<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 January 31, 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 January
31, 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 January 31, 1998 and October 31, 1997 3 - 4
Condensed Consolidated Statements of Operations for
the Three Months Ended January 31, 1998 and 1997 5
Condensed Consolidated Statements of Cash Flows
for the Three Months ended January 31, 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 - 12
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
Item 5 - Other Information 13
Item 6 - Exhibits and Reports on Form 8-K 13
Signatures 14
<PAGE> 3
SEA PINES ASSOCIATES, INC.
SEA PINES ASSOCIATES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
JANUARY 31, OCTOBER 31,
1998 1997
ASSETS (UNAUDITED) (NOTE)
----------- -----------
<S> <C> <C>
CURRENT ASSETS:
CASH AND CASH EQUIVALENTS:
UNRESTRICTED ($ 312) $ 215
RESTRICTED 2,093 1,965
-------- -------
1,781 2,180
ACCOUNTS AND NOTES RECEIVABLE, NET OF ALLOWANCE FOR
DOUBTFUL ACCOUNTS OF $84 AND $73 AT JANUARY 31, 1998
AND OCTOBER 31, 1997, RESPECTIVELY 688 965
CURRENT PORTION OF NOTES RECEIVABLE 407 402
INVENTORIES (NOTE 2) 603 617
PREPAID EXPENSES 241 240
-------- -------
TOTAL CURRENT ASSETS 3,720 4,404
-------- -------
NOTES RECEIVABLE - OTHER 1,867 1,894
INVESTMENT IN AND ADVANCES TO
TIDEPOINTE PARTNERS, NET -- --
DEFERRED INCOME TAXES 1,147 805
DEFERRED LOAN FEES, NET 53 61
OTHER ASSETS, NET 86 87
REAL ESTATE ASSETS
CONSTRUCTION IN PROGRESS 668 598
OPERATING PROPERTIES, NET 22,936 22,942
PROPERTIES HELD FOR FUTURE DEVELOPMENT 7,023 7,023
-------- -------
30,627 30,563
-------- -------
TOTAL ASSETS $ 37,500 $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>
JANUARY 31, OCTOBER 31,
1998 1997
LIABILITIES AND SHAREHOLDERS' EQUITY (UNAUDITED) (NOTE)
----------- -----------
<S> <C> <C>
CURRENT LIABILITIES:
ACCOUNTS PAYABLE AND ACCRUED EXPENSES $ 1,815 $ 1,810
ADVANCE DEPOSITS 2,309 1,880
LINE OF CREDIT WITH BANK 1,454 467
INCOME TAXES PAYABLE -- 166
CURRENT PORTION OF DEFERRED REVENUE 435 439
CURRENT MATURITIES OF LONG-TERM DEBT 810 810
------- -------
TOTAL CURRENT LIABILITIES 6,823 5,572
------- -------
LONG-TERM DEBT 17,909 17,909
OTHER DEFERRED REVENUE 764 778
------- -------
TOTAL LIABILITIES 25,496 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 2,620 4,171
------- -------
TOTAL SHAREHOLDERS' EQUITY 12,004 13,555
------- -------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $37,500 $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>
THREE MONTHS ENDED
JANUARY 31,
1998 1997
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
REVENUES $ 5,295 $ 4,889
COST AND EXPENSES:
COST OF REVENUES 4,291 3,988
SALES AND MARKETING EXPENSES 477 601
GENERAL AND ADMINISTRATIVE EXPENSES 848 918
DEPRECIATION AND AMORTIZATION 361 374
------- -------
TOTAL COSTS AND EXPENSES 5,977 5,881
------- -------
OPERATING LOSS (682) (992)
OTHER INCOME (EXPENSE):
EQUITY IN LOSS OF TIDEPOINTE PARTNERS -- (59)
INTEREST INCOME 35 71
INTEREST EXPENSE (359) (376)
------- -------
TOTAL OTHER EXPENSE (324) (364)
------- -------
LOSS BEFORE INCOME TAXES (1,006) (1,356)
INCOME TAX BENEFIT 342 461
------- -------
NET LOSS (664) (895)
PREFERRED STOCK DIVIDEND REQUIREMENT (222) (222)
------- -------
NET LOSS ATTRIBUTABLE TO COMMON STOCK ($ 886) ($1,117)
======= =======
PER SHARE OF COMMON STOCK
NET LOSS ($ 0.48) ($ 0.61)
======= =======
</TABLE>
SEE ACCOMPANYING NOTES.
