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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 September 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 ________
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 September 30, 2000 and December 31, 1999 3
Statements of Operations for the three months and nine
months ended September 30, 2000 and 1999 4
Statements of Cash Flows for the nine months ended
September 30, 2000 and 1999 5
Notes to Financial Statements 6
Saddlebrook Rental Pool Operation
Balance Sheets at September 30, 2000 and December 31, 1999 8
Statements of Operations for the three months and nine
months ended September 30, 2000 and 1999 9
Statements of Changes in Participants' Fund Balance for
the nine months ended September 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
September 30,
2000 December 31,
(Unaudited) 1999
----------- -----------
Assets
Current assets:
Cash and cash equivalents $ 8,590,915 $ 5,551,280
Escrowed cash 251,257 372,104
Short-term escrowed investments 395,164 195,251
Accounts receivable, net 2,912,748 2,874,562
Due from related parties 310,176 531,179
Inventory and supplies 1,806,212 1,832,538
Prepaid expenses and other assets 367,683 550,830
----------- -----------
Total current assets 14,634,155 11,907,744
Long-term escrowed investments 298,826 398,553
Property, buildings and equipment, net 25,101,645 24,930,026
Deferred charges, net 507,211 537,046
----------- -----------
$40,541,837 $37,773,369
=========== ===========
Liabilities and Shareholder's Equity
Current liabilities:
Current portion of notes payable $ 1,163,548 $ 1,097,965
Escrowed deposits 945,247 965,908
Accounts payable 946,144 1,515,163
Accrued rental distribution 929,986 1,431,301
Accrued payroll and related expenses 1,471,785 770,608
Guest deposits 2,093,640 1,909,517
Accrued expenses and other liabilities 1,186,011 2,151,329
Due to related parties 604,371 441,318
----------- -----------
Total current liabilities 9,340,732 10,283,109
Notes payable due after one year 22,648,560 23,529,604
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Total liabilities 31,989,292 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 7,439,418 2,847,529
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Total shareholder's equity 8,552,545 3,960,656
----------- -----------
$40,541,837 $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 Nine months ended
September 30, September 30,
------------------------- -------------------------
2000 1999 2000 1999
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Revenues $ 8,139,377 $ 7,343,017 $37,883,714 $ 36,391,776
----------- ----------- ----------- ------------
Costs and expenses:
Operating costs 6,287,219 6,503,263 24,398,060 24,198,276
Sales and marketing 664,671 829,549 2,633,536 2,678,314
General and administrative 1,075,786 1,179,345 3,351,304 3,415,601
Depreciation and amortization 494,964 385,136 1,512,079 1,142,464
Interest 465,079 449,323 1,396,845 1,374,183
----------- ----------- ----------- ------------
Total costs and expenses 8,987,719 9,346,616 33,291,824 32,808,838
----------- ----------- ----------- ------------
Net income (848,342) (2,003,599) 4,591,890 3,582,938
Distribution to shareholder -- (3,700,000) -- (3,700,000)
Accumulated earnings at
beginning of period 8,287,761 9,898,499 2,847,529 4,311,962
----------- ----------- ----------- ------------
Accumulated earnings at
end of period $ 7,439,419 $ 4,194,900 $ 7,439,419 $ 4,194,900
=========== =========== =========== ============
</TABLE>
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)
Nine months ended
September 30,
---------------------------
2000 1999
----------- -----------
Operating activities:
Net income $ 4,591,890 $ 3,582,938
Non-cash items included in net income:
Provision for doubtful accounts 37,080 55,085
Depreciation and amortization 1,512,079 1,142,464
Loss (gain) on sale of assets (2,132) 1,188
Decrease (increase) in:
Accounts receivable (75,266) 2,570,061
Inventory and supplies 26,326 (150,686)
Prepaid expenses and other assets 183,147 (50,927)
Increase (decrease) in:
Accounts payable (569,019) (545,976)
Accrued expenses and other liabilities (581,335) (1,024,756)
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5,122,770 5,579,391
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Investing activities:
Proceeds from sale of assets 9,000 1,624
Capital expenditures (1,660,730) (2,602,794)
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(1,651,730) (2,601,170)
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Financing activities:
Payments on notes payable (815,461) (784,355)
Financing costs -- (15,438)
Advances from (to) related parties 384,056 (137,685)
Distribution to shareholder -- (3,700,000)
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(431,405) (4,593,478)
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Net increase in cash 3,039,635 (1,615,257)
Cash at beginning of period 5,551,280 8,604,005
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Cash at end of period $ 8,590,915 $ 6,988,748
=========== ===========
Supplemental disclosure:
Cash paid for interest $ 1,403,524 $ 1,455,534
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 September 30, 2000, and statements of
operations and cash flows for the periods ended September 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
September 30, December 31,
2000 1999
------------ ------------
Trade accounts receivable $ 3,102,694 $ 3,038,561
Less reserve for bad debts (189,946) (163,999)
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$ 2,912,748 $ 2,874,562
============ ============
Note 3. Property, Buildings and Equipment
September 30, December 31,
2000 1999
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Land and land improvements $ 4,412,745 $ 4,412,745
Buildings and recreational facilities 21,622,893 21,407,692
Machinery and equipment 11,507,070 11,173,064
Construction in progress 2,229,319 1,128,285
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39,772,027 38,121,786
Less accumulated depreciation (14,670,382) (13,191,760)
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$ 25,101,645 $ 24,930,026
============ ============
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
September 30, December 31,
2000 1999
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Debt issue costs $ 596,716 $ 596,716
Less accumulated amortization (89,505) (59,670)
