SADDLEBROOK RESORTS INC - Annual Report: 2005 (Form 10-K)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark one)
| þ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal period ended December 31, 2005
OR
| o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from to
COMMISSION FILE NUMBER: No 1934 act file number assigned
(1933 act file no. 2-65481)
(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 if the registrant is a well-known seasoned issuer, as defined in Rule 405 of
the Securities Act. YES o NO þ
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or
Section 15(d) of the Exchange Act. YES o NO þ
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 o NO þ
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is
not contained herein, and will not be contained, to the best of registrant’s knowledge, in
definitive proxy or information statements incorporated by reference in Part III of this Form 10-K
or any amendment to the Form 10-K. Not applicable
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer,
or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in
Rule 12b-2 of the Exchange Act.:
Large accelerated filer o Accelerated Filero Non-accelerated filer þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act). YES o NO þ
The aggregate market value of the voting and nonvoting common equity held by non-affiliates of the
Registrant as of the last business day of the Registrant’s most recently completed second fiscal quarter
was zero, as all of the common equity of the Registrant is held by an affiliate of the Registrant.
Indicate the number of shares outstanding of each of the registrant’s classes of common stock, as
of the latest practicable date: Not applicable
EXPLANATORY NOTE
On April 13, 2006, the Company filed a form 8-K with the SEC disclosing that the Company, supported
by the Board of Directors, has determined that it should restate its accounting for the recognition
of revenue from initiation fees related to the sale of memberships. Historically, the Company has
recognized the revenue from initiation fees in the fiscal year in which the fees were received.
Such revenue should be amortized over the expected life of the membership. These initiation fees
have historically represented less than 1% of the Company’s total revenues. After analysis of the
issue the Company determined it would be appropriate to amortize these fees over the average life
of our memberships, which was calculated to be 12 years. This annual report on form 10-K for the
period ending December 31, 2005 reflects such revised accounting for all years presented.
PART I
Item 1. Business
Saddlebrook Resorts, Inc., (the “Company”) was incorporated in the State of Florida on June 20,
1979. It was formed to acquire an existing golf course and tennis club located in Pasco County,
Florida, and develop it into a condominium resort and residential homes project named Saddlebrook
Resort (the “Resort”). In November 1988, the Company transferred its real estate development
division to its prior parent company and retained only its operation of the Resort.
The Company is currently owned by Saddlebrook Holdings, Inc., which is ultimately owned by Thomas
L. Dempsey and his family. Mr. Dempsey acquired the Company from its prior parent company in
November 1988.
Based on its numerous awards, the Resort has a reputation as a world-class facility that caters to
corporate meeting planners and sports enthusiasts at all skill levels. As a destination resort, it
offers luxury accommodations, convention facilities, restaurants, two golf courses, tennis courts,
a spa and other recreational areas. An accredited preparatory school at the Resort and an on-site
real estate sales office are operated by affiliates of the Company.
The Resort’s accommodations are condominium units that have been sold to third parties or to
affiliates of the Company. The majority of the condominium units 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 either 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.
All of the Resort’s condominium units are governed by the Saddlebrook Resort Condominium
Association, Inc. (the “Association”) in accordance with Florida statutes. The Board of Directors
for the Association is elected by the condominium unit owners. The condominium unit owners also
approve an annual budget of common expenses for the Association that determines their quarterly
assessments that must be paid regardless of the units’ participation in rental programs.
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A Resort condominium unit’s participation in a rental program also requires a club membership at
the Resort with its separate initiation fees and quarterly dues. The club membership is directed by
a Board of Governors appointed by the Company’s management.
The Company’s operation of the Resort is 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 Resort’s business is considered to be seasonal with a higher volume of sales during the winter
and spring seasons.
Although the Resort’s reputation in the conference-hosting industry is excellent, the market for
these services is extremely competitive. Consequently, it aggressively competes against numerous
resort hotels and convention facilities both in central Florida and nationwide.
At December 31, 2005, there were approximately 687 persons employed by the Company. The Company’s
management relationship with employees is excellent and there are no collective bargaining
agreements.
Item 1A. Risk Factors
The Company is subject to operating risks common to the hotel industry which could adversely affect
our results of operations.
Common hotel industry risks include (but are not limited to);
Reduction in business travel or decrease in demand for transient rooms
and related lodging services resulting from a downturn in general
economic conditions;
The impact of war and terrorist activity (including threatened terrorist
activity) and heightened travel security measures instituted in response
thereto;
Financial condition of the airline industry and the resulting impact on air travel.
Severe weather such as that experienced by Florida and the southeastern portion of the United
States during 2004 and 2005 could result in depressed bookings, adversely affecting the Company’s
results of operations and reducing proceeds to the participants of the Rental Pool.
-3-
Item 2. Properties
Saddlebrook Resort is located in Wesley Chapel, Florida, which is in south central Pasco County,
immediately north of Tampa, Florida.
The Resort is inside the gated community of Saddlebrook. The Resort’s property includes
approximately 450 acres of land that are owned by the Company and an affiliate. Located on the
Resort’s property are convention facilities with approximately 82,000 square feet of meeting and
function space, three restaurants, two 18-hole golf courses, 45 tennis courts, a 7,000-square foot
luxury health spa, a 3,300-square foot fitness center, three swimming pools, shops and other
operational and recreation areas.
A total of 556 condominium units are at the Resort comprised of one-, two- and three-bedroom
suites. Of these condominium units, 408 are designed for hotel occupancy and located in an area
called the Walking Village. The remaining 148 are slightly larger, designed for longer-termed
rental, and are located in an area called the Lakeside Village. At December 31, 2005, there were
545 hotel accommodations participating in the Rental Pool. The three-bedroom condominium units
become hotel accommodations as a two-bedroom suite with a separate adjoining hotel room. Some
two-bedroom condominium units become hotel accommodations as a one-bedroom suite with a separate
adjoining hotel room.
Item 3. 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. The effect, if any, of these claims is considered immaterial to the Company’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 and Issuer
Purchases of Equity Securities
The Company’s stock is privately held and there is no established market for the stock.
The right to participate in a rental pool that accompanies the condominium units that were
developed and sold by the Company is deemed to be a security. However, there is no market for such
securities other than the normal real estate market.
Since the security is the participation right in a rental pool, no dividends have been paid or will
be paid to condominium unit owners. However, the condominium unit owners participating in the
Rental Pool receive a contractual distribution of rent from the Company quarterly.
-4-
Item 6. Selected Financial Data
The following selected financial data should be read in conjunction with the financial statements
and related notes in Item 8 hereof.
| Year ended December 31, | ||||||||||||||||||||
| 2004 | 2003 | 2002 | 2001 | |||||||||||||||||
| 2005 | Restated(1) | Restated(1) | Restated(1) | Restated(1) | ||||||||||||||||
Resort |
||||||||||||||||||||
Resort revenues |
$ | 40,674,000 | $ | 40,020,000 | $ | 36,711,000 | $ | 38,189,000 | $ | 46,884,000 | ||||||||||
Interest expense |
661,000 | 1,727,000 | 1,622,000 | 1,721,000 | 1,807,000 | |||||||||||||||
Write off debt
issue |
— | 345,000 | — | — | — | |||||||||||||||
Litigation
settlement,net |
— | 3,178,000 | — | — | — | |||||||||||||||
Net income (loss) |
1,221,000 | 3,021,000 | (219,000 | ) | 65,000 | 3,387,000 | ||||||||||||||
Total assets |
33,227,000 | 33,578,000 | 34,254,000 | 36,189,000 | 37,558,000 | |||||||||||||||
Total debt |
11,067,000 | 11,867,000 | 19,685,000 | 21,040,000 | 22,294,000 | |||||||||||||||
Capital leases |
470,000 | 69,000 | 94,000 | 119,000 | 49,000 | |||||||||||||||
Rental Pool |
||||||||||||||||||||
Rental Pool
revenues |
11,590,000 | 11,502,000 | 10,380,000 | 11,515,000 | 14,117,000 | |||||||||||||||
Total assets |
720,000 | 919,000 | 777,000 | 868,000 | 686,000 | |||||||||||||||
Net income |
4,672,000 | 4,607,000 | 4,100,000 | 4,600,000 | 5,659,000 | |||||||||||||||
Average
distribution
per Rental Pool
participant |
8,620 | 8,469 | 7,496 | 8,349 | 10,289 | |||||||||||||||
| (1) | The selected financial data for the years 2001 through 2004 have been restated as discussed in the “Explanatory Note” in the introduction to this report. |
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
General
The Company operates the Resort, 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 the Rental Pool. Other resort facilities owned by the Company
and its affiliates include golf courses, tennis courts, a spa, restaurants and a conference center.
