<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q/A
QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For quarter ended April 30, 1996
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Commission file number 0-17517
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Sea Pines Associates, Inc.
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(Exact name of registrant as specified in its charter)
South Carolina 57-0845789
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(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
32 Greenwood Drive
Hilton Head Island, South Carolina 29928
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(Address of principal executive offices) (Zip Code)
(803) 785-3333
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(Registrant's telephone number, including area code)
No Change
---------
(Former name, former address and former fiscal year,
if changed since last report.)
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
---
The number of shares outstanding of the registrant's common stock as of April
30, 1996 was 1,842,525.
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INDEX TO FORM 10-Q
FOR SEA PINES ASSOCIATES, INC.
<TABLE>
<CAPTION>
Page
PART I - FINANCIAL INFORMATION
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<S> <C>
Item 1 - Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as
of April 30, 1996 and October 31, 1995 3 - 4
Condensed Consolidated Statements of Operations for
the Six Months Ended April 30, 1996 and 1995 5
Condensed Consolidated Statements of Cash Flows
for the Six Months ended April 30, 1996 and 1995 6
Notes to Condensed Consolidated Financial Statements 7 - 8
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 12
PART II - OTHER INFORMATION
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Item 1 - Legal Proceedings 13
Item 2 - Changes in Securities 13
Item 3 - Defaults Upon Senior Securities 13
Item 4 - Submission of Matters To A Vote of
Security Holders 13-14
Item 5 - Other Information 14
Item 6 - Exhibits and Reports on Form 8-K 14
Signatures 15
</TABLE>
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SEA PINES ASSOCIATES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
April 30, October 31,
1996 1995
ASSETS (Unaudited) (Note)
------ ----------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents:
Unrestricted $ 494 $ 330
Restricted 2,657 1,638
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3,151 1,968
Short-term investments 503 475
Accounts and notes receivable, net of allowance for
doubtful accounts of $46 and $30 at April 30, 1996
and October 31, 1995, respectively 2,696 1,856
Inventories (Note 2) 911 749
Prepaid expenses 243 201
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Total current assets 7,504 5,249
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PROPERTY AND EQUIPMENT:
Operating properties and properties under development, net (Note 3) 35,569 33,788
Properties held for future development 7,166 7,166
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Total property and equipment 42,735 40,954
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OTHER ASSETS:
Real estate brokerage intangibles, net of accumulated
amortization of $1,114 and $1,048 at April 30, 1996
and October 31, 1995, respectively 196 262
Deferred loan fees, net 63 78
Deferred income taxes 2,773 2,662
Investment in TidePointe Partners 779 831
Note receivable from TidePointe Partners 1,618 1,538
Other, net 85 132
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Total other assets 5,514 5,503
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$55,753 $51,706
======= =======
</TABLE>
Note: The condensed consolidated balance sheet at October 31, 1995 has been
derived from the audited financial statements at that date but does not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
See accompanying notes.
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SEA PINES ASSOCIATES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
April 30, October 31,
1996 1995
LIABILITIES AND SHAREHOLDERS' EQUITY (Unaudited) (Note)
------------------------------------ ----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable and accrued expenses $ 3,791 $ 2,301
Advance deposits 2,458 1,446
Line of credit with bank 2,500 1,300
Income taxes payable - 13
Current portion of deferred revenue 839 858
Current maturities of long-term debt 748 713
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Total current liabilities 10,336 6,631
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Long-term debt 17,622 17,902
Due to TidePointe Partners 4,892 3,195
Deferred revenue on equity club 13,230 13,276
Other deferred revenue 40 61
Other liabilities 739 645
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Total liabilities 46,859 41,710
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Commitments and contingencies
SHAREHOLDERS' EQUITY:
Series A cumulative preferred stock, no par value,
2,000,000 shares authorized; 1,228,350 shares
issued and outstanding (liquidation preference $9,335,460) 7,219 8,105
Series B junior cumulative preferred stock, no par
value, 3,000 shares authorized; none issued
or outstanding - -
Common stock, 23,000,000 shares authorized;
1,842,525 shares issued and outstanding 2,166 2,166
Accumulated deficit (491) (275)
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Total shareholders' equity 8,894 9,996
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $55,753 $51,706
======= =======
</TABLE>
Note: The condensed consolidated balance sheet at October 31, 1995 has been
derived from the audited financial statements at that date but does not
include all of the information and footnotes required by generally
accepted accounting principles for complete financial statements.
