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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 June 30, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
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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 12
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INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Saddlebrook Resorts, Inc.
Balance Sheets at June 30, 2000 and December 31, 1999 3
Statements of Operations for the three months and six
months ended June 30, 2000 and 1999 4
Statements of Cash Flows for the six months ended
June 30, 2000 and 1999 5
Notes to Financial Statements 6
Saddlebrook Rental Pool Operation
Balance Sheets at June 30, 2000 and December 31, 1999 8
Statements of Operations for the three months and six
months ended June 30, 2000 and 1999 9
Statements of Changes in Participants' Fund Balance for
the six months ended June 30, 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 12
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PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
SADDLEBROOK RESORTS, INC.
BALANCE SHEETS
June 30,
2000 December 31,
(Unaudited) 1999
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 8,946,967 $ 5,551,280
Escrowed cash 642,490 372,104
Short-term escrowed investments 99,932 195,251
Accounts receivable, net 2,623,275 2,874,562
Due from related parties 707,129 531,179
Inventory and supplies 1,746,294 1,832,538
Prepaid expenses and other assets 422,308 550,830
----------- -----------
Total current assets 15,188,395 11,907,744
Long-term escrowed investments 398,553 398,553
Property, buildings and equipment, net 25,397,964 24,930,026
Deferred charges, net 517,156 537,046
----------- -----------
$41,502,068 $37,773,369
=========== ===========
Liabilities and Shareholder's Equity
Current liabilities:
Current portion of notes payable $ 1,141,262 $ 1,097,965
Escrowed deposits 1,140,975 965,908
Accounts payable 979,478 1,515,163
Accrued rental distribution 1,643,989 1,431,301
Accrued payroll and related expenses 1,004,264 770,608
Guest deposits 1,668,520 1,909,517
Accrued expenses and other liabilities 1,042,211 2,151,329
Due to related parties 532,542 441,318
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Total current liabilities 9,153,241 10,283,109
Notes payable due after one year 22,947,939 23,529,604
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Total liabilities 32,101,180 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 8,287,761 2,847,529
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Total shareholder's equity 9,400,888 3,960,656
----------- -----------
$41,502,068 $37,773,369
=========== ===========
The accompanying Notes to Financial Statements are
an integral part of these financial statements
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<PAGE> 4
SADDLEBROOK RESORTS, INC.
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------ ------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenues $12,408,267 $12,514,675 $29,744,337 $29,048,759
----------- ----------- ----------- -----------
Costs and expenses:
Operating costs 8,282,467 8,255,715 18,110,841 17,695,013
Sales and marketing 907,877 928,261 1,968,865 1,848,765
General and administrative 1,171,315 1,183,978 2,275,518 2,236,256
Depreciation and amortization 524,264 380,904 1,017,115 757,328
Interest 477,177 457,747 931,766 924,860
----------- ----------- ----------- -----------
Total costs and expenses 11,363,100 11,206,605 24,304,105 23,462,222
----------- ----------- ----------- -----------
Net income 1,045,167 1,308,070 5,440,232 5,586,537
Accumulated earnings at
beginning of period 7,242,594 8,590,429 2,847,529 4,311,962
----------- ----------- ----------- -----------
Accumulated earnings at
end of period $ 8,287,761 $ 9,898,499 $ 8,287,761 $ 9,898,499
=========== =========== =========== ===========
</TABLE>
The accompanying Notes to Financial Statements are
an integral part of these financial statements
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<PAGE> 5
SADDLEBROOK RESORTS, INC.
STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six months ended
June 30,
--------------------------
2000 1999
----------- -----------
<S> <C> <C>
Operating activities:
Net income $ 5,440,232 $ 5,586,537
Non-cash items included in net income:
Provision for doubtful accounts 24,720 36,785
Depreciation and amortization 1,017,115 757,328
Loss (gain) on sale of assets (2,132) (1,624)
Decrease (increase) in:
Accounts receivable 226,567 142,052
Inventory and supplies 86,244 33,758
Prepaid expenses and other assets 128,522 (114,980)
Increase (decrease) in:
Accounts payable (535,685) (445,362)
Accrued expenses and other liabilities (904,454) (242,782)
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5,481,129 5,751,712
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Investing activities:
Proceeds from sale of assets 9,000 1,624
Capital expenditures (1,471,348) (1,217,813)
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(1,462,348) (1,216,189)
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Financing activities:
Payments on notes payable (538,368) (487,266)
Financing costs - (15,438)
Advances from (to) related parties (84,726) (3,325,441)
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(623,094) (3,828,145)
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Net increase in cash 3,395,687 707,378
Cash at beginning of period 5,551,280 8,604,005
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Cash at end of period $ 8,946,967 $ 9,311,383
=========== ===========
Supplemental disclosure:
Cash paid for interest $ 940,955 $ 975,106
</TABLE>
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 June 30, 2000, and statements of operations
and cash flows for the periods ended June 30, 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
June 30, December 31,
2000 1999
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Trade accounts receivable $ 2,811,811 $ 3,038,561
Less reserve for bad debts (188,536) (163,999)
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$ 2,623,275 $ 2,874,562
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Note 3. Property, Buildings and Equipment
June 30, December 31,
2000 1999
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Land and land improvements $ 4,412,745 $ 4,412,745
Buildings and recreational facilities 21,585,394 21,407,692
Machinery and equipment 11,394,632 11,173,064
Construction in progress 2,189,875 1,128,285
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39,582,646 38,121,786
Less accumulated depreciation (14,184,682) (13,191,760)
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$ 25,397,964 $ 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
June 30, December 31,
2000 1999
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Debt issue costs $ 596,716 $ 596,716
