<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 July 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 July 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 July 31, 1998 and October 31, 1997 3 - 4
Condensed Consolidated Statements of Operations for
the Nine Months Ended July 31, 1998 and 1997 5
Condensed Consolidated Statements of Cash Flows
for the Nine Months ended July 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 - 13
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 13
Item 2 - Changes in Securities 14
Item 3 - Defaults Upon Senior Securities 14
Item 4 - Submission of Matters To A Vote of
Security Holders 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>
JULY 31, OCTOBER 31,
1998 1997
(UNAUDITED) (NOTE)
--------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents:
Unrestricted (overdraft) $(278) $215
Restricted 2,938 1,965
--------------------------------------------
2,660 2,180
Accounts and notes receivable, net of allowance for
doubtful accounts of $74 and $73 at July 31, 1998 and
October 31, 1997, respectively 963 965
Current portion of notes receivable 441 402
Inventories (Note 2) 643 617
Prepaid expenses 278 240
--------------------------------------------
Total current assets 4,985 4,404
Notes receivable-other 1,841 1,894
Deferred income taxes 99 805
Deferred loan fees, net 38 61
Other assets, net 83 87
Real estate assets
Construction in progress 946 598
Operating properties, net 22,794 22,942
Properties held for future development 7,023 7,023
--------------------------------------------
30,763 30,563
--------------------------------------------
Total assets $37,809 $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>
JULY 31, OCTOBER 31,
1998 1997
(UNAUDITED) (NOTE)
--------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 3,292 $ 1,810
Advance deposits 2,554 1,880
Line of credit with bank - 467
Income taxes payable - 166
Current portion of deferred revenue 665 439
Current maturities of long-term debt 810 810
--------------------------------------------
Total current liabilities 7,321 5,572
Long-term debt 15,904 17,909
Other deferred revenue 545 778
--------------------------------------------
Total liabilities 23,770 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 4,655 4,171
--------------------------------------------
Total shareholders' equity 14,039 13,555
--------------------------------------------
Total Liabilities and Shareholders' Equity $37,809 $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 NINE MONTHS ENDED
JULY 31, JULY 31,
1998 1997 1998 1997
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues, other than healthcare $12,012 $10,816 $27,577 $26,165
Cost and expenses, other than healthcare:
Cost of revenues 8,346 7,535 19,488 18,284
Sales and marketing expenses 516 464 1,518 1,586
General and administrative expenses 1,014 885 2,662 2,649
Depreciation and amortization 314 388 1,036 1,131
-----------------------------------------------------------------------------
Total costs and expenses 10,190 9,272 24,704 23,650
-----------------------------------------------------------------------------
Income from operations, other than healthcare
1,822 1,544 2,873 2,515
Healthcare income (expense)
Revenue - 193 - 345
Cost of revenues - (460) - (989)
Interest expense - (218) - (381)
Gain on sale of health care business
and assets 179 846 179 846
-----------------------------------------------------------------------------
179 361 179 (179)
-----------------------------------------------------------------------------
Income from operations 2,001 1,905 3,052 2,336
Other income (expense):
Equity in loss of TidePointe Partners - (180) - (239)
Interest income 37 75 103 231
Interest expense (343) (379) (1,078) (1,137)
-----------------------------------------------------------------------------
Total other expenses (306) (484) (975) (1,145)
-----------------------------------------------------------------------------
Income before income taxes 1,695 1,421 2,077 1,191
Income tax provision 577 483 706 405
-----------------------------------------------------------------------------
Net income 1,118 938 1,371 786
Preferred stock dividend requirement (222) (222) (667) (667)
-----------------------------------------------------------------------------
Net income attributable to common stock $896 $ 716 $ 704 $ 119
=============================================================================
Per share of common stock
Net income $ 0.49 $ 0.39 $ 0.38 $ 0.06
=============================================================================
</TABLE>
See accompanying notes.
