Attached files

file filename
EXCEL - IDEA: XBRL DOCUMENT - SADDLEBROOK RESORTS INCFinancial_Report.xls
EX-32.2 - SECTION 906 CFO CERTIFICATION - SADDLEBROOK RESORTS INCd333195dex322.htm
EX-31.2 - SECTION 302 CFO CERTIFICATION - SADDLEBROOK RESORTS INCd333195dex312.htm
EX-32.1 - SECTION 906 CEO CERTIFICATION - SADDLEBROOK RESORTS INCd333195dex321.htm
EX-31.1 - SECTION 302 CEO CERTIFICATION - SADDLEBROOK RESORTS INCd333195dex311.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

 

FORM 10-Q

 

 

(Mark one)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2012

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: 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)

 

 

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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (229.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    YES  x    NO  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definition of “accelerated filer,” “large accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.:

 

Large accelerated filer   ¨    Accelerated filer   ¨
Non-accelerated filer   ¨    Smaller reporting company   x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    YES  ¨    NO  x

Registrant has 100,000 shares of common stock outstanding, all of which are held by an affiliate of the Registrant.

 

 

 


INDEX

 

         Page  

PART I - FINANCIAL INFORMATION

  

Item 1. Financial Statements

  

Saddlebrook Resorts, Inc.

  
 

Balance Sheets at March 31, 2012 and December 31, 2011

     3   
 

Statements of Operations and Accumulated Earnings for the three months ended March 31, 2012 and 2011

     4   
 

Statements of Cash Flows for the three months ended March 31, 2012 and 2011

     5   
 

Notes to Financial Statements

     6   

Saddlebrook Rental Pool Operation

  
  Balance Sheets at March 31, 2012 and December 31, 2011      9   
  Statements of Operations for the three months ended March 31, 2012 and 2011      10   
  Statements of Changes in Participants’ Fund Balance for the three months ended March 31, 2012 and 2011      11   

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

     12   

Item 3. Quantitative and Qualitative Disclosures About Market Risk

     13   

Item 4T. Controls and Procedures

     14   

PART II - OTHER INFORMATION

  

Item 1. Legal Proceedings

     14   

Item 6. Exhibits

     15   

Signature

     16   

 

- 2 -


PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

SADDLEBROOK RESORTS, INC.

BALANCE SHEETS

 

     March 31,
2012
(Unaudited)
     December 31,
2011
 

Assets

     

Current assets:

     

Cash and cash equivalents

   $ 1,138,857       $ 592,313   

Escrowed cash

     120,686         216,851   

Accounts receivable, net

     2,328,308         1,124,269   

Due from related parties

     490,912         438,238   

Inventory and supplies

     1,507,452         1,576,875   

Prepaid expenses and other assets

     831,813         745,410   
  

 

 

    

 

 

 

Total current assets

     6,418,028         4,693,956   

Property, buildings and equipment, net

     20,820,801         21,024,081   

Deferred charges, net

     22,344         25,137   
  

 

 

    

 

 

 

Total assets

   $ 27,261,173       $ 25,743,174   
  

 

 

    

 

 

 

Liabilities and Shareholder’s Equity

     

Current liabilities:

     

Current portion of long-term debt

   $ 577,332       $ 577,332   

Current portion of capital lease obligation

     83,718         99,593   

Escrowed deposits

     120,686         216,851   

Accounts payable

     785,102         734,427   

Accrued rental distribution

     938,436         571,598   

Accrued expenses and other liabilities

     2,180,605         1,728,111   

Current portion of deferred income

     754,177         798,981   

Guest deposits

     1,067,742         667,606   

Due to related parties

     5,418,927         4,704,094   
  

 

 

    

 

 

 

Total current liabilities

     11,926,725         10,098,593   

Long-term debt

     4,963,335         5,107,668   

Long-term capital lease obligation

     —           8,537   

Deferred income

     991,648         1,034,071   
  

 

 

    

 

 

 

Total liabilities

     17,881,708         16,248,869   
  

 

 

    

 

 

 

Shareholder’s equity:

     

Common stock, $1.00 par value, 100,000 shares authorized and outstanding

     100,000         100,000   

Additional paid-in capital

     1,013,127         1,013,127   

Retained earnings

     8,266,338         8,381,178   
  

 

 

    

 

 

 

Total shareholder’s equity

     9,379,465         9,494,305   
  

 

 

    

 

 

 

Total liabilities and shareholder’s equity

   $ 27,261,173       $ 25,743,174   
  

 

 

    

 

 

 

The accompanying Notes to Financial Statements are

an integral part of these financial statements

 

- 3 -


SADDLEBROOK RESORTS, INC.

