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SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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 period ended December 31, 1997
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 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 30
Page 1 of 36
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Page 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, 1997, there were approximately 860 persons employed by the
Registrant.
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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. The Registrant's property has been approved for 950 residential
and condominium units.
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 condominiums which were sold or
are for sale to outside parties of which there were 551 rental units
participating in a rental pooling program at December 31, 1997 (see Exhibit 28
- - Interest Being Registered of this Form 10-K, which is incorporated herein by
reference). As of December 31, 1997, there were 20 condominiums owned by the
Registrant.
In addition, the resort facilities include a 117,000 square foot convention
facility with approximately 60,000 square feet of meeting space, two 18-hole
golf courses, 45 tennis courts, a luxury health spa, a fitness center, three
swimming pools, three restaurants, shops and other facilities necessary for the
operation of a 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).
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Item 3. Legal Proceedings (continued)
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 due to the false testimony of plaintiffs'
expert hydrologist. 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. On August 16, 1996, the Florida Second
District Court of Appeal filed an opinion affirming, in part, and reversing, in
part, the summary judgment. On November 19, 1996, the Registrant filed a motion
with the trial court to determine the issues that remain for retrial. Oral
argument was heard on May 15, 1997. A ruling on said motion is expected in
1998. 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.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
PART II
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.
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Page 5
Item 6. Selected Financial Data
Year ended December 31,
-----------------------------------------------------------
1997 1996 1995 1994 1993
----------- ----------- ----------- ----------- -----------
Operating revenues $41,753,000 $37,309,000 $35,625,000 $33,550,000 $30,391,000
Net income before
taxes 3,133,000 1,740,000 1,797,000 2,079,000 703,000
Total assets 32,707,000 29,519,000 29,157,000 27,557,000 25,057,000
Notes payable 18,687,000 19,567,000 18,764,000 17,444,000 17,098,000
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
The Registrant's current debt, and the related debt of an affiliate, matures on
July 16, 1998. Accordingly, the Registrant's debt is classified as a current
liability on its balance sheet. The current lender has verbally indicated that
the maturing debt may be renewed with similar terms. However, management is
nearing the completion of negotiations for longer-term financing with other
lenders. Management believes this refinancing will occur before the maturity
date of the current debt (see Note 6 - Note Payable of the Notes to Financial
Statements in Item 8 of this Form 10-K, which is incorporated herein by
reference).
Construction of the resort facilities was substantially complete as of December
31, 1982. During the fiscal periods ended December 31, 1997 and 1996, the
Registrant constructed a new fitness and recreation center and upgraded its
previous fitness center area into a luxury spa at a total aggregate cost of
$1,440,000. 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.
There were no other major capital additions or improvements during the fiscal
years ended December 31, 1997, 1996 and 1995.
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 pursuant to the anticipated refinancing of the
Registrant's debt discussed above.
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.
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.
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Page 6
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Management is aware of the issues associated with the programming code in
existing computer systems as the millennium (year 2000) approaches. Management
has commenced the replacement and upgrading of the Registrant's computer
systems so that the systems are converted to the current technological
standards for its industry. Accordingly, management anticipates that the
Registrant's computer systems will be year 2000-compliant and the effects of
the millennium on the Registrant's operations will be minimized.
There are no adverse purchase or other commitments outstanding as of December
31, 1997.
Results of Operations
Revenues for the fiscal years ended December 31, 1997, 1996 and 1995 were
comprised of the following areas of operation:
Year ended December 31,
------------------------
1997 1996 1995
------ ------ ------
Hotel revenues 48% 49% 50%
Merchandise sales 36 36 36
Club fees 15 15 13
Other income 1 - 1
--- --- ---
100% 100% 100%
=== === ===
Total revenues increased 12% for the fiscal year ended December 31, 1997 when
compared with the previous year. This improvement was a result of increases in
occupied unit nights, average daily rate and number of guests who stayed at the
resort for 1997 when compared to the prior fiscal period. Total revenues
increased 5% for the fiscal year ended December 31, 1996 when compared with its
previous year. This improvement was a result of increases in occupied unit
nights and number of guests who stayed at the resort, which were offset
slightly by a decrease in the average daily rate, for 1996 when compared to
fiscal 1995. The above improvements in guest occupancies are attributed to
various remodeling projects and the upgrading of the resort property that
occurred over the last few years. Projections for occupied unit nights and
revenues for 1998 and subsequent fiscal periods are expected to continue a
slight growth trend.
