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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 2000
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.
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(Exact name of registrant as specified in its charter)
Florida 59-1917822
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(State of incorporation) (IRS employer identification no.)
5700 Saddlebrook Way, Wesley Chapel, Florida 33543-4499
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(Address of principal executive offices)
813-973-1111
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(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
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INDEX
Page
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Saddlebrook Resorts, Inc.
Balance Sheets at March 31, 2000 and December 31, 1999 3
Statements of Operations for the three months ended
March 31, 2000 and 1999 4
Statements of Cash Flows for the three months ended
March 31, 2000 and 1999 5
Notes to Financial Statements 6
Saddlebrook Rental Pool Operation
Balance Sheets at March 31, 2000 and December 31, 1999 8
Statements of Operations for the three months ended
March 31, 2000 and 1999 9
Statements of Changes in Participants' Fund Balance for the
three months ended March 31, 2000 and 1999 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 6. Exhibits and Reports on Form 8-K 13
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SADDLEBROOK RESORTS, INC.
BALANCE SHEETS
March 31,
2000 December 31,
(Unaudited) 1999
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Assets
Current assets:
Cash and cash equivalents $ 7,916,294 $ 5,551,280
Escrowed cash 113,496 372,104
Short-term escrowed investments 195,251 195,251
Accounts receivable, net 4,987,259 2,874,562
Due from related parties 402,979 531,179
Inventory and supplies 1,787,055 1,832,538
Prepaid expenses and other assets 581,338 550,830
----------- -----------
Total current assets 15,983,672 11,907,744
Long-term escrowed investments 398,553 398,553
Property, buildings and equipment, net 25,560,636 24,930,026
Deferred charges, net 527,101 537,046
----------- -----------
$42,469,962 $37,773,369
=========== ===========
Liabilities and Shareholder's Equity
Current liabilities:
Current portion of notes payable $ 1,119,404 $ 1,097,965
Escrowed deposits 707,300 965,908
Accounts payable 1,741,035 1,515,163
Accrued rental distribution 2,588,501 1,431,301
Accrued payroll and related expenses 1,135,931 770,608
Guest deposits 1,531,187 1,909,517
Accrued expenses and other liabilities 1,323,209 2,151,329
Due to related parties 726,091 441,318
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Total current liabilities 10,872,658 10,283,109
Notes payable due after one year 23,241,583 23,529,604
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Total liabilities 34,114,241 33,812,713
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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 7,242,594 2,847,529
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Total shareholder's equity 8,355,721 3,960,656
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$42,469,962 $37,773,369
=========== ===========
The accompanying Notes to Financial Statements are
an integral part of these financial statements
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SADDLEBROOK RESORTS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
March 31,
----------------------------
2000 1999
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Resort revenues $17,336,070 $16,534,084
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Costs and expenses:
Operating costs 9,828,374 9,439,298
Sales and marketing 1,060,988 920,504
General and administrative 1,104,203 1,052,278
Depreciation and amortization 492,851 376,424
Interest 454,589 467,113
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Total costs and expenses 12,941,005 12,255,617
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Net income 4,395,065 4,278,467
Accumulated earnings at beginning of period 2,847,529 4,311,962
----------- -----------
Accumulated earnings at end of period $ 7,242,594 $ 8,590,429
=========== ===========
The accompanying Notes to Financial Statements are
an integral part of these financial statements
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SADDLEBROOK RESORTS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
Three months ended
March 31,
------------------------------
2000 1999
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Operating activities:
Net income $ 4,395,065 $ 4,278,467
Non-cash items included in net income:
Provision for doubtful accounts 12,360 18,485
Depreciation and amortization 492,851 376,424
(Gain) on sale of assets -- (1,274)
Decrease (increase) in:
Accounts receivable (2,125,057) (697,397)
Inventory and supplies 45,483 (27,710)
Prepaid expenses and other assets (30,508) (43,848)
Increase (decrease) in:
Accounts payable 225,872 (304,702)
Accrued expenses and other liabilities 316,073 1,193,428
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3,332,139 4,791,873
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Investing activities:
Proceeds from sale of assets -- 1,274
Capital expenditures (1,113,516) (659,708)
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(1,113,516) (658,434)
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Financing activities:
Payments on notes payable (266,582) (242,065)
Financing costs -- (12,099)
Advances from (to) related parties 412,973 (545,606)
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146,391 (799,770)
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Net increase in cash 2,365,014 3,333,669
Cash at beginning of period 5,551,280 8,604,005
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Cash at end of period $ 7,916,294 $ 11,937,674
=========== ============
Supplemental disclosure:
Cash paid for interest $ 473,079 $ 489,898
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
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SADDLEBROOK RESORTS, INC.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1. Basis of Presentation
The accompanying balance sheet for March 31, 2000, and statements of operations
and cash flows for the periods ended March 31, 2000 and 1999, 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, 1999.