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Critical Accounting Policies and Estimates
The following accounting policies are considered critical by the Company’s management. These and
other accounting policies require that estimates be made, based on assumptions and judgment, that
affect revenues, expenses, assets, liabilities and disclosure of contingencies in the Company’s
financial statements. These estimates and assumptions are based on historical experience and on
various other factors that are believed to be reasonable under the circumstances. However, actual
results may differ from these estimates due to different conditions.
Asset Impairments — The Company’s management periodically evaluates whether there has been a
permanent impairment of long-lived assets, in accordance with Financial Accounting Standard (“FAS”)
No. 144 — Accounting for the Impairment or Disposal of Long-Lived Assets. The Company’s management
believes that the accounting estimates related to asset impairments are critical estimates for the
following reasons: (1) the ongoing changes in management’s expectations regarding future
utilization of assets; and (2) the impact of an impairment on reported assets and earnings could be
material. During the year ended December 31, 2005 the Company’s management evaluated assets for
impairment in accordance with FAS 144 and concluded that the sum of the undiscounted expected
future cash flows (excluding interest charges) from its assets exceeded their then current carrying
values. Accordingly, the Company did not recognize an impairment charge.
Depreciation Expense — The Company provides for depreciation by the straight-line method at annual
rates that amortize the original costs, net of salvage values, of depreciable assets over their
estimated useful lives. Management’s estimation of assets’ useful lives are critical estimates for
the following reasons: (1) forecasting the salvage value for long-lived assets over a long period
of time is subjective; (2) changes may take place that could render an asset obsolete or
uneconomical; and (3) a change in the useful life of a long-lived asset could have a material
impact on reported results of operations and reported asset values. The Company’s management
believes the estimated useful life corresponds to the anticipated physical life for most assets.
Although it is difficult to predict values far into the future, the Company has a long history of
actual costs and values that are considered in reaching a conclusion as to the appropriate useful
life of an asset.
See the Notes to the Financial Statements for Saddlebrook Resorts, Inc. in Item 8 hereof for
additional accounting policies used in the preparation of the financial statements.
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Liquidity and Capital Resources
During 2005 the Company spent $2,021,000 in capital improvements including completion of the
installation of a new clear-span structure at a total cost of $492,000 and the enclosure of the
open air pavilion at the fitness facility at a total cost of $264,000. In 2006, the Company plans
to renovate the greens on the Saddlebrook golf course along with replacement of the irrigation
system at an estimated cost of $1,500,000. The Company also plans a modification of an area
currently containing a seldom used roadway into additional outdoor function space to be known as
the Royal Palm Commons at an estimated cost of $500,000.
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, or
cash generated by the Resort’s operations. Also, the Company’s current debt agreement contains a
provision for additional financing from the lender of $5,000,000, subject to specific covenants,
until November 1, 2006.
The Company’s management is not aware of any environmental matters that are currently present.
The Company’s operation of the Resort is not considered to be dependent on any individual or small
group of customers, the loss of which would have a material adverse effect.
-7-
Results of Operations
The following chart highlights changes in the sources of Company revenues:
| Year ended December 31, | ||||||||||||
| 2005 | 2004 | 2003 | ||||||||||
Rental Pool Revenues
|
28 | % | 29 | % | 28 | % | ||||||
Food and beverage
|
33 | 33 | 33 | |||||||||
Resort facilites and other
|
39 | 38 | 39 | |||||||||
| 100 | % | 100 | % | 100 | % | |||||||
The financial statements as of December 31, 2004 and December 31, 2003 have been restated as
discussed in the “Explanatory Note” in the introduction to this report.
This restatement resulted in a decrease in Resort Revenues and Net Income of $137,000 in 2004 and
$87,000 in 2003.
All financial data in the following discussion has been adjusted to reflect this change.
2005 Compared to 2004
The Company’s total revenues increased $654,000, which is an increase of 2% over the prior year.
Some areas of the resort, particularly our spa and our fine dining restaurants, have benefited from
an aggressive advertising campaign to attract more local and social business. Spa revenues
increased 25% over the prior year, accounting for $363,000 of the total increase, while the fine
dining restaurants increased $271,000, or about 9%. These increases were partially offset by a 4%
decrease in overnight guests on property, which affects other areas of the resort more dependent on
that business, such as Banquets and Guest Activities. Rental Pool revenues increased $88,000, or
about 1%. The increase in Rental Pool revenue was partly due to a 3% increase in average room rate
partially offset by a decrease of 3% in paid room nights.
The Company’s costs and expenses increased $722,000, a 2% increase over the prior year. This
increase is directly related to the increase in revenues. Expenses of the Rental Pool Operation
decreased $39,000, or about 2%. This was related to a decrease of about 14% in commissions paid to
travel agents.
The Company’s net income for the year 2005 of $1,221,000 is a $1,800,000 decrease from the prior
year. This change is directly related to the receipt in 2004 of the litigation settlement discussed
in note 11 of the financial statements, along with decreased interest expense in 2005 as a result
of the refinancing and partial payment of the prior debt. The Rental Pool’s increase of $65,000 in
amounts available for distribution is a result of the increase in rental pool revenues.
-8-
2004 Compared to 2003
The Company’s total revenues increased approximately $3,309,000, which is an increase of 9% over
the prior year. Rental Pool revenue increased $1,122,000, or about 11%. These increases were
primarily due to an 11% increase in paid room nights. Revenues were also positively affected by an
increase of 10% in the number of individual guests staying at the Resort.
The Company’s total costs and expenses increased $2,666,000, which is an increase of 8% over the
prior year. Expenses of the Rental Pool Operation increased $323,000 or about 12%. These increases
were directly related to the increase in revenues.
The Company’s net income for the year 2004 of $3,021,000 is a $3,240,000 improvement over the prior
year’s net loss. This change from a net loss to a net income is the result of higher revenues along
with receipt of the litigation settlement discussed in note 11 of the financial statements. The
Rental Pool’s increase of $507,000 in amounts available for distribution is directly related to the
increase in rental pool revenues.
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. Income tax expense was not reflected in the Company’s Rental
Pool financial statements as the related income tax is assessed to its participating condominium
unit owners.
Off-Balance Sheet Arrangements
The Company does not have any material Off-Balance Sheet Arrangements that have or are reasonably
likely to have a current or future effect on the financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital
resources as defined in Regulation S-K Item 303(a)(4).
Contractual Obligations
| Payments Due By Period | ||||||||||||||||||||
| Less than | 1-3 | 3-5 | More than | |||||||||||||||||
| 1 year | years | years | 5 years | Total | ||||||||||||||||
Long-term debt |
$ | 800,000 | $ | 1,600,000 | $ | 8,667,000 | $ | 0 | $ | 11,067,000 | ||||||||||
Interest on long-term debt |
684,000 | 1,172,000 | 445,000 | 0 | 2,301,000 | |||||||||||||||
Capital lease |
179,000 | 291,000 | 0 | 0 | 470,000 | |||||||||||||||
Interest on capital lease |
21,000 | 15,000 | 0 | 0 | 36,000 | |||||||||||||||
Operating leases |
178,000 | 58,000 | 0 | 0 | 236,000 | |||||||||||||||
Total |
$ | 1,862,000 | $ | 3,136,000 | $ | 9,112,000 | $ | 0 | $ | 14,110,000 | ||||||||||
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Item 7A. Quantitative and Qualitative Disclosures about Market Risk
The Company’s primary market risk exposure is to changes in interest rates as a result of its
variable interest rate long term debt.
The Company’s invested cash, including investments escrowed on behalf of the condominium unit
owners in the Rental Pool’s Maintenance Escrow Fund, are 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.