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Page 7
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations (continued)
Net income increased 80% for the fiscal year ended December 31, 1997 when
compared with the previous year. This increase is a direct result of the
increased revenues which were offset by increased general costs of operation.
Net income decreased 3% for the fiscal year ended December 31, 1996 when
compared with its previous year. This decrease was a result of increased
depreciation and interest expense related to recent capital improvements along
with increased general costs of operation.
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 8 Income Taxes of the Notes
to 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 1997, 1996 and 1995.
Saddlebrook Rental Pool Operation
The Saddlebrook Rental Pool Operation (the "Rental Pool") is described in Note
2. Significant Accounting Policies of the Notes to 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 1997, 1996 and 1995 was 54%, 51% and 49%,
respectively. The average distribution of Net Rental Income per participating
rental unit for fiscal 1997, 1996 and 1995 was $11,093, $9,881 and $9,733,
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 12 to 22 and
for Saddlebrook Rental Pool Operation on pages 23 to 27. An index to the
financial statements is on page 11.
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 29
Item 9. Changes in and Disagreements on Accounting and Financial Disclosure
Not applicable.
8
Page 8
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 71 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, Vice Wife of Thomas Dempsey
5327 Cobblestone Ct. President - Merchandising
Wesley Chapel, FL
Richard Boehning Director, Executive Vice General Manager, Doral Hotel
Age 63 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 41 and Secretary Attorney, Shumaker, Loop &
30338 Laurelwood Ln. Kendrick, Tampa, FL
Wesley Chapel, FL
Maureen Dempsey Director, Vice President Daughter of Thomas Dempsey,
Age 39 and Assistant Secretary President, Saddlebrook
29812 Fairway Drive International Tennis, Inc.
Wesley Chapel, FL
Diane L. Riehle Director, Vice President Daughter of Thomas Dempsey,
Age 37 and Assistant Secretary Regional Sales Manager,
30338 Laurelwood Ln. Saddlebrook Resorts, Inc.
Wesley Chapel, FL
Donald L. Allen Vice President and Controller, Kiawah Island,
Age 58 Treasurer Charleston, SC
1314 Foxwood Drive
Lutz, FL
Robert A. Shaw Assistant Treasurer and Controller, Gulf Shores
Age: 41 Controller Plantation, Gulf Shores, AL,
5404 Saddlebrook Way CPA, Price Waterhouse,
Wesley Chapel, FL Indianapolis, IN
9
Page 9
Item 11. Executive Compensation
The directors and executive officers of the Registrant as of December 31, 1997
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, 1997 was $834,000. Of
this amount, Thomas Dempsey received $113,000, Richard Boehning received
$190,000 and Gregory Riehle received $125,000. 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, 1997, present and past executive officers and/or directors
of the Registrant have personally accounted for real estate sales totaling
$2,748,000 since inception of the project. Other relationships and related
transactions are described in Note 7 Related Party Transactions of the Notes to
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, 1997.
10
Page 10
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 31, 1998 /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 31, 1998.
/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 and Vice President Assistant Treasurer
and Controller
11
SADDLEBROOK RESORTS, INC.
INDEX TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
PAGE
Financial Statements
- --------------------
SADDLEBROOK RESORTS, INC.
Report of Independent Certified Public Accountants 12
Balance Sheets at December 31, 1997 and 1996 13
Statements of Income for each of the three years in the period
ended December 31, 1997 14
Statements of Changes in Shareholders' Equity for each of the
three years in the period ended December 31, 1997 15
Statements of Cash Flows for each of the three years in the
period ended December 31, 1997 16
Notes to Financial Statements 17-22
SADDLEBROOK RENTAL POOL OPERATION
Report of Independent Certified Public Accountants 23
Balance Sheets at December 31, 1997 and 1996 24
Statements of Operations for each of the three years in the period
ended December 31, 1997 25
Statements of Changes in Participants' Fund Balance for each of
the three years in the period ended December 31, 1997 26
Notes to Financial Statements 27
Financial Statement Schedules
- -----------------------------
Report of Independent Certified Public Accountants on
Financial Statement Schedule 28
Schedule II - Valuation and Qualifying Accounts and Reserves 29
-11-
12
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
March 13, 1998
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, 1997 and 1996, and the results of its
operations and its cash flows for each of the three years in the period ended
December 31, 1997, 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.
