<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934.
For quarter ended April 30, 1998
Commission file number 0-17517
Sea Pines Associates, Inc.
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
South Carolina 57-0845789
- --------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
32 Greenwood Drive
Hilton Head Island, South Carolina 29928
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(803) 785-3333
--------------------------------------------------------------
(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, 1998 was 1,842,525.
<PAGE> 2
INDEX TO FORM 10-Q
FOR SEA PINES ASSOCIATES, INC.
Page
----
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as
of April 30, 1998 and October 31, 1997 3 - 4
Condensed Consolidated Statements of Operations for
the Six Months Ended April 30, 1998 and 1997 5
Condensed Consolidated Statements of Cash Flows
for the Six Months ended April 30, 1998 and 1997 6
Notes to Condensed Consolidated Financial Statements 7 - 8
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 9 - 13
PART II - OTHER INFORMATION
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
2
<PAGE> 3
SEA PINES ASSOCIATES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
April 30, October 31,
1998 1997
(Unaudited) (Note)
--------------------------------------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents:
Unrestricted (temporary overdraft) ($548) $215
Restricted 3,732 1,965
--------------------------------------------
3,184 2,180
Accounts and notes receivable, net of allowance for
doubtful accounts of $69 and $73 at April 30, 1998 and
October 31, 1997, respectively 1,383 965
Current portion of notes receivable 562 402
Inventories (Note 2) 736 617
Prepaid expenses 298 240
--------------------------------------------
Total current assets 6,163 4,404
Notes receivable-other 1,801 1,894
Investment in and advances to
TidePointe Partners, net - -
Deferred income taxes 675 805
Deferred loan fees, net 46 61
Other assets, net 84 87
Real estate assets
Construction in progress 827 598
Operating properties, net 22,956 22,942
Properties held for future development 7,023 7,023
--------------------------------------------
30,806 30,563
--------------------------------------------
Total assets $39,575 $37,814
============================================
</TABLE>
Note: The condensed consolidated balance sheet at October 31, 1997 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.
3
<PAGE> 4
SEA PINES ASSOCIATES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
April 30, October 31,
1998 1997
(Unaudited) (Note)
--------------------------------------------
<S> <C> <C>
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable and accrued expenses $ 2,904 $ 1,810
Advance deposits 3,426 1,880
Line of credit with bank 366 467
Income taxes payable - 166
Current portion of deferred revenue 548 439
Current maturities of long-term debt 810 810
--------------------------------------------
Total current liabilities 8,054 5,572
Long-term debt 17,909 17,909
Other deferred revenue 692 778
--------------------------------------------
Total liabilities 26,655 24,259
--------------------------------------------
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) 7,218 7,218
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
Retained earnings 3,536 4,171
--------------------------------------------
Total shareholders' equity 12,920 13,555
--------------------------------------------
============================================
Total Liabilities and Shareholders' Equity $39,575 $37,814
============================================
</TABLE>
Note: The condensed consolidated balance sheet at October 31, 1997 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,
1998 1997 1998 1997
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues, other than healthcare $10,270 $10,460 $15,565 $15,349
Cost and expenses, other than healthcare:
Cost of revenues 6,851 6,761 11,142 10,749
Sales and marketing expenses 525 521 1,002 1,122
General and administrative expenses 800 846 1,648 1,764
Depreciation and amortization 361 369 722 743
-----------------------------------------------------------------------------
Total costs and expenses 8,537 8,497 14,514 14,378
-----------------------------------------------------------------------------
Income from operations, other than healthcare 1,733 1,963 1,051 971
Healthcare income (expense)
Revenue 0 152 0 152
Cost of revenues 0 (692) 0 (692)
-----------------------------------------------------------------------------
0 (540) 0 (540)
-----------------------------------------------------------------------------
Income from operations 1,733 1,423 1,051 431
Other income (expense):
Equity in loss of TidePointe Partners 0 0 0 (59)
Interest income 31 85 66 156
Interest expense (376) (382) (735) (758)
-----------------------------------------------------------------------------
Total other expenses (345) (297) (669) (661)
Income (loss) before income taxes 1,388 1,126 382 (230)
Income tax (benefit) 472 383 130 (78)
-----------------------------------------------------------------------------
Net income (loss) 916 743 252 (152)
Preferred stock dividend requirement (223) (223) (445) (445)
-----------------------------------------------------------------------------
Net income (loss) attributable to common stock $ 693 $ 520 $ (193) $ (597)
=============================================================================
Per share of common stock
Net income (loss) $ 0.38 $ 0.28 $ (0.10) $ (0.32)
=============================================================================
</TABLE>
See accompanying notes.
