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Previous: REALMARK PROPERTY INVESTORS LIMITED PARTNERSHIP, NT 10-Q, 1997-05-12 |
Next: HARKEN ENERGY CORP, 10-Q, 1997-05-12 |
<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, 1997
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
<TABLE>
<CAPTION>
INDEX
Page
----
<S> <C> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Saddlebrook Resorts, Inc.
Balance Sheets at March 31, 1997 and December 31, 1996 3
Statements of Operations for the three months ended
March 31, 1997 and 1996 4
Statements of Cash Flows for the three months ended
March 31, 1997 and 1996 5
Notes to Financial Statements 6
Saddlebrook Rental Pool Operation
Balance Sheets at March 31, 1997 and December 31, 1996 8
Statements of Operations for the three months ended
March 31, 1997 and 1996 9
Statements of Changes in Participants' Fund Balance for the
three months ended March 31, 1997 and 1996 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>
March 31, December 31,
1997 1996
----------- -----------
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 2,431,373 $ 418,197
Escrowed cash deposits 401,671 216,687
Escrowed short-term investments 99,796 99,796
Accounts receivable, net 8,104,186 3,456,189
Related parties receivable 157,137 276,284
Inventory and supplies 1,447,223 1,459,095
Prepaid expenses and other assets 388,900 375,209
----------- -----------
Total current assets 13,030,286 6,301,457
Escrowed long-term investments 299,431 299,431
Property, buildings and equipment, net 23,124,015 22,720,248
Deferred charges, net 164,072 197,867
----------- -----------
$36,617,804 $29,519,003
=========== ===========
Liabilities and Shareholders' Equity
Current liabilities:
Current portion of notes payable $ 950,000 $ 950,000
Escrowed deposits 800,898 615,914
Accounts payable 882,516 597,980
Accrued rental distribution 2,727,994 1,443,512
Accrued payroll and related expenses 690,300 908,053
Accrued interest 149,537 146,207
Accrued taxes 285,505 83,372
Guest deposits 892,881 1,090,718
Other liabilities and accrued expenses 875,780 1,023,305
Due to related parties 2,431,038 551,070
----------- -----------
Total current liabilities 10,686,449 7,410,131
Notes payable due after one year 18,616,920 18,616,920
----------- -----------
Total liabilities 29,303,369 26,027,051
----------- -----------
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 6,201,308 2,378,825
----------- -----------
Total shareholders' equity 7,314,435 3,491,952
----------- -----------
$36,617,804 $29,519,003
=========== ===========
</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
March 31,
-----------------------------
1997 1996
----------- -----------
<S> <C> <C>
Revenues $15,431,844 $12,340,859
----------- -----------
Costs and expenses:
Operating costs 8,893,226 7,334,899
Sales and marketing 962,386 841,162
General and administrative 957,939 960,688
Depreciation and amortization 362,585 340,553
Interest 418,493 420,547
----------- -----------
Total costs and expenses 11,594,629 9,897,849
----------- -----------
Net income 3,837,215 2,443,010
Distribution to shareholder (14,732) (11,763)
Accumulated earnings at beginning of period 2,378,825 1,785,182
----------- -----------
Accumulated earnings at end of period $ 6,201,308 $ 4,216,429
=========== ===========
</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>
Three months ended
March 31,
-----------------------------
1997 1996
----------- -----------
<S> <C> <C>
Operating activities:
Net income $ 3,837,215 $ 2,443,010
Non-cash items included in net income:
Provision for doubtful accounts 12,300 9,300
Loss (gain) on sale of assets - (1,081)
Depreciation and amortization 362,585 340,553
Decrease (increase) in:
Accounts receivable (4,660,297) (1,817,398)
Inventory and supplies 11,872 80,771
Prepaid expenses and other assets (13,691) 106,946
Increase (decrease) in:
Accounts payable 284,536 (515,527)
Accrued expenses and other liabilities 926,830 732,522
Net payable to related parties 1,999,115 205,405
----------- -----------
2,760,465 1,584,501
----------- -----------
Investing activities:
Proceeds from sale of assets - 2,581
Capital expenditures (732,557) (249,692)
----------- ------------
(732,557) (247,111)
----------- ------------
Financing activities:
Notes payable borrowings - 1,540,000
Payments on notes payable - (511,123)
Financing costs - (29,992)
Distribution to shareholders (14,732) (11,763)
----------- -----------
(14,732) 987,122
----------- -----------
Net increase in cash 2,013,176 2,324,512
Cash at beginning of period 418,197 40,702
----------- -----------
Cash at end of period $ 2,431,373 $ 2,365,214
=========== ===========
Supplemental disclosure:
Cash paid for interest $ 430,810 $ 418,949
=========== ===========
</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, 1996.
