<PAGE>
U. S. SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
Form 10-KSB
[X] Annual Report under Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended December 31, 1995
-----------------
or
[_] Transition report under section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from
_____________ to _____________
Commission file number 1-3753
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UNITED PARK CITY MINES COMPANY
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(Name of small business issuer in its charter)
Delaware 87-0219807
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(State or other jurisdiction of (I. R. S. Employer
incorporation or organization) Identification No.)
P. O. Box 1450
Park City, Utah 84060
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number, including area code (801) 649-8011
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Securities registered under Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
- --------------------------- ---------------------------------------------
Common Stock, $0.01 Par Value New York Stock Exchange
Securities Registered pursuant to Section 12(g) of the Act:
None
----
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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 .
----- ----
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B contained in this form, and no disclosure will 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-KSB or any
amendment to this Form 10-KSB. X
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Issuer's revenues for its most recent fiscal year. $5,638,562
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Based on the closing sales price on March 18, 1996, the aggregate market value
of the voting stock held by nonaffiliates of the registrant was $37,802,184.
For purposes of this computation, voting stock directly held by officers and
directors of the registrant has been excluded. Such exclusion is not intended,
nor shall it be deemed, an admission that such officers and directors are
affiliates of the registrant.
The number of shares outstanding of the registrant's common stock, $0.01 par
value, was 2,700,250 on March 18, 1996.
DOCUMENTS INCORPORATED BY REFERENCE
Specified sections of United Park City Mines Company's 1995 Annual Report to
Stockholders, as described herein, are incorporated by reference in Parts I and
II of this Form 10-KSB. The definitive Proxy Statement for the 1996 Annual
Meeting of Stockholders, which will be filed with the Securities and Exchange
Commission within 120 days after December 31, 1995, is incorporated by reference
in Part III of this Form 10-KSB.
Transitional Small Business Disclosure Format (Check One): Yes . No X .
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Exhibit Index on Page 4
Page 1 of 37
<PAGE>
UNITED PARK CITY MINES COMPANY
FORM 10-KSB ANNUAL REPORT
For the Year Ended December 31, 1995
Page 2
PART I
Item 1. Description of Business
Information concerning the Business of the Registrant is incorporated herein by
reference from pages 2 through 6 of the Registrant's 1995 Annual Report to
Stockholders under the heading "Business and Properties."
Item 2. Description of Property
Information concerning the Properties of the Registrant is incorporated herein
by reference from pages 2 through 6 of the Registrant's 1995 Annual Report to
Stockholders under the heading "Business and Properties."
Item 3. Legal Proceedings
Information concerning the Legal Proceedings of the Registrant is incorporated
herein by reference from pages 6 through 7 of the Registrant's 1995 Annual
Report to Stockholders under the heading "Legal Proceedings."
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Information concerning the Market for the Registrant's Common Equity and Related
Stockholder Matters is incorporated herein by reference from pages 7 through 8
of the Registrant's 1995 Annual Report to Stockholders under the heading "Market
For United Park's Stock."
Item 6. Management's Discussion and Analysis or Plan of Operation
Information concerning Management's Discussion and Analysis of Financial
Condition and Results of Operations is incorporated herein by reference from
pages 8 through 12 of the Registrant's 1995 Annual Report to Stockholders under
the heading "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Item 7. Financial Statements
The consolidated financial statements, notes to consolidated financial
statements, and the report of independent accountants are incorporated herein by
reference from pages F-1 through F-14 of the Registrant's 1995 Annual Report to
Stockholders.
Item 8. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
Not Applicable
<PAGE>
UNITED PARK CITY MINES COMPANY
FORM 10-KSB ANNUAL REPORT
For the Year Ended December 31, 1995
Page 3
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
Information concerning the Directors and Executive Officers of the Registrant is
incorporated herein by reference from page 2 of the Registrant's definitive
Proxy Statement for the 1996 Annual Meeting of Stockholders under the heading
"Proposal #1-To Elect Four Directors to the Board of Directors."
Item 10. Executive Compensation
Information concerning Executive Compensation of the Registrant's executive
officers is incorporated herein by reference from pages 3 through 4 of the
Registrant's definitive Proxy Statement for the 1996 Annual Meeting of
Stockholders under the heading "Executive Compensation."
