<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, 2000
----------------
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, 2000 was 1,842,525.
<PAGE> 2
INDEX TO FORM 10-Q
FOR SEA PINES ASSOCIATES, INC.
Page
----
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as
of January 31, 2000 and October 31, 1999 3 - 4
Condensed Consolidated Statements of Operations for
the Three Months Ended January 31, 2000 and 1999 5
Condensed Consolidated Statements of Cash Flows
for the Three Months ended January 31, 2000 and 1999 6
Notes to Condensed Consolidated Financial Statements 7 - 9
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 10 - 15
Item 3 - Quantitative and Qualitative Disclosures About Market Risk 15
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings 15
Item 2 - Changes in Securities 15
Item 3 - Defaults Upon Senior Securities 15
Item 4 - Submission of Matters To A Vote of
Security Holders 15
Item 5 - Other Information 15
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>
JANUARY 31, OCTOBER 31,
2000 1999
(UNAUDITED) (NOTE)
------- -------
<S> <C> <C>
ASSETS
Current Assets:
Cash and cash equivalents:
Unrestricted $ -- $ 662
Restricted 3,046 2,380
------- -------
3,046 3,042
Accounts and notes receivable, net of allowance
for doubtful accounts of $41 and $41 at
January 31, 2000 and October 31, 1999,
respectively 695 1,189
Income tax refund receivable 346 346
Current portion of notes receivable 56 373
Inventories (Note 2) 704 737
Offering costs (Note 5) 300 --
Prepaid expenses 87 140
------- -------
Total current assets 5,234 5,827
Notes receivable, less current portion 1,261 1,687
Deferred income taxes 674 83
Deferred loan fees, net 47 36
Other assets, net 76 78
------- -------
2,058 1,884
Real estate assets
Construction in progress 9,665 6,575
Operating properties, net 23,780 23,765
Properties held for future development 4,623 4,623
------- -------
38,068 34,963
------- -------
Total assets $45,360 $42,674
======= =======
</TABLE>
Note: The condensed consolidated balance sheet at October 31, 1999 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>
JANUARY 31, OCTOBER 31,
2000 1999
(UNAUDITED) (NOTE)
------- -------
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 4,951 $ 3,300
Advance deposits 3,394 2,155
Current portion of deferred revenue 159 537
Line of credit 1,348 --
Current maturities of long-term debt 400 400
------- -------
Total current liabilities 10,252 6,392
Long-term debt 20,483 19,483
Deferred revenue 765 905
------- -------
Total liabilities 31,500 26,780
Commitments and contingencies
Shareholders' equity: (Note 5)
Series A cumulative preferred stock, no par
value, 2,000,000 shares authorized; 1,228,350
shares issued and outstanding (liquidation
preference $9,335,460) 7,218 7,218
Series B junior cumulative preferred stock, no
par value, 3,000 shares authorized; none
issued or outstanding -- --
Common stock, 23,000,000 shares authorized;
1,842,525 shares issued and outstanding 2,166 2,166
Retained earnings 4,476 6,510
------- -------
Total shareholders' equity 13,860 15,894
------- -------
Total Liabilities and Shareholders' Equity $45,360 $42,674
======= =======
</TABLE>
Note: The condensed consolidated balance sheet at October 31, 1999 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>
THREE MONTHS ENDED
JANUARY 31,
2000 1999
(UNAUDITED) (UNAUDITED)
------- -------
<S> <C> <C>
Revenues $ 7,424 $ 6,544
Cost and expenses:
Cost of revenues 7,037 5,755
Sales and marketing expenses 505 323
General and administrative expenses 1,012 809
Depreciation and amortization 334 300
------- -------
Total costs and expenses 8,888 7,187
------- -------
Loss from operations (1,464) (643)
Other income (expense):
Interest income 29 33
Interest expense (303) (308)
------- -------
Total other income (expense) (274) (275)
------- -------
Loss before income tax benefit (1,738) (918)
Income tax benefit 591 312
------- -------
Net loss (1,147) (606)
Preferred stock dividend requirement (222) (222)
------- -------
Net loss attributable to common stock $(1,369) $ (828)
======= =======
Per share of common stock
Net loss $ (0.74) $ (0.45)
======= =======
</TABLE>
See accompanying notes.