5
<PAGE> 6
SEA PINES ASSOCIATES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
JULY 31,
1998 1997
(UNAUDITED) (UNAUDITED)
-----------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 1,371 $786
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization 1,078 1,131
Increase (decrease) in deferred revenue (7) 506
Increase in allowance for doubtful accounts 1 67
Decrease in deferred income taxes 706 405
Equity in loss of TidePointe Partners - 239
Changes in current assets and liabilities:
Increase in restricted cash (973) (950)
Decrease in accounts and notes receivable 16 269
(Increase) decrease in inventories (26) 81
Increase in prepaid expenses (38) (71)
Decrease in other assets 27 124
Increase in accounts payable and accrued expenses 1,261 556
Increase in advance deposits 674 404
Decrease in income taxes payable (166) (142)
-----------------------------------------
Net cash provided by operating activities 3,924 3,405
-----------------------------------------
Cash Flows from Investing Activities:
Capital expenditures and property acquisitions (1,278) (1,243)
Additions to note receivable from TidePointe Partners - (122)
-----------------------------------------
Net cash used in investing activities (1,278) (1,365)
-----------------------------------------
Cash Flows from Financing Activities:
Principal repayments of debt (405) (570)
Repayment of short-term debt (467) (775)
Repayment of long-term debt (1,600) -
Dividends paid (667) (667)
-----------------------------------------
Net cash used in financing activities (3,139) (2,012)
-----------------------------------------
Net (decrease) in unrestricted cash and cash equivalents (493) 28
Unrestricted cash and cash equivalents at start of period 215 232
-----------------------------------------
Unrestricted cash and cash equivalents (overdraft) at end of
period $ (278) $ 260
=========================================
</TABLE>
See accompanying notes.
6
<PAGE> 7
SEA PINES ASSOCIATES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 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 nine months period
ended July 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>
July 31, October 31,
1998 1997
-------- -----------
<S> <C> <C>
Merchandise $569 $546
Supplies, parts and accessories 35 35
Food and beverages 12 11
Other 27 25
---- ----
$643 $617
==== ====
</TABLE>
7
<PAGE> 8
NOTE 3 - OPERATING PROPERTIES
Operating properties consist of the following (amounts in thousands):
<TABLE>
<CAPTION>
July 31, October 31,
1998 1997
-------- -----------
<S> <C> <C>
Land and land improvements $ 20,076 $ 19,884
Buildings 7,103 7,051
Machinery and equipment 6,270 5,645
Property held under capital leases 251 251
-------- --------
33,700 32,831
Less - Accumulated depreciation (10,906) (9,889)
-------- --------
$ 22,794 $ 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 on such
calculation when 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") which is in the process of liquidation as described below. 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
9
<PAGE> 10
more fully discussed in the Company's fiscal 1997 Annual Report on Form 10-K.
During the quarter ended July 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 and advances to the Partnership as of
October 31, 1997, the Company did not record its 17.5% of such Partnership
losses in this quarter.
On June 30, 1998 TidePointe Partners closed on the sale of all of the
TidePointe assets to CC-Hilton Head, Inc. (an affiliate of Classic Residences by
Hyatt) for a sales price of $23,200,000. At closing, the Company received no
cash funds or other consideration and released its mortgage on the TidePointe
property which secured its investments and loans to the project. The Company has
no ownership interest in CC-Hilton Head, Inc. and no longer has any ownership
interest in the TidePointe project. TidePointe Partners is in the process of
winding up its affairs and intends to liquidate in 1998. The Company will
receive no additional funds from the Partnership.
The Company has entered into a 25-year license and use agreement with
CC-Hilton Head, Inc. 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 agreement the Company will receive annual
license fees totaling $4,125,000 over the 25-year term.
Liquidity and Capital Resources
Cash and cash equivalents decreased by $524,000 during the third
quarter of 1998 and totaled $2,660,000 at July 31, 1998, of which $2,938,000 was
restricted. The Company's working capital deficit increased by $445,000 in the
third quarter resulting in a working capital deficit of $2,336,000 at July 31,
1998. The changes reflect both the seasonal nature of advance deposits on future
lodging business and the Company's use of available cash to temporarily repay
long term debt to reduce its interest costs.
The Company maintains a $2.5 million seasonal line of credit used to
meet cash requirements during the Company's off-season. As of July 31, 1998, the
line of credit had no outstanding balance. 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 July 31, 1998, the outstanding balance on the revolving credit facility
totaled $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 three of which were paid on January 15, 1998, April
15, 1998, and July 15, 1998. The fourth quarterly installment will be paid on
October 15, 1998 to shareholders of record on the first day of October.
10
<PAGE> 11
Results of Operations for 1998 as Compared with 1997
The Company reported consolidated net income during the third quarter
of 1998 of $1,118,000. The consolidated net income reported during the third
quarter of 1997 was $938,000.