Item 8. Financial Statements and Supplementary Data
The financial statements, including the Reports of Independent Registered Certified Public
Accountants, for Saddlebrook Resorts, Inc. are included on pages 19 to 31 and for Saddlebrook
Rental Pool Operation on pages 32 to 36. An index to the financial statements is on page 18.
Financial statement schedules have been omitted because they are not applicable or the required
information is shown in the financial statements or notes thereto.
Item 9A. Controls and Procedures
As of December 31, 2005, the Company’s management, under the direction of its Chief Executive
Officer and the Chief Financial Officer, carried out an evaluation of the effectiveness of the
design and operation of the Company’s disclosure controls and procedures pursuant to Exchange Act
Rule 15d-15. It should be noted that any system of controls, however well designed and operated,
can provide only reasonable, and not absolute, assurance that the objectives of the system are met.
A control deficiency was identified relating to our application of Generally Accepted Accounting
Principles regarding the recognition of initiation fee revenues. Specifically, the Company did not
accurately recognize initiation fees in the proper periods. This control deficiency resulted in the
restatement of the Company’s 2003 and 2004 annual financial statements as discussed in the
“Explanatory Note” in the introduction to this report. Additionally, this control deficiency could
result in a misstatement to the aforementioned account that would result in a material misstatement
to our annual or interim consolidated financial statements that would not be prevented or detected.
Accordingly, management has determined that this control deficiency constitutes a material
weakness.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over
financial reporting that results in more than a remote likelihood that a material misstatement of
the annual or interim financial statements will not be prevented or detected.
Based on this evaluation, and because of the material weakness described above, management has
concluded that the Company’s disclosure controls and procedures were not effective as of December
31, 2005. Notwithstanding the material weakness described above, management believes the
consolidated financial statements included in this Annual Report were prepared in accordance with
Generally Accepted Accounting Principles.
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Remediation Measures for Identified Material Weakness
Following the identification of the material weakness described above, we have developed control
procedures designed to provide assurance that initiation fees are properly recorded in the
financial statements in accordance with Generally Accepted Accounting Principles. These procedures
ensure that initiation fees are identified when received and are recorded in a template designed to
calculate revenue to be recognized and revenue to be deferred to future periods. We have also
instituted a review process that ensures the amounts calculated in the template are appropriately
included in the financial statements on an interim and annual basis.
Changes in Internal Control over Financial Reporting
There were no significant changes in the Company’s internal controls over financial reporting
during the quarter ended December 31, 2005, that have materially affected, or are reasonably likely
to materially affect, the Company’s internal control over financial reporting.
PART III
Item 10. Directors and Executive Officers of the Registrant
The Directors and Executive Officers of the Company are as follows:
| Name | Position and Background | |
Thomas L. Dempsey Age 79 |
Chairman of the Board and Chief Executive Officer of the Company for more than five years. President of the Company until November 2000. Chairman of the Board and President of Saddlebrook Holdings, Inc. for more than five years. | |
Eleanor Dempsey
|
Vice Chairman of the Board of the Company for more than five years. Director and Executive Vice President of Saddlebrook Holdings, Inc. for more than five years. Wife of Thomas Dempsey. | |
Richard Boehning Age 71 |
Director and Chief Marketing Officer. Previously, Director and President for more than five years. | |
Gregory R. Riehle Age 49 |
Director, Vice President and Secretary of the Company for
more than five years. Director and Executive Vice President of
Saddlebrook Holdings, Inc. for more than five years. Son-in- law of Thomas Dempsey. |
|
Maureen Dempsey Age 47 |
Director, Vice President and Assistant Secretary of the
Company for more than five years. Director and Executive Vice
President of Saddlebrook Holdings, Inc. for more than five Years. Daughter of Thomas Dempsey. |
|
Diane L. Riehle Age 45 |
Director, Vice President and Assistant Secretary of the
Company for more than five years. Director and Executive Vice
President of Saddlebrook Holdings, Inc. for more than five Years. Daughter of Thomas Dempsey. |
|
Donald L. Allen Age 66 |
Vice President and Treasurer of the Company for more than five years. |
-11-
Code of Ethics
The Board of Directors of the Company has adopted a Code of Ethics that covers the Company’s
principal financial officer, principal accounting officer and controller, as well as its Executive
Committee. The Board did not provide for the Code to cover the Company’s principal executive
officer, Mr. Thomas Dempsey, as Mr. Dempsey is the controlling shareholder of Saddlebrook Holdings,
Inc., which owns all of the stock in the Company. All of the capital stock of Saddlebrook Holdings,
Inc. is owned by Mr. Dempsey and trusts for the benefit of his two daughters, Maureen Dempsey and
Diane L. Riehle, and their children, therefore, it is primarily for the benefit of Mr. Dempsey that
the Code has been adopted.
Audit Committee Financial Expert
The Board of Directors of the Company has determined that it does not have an “audit committee
financial expert,” as defined by the rules of the Securities and Exchange Commission, serving on
the Board of Directors. The Board and Mr. Thomas Dempsey, the Company’s principal shareholder,
believe that there is adequate financial expertise on the Board and within the senior management of
the Company to serve the interests of the shareholders of Saddlebrook Holdings, Inc., which owns
all of the stock of the Company, such shareholders being Mr. Dempsey and trusts for the benefit of
his daughters and grandchildren.
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Item 11. Executive Compensation
The following table sets forth the remuneration paid, distributed or accrued to the Company’s
executive officers by the Company and its parent, Saddlebrook Holdings, Inc. consolidated, during
the three years ended December 31, 2005.
| Fiscal | Other annual | |||||||||||||||
| Name and Principal Position | year | Salary | Bonus | compensation (1) | ||||||||||||
Thomas L. Dempsey |
2005 | $ | 200,000 | $ | — | $ | 34,352 | |||||||||
Chief Executive Officer |
2004 | 200,000 | 150,000 | 32,664 | ||||||||||||
| 2003 | 200,000 | — | 24,484 | |||||||||||||
Richard Boehning |
2005 | 144,800 | 17,656 | 3,331 | ||||||||||||
Chief Marketing Officer |
2004 | 144,800 | 60,529 | 4,418 | ||||||||||||
| 2003 | 144,800 | 8,126 | 1,529 | |||||||||||||
Gregory R. Riehle |
2005 | 120,000 | 23,283 | 19,190 | ||||||||||||
Vice President and Secretary |
2004 | 120,000 | 529,015 | 23,472 | ||||||||||||
| 2003 | 120,000 | 7,000 | 17,915 | |||||||||||||
Maureen Dempsey |
2005 | 141,000 | — | 20,969 | ||||||||||||
Vice President and Assistant |
2004 | 141,000 | 440,000 | 21,301 | ||||||||||||
Secretary |
2003 | 141,000 | — | 21,459 | ||||||||||||
Diane L. Riehle |
2005 | 141,000 | — | 17,648 | ||||||||||||
Vice President and Assistant |
2004 | 141,000 | — | 20,037 | ||||||||||||
Secretary |
2003 | 141,000 | — | 14,163 | ||||||||||||
Jeffery J. Clough |
2005 | 140,000 | 28,656 | 1,851 | ||||||||||||
General Manager |
2004 | 137,529 | 38,765 | 1,925 | ||||||||||||
| 2003 | 129,800 | 8,126 | 1,523 | |||||||||||||
| (1) | Other Annual Compensation for 2005 consists of the following; |
Vehicle Allowances
Tax Preparation Fees
Health Insurance premiums paid on behalf of greater than 2% shareholders
Group Term Life Insurance
401K Matching Contributions
Tax Preparation Fees
Health Insurance premiums paid on behalf of greater than 2% shareholders
Group Term Life Insurance
401K Matching Contributions
The following table shows the amounts for each category received by each named executive.
| Health | ||||||||||||||||||||
| Executive | Vehicle | Tax Prep. | Premium | GTL | 401K Match | |||||||||||||||
Thomas L. Dempsey |
$ | 21,250 | $ | 3,750 | $ | 4,408 | $ | 4,944 | — | |||||||||||
Richard Boehning |
— | — | — | 1,706 | 1,625 | |||||||||||||||
Gregory R. Riehle |
11,959 | — | 5,678 | — | 1,553 | |||||||||||||||
Maureen Dempsey |
14,335 | 2,900 | 3,478 | 256 | — | |||||||||||||||
Diane L. Riehle |
12,888 | 3,350 | — | — | 1,410 | |||||||||||||||
Jeffery J. Clough |
— | — | — | 164 | 1,687 | |||||||||||||||
-13-
Item 12. Security Ownership of Certain Beneficial Owners and Management
All of the outstanding shares of the Company’s capital stock are owned by Saddlebrook Holdings,
Inc. All of the capital stock of Saddlebrook Holdings, Inc. is owned by Thomas L. Dempsey and
trusts for the benefit of his two daughters, Maureen Dempsey and Diane L. Riehle, and their
children. Thomas L. Dempsey is the controlling shareholder of Saddlebrook Holdings, Inc.