PRICE WATERHOUSE LLP
Tampa, Florida
-12-
13
SADDLEBROOK RESORTS, INC.
BALANCE SHEETS
- -----------------------------------------------------------------------------
DECEMBER 31,
1997 1996
ASSETS
Current assets:
Cash and cash equivalents $ 854,596 $ 418,197
Escrowed cash 92,520 216,687
Short-term escrowed investments 690,828 99,796
Trade accounts receivable, net of allowances for
doubtful accounts of $122,000 and $97,000 4,041,440 3,456,189
Due from related parties 391,148 276,284
Resort inventory and supplies 1,567,972 1,459,095
Prepaid expenses and other assets 523,675 375,209
----------- -----------
Total current assets 8,162,179 6,301,457
Long-term escrowed investments 598,437 299,431
Property, buildings and equipment, net 23,838,237 22,720,248
Deferred charges, net of accumulated amortization
of $461,000 and $335,000 107,928 197,867
----------- -----------
$32,706,781 $29,519,003
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Current portion of note payable $18,686,920 $ 950,000
Accounts payable 541,281 597,980
Accrued rental distribution 1,449,795 1,443,512
Accrued payroll and related expenses 1,168,790 908,053
Accrued interest 134,766 146,207
Accrued taxes 55,283 83,372
Guest deposits 2,161,620 1,090,718
Escrowed deposits 1,381,785 615,914
Accrued expenses and other liabilities 1,290,581 1,023,305
Due to related parties 863,618 551,070
----------- -----------
Total current liabilities 27,734,439 7,410,131
Note payable due after one year - 18,616,920
----------- -----------
Total liabilities 27,734,439 26,027,051
----------- -----------
Commitments and contingencies (Note 9)
Shareholders' equity:
Common stock, $1.00 par value, 50,000 voting and
50,000 nonvoting shares authorized, issued and
outstanding 100,000 100,000
Additional paid-in capital 1,013,127 1,013,127
Accumulated earnings 3,859,215 2,378,825
----------- -----------
Total shareholders' equity 4,972,342 3,491,952
----------- -----------
$32,706,781 $29,519,003
=========== ===========
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
-13-
14
SADDLEBROOK RESORTS, INC.
STATEMENTS OF INCOME
- -------------------------------------------------------------------------------
YEAR ENDED
DECEMBER 31,
1997 1996 1995
Resort revenues $41,752,786 $37,309,372 $35,625,389
----------- ----------- -----------
Cost and expenses:
Operating costs of resort 28,128,453 25,683,947 24,342,402
Sales and marketing 3,529,378 3,172,772 3,089,655
General and administrative 3,785,816 3,548,758 3,593,224
Depreciation and amortization 1,489,063 1,392,180 1,326,441
Interest 1,687,092 1,771,766 1,476,569
----------- ----------- -----------
Total costs and expenses 38,619,802 35,569,423 33,828,291
----------- ----------- -----------
Net income $ 3,132,984 $ 1,739,949 $ 1,797,098
=========== =========== ===========
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
-14-
15
SADDLEBROOK RESORTS, INC.
STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
- -------------------------------------------------------------------------------
TOTAL
COMMON ADDITIONAL ACCUMULATED SHAREHOLDERS'
STOCK PAID-IN CAPITAL EARNINGS EQUITY
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
Distributions to shareholders (1,704,958) (1,704,958)
-------- ---------- ---------- ----------
Balance at December 31, 1995 100,000 1,013,127 1,785,182 2,898,309
Net income for the year 1,739,949 1,739,949
Distributions to shareholders (1,146,306) (1,146,306)
-------- ---------- ---------- ----------
Balance at December 31, 1996 100,000 1,013,127 2,378,825 3,491,952
Net income for the year 3,132,984 3,132,984
Distributions to shareholders (1,652,594) (1,652,594)
-------- ---------- ---------- ----------
Balance at December 31, 1997 $100,000 $1,013,127 $3,859,215 $4,972,342
======== ========== ========== ==========
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
-15-
16
SADDLEBROOK RESORTS, INC.