Item 11. Security Ownership of Certain Beneficial Owners and Management
Information concerning Security Ownership of Certain Beneficial Owners and
Management of the Registrant is incorporated herein by reference from page 5 of
the Registrant's definitive Proxy Statement for the 1996 Annual Meeting of
Stockholders under the heading "Security Ownership of Certain Beneficial Owners
and Management."
Item 12. Certain Relationships and Related Transactions
Not applicable
Item 13. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed with this Form 10-KSB pursuant to
Item 601 of Regulation S-B:
<PAGE>
UNITED PARK CITY MINES COMPANY
FORM 10-KSB ANNUAL REPORT
For the Year Ended December 31, 1995
Page 4
<TABLE>
<CAPTION>
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Reg. S-B Sequential
Reference Page
Number Document Number
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<S> <C> <C>
3.1 Restated Certificate of (1)
Incorporation, as amended by
Certificate of Amendment of Restated
Certificate of Incorporation
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3.2 Amendment to Restated Certificate of (2)
Incorporation filed in Delaware on
December 19, 1990
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3.3 Amendment to Restated Certificate of (5)
Incorporation filed in Delaware on
September 8, 1993
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3.4 Amendment to Restated Certificate of (7)
Incorporation filed in Delaware on
August 25, 1995
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3.5 Bylaws (1)
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10.1 Purchase Agreement dated January 1, (1)
1971 between United Park City Mines
Company and Greater Park City
Company (formerly Treasure Mountain
Resort Company), as amended by First
Amendment to Purchase Agreement
dated June 11, 1971, Second
Amendment to Purchase Agreement
dated March 30, 1972, Third
Amendment to Purchase Agreement
dated April 2, 1975, and Fourth
Amendment to Purchase Agreement
dated July 1, 1975
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10.2 Memorandum of Agreement dated June (1)
23, 1975 among United Park City
Mines Company, Greater Park City
Company, Unionamerica, Inc., Royal
Street Corporation, Morgan Guaranty
Trust Company of New York as
Trustee, The Fidelity Bank as
Trustee, and Alpine Meadows of
Tahoe, Inc.
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10.3 Substituted Escrow Agreement dated (1)
October 11, 1975 among United Park
City Mines Company, Greater Park
City Company, Royal Street Land
Company, Greater Properties, Inc.,
Park Properties, Inc., and First
Security Bank of Utah, as trustee
and escrow agent, as amended by
Amendment to Substituted Escrow
Agreement dated October 1, 1979
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10.4 Acquisition Agreement dated October (1)
11, 1975 between Greater Park City
Company and Royal Street Land Company
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10.5 Resort Area Lease dated January 1, (1)
1971 between United Park City Mines
Company and Greater Park City
Company, as amended by Amendment to
Resort Area Lease dated May 1, 1975
and Second Amendment to Resort Area
Lease dated June 19, 1980, and Third
Amendment to Resort Area Lease dated
December 12, 1980
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10.6 Crescent Ridge Lease dated January (1)
1, 1971 between United Park City
Mines Company and Greater Park City
Company, as amended by Crescent
Ridge Lease dated May 1, 1975
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10.7 Deer Valley Lease dated January 1, (1)
1971 between United Park City Mines
Company and Greater Park City
Company, as amended by Deer Valley
Lease dated May 1, 1975, and
Amendment to Deer Valley Lease dated
May 21, 1979 and Second Amendment to
Deer Valley Lease dated July 31, 1980
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10.8 Water Rights Purchase Agreement (1)
dated January 1, 1971 between United
Park City Mines Company and Greater
Park City Company, as amended by
Amendment to Water Rights Purchase
Agreement dated February 10, 1975
and Second Amendment to Water Rights
Purchase Agreement dated July 1, 1975
- ------------------------------------------------------------------------------
10.9 Settlement Agreement and Release by (4)
and between United Park City Mines
Company, Royal Street Land Company,
Deer Valley Resort Company, Royal
Street of Utah, Royal Street
Development Company, and Wells Fargo
Bank, N.A. dated November 6, 1992
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10.10 Employment Agreement dated June 1, (6)
1994 by and between United Park City
Mines Company and Hank Rothwell
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</TABLE>
<PAGE>
UNITED PARK CITY MINES COMPANY
FORM 10-KSB ANNUAL REPORT
For the Year Ended December 31, 1995
Page 5
<TABLE>
<CAPTION>
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Reg. S-B Sequential
Reference Page
Number Document Number
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<S> <C> <C>
10.11 Incentive Stock Option Agreement (6)
dated June 27, 1994 by and between
United Park City Mines Company and
Hank Rothwell
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10.12 Incentive Stock Option Agreement (6)
dated August 2, 1994 by and between
United Park City Mines Company and
Edwin L. Osika, Jr.
