costs and expenses 9,897,849 9,829,288
------------ ------------
Net income 2,443,010 2,739,873
Distribution to shareholder (11,763) (309,682)
Accumulated earnings at beginning of period 1,785,182 1,693,042
------------ ------------
Accumulated earnings at end of period $ 4,216,429 $ 4,123,233
============ ============
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
<PAGE> 5
SADDLEBROOK RESORTS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------------
1996 1995
----------- -----------
<S> <C> <C>
Operating activities:
Net income $2,443,010 $2,739,873
Non-cash items included in net income:
Provision for doubtful accounts 9,300 6,200
Gain on sale of assets (1,081) --
Depreciation and amortization 340,553 293,493
(Increase) decrease in:
Accounts receivable (1,817,398) (2,903,907)
Inventory and supplies 80,771 63,676
Prepaid expenses and other assets 106,946 38,697
Increase (decrease) in:
Accounts payable (515,527) (168,044)
Accrued expenses 732,522 314,889
Net payable to related parties 205,405 316,034
----------- -----------
1,584,501 700,911
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Investing activities:
Proceeds from sale of assets 2,581 --
Capital expenditures (249,692) (877,828)
----------- -----------
(247,111) (877,828)
----------- -----------
Financing activities:
Notes payable borrowings 1,540,000 500,000
Payments on notes payable (511,123) (71,268)
Financing costs (29,992) --
Distribution to shareholder (11,763) (309,682)
----------- -----------
987,122 119,050
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Net increase (decrease) in cash 2,324,512 (57,867)
Cash at beginning of period 40,702 595,502
----------- -----------
Cash at end of period $ 2,365,214 $ 537,635
=========== ===========
Cash paid for interest $ 418,949 $ 357,366
=========== ===========
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
<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, 1995.
Note 2. Accounts Receivable
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Trade accounts receivable $ 5,289,425 $ 3,472,755
Less reserve for bad debts (131,548) (122,976)
------------ ------------
$ 5,157,877 $ 3,349,779
============ ============
</TABLE>
Note 3. Fixed Assets
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
------------ ------------
<S> <C> <C>
Land and land improvements $ 4,477,482 $ 4,478,982
Buildings and recreational facilities 18,854,453 18,862,973
Furnishings and equipment 7,605,852 7,587,232
Construction in progress 511,071 300,308
------------ ------------
31,448,858 31,229,495
Less accumulated depreciation (8,931,850) (8,648,497)
------------ ------------
$ 22,517,008 $ 22,580,998
============ ============
</TABLE>
<PAGE> 7
Note 4. Intangible Assets and Deferred Charges
<TABLE>
<CAPTION>
March 31, December 31,
1996 1995
----------- -----------
<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 509,164 479,172
----------- -----------
2,050,741 2,020,749
Less accumulated amortization (1,781,413) (1,754,047)
----------- -----------
$ 269,328 $ 266,702
=========== ===========
</TABLE>
Note 5. Notes Payable
<TABLE>
<CAPTION>
March 31, December 31,
1995 1995
------------ ------------
<S> <C> <C>
Note payable to bank, variable rate currently 8.75% $ 19,766,920 $ 18,226,920
Line of credit payable to bank -- 500,000
Capital leases 25,599 36,722
------------ ------------
19,792,519 18,763,642
Less current portion (975,599) (1,486,722)
------------ ------------
$ 18,816,920 $ 17,276,920
============ ============
</TABLE>
The Registrant is also the guarantor of amounts that are owed by its majority
shareholder and an affiliated company of $470,000 and $729,000, respectively,
at March 31, 1996.
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.