<TABLE>
<CAPTION>
Note 2. Accounts Receivable
March 31, December 31,
1997 1996
----------- -----------
<S> <C> <C>
Trade accounts receivable $ 8,213,034 $ 3,552,737
Less reserve for bad debts (108,848) (96,548)
----------- -----------
$ 8,104,186 $ 3,456,189
=========== ===========
Note 3. Fixed Assets
March 31, December 31,
1997 1996
----------- -----------
Land and land improvements $ 4,591,278 $ 4,591,278
Buildings and recreational facilities 19,564,552 19,563,084
Furnishings and equipment 7,653,310 7,600,876
Construction in progress 1,192,562 513,907
----------- -----------
33,001,702 32,269,145
Less accumulated depreciation (9,877,687) (9,548,897)
----------- -----------
$23,124,015 $22,720,248
=========== ===========
</TABLE>
-6-
<PAGE> 7
<TABLE>
<CAPTION>
Note 4. Deferred Charges
March 31, December 31,
1997 1996
----------- -----------
<S> <C> <C>
Debt issue costs $ 532,603 $ 532,603
Less accumulated amortization (368,531) (334,736)
----------- -----------
$ 164,072 $ 197,867
=========== ===========
Note 5. Notes Payable
March 31, December 31,
1997 1996
----------- -----------
Note payable to bank, variable rate currently 8.875% $19,566,920 $19,566,920
Less current portion (950,000) (950,000)
----------- -----------
$18,616,920 $18,616,920
=========== ===========
</TABLE>
The Registrant is also the guarantor of amounts that are owed by its majority
shareholder and an affiliated company of $270,000 and $679,000, respectively,
at March 31, 1997.
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>
March 31, December 31,
1997 1996
---------- -----------
<S> <C> <C>
Assets
Receivable from Saddlebrook Resorts, Inc $2,549,709 $1,381,418
========== ==========
Liabilities and Participants' Fund Balance
Due to participants $2,075,563 $1,132,612
Due to maintenance escrow fund 474,146 248,806
Participants' fund balance -- --
---------- ----------
$2,549,709 $1,381,418
========== ==========
</TABLE>
MAINTENANCE ESCROW FUND
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
---------- ----------
<S> <C> <C>
Assets
Cash and cash equivalents $ 386,621 $ 194,287
Investments 399,227 399,227
Receivables:
Distribution fund 474,146 248,806
Interest 2,534 5,606
Prepaid maintenance 335,285 335,381
---------- ----------
$1,597,813 $1,183,307
========== ==========
Liabilities and Participants' Fund Balance
Accounts payable $ 58,854 $ 36,998
Participants' fund balance 1,538,959 1,146,309
---------- ----------
$1,597,813 $1,183,307
========== ==========
</TABLE>
-8-
<PAGE> 9
SADDLEBROOK RENTAL POOL OPERATION
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended
March 31,
-----------------------------
1997 1996
----------- -----------
<S> <C> <C>
Rental pool revenue $ 6,168,240 $ 4,760,070
----------- -----------
Deductions:
Marketing expense 462,618 357,005
Management expense 771,030 595,009
Travel agent commissions 262,325 217,009
Credit card expense 56,904 34,783
Bad debt expense 3,000 -
----------- -----------
1,555,877 1,203,806
----------- -----------
Net rental income 4,612,363 3,556,264
Less operator share of net rental income (2,075,563) (1,600,319)
Other revenues (expenses):
Complimentary room revenues 43,862 30,267
Minor repairs and replacements (30,953) (33,560)
----------- -----------
Amount available for distribution $ 2,549,709 $ 1,952,652
=========== ===========
</TABLE>
-9-
<PAGE> 10
SADDLEBROOK RENTAL POOL OPERATION
STATEMENTS OF CHANGES IN PARTICIPANTS' FUND BALANCE
(Unaudited)
DISTRIBUTION FUND
<TABLE>
<CAPTION>
Three months ended
March 31,
-----------------------------
1997 1996
----------- -----------
<S> <C> <C>
Balance at beginning of period $ -- $ --
Additions:
Amount available for distribution 2,549,709 1,952,652
Reductions:
Amount withheld for maintenance escrow fund (2,075,563) (352,333)
Amount accrued or paid to participants (474,146) (1,600,319)
----------- -----------
Balance at end of period $ -- $ --
=========== ===========
</TABLE>
MAINTENANCE ESCROW FUND
<TABLE>
<CAPTION>
Three months ended
March 31,
-----------------------------
1997 1996
----------- -----------
<S> <C> <C>
Balance at beginning of period $ 1,146,309 $ 1,017,769
Additions:
Amount withheld from distribution fund 474,146 352,333
Unit owner payments 36,625 34,570
Interest earned 7,821 11,252
Reductions:
Escrow account refunds (26,448) (23,966)
Maintenance charges (23,239) (48,181)
Unit renovations (42,132) (6,390)
Linen replacement (34,123) (16,600)
----------- -----------
Balance at end of period $ 1,538,959 $ 1,320,787
=========== ===========
</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 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, 1997 when compared with its fiscal year-end of
December 31, 1996. The primary effect of this seasonal period was an increase
in cash, accounts receivable and accumulated earnings.