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13.1 United Park City Mines Company's (7)
1995 Annual Report to Stockholders
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22.1 Subsidiaries of the Registrant (8)
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</TABLE>
(1) Incorporated by reference from Amendment Number 1 of the Registrant's
registration statement on Form S-1 filed with the Securities and
Exchange Commission on March 19, 1987 (Registration Number 33-11328)
(2) Incorporated by reference from Amendment Number 1 of the Registrant's
registration statement on Form S-3 filed with the Securities and
Exchange Commission on January 28, 1991 (Registration Number 33-
37914)
(3) Incorporated by reference from the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1989
(4) Incorporated by reference from the Registrant's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1992
(5) Incorporated by reference from Amendment Number 1 of the Registrant's
registration statement on Form S-3 filed with the Securities and
Exchange Commission on October 12, 1993 (Registration Number 33-
67458)
(6) Incorporated by reference from the Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1994
(7) Incorporated by reference from the Registrant's Form 8-K filed with
the Securities and Exchange Commission on September 7, 1995
(b) Reports on Form 8-K:
On September 7, 1995, the Company filed a report on Form 8-K
dated September 6, 1995. The Form 8-K disclosed that the
Company had filed an Amendment to its Restated Certificate
of Incorporation for the purpose of effecting a one-for-
twenty (1:20) reverse stock split of its common stock, and
summarized the transaction.
<PAGE>
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
UNITED PARK CITY MINES COMPANY
(Registrant)
April 8, 1996 s/ Hank Rothwell
- --------------------- ------------------------------------------------
Date Hank Rothwell
President, Chief Executive Officer, and Director
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
SIGNATURE CAPACITY DATE
s/ Alan L. Gordon April 8, 1996
- --------------------------- ---------------
Alan L. Gordon Director Date
s/ Joseph S. Lesser April 8, 1996
- --------------------------- ---------------
Joseph S. Lesser Director Date
s/ Hank Rothwell April 8, 1996
- --------------------------- ---------------
Hank Rothwell President, Chief Executive Officer, Date
and Director
s/ Edwin L. Osika, Jr. April 8, 1996
- --------------------------- ---------------
Edwin L. Osika, Jr. Executive Vice President, Date
Secretary, Treasurer, Chief
Financial Officer, and Director
s/ Dale J. Harrison April 8, 1996
- --------------------------- ---------------
Dale J. Harrison Controller, Chief Accounting Officer Date
<PAGE>
EXHIBIT 13.1
<PAGE>
[ART]
1995
ANNUAL REPORT TO STOCKHOLDERS
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
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<S> <C>
BUSINESS AND PROPERTIES....................................................................... 2
General..................................................................................... 2
Real Estate................................................................................. 2
Mine Maintenance............................................................................ 3
Mine Tour Attraction........................................................................ 5
Title To Properties......................................................................... 5
Resort Agreements........................................................................... 6
Employees................................................................................... 6
LEGAL PROCEEDINGS............................................................................. 7
United States of America v. 106.79 Acres of Land, United Park City Mines Company, et al. ... 7
Charles Frank Gillmor, et al. v. United Park City Mines Company, et al. .................... 7
Steven Megur and Susan Megur v. United Park City Mines Company, et al. ..................... 7
MARKET FOR UNITED PARK CITY MINES COMPANY'S STOCK............................................. 8
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS................................................................................... 9
Liquidity and Capital Resources............................................................. 9
Real Estate Development................................................................... 9
Water..................................................................................... 10
Mine Maintenance.......................................................................... 10
Mine Tour Attraction...................................................................... 11
Resort Litigation......................................................................... 12
Cash Flow................................................................................. 12
Results of Operations....................................................................... 12
1995 Compared with 1994................................................................... 12
Outlook................................................................................... 13
Impact of Recently Issued Accounting Standards.............................................. 13
LIST OF CONSOLIDATED FINANCIAL STATEMENTS..................................................... 14
</TABLE>
<PAGE>
[LOGO OF UNITED PARK CITY MINES COMPANY APPEARS HERE]
MARCH 26, 1996
To Our Stockholders:
I am pleased to report on the continued progress of the Company. During
1995, the Company posted its first profitable year in over a decade. The net
profit for 1995 was $773,276 or $0.28 per share as compared to the net loss of
$702,392 or $0.26 per share for 1994.
