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1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark one)
(X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
-----------------
OR
( ) 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: No 1934 act file number assigned
(1933 act file no. 2-65481)
SADDLEBROOK RESORTS, INC.
-------------------------
(Exact name of registrant as specified in its charter)
Florida 59-1917822
------- ----------
(State of incorporation) (IRS employer identification no.)
5700 Saddlebrook Way, Wesley Chapel, Florida 33543-4499
-------------------------------------------------------
(Address of principal executive offices)
813-973-1111
------------
(Registrant's telephone number, including area code)
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: None*
-----
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None*
-----
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
----- -----
State the aggregate value of the voting stock held by nonaffiliates of the
registrant: None*
-----
Indicate the number of shares outstanding of each of the registrant's classes
of common stock, as of the latest practicable date:
Not Applicable*
---------------
DOCUMENTS INCORPORATED BY REFERENCE
-----------------------------------
Portions of the registrant's Form S-1 Registration Statement (No. 2-65481) as
declared effective December 28, 1979 are incorporated by reference into Part
IV.
* Registrant has no common stock subject to this annual report.
Exhibit Index on Page 32
Page 1 of 39
2
PART I
Item 1. Business
Saddlebrook Resorts, Inc., (the "Registrant") was incorporated in the State of
Florida on June 20, 1979 as a wholly-owned subsidiary of Pittway Real Estate,
Inc. ("PREI"). PREI was a wholly-owned subsidiary of Penton Publishing, Inc.
which, in turn, was a wholly-owned subsidiary of Pittway Corporation of
Northbrook, Illinois. The Registrant was formed to acquire an existing golf
course and tennis club and develop it into a condominium resort and residential
homes project.
Thomas L. Dempsey ("Dempsey") effectively purchased one hundred percent (100%)
of the authorized and issued stock of the Registrant from PREI on November 14,
1988 for approximately $24,116,000. Dempsey is the former Chairman of the Board
of Penton Publishing, Inc. and a former Director and Vice President of Pittway
Corporation. Dempsey subsequently gifted 13,000 shares of the Registrant's
non-voting stock to family trusts (see Item 12. Security Ownership of Certain
Beneficial Owners and Management of this Form 10-K, which is incorporated
herein by reference).
Prior to November 14, 1988, the Registrant operated and reported the results of
its operations in two industry segments: (1) the real estate segment was
engaged in the development, construction and sales of resort and residential
condominium units, homes and residential lots and (2) the resort segment was
engaged in the ownership and operation of the resort including its facilities
for hotel, convention, food and beverage, golf, tennis and other recreational
activities.
In connection with and immediately prior to the sale of the stock of the
Registrant to Dempsey, the Registrant deeded the property which comprised its
real estate segment to PREI as a dividend from a subsidiary to its parent. The
property that was conveyed to PREI was not used as part of the resort or by its
rental guests or condominium owners.
The operations of the Registrant are not considered to be dependent upon the
availability of raw materials, nor the effect of the duration of patents,
licenses, franchises or concessions held.
The Registrant's resort operations are seasonal with a higher volume of sales
during the winter and spring seasons.
The Registrant's competition includes major golf and tennis resorts nationwide,
which provide luxury accommodations and facilities for conventions and
recreational activities.
At December 31, 1995, there were approximately 720 persons employed by the
Registrant.
- 2 -
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Item 2. Properties
Saddlebrook Resort is located in south Pasco County, near Tampa, Florida. The
property originally consisted of approximately 330 acres which the Registrant
purchased in July 1979. In addition, approximately 170 and 11 adjoining acres
were purchased and added to the Saddlebrook project in 1984 and 1985,
respectively.
A portion of the Registrant's property that was being developed as residential
single family and cluster homes and improved residential lots known as Fairway
Village, was deeded to PREI in November 1988 (see Item 1. Business of this
Form 10-K, which is incorporated herein by reference).
Property improvements for the resort consist of 720 condominiums which were
sold or are for sale to outside parties of which there were 544 condominiums
participating in a rental pooling program at December 31, 1995 (see Exhibit 28
- - Interest Being Registered of this Form 10-K, which is incorporated herein by
reference). As of December 31, 1995, there were 24 condominiums owned by the
Registrant.
In addition, the resort facilities include two 18-hole golf courses, 45 tennis
courts, three swimming pools, three restaurants, a 117,000 square foot
convention facility with approximately 60,000 square feet of meeting space, a
health spa, shops and other facilities necessary for the operation of a luxury
resort.
Item 3. Legal Proceedings
On May 12, 1989, the Circuit Court of the Sixth Judicial Circuit in and for
Pasco County, Florida, in the lawsuit, James H. Porter and Martha Porter,
Trustees, et al v. Saddlebrook Resorts, Inc. and the County of Pasco, Florida,
Case No. 83-1860, entered a judgment against the Registrant in the amount of
$8,082,000 relating to damages to adjacent property for surface water effects.
In addition, an injunction was entered to remediate damages relating thereto.
On October 14, 1989, the Registrant and Pittway Corporation entered into an
agreement and on July 16, 1993 an amended agreement, to split equally the costs
of the defense of the litigation, the ultimate judgment and the mandated
remedial work. The agreements provide for Pittway Corporation to make
subordinated loans to the Registrant, if required, to enable the Registrant to
pay for its half of these costs (see Item 1. Business of this Form 10-K, which
is incorporated herein by reference).
On March 18, 1992, the Florida Second District Court of Appeal issued an
opinion reversing and vacating the jury verdict and judgment against the
Registrant and ordering a new trial. On December 22, 1993, the Registrant filed
a motion for summary judgment in the trial court on grounds that the findings
in its favor by an administrative law judge in a related proceeding bar further
litigation of this matter. An order granting the summary judgment and
dismissing the action was entered on January 7, 1995. The Plaintiff filed an
appeal of said order in the Florida Second District Court of Appeal. Oral
argument on said appeal was heard on February 21, 1996. It is currently not
known when the appellate court will render a decision. Management currently
believes that the Registrant's position in further litigation would be
meritorious.
The Registrant is involved in other litigation in the ordinary course of
business. In the opinion of management, these matters are adequately covered by
insurance or indemnification from other third parties. The effect, if any, of
these claims is, in management's opinion, immaterial to the Registrant's
financial condition and results of operations.
