<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, 1999
-------------
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)
(843) 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,
1999 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, 1999 and October 31, 1998 3 - 4
Condensed Consolidated Statements of Operations for
the Nine Months Ended July 31, 1999 and 1998 5
Condensed Consolidated Statements of Cash Flows
for the Nine Months ended July 31, 1999 and 1998 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
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 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
<PAGE> 3
SEA PINES ASSOCIATES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
JULY 31, OCTOBER 31,
1999 1998
(UNAUDITED) (NOTE)
--------------------------------------------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents:
Unrestricted $ 860 $ 591
Restricted 3,917 2,008
--------------------------------------------
4,777 2,599
Accounts and notes receivable, net of allowance for
doubtful accounts of $55 and $50 at July 31, 1999 and 1,072 1,027
October 31, 1998, respectively
Current portion of notes receivable 409 441
Inventories (Note 2) 670 653
Prepaid expenses 331 132
--------------------------------------------
Total current assets 7,259 4,852
Notes receivable, less current portion 1,736 1,767
Deferred income taxes 316 316
Deferred loan fees, net 39 70
Other assets, net 79 82
Real estate assets
Construction in progress 2,341 1,135
Operating properties, net 24,205 22,680
Properties held for future development 7,023 7,023
--------------------------------------------
33,569 30,838
--------------------------------------------
Total assets $42,998 $37,925
============================================
</TABLE>
Note: The condensed consolidated balance sheet at October 31, 1998 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,
1999 1998
(UNAUDITED) (NOTE)
--------------------------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 4,369 $ 2,469
Advance deposits 2,685 1,946
Income taxes payable 124 113
Current portion of deferred revenue 575 623
Current maturities of long-term debt 367 367
--------------------------------------------
Total current liabilities 8,120 5,518
Long-term debt 17,949 16,792
Deferred revenue 917 897
--------------------------------------------
Total liabilities 26,986 23,207
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 6,628 5,334
--------------------------------------------
Total shareholders' equity 16,012 14,718
--------------------------------------------
Total Liabilities and Shareholders' Equity $42,998 $37,925
============================================
</TABLE>
Note: The condensed consolidated balance sheet at October 31, 1998 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,
1999 1998 1999 1998
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $14,786 $12,012 $34,725 $27,577
Cost and expenses:
Cost of revenues 10,621 8,346 25,191 19,488
Sales and marketing expenses 716 516 2,132 1,518
General and administrative expenses 1,089 1,014 2,898 2,662
Depreciation and amortization 313 314 919 1,036
----------------------------------------------------------------------------
Total costs and expenses 12,739 10,190 31,140 24,704
----------------------------------------------------------------------------
Income from operations 2,047 1,822 3,585 2,873
Other income (expense):
Interest income 51 37 112 103
Interest expense (296) (343) (916) (1,078)
Gain on sale of healthcare business and assets
-- 179 -- 179
Gain on sale of assets 524 -- 524 --
----------------------------------------------------------------------------
Total other income (expense) 279 (127) (280) (796)
----------------------------------------------------------------------------
Income before income taxes 2,326 1,695 3,305 2,077
Income tax provision 791 577 1,124 706
----------------------------------------------------------------------------
Net income 1,535 1,118 2,181 1,371
Preferred stock dividend requirement (222) (222) (667) (667)
----------------------------------------------------------------------------
Net income attributable to common stock $1,313 $ 896 $ 1,514 $ 704
============================================================================
Per share of common stock
Net income $ 0.71 $ 0.49 $ 0.82 $ 0.38
=============================================================================
</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,
1999 1998
(UNAUDITED) (UNAUDITED)
-----------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 2,181 $ 1,371
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 919 1,078
Decreases in deferred revenue (28) (7)
Increase in allowance for doubtful accounts 5 1
Decrease in deferred income taxes -- 706
Changes in assets and liabilities:
Increase in restricted cash (1,909) (973)
Increase in accounts and notes receivable 18 16
Increase in inventories (17) (26)
Increase in prepaid expenses (199) (38)
Decrease in other assets 34 27
Increase in accounts payable and accrued expenses 1,900 1,261
Increase in advance deposits 739 674
Increase (decrease) in income taxes payable 11 (166)
-----------------------------------------
Net cash provided by operating activities 3,654 3,924
-----------------------------------------
Cash Flows from Investing Activities:
Capital expenditures and property acquisitions (3,875) (1,278)
-----------------------------------------
Net cash used in investing activities (3,875) (1,278)
-----------------------------------------
Cash Flows from Financing Activities:
Additional borrowing on term loan 1,341 --
Principal repayments of debt (184) (405)
Repayment of short-term debt -- (467)
Repayment of long-term debt -- (1,600)
Dividends paid (667) (667)
-----------------------------------------
Net cash provided by (used in) financing activities 490 (3,139)
-----------------------------------------
Net increase (decrease) in unrestricted cash and cash equivalents
269 (493)
Unrestricted cash and cash equivalents at start of period 591 215
-----------------------------------------
Unrestricted cash and cash equivalents (overdraft) at end of period $ 860 $ (278)
=========================================
</TABLE>
See accompanying notes.