See accompanying notes.
-4-
<PAGE> 5
SEA PINES ASSOCIATES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
April 30, April 30,
1996 1995 1996 1995
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
REVENUES $10,848 $9,194 $16,184 $13,877
COST AND EXPENSES:
Cost of revenues 7,534 6,385 11,875 10,655
Sales and marketing expenses 603 465 1,055 967
General and administrative expenses 749 855 1,914 1,806
Depreciation and amortization 484 482 968 942
------- ------ ------- -------
Total costs and expenses 9,370 8,187 15,812 14,370
------- ------ ------- -------
Operating income (loss) 1,478 1,007 372 (493)
OTHER INCOME (EXPENSE):
Interest income 44 10 91 14
Interest expense (366) (330) (739) (627)
Equity loss from TidePointe Partners (52) 0 (52) 0
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Total other expense (374) (320) (700) (613)
------- ------ ------- -------
Income (loss) before income taxes 1,104 687 (328) (1,106)
Income tax benefit (provision) (375) (234) 112 376
------- ------ ------- -------
Net income (loss) 729 453 (216) (730)
Preferred stock dividend requirement (222) (222) (445) (445)
------- ------ ------- -------
Net income (loss) attributable to common stock $ 507 $ 231 ($661) ($1,175)
======= ====== ======= =======
Per share of common stock
Net Income (loss) $ 0.27 $ 0.13 ($0.36) ($0.64)
======= ====== ======= =======
</TABLE>
See accompanying notes.
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<PAGE> 6
SEA PINES ASSOCIATES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Six Months Ended
April 30,
1996 1995
(Unaudited) (Unaudited)
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<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ($216) ($730)
Adjustments to reconcile net loss to
net cash used in operating activities:
Depreciation and amortization 968 942
Increase (decrease) in deferred revenue (86) 221
Increase in allowance for doubtful accounts 16 3
Increase in deferred income taxes (111) (376)
Changes in current assets and liabilities:
Increase in accounts receivable (856) (665)
Increase in inventories (162) (126)
Increase in prepaid expenses (42) (137)
(Increase) decrease in other assets 99 (25)
Increase in accounts payable and accrued expenses 970 592
Increase in other liabilities 94 24
Increase in advance deposits 1,012 898
Decrease in income taxes payable (13) (167)
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Net cash provided by operating activities 1,673 454
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CASH FLOWS FROM INVESTING ACTIVITIES:
Increase in short term investments (28) (43)
Capital expenditures and property acquisitions (2,749) (2,555)
Additions to note receivable from TidePointe Partners 80 --
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Net cash used in investing activities (2,697) (2,598)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Principal repayments of debt (345) (315)
Additions to long-term debt 100 900
Additions to short-term debt 1,200 1,900
Additions to advance from TidePointe Partners 1,697 385
Dividends paid (445) (445)
Principal payments under capital lease obligations -- (38)
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Net cash provided by financing activities 2,207 2,387
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Net Increase in cash and cash equivalents 1,183 243
Cash and cash equivalents at beginning of period 1,968 1,847
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Cash and cash equivalents at end of period $ 3,151 $ 2,090
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</TABLE>
See accompanying notes.
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SEA PINES ASSOCIATES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1996 AND OCTOBER 31, 1995
NOTE 1 - BASIS OF PRESENTATION
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with generally accepted accounting principles
for interim financial information and with the instructions to Form 10-Q and
Article 10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all
adjustments (consisting of normal recurring accruals) considered necessary for
a fair presentation have been included. Operating results for the six month
period ended April 30, 1996 are not necessarily indicative of the results that
may be expected for the year ended October 31, 1996. For further information,
refer to the consolidated financial statements and footnotes thereto included
in the Company's annual report on Form 10-K for the year ended October 31,
1995.
