<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934.
For quarter ended January 31, 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
January 31, 1999 was 1,842,525.
<PAGE> 2
INDEX TO FORM 10-Q
FOR SEA PINES ASSOCIATES, INC.
Page
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PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as
of January 31, 1999 and October 31, 1998 3 - 4
Condensed Consolidated Statements of Operations for
the Three Months Ended January 31, 1999 and 1998 5
Condensed Consolidated Statements of Cash Flows
for the Three Months ended January 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
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 13
Item 2 - Changes in Securities 13
Item 3 - Defaults Upon Senior Securities 13
Item 4 - Submission of Matters To A Vote of
Security Holders 13
Item 5 - Other Information 13
Item 6 - Exhibits and Reports on Form 8-K 13
Signatures 14
<PAGE> 3
SEA PINES ASSOCIATES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands)
<TABLE>
<CAPTION>
January 31, October 31,
1999 1998
(Unaudited) (Note)
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents:
Unrestricted (overdraft) $ (601) $ 591
Restricted 2,214 2,008
-------- -------
1,613 2,599
Accounts and notes receivable, net of allowance
for doubtful accounts of $50 at each date
769 1,027
Current portion of notes receivable 432 441
Inventories (Note 2) 559 653
Prepaid expenses 125 132
-------- -------
Total current assets 3,498 4,852
Notes receivable, less current portion 1,753 1,767
Deferred income taxes 628 316
Deferred loan fees, net 47 70
Other assets, net 80 82
Real estate assets
Construction in progress 2,032 1,135
Operating properties, net 23,094 22,680
Properties held for future development 7,023 7,023
-------- -------
32,149 30,838
-------- -------
Total assets $ 38,155 $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>
January 31, October 31,
1999 1998
(Unaudited) (Note)
--------------------------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 1,956 $ 2,469
Advance deposits 2,785 1,946
Line of credit with bank 1,591 --
Income taxes payable -- 113
Current portion of deferred revenue 486 623
Current maturities of long-term debt 367 367
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Total current liabilities 7,185 5,518
Long-term debt 16,792 16,792
Other deferred revenue 953 897
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Total liabilities 24,930 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 3,841 5,334
------- -------
Total shareholders' equity 13,225 14,718
------- -------
Total Liabilities and Shareholders' Equity $38,155 $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>
Three Months Ended
January 31,
1999 1998
(Unaudited) (Unaudited)
--------------------------
<S> <C> <C>
Revenues $ 6,544 $ 5,295
Cost and expenses:
Cost of revenues 5,433 4,291
Sales and marketing expenses 645 477
General and administrative expenses 809 848
Depreciation and amortization 300 361
------- -------
Total costs and expenses 7,187 5,977
======= =======
Loss from operations (643) (682)
Other income (expense):
Interest income 33 35
Interest expense (308) (359)
------- -------
Total other expenses (275) (324)
------- -------
Loss before income taxes (918) (1,006)
Income tax benefit 312 342
------- -------
Net loss (606) (664)
Preferred stock dividend requirement (222) (222)
------- -------
Net loss attributable to common stock $ (828) $ (886)
======= =======
Per share of common stock
Net loss $ 0.45 $ 0.48
======= =======
</TABLE>
See accompanying notes.
5
<PAGE> 6
SEA PINES ASSOCIATES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
Three Months Ended
January 31,
1999 1998
(Unaudited) (Unaudited)
-------------------------
<S> <C> <C>
Cash Flows From Operating Activities:
Net loss $ (606) $(664)
Adjustments to reconcile net income to net cash used in
operating activities:
Depreciation and amortization 300 361
Decrease in deferred revenue (81) (18)
Increase in allowance for doubtful accounts -- 11
Increase in deferred income taxes (312) (342)
Changes in current assets and liabilities:
Increase in restricted cash (206) (128)
Decrease in accounts and notes receivable 281 299
Decrease in inventories 94 14
Decrease (Increase) in prepaid expenses 7 (1)
Decrease in other assets 25 1
Decrease in accounts payable and accrued expenses (1,178) (663)
Increase in advance deposits 839 429
Decrease in income taxes payable (113) (166)
------- -----
Net cash used in operating activities (950) (867)
------- -----
Cash Flows from Investing Activities:
Capital expenditures and property acquisitions (1,611) (425)
------- -----
Net cash used in investing activities (1,611) (425)
------- -----
Cash Flows from Financing Activities:
Additional borrowings on line of credit 1,591 987
Dividends paid (222) (222)
------- -----
Net cash provided by financing activities 1,369 765
------- -----
Net decrease in unrestricted cash and cash equivalents (1,192) (527)
Unrestricted cash and cash equivalents at start of period 591 215
======= =====
Unrestricted cash and cash equivalents (overdraft) at
end of period $ (601) $(312)
======= =====
</TABLE>
See accompanying notes.