Item 13. Certain Relationships and Related Transactions
The Company currently funds a portion of the expenditures for Saddlebrook Holdings, Inc. (“SHI”),
its sole shareholder, which is offset by dividends declared thereto if necessary. SHI’s
expenditures include dividends to its shareholders, which are primarily amounts that approximate
their income taxes related to the operations of SHI and its subsidiaries.
Saddlebrook International Tennis, Inc. (“SIT”) operates a tennis training facility and preparatory
school at the Resort and is solely owned by SHI. SIT owns 10 condominium units at the Resort, two
of which participate in the Rental Pool Operation. The Company receives revenue for services
provided to SIT’s guests. In addition, the Company is reimbursed for actual expenses and other
costs incurred on behalf of SIT.
Saddlebrook Investments, Inc. is a broker/dealer for the Resort’s condominium units. Saddlebrook
Realty, Inc. is a broker for sales of other general real estate in the area. Both companies are
owned by Thomas L. Dempsey. These companies collectively operate an on-site real estate office at
the Resort and the Company is reimbursed for actual expenses and other costs incurred on their
behalf.
Dempsey and Daughters, Inc. hold certain tracts of real estate and owns 24 individual condominium
units at the Resort, 10 of which participate in the Rental Pool Operation. This company is solely
owned by SHI. The Company is reimbursed for actual expenses and other costs incurred on behalf of
this company.
Saddlebrook Resort Condominium Association, Inc. is a nonprofit corporation whose
membership is comprised of the Resort’s condominium unit owners pursuant to Florida statutes. The
company is compensated by this entity for various services provided and is reimbursed for actual
expenses and other costs incurred on its behalf.
The Company’s management and ownership are involved with other related entities and operations that
are considered minor.
-14-
Item 14. Principal Accounting Fees and Services
PricewaterhouseCoopers LLP served as the Company’s independent registered certified public
accounting firm for the fiscal year ended December 31, 2005.
The following fees were paid to PricewaterhouseCoopers LLP for services rendered during the
Company’s last two fiscal years:
Audit Fees: $128,000 and $124,275 for the fiscal years ended December 31, 2005 and 2004,
respectively, for professional services rendered for the audit of the Company’s annual financial
statements, review of financial statements included in its Forms 10-Q and services that are
normally provided by the auditors in connection with statutory and regulatory filings or
engagements for those fiscal years.
Audit-Related Fees: None
Tax Fees: $15,961 and $14,150 for the fiscal years ended December 31, 2005 and 2004, respectively,
for tax compliance, tax advice and tax planning services.
All Other Fees: None
Effective May 6, 2003, the Board of Directors has implemented a policy requiring the Board of
Directors, which functions as the Company’s audit committee, to approve the engagement of the
Company’s independent auditors prior to the engagement of the independent auditor to render audit
or non-audit related services in accordance with the rules of the Securities and Exchange
Commission. The Board of Directors has not adopted any pre-approval policies or procedures.
-15-
PART IV
Item 15. Exhibits and Financial Statement Schedules
| (a) | Financial statements and schedules required to be filed are listed in Item 8 of this Form 10-K. | |
| (b) | Exhibits: |
| 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. (incorporated by reference to Registrant’s Form 10-K for the annual period ended December 31, 2003) | ||
| 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*). | ||
| 10.7 | Loan Agreement between the Registrant and SunTrust Bank, dated November 1, 2004 (incorporated by reference from the Registrants Form 10-Q for the quarterly period ended September 30, 2004). | ||
| 10.8 | Second Amended and Restated Mortgage, Security Agreement and Fixture Filing, between the Registrant and SunTrust Bank, dated November 1, 2004 (incorporated by reference to Registrants Form 10-Q for the quarterly period ended September 30, 2004). | ||
| 10.9 | Promissory Note ($12 million) made by the Registrant and payable to SunTrust Bank, dated November 1, 2004 (incorporated by reference to Registrants Form 10-Q for the quarterly period ended September 30, 2004). | ||
| 10.10 | Revolving Line of Credit Promissory Note ($5 million) made by the Registrant and payable to SunTrust Bank, dated November 1, 2004 (incorporated by reference to Registrants Form 10-Q for the quarterly period ended September 30, 2004). |
-16-
| 14.1 | Code of Ethics | ||
| 31.1 | Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
| 31.2 | Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. | ||
| 32.1 | Chief Executive Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. | ||
| 32.2 | Chief Financial Officer Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. |
| * | Identification of exhibit incorporated by reference from the Registration Statement No. 2-65481 previously filed by Registrant, effective December 28, 1979. |
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
Company has duly caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
| SADDLEBROOK RESORTS, INC. (Registrant) |
||||
| Date: September 12, 2006 | /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 Company and in the capacities indicated on August
15, 2006.
/s/ Thomas L. Dempsey
|
/s/ Richard Boehning | |
Thomas L. Dempsey Chairman of the Board Chief Executive Officer (Principal Executive Officer) |
Richard Boehning Director and President |
|
/s/ Gregory R. Riehle
|
/s/ Maureen Dempsey | |
Gregory R. Riehle Director, Vice President and Secretary |
Maureen Dempsey Director, Vice President and Assistant Secretary |
|
/s/ Diane L. Riehle
Director, Vice President and Assistant Secretary |
-17-
Saddlebrook Resorts, Inc.
Index
December 31, 2005 and 2004
Index
December 31, 2005 and 2004
| Page(s) | ||||
Saddlebrook Resorts, Inc. |
||||
| 19 | ||||
Financial Statements |
||||
| 20 | ||||
| 21 | ||||
| 22 | ||||
| 23 | ||||
| 24-31 | ||||
Saddlebrook Rental Pool Operation |
||||
| 32 | ||||
Financial Statements |
||||
| 33 | ||||
| 34 | ||||
| 35 | ||||
| 36 | ||||
| * | As Restated. See Note 2 to the Financial Statements. |
18
Report of Independent Registered Certified Public Accounting Firm
To the Board of Directors and Shareholder of Saddlebrook Resorts, Inc.
In our opinion, the accompanying balance sheets and the related statements of operations, of
changes in shareholder’s equity and of cash flows present fairly, in all material respects, the
financial position of Saddlebrook Resorts, Inc. (the “Company”) at December 31, 2005 and 2004, and
the results of its operations and its cash flows for each of the three years in the period ended
December 31, 2005 in conformity with accounting principles generally accepted in the United States
of America. 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 the standards of the Public Company
Accounting Oversight Board (United States). Those standards 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 our opinion.
As discussed in Note 2, the Company has restated its financial statements for the years ended
December 31, 2004 and 2003.
September 11, 2006
19
Saddlebrook Resorts, Inc.
