10-Q 1 a2041942z10-q.txt 10-Q ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended JANUARY 31, 2001. OR Transition Report Pursuant to Section 13 or 15(d) of the Securities --- Exchange Act of 1934 for the transition period from to --------- --------- Commission File Number 333-31025 KSL RECREATION GROUP, INC. (Exact name of Registrant as specified in its charter) Delaware 33-0747103 ------------ ---------------------- (State or other jurisdiction of (IRS Employer ID Number) incorporation or organization) 55-880 PGA Boulevard La Quinta, California 92253 ---------------------------------------- ------------ (Address of principal executive offices) (Zip Code) 760/564-8000 ------------ (Registrant's telephone number, including area code) N/A -------------- (Former name, address and fiscal year, if changed since last report) 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 . Shares outstanding of the Registrant's common stock as of March 19, 2001 1,000 Class Common Stock, $0.01 par value ================================================================================ KSL RECREATION GROUP, INC. (A WHOLLY OWNED SUBSIDIARY OF KSL RECREATION CORPORATION)

2 KSL RECREATION GROUP, INC. (A WHOLLY OWNED SUBSIDIARY OF KSL RECREATION CORPORATION) PART I. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS CONDENSED CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)

See accompanying notes to consolidated financial statements. 3 KSL RECREATION GROUP, INC. (A WHOLLY OWNED SUBSIDIARY OF KSL RECREATION CORPORATION) CONDENSED CONSOLIDATED BALANCE SHEETS (UNAUDITED)

See accompanying notes to consolidated financial statements. 4 KSL RECREATION GROUP, INC. (A WHOLLY OWNED SUBSIDIARY OF KSL RECREATION CORPORATION) CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

See accompanying notes to consolidated financial statements. 5 KSL RECREATION GROUP, INC. (A WHOLLY OWNED SUBSIDIARY OF KSL RECREATION CORPORATION) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1. ORGANIZATION AND ACCOUNTING POLICIES KSL Recreation Group, Inc. and its subsidiaries (collectively, the Company) is engaged in the ownership and management of resorts, spas, golf courses, private clubs, and activities related thereto. The unaudited interim condensed consolidated financial statements presented herein have been prepared in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the Securities and Exchange Commission for reporting on Form 10-Q and do not include all of the information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America. In the opinion of management, these condensed consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the Company's consolidated financial position, results of operations and cash flows. These unaudited interim condensed consolidated financial statements should be read in conjunction with the other disclosures contained herein and with the Company's audited consolidated financial statements and notes thereto contained in the Company's Form 10-K for the year ended October 31, 2000. Operating results for interim periods are not necessarily indicative of results that may be expected for the entire fiscal year. Certain reclassifications have been made in the consolidated financial statements to conform to the 2001 presentation. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America necessarily 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 periods. Actual results could differ from these estimates. Effective November 1, 2000, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging Activities." SFAS 133 was amended by SFAS 137, which modified the effective date of SFAS 133 to all fiscal quarters of all fiscal years beginning after June 15, 2000. In June 2000, SFAS 133 was further amended by SFAS 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities". SFAS 133, as amended, requires that every derivative instrument, including certain derivative instruments embedded in other contracts, be recorded on the balance sheet at its fair value. Changes in the fair value of derivatives are recorded each period in current earnings or other comprehensive income, depending on whether a derivative is designated as part of a hedge transaction and, if it is, the type of hedge transaction. SFAS 133 also requires that the Company formally document, designate, and assess the effectiveness of transactions that receive hedge accounting. Upon adoption of SFAS 133, the Company recorded an asset of $4.6 million and a net of tax adjustment for the cumulative effect of change in accounting principles of $2.7 million as other comprehensive income (OCI). The fair value of the