Less accumulated amortization (79,560) (59,670)
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$ 517,156 $ 537,046
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Note 5. Notes Payable
June 30, December 31,
2000 1999
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Note payable due June 30, 2013 $24,005,004 $24,532,820
Capital lease obligation 84,197 94,749
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24,089,201 24,627,569
Less current portion (1,141,262) (1,097,965)
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$22,947,939 $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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<PAGE> 8
SADDLEBROOK RENTAL POOL OPERATION
BALANCE SHEETS
DISTRIBUTION FUND
<TABLE>
<CAPTION>
June 30,
2000 December 31,
(Unaudited) 1999
------------ ------------
<S> <C> <C>
Assets
Receivable from Saddlebrook Resorts, Inc. $ 1,579,447 $ 1,354,525
=========== ===========
Liabilities and Participants' Fund Balance
Due to participants for rental pool distribution $ 1,302,450 $ 1,108,663
Due to maintenance escrow fund 276,997 245,862
Participants' fund balance - -
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$ 1,579,447 $ 1,354,525
=========== ===========
</TABLE>
MAINTENANCE ESCROW FUND
<TABLE>
<CAPTION>
June 30,
2000 December 31,
(Unaudited) 1999
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<S> <C> <C>
Assets
Cash and cash equivalents $ 630,940 $ 353,829
Investments 498,485 593,804
Receivables:
Distribution fund 276,997 245,862
Interest 7,354 8,180
Linen inventory 215,313 222,188
Prepaid maintenance costs 675,823 636,669
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$ 2,304,912 $ 2,060,532
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Liabilities and Participants' Fund Balance
Accounts payable $ 84,391 $ 340,730
Participants' fund balance 2,220,521 1,719,802
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$ 2,304,912 $ 2,060,532
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</TABLE>
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SADDLEBROOK RENTAL POOL OPERATION
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------------ ------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Rental pool revenues $ 3,898,902 $ 3,966,174 $10,105,601 $10,266,577
----------- ----------- ----------- -----------
Deductions:
Marketing expense 292,418 297,463 757,920 769,993
Management expense 487,363 495,772 1,263,200 1,283,322
Travel agent commissions 169,304 231,460 477,749 516,755
Credit card expense 55,484 50,804 126,952 123,501
Bad debt expense - 9,000 - 18,000
----------- ----------- ----------- -----------
1,004,569 1,084,499 2,625,821 2,711,571
----------- ----------- ----------- -----------
Net rental income 2,894,333 2,881,675 7,479,780 7,555,006
Less operator share of net
rental income (1,302,450) (1,296,754) (3,365,901) (3,399,753)
Other revenues (expenses):
Complimentary room revenues 22,182 22,143 55,217 41,886
Minor repairs and replacements (34,618) (34,149) (61,321) (64,765)
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Amount available for
distribution $ 1,579,447 $ 1,572,915 $ 4,107,775 $ 4,132,374
=========== =========== =========== ===========
</TABLE>
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SADDLEBROOK RENTAL POOL OPERATION
STATEMENTS OF CHANGES IN PARTICIPANTS' FUND BALANCE
(Unaudited)
DISTRIBUTION FUND
Six months ended
June 30,
---------------------------
2000 1999
------------ ------------
Balance at beginning of period $ -- $ --
Additions:
Amount available for distribution 4,107,775 4,132,374
Reductions:
Amount withheld for maintenance escrow fund (741,874) (732,621)
Amount accrued or paid to participants (3,365,901) (3,399,753)
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Balance at end of period $ -- $ --
=========== ===========
MAINTENANCE ESCROW FUND
Six months ended
June 30,
--------------------------
2000 1999
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Balance at beginning of period $ 1,719,802 $ 2,440,102
Additions:
Amount withheld from distribution fund 741,874 732,621
Unit owner payments 806,234 83,811
Interest earned 24,193 42,427
Reductions:
Escrow account refunds (49,242) (171,244)
Maintenance charges (130,752) (108,980)
Unit renovations (828,662) (1,076,287)
Linen replacement (62,926) (66,471)
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Balance at end of period $ 2,220,521 $ 1,875,979
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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. The second quarter has,
historically, had marginal financial performance. Accordingly, the Registrant's
experienced an improvement in its financial condition as of June 30, 2000 when
compared with its fiscal year-end of December 31, 1999. The primary effect of
this seasonal period was an increase in cash 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
six months ended June 30, 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.
Results of Operations
Total revenues decreased $106,000, or less than 1%, for the second quarter of
2000 when compared with the same period in 1999. Total revenues increased
$696,000, or 2%, for the first six months of 2000 when compared with the same
period in 1999. These marginal financial results were caused by a higher
average daily room rate, which offset fewer occupied unit nights and numbers of
guests in the resort, for the current periods when compared to the same periods
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 second quarter of 2000 decreased $263,000 or 20% from the
net income for the same period in 1999. Net income for the first six months of
2000 decreased $146,000 or 3% from the net income for the same period in 1999.
These decreases were a result of higher depreciation and 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.
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<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 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 June 30, 2000 and 1999 were 56%
and 58%, respectively. The average distributions of net rental income per
participating condominium unit for the same periods were $2,892 and $2,860,
respectively. The slight increase in the average distribution of net rental
income was primarily due to reduced travel agent fees and provision for bad
debts, which increased the total amount available for distribution for the
current quarter when compared to the same period the prior year.
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 six
months ended June 30, 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.
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(Registrant)
Date: August 11, 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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