<PAGE> 6
SEA PINES ASSOCIATES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In Thousands)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
JANUARY 31,
2000 1999
(UNAUDITED) (UNAUDITED)
------- -------
<S> <C> <C>
Cash Flows From Operating Activities:
Net Loss $(1,147) $ (606)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization 334 300
Decrease in deferred revenue (518) (81)
Increase in deferred income taxes (591) (312)
Changes in assets and liabilities:
Increase in restricted cash (666) (206)
Decrease in accounts and notes receivable 1,237 281
Decrease in inventories 33 94
Increase in offering costs (300) --
Decrease in prepaid expenses 53 7
(Increase) decrease in other assets (9) 25
(Increase) decrease in accounts payable and accrued expenses 986 (577)
Increase in advance deposits 1,239 839
Decrease in income taxes payable -- (113)
------- -------
Net cash provided by (used in) operating activities 651 (349)
------- -------
Cash Flows from Investing Activities:
Capital expenditures and property acquisitions (3,439) (1,611)
------- -------
Net cash used in investing activities (3,439) (1,611)
------- -------
Cash Flows from Financing Activities:
Additional borrowing on revolving loan 1,000 --
Additional borrowing on line of credit 1,348 1,591
Dividends paid (222) (222)
------- -------
Net cash provided by financing activities 2,126 1,369
------- -------
Net increase (decrease) in unrestricted cash and cash
equivalents (662) (591)
Unrestricted cash and cash equivalents at start of period 662 591
------- -------
Unrestricted cash and cash equivalents at end of period $ -- $ --
======= =======
</TABLE>
See accompanying notes.
<PAGE> 7
SEA PINES ASSOCIATES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
JANUARY 31, 2000 AND OCTOBER 31, 1999
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, 2000 are not necessarily indicative of the results that may be
expected for the year ended October 31, 2000. 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, 1999.
NOTE 2 - INVENTORIES
Inventories consist of the following (amounts in thousands):
<TABLE>
<CAPTION>
January 31, October 31,
2000 1999
-------- --------
<S> <C> <C>
Merchandise $ 594 $ 628
Supplies, parts and accessories 35 37
Food and beverages 45 44
Other 30 28
-------- --------
$ 704 $ 737
======== ========
</TABLE>
<PAGE> 8
NOTE 3 - OPERATING PROPERTIES
Operating properties consist of the following (amounts in thousands):
<TABLE>
<CAPTION>
January 31, October 31,
2000 1999
-------- --------
<S> <C> <C>
Land and land Improvements $ 19,114 $ 19,047
Buildings 8,476 8,466
Machinery and equipment 7,581 7,308
-------- --------
35,171 34,821
Less - Accumulated depreciation (11,391) (11,056)
-------- --------
$ 23,780 $ 23,765
======== ========
</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.
NOTE 5 - PREFERRED STOCK EXCHANGE OFFERING
On February 15, 2000, the Company completed its Exchange Offer pursuant
to the December 21, 1999 Exchange Offer Prospectus. The Exchange Offer allowed
holders of the Company's Series A Preferred Stock to exchange each preferred
share for either 2 1/2 shares of the Company's common stock or a new 9.5% Trust
Preferred Security to be issued by Sea Pines Associates Trust I. The purpose of
the Exchange Offer was to refinance Series A Preferred Stock. Holders of
approximately 56% of the preferred stock exchanged their shares for Common
Stock. Holders of approximately 26% of the preferred stock exchanged their
shares for the new Trust Preferred Security. This refinancing will benefit the
Company in two ways: (i) to the extent shares of Series
<PAGE> 9
A Preferred Stock were exchanged for the Trust Preferred Securities, the Company
will be able to deduct interest payable on these Junior Subordinated Debentures
for income tax purposes, while dividends on shares of Series A Preferred Stock
were not tax deductible, and (ii) to the extent shares of Series A Preferred
Stock were exchanged for Common Stock, which do not currently pay a dividend,
the Company's quarterly cash payment obligation will be reduced.
Holders of approximately 18% of the Series A Preferred Stock did not exchange
their shares. The Company currently intends to redeem the remaining shares of
Series A Preferred Stock later this year. The Company incurred approximately
$300,000 in professional fees and other costs relating to this transaction.
Approximately $202,800 of the costs will be expensed in the second quarter as
costs of the Common Stock Exchange. The remaining costs of approximately $97,200
will be capitalized as deferred financing costs and will be amortized over the
life of the Trust Preferred Securities, 30 years.
<PAGE> 10
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, AND THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. 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 racquet club facility, 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 fourteen offices serving Hilton Head
Island and its neighboring communities.
Results of Operations for 2000 as Compared with 1999
Consolidated revenues during the three months ended January 31, 2000
totaled $7,424,000, a 13.4% increase over consolidated revenues reported during
the three months ended January 31, 1999 of $6,544,000.