NOTE 2 - INVENTORIES
Inventories consist of the following (amounts in thousands):
<TABLE>
<CAPTION>
April 30, October 31,
1996 1995
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<S> <C> <C>
Merchandise $ 789 $ 651
Supplies, parts and accessories 35 35
Food and beverages 46 33
Other 41 30
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$ 911 $ 749
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</TABLE>
7
<PAGE> 8
NOTE 3 - OPERATING PROPERTIES AND PROPERTIES UNDER DEVELOPMENT
Operating properties and properties under development consist of the following
(amounts in thousands):
<TABLE>
<CAPTION>
April 30, October 31,
1996 1995
----------------------------------
<S> <C> <C>
Land and land improvements $22,588 $22,624
Buildings 9,387 9,271
Machinery and equipment 6,512 6,324
Construction in progress 7,069 4,655
Property held under capital leases 251 251
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45,807 43,135
Less - Accumulated depreciation (10,238) (9,347)
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$35,569 $33,788
======= =======
</TABLE>
8
<PAGE> 9
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The Company's operations are conducted primarily through three wholly owned
subsidiaries. Sea Pines Company, Inc. operates all of the resort assets,
including three resort golf courses, a 28 court racquet club, a home and villa
rental management business, retail sales outlets, food service operations and
other resort recreational facilities. Sea Pines Real Estate Company, Inc. is
an independent real estate brokerage firm with eleven offices located in the
Hilton Head Island area. Sea Pines Country Club, Inc. owns and operates a full
service private country club providing golf, tennis and clubhouse facilities
for approximately 1,500 equity and associate club members. (See Business
Outlook and Recent Developments.)
The Company, through its wholly owned subsidiary, Sea Pines/TidePointe, Inc.,
owns a 17.5% general partnership interest in TidePointe Partners. TidePointe
Partners is a General Partnership which is developing and constructing a
continuing care retirement community on Hilton Head Island, South Carolina.
TidePointe is currently under construction and Phase I is expected to be
completed by August 1996. Sea Pines Senior Living Center, Inc., a wholly owned
subsidiary of the Company, is currently developing the health care facility
located within the TidePointe community. Upon completion and approval by the
South Carolina Department of Health and Environmental Control, it is
anticipated that TidePointe Partners will exercise an option to purchase this
facility.
Liquidity and Capital Resources
Cash and short term investments increased by $1,963,000 during the second
quarter of 1996 and totaled $3,654,000 at April 30, 1996, of which $3,160,000
was restricted. The Company's working capital deficit decreased by $871,000
during the second quarter resulting in a working capital deficit of $2,832,000
at April 30, 1996. These increases in cash and working capital are consistent
with the seasonal nature of the Company's operations.
The Company maintains a $2.5 million seasonal line of credit used to meet cash
requirements during the Company's off-season. As of April 30, 1996, the
outstanding balance on the line of credit totaled $2.5 million. In addition to
the seasonal line of credit, the Company maintains a $12 million revolving
credit facility used for capital investments in business lines consistent with
the Company's operations. As of April 30, 1996, the outstanding balance on the
revolving credit facility totaled $6.1 million.
At its December 1995 Board of Directors meeting, the Company declared a cash
dividend to holders of Series A Cumulative Preferred Stock of $0.722 per share.
This dividend is payable in equal quarterly installments of approximately
$0.181 per share, the first two installments were paid on January 15, 1996 and
April 15, 1996. Additional quarterly
9
<PAGE> 10
installments will be paid on July 15, 1996, and October 15, 1996 to
shareholders of record on the first day of each of those months.