STATEMENTS OF OPERATIONS

AND ACCUMULATED EARNINGS

(Unaudited)

 

     Three months ended
March 31,
 
    
     2012     2011  

Resort revenues

   $ 7,916,731      $ 7,792,333   
  

 

 

   

 

 

 

Costs and expenses:

    

Operating costs

     6,207,477        5,923,208   

Sales and marketing

     450,230        304,528   

General and administrative

     878,468        741,617   

Depreciation

     459,349        477,858   
  

 

 

   

 

 

 

Total costs and expenses

     7,995,524        7,447,211   
  

 

 

   

 

 

 

Net operating (loss)income before other expenses and (income)

     (78,793     345,122   
  

 

 

   

 

 

 

Other expenses and (income):

    

Interest income

     (1     (4

Other income

     (6,387     (4,409

Interest expense

     42,435        65,815   
  

 

 

   

 

 

 

Total other expenses and (income)

     36,047        61,402   
  

 

 

   

 

 

 

Net (loss) income

     (114,840     283,720   

Accumulated earnings at beginning of period

     8,381,178        11,625,169   
  

 

 

   

 

 

 

Accumulated earnings at end of period

   $ 8,266,338      $ 11,908,889   
  

 

 

   

 

 

 

The accompanying Notes to Financial Statements are

an integral part of these financial statements

 

- 4 -


SADDLEBROOK RESORTS, INC.

STATEMENTS OF CASH FLOWS

(Unaudited)

 

     Three months ended
March 31,
 
    
     2012     2011  

Operating activities:

    

Net (loss) income

   $ (114,840   $ 283,720   

Non-cash items included in net income:

    

Depreciation

     459,349        477,858   

Amortization of debt financing costs

     2,793        2,793   

Gain on sale of assets

     —          (563

(Increase) decrease in:

    

Accounts receivable

     (1,204,039     (619,737

Inventory and supplies

     69,423        74,541   

Prepaid expenses and other assets

     (86,403     32,172   

Increase (decrease) in:

    

Accounts payable

     50,675        (210,883

Guest deposits

     400,136        11,283   

Accrued expenses and other liabilities

     819,332        682,058   

Deferred income

     (87,227     (6,205
  

 

 

   

 

 

 

Cash flow provided by operating activities

     309,199        727,037   
  

 

 

   

 

 

 

Investing activities:

    

Capital expenditures

     (256,069     (43,669

Proceeds from the sale of property and equipment

     —          1,500   
  

 

 

   

 

 

 

Cash flow used in investing activities

     (256,069     (42,169
  

 

 

   

 

 

 

Financing activities:

    

Payments on notes payable

     (144,333     (265,000

Payments on capital lease obligations

     (24,412     (23,167

Net payments from related parties

     662,159        495,651   
  

 

 

   

 

 

 

Cash flow provided by financing activities

     493,414        207,484   
  

 

 

   

 

 

 

Net increase in cash and cash equivalents

     546,544        892,352   

Cash and cash equivalents at beginning of period

     592,313        1,038,368   
  

 

 

   

 

 

 

Cash and cash equivalents at end of period

   $ 1,138,857      $ 1,930,720   
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information:

    

Cash paid for interest

   $ 39,643      $ 63,276   
  

 

 

   

 

 

 

The accompanying Notes to Financial Statements are

an integral part of these financial statements.

 

- 5 -


SADDLEBROOK RESORTS, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

 

Note 1. Basis of Presentation

Saddlebrook Resorts, Inc. (the “Company”) developed and operates Saddlebrook Resort, which is a condominium hotel and resort located in Wesley Chapel, Florida.