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$ 507,211 $ 537,046
============ ============
Note 5. Notes Payable
September 30, December 31,
2000 1999
------------ ------------
Note payable due June 30, 2013 $ 23,733,402 $ 24,532,820
Capital lease obligation 78,706 94,749
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23,812,108 24,627,569
Less current portion (1,163,548) (1,097,965)
------------ ------------
$ 22,648,560 $ 23,529,604
============ ============
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
September 30,
2000 December 31,
(Unaudited) 1999
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Assets
Receivable from Saddlebrook Resorts, Inc. $ 959,717 $1,354,525
========== ==========
Liabilities and Participants' Fund Balance
Due to participants for rental pool distribution $ 788,042 $1,108,663
Due to maintenance escrow fund 171,675 245,862
Participants' fund balance - -
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$ 959,717 $1,354,525
========== ==========
MAINTENANCE ESCROW FUND
September 30,
2000 December 31,
(Unaudited) 1999
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Assets
Cash and cash equivalents $ 236,207 $ 353,829
Investments 693,990 593,804
Receivables:
Distribution fund 171,675 245,862
Interest 16,086 8,180
Linen inventory 237,033 222,188
Prepaid maintenance costs 1,220,689 636,669
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$2,575,680 $2,060,532
========== ==========
Liabilities and Participants' Fund Balance
Accounts payable $ 134,841 $ 340,730
Participants' fund balance 2,440,839 1,719,802
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$2,575,680 $2,060,532
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<PAGE> 9
SADDLEBROOK RENTAL POOL OPERATION
STATEMENTS OF OPERATIONS
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
----------- ----------- ------------ ------------
2000 1999 2000 1999
----------- ----------- ------------ ------------
<S> <C> <C> <C> <C>
Rental pool revenues $ 2,398,744 $ 2,035,454 $ 12,504,345 $ 12,302,031
----------- ----------- ------------ ------------
Deductions:
Marketing expense 179,906 152,659 937,826 922,652
Management expense 299,843 254,432 1,563,043 1,537,754
Travel agent commissions 124,719 139,225 602,468 655,980
Credit card expense 43,071 31,423 170,023 154,924
Bad debt expense - 9,000 - 27,000
----------- ----------- ------------ ------------
647,539 586,739 3,273,360 3,298,310
----------- ----------- ------------ ------------
Net rental income 1,751,205 1,448,715 9,230,985 9,003,721
Less operator share of net
rental income (788,042) (651,922) (4,153,943) (4,051,675)
Other revenues (expenses):
Complimentary room revenues 20,833 24,661 76,050 66,547
Minor repairs and replacements (24,279) (30,350) (85,600) (95,115)
----------- ----------- ------------ ------------
Amount available for
distribution $ 959,717 $ 791,104 $ 5,067,492 $ 4,923,478
=========== =========== ============ ============
</TABLE>
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SADDLEBROOK RENTAL POOL OPERATION
STATEMENTS OF CHANGES IN PARTICIPANTS' FUND BALANCE
(Unaudited)
DISTRIBUTION FUND
Nine months ended
September 30,
---------------------------
2000 1999
----------- -----------
Balance at beginning of period $ - $ -
Additions:
Amount available for distribution 5,067,492 4,923,478
Reductions:
Amount withheld for maintenance escrow fund (913,549) (871,803)
Amount accrued or paid to participants (4,153,943) (4,051,675)
----------- -----------
Balance at end of period $ - $ -
=========== ===========
MAINTENANCE ESCROW FUND
Nine months ended
September 30,
---------------------------
2000 1999
----------- -----------
Balance at beginning of period $ 1,719,802 $ 2,440,102
Additions:
Amount withheld from distribution fund 913,549 871,803
Unit owner payments 977,731 147,038
Interest earned 36,382 60,343
Reductions:
Escrow account refunds (79,474) (190,940)
Maintenance charges (183,439) (167,243)
Unit renovations (873,896) (1,093,943)
Linen replacement (69,816) (86,630)
----------- -----------
Balance at end of period $ 2,440,839 $ 1,980,530
=========== ===========
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<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 in the first quarter of each calendar year. The third quarter has
historically produced the lowest volume of sales. Consequently, the
Registrant's financial condition declined slightly during the third quarter of
2000. However, due to the earlier seasonal period, the Registrant's financial
condition at September 30, 2000 is improved 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 the Registrant remains in
compliance with certain financial covenants (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 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
nine months ended September 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 increased $796,000, or 11%, for the third quarter of 2000 when
compared with the same period in 1999. Total revenues increased $1,492,000, or
4%, for the first nine months of 2000 when compared with the same period in
1999. These improvements were caused by higher average daily room rates, which
offset slightly fewer occupied unit nights and number 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.
A net loss for the third quarter of 2000 decreased $1,155,000 or 58% from the
net loss for the same period in 1999. The net income for the first nine months
of 2000 increased $1,009,000 or 28% from the net income for the same period in
1999. These improvements were a direct result of the higher revenues along with
general cost control measures, which were offset by slightly increased
depreciation of recent fixed asset additions.
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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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 September 30, 2000 and 1999 were
40% and 41%, respectively. The average distributions of net rental income per
participating condominium unit for the same periods were $1,757 and $1,436,
respectively. The increase in the average distribution of net rental income was
primarily due to increased rental pool revenues combined with 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 nine
months ended September 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: November 14, 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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