UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
FORM 10-Q
(Mark one)
| x |
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
| For the quarterly period ended September 30, 2003 | ||
| OR | ||
| o |
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
|
| For the transition period from to | ||
COMMISSION FILE NUMBER: 2-65481
SADDLEBROOK RESORTS, INC.
| Florida | 59-1917822 | |
|
|
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| (State of incorporation) | (IRS employer identification no.) |
5700 Saddlebrook Way, Wesley Chapel, Florida 33543-4499
813-973-1111
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 o
Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Act).
YES o NO x
Registrant has 100,000 shares of common stock outstanding, all of which are held by an affiliate of the Registrant.
INDEX
| Page | |||||||
PART I — FINANCIAL INFORMATION |
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Item 1. Financial Statements |
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Saddlebrook Resorts, Inc. |
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Balance Sheets at September 30, 2003 and December 31, 2002 |
3 | ||||||
Statements of Operations for the three months and nine
months ended September 30, 2003 and 2002 |
4 | ||||||
Statements of Cash Flows for the nine months ended
September 30, 2003 and 2002 |
5 | ||||||
Notes to Financial Statements |
6 | ||||||
Saddlebrook Rental Pool Operation |
|||||||
Balance Sheets at September 30, 2003 and December 31, 2002 |
9 | ||||||
Statements of Operations for the three months and nine
months ended September 30, 2003 and 2002 |
10 | ||||||
Statements of Changes in Participants’ Fund Balance for
the nine months ended September 30, 2003 and 2002 |
11 | ||||||
Item 2. Management’s Discussion and Analysis of Financial Condition
and Results of Operations |
12 | ||||||
Item 3. Quantitative and Qualitative Disclosures About Market Risk |
14 | ||||||
Item 4. Controls and Procedures |
14 | ||||||
PART II — OTHER INFORMATION |
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Item 1. Legal Proceedings |
14 | ||||||
Item 2. Changes in Securities and Use of Proceeds |
14 | ||||||
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 | ||||||
Signature |
15 | ||||||
-2-
PART I — FINANCIAL INFORMATION
Item 1. Financial Statements
SADDLEBROOK RESORTS, INC.
BALANCE SHEETS
| September 30, | ||||||||||
| 2003 | December 31, | |||||||||
| (Unaudited) | 2002 | |||||||||
Assets |
||||||||||
Current assets: |
||||||||||
Cash and cash equivalents |
$ | 5,961,246 | $ | 6,255,608 | ||||||
Escrowed cash |
360,414 | 411,394 | ||||||||
Short-term investments |
300,000 | 300,000 | ||||||||
Short-term escrowed investments |
994 | 100,690 | ||||||||
Accounts receivable, net |
1,167,970 | 1,397,379 | ||||||||
Due from related parties |
623,036 | 567,467 | ||||||||
Inventory and supplies |
1,359,915 | 1,616,035 | ||||||||
Prepaid expenses and other assets |
727,963 | 630,607 | ||||||||
Total current assets |
10,501,538 | 11,279,180 | ||||||||
Long-termed escrowed investments |
399,576 | — | ||||||||
Property, buildings and equipment, net |
23,314,959 | 24,492,089 | ||||||||
Deferred charges, net |
387,871 | 417,706 | ||||||||
| $ | 34,603,944 | $ | 36,188,975 | |||||||
Liabilities and Shareholder’s Equity |
||||||||||
Current liabilities: |
||||||||||
Current portion of notes payable |
$ | 1,461,802 | $ | 1,379,906 | ||||||
Escrowed deposits |
760,984 | 512,084 | ||||||||
Accounts payable |
675,747 | 626,629 | ||||||||
Accrued rental distribution |
241,038 | 900,571 | ||||||||
Accrued expenses and other liabilities |
2,062,930 | 1,718,777 | ||||||||
Guest deposits |
996,858 | 2,001,090 | ||||||||
Due to related parties |
— | 162,227 | ||||||||
Total current liabilities |
6,199,359 | 7,301,284 | ||||||||
Notes payable due after one year |
18,674,085 | 19,778,774 | ||||||||
Total liabilities |
24,873,444 | 27,080,058 | ||||||||
Shareholder’s equity: |
||||||||||
Common stock, $1.00 par value, 100,000 shares
authorized and outstanding |
100,000 | 100,000 | ||||||||
Additional paid-in capital |
1,013,127 | 1,013,127 | ||||||||
Accumulated earnings |
8,617,373 | 7,995,790 | ||||||||
Total shareholder’s equity |
9,730,500 | 9,108,917 | ||||||||
| $ | 34,603,944 | $ | 36,188,975 | |||||||
The accompanying Notes to Financial Statements are an integral part of these financial statements
-3-
SADDLEBROOK RESORTS, INC.