- 3 -
4
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The Registrant's stock is privately held and there is no established market for
the stock (see Item 12. Security Ownership of Certain Beneficial Owners and
Management of this Form 10-K, which is incorporated herein by reference).
Condominium units that were developed and sold by the Registrant are deemed to
be securities due to the rental pool feature (see Exhibit 28 - Interest Being
Registered of this Form 10-K, which is incorporated herein by reference).
However, there is no market for such securities other than the normal real
estate market. Since the security is real estate, no dividends have been paid
or will be paid.
Item 6. Selected Financial Data
Year ended December 31,
------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
Operating revenues $35,625,000 $33,550,000 $30,391,000 $28,208,000 $30,037,000
Net income before taxes 1,797,000 2,079,000 703,000 616,000 594,000
Total assets 29,157,000 27,557,000 25,057,000 26,688,000 27,726,000
Notes payable 18,764,000 17,444,000 17,098,000 20,600,000 21,700,000
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Liquidity and Capital Resources
Construction of the resort facilities was substantially complete as of December
31, 1982. During the fiscal period ended December 31, 1995, the Registrant
completed several capital projects for an aggregate cost of approximately
$2,277,000. However, no individual project had a cost in excess of $1,000,000.
During the fiscal period ended December 31, 1994, the Registrant renovated and
expanded its hotel lobby, lobby terrace and Polo Lounge at a cost of
approximately $1,226,000. There were no other major capital additions or
improvements during the fiscal years ended December 31, 1995, 1994 and 1993.
Significant capital expenditures are not anticipated in the next year. Future
operating costs and planned expenditures for minor capital additions and
improvements will be funded by the resort operations of the Registrant or by
additional financing within the terms of the Registrant's debt agreement (See
Note 8 - Notes Payable of the Notes to the Financial Statements in Item 8 of
this Form 10-K, which is incorporated herein by reference).
Management is not aware of any environmental matters other than the issue in
Item 3. Legal Proceedings of this Form 10-K, which is incorporated herein by
reference.
- 4 -
5
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
The Registrant's operations are not considered to be dependent on any
individual or small group of customers, the loss of whom would have a material
adverse effect.
There are no adverse purchase or other commitments outstanding as of December
31, 1995.
Results of Operations
Revenues for the fiscal years ended December 31, 1995, 1994 and 1993 were
comprised of the following areas of operation:
Year ended December 31,
---------------------------
1995 1994 1993
---- ---- ----
Hotel revenues 50% 50% 50%
Merchandise sales 36 36 36
Club fees 13 14 14
Other income 1 0 0
---- ---- ----
100% 100% 100%
==== ==== ====
Total revenues increased 6% for the fiscal year ended December 31, 1995 when
compared with the previous year. This improvement was a result of an increase
in the average daily rate which was offset slightly by decreases in occupied
unit nights and number of guests who stayed at the resort during 1995 when
compared to the prior fiscal period. Total revenues increased 10% for the
fiscal year ended December 31, 1994, when compared with the previous year. This
improvement was a result of increases in occupied unit nights and number of
guests who stayed at the resort during 1994 when compared to the prior fiscal
period. These increases are attributed to the recent remodeling and upgrading
of the resort property that is discussed above. Projections for occupied unit
nights in 1996 and subsequent fiscal periods are expected to remain at the
resort's current volume of business.
Net income decreased 14% for the fiscal year ended December 31, 1995 when
compared with the previous year. This was a result of increased depreciation
and interest expense related to the recent capital improvements along with
increased general costs of operation. Net income increased 196% for the fiscal
year ended December 31, 1994 when compared with the previous year. This
improvement is a result of the increased revenues and a reduction in interest
expense due to a lower interest rate and reduction in principal from a July
1993 refinancing of the Registrant's prior debt. 1994 net income also benefited
from the expiration of capital asset depreciation and intangible asset
amortization which were related to the Registrant's acquisition in November
1988 (see Item 1. Business of this Form 10-K, which is incorporated herein by
reference).
- 5 -
6
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations (continued)
The Registrant elected S Corporation status effective February 1, 1990.
Accordingly, the Registrant has subsequently had no income tax expense as the
tax is assessed at the shareholder level (See Note 9 - Income Taxes of the
Notes to the Financial Statements in Item 8 of this Form 10-K, which is
incorporated herein by reference).
In management's estimation, the effects of inflation and changing prices on the
Registrant's results of operations were negligible in 1995, 1994 and 1993.
Saddlebrook Rental Pool Operation
The Saddlebrook Rental Pool Operation (the "Rental Pool") is described in Note
2 - Significant Accounting Policies of the Notes to the Financial Statements of
Saddlebrook Resorts, Inc. and in Note 1 - Rental Pool Operations and Rental
Pool Agreement of the Notes to Financial Statements of Saddlebrook Rental Pool
Operation in Item 8 of this Form 10-K, which are incorporated herein by
reference.
The average occupancy for fiscal 1995, 1994 and 1993 was 49%, 50% and 47%,
respectively. The average distribution of Net Rental Income per participating
condominium unit for fiscal 1995, 1994 and 1993 was $9,733 $9,248 and $8,333,
respectively.
Item 8. Financial Statements and Supplementary Data
The financial statements, including the Reports of Independent Certified Public
Accountants for Saddlebrook Resorts, Inc. are included on pages 11 to 23, and
for Saddlebrook Rental Pool Operation on pages 24 to 29. An index to the
financial statements is on page 10.
The following financial statement schedule should be read in conjunction with
the aforementioned financial statements. Financial statement schedules not
included in this Form 10-K have been omitted because they are not applicable or
the required information is shown in the financial statements or notes thereto.
Schedule II Valuation and Qualifying Accounts and Reserves Page 31
Item 9. Changes in and Disagreements on Accounting and Financial Disclosure
Not applicable
- 6 -
7
PART III
Item 10. Directors and Executive Officers of the Registrant
The Directors and Executive Officers of the Registrant are as follows:
Name Position Background
---- -------- ----------
Thomas L. Dempsey Chairman of the Board Chairman of the Board, Penton
Age: 69 President, and Chief Publishing, Inc., Cleveland, OH,
5327 Cobblestone Ct. Executive Officer Vice President and Director,
Wesley Chapel, FL Pittway Corp., Northbrook, IL
Eleanor Dempsey Director Wife of Thomas Dempsey,
5327 Cobblestone Ct. Merchandizing Manager,
Wesley Chapel, FL Saddlebrook Resorts, Inc.