Note 2. Accounts Receivable
March 31, December 31,
2000 1999
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Trade accounts receivable $ 5,163,480 $ 3,038,561
Less reserve for bad debts (176,221) (163,999)
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$ 4,987,259 $ 2,874,562
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Note 3. Property, Buildings and Equipment
March 31, December 31,
2000 1999
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Land and land improvements $ 4,412,745 $ 4,412,745
Buildings and recreational facilities 21,417,781 21,407,692
Machinery and equipment 11,325,297 11,173,064
Construction in progress 2,079,479 1,128,285
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39,235,302 38,121,786
Less accumulated depreciation (13,674,666) (13,191,760)
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$25,560,636 $24,930,026
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The Registrant's property, buildings and equipment are pledged as security for
its debt (see Note 5).
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Note 4. Deferred Charges
March 31, December 31,
2000 1999
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Debt issue costs $ 596,716 $ 596,716
Less accumulated amortization (69,615) (59,670)
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$ 527,101 $ 537,046
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Note 5. Notes Payable
March 31, December 31,
2000 1999
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Note payable due June 30, 2013 $24,271,444 $24,532,820
Capital lease obligation 89,543 94,749
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24,360,987 24,627,569
Less current portion (1,119,404) (1,097,965)
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$23,241,583 $23,529,604
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The Registrant's financing from a third-party lender has an annual interest
rate fixed at 7.7% and monthly payments for principal and interest of $243,988.
The debt is secured by the Registrant's real and personal property.
An additional $5,000,000 is available from the same lender if certain financial
covenants are met. If received by the Registrant, the additional financing
would be due on June 30, 2013.
Note 6. Income Taxes
The Registrant previously elected S Corporation status and is currently a
member of a Qualified Subchapter S Subsidiary Group. Accordingly, the
Registrant has had no income tax expense since the initial election as the tax
is assessed at the shareholder level.
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SADDLEBROOK RENTAL POOL OPERATION
BALANCE SHEETS
DISTRIBUTION FUND
March 31,
2000 December 31,
(Unaudited) 1999
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Assets
Receivable from Saddlebrook Resorts, Inc. $ 2,528,328 $ 1,354,525
=========== ===========
Liabilities and Participants' Fund Balance
Due to participants for rental pool distribution $ 2,063,451 $ 1,108,663
Due to maintenance escrow fund 464,877 245,862
Participants' fund balance - -
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$ 2,528,328 $ 1,354,525
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MAINTENANCE ESCROW FUND
March 31,
2000 December 31,
(Unaudited) 1999
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Assets
Cash and cash equivalents $ 96,421 $ 353,829
Investments 593,804 593,804
Receivables:
Distribution fund 464,877 245,862
Interest 11,053 8,180
Linen inventory 205,790 222,188
Prepaid maintenance costs 277,090 636,669
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$ 1,649,035 $ 2,060,532
=========== ===========
Liabilities and Participants' Fund Balance
Accounts payable $ 301,825 $ 340,730
Participants' fund balance 1,347,210 1,719,802
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$ 1,649,035 $ 2,060,532
=========== ===========
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<PAGE> 9
SADDLEBROOK RENTAL POOL OPERATION
STATEMENTS OF OPERATIONS
(Unaudited)
Three months ended
March 31,
---------------------------
2000 1999
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Rental pool revenue $ 6,206,699 $ 6,300,403
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Deductions:
Marketing expense 465,502 472,530
Management expense 775,837 787,550
Travel agent commissions 308,445 285,295
Credit card expense 71,468 72,697
Bad debt expense - 9,000
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1,621,252 1,627,072
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Net rental income 4,585,447 4,673,331
Less operator share of net rental income (2,063,451) (2,102,999)
Other revenues (expenses):
Complimentary room revenues 33,035 19,743
Minor repairs and replacements (26,703) (30,616)
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Amount available for distribution $ 2,528,328 $ 2,559,459
=========== ===========
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<PAGE> 10
SADDLEBROOK RENTAL POOL OPERATION
STATEMENTS OF CHANGES IN PARTICIPANTS' FUND BALANCE
(Unaudited)
DISTRIBUTION FUND
Three months ended
March 31,
---------------------------
2000 1999
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Balance at beginning of period $ - $ -
Additions:
Amount available for distribution 2,528,328 2,559,459
Reductions:
Amount withheld for maintenance escrow fund (464,877) (456,460)
Amount accrued or paid to participants (2,063,451) (2,102,999)
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Balance at end of period $ - $ -
=========== ===========
MAINTENANCE ESCROW FUND
Three months ended
March 31,
---------------------------
2000 1999
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Balance at beginning of period $ 1,719,802 $ 2,440,102
Additions:
Amount withheld from distribution fund 464,877 456,460
Unit owner payments 79,650 39,865
Interest earned 9,406 21,208
Reductions:
Escrow account refunds (24,294) (138,307)
Maintenance charges (47,893) (60,049)
Unit renovations (818,171) (271,273)
Linen replacement (36,167) (36,832)
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Balance at end of period $ 1,347,210 $ 2,451,174
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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 in the first quarter of each calendar year. Accordingly, the
Registrant's experienced an improvement in its financial condition as of March
31, 2000 when compared with its fiscal year-end of December 31, 1999. The
primary effect of this seasonal period was an increase in cash, accounts
receivable and accumulated earnings.
The Registrant's loan agreement for its existing debt provides for an
additional $5,000,000 from the same lender if certain financial covenants are
met (see Note 5. Note 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 completed construction on a facility which expands its group
function space by 18,000 square feet, at an approximate cost of $1,900,000.
There were no other significant capital additions or improvements during the
three months ended March 31, 2000. No major capital projects are anticipated in
the remaining fiscal period. Future operating costs and planned expenditures
for capital additions and improvements should be funded by the Registrant's
current cash reserves, cash generated by resort operations or by additional
funds, if available, from it's current lender discussed above.
Management is aware of the issues associated with the programming code in
computer systems related to the new millennium (year 2000). The Registrant's
systems for property management and financial accounting had been in use for
many years which necessitated an upgrading to the current technological
standards for its industry. Consequently, the Registrant replaced its hardware
and software for both systems in 1998 at an aggregate cost of approximately
$395,000. Based on testing of the new computer systems and their performance
to-date, management anticipates that they are year 2000-compliant and the
effects of the new millennium on the Registrant's operations will be minimal.
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<PAGE> 12
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
Results of Operations
Total revenues increased $802,000 or 5% for the first quarter of 2000 when
compared with the same period in 1999. This improvement resulted from a higher
average daily room rate, which offset slightly fewer occupied unit nights and
numbers of guests in the resort, for the current period when compared to the
same period in 1999. Anticipated occupied unit nights for the remainder of 2000
are expected to approximate the prior year's level. Projections for occupied
unit nights in the year 2001 and subsequent fiscal periods are expected to
remain at the resort's current volume of business.
Net income for the first quarter of 2000 increased $117,000 or 3% from the net
income for the same period in 1999. This increase was a direct result of the
higher revenues partially offset by expected increases in the general operating
costs of the resort.
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 their full fiscal year.
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 a distribution of a percentage of
net rental income to participating condominium owners. Net rental income is
calculated and distributed according to the provisions of a Rental Pool and
Agency Appointment Agreement. The level of the Registrant's occupancy and
related average daily room rate directly impacts revenues and expenses used to
determine the distribution.
The average occupancies for the quarters ended March 31, 2000 and 1999 were 64%
and 66%, respectively. The average distributions of net rental income per
participating condominium unit for the same periods were $4,613 and $4,654,
respectively. The slight decrease in the average distribution of net rental
income was primarily due to the lower occupancy for rental units, which
decreased the total amount available for distribution for the current quarter
when compared to the same period the prior year.
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<PAGE> 13
Item 6. Exhibits and Reports on Form 8-K
(a) 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, 2000.
SIGNATURE
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, 2000 /s/ Donald L. Allen
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Donald L. Allen
Vice President and Treasurer
(Principal Financial and
Accounting Officer)
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