United Park City Mines Company and its subsidiary Blue Ledge Corporation
continued to pursue their real estate development and entitlement strategies
during 1995 and were successful on a number of fronts. 1995 saw the completion
of Blue Ledge Corporation's Morning Star Estates subdivision and the
development of Hidden Meadows subdivision. United Park City Mines Company
continues to make progress in the approval process with Park City Municipal
Corporation on the Flagstaff Mountain of Deer Valley project.
By the fall of 1995, the Hidden Meadows subdivision improvements had been
completed and two homes were under construction. Hidden Meadows subdivision is
a 45 lot single-family development that was approved by Park City Municipal
Corporation in 1995. As of this date, sales of twelve of the lots have been
closed and another six lots are under sales contracts and expected to close in
the near future. Blue Ledge Corporation is developing lots or homesites for
sale to buyers interested in building homes on the lots.
Flagstaff Mountain of Deer Valley is a master-planned expansion of the Deer
Valley Ski Resort, where Deer Valley will develop and operate additional ski
terrain, while United Park City Mines Company will develop and sell the real
estate. The project is designed as a mix of single-family, multi-family,
hotel, and commercial ski-in/ski-out, land uses on the mountain. It is
believed that Flagstaff Mountain of Deer Valley will become a significant
development project of the Company. The Company anticipates completing
negotiations for approval of the project during 1996.
Shareholders approved a reverse stock split of the Company's stock during
1995. This one for twenty reverse stock split was completed in the third
quarter of 1995, and resulted in a reduction in the Company's outstanding
stock to just in excess of 2.7 million shares.
In December 1995, the Company's wholly owned subsidiary Park City Silver
Mine Adventure, Inc. opened its mine tour attraction to the public. After a
number of years of planning and over a year in construction and preparation,
the "Silver Mine Adventure" has been very well received. The attraction
combines a tour of a real mine, 1,500 feet underground, with an extensive
group of historical exhibits that tell the story of Park City and its mining
heritage. In addition to the exhibits above ground, the attraction includes
theaters, a gift shop, food concession, and a special events facility. In the
first 90 days of operation, the mine tour attraction has been visited by over
23,000 guests.
In June of 1995, the International Olympic Committee announced that Utah was
selected to be the Host for the 2002 Winter Olympic Games. Most of the skiing
and alpine venues will occur within close proximity to Park City and some of
the events will take place on the Company's property that is leased to the
Park City and Deer Valley Resorts. This international exposure will only add
to the growing tourist economy in Park City. The continued interest in Park
City as a destination resort bodes well for the Company's long-term property
values.
Sincerely,
[SIGNATURE OF HANK ROTHWELL APPEARS HERE]
Hank Rothwell
President and
Chief Executive Officer
P.O. Box 1450, Park City, Utah 84060, (801) 649-8011
<PAGE>
BUSINESS AND PROPERTIES
GENERAL
United Park City Mines Company ("United Park" or "Company") is a Delaware
corporation formed in 1953. United Park's principal business is currently the
lease, development, and sale of real property located in or near Park City,
Utah.
United Park acquired mining properties in the Park City area upon its
formation in 1953. Prior to 1982, United Park's principal business was the
mining of lead, zinc, silver, gold, and copper ores from these properties or
the leasing of these properties to other mine operators. United Park now
conducts no active mining operations and has no agreement to sell or lease its
mining properties. The mining properties are maintained on a stand-by basis.
The Company also performs mine and tunnel maintenance for other entities on a
contract basis.
During 1995, United Park completed construction of a mine tour attraction at
its Ontario Mine facilities near Park City, Utah which opened to the public on
December 15, 1995. The mine tour attraction is operated by the Company's
wholly owned subsidiary Park City Silver Mine Adventure, Inc. and combines an
underground mine tour with extensive historical exhibits that depict the
mining heritage of the Park City area.