5
<PAGE> 6
SEA PINES ASSOCIATES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Six Months Ended
April 30,
1998 1997
(Unaudited) (Unaudited)
-----------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income (loss) $ 252 ($152)
Adjustments to reconcile net income (loss) to net cash provided
by operating activities:
Depreciation and amortization 722 743
Increase in deferred revenue 23 227
Decrease in allowance for doubtful accounts (4) -
Decrease (increase) in deferred income taxes 130 (78)
Equity in loss of TidePointe Partners - 59
Changes in current assets and liabilities:
Increase in restricted cash (1,767) (1,274)
Increase in accounts and notes receivable (481) (891)
Increase in inventories (119) (48)
Decrease (increase) in prepaid expenses (58) 72
Decrease in other assets 18 67
Increase in accounts payable and accrued expenses 652 585
Increase in advance deposits 1,546 1,366
Decrease in income taxes payable (166) (142)
-----------------------------------------
Net cash provided by operating activities 748 534
-----------------------------------------
Cash Flows from Investing Activities:
Capital expenditures and property acquisitions (965) (1,287)
Additions to note receivable from TidePointe Partners - (81)
-----------------------------------------
Net cash used in investing activities (965) (1,368)
-----------------------------------------
Cash Flows from Financing Activities:
Principal repayments of debt - (380)
Additions to short-term debt - 475
Repayment of short-term debt (101) -
Additions to advance from TidePointe Partners - 1,167
Dividends paid (445) (445)
-----------------------------------------
Net cash provided by (used in) financing activities (546) 817
-----------------------------------------
Net decrease in unrestricted cash and cash equivalents (763) (17)
Unrestricted cash and cash equivalents at start of period 215 232
-----------------------------------------
Unrestricted cash and cash equivalents (temporary overdraft) at
end of period $ (548) $ 215
=========================================
</TABLE>
See accompanying notes.
6
<PAGE> 7
SEA PINES ASSOCIATES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 1998 AND OCTOBER 31, 1997
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, 1998 are not necessarily indicative of the results that may be
expected for the year ended October 31, 1998. 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, 1997.
NOTE 2 - INVENTORIES
Inventories consist of the following (amounts in thousands):
<TABLE>
<CAPTION>
April 30, October 31,
1998 1997
---- ----
<S> <C> <C>
Merchandise $656 $546
Supplies, parts and accessories 35 35
Food and beverages 14 11
Other 31 25
---- ----
$736 $617
==== ====
</TABLE>
7
<PAGE> 8
NOTE 3 - OPERATING PROPERTIES
Operating properties consist of the following (amounts in thousands):
<TABLE>
<CAPTION>
April 30, October 31,
1998 1997
-------- --------
<S> <C> <C>
Land and land improvements $ 19,978 $ 19,884
Buildings 7,150 7,051
Machinery and equipment 6,186 5,645
Property held under capital leases 251 251
-------- --------
33,565 32,831
Less - Accumulated depreciation (10,609) (9,889)
-------- --------
$ 22,956 $ 22,942
======== ========
</TABLE>
NOTE 4 - EARNINGS PER SHARE
The Company has calculated its earnings per share using Statement of Financial
Accounting Standards No. 128, Earnings Per Share. There was no effect of such
calculation as compared to the previous calculations using Accounting Principles
Bulletin No. 15; furthermore, basic and diluted earnings per share are identical
for all periods presented. Potentially dilutive securities (stock rights) have
not been included in diluted earnings per share as the stock rights are not yet
exercisable.