6
<PAGE> 7
SEA PINES ASSOCIATES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JULY 31, 1999 AND OCTOBER 31, 1998
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 month period
ended July 31, 1999 are not necessarily indicative of the results that may be
expected for the year ended October 31, 1999. 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, 1998.
NOTE 2 - INVENTORIES
Inventories consist of the following (amounts in thousands):
July 31, October 31,
1999 1998
-------- ----------
Merchandise $ 556 $ 580
Supplies, parts and accessories 35 35
Food and beverages 49 10
Other 30 28
------- -------
$ 670 $ 653
======= =======
7
<PAGE> 8
NOTE 3 - OPERATING PROPERTIES
Operating properties consist of the following (amounts in thousands):
July 31, October 31,
1999 1998
-------- -----------
Land and land Improvements $ 21,495 $ 20,140
Buildings 7,244 7,103
Machinery and equipment 7,059 6,399
Property held under capital leases 251 251
-------- --------
36,049 33,893
Less - Accumulated depreciation (11,844) (11,213)
-------- --------
$ 24,205 $ 22,680
======== ========
NOTE 4 - EARNINGS PER SHARE
Income (loss) per share of common stock is calculated by dividing net income or
loss after preferred stock dividend requirements by the weighted average number
of outstanding shares of common stock. Furthermore, basic and diluted earnings
per share are identical for all periods presented. Potentially diluted
securities consist of additional shares of common stock issuable when the stock
rights become exercisable. These contingently issuable shares have not been
included in basic or 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 thirteen offices serving Hilton Head
Island and its neighboring communities.
Liquidity and Capital Resources
Cash and cash equivalents increased by $350,000, during the third
quarter of 1999 and totaled $4,777,000 at July 31, 1999 of which $3,917,000 was
restricted. The Company's working capital deficit decreased by $907,000 in the
third quarter resulting in a working capital deficit of $861,000 at July 31,
1999. These increases in cash and working capital are consistent with the
seasonal nature of the Company's operations.
9
<PAGE> 10
Under a Master Credit Agreement with its principal corporate lender,
the Company maintains a term loan, a revolving line of credit and a seasonal
line of credit. Available funds under these facilities total $36,000,000 of
which $18,316,000 was outstanding at July 31, 1999.
The term loan in the principal sum of $18,500,000 matures on October
31, 2008. As of July 31, 1999, $18,316,000 was outstanding under the term loan.
The $15,000,000 revolving line of credit is maintained by the Company
primarily to fund its capital projects. The bank has approved the entire
$15,000,000 line for use in the construction of the Company's inn, conference
center and racquet club renovations. As of July 31, 1999 there was no
outstanding amount under the revolving line of credit.
The seasonal line of credit in the amount of $2,500,000 is designed to
meet cash requirements during the Company's off-season winter months. As of July
31, 1999, there was no outstanding amount under the revolving line of credit.