Balance Sheets
December 31, 2005 and 2004
Balance Sheets
December 31, 2005 and 2004
| 2005 | 2004 | |||||||
| (Restated) | ||||||||
Assets |
||||||||
Current assets |
||||||||
Cash and cash equivalents |
$ | 1,030,283 | $ | 723,131 | ||||
Escrowed cash |
468,956 | 3,250,362 | ||||||
Short-term investments |
375,000 | 375,000 | ||||||
Trade accounts receivable, net of allowances for
doubtful accounts of $45,419 and $31,979 |
2,514,867 | 2,300,423 | ||||||
Due from related parties |
3,235,465 | 988,012 | ||||||
Resort inventory and supplies |
1,381,747 | 1,514,533 | ||||||
Prepaid expenses and other assets |
777,460 | 711,049 | ||||||
Total current assets |
9,783,778 | 9,862,510 | ||||||
Long-term escrowed investments |
— | 399,576 | ||||||
Property, buildings and equipment, net |
23,378,224 | 23,234,943 | ||||||
Deferred charges, net |
64,638 | 80,946 | ||||||
Total assets |
$ | 33,226,640 | $ | 33,577,975 | ||||
Liabilities and Shareholder’s Equity |
||||||||
Current liabilities |
||||||||
Current portion of notes payable |
$ | 800,004 | $ | 800,004 | ||||
Current portion of capital leases |
178,854 | 29,260 | ||||||
Escrowed deposits |
468,956 | 3,649,938 | ||||||
Accounts payable |
1,091,700 | 805,021 | ||||||
Accrued rental distribution |
767,165 | 810,169 | ||||||
Accrued expenses and other liabilities |
2,326,927 | 2,304,836 | ||||||
Current portion of deferred income |
714,587 | 691,732 | ||||||
Guest deposits |
1,245,190 | 1,466,485 | ||||||
Due to related parties |
1,675,965 | — | ||||||
Total current liabilities |
9,269,348 | 10,557,445 | ||||||
Notes payable due after one year |
10,266,658 | 11,066,662 | ||||||
Capital lease obligations due after one year |
290,863 | 40,175 | ||||||
Long-term portion of deferred income |
1,618,060 | 1,352,654 | ||||||
Total liabilities |
21,444,929 | 23,016,936 | ||||||
Commitments and contingencies (Note 9) |
||||||||
Shareholder’s equity |
||||||||
Common stock, $1 par, 100,000 shares authorized,
issued and outstanding |
100,000 | 100,000 | ||||||
Additional paid-in capital |
1,013,127 | 1,013,127 | ||||||
Retained earnings |
10,668,584 | 9,447,912 | ||||||
Total shareholder’s equity |
11,781,711 | 10,561,039 | ||||||
Total liabilities and shareholder’s equity |
$ | 33,226,640 | $ | 33,577,975 | ||||
The accompanying notes are an integral part of these financial statements.
20
Saddlebrook Resorts, Inc.
Statements of Operations
Years ended December 31, 2005, 2004 and 2003
Statements of Operations
Years ended December 31, 2005, 2004 and 2003
| 2005 | 2004 | 2003 | ||||||||||
| (Restated) | (Restated) | |||||||||||
Resort revenues (Note 8) |
$ | 40,673,774 | $ | 40,020,142 | $ | 36,710,516 | ||||||
Costs and expenses |
||||||||||||
Operating costs of resort (Note 8) |
30,693,354 | 29,698,436 | 27,245,161 | |||||||||
Sales and marketing |
2,581,581 | 2,718,732 | 2,529,867 | |||||||||
General and administrative |
3,814,695 | 3,972,061 | 3,655,935 | |||||||||
Depreciation |
1,804,948 | 1,783,114 | 2,075,018 | |||||||||
Total costs and expenses |
38,894,578 | 38,172,343 | 35,505,981 | |||||||||
Operating income before other expenses
and (income) |
1,779,196 | 1,847,799 | 1,204,535 | |||||||||
Other expenses and (income) |
||||||||||||
Interest income |
(50,584 | ) | (102,943 | ) | (72,737 | ) | ||||||
Other (income) expense |
(52,129 | ) | 36,055 | (125,052 | ) | |||||||
Interest expense |
661,237 | 1,726,693 | 1,621,717 | |||||||||
Write off of debt issue costs |
— | 344,776 | — | |||||||||
Litigation settlement (net) |
— | (3,177,832 | ) | — | ||||||||
Total other expense (income) |
558,524 | (1,173,251 | ) | 1,423,928 | ||||||||
Net income (loss) |
$ | 1,220,672 | $ | 3,021,050 | $ | (219,393 | ) | |||||
The accompanying notes are an integral part of these financial statements.
21
Saddlebrook Resorts, Inc.
Statements of Changes in Shareholder’s Equity
Years ended December 31, 2005, 2004 and 2003
Statements of Changes in Shareholder’s Equity
Years ended December 31, 2005, 2004 and 2003
| Additional | Total | |||||||||||||||
| Common | Paid-In | Retained | Shareholder’s | |||||||||||||
| Stock | Capital | Earnings | Equity | |||||||||||||
Balances at December 31, 2002 (restated) |
$ | 100,000 | $ | 1,013,127 | $ | 6,646,255 | $ | 7,759,382 | ||||||||
Net loss (restated) |
— | — | (219,393 | ) | (219,393 | ) | ||||||||||
Balances at December 31, 2003 (restated) |
100,000 | 1,013,127 | 6,426,862 | 7,539,989 | ||||||||||||
Net income (restated) |
— | — | 3,021,050 | 3,021,050 | ||||||||||||
Balances at December 31, 2004 (restated) |
100,000 | 1,013,127 | 9,447,912 | 10,561,039 | ||||||||||||
Net income |
— | — | 1,220,672 | 1,220,672 | ||||||||||||
Balances at December 31, 2005 |
$ | 100,000 | $ | 1,013,127 | $ | 10,668,584 | $ | 11,781,711 | ||||||||
The accompanying notes are an integral part of these financial statements.
22
Saddlebrook Resorts, Inc.
Statements of Cash Flows
Years ended December 31, 2005, 2004 and 2003
Statements of Cash Flows
Years ended December 31, 2005, 2004 and 2003
| 2005 | 2004 | 2003 | ||||||||||
| (Restated) | (Restated) | |||||||||||
Cash flows from operating activities |
||||||||||||
Net income (loss) |
$ | 1,220,672 | $ | 3,021,050 | $ | (219,393 | ) | |||||
Adjustments to reconcile net income (loss) to net
cash provided by operating activities |
||||||||||||
Depreciation and amortization |
1,821,256 | 1,819,047 | 2,114,798 | |||||||||
Write off of debt issue costs |
— | 344,776 | — | |||||||||
(Gain) loss on disposal of property, buildings
and equipment |
(67,791 | ) | 14,635 | (10 | ) | |||||||
(Reverse of) additions to allowance for doubtful
accounts |
13,440 | 10,320 | (33,420 | ) | ||||||||
Change in assets and liabilities
|
||||||||||||
(Increase) decrease in |
||||||||||||
Escrowed cash |
2,781,406 | (3,001,447 | ) | 162,479 | ||||||||
Escrowed investments |
399,576 | 995 | (299,881 | ) | ||||||||
Trade accounts receivable |
(227,884 | ) | (663,484 | ) | (216,460 | ) | ||||||
Resort inventory and supplies |
132,786 | (174,075 | ) | 275,577 | ||||||||
Prepaid expenses and other assets |
(66,411 | ) | 466,200 | (546,642 | ) | |||||||
Increase (decrease) in |
||||||||||||
Escrowed deposits |
(3,180,982 | ) | 3,000,452 | 137,402 | ||||||||
Accounts payable |
286,679 | 3,033 | 175,359 | |||||||||
Accrued rental distribution |
(43,004 | ) | 111,174 | (201,576 | ) | |||||||
Accrued expenses and other liabilities |
22,091 | 735,169 | 207,374 | |||||||||
Deferred income |
288,261 | 228,354 | 110,013 | |||||||||
Guest deposits |
(221,295 | ) | 86,439 | (621,044 | ) | |||||||
Net cash provided by operating activities |
3,158,800 | 6,002,638 | 1,044,576 | |||||||||
Cash flows from investing activities |
||||||||||||
Proceeds from sales of equipment |
140,100 | 400 | 10 | |||||||||
Capital expenditures |
(2,020,538 | ) | (2,033,463 | ) | (582,558 | ) | ||||||
Investments |
— | (75,000 | ) | — | ||||||||
Net cash used in investing activities |
(1,880,438 | ) | (2,108,063 | ) | (582,548 | ) | ||||||
Cash flows from financing activities |
||||||||||||
Proceeds from notes payable |
— | 17,000,000 | — | |||||||||
Payments on notes payable |
(800,004 | ) | (24,817,910 | ) | (1,354,963 | ) | ||||||
Proceeds from capital leases |
559,592 | — | — | |||||||||
Payments on capital leases |
(159,310 | ) | (24,792 | ) | (24,914 | ) | ||||||
Debt issue costs |
— | (83,729 | ) | — | ||||||||
Due (from) to related parties |
(571,488 | ) | (443,728 | ) | (139,044 | ) | ||||||
Net cash used in financing activities |
(971,210 | ) | (8,370,159 | ) | (1,518,921 | ) | ||||||
Net increase (decrease) in cash and cash equivalents |
307,152 | (4,475,584 | ) | (1,056,893 | ) | |||||||
Cash and cash equivalents |
||||||||||||
Beginning of year |
723,131 | 5,198,715 | 6,255,608 | |||||||||
End of year |
$ | 1,030,283 | $ | 723,131 | $ | 5,198,715 | ||||||
Supplemental disclosure |
||||||||||||
Cash paid for interest |
$ | 644,929 | $ | 1,690,760 | $ | 1,581,906 | ||||||
Noncash financing and investing activities |
||||||||||||
Capital lease obligation |
$ | 469,717 | $ | 69,435 | $ | 94,227 | ||||||
The accompanying notes are an integral part of these financial statements.