United Park also leases land for skiing to the operators of the Park City
Ski Area and the Deer Valley Ski Area.
REAL ESTATE
United Park owns the surface estate to more than 9,000 acres of land. Of this
land, United Park leases to ski resort operators its surface estate to
approximately 5,300 acres for skiing. (See "Resort Agreements.") However,
United Park has the right to sell certain portions of the leased properties,
subject to the lessees' right of first refusal to purchase the properties.
United Park believes that a substantial portion of its land, including land
not subject to lease and land which may become unencumbered by the leases in
the future, may be suitable for resort, residential, commercial, or industrial
development.
During 1992, Blue Ledge Corporation ("Blue Ledge"), a wholly owned
subsidiary of the Company, received approvals for development of twelve single
family estate lots ("Morning Star Estates") on approximately 175 acres of land
located north of the Deer Valley Ski Area near Park City, Utah. Blue Ledge
substantially completed the improvements for the Morning Star Estates
subdivision during 1994 and repaid the financing obligations for the project
in the first quarter of 1994. During 1993, Blue Ledge sold four of the twelve
Morning Star Estates lots, and in 1994, sold another five of the twelve
Morning Star Estates lots. Two lots were sold by Blue Ledge during 1995 and
the remaining one lot was sold during the first quarter of 1996.
In the third quarter of 1995, Blue Ledge also received approval for
annexation and master plan of a proposed single family lot subdivision, Hidden
Meadows, on approximately 258 acres of land adjacent to the Morning Star
Estates subdivision. The Hidden Meadows subdivision is a 45 lot subdivision,
and was substantially developed during 1995. During 1995, Blue Ledge sold
eleven lots in the Hidden Meadows subdivision. Since December 31, 1995, Blue
Ledge has sold one additional lot and has another 6 lots under contract to
close in 1996.
During 1991, the Company entered into a series of transactions involving
water rights. As a result of these transactions, United Park has fully
satisfied its future obligation to dedicate water rights to Park City
Municipal Corporation ("Park City") as a direct or indirect condition of the
annexation to or development in Park City of all of the real property
currently owned by United Park. The Company also received a contract right for
400 acre feet per year of water for snow-making purposes.
On November 6, 1992, United Park entered into a Settlement Agreement and
Release ("Settlement Agreement") with Royal Street Land Company, Deer Valley
Resort Company, Royal Street of Utah, Royal
2
<PAGE>
Street Development Company (collectively "Deer Valley"), and Wells Fargo Bank,
N.A. In the settlement, Deer Valley conveyed its interests in certain water
rights, located in Wasatch and Summit Counties, Utah, to United Park, and
United Park assigned its contract right with Park City for 400 acre feet per
year of snow-making water to Deer Valley. The Settlement Agreement also
provides United Park the opportunity to develop, without the encumbrance of
the Deer Valley Ski Lease, certain parcels of land which are currently subject
to the Deer Valley Ski Lease. The Settlement Agreement further provides Deer
Valley the opportunity to acquire United Park's interest in the surface estate
to the balance of the land within the Deer Valley Ski Lease. Both United
Park's and Deer Valley's opportunities concerning these parcels of land
currently under the Deer Valley Ski Lease are contingent upon master plan
approval by Park City and acceptance of the master plan by United Park. During
1993, the Company actively worked on the design of a real estate development
project on Flagstaff Mountain in Deer Valley. The Company requested annexation
and master plan approval for the project during 1994. Park City is currently
reviewing the Company's request for annexation and master plan approval and it
is anticipated that Park City's review will be completed during 1996.
Some of the factors that influence the development of the Company's real
estate include competition, cooperative agreements with other parties,
governmental approvals, master plans, engineering, installation of utility
service, and financing. The Company also faces competition in its real estate
development activities from developers that have completed and are currently
marketing other development projects in the Park City area. The market for
developed real estate in the Park City area is also subject to seasonal
fluctuations, with most sales occurring during the ski season from December
through March of each year. The Company believes that the quantity and variety
of its real estate holdings, which may be suitable for resort, residential,
industrial or commercial uses, gives the Company a competitive advantage and
the ability to adapt to changing market conditions. During the past several
years, the Company has occasionally sold small parcels of land outside of
United Park's development areas, as opportunities were available.