8
<PAGE> 9
PART I
THIS REPORT ON FORM 10-Q AND OTHER STATEMENTS ISSUED OR MADE FROM TIME TO TIME
BY THE COMPANY OR ITS REPRESENTATIVES CONTAIN STATEMENTS WHICH MAY CONSTITUTE
"FORWARD-LOOKING STATEMENTS" WITHIN THE MEANING OF THE SECURITIES ACT OF 1933,
AS AMENDED (THE "1933 ACT"), AND THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED
BY THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. 15 U.S.C.A. SECTIONS
77Z-2 AND 78U-5 (SUPP. 1996). THOSE STATEMENTS INCLUDE STATEMENTS REGARDING THE
INTENT, BELIEF OR CURRENT EXPECTATIONS OF THE COMPANY AND MEMBERS OF ITS
MANAGEMENT TEAM, AS WELL AS THE ASSUMPTIONS ON WHICH SUCH STATEMENTS ARE BASED.
PROSPECTIVE INVESTORS ARE CAUTIONED THAT ANY SUCH FORWARD-LOOKING STATEMENTS ARE
NOT GUARANTEES OF FUTURE PERFORMANCE AND INVOLVE RISKS AND UNCERTAINTIES, AND
THAT ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE CONTEMPLATED BY SUCH
FORWARD-LOOKING STATEMENTS. IMPORTANT FACTORS CURRENTLY KNOWN TO MANAGEMENT THAT
COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM THOSE IN FORWARD-LOOKING
STATEMENTS INCLUDE THOSE SET FORTH IN THIS REPORT, AS WELL AS THOSE CONTAINED IN
THE SAFE HARBOR COMPLIANCE STATEMENT FOR FORWARD-LOOKING STATEMENTS INCLUDED AS
EXHIBIT 99.1 TO THIS REPORT ON FORM 10-Q, WHICH FACTORS ARE HEREBY INCORPORATED
BY REFERENCE. THE COMPANY UNDERTAKES NO OBLIGATION TO UPDATE OR REVISE
FORWARD-LOOKING STATEMENTS TO REFLECT CHANGED ASSUMPTIONS, THE OCCURRENCE OF
UNANTICIPATED EVENTS OR CHANGES TO FUTURE OPERATING RESULTS OVER TIME.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
The Company's operations are conducted primarily through two 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 ten offices serving Hilton Head
Island and its neighboring communities.
The Company, through its wholly owned subsidiary, Sea Pines/TidePointe,
Inc. owns a 17.5% general partnership interest in TidePointe Partners (the
"Partnership"). The Company formed the Partnership on January 14, 1994 with
Providers Enterprises, Inc. (a 82.5% general partner) for the purpose of
constructing, developing and operating a continuing care retirement community on
Hilton Head Island, South Carolina, to be known as TidePointe. The formation,
results of operations, and financial condition of the Partnership and that of
PIE Mutual Insurance Company (the ultimate parent of Providers Enterprises,
Inc., the 82.5% general partner) are more fully discussed in the Company's
9
<PAGE> 10
fiscal 1997 Annual Report on Form 10-K. During the quarter ended April 30, 1998,
the TidePointe Partnership continued to generate net losses. Since the Company
is not obligated to fund the Partnership and has fully written off its
investment as of October 31, 1997, the Company did not record its 17.5% of such
Partnership losses in this quarter. During the second quarter of 1998 the
Company continued to work with the Insurance Department of the State of Ohio in
seeking a purchaser for PIE Mutual's 82.5% partnership interest or possibly for
the Partnership's assets in total. See Business Outlook and Recent Developments
regarding the pending sale of the TidePointe assets.
Liquidity and Capital Resources
Cash and cash equivalents increased by $1,403,000 during the second
quarter of 1998 and totaled $3,184,000 at April 30, 1998, of which $3,732,000
was restricted. The Company's working capital deficit decreased by $1,212,000 in
the second quarter resulting in a working capital deficit of $1,891,000 at April
30, 1998. The increase in cash and decrease in working capital deficit 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, 1998,
the outstanding balance on the line of credit totaled $366,000. 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, 1998, the outstanding balance on the
revolving credit facility totaled $7.6 million.