Consolidated revenues during the three months ended July 31, 1998
totaled $12,012,000, a 11.1% increase over consolidated revenues reported during
the three months ended July 31, 1997 of $10,816,000. Resort revenues increased
3.6% during the third quarter from $8,411,000 in 1997 to $8,710,000 in 1998.
Real estate brokerage revenues increased by $898,000 or 37%, to
$3,302,000 during the third quarter ended July 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 $811,000, or 10.8% during the third
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 64.4% in 1997 to 67.4% in
1998.
Sales and marketing expenses increased during the third quarter by
$52,000 or 12.5% compared to the same period last year. This increase is
attributable to the delay of certain collateral materials and media placements
from the first and second quarters into the third quarter. Year to date sales
and marketing expenses remain 4.2% below prior year.
General and administrative expenses increased by $129,000 or 14.6% from
the same period last year. This increase results from two non-recurring items.
First, legal costs increased due to the Company's costs related to its
TidePointe investment and the sale of the TidePointe assets, and, second, the
Company paid a severance package to a former employee in its lodging division.
These increases were partially offset by savings the Company has achieved in
insurance and 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. However, due to the sale of all the TidePointe assets
including the healthcare facility, the portion of the gain previously deferred
on the sale of the healthcare facility of $179,000 was recognized in the quarter
ended July 31, 1998.
Interest expense on the Company's debt decreased by $36,000 or 9.5%
during the
11
<PAGE> 12
third quarter of 1998. In addition to scheduled principal payments the Company
has made repayments of $1,600,000 on its revolving credit facility. A portion of
these repayments is temporary in nature and will be redrawn during the fourth
quarter.
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 majority of 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 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 firm cost estimate is available;
however, it is anticipated that the cost of the inn will be approximately $6
million. The Company is in final negotiations with its primary lender to modify
and extend existing credit to facilitate the funds necessary to construct the
inn and other projects.
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 its recently completed 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 has divided its Year 2000 issues into what it considers to
be critical and non-critical issues. The Company believes that in its line of
business the critical issues revolve around the ability to process retail
transactions from the reservation stage through settlement and collection.
Additionally, of prime importance
12
<PAGE> 13
is the maintenance of accurate accounting and corporate records.
The systems that the Company has identified as being critical include
but may not be limited to the following: AS400 Operating System, Lodging
Management System, Point of Sale System, General Ledger System, Credit Card
Processing, Banking relationship, Telecommunications vendor.
The Company has also identified non-critical issues including, but not
limited to, stand alone personal computers, computerized irrigation systems,
other third party vendors and possible security systems issues.
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. The Company will
utilize both internal and external resources to program, or replace and test its
software for year 2000 modifications. The Company has not determined the total
cost of the year 2000 project. However, the costs are not expected to exceed
$150,000 nor have a material effect on its financial statements. The Company has
spent to date less than $25,000, which has been expensed as part of the
information services budget. The Company plans to complete the year 2000 project
not later than June 30, 1999 and is currently on schedule to meet this target.
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.
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 an appeal of
the Court's decision primarily as it relates to the timing of the construction
of the inn. The Company is in the process of formulating its response to this
appeal.
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
13
<PAGE> 14
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
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: September 8, 1998 Charles W. Flynn
------------------ ----------------
Charles W. Flynn
Chairman
Date: September 8, 1998 Thomas C. Morton
------------------ ----------------
Thomas C. Morton
Treasurer
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS CONTAINED IN THE JULY 31, 1998 FORM 10-Q AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH JULY 31, 1998 FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1998
<PERIOD-START> NOV-01-1997
<PERIOD-END> JUL-31-1998
<CASH> 2,660
<SECURITIES> 0
<RECEIVABLES> 3,245
<ALLOWANCES> 74
<INVENTORY> 643
<CURRENT-ASSETS> 4,985
<PP&E> 41,669
<DEPRECIATION> 10,906
<TOTAL-ASSETS> 37,809
<CURRENT-LIABILITIES> 23,770
<BONDS> 0
0
7,218
<COMMON> 2,166
<OTHER-SE> 4,655
<TOTAL-LIABILITY-AND-EQUITY> 37,809
<SALES> 27,577
<TOTAL-REVENUES> 27,577
<CGS> 19,448
<TOTAL-COSTS> 19,448
<OTHER-EXPENSES> 5,216
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 975
<INCOME-PRETAX> 2,077
<INCOME-TAX> 706
<INCOME-CONTINUING> 1,371
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,371
<EPS-PRIMARY> .38
<EPS-DILUTED> .38
</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 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.