23
Saddlebrook Resorts, Inc.
Notes to Financial Statements
December 31, 2005 and 2004
Notes to Financial Statements
December 31, 2005 and 2004
| 1. | Organization and Business | |
| Saddlebrook Resorts, Inc. (the “Company”), a wholly-owned subsidiary of Saddlebrook Holdings, Inc. (“SHI” or the “Parent 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 include condominiums, of which most were sold 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 (the “Rental Pool”). Other resort facilities include two 18-hole golf courses, 45 tennis courts, three swimming pools, three restaurants, a convention facility with approximately 82,000 square feet of meeting and function space, a health spa, a fitness center, shops and other facilities necessary for the operation of a resort. | ||
| 2. | Restatements | |
| In these financial statements, the Company revised it accounting for the recognition of revenue from nonrefundable initiation fees related to the sale of memberships. Under the appropriate accounting method, the Company will recognize revenue over the average life of our memberships, which was calculated to be 12 years. Historically, the Company had recognized the revenue from initiation fees in the fiscal year in which the fees were received. | ||
| The total impact of the restatement included in this filing as compared to the previously reported financial statements is summarized below (only line items that were impacted are presented): | ||
| Balance Sheet |
| 2004 | 2003 | |||||||||||||||
| Previously | As | Previously | As | |||||||||||||
| Reported | Restated | Reported | Restated | |||||||||||||
Current portion of deferred
income |
$ | 470,052 | $ | 691,732 | $ | 379,141 | $ | 581,427 | ||||||||
Short-term liabilities |
10,335,765 | 10,557,445 | 6,988,737 | 7,191,023 | ||||||||||||
Long-term portion of deferred
income |
— | 1,352,654 | — | 1,234,605 | ||||||||||||
Total liabilities |
21,442,602 | 23,016,936 | 25,277,374 | 26,714,265 | ||||||||||||
Retained earnings |
11,022,246 | 9,447,912 | 7,863,753 | 6,426,862 | ||||||||||||
Shareholder’s equity |
12,135,373 | 10,561,039 | 8,976,880 | 7,539,989 | ||||||||||||
| Income Statement |
| 2004 | 2003 | |||||||||||||||
| Previously | As | Previously | As | |||||||||||||
| Reported | Restated | Reported | Restated | |||||||||||||
Resort revenues |
$ | 40,157,585 | $ | 40,020,142 | $ | 36,797,872 | $ | 36,710,516 | ||||||||
Operating income before other
expenses and (income) |
1,985,242 | 1,847,799 | 1,291,891 | 1,204,535 | ||||||||||||
Net income (loss) |
3,158,493 | 3,021,050 | (132,037 | ) | (219,393 | ) | ||||||||||
24
Saddlebrook Resorts, Inc.
Notes to Financial Statements
December 31, 2005 and 2004
Notes to Financial Statements
December 31, 2005 and 2004
| Cash Flow Statement |
| 2004 | 2003 | |||||||||||||||
| Previously | As | Previously | As | |||||||||||||
| Reported | Restated | Reported | Restated | |||||||||||||
Net income (loss) |
$ | 3,158,493 | $ | 3,021,050 | $ | (132,037 | ) | $ | (219,393 | ) | ||||||
Deferred income |
90,911 | 228,354 | 22,657 | 110,013 | ||||||||||||
| 3. | Significant Accounting Policies | |
| A summary of the Company’s significant accounting policies are as follows: | ||
| Use of Estimates | ||
| The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America 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 and Cash Equivalents | ||
| All short-term highly liquid instruments purchased with an original maturity of three months or less are considered to be cash equivalents. | ||
| Escrowed Cash and Escrowed Investments | ||
| Escrowed cash and escrowed investments relate to Rental Pool unit owner deposits for the maintenance reserve fund. Interest earned on these deposits is retained by the Rental Pool. | ||
| Investments | ||
| Investments held at December 31, 2005 consist of a Certificate of Deposit yielding interest at 2.96%, which matures in May 2006. Investments are held to maturity and recorded at amortized cost, which approximates fair market value. | ||
| Accounts Receivable | ||
| Substantially all of the Company’s accounts receivable are due from direct billings to companies or individuals who hold conferences or large group stays at the resort. Other receivables include quarterly membership fees and credit card charges. The Company performs ongoing credit evaluations of its customers’ financial conditions and establishes an allowance for doubtful accounts based upon factors surrounding specific customers, historical trends and other information. | ||
| 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. |
25
Saddlebrook Resorts, Inc.
Notes to Financial Statements
December 31, 2005 and 2004
Notes to Financial Statements
December 31, 2005 and 2004
| 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. |
||
| Certain 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. When property, buildings and equipment are retired or otherwise disposed, 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. | ||
| Deferred Charges In connection with the Company’s debt refinancing during 2004, financing costs in the amount of approximately $84,000 were incurred and deferred. These financing costs are being amortized over five years, the life of the related debt outstanding. In addition, the Company wrote-off approximately $345,000 of costs related to the early extinguishment of the previous debt (Note 6). Those costs have been recorded separately as “write off of debt issue costs” in the Statements of Operations. |
||
| Accumulated amortization amounted to approximately $19,100 and $2,800 at December 31, 2005 and 2004, respectively. Amortization expense for deferred charges amounted to approximately $16,300 and $36,000 for each of the years ended December 31, 2005 and 2004, respectively, and is included in interest expense line item of the Statements of Operations. | ||
| Deferred Income Deferred income includes deferred liabilities related to the sale of gift certificates, prepaid dues, and deferred income of membership initiation fees (as described in Note 2). Revenue from gift certificates is recorded when the certificate is redeemed. Revenue from dues is recorded over the annual membership period, and the deferred membership initiation fees are recognized over the historical average life of a membership which approximates 12 years. |
||
| Resort Revenues Resort revenues are recognized as the related service is performed and 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, unit maintenance and other costs would have been incurred. Instead, operating costs of resort for the years ended December 31, 2005, 2004 and 2003 include rental pool distributions to condominium unit owners approximating $4,700,000, $4,600,000 and $4,100,000, respectively. |
||
| Income Taxes Effective February 1, 1990, the Company elected S Corporation status for federal and state income tax purposes. Taxable income and losses are ultimately passed through to the Parent Company and, accordingly, no provision for income taxes has been made in the accompanying financial statements. |
26
Saddlebrook Resorts, Inc.