At its December 1997 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 of which were paid on January 15, 1998 and April
15, 1998. Additional quarterly installments will be paid on July 15, 1998 and
October 15, 1998 to shareholders of record on the first day of each of those
months.
Results of Operations for 1998 as Compared with 1997
The Company reported consolidated net income during the second quarter
of 1998 of $916,000. The consolidated net income reported during the second
quarter of 1997 was $743,000.
Consolidated revenues during the three months ended April 30, 1998
totaled $10,270,000, a 1.8% decrease over consolidated revenues reported during
the three months ended April 30, 1997 of $10,460,000. Resort revenues decreased
3.4% during the second quarter from $8,333,000 in 1997 to $8,049,000 in 1998.
The Company believes rainy weather experienced in the Southeast associated with
El Nino had a direct adverse
10
<PAGE> 11
effect on the Company's lodging and golf revenues during the months of February
and March.
Real estate brokerage revenues increased by $92,000, or 4.3%, to
$2,219,000 during the second quarter ended April 30, 1998 from the same period
last year. This increase in real estate revenues reflects the continued strength
in the demand for both primary and secondary homes within the Hilton Head Island
market area. The Company continues to maintain its market share of sales and
listings
Cost of revenues increased by $90,000, or 1.3% during the second
quarter of 1998 compared to the same period last year. This increase can be
attributed to an increase in real estate brokerage sales and an increase in the
costs associated with those sales. The average commission paid to the Company's
agents as a percentage of revenue has increased from 64.6% in 1997 to 67.8% in
1998.
Sales and marketing expenses during the second quarter remained
relatively constant at $525,000 and $521,000 in 1998 and 1997, respectively.
General and administrative expenses decreased by $46,000 or 5.4% from
the same period last year. The Company continues to closely monitor its
controllable general and administrative expenses.
There was no healthcare revenue or expense in 1998 associated with the
healthcare facility within the TidePointe Community as the facility was sold by
the Company in July 1997.
Interest expense on the Company's debt remained relatively constant at
$376,000 and $382,000 during the second quarter of 1998 and 1997, respectively,
as average borrowings and average interest rates remained comparable.
Business Outlook and Recent Developments
The Company is in the final planning stages for construction of a new
conference center in Harbour Town, adjacent to the Harbour Town Clubhouse. The
planned facility will include approximately 15,000 square feet and contain a
ballroom, meeting space and catering kitchen facilities. Management believes
such a facility will enhance the Company's existing facilities and enable the
Company to be more competitive in attracting small group meetings and other
functions to Sea Pines. Construction will begin upon completion of planning and
is anticipated to cost approximately $4,700,000 and take approximately one year
to complete. The Company intends to finance the project with the remaining $4.4
million available on its revolving credit facility with its principal lender.
The construction of the conference center is contingent upon the
construction of a
11
<PAGE> 12
60 room inn adjacent to the site. See further discussion under Part II Item 1
"Legal Proceedings". The Company is also currently planning this inn facility
and is proceeding with architectural drawings and economic feasibility studies,
as well as analyzing the timing of construction. As this facility is still in
the planning stages no final cost estimate is available, however, it is
anticipated that the cost of the inn will be approximately $6 million.
On May 20, 1998 TidePointe Partners entered into a Purchase and Sale
Agreement with CC-Hilton Head, Inc. (an affiliate of Classic Residences by
Hyatt) for the sale of all of the TidePointe assets. The terms of the sale
include a purchase price of $23,700,000 and a scheduled closing in June 1998
contingent upon the purchaser's satisfactory completion of normal due diligence.
The Company has established a long term relationship with the purchaser, and at
closing will enter into a 25 year license and use agreement for the use of the
Company's logo, trade name, a non-compete agreement and other services and
amenity use in connection with the TidePointe Community. Under this license and
use agreement the Company will receive annual license fees over the term of the
agreement.
Year 2000 Issue
The Year 2000 issue is the result of computer programs having been
written using two digits rather than four to define the applicable year. Any of
the Company's computer programs that have date-sensitive software may recognize
a date using "00" as the year 1900 rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process transactions,
send invoices, or engage in similar normal business activities.