swap was a liability of $2.2 million at January 31, 2001. The change in the swap's carrying value, net of tax, from November 1, 2000 to January 31, 2001 is reflected as a reduction to OCI in the accompanying condensed consolidated financial statements. The reduction to OCI is attributable to losses on cash flow hedges during the quarter ended January 31, 2001. During the quarter ended January 31, 2001, the Company received payments related to this swap agreement totaling $0.8 million. This amount was recorded as a reduction to interest expense. The Company uses derivatives instruments to manage exposures to interest rate risks in accordance with its risk management policy. The Company's objectives for holding derivatives are to minimize the risks using the most effective methods to eliminate or reduce the impacts of these exposures. In December 1999, the Securities and Exchange Commission ("SEC") issued Staff Accounting Bulletin No. 101 ("SAB 101"), "Revenue Recognition in Financial Statements." SAB 101 summarizes certain of the SEC's views in applying generally accepted accounting principles to revenue recognition in financial statements. The Company adopted SAB 101 effective upon issuance. The adoption of SAB 101 did not have a material effect on the Company's consolidated financial statements. 6 KSL RECREATION GROUP, INC. (A WHOLLY OWNED SUBSIDIARY OF KSL RECREATION CORPORATION) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) NOTE 2. ACQUISITIONS On December 22, 2000, the Company, through a wholly-owned subsidiary, acquired certain assets and assumed certain liabilities comprising the Arizona Biltmore Resort & Spa (the "Property", or the "Biltmore"), located in Phoenix, Arizona. The purchase price of the Property was $335.0 million (excluding transaction costs of $5.3 million and a working capital purchase price adjustment of $8.3 million). The Company financed the acquisition with cash and debt issued under its Amended and Restated Credit Agreement (as amended December 22, 2000) with various financial institutions, Credit Suisse First Boston, The Bank of Nova Scotia and Salomon Smith Barney. In addition, the Company assumed a mortgage of $59.4 million, secured by the Property. The acquisition was accounted for using the purchase method of accounting. The excess of cost over net assets acquired was $27.8 million, which is being amortized over 20 years. Accordingly, the operating results of the Biltmore have been included in the Company's consolidated financial statements since acquisition. The excess of the purchase price over the debt assumed, acquisition related costs, and working capital were funded with existing cash and debt issued under the Company's Amended and Restated Credit Agreement, as amended December 22, 2000 (Note 3). The following are the Company's unaudited pro forma consolidated results of operations for the three months ended January 31, assuming the Biltmore transaction occurred as of November 1, 1999:

The unaudited pro forma results do not necessarily represent results that would have occurred if the acquisitions had taken place as of the beginning of the fiscal periods presented, nor do they purport to be indicative of the results that will be obtained in the future. NOTE 3. LONG-TERM DEBT AND RESTRICTED CASH Concurrent with the acquisition of the Arizona Biltmore on December 22, 2000, the Company amended its credit facility. The Amended and Restated Credit Facility allows for maximum borrowings of $529.3 million, including Term A and Term B loans of $48.5 million each, a Term C loan of $175.0 million and maximum borrowings under a revolving credit facility of $257.3 million, decreasing to $239.6 million, $216.1 million and $186.6 million in May 2001, 2002 and 2003, respectively. Borrowings under the Amended and Restated Credit Facility as of January 31, 2001 bear interest at variable rates up to 2.875% above LIBOR or 1.875% above the Syndication Agent's Base Rate. The Company paid approximately $4.9 million in financing costs in connection with such amendment, which is being amortized over the remaining life of the Amended and Restated Credit Facility. The Company's outstanding borrowings under the revolving credit line were $124.0 million at January 31, 2001. The terms of the Company's credit facility, including the revolving credit line, contain certain financial covenants. The Company is in compliance with the required financial covenants of the credit facility and other debt instruments at January 31, 2001. In March 1999, the Company entered into an interest rate swap agreement to hedge the effects of changes in interest rates. The swap