Richard Boehning Director, Executive Vice General Manager, Doral Hotel
Age: 61 President and General and Country Club, Miami, FL
5017 Pinelake Road Manager
Wesley Chapel, FL
Gregory R. Riehle Director, Vice President Son-in-law of Thomas Dempsey,
Age: 39 and Secretary Attorney, Shumaker, Loop &
30155 Fairway Drive Kendrick, Tampa, FL
Wesley Chapel, FL
Maureen Dempsey Director, Vice President Daughter of Thomas Dempsey,
Age: 37 and Assistant Secretary President, Saddlebrook
4947 Mill Pond Road International Tennis, Inc.
Wesley Chapel, FL
Diane L. Riehle Director, Vice President Daughter of Thomas Dempsey,
Age: 35 and Assistant Secretary Regional Sales Manager,
30155 Fairway Drive Saddlebrook Resorts, Inc.
Wesley Chapel, FL
Donald L. Allen Vice President and Controller, Kiawah Island,
Age: 56 Treasurer Charleston, SC
1314 Foxwood Drive
Lutz, FL
Robert A. Shaw Assistant Treasurer and Controller, Gulf Shores Plantation,
Age: 39 Controller Gulf Shores, AL, CPA, Price
5404 Saddlebrook Way Waterhouse, Indianapolis, IN
Wesley Chapel, FL
- 7 -
8
Item 11. Executive Compensation
The directors and executive officers of the Registrant as of December 31, 1995
are listed in Item 10 of this Form 10-K, which is incorporated herein by
reference. The aggregate remuneration from the Registrant for all directors and
executive officers for the fiscal year ended December 31, 1995 was $804,455. Of
this amount, Thomas Dempsey received $110,134 and Richard Boehning received
$229,242. No other director or executive officer received compensation in
excess of $100,000.
Directors and executive staff are allowed to use the Registrant's resort
facilities and are provided various discounts on related purchases in
accordance with hospitality industry standards. The Registrant has no other
compensation plans for directors and executive officers.
Item 12. Security Ownership of Certain Beneficial Owners and Management
Title of Name of beneficial Amount and nature of Percent
class owner beneficial ownership of class
-------- ---------------------- --------------------- --------
Common Thomas L. Dempsey 100.0% 87.0%
Common Maureen Dempsey Trust 6.5% 6.5%
Common Diane Lynn Riehle Trust 6.5% 6.5%
In December 1994, the Registrant's Articles of Incorporation were amended to
increase the number of shares of authorized common stock from 25,000 to 100,000
shares. Each of the 500 shares of stock that was previously outstanding was
then exchanged for 100 shares of voting stock and 100 shares of nonvoting
stock. The par value of each share remains unchanged at $1. On October 1, 1995,
6,500 shares of nonvoting stock was gifted by Dempsey to each of two family
trusts.
Item 13. Certain Relationships and Related Transactions
As of December 31, 1995, present and past executive officers and/or directors
of the Registrant have personally accounted for real estate sales totalling
$2,748,000 since inception of the project. Other relationships and related
transactions are described in Note 6 - Related Party Transactions of the Notes
to the Financial Statements in Item 8 of this Form 10-K, which is incorporated
herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K
(a) Financial statements and schedules required to be filed are listed in
Item 8 of this Form 10-K, which is incorporated herein by reference.
Exhibits required to be attached by Item 601 of Regulation S-K are listed
in the Index to Exhibits attached to this Form 10-K, which is
incorporated herein by reference.
(b) The Registrant was not required to file a Form 8-K during the year ended
December 31, 1995.
- 8 -
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Pursuant to the requirements of Section 13 or 15(d) 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.
SADDLEBROOK RESORTS, INC.
(Registrant)
Date: March 25, 1996
--------------- /s/ Donald L. Allen
-------------------------------
Donald L. Allen
Vice President and Treasurer
(Principal Financial and
Accounting Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 25, 1996.
/s/ Thomas L. Dempsey /s/ Richard Boehning
---------------------------- -----------------------------
Thomas L. Dempsey Richard Boehning
President and Chairman Director and Executive
of the Board Vice President
(Principal Executive Officer)
/s/ Gregory R. Riehle /s/ Robert A. Shaw
---------------------------- -----------------------------
Gregory R. Riehle Robert A. Shaw
Director Assistant Treasurer
and Controller
- 9 -
10
Saddlebrook Resorts, Inc.
INDEX TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
Financial Statements PAGE
- --------------------
SADDLEBROOK RESORTS, INC.
Report of Independent Certified Public Accountants 11
Balance Sheets at December 31, 1995 and 1994 12
Statements of Income for each of the three years in
the period ended December 31, 1995 13
Statement of Changes in Shareholders' Equity for each of
the three years in the period ended December 31, 1995 14
Statements of Cash Flows for each of the three years in the
period ended December 31, 1995 15
Notes to Financial Statements 16-23
SADDLEBROOK RENTAL POOL OPERATION
Report of Independent Certified Public Accountants 24
Balance Sheets at December 31, 1995 and 1994 25
Statements of Operations for each of the three years
in the period ended December 31, 1995 26
Statements of Changes in Participants' Fund Balance
for each of the three years in the period ended
December 31, 1995 27
Notes to Financial Statements 28-29
Financial Statement Schedules
- -----------------------------
Report of Independent Certified Public Accountants on
Financial Statement Schedules 30
Schedule II - Valuation and Qualifying Accounts and Reserves 31
- 10 -
11
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
March 13, 1996
To the Board of Directors and Shareholders of
Saddlebrook Resorts, Inc.
In our opinion, the accompanying balance sheets and the related statements of
income and changes in shareholders' equity and of cash flows present fairly, in
all material respects, the financial position of Saddlebrook Resorts, Inc. (the
"Company") at December 31, 1995 and 1994, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
1995, in conformity with generally accepted accounting principles. These
financial statements are the responsibility of the Company's management; our
responsibility is to express an opinion on these financial statements based on
our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for the
opinion expressed above.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Tampa, Florida
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Saddlebrook Resorts, Inc.