Results of Operations for 1996 as Compared with 1995
The Company reported a consolidated net income for the second quarter ended
April 30, 1996 of $729,000, a 61% increase from the consolidated net income of
$453,000 reported for the second quarter of 1995. Consolidated revenues during
the second quarter totalled $10,848,000, an 18% increase over consolidated
revenues reported for the second quarter of 1995. These increases in
consolidated revenues and net income are attributable to increases in real
estate brokerage revenues and revenues from golf operations.
Resort revenues increased during the second quarter from $6,542,000 in 1995 to
$7,598,000 in 1996, a 16.1% increase. This increase in resort revenues is
attributable to increased golf revenues resulting primarily from having the
newly renovated Ocean Golf Course open for play. The course had been closed
for a major renovation from December 5, 1994 to September 17, 1995.
Real estate brokerage revenues increased by $651,000 or 41%, to $2,243,000
during the second quarter ended April 30, 1996 from the same period last year.
This increase in real estate revenues is indicative of the strong brokerage
sales the Company has experienced in both the first and second quarters of 1996
as compared to the same period last year. Based on the level of sales under
contract which are scheduled to close during the third and fourth quarters
management believes that this trend will continue during those quarters.
Country Club revenues decreased by $51,000 or 4.8% to $1,007,000 for the second
quarter of 1996 as compared to the same period last year, as food and beverage
sales continue to lag behind last year.
Cost of revenues increased by $1,149,000 or 18% primarily as a result of
revenue volume increases during the second quarter of 1996 as compared to the
same period last year. The cost of revenue percentage remained constant at
69.5% for both the second quarter of 1996 and 1995. Sales and marketing
expenses increased by $138,000, or 29.7% during the second quarter of 1996 as
compared to the second quarter of 1995. This increase results from the
combined effects of a planned increase in real estate marketing aimed at
increasing market share, and from the acceleration of certain media placements
which previously had occurred in the second half of the year.
General and administrative expenses decreased by $106,000 or 12.4% in 1996 as
compared to the same period in 1995. The decrease can be primarily
attributable to payroll cost savings as a result of the Company's cost
reduction plan which it implemented during the first quarter of 1996.
10
<PAGE> 11
Interest expense on the Company's long-term debt increased by $36,000, or
10.9%, in the second quarter of 1996 as compared with the same period in 1995.
This increase was the result of increased debt levels as additional borrowings
were needed in 1995 for the Ocean Course renovation project and other capital
expenditures.
Revenue from the sale of new Country Club memberships and a portion of the
proceeds from resales of existing memberships are being deferred until the
"turnover date". (See Business Outlook and Recent Developments.) As of April
30, 1996, the Company had sold 1,148 memberships and had received approximately
$13,230,000.
Business Outlook and Recent Developments
On May 1, 1996, the Company consummated a turnover of the operations and assets
of the Sea Pines Country Club to the equity members. Effective with the
turnover, the Club has complete and total responsibility for the operation and
control of the Club including all physical assets and all "risks and rewards"
of ownership. The Club has entered into a one year administrative services
contract with the Company to provide certain accounting, human resources,
maintenance, landscaping and information services for fixed monthly fees
expected to be equal to or in excess of the estimated costs of such services.
The Company and the Club have agreed that the Company will have the right to
market and sell the remaining unissued 152 equity memberships of the Club.
This transaction will not have a material effect on current year cash flow,
however it will have a major impact on 1996 net income as all deferred income
from the sale of Country Club memberships, net of the book value of assets
turned over, will be recognized, based on the criteria established in Statement
of Financial Accounting Standards No. 66, Accounting For Sales Of Real Estate.
This is expected to produce a one time increase in net income of approximately
$5,000,000 in the third quarter of 1996. In future years this turnover is
expected to have a positive impact of approximately $200,000 annually on
pre-tax income due to eliminating the cost of operating the Club.