The Company’s accompanying balance sheet for March 31, 2012, and its statements of operations and accumulated earnings and cash flows for the periods ended March 31, 2012 and 2011, are unaudited but reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented. All such adjustments are of a normal recurring nature.

The Company’s business is seasonal. Therefore, the results of operations for the interim periods shown in this report are not necessarily indicative of results to be expected for the full fiscal year.

These financial statements and related notes are presented for interim periods in accordance with the requirements of Form 10-Q and, consequently, do not include all disclosures normally provided in the Company’s Annual Report on Form 10-K. Accordingly, these financial statements and related notes should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended December 31, 2011.

 

Note 2. Accounts Receivable

 

     March 31,
2012
(Unaudited)
    December 31,
2011
 

Trade accounts receivable

   $ 2,375,501      $ 1,161,462   

Less reserve for bad debts

     (47,193     (37,193
  

 

 

   

 

 

 
   $ 2,328,308      $ 1,124,269   
  

 

 

   

 

 

 

 

- 6 -


Note 3. Property, Buildings and Equipment

 

     March 31,
2012
(Unaudited)
    December 31,
2011
 

Land and land improvements

   $ 6,802,067      $ 6,802,067   

Buildings and recreational facilities

     30,203,296        30,164,381   

Machinery and equipment

     17,700,630        17,669,598   

Construction in progress

     993,733        807,611   
  

 

 

   

 

 

 
     55,699,726        55,443,657   

Less accumulated depreciation

     (34,878,925     (34,419,576
  

 

 

   

 

 

 
   $ 20,820,801      $ 21,024,081   
  

 

 

   

 

 

 

The Company’s property, buildings and equipment are pledged as security for its debt (see Note 5).

 

Note 4. Deferred Charges

 

     March 31,
2012
(Unaudited)
    December 31,
2011
 

Debt issue costs

   $ 55,895      $ 55,895   

Less accumulated amortization

     (33,551     (30,758
  

 

 

   

 

 

 
   $ 22,344      $ 25,137   
  

 

 

   

 

 

 

 

- 7 -


Note 5. Notes Payable and Capital Lease Obligation

On December 15, 2011, the Company amended the agreement on the term note and made a principal payment in the amount of $2,000,000. The balance on the term note is due March 12, 2014, and requires monthly principal payments of $48,111, plus monthly payments of all accrued interest. The term note bears interest at 2.5% over the one month LIBOR index. The rate as of March 31, 2012 was 2.75%. The note is collateralized by all current and subsequently acquired real and personal property. At March 31, 2012, the outstanding balance on this term note was $5,540,667. The Company has the ability to obtain an additional $1,500,000 under a line of credit facility from the same lender subject to meeting certain financial covenants on an annual basis. The line of credit expires in November 2012. At March 31, 2012, the Company had no borrowings on the line of credit.

On February 11, 2009, the Company entered into a capital lease for the purchase of vehicles in the amount of $370,542. The capital lease is secured by the vehicles purchased, matures in January 2013 and requires monthly payments of $8,574, including interest at 5.24%. At March 31, 2012, the amount due on the capital lease obligation was $83,718.

 

Note 6. Related Party Receivables and Payables

Related party receivables and payables at March 31, 2012 and December 31, 2011 are the result of net intercompany transactions and cash transfers between the Company and its shareholder and affiliated companies. Related party receivables and payables are unsecured and non-interest bearing.

 

Note 7. Income Taxes

The Company is currently a member of a Qualified Subchapter S Subsidiary Group. Accordingly, no income tax expense was reflected in the Company’s operating results as the tax is assessed to the shareholders of its parent company.

 

- 8 -


SADDLEBROOK RENTAL POOL OPERATION

BALANCE SHEETS

DISTRIBUTION FUND

 

     March 31,
2012
(Unaudited)
     December 31,
2011
 

Assets

     

Receivable from Saddlebrook Resorts, Inc.