Notes to Financial Statements
December 31, 2005 and 2004
Notes to Financial Statements
December 31, 2005 and 2004
| Employee Benefit Plans Effective January 1, 2001, the Company sponsors a defined contribution plan (the “Plan”), which provides retirement benefits for all eligible employees who have elected to participate. Employees must fulfill a one year service requirement to be eligible. The Company currently matches one-half of the first 2% of an employee’s contribution. Company contributions approximated $55,000, $53,000 and $51,000 for the years ended December 31, 2005, 2004 and 2003, respectively. |
||
| Reclassifications Certain prior year balances have been reclassified to conform with current year presentation. |
| 4. | Escrowed Cash | |
| Escrowed cash, restricted as to use, as of December 31, is comprised of the following: |
| 2005 | 2004 | |||||||
Rental pool unit owner deposits for maintenance reserve fund
held in a bank account which bears an interest rate of 1.36% |
$ | 441,433 | $ | 3,223,612 | ||||
Security deposits held on long-term rentals |
27,523 | 26,750 | ||||||
| $ | 468,956 | $ | 3,250,362 | |||||
| 5. | Property, Buildings and Equipment, Net | |
| Property, buildings and equipment as of December 31, consist of the following: |
| Estimated | ||||||||||||
| Useful | ||||||||||||
| Lives | 2005 | 2004 | ||||||||||
Land and land improvements |
$ | 4,859,372 | $ | 4,859,372 | ||||||||
Buildings and recreational facilities |
10-40 | 26,597,059 | 25,554,112 | |||||||||
Machinery and equipment |
5-15 | 14,942,049 | 14,404,035 | |||||||||
Construction in progress |
441,875 | 677,701 | ||||||||||
| 46,840,355 | 45,495,220 | |||||||||||
Accumulated depreciation |
(23,462,131 | ) | (22,260,277 | ) | ||||||||
| $ | 23,378,224 | $ | 23,234,943 | |||||||||
| Substantially all property, buildings and equipment are mortgaged, pledged or otherwise subject to lien under a loan agreement (Note 7). |
27
Saddlebrook Resorts, Inc.
Notes to Financial Statements
December 31, 2005 and 2004
Notes to Financial Statements
December 31, 2005 and 2004
| The Company leases equipment under agreements which are classified as capital leases. The equipment and obligations related to the lease are recorded at the present value of the minimum lease payments. During 2005, 2004 and 2003, the Company recorded approximately $28,000, $7,000 and $9,000, respectively, of interest expense related to the leases. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets. Total depreciation expense on the assets under lease was approximately $129,100, $28,200 and $28,000 or the years ended December 31, 2005, 2004 and 2003, respectively. Future minimum lease payments under these leases are payable as follows: |
2006 |
$ | 199,375 | ||
2007 |
173,906 | |||
2008 |
131,194 | |||
| 504,475 | ||||
Less: Amount representing interest |
34,758 | |||
| $ | 469,717 | |||
| The Company also leases equipment under operating leases. Some of the leases contain annual renewal options after the initial lease term. Lease expense amounted to $249,000, $217,000 and $295,000 for the years ended December 31, 2005, 2004 and 2003, respectively. Future minimum lease payments under noncancelable operating leases with initial lease terms in excess of one year are as follows: |
2006 |
$ | 177,820 | ||
2007 |
58,154 | |||
2008 |
— | |||
2009 and thereafter |
— | |||
| $ | 235,974 | |||
| 6. | Accrued Expenses and Other Liabilities | |
| Accrued expenses and other liabilities as of December 31, consist of the following: |
| 2005 | 2004 | |||||||
Accrued payroll and related expenses |
$ | 1,125,312 | $ | 994,450 | ||||
Accrued insurance |
974,532 | 802,053 | ||||||
Other accrued expenses and liabilities |
227,083 | 508,333 | ||||||
| $ | 2,326,927 | $ | 2,304,836 | |||||
28
Saddlebrook Resorts, Inc.
Notes to Financial Statements
December 31, 2005 and 2004
Notes to Financial Statements
December 31, 2005 and 2004
| 7. | Notes Payable |
| Notes payable consist of the following: |
| 2005 | 2004 | |||||||
Note payable to lender, 5 year term (maturity date of
November 1, 2009), interest rate at 2% over the one
month LIBOR index, monthly principal and interest
payments, collateralized by all current and subsequently
acquired real and personal property |
$ | 11,066,662 | $ | 11,866,666 | ||||
Capital lease obligation |
469,717 | 69,435 | ||||||
Less: Current portion |
(978,858 | ) | (829,264 | ) | ||||
| $ | 10,557,521 | $ | 11,106,837 | |||||
| On November 1, 2004, the Company refinanced the $12 million note payable due on June 30, 2013 with a new term note and a $5 million line of credit with a new lender. As part of the refinancing, the Company paid the remaining principal balance due under the prior note. The new $12 million term note is due November 1, 2009, and requires monthly principal payments of $66,667, together with monthly payment of all accrued interest. The new term note bears interest at 2% over the one month LIBOR index. The one month LIBOR index rate as of December 31, 2005 was 4.39%. Annual principal payments of $800,004 are required for the next three years as well as a payment of $8,666,650 in 2009. | ||
| The Company has the ability to obtain an additional $5 million under a line of credit facility from the same lender under the terms of the agreement subject to specific covenants until November 1, 2006. There was no balance outstanding under the line as of December 31, 2005. |
| 8. | Resort Revenues and Operating Costs of Resort | |
| Resort revenues and operating costs of resort are comprised of the following: |
| Year Ended December 31, | ||||||||||||
| 2005 | 2004 | 2003 | ||||||||||
| (Restated) | (Restated) | |||||||||||
Resort Revenues |
||||||||||||
Room revenue subject to rental pool agreement |
$ | 11,589,794 | $ | 11,501,652 | $ | 10,379,559 | ||||||
Food and beverage |
13,451,252 | 13,427,166 | 12,103,842 | |||||||||
Resort facilities and other |
15,632,728 | 15,091,324 | 14,227,115 | |||||||||
| $ | 40,673,774 | $ | 40,020,142 | $ | 36,710,516 | |||||||
Operating Costs of Resort |
||||||||||||
Distribution to rental pool participants |
$ | 4,672,047 | $ | 4,607,151 | $ | 4,100,247 | ||||||
Food and beverage |
11,070,251 | 10,572,221 | 9,421,761 | |||||||||
Resort facilities and other |
14,951,056 | 14,519,064 | 13,723,153 | |||||||||
| $ | 30,693,354 | $ | 29,698,436 | $ | 27,245,161 | |||||||
29
Saddlebrook Resorts, Inc.
Notes to Financial Statements
December 31, 2005 and 2004
Notes to Financial Statements
December 31, 2005 and 2004
| 9. | Related Party Transactions | |
| Amounts due from related parties as of December 31, are comprised of the following: |
| 2005 | 2004 | |||||||
Saddlebrook Resort Condominium Association, Inc. |
$ | 75,026 | $ | 113,199 | ||||
Saddlebrook Holdings, Inc. |
2,586,962 | 386,092 | ||||||
Dempsey and Daughters, Inc. |
532,195 | 413,129 | ||||||
Dempsey Resort Management, Inc. |
3,192 | 13,603 | ||||||
Saddlebrook Properties LLC |
3,666 | 3,616 | ||||||
Saddlebrook International Tennis, Inc. |
— | 29,202 | ||||||
Saddlebrook Realty, Inc. |
12,439 | 9,771 | ||||||
Saddlebrook Investments, Inc. |
4,271 | 4,093 | ||||||
Other |
17,714 | 15,307 | ||||||
| $ | 3,235,465 | $ | 988,012 | |||||
| Amounts due to related parties as of December 31, are comprised of the following: |
| 2005 | 2004 | |||||||
Saddlebrook International Tennis, Inc. |
$ | 1,675,965 | $ | — | ||||
| The Company currently funds expenditures for SHI, the Company’s parent. SHI’s expenditures include dividends to its shareholders, which are primarily income taxes related to the operations of SHI and its subsidiaries. | ||
| Saddlebrook International Tennis, Inc. (“SIT”) operates is a tennis training facility and preparatory school operating at the resort. SIT is solely owned by SHI. SIT owns 10 condominium units at the Resort, two of which participate in the Rental Pool Operation. The Company received revenue from SIT for services provided to SIT guests, which amounted to approximately $1,579,000, $1,443,000 and $1,371,000, for the years ended December 31, 2005, 2004 and 2003, respectively. In addition, the Company was reimbursed for actual expenses and other costs incurred on behalf of SIT. | ||
| Saddlebrook Investments, Inc. is a broker/dealer for sales of Saddlebrook Resort condominium units. Saddlebrook Realty, Inc. is a broker for the sale of other general real estate. These companies are solely owned by the shareholder of the Company’s parent. The Company was reimbursed for actual expenses and costs incurred on behalf of these entities. | ||
| Dempsey and Daughters, Inc. hold certain tracts of real estate and own 24 individual condominium units at the Resort, 10 of which participate in the Rental Pool Operation. This company is solely owned by SHI. The Company was reimbursed for actual expenses incurred on behalf of Dempsey and Daughters, Inc. |
30
Saddlebrook Resorts, Inc.