STATEMENTS OF CASH FLOWS
- -----------------------------------------------------------------------------
Year ended
December 31,
1997 1996 1995
Cash flows from operating activities:
Net income $3,132,984 $ 1,739,949 $ 1,797,098
Adjustments to reconcile net income to net
cash provided by operating activites:
Depreciation and amortization 1,489,063 1,392,180 1,326,441
Loss on disposal of property, buildings
and equipment 4,629 39,036 7,596
Provision for doubtful accounts 77,100 42,900 33,000
Change in assets and liabilities:
(Increase) decrease in:
Escrowed cash 124,167 (110,591) 13,914
Escrowed investments (890,038) 299,908 82,920
Trade accounts receivable (662,351) (149,310) (1,068,148)
Due from related parties (93,664) (162,280) 3,823
Resort inventory and supplies (108,877) 13,594 (145,205)
Prepaid expenses and other assets (148,466) 151,215 (80,624)
Increase (decrease) in:
Accounts payable (56,699) (727,285) 327,361
Accrued rental distribution 6,283 405,647 (227,991)
Guest deposits 1,070,902 292,274 73,683
Escrowed deposits 765,871 (189,317) (96,834)
Accrued expenses and other liabilities 488,483 556,625 (487,368)
Due to related parties 291,348 (1,372,391) 599,362
---------- ----------- -----------
Net cash provided by operating
activities 5,490,735 2,222,154 2,159,028
---------- ----------- -----------
Cash flows from investing activities:
Proceeds from sales of equipment 555,400 2,581 4,042
Capital expenditures (3,040,501) (1,450,781) (2,277,326)
---------- ----------- -----------
Net cash used in investing activities (2,485,101) (1,448,200) (2,273,284)
---------- ----------- -----------
Cash flows from financing activities:
Proceeds from notes payable 0 2,290,000 2,926,284
Payments on notes payable (880,000) (1,486,722) (1,606,711)
Distribution to shareholders (1,652,594) (1,146,306) (1,704,958)
Financing costs (36,641) (53,431) (55,159)
---------- ----------- -----------
Net cash used in financing activities (2,569,235) (396,459) (440,544)
---------- ----------- -----------
Net increase (decrease) in cash and
cash equivalents 436,399 377,495 (554,800)
Cash and cash equivalents, beginning of year 418,197 40,702 595,502
----------- ----------- -----------
Cash and cash equivalents, end of year $ 854,596 $ 418,197 $ 40,702
=========== =========== ===========
Supplemental disclosure:
Cash paid for interest $ 1,608,123 $ 1,767,050 $ 1,455,764
=========== =========== ===========
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
-16-
17
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. Property improvements for the resort consist of condominiums
which were sold or are for sale to outside parties. The majority of the
condominium units sold are provided as hotel accommodations by their
owners under a Rental Pool and Agency Appointment Agreement. 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 luxury
health spa, a fitness center, shops and other facilities necessary for the
operation of a luxury resort. 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
nonvoting 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 inventory and supplies
Inventory includes operating materials and supplies and is 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.
-17-
18
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.
Management periodically reviews the potential impairment of property,
buildings and equipment in order to determine the proper carrying value of
property, buildings and equipment as of each balance sheet date presented.
Deferred charges
In connection with the Company's refinancing of its debt during 1993 and
further consolidation of debt through 1997, costs in the amount of
$569,244 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 deferred charges amounted to $126,580, $122,266
and $92,531 for the years ended December 31, 1997, 1996 and 1995,
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, 1997, 1996 and 1995 include rental pool distributions
approximating $6,090,000, $5,385,000 and $5,285,000, respectively.