6
<PAGE> 7
SEA PINES ASSOCIATES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 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 three-month period
ended January 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):
<TABLE>
<CAPTION>
January 31, October 31,
1999 1998
----------- -----------
<S> <C> <C>
Merchandise $ 487 $ 580
Supplies, parts and accessories 35 35
Food and beverages 8 10
Other 29 28
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$ 559 $ 653
======= =======
</TABLE>
7
<PAGE> 8
NOTE 3 - OPERATING PROPERTIES
Operating properties consist of the following (amounts in thousands):
<TABLE>
<CAPTION>
January 31, October 31,
1999 1998
----------- -----------
<S> <C> <C>
Land and land improvements $ 20,395 $ 20,140
Buildings 7,105 7,103
Machinery and equipment 6,855 6,399
Property held under capital leases 251 251
-------- --------
34,606 33,893
Less - Accumulated depreciation (11,512) (11,213)
-------- --------
$ 23,094 $ 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 dilutive
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 twelve offices serving Hilton Head
Island and its neighboring communities.
Liquidity and Capital Resources
The Company's financial results from its resort operations and real
estate brokerage activities experience fluctuations by season. The period from
November through March has historically been the Company's lowest resort revenue
and real estate sales season and the period from April through October has been
the Company's highest season. Therefore, significant decreases in the Company's
liquidity, cash resources and working capital are expected during the first
fiscal quarter.
9
<PAGE> 10
Cash and cash equivalents decreased by $986,000 during the first
quarter of 1999 and totaled $1,613,000 at January 31, 1999, of which $2,214,000
was restricted. The Company's working capital deficit increased by $2,568,000 in
the first quarter resulting in a working capital deficit of $3,682,000 at
January 31, 1999. These reductions in cash and working capital are consistent
with the seasonal nature of the Company's operations.
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
$18,750,000 was outstanding at January 31, 1999.
The term loan in the principal sum of $18,500,000 matures on October
31, 2008. As of January 31, 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. $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
January 31, 1999 there was no outstanding amount under the revolving line of
credit.
The seasonal line of credit in the principal amount of $2,500,000 is
used to meet cash requirements during the Company's off-season winter months. As
of January 31, 1999, $1,591,000 was outstanding on the seasonal 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 of which was paid on January 15, 1999. Declared, but
unpaid, amounts are recorded as dividends payable. Additional quarterly
installments will be paid on April 15, 1999, 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 to 1998
The Company reported a consolidated net loss during the first quarter
of 1999 of $606,000. The consolidated net loss reported during the first quarter
of 1998 was $664,000. These losses reflect the seasonal nature of the Company's
resort operations. Losses during the first quarter are anticipated and are
consistent with previous year's operating results.
Consolidated revenues during the three months ended January 31, 1999
totaled $6,544,000, a 23.6% increase over consolidated revenue reported during
the three months ended January 31, 1998 of $5,295,000. Resort revenues increased
3.0% during the first quarter from $2,867,000 in 1998 to $2,954,000 in 1999. The
increase in resort revenues is primary a result of improved first-quarter
performance of
10
<PAGE> 11
the Company's golf division, due to mild weather and increased rounds.
Real estate brokerage revenues, during the first quarter of 1999,
increased by $1,110,000 or 45.7% to $3,540,000 compared to 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 $1,142,000, or 26.6%, during the first
quarter of 1999 compared to the same period last year. This increase can be
attributed to the increase in real estate brokerage sales and an increase in the
costs associated with those sales.