Preferred stock dividends are declared and paid one year in arrears. At
its December 1998 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, 1999, April 15,
1999 and July 15, 1999. Declared, but unpaid, amounts are recorded as dividends
payable. The fourth quarterly installment will be paid on October 15, 1999 to
shareholders of record on the first day of October.
Results of Operations for 1999 as Compared with 1998
The Company reported consolidated net income during the third quarter
of 1999 of $1,535,000, a 37% increase over the 1998 third quarter net income of
$1,118,000.
Consolidated revenues during the three months ended July 31, 1999
totaled $14,786,000, a 23% increase over consolidated revenues reported during
the three months ended July 31, 1998 of $12,012,000.
Resort revenues during the third quarter of 1999 increased by
$1,136,000 or 12.8% over third quarter 1998 resort revenues. The Company
attributes the increase in resort revenues to an increase in lodging revenue
partially generated from the acquisition of additional units onto the Company's
rental program.
Real estate brokerage revenues increased by $1,372,000, or 41.5%, to
$4,675,000 during the third quarter ended July 31, 1999 from the same period
last year. This increase in real estate revenues reflects both the continued
strength in market demand and the rapidly appreciating property values within
the Hilton Head Island market area. The
10
<PAGE> 11
Company continues to increase its market share of sales and listings.
Cost of revenues increased by $2,275,000, or 27.3% during the third
quarter of 1999 compared to the same period last year. This increase can be
attributed to the volume increase in real estate brokerage sales and lodging
rental revenues. Additionally, the costs associated with the real estate
brokerage sales have increased. The average commission paid to the Company's
agents as a percentage of revenue has increased from 67.4% in 1998 to 69.8% in
1999. However, despite this increase in commissions paid, the Real Estate
Company's net income as a percentage of revenue has increased to 11.9% in 1999
as compared to 10.5% in 1998.
Sales and marketing expenses have increased by $200,000 or 38.8% during
the third quarter of 1999 as compared to the same period last year. This
increase relates primarily to three factors: first, advertising related to the
significant increase in real estate brokerage sales; second, pre-opening sales
and marketing costs associated with the inn and conference center under
construction; and, third, specific marketing targeted at increasing rentals at
the SeaCrest, a new condominium project on the Island where the Company manages
over 60 units.
General and administrative expenses increased by $75,000 or 7.4% during
the third quarter of 1999 compared to the same period last year. The Company has
experienced increases in the cost of health benefits provided to its employees
and also in its property taxes due to a countywide reassessment of property
values.
Interest expense on the Company's debt decreased by $47,000 or 13.7%
from the same period last year. This decrease results from a reduction in
interest rates obtained as part of the October 1998 refinancing and swap
agreement and interest capitalized in the inn, conference center and racquet
club construction projects.
Business Outlook and Recent Developments
The Company has entered into construction contracts and has commenced
construction on The Inn at Harbour Town, The Heritage Conference Center and the
court reconstruction phase of the Sea Pines Racquet Club renovation.
Construction contracts signed to date total approximately $12,500,000. Total
project costs are estimated at $17,200,000 for all three projects. As of July
31, 1999, total combined project costs spent to date are $2,041,000.
The Inn at Harbour Town will be a 47,000 square-foot facility featuring
60 rooms and will be adjacent to and provide views of the Harbour Town Golf
Course. Total construction costs are estimated at $10,600,000. As of July 31,
1999, $1,090,000 has been spent. Completion is scheduled for the fall of 2000.
11
<PAGE> 12
The Heritage Conference Center will be a 16,000 square-foot facility
adjacent to the existing Harbour Town Clubhouse. Total construction costs are
estimated at $5,500,000. As of July 31, 1999, $863,000 has been spent.
Completion is scheduled for the spring of 2000.
Additionally, the Company is starting work on Phase I of the Sea Pines
Racquet Club renovation. Phase I includes a complete reconfiguration and
reconstruction of the court facilities and surrounding area. Total construction
costs of Phase I have been estimated at $1,100,000. Phase II of the project
includes a permanent 3,800 square-foot facility containing an expanded pro shop,
club offices and meeting room. As of July 31, 1999, $88,000 has been spent.
