<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For quarter ended April 30, 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 April
30, 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 April 30, 1999 and October 31, 1998 3 - 4
Condensed Consolidated Statements of Operations for
the Six Months Ended April 30, 1999 and 1998 5
Condensed Consolidated Statements of Cash Flows
for the Six Months ended April 30, 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 15
Signatures 16
<PAGE> 3
SEA PINES ASSOCIATES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
April 30, October 31,
1999 1998
(Unaudited) (Note)
--------------------------------------------
<S> <C> <C>
Assets
Current Assets:
Cash and cash equivalents:
Unrestricted $ -- $ 591
Restricted 4,527 2,008
--------------------------------------------
4,527 2,599
Accounts and notes receivable, net of allowance for
doubtful accounts of $50 at each date 1,366 1,027
Current portion of notes receivable 406 441
Inventories (Note 2) 620 653
Prepaid expenses 332 132
--------------------------------------------
Total current assets 7,251 4,852
Notes receivable, less current portion 1,763 1,767
Deferred income taxes 316 316
Deferred loan fees, net 43 70
Other assets, net 80 82
Real estate assets
Construction in progress 3,167 1,135
Operating properties, net 22,959 22,680
Properties held for future development 7,023 7,023
--------------------------------------------
33,149 30,838
--------------------------------------------
Total assets $42,602 $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.
<PAGE> 4
SEA PINES ASSOCIATES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
April 30, October 31,
1999 1998
(Unaudited) (Note)
--------------------------------------------
<S> <C> <C>
Liabilities and Shareholders' Equity
Current Liabilities:
Accounts payable and accrued expenses $ 3,885 $ 2,469
Advance deposits 3,719 1,946
Line of credit with bank 314 -
Income taxes payable 333 113
Current portion of deferred revenue 401 623
Current maturities of long-term debt 367 367
--------------------------------------------
Total current liabilities 9,019 5,518
Long-term debt 18,133 16,792
Deferred revenue 973 897
Total liabilities 28,125 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 5,093 5,334
--------------------------------------------
Total shareholders' equity 14,477 14,718
--------------------------------------------
Total Liabilities and Shareholders' Equity $42,602 $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.
<PAGE> 5
SEA PINES ASSOCIATES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
<TABLE>
<CAPTION>
Quarter Ended Six Months Ended
April 30, April 30,
1999 1998 1999 1998
(Unaudited) (Unaudited) (Unaudited) (Unaudited)
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenues $13,395 $10,270 $19,939 $15,565
Cost and expenses:
Cost of revenues 9,140 6,851 14,570 11,142
Sales and marketing expenses 768 525 1,416 1,002
General and administrative expenses 1,000 800 1,809 1,648
Depreciation and amortization 306 361 606 722
-----------------------------------------------------------------------------
Total costs and expenses 11,214 8,537 18,401 14,514
-----------------------------------------------------------------------------
Income from operations 2,181 1,733 1,538 1,051
Other income (expense):
Interest income 28 31 61 66
Interest expense (312) (376) (620) (735)
-----------------------------------------------------------------------------
Total other expenses (284) (345) (559) (669)
-----------------------------------------------------------------------------
Income before income taxes 1,897 1,388 978 382
Provision for income taxes 645 472 333 130
-----------------------------------------------------------------------------
Net income 1,252 916 646 252
Preferred stock dividend requirement (223) (223) (445) (445)
-----------------------------------------------------------------------------
Net income (loss) attributable to common
stock $ 1,029 $ 693 $ 201 $ (193)
=============================================================================
Per share of common stock
Net income (loss) $ 0.56 $ 0.38 $ 0.11 $ (0.10)
=============================================================================
</TABLE>
See accompanying notes.