STATEMENTS OF OPERATIONS
| Three months ended | Nine months ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2003 | 2002 | 2003 | 2002 | |||||||||||||||
Revenues |
$ | 5,468,012 | $ | 5,483,891 | $ | 29,097,072 | $ | 30,324,614 | ||||||||||
Costs and expenses: |
||||||||||||||||||
Operating costs |
4,822,091 | 4,995,425 | 20,782,980 | 21,571,793 | ||||||||||||||
Sales and marketing |
490,409 | 440,176 | 1,862,206 | 1,632,137 | ||||||||||||||
General and administrative |
945,090 | 1,000,324 | 3,029,474 | 2,905,131 | ||||||||||||||
Depreciation and amortization |
530,341 | 564,562 | 1,605,092 | 1,653,291 | ||||||||||||||
Interest |
392,270 | 415,297 | 1,195,737 | 1,267,965 | ||||||||||||||
Total costs and expenses |
7,180,201 | 7,415,784 | 28,475,489 | 29,030,317 | ||||||||||||||
Net income (loss) |
(1,712,189 | ) | (1,931,893 | ) | 621,583 | 1,294,297 | ||||||||||||
Accumulated earnings at
beginning of period |
10,329,562 | 12,363,264 | 7,995,790 | 9,137,074 | ||||||||||||||
Accumulated earnings at
end of period |
$ | 8,617,373 | $ | 10,431,371 | $ | 8,617,373 | $ | 10,431,371 | ||||||||||
The accompanying Notes to Financial Statements are an integral part of these financial statements
-4-
SADDLEBROOK RESORTS, INC.
STATEMENTS OF CASH FLOWS
| Nine months ended | ||||||||||
| September 30, | ||||||||||
| 2003 | 2002 | |||||||||
Operating activities: |
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Net income |
$ | 621,583 | $ | 1,294,291 | ||||||
Non-cash items included in net income: |
||||||||||
Provision for doubtful accounts |
31,080 | 40,580 | ||||||||
Depreciation and amortization |
1,605,092 | 1,653,291 | ||||||||
Loss (gain) on sale of assets |
— | (350 | ) | |||||||
Decrease (increase) in: |
||||||||||
Accounts receivable |
198,329 | 649,140 | ||||||||
Inventory and supplies |
256,120 | 104,606 | ||||||||
Prepaid expenses and other assets |
(97,356 | ) | (137,997 | ) | ||||||
Increase (decrease) in: |
||||||||||
Accounts payable |
49,118 | (135,156 | ) | |||||||
Accrued expenses and other liabilities |
(1,319,611 | ) | 505,151 | |||||||
| 1,344,355 | 3,973,556 | |||||||||
Investing activities: |
||||||||||
Proceeds from sale of asset |
— | 86,594 | ||||||||
Capital expenditures |
(398,128 | ) | (1,523,048 | ) | ||||||
| (398,128 | ) | (1,436,454 | ) | |||||||
Financing activities: |
||||||||||
Payments on notes payable |
(1,022,793 | ) | (948,894 | ) | ||||||
Net payments from (to) related parties |
(217,796 | ) | (886,227 | ) | ||||||
| (1,240,589 | ) | (1,835,121 | ) | |||||||
Net increase (decrease) in cash |
(294,362 | ) | 701,981 | |||||||
Cash at beginning of period |
6,255,608 | 6,724,259 | ||||||||
Cash at end of period |
$ | 5,961,246 | $ | 7,426,240 | ||||||
Supplemental disclosure: |
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Cash paid for interest |
$ | 1,196,437 | $ | 1,267,069 | ||||||
The accompanying Notes to Financial Statements are an integral part of these financial statements.
-5-
SADDLEBROOK RESORTS, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1. Basis of Presentation
Saddlebrook Resorts, Inc. (the “Company”) developed and operates Saddlebrook Resort, which is a condominium hotel and resort located in Wesley Chapel, Florida.
The Company’s accompanying balance sheet for September 30, 2003, and its statements of operations and cash flows for the periods ended September 30, 2003 and 2002, are unaudited but reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature.
The Company’s business is seasonal. Therefore, the results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the full fiscal year.
These financial statements and related notes are presented for interim periods in accordance with the requirements of Form 10-Q and, consequently, do not include all disclosures normally provided in the Company’s Annual Report on Form 10-K. Accordingly, these financial statements and related notes should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2002.