Based on a recent assessment, the Company determined that it will be
required to modify or replace portions of its existing software so that its
computer systems will properly utilize dates beyond December 31, 1999. The
Company presently believes that with modifications to existing software and
conversions to new software, the Year 2000 issue can be mitigated. The Company
is currently working on these modifications. However, if such modifications and
conversions are not made, or are not completed timely, the Year 2000 issue could
have a material impact on the operations of the Company.
The Company will utilize both internal and external resources to
program, or replace and test its software for year 2000 modifications. The
Company has discussed this issue
12
<PAGE> 13
with all of its third party software providers and has planned for future year
2000 compliant updates. The Company has not determined the total cost of the
year 2000 project. However, the costs are not expected to have a material effect
on the results of operations. The Company plans to complete the year 2000
project not later than June 30, 1999 and is currently on schedule to meet this
target.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company was a defendant in a lawsuit filed in April 1997 in
Beaufort County, South Carolina by Harbour Town Villas, et. al. relating to the
construction of a new conference center in Harbour Town, adjacent to the Harbour
Town clubhouse. The suit, filed by the neighboring property owners, challenged
the Company's right to construct such a facility on the site. The Court ruled on
March 4, 1998 that the Company may proceed with the construction of the facility
contingent upon the construction of a 50 to 60 room inn adjacent to the site.
The construction of the inn must commence within two years of the completion of
the conference center. However the inn could be built simultaneously or prior to
the conference center. The Plaintiffs in this lawsuit have filed a notice of its
intent to appeal the Court's decision.
There have been no material changes in any of the other legal
proceedings discussed in the Company's 1997 Annual Report on Form 10-K. See Item
3 "Legal Proceedings" of Form 10-K for a complete discussion.
The Company is subject to other claims and suits in the ordinary course
of business. In management's opinion, such currently pending legal proceedings
and claims and suits against the Company will not, in the aggregate, have a
material adverse effect on the Company.
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 14, 1998.
13
<PAGE> 14
b) The following Directors of the Company were elected during the
Annual Meeting:
Angus Cotton
P.R. Easterlin, Jr.
James L. Gray
John G. McGarty
Joseph F. Vercellotti
The following Directors' terms of office as Directors of the
Company continued after the Annual Meeting:
Paul B. Barringer, II
Thomas G. Daniels
Ralph L. Dupps, Jr.
Charles W. Flynn
Norman P. Harberger
Michael E. Lawrence
Thomas C. Morton
Robert W. Siler, Jr.
Arthur P. Sundry
Frank E. Zimmerman, Jr.
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, 1998. The ratification passed with
1,272,300 affirmative votes, 3,750 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)
99.1-Safe Harbor Disclosure
(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 12, 1998 Charles W. Flynn
------------- ----------------
Charles W. Flynn
Chairman
Date: June 12, 1998 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, 1998 FORM
10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH APRIL 30, 1998 FORM
10-Q
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> APR-30-1998
<CASH> 3,184
<SECURITIES> 0
<RECEIVABLES> 3,746
<ALLOWANCES> 69
<INVENTORY> 736
<CURRENT-ASSETS> 6,163
<PP&E> 41,415
<DEPRECIATION> 10,609
<TOTAL-ASSETS> 39,575
<CURRENT-LIABILITIES> 8,054
<BONDS> 0
0
7,218
<COMMON> 2,166
<OTHER-SE> 3,536
<TOTAL-LIABILITY-AND-EQUITY> 39,575
<SALES> 15,565
<TOTAL-REVENUES> 15,565
<CGS> 0
<TOTAL-COSTS> 14,514
<OTHER-EXPENSES> 669
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 735
<INCOME-PRETAX> 382
<INCOME-TAX> 130
<INCOME-CONTINUING> 252
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 252
<EPS-PRIMARY> (.10)
<EPS-DILUTED> (.10)
</TABLE>
<PAGE> 1
EXHIBIT 99.1
TO FORM 10-Q OF
SEA PINES ASSOCIATES, INC.