<PAGE> 6
SEA PINES ASSOCIATES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Six Months Ended
April 30,
1999 1998
(Unaudited) (Unaudited)
-----------------------------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income $ 646 $ 252
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization 606 722
Increase (decrease) in deferred revenue (146) 23
Decrease in allowance for doubtful accounts - (4)
Decrease in deferred income taxes - 130
Changes in current assets and liabilities:
Increase in restricted cash (2,519) (1,767)
Increase in accounts and notes receivable (300) (481)
Decrease (increase) in inventories 33 (119)
Increase in prepaid expenses (200) (58)
Decrease in other assets 29 18
Increase in accounts payable and accrued expenses 974 652
Increase in advance deposits 1,773 1,546
Increase (decrease) in income taxes payable 220 (166)
-----------------------------------------
Net cash provided by operating activities 1,116 748
-----------------------------------------
Cash Flows from Investing Activities:
Capital expenditures and property acquisitions (2,917) (965)
-----------------------------------------
Net cash used in investing activities (2,917) (965)
-----------------------------------------
Cash Flows from Financing Activities:
Additional borrowing on term loan 1,341 --
Borrowings (repayments) on line of credit 314 (101)
Dividends paid (445) (445)
-----------------------------------------
Net cash provided by (used in) financing activities 1,210 (546)
-----------------------------------------
Net decrease in unrestricted cash and cash equivalents (591) (763)
Unrestricted cash and cash equivalents at start of period 591 215
-----------------------------------------
Unrestricted cash and cash equivalents at end of period $ 0 $ (548)
=========================================
</TABLE>
See accompanying notes.
<PAGE> 7
SEA PINES ASSOCIATES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
APRIL 30, 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 six month period
ended April 30, 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):
<TABLE>
<CAPTION>
April 30, October 31,
1999 1998
-------- -----------
<S> <C> <C>
Merchandise $ 542 $ 580
Supplies, parts and accessories 35 35
Food and beverages 14 10
Other 29 28
------- -------
$ 620 $ 653
======= =======
</TABLE>
<PAGE> 8
NOTE 3 - OPERATING PROPERTIES
Operating properties consist of the following (amounts in thousands):
<TABLE>
<CAPTION>
April 30, October 31,
1999 1998
------------------------------------
<S> <C> <C>
Land and land improvements $ 20,395 $ 20,140
Buildings 7,157 7,103
Machinery and equipment 6,973 6,399
Property held under capital leases 251 251
-------- --------
34,776 33,893
Less - Accumulated depreciation (11,817) (11,213)
-------- --------
$ 22,959 $ 22,680
======== ========
</TABLE>
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.
<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 $2,914,000, during the second
quarter of 1999 and totaled $4,527,000 at April 30, 1999 all of which was
restricted. The Company's working capital deficit decreased by $1,914,000 in the
second quarter resulting in a working capital deficit of $1,768,000 at April 30,
1999. These increases in cash and working capital are consistent with the
seasonal nature of the Company's operations.
<PAGE> 10
Under a Master Credit Agreement with its principal corporate lender,
the Company maintains a term loan, revolving line of credit and a seasonal line
of credit. Available funds under these facilities total $36,000,000 of which
$18,814,000 was outstanding at April 30, 1999.
The term loan in the principal sum of $18,500,000 matures on October
31, 2008. As of April 30, 1999, $18,500,000 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. Under the line of credit, $11,000,000
has been pre-approved by the bank for use in the construction of the Company's
planned inn and conference center. The remaining $4,000,000 is restricted to
bank approved uses. As of April 30, 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
April 30, 1999, $314,000 was outstanding on the seasonal line of credit.
Preferred stock dividends are declared and paid one year in arrears. As
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 two of which were paid on January 15, 1999 and April 15,
1999. Declared, but unpaid, amounts are recorded as dividends payable.
Additional quarterly installments will be paid on July 15, 1999 and October 15,
1999 to shareholders of record on the first day of each of those months.
Results of Operations for 1999 as Compared with 1998
The Company reported consolidated net income during the second quarter
of 1999 of $1,252,000, a 37% increase over the 1998 second quarter net income of
$916,000.
Consolidated revenues during the three months ended April 30, 1999
totaled $13,395,000, a 30% increase over consolidated revenues reported during
the three months ended April 30, 1998 of $10,270,000.
Resort revenues during the second quarter of 1999 increased by $628,000
or 7.8% over second quarter 1998 resort revenues. The Company attributes the
increase in resort revenues to two factors: first, to an increase in the lodging
revenue partially generated from the acquisition of additional units onto the
Company's rental program ; and, second, to better weather conditions as compared
to the second quarter of 1998 which continued to feel the effects of the El Nino
weather pattern.
<PAGE> 11
Real estate brokerage revenues increased by $2,557,000, or 115%, to
$4,775,000 during the second quarter ended April 30, 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 Company continues to increase its market
share of sales and listings.