Completion is scheduled for the spring of 2000. The cost of Phase II is
estimated at $900,000 although no firm start date has been determined.
The Company also is in the planning stages of a major renovation of the
Harbour Town Golf Links. This renovation is tentatively scheduled to commence in
May 2000 with an estimated construction cost of $2,000,000. During the
construction and grow-in, the course will be closed for approximately 8 months.
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 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 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 Sales System, General Ledger System, Credit Card
Processing, Banking relationship and Telecommunications vendor.
The Company has also identified non-critical issues including, but not
limited to,
12
<PAGE> 13
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 issues 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 less than $100,000 to date, all of which has been expensed. The Company
plans to complete the year 2000 project not later than September 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. The Company has not yet determined the extent of
contingency planning that may be required for the Company's critical systems if
unanticipated problems or delays are encountered with its year 2000 project.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
During the three months ended July 31, 1999, there were no material
changes to the quantitative and qualitative disclosures about market risks
presented in the Company's Annual Report on Form 10-K for the year ended October
31, 1998.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
The Company has reached a written settlement agreement with the
plaintiffs that filed a lawsuit against the Company relating to the construction
of a new conference center in the Harbour Town area. See Item 3 "Legal
Proceedings" of the 1998 Form 10-K for a complete discussion of the lawsuit. The
settlement agreement requires the plaintiffs to dismiss their appeal and agree
to be bound by the trial court's order of March 4, 1998 if the Company proceeds
with the construction of a 60-room inn adjacent to the conference center site.
The Company is also obligated to pay $15,000 to the plaintiffs for legal fees
incurred in the appeal. Construction of both the conference center and the inn
began in the third quarter of 1999 and both facilities are expected to be
completed and operational before the end of fiscal year 2000.
The Company has also signed a written settlement agreement with the
plaintiffs in a lawsuit filed by thirteen condominium rental companies and two
individuals relating to an alleged tying arrangement regarding access to the
Company's pools and parking facilities.
13
<PAGE> 14
See Item 3 "Legal Proceedings" of the 1998 Form 10-K for a complete discussion
of the lawsuit. The plaintiffs have agreed to dismiss all claims against the
Company and convey by quit-claim deeds any interest they have in all of the
properties involved in the lawsuit. The Company is required to allow access to
the Company's swimming pools under certain conditions to guests of the
plaintiffs.
There have been no other material changes in any of the legal
proceedings discussed in the Company's 1998 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
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 14, 1999 /s/ Norman P. Harberger
------------------ --------------------------------------
Norman P. Harberger
Chairman
Date: September 14, 1999 /s/ Thomas C. Morton
------------------ --------------------------------------
Thomas C. Morton
Treasurer
15
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS CONTAINED IN THE JULY 31, 1999 FORM
10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH JULY 31, 1999 FORM
10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> JUL-31-1999
<CASH> 4,777
<SECURITIES> 0
<RECEIVABLES> 3,217
<ALLOWANCES> 55
<INVENTORY> 670
<CURRENT-ASSETS> 7,259
<PP&E> 45,413
<DEPRECIATION> 11,844
<TOTAL-ASSETS> 42,998
<CURRENT-LIABILITIES> 8,120
<BONDS> 0
0
7,218
<COMMON> 2,166
<OTHER-SE> 6,628
<TOTAL-LIABILITY-AND-EQUITY> 42,998
<SALES> 34,725
<TOTAL-REVENUES> 34,725
<CGS> 25,191
<TOTAL-COSTS> 25,191
<OTHER-EXPENSES> 5,949
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 804
<INCOME-PRETAX> 3,305
<INCOME-TAX> 1,124
<INCOME-CONTINUING> 2,181
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,181
<EPS-BASIC> .82
<EPS-DILUTED> .82
</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
or other conditions which may adversely affect tourism, vacation resorts or the
vacation or retirement home industries, 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 or future 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.