-5-
<PAGE> 6
SEA PINES ASSOCIATES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JANUARY 31,
1997 1997
(UNAUDITED) (UNAUDITED)
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
NET LOSS ($664) ($ 895)
ADJUSTMENTS TO RECONCILE NET LOSS TO
NET CASH USED IN OPERATING ACTIVITIES:
DEPRECIATION AND AMORTIZATION 361 374
INCREASE (DECREASE) IN DEFERRED REVENUE (18) 110
INCREASE IN ALLOWANCE FOR DOUBTFUL ACCOUNTS 11 --
INCREASE IN DEFERRED INCOME TAXES (342) (461)
EQUITY IN LOSS OF TIDEPOINTE PARTNERS -- 59
CHANGES IN CURRENT ASSETS AND LIABILITIES:
INCREASE IN RESTRICTED CASH (128) (404)
DECREASE IN ACCOUNTS AND NOTES RECEIVABLE 299 278
DECREASE IN INVENTORIES 14 110
INCREASE IN PREPAID EXPENSES (1) (26)
DECREASE IN OTHER ASSETS 1 41
DECREASE IN ACCOUNTS PAYABLE AND ACCRUED EXPENSES (663) (825)
INCREASE IN ADVANCE DEPOSITS 429 621
DECREASE IN INCOME TAXES PAYABLE (166) (142)
----- -------
NET CASH USED IN OPERATING ACTIVITIES (867) (1,160)
----- -------
CASH FLOWS FROM INVESTING ACTIVITIES:
CAPITAL EXPENDITURES AND PROPERTY ACQUISITIONS (425) (660)
ADDITIONS TO NOTE RECEIVABLE FROM TIDEPOINTE PARTNERS -- (41)
----- -------
NET CASH USED IN INVESTING ACTIVITIES (425) (701)
----- -------
CASH FLOWS FROM FINANCING ACTIVITIES:
PRINCIPAL REPAYMENTS OF DEBT -- (190)
ADDITIONAL BORROWINGS ON LINE OF CREDIT 987 1,400
ADDITIONS TO ADVANCE FROM TIDEPOINTE PARTNERS -- 303
DIVIDENDS PAID (222) (222)
----- -------
NET CASH PROVIDED BY FINANCING ACTIVITIES 765 1,291
----- -------
NET DECREASE IN UNRESTRICTED CASH AND CASH EQUIVALENTS (527) (570)
UNRESTRICTED CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 215 232
----- -------
UNRESTRICTED CASH AND CASH EQUIVALENTS AT END OF PERIOD ($312) ($ 338)
===== =======
</TABLE>
SEE ACCOMPANYING NOTES.
-6-
<PAGE> 7
SEA PINES ASSOCIATES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 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 three month period
ended January 31, 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>
January 31, October 31,
1998 1997
---- ----
<S> <C> <C>
Merchandise $531 $546
Supplies, parts and accessories 35 35
Food and beverages 7 11
Other 30 25
---- ----
$603 $617
==== ====
</TABLE>
7
<PAGE> 8
NOTE 3 - OPERATING PROPERTIES
Operating properties consist of the following (amounts in thousands):
<TABLE>
<CAPTION>
January 31, October 31,
1998 1997
-------- --------
<S> <C> <C>
Land and land improvements $ 19,900 $ 19,884
Buildings 7,121 7,051
Machinery and equipment 5,914 5,645
Property held under capital leases 251 251
-------- --------
33,186 32,831
Less - Accumulated depreciation (10,250) (9,889)
-------- --------
$ 22,936 $ 22,942
======== ========
</TABLE>
NOTE 4 - EARNINGS PER SHARE
The Company has restated its earnings per share as required by Statement of
Financial Accounting Standards No. 128, Earnings Per Share. There was no effect
of such restatement; furthermore, basic and diluted earnings per share are
identical for both periods. 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 January 31,
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. Both the Company and the State of Ohio are
continuing the process of evaluating the Partnership's assets and seeking buyers
for Providers Enterprises Inc.'s partnership interest or for the Partnership's
assets.
Liquidity and Capital Resources
The Company's financial results from its resort operations and real
estate brokerage activities experience fluctuations by season. The period from
November through March has historically been the Company's low resort revenue
and real estate sales season and the period from April through October has been
the Company's high season. Therefore, significant decreases in the Company's
liquidity, cash resources and working capital are expected during the first
fiscal quarter.