Cost of revenues increased by $2,289,000, or 33.4% during the second
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 67.8% in 1998 to 70.7% in
1999. However, despite this increase in commissions paid, the Real Estate
Company's net income as a percentage of revenue has increased to 11.4% in 1999
as compared to 8.26% in 1998.
Sales and marketing expenses have increased by $243,000 or 46.3% during
the second 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 $200,000 or 25% during
the second 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 $64,000 or 17% from
the same period last year. This decrease results from lower levels of average
outstanding debt and the favorable interest rates obtained as part of the
October 1998 refinancing and swap agreement.
Business Outlook and Recent Developments
The Company expects to enter into construction contracts and commence
construction within the next several weeks on The Inn at Harbour Town, The
Heritage Conference Center and the court reconstruction phase of the Sea Pines
Racquet Club renovation. Initial site work has been completed on these projects.
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. Construction budgets have now been completed and total construction
costs are estimated at $10.7
<PAGE> 12
million. Completion is scheduled for the fall of 2000.
The Heritage Conference Center will be a 16,000 square-foot facility
adjacent to the existing Harbour Town Clubhouse. Construction budgets have now
been completed, and total construction costs are estimated at $5.4 million.
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. It also includes
the location and use of a temporary pro shop building. Total construction costs
of Phase I have been estimated at $1.1 million. Phase II of the project includes
a permanent 3,800 square-foot facility containing an expanded pro shop, club
offices and meeting room. 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. 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, Telecommunications vendor.
<PAGE> 13
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 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 August 31, 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 April 30, 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 had settlement discussions directly with the Plaintiff
in the lawsuit relating to the construction of the Conference Center in Harbour
Town. See Item 3 "Legal Proceedings" of the 1998 Form 10-K for a complete
discussion of the case. The Company is reviewing a recent proposal by the
Plaintiff and anticipates that an outcome favorable to the Company can be
reached. However, no final agreement has been executed and assurance of such
cannot be given at this time.
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
<PAGE> 14
against the Company will not, in the aggregate, have a material adverse effect
on the Company.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters To A Vote of Security Holders
a) The Annual Meeting of Shareholders of the Company was held at
3:00 p.m. (EST) on March 6, 1999.
b) The following Directors of the Company were elected during the
Annual Meeting:
Thomas G. Daniels
Ralph L. Dupps, Jr.
Charles W. Flynn
Arthur P. Sundry
Frank E. Zimmerman, Jr.
The following Directors' terms of office as Directors of the
Company continued after the Annual Meeting:
Paul B. Barringer, II
Angus Cotton
P.R. Easterlin, Jr.
James L. Gray
Norman P. Harberger
Michael E. Lawrence
John G. McGarty
Thomas C. Morton
Robert W. Siler, Jr.
Joseph E. Vercellotti
At the Annual Meeting the Shareholders ratified the appointment of Ernst & Young
LLP as independent auditors for the Company for the fiscal year ending October
31, 1999. The ratification passed with 1,338,000 affirmative votes, 2,250
negative votes and 4,500 abstaining votes.
Item 5. Other Information
None
<PAGE> 15
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
<PAGE> 16
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEA PINES ASSOCIATES, INC.
Date: June 14, 1999 Norman P. Harberger
------------- -------------------
Norman P. Harberger
Chairman
Date: June 14, 1999 Thomas C. Morton
------------- ----------------
Thomas C. Morton
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED CONDENSED FINANCIAL STATEMENTS CONTAINED IN THE APRIL 30, 1999 FORM
10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH APRIL 30, 1999 FORM
10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> APR-30-1999
<CASH> 4,527
<SECURITIES> 0
<RECEIVABLES> 3,535
<ALLOWANCES> 50
<INVENTORY> 620
<CURRENT-ASSETS> 7,251
<PP&E> 44,966
<DEPRECIATION> 11,817
<TOTAL-ASSETS> 42,602
<CURRENT-LIABILITIES> 9,019
<BONDS> 0
0
7,218
<COMMON> 2,166
<OTHER-SE> 5,093
<TOTAL-LIABILITY-AND-EQUITY> 42,602
<SALES> 19,939
<TOTAL-REVENUES> 19,939
<CGS> 14,573
<TOTAL-COSTS> 14,573
<OTHER-EXPENSES> 3,831
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 620
<INCOME-PRETAX> 978
<INCOME-TAX> 333
<INCOME-CONTINUING> 646
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 646
<EPS-BASIC> .11
<EPS-DILUTED> .11
</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.