Note 2. Accounts Receivable
| September 30, | ||||||||
| 2003 | December 31, | |||||||
| (Unaudited) | 2002 | |||||||
Trade accounts receivable |
$ | 1,254,129 | $ | 1,464,617 | ||||
Less reserve for bad debts |
(86,159 | ) | (67,238 | ) | ||||
| $ | 1,167,970 | $ | 1,397,379 | |||||
-6-
Note 3. Property, Buildings and Equipment
| September 30, | ||||||||
| 2003 | December 31, | |||||||
| (Unaudited) | 2002 | |||||||
Land and land improvements |
$ | 4,412,746 | $ | 4,412,746 | ||||
Buildings and recreational facilities |
25,095,990 | 24,932,314 | ||||||
Machinery and equipment |
14,134,747 | 13,900,295 | ||||||
Construction in progress |
105,827 | 105,827 | ||||||
| 43,749,310 | 43,351,182 | |||||||
Less accumulated depreciation |
(20,434,351 | ) | (18,859,093 | ) | ||||
| $ | 23,314,959 | $ | 24,492,089 | |||||
The Company’s property, buildings and equipment are pledged as security for its debt (see Note 5).
Note 4. Deferred Charges
| September 30, | ||||||||
| 2003 | December 31, | |||||||
| (Unaudited) | 2002 | |||||||
Debt issue costs |
$ | 596,716 | $ | 596,716 | ||||
Less accumulated amortization |
(208,845 | ) | (179,010 | ) | ||||
| $ | 387,871 | $ | 417,706 | |||||
-7-
Note 5. Notes Payable
| September 30, | ||||||||
| 2003 | December 31, | |||||||
| (Unaudited) | 2002 | |||||||
Note payable due June 30, 2013 |
$ | 20,033,128 | $ | 21,039,539 | ||||
Capital lease obligation |
102,759 | 119,141 | ||||||
| 20,135,887 | 21,158,680 | |||||||
Less current portion |
(1,461,802 | ) | (1,379,906 | ) | ||||
| $ | 18,674,085 | $ | 19,778,774 | |||||
The Company’s financing from a third-party lender has an annual interest rate fixed at 7.7% and monthly payments for principal and interest of $243,988. The debt is secured by the Company’s real and personal property.
An additional $5,000,000 is available from the same lender if the Company is in compliance with certain financial covenants. If received, the additional financing will be due with the existing debt on June 30, 2013. For the debt’s reporting period ended June 30, 2003, the Company was not in compliance with the financial covenants related to this additional financing. However, the Company was in compliance with the financial covenants related to its existing debt.
Note 6. Related Party Receivables and Payables
Related party receivables and payables at September 30, 2003 and December 31, 2002 are the result of net intercompany transactions and cash transfers between the Company and its shareholder company and affiliated companies. There are no advances from the Company to its Directors or Officers.
Note 7. Income Taxes
The Company is currently a member of a Qualified Subchapter S Subsidiary Group. Accordingly, no income tax expense was reflected in the Company’s operating results as the tax is assessed to the shareholders of its parent company.
-8-
SADDLEBROOK RENTAL POOL OPERATION
BALANCE SHEETS
DISTRIBUTION FUND
| September 30, | ||||||||
| 2003 | December 31, | |||||||
| (Unaudited) | 2002 | |||||||
Assets |
||||||||
Receivable from Saddlebrook Resorts, Inc. |
$ | 391,528 | $ | 867,622 | ||||
| Liabilities
and Participants’ Fund Balance Due to participants for rental pool distribution |
$ | 355,298 | $ | 723,068 | ||||
Due to maintenance escrow fund |
36,230 | 144,554 | ||||||
Participants’ fund balance |
— | — | ||||||
| $ | 391,528 | $ | 867,622 | |||||
MAINTENANCE ESCROW FUND
| September 30, | |||||||||
| 2003 | December 31, | ||||||||
| (Unaudited) | 2002 | ||||||||
Assets |
|||||||||
Cash and cash equivalents |
$ | 334,564 | $ | 387,443 | |||||
Investments |
400,570 | 100,690 | |||||||
Receivables: |
|||||||||
Distribution fund |
36,230 | 144,554 | |||||||
Owner payments |
11,308 | 9,269 | |||||||
Interest |
1,248 | 162 | |||||||
Linen inventory |
205,125 | 286,127 | |||||||
Prepaid expenses and other assets |
119,059 | 575,914 | |||||||
| $ | 1,108,104 | $ | 1,504,159 | ||||||
| Liabilities and Participants’ Fund Balance | |||||||||
Accounts payable |
$ | 209,807 | $ | 46,313 | |||||
Participants’ fund balance |
898,297 | 1,457,846 | |||||||
| $ | 1,108,104 | $ | 1,504,159 | ||||||
-9-
SADDLEBROOK RENTAL POOL OPERATION
STATEMENTS OF OPERATIONS