Notes to Financial Statements
December 31, 2005 and 2004
Notes to Financial Statements
December 31, 2005 and 2004
| 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 $1,504,000, $1,382,000 and $1,365,000, for the years ended December 31, 2005, 2004 and 2003, respectively. | ||
| Other related party receivables and payables consist of transactions with several other entities, along with receivables from employees for resort charges and travel advances. | ||
| 10. | Commitments and Contingencies | |
| The Company is involved in 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, 2005. | ||
| 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 10% and all amounts contributed as capital ($122,950 as of December 31, 2005) and the increase in equity cumulative to date ($147,121 as of December 31, 2005) were recorded as a component of prepaid expenses and other assets. Any change in equity is reflected as a component of other income in the Statements of Operations. The Company’s investment approximates the proportionate net book value of the insurance company at December 31, 2005. The Company may withdraw from the risk pool annually at any renewal date. | ||
| 11. | Litigation Settlement | |
| During January 2004, the Company and Honeywell Corporation (the owner of the Company’s former parent company), settled a legal dispute with a prior insurance provider. The case involved the Company and its former parent company seeking reimbursement for the defense and settlement costs incurred in connection with a lawsuit that alleged damages covered by the policies issued by the insurance company. A favorable settlement of $4,950,000 was received by the Company in February 2004. Certain related expenses for legal services and bonuses have been netted against this amount resulting in a net litigation settlement of $3,177,832. |
31
Report of Independent Registered Certified Public Accounting Firm
To the Board of Directors of Saddlebrook
Resorts, Inc., as Operators under the Saddlebrook
Rental Pool and Agency Appointment Agreement
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 Saddlebrook Rental Pool Operation (funds created for participants who have entered into
a rental pool agreement as explained in Note 1) at December 31, 2005 and 2004, 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, 2005 in conformity with accounting principles generally accepted in the
United States of America. These financial statements are the responsibility of the rental pool
operator’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 the standards
of the Public Company Accounting Oversight Board (United States). Those standards 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 our opinion.
September
11, 2006
32
Saddlebrook Rental Pool Operation
Balance Sheets
December 31, 2005 and 2004
Balance Sheets
December 31, 2005 and 2004
| 2005 | 2004 | |||||||
Distribution Fund |
||||||||
Assets |
||||||||
Receivable from Saddlebrook Resorts, Inc. |
$ | 719,793 | $ | 919,360 | ||||
Liabilities and Participants’ Fund Balance |
||||||||
Due to participants for rental pool distribution |
$ | 607,008 | $ | 751,408 | ||||
Due to maintenance escrow fund |
112,785 | 167,952 | ||||||
Participants’ fund balance |
— | — | ||||||
| $ | 719,793 | $ | 919,360 | |||||
Maintenance Escrow Fund |
||||||||
Assets |
||||||||
Cash in bank |
$ | 441,433 | $ | 3,223,612 | ||||
Investments |
— | 399,576 | ||||||
Receivables |
||||||||
Distribution fund |
112,785 | 167,952 | ||||||
Interest |
— | 672 | ||||||
Owner payments |
31,108 | — | ||||||
Prepaid expenses and other assets |
16,186 | 25,018 | ||||||
Linen inventory |
26,498 | 97,420 | ||||||
| $ | 628,010 | $ | 3,914,250 | |||||
Liabilities and Participants’ Fund Balance |
||||||||
Due to Saddlebrook Resorts, Inc. |
$ | 50,908 | $ | 178,800 | ||||
Other |
10,652 | — | ||||||
Participants’ fund balance |
566,450 | 3,735,450 | ||||||
| $ | 628,010 | $ | 3,914,250 | |||||
The accompanying notes are an integral part of these financial statements.
33
Saddlebrook Rental Pool Operation
Statements of Operations
Years Ended December 31, 2005, 2004 and 2003
Statements of Operations
Years Ended December 31, 2005, 2004 and 2003
| 2005 | 2004 | 2003 | ||||||||||
Distribution Fund |
||||||||||||
Rental pool revenues |
$ | 11,589,794 | $ | 11,501,652 | $ | 10,379,559 | ||||||
Deductions |
||||||||||||
Marketing fee |
869,235 | 862,624 | 778,467 | |||||||||
Management fee |
1,448,724 | 1,437,707 | 1,297,444 | |||||||||
Travel agent commissions |
445,167 | 513,125 | 414,755 | |||||||||
Credit card expense |
196,234 | 184,603 | 186,118 | |||||||||
Bad debt expense and other |
6,000 | 6,000 | 4,500 | |||||||||
| 2,965,360 | 3,004,059 | 2,681,284 | ||||||||||
Net rental income |
8,624,434 | 8,497,593 | 7,698,275 | |||||||||
Operator share of net rental income |
(3,880,995 | ) | (3,823,917 | ) | (3,464,223 | ) | ||||||
Other revenues (expenses) |
||||||||||||
Complimentary room revenues |
73,450 | 80,026 | 75,465 | |||||||||
Minor repairs and replacements |
(144,842 | ) | (146,551 | ) | (209,270 | ) | ||||||
Amounts available for distribution to
participants and maintenance escrow fund |
$ | 4,672,047 | $ | 4,607,151 | $ | 4,100,247 | ||||||
The accompanying notes are an integral part of these financial statements.
34
Saddlebrook Rental Pool Operation
Statements of Changes in Participants’ Fund Balance
Years Ended December 31, 2005, 2004 and 2003
Statements of Changes in Participants’ Fund Balance
Years Ended December 31, 2005, 2004 and 2003
| 2005 | 2004 | 2003 | ||||||||||
Distribution Fund |
||||||||||||
Balances, beginning of period |
$ | — | $ | — | $ | — | ||||||
Additions |
||||||||||||
Amounts available for distribution |
4,672,047 | 4,607,151 | 4,100,247 | |||||||||
Reductions |
||||||||||||
Amounts withheld for maintenance escrow fund |
(791,052 | ) | (783,235 | ) | (636,024 | ) | ||||||
Amounts accrued or paid to participants |
(3,880,995 | ) | (3,823,916 | ) | (3,464,223 | ) | ||||||
Balances, end of period |
$ | — | $ | — | $ | — | ||||||
Maintenance Escrow Fund |
||||||||||||
Balances, beginning of period |
$ | 3,735,450 | $ | 1,089,720 | $ | 1,457,846 | ||||||
Additions |
||||||||||||
Amount withheld from distribution fund |
791,052 | 783,235 | 636,024 | |||||||||
Unit owner payments |
1,207,780 | 6,807,301 | 342,910 | |||||||||
Interest earned |
15,357 | 41,852 | 4,814 | |||||||||
Reductions |
||||||||||||
Unit renovations |
(4,595,843 | ) | (4,381,219 | ) | (847,730 | ) | ||||||
Refunds of excess amounts in escrow accounts |
(38,612 | ) | (58,775 | ) | (44,244 | ) | ||||||
Maintenance charges |
(303,988 | ) | (310,469 | ) | (376,206 | ) | ||||||
Linen amortization |
(244,746 | ) | (236,195 | ) | (83,694 | ) | ||||||
Balances, end of period |
$ | 566,450 | $ | 3,735,450 | $ | 1,089,720 | ||||||
The accompanying notes are an integral part of these financial statements.
35
Saddlebrook Rental Pool Operation
Notes to Financial Statements
December 31, 2005 and 2004
Notes to Financial Statements
December 31, 2005 and 2004
| 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 7.5%, a 12.5% management fee, travel agent commissions, credit card expense and 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 participant’s 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. |
||
| 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 Saddlebrook. |
36