The Company reported a consolidated net loss during the first quarter
of 2000 of $1,369,000, a 65% increase over the 1999 first quarter net loss of
$828,000. The first quarter of 2000 includes significant off-season carrying
costs of the Company's food and beverage operations which were brought in-house
in June 1999. Additional expense increases relate to increased conference sales
and marketing efforts relating to the
<PAGE> 11
Company's new Inn and Conference Center currently under construction. These
increased expenses were budgeted and expected.
Resort revenues during the first quarter of 2000 increased by $400,000
or 13.3% over first quarter 1999 resort revenues. The Company attributes the
increase in resort revenues to an increase in lodging revenue partially
generated from the increase of available units on the Company's rental program.
Real estate brokerage revenues increased by $480,000, or 13.6%, to
$4,020,000 during the first quarter ended January 31, 2000 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 $1,282,000, or 22.3% during the first
quarter of 2000 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 71.53% in 1999 to 72.34% in
2000.
Sales and marketing expenses have increased by $182,000 or 56% during
the first quarter of 2000 as compared to the same period last year. This
increase relates primarily to pre-opening sales and marketing costs associated
with the inn and conference center under construction.
General and administrative expenses increased by $203,000 or 25.0%
during the first quarter of 2000 compared to the same period last year. The
primary reason for the increase is an increase in the cost of health benefits
provided to its employees during the first quarter of 2000 as compared to the
same period last year.
Interest income remained relatively constant at $29,000 and $34,000 for
the first quarter of 2000 and 1999, respectively.
Interest expense also remained relatively constant at $303,000 and
$308,000 for the first quarter of 2000 and 1999, respectively. During the first
quarter of 2000, the Company capitalized $128,000 of interest in connection with
the Harbour Town construction projects.
<PAGE> 12
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.
Cash and cash equivalents increased by $4,000 during the first quarter
of 2000 and totaled $3,046,000 at January 31, 2000, all of which was restricted.
The Company's working capital deficit increased by $4,453,000 in the first
quarter resulting in a working capital deficit of $5,018,000 at January 31,
2000. The reduction in working capital is 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, a revolving line of credit and a seasonal
line of credit. Available funds under these facilities total $40,933,000 of
which $22,231,000 was outstanding at January 31, 2000.
The term loan in the principal sum of $18,500,000 matures on October
31, 2008. As of January 31, 2000, $18,133,000 was outstanding under the term
loan.
The $18,300,000 revolving line of credit is maintained by the Company
primarily to fund its capital projects. The bank has approved $15,000,000 of the
line for use in the construction of the Company's inn, conference center and
racquet club renovations. The remaining $3,300,000 has been approved for use in
the Harbour Town Golf Links renovation. As of January 31, 2000, $2,750,000 was
outstanding under the revolving line of credit.
The seasonal line of credit in the amount of $4,500,000 is designed to
meet cash requirements during the Company's off-season winter months. As of
January 31, 2000, $1,348,000 was outstanding under the revolving line of credit.
Preferred stock dividends are declared and paid one year in arrears. At
its December 13, 1999 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 17, 2000. Additional quarterly
installments will be paid on April 17, 2000, July 17, 2000 and October 17, 2000,
to shareholders of record on April 3, 2000, July 3, 2000 and October 2, 2000,
respectively, and represents the accrued dividend for the fiscal year ended
October 31, 1999. Declared, but unpaid, amounts are recorded as dividends
payable.
<PAGE> 13
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 $12,539,000. Total
construction costs are estimated at $17,230,000 for all three projects. As of
January 31, 2000, total combined construction costs incurred to date are
$6,868,000.
The Inn at Harbour Town will be a 47,000 square-foot facility featuring
60 inn rooms and will be adjacent to and provide views of the Harbour Town Golf
Links. Total construction costs are estimated at $10,600,000. As of January 31,
2000, $2,548,000, has been spent. 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. Total construction costs are
estimated at $5,500,000. As of January 31, 2000, $3,681,000 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 tennis court facilities and surrounding area. Total
construction costs of Phase I have been estimated at $1,100,000. As of January
31, 2000 $638,000 has been spent. Completion of Phase I is scheduled for the
spring of 2000. 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 has scheduled a major renovation of the Harbour Town Golf
Links to commence in May 2000 with an estimated construction cost of $3,200,000.
During the construction and grow-in, the course will be closed for approximately
nine months.