BALANCE SHEETS
- --------------------------------------------------------------------------------
DECEMBER 31,
1995 1994
ASSETS
Current assets:
Cash and cash equivalents $ 40,702 $ 595,502
Escrowed cash 106,096 120,010
Short-term escrowed investments 399,635 382,648
Trade accounts receivable, net of allowances for
doubtful accounts of $122,976 and $99,691 3,349,779 2,314,631
Due from related parties 114,004 117,827
Resort inventory and supplies 1,472,689 1,327,484
Prepaid expenses and other assets 526,424 445,800
---------------- -----------------
Total current assets 6,009,329 5,303,902
Long-term escrowed investments 299,500 399,407
Property, buildings and equipment, net 22,580,998 21,549,219
Intangible assets and deferred charges, net of
accumulated amortization of $1,254,047 and $1,161,516 266,702 304,075
----------------- -----------------
$ 29,156,529 $ 27,556,603
================= =================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of notes payable $ 1,486,722 $ 1,231,547
Accounts payable 1,325,265 997,904
Accrued rental distribution 1,037,865 1,265,856
Accrued payroll and related expenses 743,077 678,330
Accrued interest 141,491 120,686
Accrued taxes 43,178 36,519
Guest deposits 798,444 724,761
Escrowed deposits 805,231 902,065
Accrued expenses and other liabilities 676,566 1,256,145
Due to related parties 1,923,461 1,324,099
----------------- -----------------
Total current liabilities 8,981,300 8,537,912
Notes payable due after one year 17,276,920 16,212,522
----------------- -----------------
Total liabilities 26,258,220 24,750,434
----------------- -----------------
Commitments and contingencies (Note 10)
Shareholders' 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 1,785,182 1,693,042
----------------- -----------------
Total shareholders' equity 2,898,309 2,806,169
----------------- -----------------
$ 29,156,529 $ 27,556,603
================= =================
The accompanying Notes to Financial Statements are
an integral part of these financial statements
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Saddlebrook Resorts, Inc.
STATEMENTS OF INCOME
- ------------------------------------------------------------------------------
YEAR ENDED
DECEMBER 31,
1995 1994 1993
Resort revenues $ 35,625,389 $ 33,549,984 $ 30,391,280
Costs and expenses: -------------- -------------- --------------
Operating costs of resort 24,342,402 22,811,961 20,969,905
Sales and marketing 3,089,655 2,898,398 2,447,709
General and administrative 3,593,224 3,430,035 3,142,125
Depreciation and amortization 1,326,441 1,109,849 1,534,170
Interest 1,476,569 1,221,190 1,594,139
-------------- -------------- --------------
Total costs and expenses 33,828,291 31,471,433 29,688,048
-------------- -------------- --------------
Net income $ 1,797,098 $ 2,078,551 $ 703,232
============== ============== ==============
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
- 13 -
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Saddlebrook Resorts, Inc.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
- ------------------------------------------------------------------------------
ACCUMULATED TOTAL
COMMON ADDITIONAL EARNINGS SHAREHOLDERS'
STOCK PAID-IN CAPITAL (DEFICIT) EQUITY
Balance at December 31, 1992 $ 500 $ 1,112,627 $ 443,660 $ 1,556,787
Net income for the year 703,232 703,232
Distribution to shareholder (363,703) (363,703)
-------------- -------------- -------------- --------------
Balance at December 31, 1993 500 1,112,627 783,189 1,896,316
Net income for the year 2,078,551 2,078,551
Distribution to shareholder (1,168,698) (1,168,698)
Common stock
recapitalization (Note 1) 99,500 (99,500)
-------------- -------------- -------------- --------------
Balance at December 31, 1994 100,000 1,013,127 1,693,042 2,806,169
Net income for the year 1,797,098 1,797,098
Distribution to shareholder (1,704,958) (1,704,958)
-------------- -------------- -------------- --------------
Balance at December 31, 1995 $ 100,000 $ 1,013,127 $ 1,785,182 $ 2,898,309
============== ============== ============== ==============
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
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Saddlebrook Resorts, Inc.
STATEMENTS OF CASH FLOWS
- ------------------------------------------------------------------------------
YEAR ENDED
DECEMBER 31,
1995 1994 1993
Net income $ 1,797,098 $ 2,078,551 $ 703,232
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 1,326,441 1,109,849 1,534,170
Loss (gain) on disposal of property, buildings and
equipment 7,596 (600) -
Provision for doubtful accounts 33,000 21,700 16,200
Change in assets and liabilities:
(Increase) decrease in:
Escrowed cash 13,914 150,057 (42,947)
Escrowed investments 82,920 (192,094) (99,426)
Trade accounts receivable (1,068,148) (246,195) (285,682)
Due from related parties 3,823 73,375 (50,150)
Resort inventory and supplies (145,205) (7,046) 36,946
Prepaid expenses and other assets (80,624) (79,332) (32,797)
Increase (decrease) in:
Accounts payable 327,361 562,567 (176,480)
Accrued rental distribution (227,991) 161,429 165,982
Guest deposits 73,683 88,938 (187,381)
Escrowed deposits (96,834) 42,037 142,373
Accrued expenses and other liabilities (487,368) 82,875 607,107
Due to related parties 599,362 305,659 980,022
-------------- -------------- --------------
Net cash provided by operating
activities 2,159,028 4,151,770 3,311,169
Cash flows from investing activities: -------------- -------------- --------------
Proceeds from sale of equipment 4,042 8,327 2,514
Capital expenditures (2,277,326) (3,011,737) (1,350,395)
-------------- -------------- --------------
Net cash used in investing activities (2,273,284) (3,003,410) (1,347,881)
-------------- -------------- --------------
Cash flows from financing activities:
Proceeds from notes payable 2,926,284 1,415,676 17,507,010
Payments on notes payable (1,606,711) (1,069,165) (21,009,452)
Distribution to shareholder (1,704,959) (1,168,698) (363,703)
Finance costs (55,158) (33,543) (390,471)
-------------- -------------- --------------
Net cash used in financing activities (440,544) (855,730) (4,256,616)
-------------- -------------- --------------
Net (decrease) increase in cash and cash equivalents (554,800) 292,630 (2,293,328)
Cash and cash equivalents, beginning of year 595,502 302,872 2,596,200
-------------- -------------- --------------
Cash and cash equivalents, end of year $ 40,702 $ 595,502 $ 302,872
============== ============== ==============
SUPPLEMENTAL DISCLOSURES:
Cash paid for interest $ 1,455,764 $ 1,196,447 $ 1,631,722
============== ============== ==============
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
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Saddlebrook Resorts, Inc.