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
SAFE HARBOR COMPLIANCE STATEMENT
FOR FORWARD-LOOKING STATEMENTS
In passing the Private Securities Litigation Reform Act of 1995 (the
"Reform Act"), 15 U.S.C.A. Sections 77z-2 and 78u-5 (Supp. 1996), Congress
encouraged public companies to make "forward-looking statements" by creating a
safe harbor to protect companies from securities law liability in connection
with forward-looking statements. Sea Pines Associates, Inc. ("Sea Pines" or the
"Company") intends to qualify both its written and oral forward-looking
statements for protection under the Reform Act and any other similar safe harbor
provisions.
"Forward-looking statements" are defined by the Reform Act. Generally,
forward-looking statements include expressed expectations of future events and
the assumptions on which the expressed expectations are based. All
forward-looking statements are inherently uncertain as they are based on various
expectations and assumptions concerning future events and they are subject to
numerous known and unknown risks and uncertainties which could cause actual
events or results to differ materially from those projected. Due to those
uncertainties and risks, the investment community is urged not to place undue
reliance on written or oral forward-looking statements of Sea Pines. The Company
undertakes no obligation to update or revise this Safe Harbor Compliance
Statement for Forward-Looking Statements (the "Safe Harbor Statement") to
reflect future developments. In addition, Sea Pines undertakes no obligation to
update or revise forward-looking statements to reflect changed assumptions, the
occurrence of unanticipated events or changes to future operating results over
time.
Sea Pines provides the following risk factor disclosure in connection
with its continuing effort to qualify its written and oral forward-looking
statements for the safe harbor protection of the Reform Act and other similar
safe harbor provisions. Important factors currently known to management that
could cause actual results to differ materially from those in forward-looking
statements include the disclosures contained in this report on Form 10-Q to
which this statement is appended as an exhibit and also include the following:
Risks Related to Resort Operations. The risks associated with the
Company's resort operations include the intense competition among local,
regional and national resorts, the dependence upon Sea Pines and Hilton Head
continuing to be considered as prime destination resort areas, the seasonality
of the resort business, economic conditions
<PAGE> 2
which may adversely affect tourism generally, adverse weather conditions, the
possibility of oil or hazardous waste spills offshore, the impact of increased
fuel or other transportation costs on travel, adverse changes in applicable
environmental regulation and the possible loss of one or more of the Company's
national golf or tennis tournaments. There can be no assurance that the Company
will be able to compete successfully in the future with existing and future
competitors, or that the Company and Hilton Head Island will be able to continue
to attract the level of resort business the Company has experienced in the past.
Risks Related to Real Estate Brokerage Operations. Risks associated
with the Company's real estate brokerage operations include general reductions
in resort visitors, rising interest rates, other economic conditions which may
adversely affect real estate sales in general or vacation or second-home sales
in particular, competition from other real estate brokerage firms and the loss
of key brokers and agents.
Risks Related to Retirement Community Investment. Risks associated with
the TidePointe Retirement Community include the risk that the Company's
investment in the Partnership may not be recovered, or may be recovered much
later than originally anticipated, by reason of operational difficulties of the
Partnership and the disruption resulting from the financial and regulatory
difficulties facing the parent company of its majority general partner.
Risks Related to Litigation and Other Factors. Other factors which
could affect the Company's operations include the risk of adverse outcomes on
pending litigation, the availability of adequate debt or equity capital to
finance possible future capital expenditures, improvements and repairs, and the
loss of key members of management.
Risks Related to Potential "Year 2000" Problems. There can be no
assurance that the Company will identify all year 2000 problems in its computer
systems in advance of their occurrence or that the Company will be able to
successfully remedy any problems that are discovered. The Company cannot be
assured that it has adequately estimated the expenses of the Company's efforts
to identify and address such problems, or the expenses to which the Company may
become subject as a result of such problems, or that such expenses will not,
ultimately have a material adverse effect on the Company's business, financial
condition and results of operations. In addition, failure of the Company to
identify and remedy Year 2000 problems could put the Company at a competitive
disadvantage relative to companies that have corrected such problems.