   $ 938,436       $ 571,598   
  

 

 

    

 

 

 

Liabilities and Participants’ Fund Balance

     

Due to participants for rental pool distribution

   $ 778,874       $ 473,950   

Due to maintenance escrow fund

     159,562         97,648   
  

 

 

    

 

 

 
   $ 938,436       $ 571,598   
  

 

 

    

 

 

 

MAINTENANCE ESCROW FUND

 

     March 31,
2012
(Unaudited)
     December 31,
2011
 

Assets

     

Cash and cash equivalents

   $ 100,904       $ 195,369   

Receivables:

     

Distribution fund

     159,562         97,648   

Prepaid expenses and other assets

     9,381         7,545   

Linen Inventory

     23,981         —     

Furniture Inventory

     38,253         48,418   
  

 

 

    

 

 

 
   $ 332,081       $ 348,980   
  

 

 

    

 

 

 

Liabilities and Participants’ Fund Balance

     

Accounts payable

   $ 54,510       $ 82,194   

Participants’ fund balance

     277,571         266,786   
  

 

 

    

 

 

 
   $ 332,081       $ 348,980   
  

 

 

    

 

 

 

 

- 9 -


SADDLEBROOK RENTAL POOL OPERATION

STATEMENTS OF OPERATIONS

(Unaudited)

DISTRIBUTION FUND

 

     Three months ended
March 31,
 
     2012     2011  

Rental pool revenue

   $ 2,400,748      $ 2,310,985   
  

 

 

   

 

 

 

Deductions:

    

Marketing fee

     180,056        173,324   

Management fee

     300,094        288,873   

Travel agent commissions

     135,637        57,405   

Credit card expense

     54,131        52,028   
  

 

 

   

 

 

 
     669,918        571,630   
  

 

 

   

 

 

 

Net rental income

     1,730,830        1,739,355   

Less operator share of net rental income

     (951,956     (782,710

Other revenues (expenses):

    

Complimentary room revenues

     10,400        6,630   

Minor repairs and replacements

     (23,920     (30,584
  

 

 

   

 

 

 

Amount available for distribution

   $ 938,436      $ 932,691   
  

 

 

   

 

 

 

 

- 10 -


SADDLEBROOK RENTAL POOL OPERATION

STATEMENTS OF CHANGES IN PARTICIPANTS’ FUND BALANCES

(Unaudited)

DISTRIBUTION FUND

 

     Three months ended
March 31,
 
     2012     2011  

Balance at beginning of period

   $ —        $ —     

Additions:

    

Amount available for distribution

     938,436        932,691   

Reductions:

    

Amount withheld for maintenance escrow fund

     (159,562     (149,981

Amount accrued or paid to participants

     (778,874     (782,710
  

 

 

   

 

 

 

Balance at end of period

   $ —        $ —     
  

 

 

   

 

 

 

MAINTENANCE ESCROW FUND

 

     Three months ended
March 31,
 
     2012     2011  

Balance at beginning of period

   $ 266,786        657,499   

Additions:

    

Amount withheld from distribution fund

     159,562        149,981   

Unit owner payments

     9,964        20,353   

Interest earned

     11        378   

Reductions:

    

Escrow account refunds

     —          (13,146

Maintenance charges

     (60,013     (76,991

Unit renovations

     (51,795     4,625   

Linen replacement

     (46,944     (24,693
  

 

 

   

 

 

 

Balance at end of period

   $ 277,571      $ 718,006   
  

 

 

   

 

 

 

 

- 11 -


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

General

The Company operates Saddlebrook Resort (the “Resort”) in Wesley Chapel, Florida, which contains condominium units that have been sold to third parties or to affiliates of the Company. The majority of the condominium units are hotel accommodations that participate in a rental-pooling program (the “Rental Pool”) that provides its owners with a percentage distribution of related room revenues minus certain fees and expenses. The remainder of the condominium units participate in a non-pooling rental program, are owner-occupied or are designated as hospitality suites or housing for young athletes independent of the rental programs. Other resort property owned by the Company and its affiliates include golf courses, tennis courts, a spa, restaurants and conference center facilities.

Results of Operations

First quarter 2012 compared to first quarter 2011

The Company’s total revenues for the three months ended March 31, 2012 increased approximately $125,000, about 2%, from the same period in the prior year. Rental Pool revenues increased $90,000, or about 4% from the comparable period last year. These increases are directly related to a increase in the number of paid unit nights of about 10%, partially offset by a 6% decrease in the average room rate.