The real estate market in the Park City area has improved over the last
several years. The International Olympic Committee ("IOC") chose the Salt Lake
City metropolitan area, including Park City, to host the 2002 Winter Olympic
Games. The Company believes that the national exposure of the Park City area
during the 2002 Winter Olympic Games will favorably impact real estate values.
MINE MAINTENANCE
United Park owns the mineral estate to more than 13,400 acres of land
principally located near or in Park City, Utah, with the exception of 21 acres
of patented mining claims located in Beaver County, Utah. United Park's total
mining properties consist of more than 10,500 acres of patented (fee title)
mining claims, together with an additional 2,726 acres of fee lands and 201
acres of unpatented mining claims. Portions of the surface estate of these
properties have been sold; however, United Park has retained the surface
estate to more than 9,000 acres, which was described under "Real Estate."
The Company owns several underground mines, most of which are interconnected
via underground tunnels and shafts. United Park's mining properties have not
been operated since 1982, but are maintained on a stand-by basis. The Ontario
Mine serves as United Park's primary facility for its maintenance activities;
however, the Company also maintains facilities at several other locations.
United Park has seven principal shafts and five adits suitable for drainage,
ventilation, and transportation as well as numerous drifts, raises,
underground workings, and facilities on the surface of its properties. The
maintenance activities on a number of these shafts and adits are undertaken to
provide that all types of equipment are in adequate condition, that
underground transportation and ventilation systems are adequate, and that the
Company is in compliance with its governmental permits and regulations.
The costs associated with maintaining and holding the Company's mining
properties include, but are not limited to, costs for water treatment and
pumping, tunnel maintenance, security, equipment and building maintenance,
utilities, fuel, payroll, insurance, property taxes, other taxes, and
compliance with various governmental regulations.
3
<PAGE>
The Company, from time to time, performs tunnel maintenance and repair work
for other entities on a contract basis. United Park performs work for Park
City in the Judge Tunnel and the Spiro Tunnel. The Company anticipates further
contract work in 1996.
The water which is discharged from the Ontario Mine is subject to a Utah
Pollutant Discharge Elimination System ("UPDES") permit issued by the Division
of Water Quality, Utah Department of Environmental Quality, with oversight by
the U. S. Environmental Protection Agency ("EPA"). This permit sets
limitations on the concentrations of various metals allowed in the water
before the water can be released into the environment. To comply with the
UPDES permit, the Company must monitor the concentrations of various metals in
the water flowing from the mine and treat the water before it is released. The
Company maintains a water treatment facility at its Keetley plant for this
purpose.
United Park remains in compliance under its environmental and regulatory
permits issued by various governmental agencies. A portion of United Park's
mining property, known as "Richardson Flat Tailings," which the Company
monitors under its UPDES permit, has been subject to testing and evaluation by
the EPA under the National Contingency Plan pursuant to the Comprehensive
Environmental Response, Compensation, and Liability Act ("CERCLA"). On June
24, 1988, by notice published in the Federal Register, the EPA proposed that
the Richardson Flat Tailings site be added to the EPA's National Priorities
List ("NPL"), the EPA's listing of national priority hazardous waste sites.
United Park submitted written comments opposing the listing of the Richardson
Flat Tailings site on a number of procedural and substantive grounds. In a
final rule published February 11, 1991, in the Federal Register, and effective
as of March 13, 1991, the EPA announced that the Richardson Flat Tailings site
would not be listed on the NPL. The EPA withdrew the Richardson Flat Tailings
site from the EPA's previous proposal for listing on the NPL because, based on
information then available to the EPA, the site scored below the regulatory
cut-off for listing.
On February 7, 1992, by notice published in the Federal Register, the EPA
again proposed that the Richardson Flat Tailings site be added to the NPL. In
April 1992, the Company submitted written comments opposing the listing on a
number of procedural and substantive grounds. As of this date, the EPA has
neither responded to United Park's comments nor finalized its proposal to list
the site on the NPL.
The NPL has been established by the EPA under CERCLA to identify, inventory,
and prioritize sites which warrant further investigation to assess the nature
and extent of any public health and environmental risks associated with the
site and to determine what remedial action, if any, may be appropriate.