The Company is continuing construction of the health care facility located
within the TidePointe continuing care retirement community. The health care
facility is scheduled to be completed by August 1996 at an anticipated total
cost of approximately $5,500,000. As of April 30, 1996 costs and accrued
interest totalled $4,892,000. TidePointe Partners has advanced the Company
$4,892,000 for such construction and has committed to advance the Company the
remaining funds required to construct, equip and begin operating the health
care facility. TidePointe Partners also has an option to purchase the health
care facility exercisable only after completion of construction, licensing,
commencement of operations and approval of South Carolina Department Of Health
And Environmental Control.
The Company is also continuing construction on the two major renovation
projects started during fiscal 1995. The first project is the renovation of
the three commercial
11
<PAGE> 12
office buildings which comprise the former Sea Pines Welcome Center which is
expected to be completed in the third quarter of 1996. Upon completion the
Company will occupy approximately 1,000 square feet of the building for real
estate offices and lease the remaining space to third party tenants. The
Company has reached agreement on lease terms with two tenants who will occupy
the remaining space. Hilton Head Hospital will occupy approximately 6,500
square feet for use as an urgent care center. Lighthouse Mortgage Corporation
will occupy approximately 2,400 square feet. Lighthouse Mortgage Corporation
has executed the lease document and the Company believes that the Hilton Head
Hospital lease will be executed shortly and that the tenants will be occupying
the space by August 1996. The second project is a major renovation and upgrade
of the Company's golf maintenance and warehouse facility. The investment in
these two projects during fiscal 1996 is expected to total approximately
$1,000,000.
12
<PAGE> 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company is not currently involved in any litigation which
it believes will materially and adversely affect its financial
condition or results of operations.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters To A Vote of Security Holders
a) The Annual Meeting of Shareholders of the Company was
held at 3:00 p.m. (EST) on March 2, 1996.
b) The following Directors of the Company were elected
during the Annual Meeting:
Thomas G. Daniels
Ralph L. Dupps, Jr.
Charles W. Flynn
Arthur P. Sundry
Frank E. Zimmerman, Jr.
The following Directors' terms of office as Directors
of the Company continued after the Annual Meeting:
Angus Cotton
P. R. Easterlin, Jr.
James L. Gray
Norman P. Harberger
Michael E. Lawrence
John G. McGarty
Thomas C. Morton
Joseph F. Vercellotti
Francis S. Webster, Jr.
13
<PAGE> 14
c) At the Annual Meeting the Shareholders ratified the
appointment of Ernst & Young LLP as independent auditors for
the Company for the fiscal year ending October 31, 1996. The
ratification passed with 1,250,600 affirmative votes, 750
negative votes and 1,500 abstaining votes.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27 - Financial Data Schedule (for SEC use only)
(b) Reports on Form 8-K:
None
14
<PAGE> 15
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.
SEA PINES ASSOCIATES, INC.
Date: June 13, 1996 /s/ Charles W. Flynn
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Charles W. Flynn
Chairman
Date: June 13, 1996 /s/ Thomas C. Morton
-------------- --------------------
Thomas C. Morton
Treasurer
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONTAINED IN THE APRIL 30, 1996
FORM 10Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH APRIL
30, 1996 FORM 10Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1996
<PERIOD-START> NOV-01-1996
<PERIOD-END> APR-30-1996
<CASH> 3,654
<SECURITIES> 0
<RECEIVABLES> 2,696
<ALLOWANCES> 46
<INVENTORY> 911
<CURRENT-ASSETS> 7504
<PP&E> 52,973
<DEPRECIATION> 10,238
<TOTAL-ASSETS> 55,753
<CURRENT-LIABILITIES> 10,336
<BONDS> 0
0
7,219
<COMMON> 2,166
<OTHER-SE> (491)
<TOTAL-LIABILITY-AND-EQUITY> 8,894
<SALES> 16,184
<TOTAL-REVENUES> 16,184
<CGS> 6,219
<TOTAL-COSTS> 11,875
<OTHER-EXPENSES> 3,976
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 739
<INCOME-PRETAX> (328)
<INCOME-TAX> (112)
<INCOME-CONTINUING> (661)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (661)
<EPS-PRIMARY> (.36)
<EPS-DILUTED> (.36)
</TABLE>