is designated as a cash flow hedge as defined by SFAS 133. The Company does not use derivative financial instruments for trading purposes. As required by SFAS 133, the swap is recorded at its fair market value on the accompanying condensed consolidated balance sheet, with the change in the swap's carrying value, net of tax, from November 1, 2000 to January 31, 2001 being reflected in OCI. The swap involves the exchange of the variable interest rate of 30 day LIBOR (receive) with a fixed LIBOR interest rate of 5.57% (pay). This interest rate swap agreement is denominated in dollars, has a notional principal amount of $270.0 million and matures in November 2002. The counter-parties to the interest swap agreement are two major financial institutions. The amounts to be received or paid pursuant to this agreement are accrued and recognized through an adjustment to interest expense in the accompanying condensed consolidated statements of operations over the life of the agreement. 7 KSL RECREATION GROUP, INC. (A WHOLLY OWNED SUBSIDIARY OF KSL RECREATION CORPORATION) NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED) NOTE 4. SEGMENT INFORMATION Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the Company's chief operating decision maker, or decision making group, in deciding how to allocate resources and in assessing performance. The Company's chief operating decision-maker is its Chief Executive Officer. The operating segments of the Company are managed separately because each segment represents a strategic business unit that offers different products or services. The Company's reportable operating segments include the Resort segment and the Real Estate segment. The Resort segment provides service-based recreation through resorts, spas, golf courses, private clubs and activities related thereto. For financial reporting purposes, individual properties included in the Resort segment have been aggregated because of their common economic and operating characteristics. The Real Estate segment develops and sells real estate in and around the Company's Resort operations. The Company's Real Estate segment exists to support and enhance growth of the Company's Resort segment. The Company utilizes the expertise of an affiliate Company in determining real estate projects to undertake. Both of the Company's operating segments are within the United States. The accounting policies of the Company's operating segments are the same as those described in Note 1, Organization and Accounting Policies. The Company evaluates performance based on stand alone segment income reduced by direct expenses. Because the Company does not evaluate performance based on segment net income at the operating segment level, the Company's non-operating expenses are not tracked internally by segment. Therefore, such information is not presented. Reportable segment data for the quarters ended January 31, 2001 and 2000 are as follows:

The Real Estate segment's identifiable assets were $10.2 million and $10.4 million at January 31, 2001 and 2000, respectively. All of the remaining assets of the Company are related to the Resort segment, other than the deferred income taxes, which is considered a corporate asset and is not identifiable to either segment. Substantially all of the Company's capital expenditures and depreciation and amortization expense relates to the Resort segment. 8 KSL RECREATION GROUP, INC. (A WHOLLY OWNED SUBSIDIARY OF KSL RECREATION CORPORATION) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THE FOLLOWING DISCUSSION AND ANALYSIS OF THE COMPANY'S FINANCIAL CONDITION AND RESULTS OF OPERATIONS SHOULD BE READ IN CONJUNCTION WITH THE COMPANY'S HISTORICAL CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED ELSEWHERE IN THIS DOCUMENT. CONSOLIDATED RESULTS OF OPERATIONS Net income totaled $3.7 million and $1.4 million for the three months ended January 2001 and 2000, respectively. Income from operations totaled $22.3 million and $14.5 million in fiscal 2001 and 2000, respectively. The improvement in operating results from the three months ended January 31, 2000 to the three months ended January 31, 2001 relates primarily to (i) the acquisition of the Biltmore; (ii) recently completed capital improvements; and (iii) internal growth, as the Company achieved significant increases in occupancy at its resorts, especially Grand Wailea. Additional information relating to the operating results for each business segment is set forth below. RESORT SEGMENT Select operating data for the Company's resort segment for the quarters indicated is as follows:

9 KSL RECREATION GROUP, INC. (A WHOLLY OWNED SUBSIDIARY OF KSL RECREATION CORPORATION) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) THREE MONTHS ENDED JANUARY 31, 2001 (2001 FIRST QUARTER) AS COMPARED TO THE THREE MONTHS ENDED JANUARY 31, 2000 (2000 FIRST QUARTER). RESORT REVENUES. Resort revenues increased by $19.1 million or 18.8%, from $101.4 in the 2000 First Quarter to $120.5 million in the 2001 First Quarter. The majority of this increase can be attributed to the acquisition of the Biltmore on December 22, 2000. This transaction was accounted for as a purchase and accordingly Biltmore's results are included from the date of its acquisition. The revenue increase can also be attributed to internal growth as "same stores" revenues increased 8.2% in the 2001 First Quarter as compared to the 2000 First Quarter. Rooms revenue increased by $8.6 million or 21.7%; food and beverage sales increased by $5.3 million or 21.2%; golf fees increased $0.9 million or 10.9%; dues and fees increased $0.8 million or 15.3%; merchandise sales increased by $0.8 million or 16.1%; spa revenue increased by $1.4 million or 25.9%; and other revenue increased by $1.3 million or 9.8%. During the quarter ended January 31, 2001, the Company was engaged in ongoing capital improvements at all of its resorts, which the Company believes will add to future revenues. These capital improvements totaled approximately $8.2 million. RESORT OPERATING EXPENSES. With the exception of the cost of real estate sold, substantially all of the Company's operating expenses, including depreciation and amortization and the corporate fee, relate to the Resort segment. Operating expenses (excluding depreciation and amortization and the corporate fee) increased by $9.6 million, or 13.2%, from $72.8 million in the 2000 First Quarter to $82.4 in the 2001 First Quarter. Same stores operating expenses increased $3.8 million, or 5.2%. The increase can be attributed to expenses related to revenue growth described above. Depreciation and amortization increased $1.6 million or 13.5%. The increase can be attributed primarily to the acquisition of the Biltmore, which added approximately $1.1 million in depreciation and amortization in the 2001 First Quarter. RESORT OPERATING INCOME. Operating income increased $7.4 million, or 52.0%, from $14.3 million in the 2000 First Quarter to $21.7 in the 2001 First Quarter due to the factors detailed above. Same stores operating income increased $3.6 million, or 25.0%. The operating income margin for the resort segment was 18.0% in the 2001 First Quarter as compared to 14.1% in the 2000 First Quarter. REAL ESTATE OPERATIONS. Real estate revenue totaled $2.1 million in the 2001 First Quarter as compared to $2.5 million in the 2000 First Quarter, a quarter over quarter decrease of $0.4 million or 15.2%. Operating income earned by the real estate segment increased $0.4 million from $0.2 million in the 2000 First Quarter to $0.6 million in the 2001 First Quarter. The real estate segment closed sales of four resort homes on a site adjacent to La Quinta Resort and Spa, for approximately $2.3 million in the 2000 First Quarter. In the 2001 First Quarter, the real estate segment closed sales of two resort homes for approximately $1.6 million. NET INTEREST EXPENSE. Net interest expense increased by $3.9 million or 32.7% from $12.1 million in the 2000 First Quarter to $16.0 million in the 2001 First Quarter. Interest expense for the 2001 First Quarter consisted primarily of interest on the Company's (i) $125.0 million 10.25% Senior Subordinated Notes due 2007; (ii) $275.0 million mortgage secured by the Grand Wailea Resort; (iii) Term A, Term B and Term C Notes drawn against the Company's Amended and Restated Credit Facility; (iv) $59.2 million mortgage secured by the Arizona Biltmore Resort and Spa; and (v) revolving borrowings under the Company's Amended and Restated Credit Facility. The increase in interest expense can be attributed to the Company's increased debt level due to the acquisition of the Biltmore. INCOME TAX EXPENSE. Income tax expense increased to $2.5 million in the 2001 First Quarter from $0.9 million in the 2000 First Quarter due to the factors described above. The Company's effective tax rate for the 2001 First Quarter and 2000 First Quarter was 40.0%. NET INCOME. Net income increased by $2.3 million or 167.9%, from $1.4 million in the 2000 First Quarter to $3.7 million in the 2001 First Quarter due to the factors described above. 10 KSL RECREATION GROUP, INC. (A WHOLLY OWNED SUBSIDIARY OF KSL RECREATION CORPORATION) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) EBITDA AND ADJUSTED EBITDA ANALYSIS The following includes comparative financial information of the Company's EBITDA and Adjusted EBITDA for the three months ended January 31, 2001 and 2000:

EBITDA AND ADJUSTED EBITDA. EBITDA increased by $9.5 million or 36.0% from $26.3 million in the 2000 First Quarter to $35.8 million in the 2001 First Quarter, due primarily to the acquisition of the Biltmore, as discussed above. In addition, same stores EBITDA growth was 18.4% and was driven by margin improvements as well as return on capital improvements at certain of the Company's resorts. Similarly, Adjusted EBITDA increased by $9.7 million or 32.0% from $30.4 million in the 2000 First Quarter to $40.1 million in the 2001 First Quarter, primarily due to the same factors that resulted in EBITDA increases. In addition, Adjusted EBITDA was positively impacted by a 6.6% increase in net membership deposits. -------------------- 1) EBITDA is defined as net income before (i) income tax expense; (ii) depreciation and amortization; and (iii) net interest expense. EBITDA is not defined as an alternative to profitability measures as determined under generally accepted accounting principles ("GAAP"), and it may not be comparable to similarly titled measures reported by other companies. 2) Net Membership Deposits is defined as the amount of refundable membership deposits paid by new and upgraded resort club members and by existing members who have converted to new membership plans, in cash, plus principal payments in cash received on notes in respect thereof, minus the amount of any refunds paid in cash with respect to such deposits. These membership deposits are fully refundable in thirty years (or sooner under certain circumstances). In accordance with GAAP, the Company accounts for membership deposits as "cash provided from financing activities" in its statements of cash flows and reports a liability in its balance sheets equal to the amount of such membership deposits. 3) Other non-cash and non recurring items may consist of loss on sale of facility, gain on sale of subsidiary, extraordinary items, non-recurring charges and non-cash membership related items. 4) Adjusted EBITDA is defined as EBITDA adjusted for (i) net membership deposits and (ii) other non-cash and/or non-recurring items. Adjusted EBITDA should not be construed as an indicator of the Company's operating performance or as an alternative to profitability measures as determined in accordance with GAAP. Additionally, Adjusted EBITDA should not be construed by investors as a measure of the Company's liquidity or ability to meet all cash needs or as an alternative to cash flows from operating, investing and financing activities as determined in accordance with GAAP, nor should Adjusted EBITDA be construed by investors as an alternative to any other determination under GAAP. The Company's Adjusted EBITDA may not be comparable to similarly titled measures reported by other companies. 11 KSL RECREATION GROUP, INC. (A WHOLLY OWNED SUBSIDIARY OF KSL RECREATION CORPORATION) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) LIQUIDITY AND CAPITAL RESOURCES Historically, the Company has funded its capital and operating requirements with a combination of operating cash flow, borrowings under its credit facilities, and equity investments from its Parent. The Company has utilized these sources of funds to make acquisitions, to fund significant capital expenditures at its properties, to fund operations and to service debt under its credit facilities. The Company presently expects to fund its future capital and operating requirements at its existing operations through a combination of borrowings under its credit facility and cash generated from operations. During the 2001 First Quarter, cash flow provided by operating activities was $31.0 million compared to $21.0 million in the 2000 First Quarter. As of January 31, 2001, the Company had cash and cash equivalents of $11.3 million (excluding restricted cash of $20.3 million). The Company's long-term debt at January 31, 2001 included (i) $125.0 million 10.25% Senior Subordinated Notes due 2007; (ii) a $275.0 million mortgage secured by the Grand Wailea Resort; (iii) Term A, Term B and Term C Notes totaling $272.0 million drawn against the Company's Amended and Restated Credit Facility; (iv) $124.0 million of revolving borrowings under the Company's Amended and Restated Credit Facility; and (v) $59.2 million mortgage secured by the Arizona Biltmore Resort and Spa. Capital expenditures totaled $8.2 million and $18.7 million for the 2001 First Quarter and the 2000 First Quarter, respectively. Although the Company has no material firm commitments