3. ESCROWED CASH:
Escrowed cash, restricted as to use, at December 31 is comprised of the
following:
1997 1996
Rental pool unit owner deposits for maintenance
reserve fund held in bank accounts which bear an
interest rate of 2.20% $66,570 $194,287
Security deposits held on long-term rentals 25,950 22,400
------- --------
$92,520 $216,687
======= ========
-18-
19
SADDLEBROOK RESORTS, INC.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
4. ESCROWED INVESTMENTS:
Escrowed investments at December 31 are comprised of the following:
1997 1996
U.S. Treasury Securities $1,289,265 $399,227
Less current portion (690,828) (99,796)
---------- --------
$ 598,437 $299,431
========== ========
Escrowed investments relate to rental pool unit owner deposits for the
maintenance reserve fund which bear interest at rates ranging from 5.11% to
7.125%. Long term portions of these investments mature in 1999 through
2002.
5. PROPERTY, BUILDINGS AND EQUIPMENT:
Property, buildings and equipment at December 31 consist of the following:
ESTIMATED
USEFUL
1997 1996 LIVES
Land and land improvements $ 4,821,537 $ 4,591,278
Buildings and recreational facilities 20,371,097 19,563,084 10-40
Machinery and equipment 8,422,251 7,600,876 2-15
Construction in progress 1,053,429 513,906
----------- -----------
34,668,314 32,269,144
Less accumulated depreciation (10,830,077) (9,548,896)
----------- -----------
$23,838,237 $22,720,248
=========== ===========
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 6 and 9).
Depreciation expense amounted to $1,362,483, $1,269,914 and $1,233,911 for
the years ended December 31, 1997, 1996 and 1995, 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 $203,207, $229,521 and $297,545 for the years ended
December 31, 1997, 1996 and 1995, respectively. Future minimum lease
payments for noncancelable operating leases with initial lease terms in
excess of one year approximate:
-19-
20
SADDLEBROOK RESORTS, INC.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1998 $106,371
1999 59,400
2000 43,104
2001 and thereafter 3,059
--------
$211,934
========
6. NOTE PAYABLE:
Note payable at December 31 consisted of the following:
1997 1996
Note payable to bank secured by all real and personal
property and subsequently acquired real and personal
property, guaranteed by Saddlebrook International Tennis,
Inc. ("SIT") and majority shareholder, at 8.375% (8.875%
in 1996), balance due in 1998 $ 18,686,920 $19,566,920
Less current portion (18,686,920) (950,000)
------------ -----------
$ - $18,616,920
============ ===========
The 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, 1997 and a debt service coverage
ratio of 125% over the term of the loan. The agreement also contains
restrictive covenants regarding lease agreements, assignment of contracts,
capital expenditures, and other indebtedness.
The Company is in the process of working with certain financial
institutions to refinance the current note payable on terms substantially
consistent with its existing obligation. Management believes the note
payable will be refinanced prior to its due date.
Accrued interest outstanding on the Company's note payable was $134,766
and $146,207 at December 31, 1997 and 1996, respectively.
7. RELATED PARTY TRANSACTIONS:
SIT, solely owned by the Company's majority shareholder, is a tennis
academy operating at the resort. The Company is reimbursed for expenses
paid on behalf of SIT. In addition, the Company charges SIT various
amounts for services provided to SIT guests, which amounted to
approximately $1,869,000, $1,908,000 and $1,557,000 for the years ended
December 31, 1997, 1996 and 1995, respectively. At December 31, 1997, a
net payable amounting to approximately $305,900 was due SIT relating to
amounts collected by the Company on behalf of SIT for resort operations
and for other operating cash transfer transactions. As of December 31,
1996, a net receivable of approximately $78,400 was due from SIT for
accounting, management and other services provided, as well as for
operating cash transfer transactions.
-20-
21
SADDLEBROOK RESORTS, INC.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
Saddlebrook Investments, Inc. ("SII"), solely owned by the Company's
majority shareholder, is a broker/dealer for sales of Saddlebrook Resort
condominium units. Saddlebrook Realty, Inc., solely owned by the
Company's majority shareholder, is a broker/dealer for the sale of other
general real estate. The Company provided certain accounting, management
and other services to these companies which amounted to approximately
$15,300, $13,900 and $13,900 for the years ended December 31, 1997, 1996
and 1995, respectively. At December 31, 1997 and 1996, a net payable of
approximately $200,000 and $201,000, respectively, was due these companies
for brokerage services and operating cash transfers provided to the
Company.