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
1. THE COMPANY:
Saddlebrook Resorts, Inc. (the "Company") was incorporated in the State of
Florida in June 1979 at which time it purchased a golf course and tennis
complex, as well as certain undeveloped land, located in Pasco County,
Florida which was developed as a resort-condominium and residential homes
project. In 1980, the Company commenced development of the
resort-condominium project. The majority of the condominium units sold
are provided as hotel accommodations by their owners under a Rental Pool
and Agency Appointment Agreement. The Company was purchased by its
current majority shareholder in 1988.
In December 1994, the Company's sole shareholder approved an amendment to
the Company's Articles of Incorporation increasing the amount of
authorized shares of Common Stock to 50,000 voting and 50,000 nonvoting
shares from 25,000 shares. Each share of voting stock outstanding was
exchanged for 100 shares of voting and 100 shares of nonvoting stock. Par
value of the stock remained unchanged at $1 per share.
Effective October 1, 1995, the Company's sole shareholder gifted 6,500
non-voting shares to each of two family trusts. The ownership percentages
are 87%, 6.5% and 6.5% for the controlling shareholder and the two trusts,
respectively.
2. SIGNIFICANT ACCOUNTING POLICIES:
A summary of the Company's significant accounting policies follows:
Use of estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
Cash equivalents
All highly liquid debt instruments purchased with an original maturity of
3 months or less are considered to be cash equivalents.
Resort inventories and supplies
Inventories include operating materials and supplies and are accounted for
at the lower of first-in, first-out cost or market.
Investments
Investments of the Company, which are held to maturity, are recorded at
amortized cost, which approximates fair market value.
- 16 -
17
Saddlebrook Resorts, Inc.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Property, buildings and equipment
Property, buildings and equipment are stated at cost. Depreciation is
provided over the estimated useful lives of the assets on a straight-line
basis. Expenditures for renewals and improvements that significantly add
to or extend the useful life of an asset are capitalized.
Expenditures for repairs and maintenance are charged to expense as
incurred. With the retirement or other disposition of property, buildings
and equipment, the cost of the assets and related accumulated depreciation
amounts are removed from the accounts and any resulting gains or losses
are reflected in operations.
Intangible assets and deferred charges
A non-compete agreement was negotiated in connection with the purchase of
the Company on November 14, 1988. The asset amounting to $1,000,000, was
amortized over the life of the agreement, 5 years, on a straight-line
basis.
In connection with the Company's refinancing of its debt during 1993 and
further consolidation of debt in 1994 and 1995, costs in the amount of
$479,172 have been incurred and capitalized. These debt issuance costs
are being amortized using a method that approximates the interest method
over 5 years, the life of the related debt outstanding.
Amortization expense for all intangible assets and deferred charges for
the years ended December 31, 1995, 1994 and 1993 was $92,531, $80,891 and
$221,305, respectively.
Rental pool operations
Resort revenues include rental revenues for condominium units owned by
third parties participating in the rental pool. If these rental units
were owned by the Company, normal costs associated with ownership such as
depreciation, real estate taxes, maintenance, and other costs would have
been incurred. Instead, resort operating expenses for the years ended
December 31, 1995, 1994 and 1993 include rental pool distributions
approximating $5,285,000, $4,985,000 and $4,475,000, respectively.
Reclassifications
Certain reclassifications have been made to the prior year financial
statements to conform with 1995 presentation.
- 17 -
18
Saddlebrook Resorts, Inc.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
3. FAIR VALUE OF FINANCIAL INSTRUMENTS:
The estimated fair value of financial instruments has been determined by
the Company using available market information and appropriate valuation
methodologies. However, considerable judgment is required in interpreting
data to develop the estimates of fair value. Accordingly, the estimates
presented herein are not necessarily indicative of the amounts that the
Company could realize in a current market exchange. The fair value
estimates presented herein are based on pertinent information available to
management as of December 31, 1995. Although management is not aware of
any factors that would significantly affect the estimated fair value
amounts, such amounts have not been comprehensively revalued for purposes
of these financial statements since that date and current estimates of
fair value may differ significantly from the amounts presented herein.
The fair values of the Company's financial instruments are estimated based
on current market rates and instruments with the same risk and maturities.
The fair values of cash and cash equivalents, escrowed cash, accounts
receivable, receivables from related parties, escrowed investments,
accounts payable, notes payable and payables to related parties
approximate the carrying values of these financial instruments.
4. ESCROWED CASH:
Escrowed cash, restricted as to use at December 31 is comprised of the
following:
1995 1994
Rental pool unit owner deposits for maintenance
reserve fund held in bank accounts which bear an
interest rate of 2.18% (5.25% in 1994) $ 76,314 $ 101,335
Security deposits held on long term rentals 29,782 18,675
----------------- -----------------
$ 106,096 $ 120,010
================= =================
5. ESCROWED INVESTMENTS:
Escrowed investments at December 31 are comprised of the following:
1995 1994
Certificates of deposit $ 100,000 $ 100,000
U.S. Treasury Securities 599,135 682,055
----------------- -----------------
699,135 782,055
Less current portion (399,635) (382,648)
----------------- -----------------
$ 299,500 $ 399,407
================= =================
- 18 -
19
Saddlebrook Resorts, Inc.
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
Escrowed investments relate to rental pool unit owner deposits for the
maintenance reserve fund which bear interest at rates ranging from 4.38%
to 7.13%. Long term portions of these investments mature in 1997 through
2000.
6. RELATED PARTY TRANSACTIONS:
Saddlebrook Investments, Inc. ("SII"), solely owned by the Company's
majority shareholder, is a broker/dealer for the sales of Saddlebrook
condominium units. The Company provided certain accounting, management
and other services to SII which amounted to $13,920 for each of the three
years ended December 31, 1995. At December 31, 1995 and 1994, a net
payable of $92,405 and $5,447, respectively, was due SII for brokerage
services provided to the Company.