for capital expenditures, the Company expects to invest significant capital in its Resort properties in the future to drive revenue growth. As of January 31, 2001, the Company had a revolving credit facility, which allowed for maximum borrowings of $257.3 million. Maximum borrowings under the revolving credit line decrease to $239.6 million in May 2001, $216.1 million in May 2002 and $186.6 million in May 2003. Borrowings under the credit facility bear interest at variable rates up to 2.875 % above LIBOR or 1.875% above the Syndication Agent's base rate. As of January 31, 2001 borrowings under the revolving credit facility were $124.0 million and bore interest at LIBOR plus 2.0% and mature on April 30, 2004. The Company is continually engaged in evaluating potential acquisition candidates to add to its portfolio of properties. The Company expects that funding for future acquisitions may come from a variety of sources, depending on the size and nature of any such acquisitions. Potential sources of capital include cash generated from operations, borrowings under the credit facility, additional equity investments from the Parent or partnerships formed at the direction of Kohlberg Kravis Roberts & Co., L.P. (`KKR"), or other external debt or equity financings. There can be no assurance that such additional capital sources will be available to the Company on terms which the Company finds acceptable, or be available at all. The Company believes that its liquidity, capital resources and cash flows from existing operations will be sufficient to fund capital expenditures, working capital requirements and interest and principal payments on its indebtedness for at least the next twelve months. However, a variety of factors could impact the Company's ability to fund capital expenditures, working capital requirements and interest and principal payments, including a prolonged or severe economic recession in the United States, departures from currently expected demographic trends or the Company's inability to achieve operating improvements at existing and acquired operations at currently expected levels. Moreover, the Company currently expects that it will acquire additional resorts, golf facilities or other recreational facilities, and in connection therewith, expects to incur additional indebtedness. In the event that the Company incurs such additional indebtedness, its ability to make principal and interest payments on its existing indebtedness may be adversely impacted. 12 KSL RECREATION GROUP, INC. (A WHOLLY OWNED SUBSIDIARY OF KSL RECREATION CORPORATION) ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (CONTINUED) SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 The statements in this Management's Discussion and Analysis of Financial Condition and Results of Operations concerning future events, activities, conditions and any and all statements that are not historical facts are forward-looking statements. Actual results may differ materially from those projected. Forward-looking statements involve risks and uncertainties. A change in any one or a combination of factors could affect the Company's future financial performance. Also, the Company's past performance is not necessarily evidence of or an indication of the Company's future financial performance. PART II. OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS By Unanimous Written Consent of Shareholders in Lieu of Annual Meeting dated as of November 14, 2000, the following individuals were elected directors of the Company: Henry R. Kravis Paul E. Raether Scott M. Stuart Michael S. Shannon George R. Roberts Michael T. Tokarz Alexander Navab, Jr. Larry E. Lichliter ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits None (b) Reports on Form 8-K On March 9, 2001, a Form 8-K/A was filed to amend the Form 8-K filing dated January 8, 2001. The Form 8-K filing reported the acquisition of certain assets and the assumption of certain liabilities comprising the Arizona Biltmore Resort & Spa pursuant to an agreement of purchase and sale between Biltmore Hotel Partners, LLLP, an Arizona limited liability limited partnership, and the Company, through KSL Biltmore Resort, Inc, an indirect wholly-owned subsidiary of the Company. The acquisition closed December 22, 2000. The Form 8-K/A filing included pro forma financial information and financial statements. 13 SIGNATURES 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. KSL RECREATION GROUP, INC. Dated: March 19, 2001 By: /s/ Eric C. Resnick ------------------------------------ Vice President, Chief Financial Officer and Treasurer 14

KSL RECREATION GROUP INC 10-Q