SADDLEBROOK RESORTS INC - Quarter Report: 2011 September (Form 10-Q)

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

(Mark one)

For the quarterly period ended September 30, 2011

OR

For the transition period from              to             

COMMISSION FILE NUMBER: 2-65481

SADDLEBROOK RESORTS, INC.

(Exact name of registrant as specified in its charter)

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:

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.

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INDEX

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

SADDLEBROOK RESORTS, INC.

BALANCE SHEETS

The accompanying Notes to Financial Statements are an integral part of these financial statements

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SADDLEBROOK RESORTS, INC.

STATEMENTS OF OPERATIONS

AND ACCUMULATED EARNINGS

(Unaudited)

The accompanying Notes to Financial Statements are an integral part of these financial statements

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SADDLEBROOK RESORTS, INC.

STATEMENTS OF CASH FLOWS

(Unaudited)

The accompanying Notes to Financial Statements are an integral part of these financial statements.

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SADDLEBROOK RESORTS, INC.

NOTES TO FINANCIAL STATEMENTS

(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 September 30, 2011, and its statements of operations and accumulated earnings and cash flows for the periods ended September 30, 2011 and 2010, 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, 2010.

Note 2. Accounts Receivable

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Note 3. Property, Buildings and Equipment

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

Note 4. Deferred Charges

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Note 5. Long-Term Debt and Capital Lease Obligation

Long-term debt is a bank note payable which is due March 12, 2014, and requires monthly principal payments of $88,333, 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 September 30, 2011 was 2.71%. The note is collateralized by all current and subsequently acquired real and personal property. At September 30, 2011, the outstanding balance on this term note was $6,890,000.

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%. Total depreciation expense on the assets under the lease was approximately $14,000 and $42,000 for the three and nine months ended September 30, 2011, respectively.

Note 6. Due from (to) Related Parties

Due from (to) related parties at September 30, 2011 and December 31, 2010 are the result of net intercompany transactions and cash transfers between the Company and its shareholder and affiliated companies, which 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.

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SADDLEBROOK RENTAL POOL OPERATION

BALANCE SHEETS

DISTRIBUTION FUND

MAINTENANCE ESCROW FUND

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SADDLEBROOK RENTAL POOL OPERATION

STATEMENTS OF OPERATIONS - DISTRIBUTION FUND

(Unaudited)

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SADDLEBROOK RENTAL POOL OPERATION

STATEMENTS OF CHANGES IN PARTICIPANTS’ FUND BALANCES

(Unaudited)

DISTRIBUTION FUND

MAINTENANCE ESCROW FUND

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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

Third quarter 2011 compared to third quarter 2010

The Company’s total revenues decreased approximately $6,000, less than 1%, for the three months ended September 30, 2011 compared to the same period in the prior year. While occupancy remained flat when comparing the two periods, the Company did experience an increase in the average room rate, however experienced slight decreases in the revenue per occupied room for other ancillary income. Total revenues for the Rental Pool Operation increased approximately $76,000, or about 11%. This increase is directly related to the increase in the average room rate when comparing the two periods.

Total costs and expenses for the Company decreased by $543,000 when compared to the same period in the prior year. This decrease is related to cost control programs and measures implemented by management. Total costs and expenses for the Rental Pool Operation increased by about $3,000.

The Company experienced a net loss for the quarter of approximately $1,633,000, compared with a net loss of approximately $2,190,000 in the same period in the prior year. Amounts available for distribution for the Rental Pool Operation increased $50,000 from the comparable period last year.

First nine months 2011 compared to first nine months 2010

The Company’s total revenues decreased approximately $2,833,000, or about 14% for the nine months ended September 30, 2011 compared to the same period in the prior year. The total revenues for the Rental Pool Operation decreased approximately $873,000, or about 16%. Both of these decreases are directly related to a decrease in occupancy of approximately 16% when comparing the two periods.

Total costs and expenses for the Company decreased approximately $2,395,000. This decrease is related to the decrease in revenues, along with cost control programs and measures implemented by management. Costs and expenses for the Rental Pool Operation decreased approximately $246,000. This decrease is consistent with the decrease in Rental Pool Operation revenues.

Net loss for the Company was approximately $2,242,000, compared to an approximate net loss of $1,865,000 in the comparable period last year. Amounts available for distribution for the Rental Pool Operation decreased $319,000 over the same period in the prior year.

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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. This has resulted in fewer group (corporate) bookings.

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. Additionally, the Company has increased its group (corporate meeting) sales staff.

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 (2.71% at September 30, 2011) and matures in March 2014.

Off-Balance Sheet Arrangements

The Company has not entered into any off-balance sheet arrangements as it is not the Company’s business practice to do so.

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Seasonality

The Company’s operations are seasonal with the highest volume of revenues 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 periods 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 and cash equivalents, including cash escrowed on behalf of the condominium unit owners in the Rental Pool’s Maintenance Escrow Fund, 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.

Item 4.T. 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 September 30, 2011, 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 September 30, 2011 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 September 30, 2011 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 from time to time 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.

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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

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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.

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