The Registrant constructed a new fitness center in 1996 and is completing an
upgrade of the previous fitness center area into a luxury spa at a total
projected aggregate cost of $1,100,000. Several other minor capital
improvements have been performed. However, there were no other major capital
additions or improvements during the three months ended March 31, 1997. 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 March 31, 1997, this full
line of credit was unrestricted, and no draws were outstanding (see Note 5.
Notes Payable of the Notes to 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 $3,091,000 or 25% for the first quarter of 1997 when
compared with the same period in 1996. This was a result of increases 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 1997 are expected to
slightly exceed the prior year's level. Projections for occupied unit nights in
1998 and subsequent fiscal periods are expected to remain at the resort's
current volume of business.
Net income for the first quarter of 1997 increased $1,394,000 or 57% over the
same period in 1996. This improvement is a direct result of the increase in
revenue which was partially offset by increases in general costs of operations.
Due to the seasonal business of the Registrant, the results of operations for
the interim period 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 March 31, 1997 and 1996 were 74%
and 54%, respectively. The average distributions of net rental income per
participating condominium unit for the same periods were $4,661 and $3,583,
respectively. This increase in average net rental income was primarily due to
the increases in average occupancy and average daily rate.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
PORTER, ET AL V. SADDLEBROOK RESORTS, INC. Circuit Court for the Sixth
Judicial Circuit, in and for Pasco County, Florida, Case no: 83-1860.
On May 12, 1989, a judgment was entered 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 October 16, 1990, the Registrant filed a Motion for Relief from Judgment,
which sought a new trial on the ground that newly-discovered evidence
established that the jury's verdict was based upon false testimony by one of
the plaintiffs' trial experts. On December 18, 1990, the trial court entered an
order granting the Registrant's Motion for Relief from Judgment and awarding a
new trial.
On March 18, 1992, the Second District Court of Appeal reversed the judgment
against the Registrant due to other legal errors in the trial. The appeals
court let stand the trial court's grant of a new trial on the false testimony.
On December 22, 1993, the Registrant filed a Motion for Summary Judgment in the
trial court on the grounds that the findings in its favor by an administrative
law judge in a related proceeding barred further litigation of this matter. The
trial court entered an Order Granting Summary Judgment and dismissed the action
on January 7, 1995. On August 16, 1996, the Florida Second District Court of
Appeal filed an opinion affirming in part, and reversing in part, the Summary
Judgment and remanding the case to the trial court for a determination of
whether the complaint remains viable. Management believes that the Registrant's
position in further litigation would be meritorious.
-12-
<PAGE> 13
Item 1. Legal Proceedings (continued)
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.
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, 1997.
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 12, 1997 /s/ Donald L. Allen
------------ --------------------------------
Donald L. Allen
Vice President and Treasurer
(Principal Financial and
Accounting Officer)
-13-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<EXCHANGE-RATE> 1
<CASH> 2,431,373
<SECURITIES> 399,227
<RECEIVABLES> 8,213,034
<ALLOWANCES> 108,848
<INVENTORY> 1,447,223
<CURRENT-ASSETS> 13,030,286
<PP&E> 33,001,702
<DEPRECIATION> 9,877,687
<TOTAL-ASSETS> 36,617,804
<CURRENT-LIABILITIES> 10,686,449
<BONDS> 0
0
0
<COMMON> 100,000
<OTHER-SE> 1,013,127
<TOTAL-LIABILITY-AND-EQUITY> 36,617,804
<SALES> 15,431,844
<TOTAL-REVENUES> 15,431,844
<CGS> 0
<TOTAL-COSTS> 11,176,136
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 418,493
<INCOME-PRETAX> 3,837,215
<INCOME-TAX> 0
<INCOME-CONTINUING> 3,837,215
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,837,215
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
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