The increase of $548,000 in operating costs and expenses for the Company is related to the increases in revenues, as well as an increase in sales and marketing efforts including additional media advertising and use of third party booking agencies. In addition the Company has seen increased staffing and promotion expenses for the new Saddlebrook Golf Practice Facility. The $98,000 increase in operating costs and expenses for the Rental Pool Operation is related to the increase in revenues, along with an increase in amounts paid to travel agents.

Net loss for the Company for the current quarter was $115,000, compared with a net income for the comparable period in the prior year of $284,000. Amounts available for distribution for the Rental Pool Operation increased $6,000 from the first quarter of 2011.

Impact of Current Economic Conditions

The Company believes that the reduced occupancy rates, when compared to periods prior to the year 2008, continue as a result of the current state of the United States’ economy, and the fact that businesses have altered their spending patterns in response.

In response to this trend, the Company has increased its marketing efforts toward the social clientele by developing packages designed to target more social guests, including families. These social packages are being promoted through the Company’s website as well as through travel wholesalers and with emphasis on e-commerce sites. Management has also implemented programs and measures to help the Company get back to positive operating income. These programs and measures include cost control programs, consolidation of restaurant operations and efforts to increase brand awareness and recognition of the Golf Academy.

 

- 12 -


Liquidity and Capital Resources

Future operating costs and planned expenditures for minor capital additions and improvements are expected to be adequately funded by the Company’s and its affiliates’ current cash reserves and cash generated by resort operations. The Company’s term note obtained from a third-party lender bears interest at 2.5% over the one month LIBOR index (2.75% at March 31, 2012) and matures in March 2014. The Company has the ability to obtain an additional $1,500,000 under a line of credit facility from the same lender subject to meeting certain financial covenants on an annual basis. The line of credit expires in November 2012. At March 31, 2012, the Company had no borrowings on the line of credit.

Seasonality

The Company’s operations are seasonal with the highest volume of revenue generally occurring in the first quarter of each calendar year.

Due to the seasonal business of the Company, the results of operations for the interim period shown in this report are not necessarily indicative of results to be expected for the full fiscal year.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

The Company’s invested cash is subject to changes in market interest rates. Otherwise, the Company does not have significant market risk with respect to foreign currency exchanges or other market rates.

The Company’s term note bears interest at 2.5% over the one month LIBOR index and matures on March 12, 2014.

 

- 13 -


Item 4. Controls and Procedures

The Company’s management, including the Chief Executive Officer and the Chief Financial Officer, carried out an evaluation of the effectiveness of the design and operation of the disclosure controls and procedures as of March 31, 2012, pursuant to Exchange Act Rule 15d-15. Based upon that evaluation, the Company’s Chief Executive Officer and the Chief Financial Officer concluded that the Company’s disclosure controls and procedures were effective as of March 31, 2012 in timely alerting them to material information required to be included in the Company’s periodic SEC filings.

The Company’s management, including its Chief Executive Officer and Chief Financial Officer, does not expect that its disclosure controls and procedures over internal controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must be considered relative to their costs. Because of the inherent limitation in all control systems, no evaluation of controls can provide absolute assurance that all control issues within the Company have been detected.

There were no changes in the Company’s internal controls over financial reporting during the quarter ended March 31, 2012 that materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

The Company is involved in litigation in the ordinary course of business. In the opinion of the Company’s management, insurance or indemnification from other third parties adequately covers these matters. Accordingly, the effect, if any, of these claims is considered immaterial to the Company’s financial condition and results of operations.

 

- 14 -


Item 6. Exhibits

The following exhibits are included in this Form 10-Q:

 

31.1   -    Chief Executive Officer Rule 15d-14(a) Certification
31.2   -    Chief Financial Officer Rule 15d-14(a) Certification
32.1   -    Chief Executive Officer Section 1350 Certification
32.2   -    Chief Financial Officer Section 1350 Certification
101   -    Interactive Data Files

 

- 15 -


SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

 

SADDLEBROOK RESORTS, INC.

  (Registrant)
Date: May 15, 2012  

/s/    Donald L. Allen        

  Donald L. Allen
  Vice President and Treasurer
 

(Principal Financial and

Accounting Officer)

 

- 16 -