The Company performs certain accounting and property management activities
on behalf of Saddlebrook Resort Condominium Association ("Association")
and is reimbursed for expenses paid on behalf of the Association. These
amounted to $935,686 in 1995, $943,648 in 1994 and $937,526 in 1993. The
Association also charges the Company certain fees for condominium
assessments. At December 31, 1995, a net receivable of $15,060 was due
from the Association for accounting, management and other services
rendered. At December 31, 1994, a net payable of $2,529 was due the
Association for assessments owed by the Company.
Saddlebrook International Tennis, Inc. ("SIT") is solely owned by the
Company's majority shareholder. SIT is a tennis academy operating at the
resort. The Company is reimbursed for expenses paid on behalf of SIT. In
addition, certain operating expenses are allocated to SIT. These amounted
to $1,556,579 in 1995, $1,381,876 in 1994 and $1,011,401 in 1993. As of
December 31, 1995 and 1994, a payable amounting to $1,481,059 and
$966,123, respectively, was due SIT relating to amounts borrowed by SIT
held by the Company ($729,000 and $779,000, respectively) and for other
transactions (Note 10). These amounts are included in the due to related
parties caption in the accompanying balance sheets.
Dividends declared to the Company's shareholder during 1994 in the amount
of $350,000 were unpaid as of December 31, 1995. This distribution
payable is reflected as a distribution in the Statements of Changes in
Shareholders' Equity and as a payable due to related parties in the
Balance Sheets.
Due from related parties consist of miscellaneous receivables owed the
Company of $98,944 and $117,827 at December 31, 1995 and 1994,
respectively.
- 19 -
20
Saddlebrook Resorts, Inc.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
7. PROPERTY, BUILDINGS AND EQUIPMENT:
Property, buildings and equipment at December 31 consist of the following:
Estimated
Useful
1995 1994 Lives
Land and land improvements $ 4,478,982 $ 4,478,982
Buildings and recreational
facilities 18,862,973 17,129,142 10-40
Machinery and equipment 7,587,232 5,614,055 2-15
Construction in progress 300,308 1,766,654
--------------- ----------------
31,229,495 28,988,833
Less accumulated depreciation (8,648,497) (7,439,614)
--------------- ----------------
$ 22,580,998 $ 21,549,219
=============== ================
Substantially all property, buildings and equipment are mortgaged, pledged
or otherwise subject to lien under loan agreements of the Company and
certain related parties (Notes 8 and 10).
Depreciation expense amounted to $1,233,911, $1,028,958 and $1,312,865 for
the years ended December 31, 1995, 1994 and 1993, respectively.
The Company leases certain equipment under operating leases. Some of the
leases contain annual renewal options after the initial lease term. Lease
expense amounted to $297,545, $371,441 and $379,130 for the years ended
December 31, 1995, 1994 and 1993, respectively. Future minimum lease
payments for noncancelable operating leases with initial lease terms in
excess of one year approximate:
1996 $ 185,455
1997 77,720
1998 -
1999 -
2000 -
-----------
$ 263,175
===========
- 20 -
21
Saddlebrook Resorts, Inc.
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
8. NOTES PAYABLE:
Notes payable at December 31 consist of the following:
1995 1994
Note payable to bank secured by all real and personal
property and subsequently acquired real and personal
property, guaranteed by Saddlebrook International Tennis,
Inc. and majority shareholder, at 8.75% (8.125% in 1994),
principal due in annual installments of $950,000 from
1996 through 1997, balance due in 1998 $ 18,226,920 $ 15,651,000
Advance guidance facility payable to bank, secured by all
real and personal property and subsequently acquired real
and personal property, guaranteed by Saddlebrook International
Tennis, Inc. and majority shareholder, at 6.825%, balance
consolidated during 1995 into note payable above - 323,800
Advance guidance facility payable to bank, secured by
all real and personal property and subsequently acquired
real and personal property, guaranteed by Saddlebrook
International Tennis, Inc. and majority shareholder,
at prime + 1% (9.5% at December 31, 1994), balance
consolidated during 1995 into note payable above - 1,383,008
Line of credit payable to bank, secured by all real and
personal property and subsequently acquired real and
personal property, guaranteed by Saddlebrook International
Tennis, Inc. and majority shareholder, at prime + 1%
(9.5% at December 31, 1995), principal due in 1996 500,000 -
Notes payable under various capital leases 36,722 86,261
-------------- --------------
18,763,642 17,444,069
Less current portion (1,486,722) (1,231,547)
-------------- --------------
$ 17,276,920 $ 16,212,522
============== ==============
The $18,226,920 note payable agreement requires, among other things, that
the Company and its affiliates, on a consolidated basis maintain tangible
net worth, as defined, of $1,500,000 as of December 31, 1995 as well as a
debt service coverage ratio of 125% during the entire term of the loans.
The agreement also contains restrictive covenants regarding lease
agreements, assignment of contracts, capital expenditures, and other
indebtedness.
The Company has an available advance guidance facility ("AGF") that allows
for up to $3.5 million to be drawn annually through 1996 for the purchase
of equipment, the expansion and/or renovation of exiting facilities, and
the addition of new buildings. The
- 21 -
22
Saddlebrook Resorts, Inc.
NOTES TO FINANCIAL STATEMENTS
- ------------------------------------------------------------------------------
1996 AGF agreement expires December 31, 1996. As of December 31, 1995,
the available but committed portion of the 1995 AGF was $1.8 million.
The Company also has an available operating line of credit from a bank in
the amount of $1,500,000 with similar terms to its currently outstanding
debt. As of December 31, 1995, there was $500,000 drawn on this line of
credit.
Principal maturities of notes payable are due as follows: 1996 -
$1,486,722; 1997 - $950,000; 1998 - $16,326,920; 1999 - $0; 2000 and
thereafter - $0.
Accrued interest outstanding on the Company's notes payable was $141,491
and $120,686 at December 31, 1995 and 1994, respectively.
9. INCOME TAXES:
Effective February 1, 1990, the Company elected S Corp. status for federal
and state tax purposes. As of December 31, 1995, the Company has
approximately $502,000 and $470,000 in book and tax net operating loss
carryforwards, respectively, which expire in 2005 available only to offset
future C Corp. taxable income.
10. COMMITMENTS AND CONTINGENCIES:
Litigation
On May 12, 1989, a judgment was entered against the Company in the amount
of $8,082,000 relating to damages to adjacent property owners for surface
water effects as a result of past development. In addition, an injunction
was entered to remediate damages relating thereto.