<PAGE> 8
SADDLEBROOK RENTAL POOL OPERATION
BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
DISTRIBUTION FUND
March 31, December 31,
1996 1995
----------- -----------
<S> <C> <C>
Assets
Receivable from Saddlebrook Resorts, Inc. $ 1,952,652 $ 1,017,332
=========== ===========
Liabilities and Participants' Fund Balance
Due to participants $ 1,600,319 $ 832,926
Due to maintenance escrow fund 352,333 184,406
Participants' fund balance -- --
----------- -----------
$ 1,952,652 $ 1,017,332
=========== ===========
MAINTENANCE ESCROW FUND
<CAPTION>
March 31, December 31,
1996 1995
----------- -----------
<S> <C> <C>
Assets
Cash and cash equivalents $ 168,666 $ 76,314
Investments 699,135 699,135
Receivables:
Distribution fund 352,333 184,406
Interest 1,885 8,633
Prepaid maintenance 146,435 146,932
----------- -----------
$ 1,368,454 $ 1,115,420
=========== ===========
Liabilities and Participants' Fund Balance
Accounts payable $ 47,667 $ 97,651
Participants' fund balance 1,320,787 1,017,769
----------- -----------
$ 1,368,454 $ 1,115,420
=========== ===========
</TABLE>
<PAGE> 9
SADDLEBROOK RENTAL POOL OPERATION
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
-------------------------
1996 1995
----------- -----------
<S> <C> <C>
Rental pool revenue $ 4,760,070 $ 5,318,538
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Deductions:
Marketing expense 357,005 398,890
Management expense 595,009 664,817
Travel agent commissions 217,009 282,183
Credit card expense 34,783 49,490
----------- -----------
1,203,806 1,395,380
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Net rental income 3,556,264 3,923,158
Less operator share of net rental income (1,600,319) (1,765,421)
Other revenues (expenses):
Complimentary room revenues 30,267 31,850
Minor repairs and replacements (33,560) (33,350)
----------- -----------
Amount available for distribution $ 1,952,652 $ 2,156,237
=========== ===========
</TABLE>
<PAGE> 10
SADDLEBROOK RENTAL POOL OPERATION
STATEMENTS OF CHANGES IN PARTICIPANTS' FUND BALANCE
(Unaudited)
DISTRIBUTION FUND
<TABLE>
<CAPTION>
Three months ended
March 31,
--------------------------------
1996 1995
----------- -----------
<S> <C> <C>
Balance at beginning of period $ -- $ --
Additions:
Amount available for distribution 1,952,652 2,156,237
Reductions:
Amount withheld for maintenance escrow fund (352,333) (390,816)
Amount accrued or paid to participants (1,600,319) (1,765,421)
----------- -----------
Balance at end of period $ -- $ --
=========== ===========
MAINTENANCE ESCROW FUND
Three months ended
March 31,
--------------------------------
1996 1995
----------- -----------
<S> <C> <C>
Balance at beginning of period $ 1,017,769 $ 999,356
Additions:
Amount withheld from distribution fund 352,333 390,816
Unit owner payments 34,570 25,519
Interest earned 11,252 11,936
Reductions:
Escrow account refunds (23,966) (182,245)
Maintenance charges (48,181) (87,904)
Major unit upgrades (6,390) (22,600)
Linen replacement (16,600) (31,651)
----------- -----------
Balance at end of period $ 1,320,787 $ 1,103,227
=========== ===========
</TABLE>
<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 second and fourth
quarters have historically had marginal financial performance and the third
quarter has historically had the lowest volume of sales of the fiscal period.
Accordingly, the Registrant experienced an improvement in its financial
condition as of March 31, 1996 when compared with its fiscal year-end of
December 31, 1995. The primary effect of this seasonal period was an increase in
cash, accounts receivable and accumulated earnings.
Several minor capital improvements have been performed. However, there were no
major capital additions or improvements during the three months ended March 31,
1996. No 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 March 31, 1996, 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 March 31, 1996, no draws were
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 decreased $228,000 or 2% for the first quarter of 1996 when
compared with the same period in 1995. This resulted from slight decreases in
occupied unit nights, the average daily rate and the number of guests at the
resort for the current period over the same period the previous year.
Anticipated occupied unit nights for the remainder of 1996 are not expected to
exceed the prior year's level. Projections for occupied unit nights in 1997 and
subsequent fiscal periods are expected to remain at the resort's current volume
of business.
Net income decreased $297,000 or 11% for the first quarter of 1996 when compared
with the same period in 1995. This was a direct result of reduced revenues
combined with increased depreciation and interest expense that are related to
recent capital improvements.
<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 March 31, 1996 and 1995 were 54%
and 56%, respectively. The average distributions of net rental income per
participating condominium unit for the same periods were $3,583 and $3,978,
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 the 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 the Registrant, if required,
to enable the 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 the 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 its 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. The Plaintiff filed an appeal of said order in
the Florida Second District Court of Appeal. Oral argument on said appeal was
heard on February 21, 1996. It is currently not known when the appellate court
will render a decision. 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.
<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
three months ended March 31, 1996.
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: May 13, 1995 /s/ Donald L. Allen
------------ ---------------------------------
Donald L. Allen
Vice President and Treasurer
(Principal Financial and
Accounting Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<EXCHANGE-RATE> 1
<CASH> 2,365,214
<SECURITIES> 699,135
<RECEIVABLES> 5,289,425
<ALLOWANCES> 131,548
<INVENTORY> 1,391,918
<CURRENT-ASSETS> 9,964,740
<PP&E> 31,448,858
<DEPRECIATION> 8,931,850
<TOTAL-ASSETS> 33,050,576
<CURRENT-LIABILITIES> 8,904,100
<BONDS> 0
0
0
<COMMON> 100,000
<OTHER-SE> 1,013,127
<TOTAL-LIABILITY-AND-EQUITY> 33,050,576
<SALES> 12,340,859
<TOTAL-REVENUES> 12,340,859
<CGS> 0
<TOTAL-COSTS> 9,477,302
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 420,547
<INCOME-PRETAX> 2,443,010
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,443,010
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,443,010
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