The Family Circle Cup, a tier-one women's professional tennis
tournament, will move to Charleston after the April 2000 tournament. Sea Pines
has hosted the event since its inception in 1973. While the Company regrets the
change in venue, it believes the move will not have a significant financial
impact on its operations. The tournament has been held during the height of the
spring tourism season, and the Company believes that tournament revenues should
be able to be replaced during this period with the additional social lodging
capacity now available. It is, however, difficult to measure any impact that
might result from the loss of the extensive media coverage and exposure provided
during the tournament.
<PAGE> 14
On February 15, 2000, the Company completed its Exchange Offer pursuant
to the December 21, 1999 Exchange Offer Prospectus. The Exchange Offer allowed
holders of the Company's Series A Preferred Stock to exchange each preferred
share for either 2 1/2 shares of the Company's common stock or a new 9.5% Trust
Preferred Security to be issued by Sea Pines Associates Trust I. The purpose of
the Exchange Offer was to refinance Series A Preferred Stock. Holders of
approximately 56% of the preferred stock exchanged their shares for Common
Stock. Holders of approximately 26% of the preferred stock exchanged their
shares for the new Trust Preferred Security. This refinancing will benefit the
Company in two ways: (i) to the extent shares of Series A Preferred Stock were
exchanged for the Trust Preferred Securities, the Company will be able to deduct
interest payable on these Junior Subordinated Debentures for income tax
purposes, while dividends on shares of Series A Preferred Stock were not tax
deductible, and (ii) to the extent shares of Series A Preferred Stock were
exchanged for Common Stock, which do not currently pay a dividend, the Company's
quarterly cash payment obligation will be reduced.
As a result of the exchange, the Company's annual Preferred Stock dividend
payment requirement will decrease by $727,000 although interest payments on the
Trust Preferred Securities will require $231,000 of annual cash flow, before
income tax benefits estimated at $79,000 assuming a 34% tax rate. Holders of
approximately 18% of the Series A Preferred Stock did not exchange their shares.
The Company currently intends to redeem the remaining shares of Series A
Preferred Stock later this year. The Company incurred approximately $300,000 in
professional fees and other costs relating to this transaction. Approximately
$202,800 of the costs will be expensed in the second quarter as costs of the
Common Stock Exchange. The remaining costs of approximately $97,200 will be
capitalized as deferred financing costs and will be amortized over the life of
the Trust Preferred Securities, 30 years.
YEAR 2000 ISSUE
The year 2000 issue concerns 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 1998 assessment of its computerized systems, the Company
determined that it would be required to modify or replace portions of its
existing software so that its computer systems would properly utilize dates
beyond December 31, 1999.
The Company believes that it completed and tested all necessary
software modifications and conversions prior to December 31, 1999. As a result
of its year 2000 readiness, the Company has experienced no significant year 2000
problems.
<PAGE> 15
The Company presently believes that it has very limited continued
exposure to year 2000 related issues. However, if the Company did not address
and remedy all of its year 2000 issues, these issues could have a material
impact on the operations of the Company.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
During the three months ended January 31, 2000, 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, 1999.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
There have been no material changes in any of the legal proceedings
discussed in the Company's 1999 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
<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: March 16, 2000 Norman P. Harberger
-------------- -------------------
Norman P. Harberger
Chairman
Date: March 16, 2000 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 JANUARY 31, 2000
FORM 10Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH JANUARY 31, 2000
FORM 10Q.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> OCT-31-2000
<PERIOD-START> NOV-01-1999
<PERIOD-END> JAN-31-2000
<CASH> 3,046
<SECURITIES> 0
<RECEIVABLES> 2,302
<ALLOWANCES> 41
<INVENTORY> 704
<CURRENT-ASSETS> 5,234
<PP&E> 49,459
<DEPRECIATION> 11,391
<TOTAL-ASSETS> 45,360
<CURRENT-LIABILITIES> 10,252
<BONDS> 0
0
7,218
<COMMON> 2,166
<OTHER-SE> 4,476
<TOTAL-LIABILITY-AND-EQUITY> 45,360
<SALES> 7,424
<TOTAL-REVENUES> 7,424
<CGS> 7,037
<TOTAL-COSTS> 7,037
<OTHER-EXPENSES> 1,851
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 303
<INCOME-PRETAX> (1,738)
<INCOME-TAX> (591)
<INCOME-CONTINUING> (1,147)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,147)
<EPS-BASIC> (.74)
<EPS-DILUTED> (.74)
</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
<PAGE> 2
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
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 the
Company's national golf tournament. 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 or sales executives.
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 identified 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
estimate 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 all year
2000 problems could put the Company at a competitive disadvantage relative to
companies that have corrected such problems.