Cash and cash equivalents decreased by $399,000 during the first
quarter of 1998 and totaled $1,781,000 at January 31, 1998, of which $2,093,000
was restricted. The Company's working capital deficit increased by $1,935,000 in
the first quarter resulting in a working capital deficit of $3,103,000 at
January 31, 1998. These reductions 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 January 31, 1998,
the outstanding balance on the line of credit totaled $1,454,000. 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 January 31, 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 of which was paid on January 15, 1998. Additional
quarterly installments will be paid on April 15, 1998, 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 a consolidated net loss during the first quarter
of 1998 of $664,000. The consolidated net loss reported during the first quarter
of 1997 was
10
<PAGE> 11
$895,000. These losses reflect the seasonal nature of the Company's resort
operations. Losses during the first quarter are anticipated and are consistent
with previous year's operating results.
Consolidated revenues during the three months ended January 31, 1998
totaled $5,295,000, a 8.3% increase over consolidated revenue reported during
the three months ended January 31, 1997 of $4,889,000. Resort revenues increased
3.3% during the first quarter from $2,776,000 in 1997 to $2,867,000 in 1998. The
increase in resort revenues is a result of improved first quarter performance of
the Company's lodging and golf divisions. The lodging division experienced a
17.7% increase in the number of guest occupied nights as compared to the same
period last year. The golf division increased its revenue over the prior year
despite the unusually high number of rain days in the current year.
Real estate brokerage revenues increased by $317,000, or 15%, to
$2,430,000 during the first quarter ended January 31, 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 $303,000, or 7.6% during the first
quarter of 1998 compared to the same period last year. This increase is
primarily the result of volume increases in both resort and real estate
revenues.
Sales and marketing expenses decreased by $124,000 or 20.6% during the
first quarter of 1998 over the same period last year. This decrease is
attributable to the delay of certain collateral materials and media placements
into the remaining quarters of 1998.
General and administrative expenses decreased by $70,000 or 7.6% from
the same period last year. The Company continues to closely monitor its
controllable general and administrative expenses.
Interest expense on the Company's debt remained relatively constant at
$359,000 and $376,000 during the first 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
11
<PAGE> 12
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 50-60 room hotel adjacent to the site. See further discussion
under Part II Item 1 "Legal Proceedings". The Company is also currently planning
this hotel 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 will be between $5-6 million.
During fiscal 1998 the Company, in its role as minority general partner
in the Partnership, plans to work closely with the Insurance Department of the
State of Ohio concerning the TidePointe project. This work will focus on helping
the project achieve its potential, while assisting the Insurance Department in
seeking a purchaser for PIE Mutual's 82.5% partnership interest or possibly for
the Partnership's assets in total.
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 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.
12
<PAGE> 13
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 adjoining 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 hotel adjacent to the site.
The construction of the hotel must commence within two years of the completion
of the conference center. However the hotel could be built simultaneously or
prior to the conference center.
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
None
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
13
<PAGE> 14
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: March 16, 1997 Charles W. Flynn
-------------- ----------------
Charles W. Flynn
Chairman
Date: March 16, 1997 Thomas C. Morton
-------------- ----------------
Thomas C. Morton
Treasurer
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONTAINED IN THE JANUARY 31, 1998
FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH JANUARY 31, 1998
FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> JAN-31-1998
<CASH> 1,781
<SECURITIES> 0
<RECEIVABLES> 3,046
<ALLOWANCES> 84
<INVENTORY> 603
<CURRENT-ASSETS> 3,720
<PP&E> 40,877
<DEPRECIATION> 10,250
<TOTAL-ASSETS> 37,500
<CURRENT-LIABILITIES> 6,823
<BONDS> 0
0
7,218
<COMMON> 2,166
<OTHER-SE> 2,620
<TOTAL-LIABILITY-AND-EQUITY> 12,004
<SALES> 5,295
<TOTAL-REVENUES> 5,295
<CGS> 2,401
<TOTAL-COSTS> 4,291
<OTHER-EXPENSES> 1,686
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 324
<INCOME-PRETAX> (1,006)
<INCOME-TAX> (342)
<INCOME-CONTINUING> (664)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (664)
<EPS-PRIMARY> (.48)
<EPS-DILUTED> (.48)
</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
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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.