The Company performs certain accounting and property management activities
on behalf of the Saddlebrook Resort Condominium Association (the
"Association") and is reimbursed for expenses paid on behalf of the
Association. Expenses paid on behalf of and services provided to the
Association amounted to approximately $970,500, $946,900 and $935,700 for
the years ended December 31, 1997, 1996 and 1995, respectively. The
Association also charges the Company certain amounts for condominium
assessments. At December 31, 1997 and 1996, a net receivable of
approximately $99,900 and $134,100, respectively, was due from the
Association for accounting, management and other services rendered.
Dividends declared to the Company's shareholder during 1994 in the amount
of $350,000 were unpaid as of December 31, 1997. 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
accompanying Balance Sheets.
The Company and the previous owners of the resort have an agreement to
split equally the costs of defense in the litigation and any ultimate
judgment or remedial work relating to litigation with the adjacent
property owners of the resort. A receivable for reimbursable costs of
defense and remedial work at December 31, 1997 and 1996 was approximately
$261,900 and $50,000, respectively. See Note 9 for discussion of
litigation.
These related party amounts are included in the due from/to related
parties captions in the accompanying Balance Sheets. Due from related
parties also consists of other miscellaneous receivables and employee
advances owed the Company of approximately $21,400 and $13,800 at December
31, 1997 and 1996, respectively.
8. INCOME TAXES:
Effective February 1, 1990, the Company elected S Corporation status for
federal and state income tax purposes. As of December 31, 1997, the
Company has approximately $502,000 and $470,000 in book and tax net
operating loss carryforwards, respectively, which expire in 2002 available
only to offset future C Corporation taxable income.
9. 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.
-21-
22
SADDLEBROOK RESORTS, INC.
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
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 the Company's motion for summary
judgments 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. The plaintiffs then appealed said
order to the Florida Second District Court of Appeal on April 21, 1995.
On August 16, 1996, the appellate court issued its opinion affirming and
reversing, in part, the trial court's grant of summary judgment to the
Company. On November 19, 1996, the Company filed a motion to determine
the issues that remain for retrial. Oral argument for that motion took
place on May 15, 1997. The court has not ruled on the motion and no trial
date has been set. 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, 1997.
Loan guarantees
The Company is contingently liable for the notes payable to a bank in the
amount of $629,000 maturing in 1998 recorded by SIT, a related party.
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,
1997) 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,
1997. The Company may withdraw from the risk pool at any renewal date
(annually).
-22-
23
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
March 13, 1998
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, 1997 and 1996, 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, 1997, 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.
PRICE WATERHOUSE LLP
Tampa, Florida
-23-
24
SADDLEBROOK RENTAL POOL OPERATION
BALANCE SHEETS
- -------------------------------------------------------------------------------
DISTRIBUTION FUND
DECEMBER 31,
1997 1996
ASSETS
Receivable from Saddlebrook Resorts, Inc. $1,384,044 $1,381,418
========== ==========
LIABILITIES AND PARTICIPANTS' FUND BALANCE
Due to participants for rental pool distribution $1,138,469 $1,132,612
Due to maintenance escrow fund 245,575 248,806
---------- ----------
$1,384,044 $1,381,418
========== ==========
MAINTENANCE ESCROW FUND
ASSETS DECEMBER 31,
1997 1996
Cash in bank $ 66,570 $ 194,287
Investments 1,289,265 399,227
Receivables:
Distribution fund 245,575 248,806
Interest 10,646 5,606
Prepaid maintenance 343,822 335,381
---------- ----------
$1,955,878 $1,183,307
========== ==========
LIABILITIES AND PARTICIPANTS' FUND BALANCE
Accounts payable $ 103,294 $ 36,998
Participants' fund balance 1,852,584 1,146,309
---------- ----------
$1,955,878 $1,183,307
========== ==========
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