First quarter sales and marketing expenses increased by $168,000, or
35.2%, during the first quarter of 1999 over the same period last year. This
increase was anticipated and is consistent with the current year budget. The
Company has budgeted increases in marketing expenses this year in anticipation
of the additional lodging and conference facilities which are under
construction.
General and administrative expenses decreased by $39,000 or 4.6% from
the same period last year. The Company continues to closely monitor its
controllable general and administrative expenses.
Interest expense on the Company's debt decreased by $51,000 or 14.2%
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 agreements.
Business Outlook and Recent Developments
The Company has started site work on The Inn at Harbour Town. 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. Drainage
and other site preparation work was completed during the first quarter.
Construction has been suspended until after the professional golf and tennis
tournaments hosted by the Company. Full construction is scheduled to resume in
May 1999, with a grand opening planned for the summer of 2000. Total
construction cost is estimated to be $6.5 million.
The Company has also started site work on The Heritage Conference
Center in Harbour Town. The Conference Center will be a 16,000 square-foot
facility, featuring state-of-the-art meeting amenities and catering facilities.
The work on this facility has also been suspended during the tournament season.
The resumption of work is currently scheduled for May 1999 with a grand opening
planned for the spring of 2000. Total construction cost is estimated to be $4.5
million.
The Company is in the planning stages of a new racquet club to be
located
11
<PAGE> 12
near the present site. The facility will be approximately 3,800 square feet and
feature an expanded pro shop, club offices and meeting room. Construction is
scheduled to start this summer.
The Company also is in the planning stages of a major renovation of the
Harbour Town golf course. This renovation is tentatively scheduled to commence
in May 2000. During 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 its 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 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 less than $100,000 to date, all of which has been expensed. The Company
plans to complete the year 2000
12
<PAGE> 13
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. 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.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material changes in any of the other legal
proceedings discussed in the Company's 1997 Annual Report on Form 10-K. See Item
3 "Legal Proceedings" of Form 10-K for a complete discussion.
The Company is subject to other claims and suits in the ordinary course
of business. In management's opinion, such currently pending legal proceedings
and claims and suits against the Company will not, in the aggregate, have a
material adverse effect on the Company.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters To A Vote of Security Holders
None
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
27-Financial Data Schedule (For SEC use only)
99.1-Safe Harbor Disclosure
(b) Reports on Form 8-K:
None
13
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SEA PINES ASSOCIATES, INC.
Date: March 16, 1999 Norman P. Harberger
-------------------
Norman P. Harberger
Chairman
Date: March 16, 1999 Thomas C. Morton
----------------
Thomas C. Morton
Treasurer and Chief Accounting Officer
14
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS CONTAINED IN THE JANUARY 31, 1999
FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH JANUARY 31, 1999
FORM 10-Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-1999
<PERIOD-START> NOV-01-1998
<PERIOD-END> JAN-31-1999
<CASH> 1,613
<SECURITIES> 0
<RECEIVABLES> 2,954
<ALLOWANCES> 50
<INVENTORY> 559
<CURRENT-ASSETS> 3,498
<PP&E> 43,661
<DEPRECIATION> 11,512
<TOTAL-ASSETS> 38,155
<CURRENT-LIABILITIES> 7,185
<BONDS> 0
0
7,218
<COMMON> 2,166
<OTHER-SE> 3,841
<TOTAL-LIABILITY-AND-EQUITY> 38,155
<SALES> 6,544
<TOTAL-REVENUES> 6,544
<CGS> 3,275
<TOTAL-COSTS> 5,433
<OTHER-EXPENSES> 1,754
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 308
<INCOME-PRETAX> (918)
<INCOME-TAX> (312)
<INCOME-CONTINUING> (606)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (606)
<EPS-PRIMARY> (.45)
<EPS-DILUTED> (.45)
</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 or other conditions which may
adversely affect tourism, vacation resorts or the vacation or retirement home
industries, generally, adverse
<PAGE> 2
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.