On March 18, 1992, the Florida Second District Court of Appeal issued an
opinion reversing and vacating the jury verdict and judgment against the
Company and ordered a new trial. On December 7, 1994, the trial court
heard oral argument on the merits of Company's motion for summary
judgment based on collateral estoppel, and ruled in the Company's favor.
On December 23, 1994, the plaintiffs filed a motion seeking clarification
of the court's December 7, 1994 ruling. Thereafter, on January 5, 1995
the Company filed its response in opposition to that motion. On January
7, 1995 the court entered an order granting summary judgment in favor of
the Company and dismissing the action. Oral agreement on said appeal was
heard on February 21, 1996. It is currently not known when the appellate
court will render a decision on this appeal. Management currently
believes that the Company's position in further litigation would be
meritorious.
The Company is involved in other litigation in the ordinary course of
business. In the opinion of management, these matters are adequately
covered by insurance or indemnification from other third parties and/or
the effect, if any, of these claims is not material to the reported
financial condition or results of operations of the Company as of December
31, 1995.
- 22 -
23
Saddlebrook Resorts, Inc.
NOTES TO FINANCIAL STATEMENTS
- -----------------------------------------------------------------------------
Loan guarantees
The Company is contingently liable for the notes payable to a bank in the
amount of $729,000 maturing in 1998 recorded by SIT, a related party, and
$470,000 maturing in 1998 received by the majority shareholder of the
Company.
Insurance pool
The Company has pooled its risks with other resorts by forming an
insurance purchasing group in which they retain an equity interest and to
which they pay insurance premiums. The Company's ownership is less than
8% and all amounts contributed as capital ($122,950 as of December 31,
1995) are reflected as prepaid expenses and other assets in the
accompanying balance sheets. The Company's investment approximates the
proportionate net book value of the insurance company as of December 31,
1995. The Company may withdraw from the risk pool at any renewal date
(annually).
- 23 -
24
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
March 13, 1996
To the Board of Directors of Saddlebrook
Resorts, Inc., as Operators under the Saddlebrook
Rental Pool and Agency Appointment Agreement
In our opinion, the accompanying balance sheets and the related
statements of operations and of changes in participants' fund balance
present fairly, in all material respects, the financial position of
the Saddlebrook Rental Pool Operation (funds created for participants
who have entered into a rental pool agreement as explained in Note 1)
at December 31, 1995 and 1994, and the results of its operations and
the changes in participants' fund balance for each of the three years
in the period ended December 31, 1995, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the rental pool's operators; our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Tampa, Florida
- 24 -
25
Saddlebrook Rental Pool Operation
BALANCE SHEETS
- ------------------------------------------------------------------------------
DISTRIBUTION FUND
DECEMBER 31,
1995 1994
ASSETS
Receivable from Saddlebrook Resorts, Inc. $1,017,332 $1,267,078
========== ==========
LIABILITIES AND PARTICIPANTS' FUND BALANCE
Due to participants for rental pool
distribution $ 832,926 $1,042,311
Due to maintenance escrow fund 184,406 224,767
Participants' fund balance - -
---------- ----------
$1,017,332 $1,267,078
========== ==========
MAINTENANCE ESCROW FUND
DECEMBER 31,
1995 1994
ASSETS
Cash in bank $ 76,314 $ 101,335
Investments 699,135 782,055
Receivables:
Distribution fund 184,406 224,767
Interest 8,633 9,106
Prepaid maintenance 146,932 69,317
---------- ----------
$1,115,420 $1,186,580
========== ==========
LIABILITIES AND PARTICIPANTS' FUND BALANCE
Accounts Payable $ 97,651 $ 187,224
Participants' fund balance 1,017,769 999,356
---------- ----------
$1,115,420 $1,186,580
========== ==========
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
- 25 -
26
Saddlebrook Rental Pool Operation
DISTRIBUTION FUND
STATEMENTS OF OPERATIONS
---------------------------------------------------------------------------
YEAR ENDED
DECEMBER 31,
1995 1994 1993
Rental pool revenue $13,126,672 $12,145,192 $10,934,400
----------- ----------- -----------
Deductions:
Marketing fee 984,500 910,890 820,080
Management fee 1,640,834 1,518,149 1,366,801
Travel agent commissions 710,063 457,200 440,125
Credit card expense 123,672 125,878 104,201
Provision for doubtful accounts - - 8,000
----------- ----------- -----------
3,459,069 3,012,117 2,739,207
----------- ----------- -----------
Net rental income 9,667,603 9,133,075 8,195,193
Operator share of net rental income (4,350,421) (4,109,884) (3,687,837)
Other revenues (expenses):
Complimentary room revenues 104,623 92,283 87,259
Minor repairs and replacements (136,749) (130,793) (120,006)
----------- ----------- -----------
Amounts available for distribution to
participants and maintenance
escrow fund $ 5,285,056 $ 4,984,681 $ 4,474,609
=========== =========== ===========
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
- 26 -
27
Saddlebrook Rental Pool Operation
STATEMENTS OF CHANGES IN PARTICIPANTS' FUND BALANCE
- --------------------------------------------------------------------------------
DISTRIBUTION FUND
YEAR ENDED
DECEMBER 31,
1995 1994 1993
Balance, beginning of period $ - $ - $ -
Additions:
Amounts available for distribution 5,285,056 4,984,681 4,474,609
Reductions:
Amounts withheld for maintenance
escrow fund (934,635) (874,797) (786,772)
Amounts accrued or paid to (4,350,421) (4,109,884) (3,687,837)
participants
----------- ----------- -----------
Balance, end of period $ - $ - $ -
=========== =========== ===========
MAINTENANCE ESCROW FUND
YEAR ENDED
DECEMBER 31,
1995 1994 1993
Balance, beginning of period $ 999,356 $ 1,048,576 $ 961,868
Additions:
Amount withheld from distribution
fund 934,635 874,797 786,772
Unit upgrade payments 93,302 119,647 216,260
Interest earned 48,724 29,856 22,291
Reductions:
Unit renovations (51,577) (360,523) (387,830)
Refunds of excess amounts in escrow
accounts (418,770) (448,844) (321,517)
Maintenance charges (499,359) (160,721) (158,623)
Linen replacement charges
amortization (88,542) (103,432) (70,645)
----------- ----------- -----------
Balance, end of period $ 1,017,769 $ 999,356 $ 1,048,576
=========== =========== ===========
The accompanying Notes to Financial Statments are an integral part of these
financial statements.