-24-
25
SADDLEBROOK RENTAL POOL OPERATION
STATEMENTS OF OPERATIONS
- -------------------------------------------------------------------------------
DISTRIBUTION FUND
YEAR ENDED
DECEMBER 31,
1997 1996 1995
Rental pool revenues $14,981,287 $13,309,993 $13,126,672
----------- ----------- -----------
Deductions:
Marketing fee 1,123,597 998,250 984,500
Management fee 1,872,661 1,663,750 1,640,834
Travel agent commissions 682,404 634,791 710,063
Credit card expense 151,701 141,660 123,672
Bad debt expense 10,000 - -
----------- ----------- -----------
3,840,363 3,438,451 3,459,069
----------- ----------- -----------
Net rental income 11,140,924 9,871,542 9,667,603
Operator share of net rental income (5,013,416) (4,442,194) (4,350,421)
Other revenues (expenses):
Complimentary room revenues 105,871 109,961 104,623
Minor repairs and replacements (143,369) (154,318) (136,749)
----------- ----------- -----------
Amounts available for distribution to
participants and maintenance
escrow fund $ 6,090,010 $ 5,384,991 $ 5,285,056
=========== =========== ===========
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
-25-
26
SADDLEBROOK RENTAL POOL OPERATION
STATEMENTS OF CHANGES IN PARTICIPANTS' FUND BALANCE
- -------------------------------------------------------------------------------
DISTRIBUTION FUND
YEAR ENDED
DECEMBER 31,
1997 1996 1995
Balance, beginning of period $ - $ - $ -
Additions:
Amounts available for distribution 6,090,010 5,384,991 5,285,056
Reductions:
Amounts withheld for maintenance
escrow fund (1,076,594) (942,797) (934,635)
Amounts accrued or paid to participants (5,013,416) (4,442,194) (4,350,421)
---------- ----------- -----------
Balance, end of period $ - $ - $ -
========== =========== ===========
MAINTENANCE ESCROW FUND
YEAR ENDED
DECEMBER 31,
1997 1996 1995
Balance, beginning of period $1,146,309 $1,017,769 $ 999,356
Additions:
Amount withheld from distribution fund 1,076,594 942,797 934,635
Unit upgrade payments 238,174 69,773 93,302
Interest earned 49,901 43,744 48,724
Reductions:
Unit renovations (144,458) (558,141) (51,577)
Refunds of excess amounts in escrow accounts (200,025) (39,321) (418,770)
Maintenance charges (221,687) (263,948) (499,359)
Linen amortization (92,224) (66,364) (88,542)
---------- ---------- ----------
Balance, end of period $1,852,584 $1,146,309 $1,017,769
========== ========== ==========
The accompanying Notes to Financial Statements are
an integral part of these financial statements.
-26-
27
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 escrowed assets 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
provision for bad debts, if warranted. 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 value 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 set 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 U.S. Treasury Securities which bear interest at
rates ranging from 5.11% to 7.125% (5.86% to 7.18% for 1996). At
December 31, 1997 and 1996, investments of $690,828 and $99,796,
respectively, mature in one year or less.
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.
-27-
28
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
March 13, 1998
To the Board of Directors of
Saddlebrook Resorts, Inc.
Our audits of the financial statements referred to in our report dated March 13,
1998 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, the
Financial Statement Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
financial statements.
PRICE WATERHOUSE LLP
Tampa, Florida
-28-
29
SCHEDULE II
SADDLEBROOK RESORTS, INC.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
- --------------------------------------------------------------------------------
ADDITIONS
BALANCE AT CHARGED BALANCE
BEGINNING TO COST AND AT END
OF PERIOD EXPENSES DEDUCTIONS OF PERIOD
YEAR ENDED DECEMBER 31, 1995
Amortization of Debt Issue
Costs $119,939 $ 92,531 $ - $212,470
YEAR ENDED DECEMBER 31, 1996
Amortization of Debt Issue
Costs $212,470 $122,266 $ - $334,736
YEAR ENDED DECEMBER 31, 1997
Amortization of Debt Issue
Costs $334,736 $126,580 $ - $461,316
-29-
30
Page 30
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 Owners, 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. 31
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 (SEC use only). 35
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. 36
* Identification of exhibit incorporated by reference from the Registration
Statement No. 2-65481 previously filed by Registrant, effective December 28,
1979.