- 27 -
28
Saddlebrook Rental Pool Operation
NOTES TO FINANCIAL STATEMENTS
-----------------------------------------------------------------------------
1. RENTAL POOL OPERATIONS AND RENTAL POOL AGREEMENT:
Condominium units are provided as rental (hotel) accommodations by their
owners under the Rental Pool and Agency Appointment Agreement (the
"Agreement") with Saddlebrook Resorts, Inc. (collectively, the "Rental
Pool"). Saddlebrook Resorts, Inc. ("Saddlebrook") acts as operator of
the Rental Pool, which provides for the distribution of a percentage of
net rental income, as defined, to the owners.
The Saddlebrook Rental Pool Operation consists of two funds, the Rental
Pool Income Distribution Fund ("Distribution Fund") and the Maintenance
and Furniture Replacement Escrow Fund ("Maintenance Escrow Fund"). The
operations of the Distribution Fund reflect the earnings of the Rental
Pool. The Distribution Fund balance sheets reflect amounts due from
Saddlebrook for the rental pool distribution payable to participants and
amounts due to the Maintenance Escrow Fund. The amounts due from
Saddlebrook are required to be distributed no later than forty-five days
following the end of each calendar quarter. The Maintenance Escrow Fund
reflects the accounting for certain escrowed assets to be used to
maintain unit interiors and replace furniture as it becomes necessary.
Rental pool participants and Saddlebrook share rental revenues according
to the provisions of the Agreement. Net Rental Income shared consists
of rentals received less a marketing surcharge of 7 1/2%, a 12 1/2%
management fee, travel agent commissions, credit card expense, and a
reserve for bad debts. Saddlebrook receives 45% of Net Rental Income as
operator of the Rental Pool. The remaining 55% of Net Rental Income
after adjustments for complimentary room revenues (ten percent of the
normal unit rental price paid by Saddlebrook for promotional use of the
unit) and certain minor repair and replacement charges is available for
distribution to the participants and maintenance escrow fund based upon
each participants' respective participation factor (computed using the
purchase price of a furnished unit and the number of days it was
available to the pool). Quarterly, 45% of Net Rental Income is
distributed to participants, and 10%, as adjusted for complimentary room
revenues and minor interior maintenance and replacement charges, is
deposited in an escrow account until a maximum of 20% of the existing
value of the individual owner's furniture package has been accumulated.
Excess escrow balances are refunded to participants.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Basis of Accounting
The accounting records of the funds are maintained on the accrual basis
of accounting.
Investments
Investments consist of certificates of deposits and U.S. Treasury
Securities which bear interest at rates ranging from 4.38% to 7.13%. At
December 31, 1995 and 1994, $399,635 and $382,648, respectively, mature
in one year or less.
- 28 -
29
Saddlebrook Rental Pool Operation
NOTES TO FINANCIAL STATEMENTS
-----------------------------------------------------------------------------
Income Taxes
No federal or state taxes have been reflected in the accompanying
financial statements as the tax effect of fund activities accrues to the
rental pool participants and operator.
- 29 -
30
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULES
To the Board of Directors of
Saddlebrook Resorts, Inc.
Our audits of the financial statements referred to in our report dated March
13, 1996 appearing on page 11 also included an audit of the Financial
Statement Schedules listed in Item 8 on page 6 of this Form 10-K. In our
opinion, these Financial Statement Schedules present fairly, in all material
respects, the information set forth therein when read in conjunction with
the related financial statements.
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
Tampa, Florida
March 13, 1996
- 30 -
31
Saddlebrook Resorts, Inc.
Schedule II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
-----------------------------------------------------------------------------
ADDITIONS
BALANCE AT CHARGED BALANCE
BEGINNING TO COSTS AND AT END
OF PERIOD EXPENSES DEDUCTIONS OF PERIOD
YEAR ENDED DECEMBER 31, 1995
Amortization of Noncompete
Agreement and Debt Issue
Costs $1,161,516 $ 92,531 $ - $ 1,254,047
YEAR ENDED DECEMBER 31, 1994
Amortization of Noncompete
Agreement and Debt Issue
Costs $1,080,625 $ 80,891 $ - $ 1,161,516
YEAR ENDED DECEMBER 31, 1993
Amortization of Noncompete
Agreement and Debt Issue
Costs $ 859,320 $ 221,305 $ - $ 1,080,625
- 31 -
32
INDEX TO EXHIBITS
Sequential
Number and Description of Exhibit Page Number
--------------------------------- -----------
3.1 Articles of Incorporation of Saddlebrook Resorts, Inc., a Florida
corporation (incorporated by reference to Exhibit A*).
3.2 Corporate By-laws of Saddlebrook Resorts, Inc. (incorporated by
reference to Exhibit B*).
4. Declaration of Condominium, together with the following:
(1) Articles of Incorporation of the Saddlebrook Association of
Condominium Owners, Inc. a Florida non-profit corporation;
(2) By-laws of the Saddlebrook Association of Condominium
Owners, Inc., and (3) Rules and Regulations of the Saddlebrook
Association of Condominium Owner, Inc. (incorporated by
reference to Exhibit C*).
10.1 Management Contract between Saddlebrook Resorts, Inc. and the
Saddlebrook Association of Condominium Owners, Inc. (incorporated
by reference to Exhibit C*).
10.2 Saddlebrook Rental Pool and Agency Appointment Agreement 33
10.3 Saddlebrook Rental Management Agency Employment (incorporated
by reference to Exhibit E*).
10.4 Form of Purchase Agreement (incorporated by reference to Exhibit H*).
10.5 Form of Deed (incorporated by reference to Exhibit I*).
10.6 Form of Bill of Sale (incorporated by reference to Exhibit J*).
27. Financial Data Schedule (for SEC use only)
28. Interest Being Registered. Pages 21 and 22 of the Post-Effective
Amendment No. 9 to Registration Statement on Form S-1 No. 2-65481
filed by the Registrant on March 25, 1986. 38
* Identification of exhibit incorporated by reference from the
Registration Statement No. 2-65481 previously filed by Registrant,
effective December 28, 1979.
- 32 -