Inclusion of a site on the NPL does not establish that the EPA will
necessarily require remedial action for the site. Listing on the NPL does not
establish that any remedial action by the EPA or any private party is
necessary nor does listing determine any liability for the cost of any
remediation at the site. The EPA, United Park, and/or other potentially
responsible parties may perform more detailed studies at the site to determine
what response, if any, is necessary.
Numerous mining properties throughout the United States owned by other
entities are currently proposed for listing or are listed on the NPL. As a
result of the EPA's evaluation of the Richardson Flat Tailings site, United
Park may be advised to continue its current environmental monitoring and
practices at the site under its UPDES permit, or the Company may be required
to undertake additional stabilization or remediation activities on this
portion of its mining property to comply with the standards for disposal of
mining wastes under CERCLA. In 1983, United Park began a containment program,
which is now substantially complete, to cover the Richardson Flat Tailings
area with topsoil and seed the site for vegetation. Management is not now able
to accurately predict whether the Richardson Flat Tailings site will be listed
on the NPL and, if it is listed, whether further remedial actions will be
required.
United Park is unable to predict when, if ever, it will be economically
feasible for United Park or another company to resume mining operations. The
economic feasibility of resuming mining operations will depend upon, among
other things, an increase in metals prices and the resolution of technical
problems such as
4
<PAGE>
groundwater problems and certain milling applications. The Company cannot
currently predict the metals prices which would allow for economic mining
operations. If the Company or another operator resumes active mining
operations on the properties, it would be necessary to update or acquire
certain additional permits, licenses or approvals from the appropriate
governmental agencies.
The resumption of mining operations may also be hindered by the construction
of the Jordanelle Dam and Reservoir in the Bonneville Unit of the Central Utah
Project ("CUP"). The Jordanelle Reservoir will cover only minor portions of
United Park's mining properties, but it could cause United Park's mines to be
inundated by the impounded water seeping underground through existing faults
and fissures. This underground seepage would exacerbate the current problems
caused by groundwater in the mines, such as the necessity of pumping and
treating all discharged waters and dewatering additional portions of the mines
before mining operations could be resumed. The United States Department of
Interior, Bureau of Reclamation ("BOR") began construction of the Jordanelle
Dam in 1987 and began filling the Jordanelle Reservoir in 1993. The reservoir
is scheduled to be filled in 1997. Since 1979, the Company has continually
provided BOR and other government agencies with oral and written comments
concerning the impact of the Jordanelle Dam on the Company's mining
properties. The Company established a system to monitor water flows in its
mines. This monitoring system is currently providing data which is being
analyzed. The Company intends to continue to pursue the administrative and
legal remedies currently available to it and such other appropriate remedies
in the future as may be necessary to protect the Company's property rights.
United Park's wholly owned subsidiary The Weber Coal Company ("Weber Coal")
owns approximately 811 acres of fee land located east of Coalville, Utah.
Historically, Weber Coal was a coal producer but the mines were plugged and
abandoned in the 1950's. Pursuant to prior leases for oil and gas development,
which have all now expired by their own terms, an oil and gas exploratory well
was drilled on this land in 1979 to a depth of 17,954 feet. Although this well
was later abandoned for lack of production, Weber Coal does not believe the
oil and gas potential of these lands was adequately tested because of the
substantial subsurface deviation of this wellbore from the targeted formation.
Weber Coal does not currently have any plans for additional exploration or
development of these oil and gas properties. Weber Coal has leased the surface
of its properties for grazing and permits natural gas to be stored under the
surface, but does not receive material revenue from these activities.
MINE TOUR ATTRACTION
During the first quarter of 1995, the Company determined that a mine tour
attraction developed in some of its mining facilities would be feasible and
proceeded with an outside consultant to finalize the design and implement
construction of the project. The mine tour attraction is located at the
Ontario Mine and includes history and mining exhibits, multi-media
presentations, computer interactive programs, dioramas, a theater, and
pictorial displays, along with a gift shop and a food concession. The primary
attraction is an underground tour of a part of the Company's Ontario Mine. As
part of this attraction, guests descend 1,500 feet into the Ontario Mine, ride
a specially designed mine train through mine tunnels, view mine equipment from
several different eras, and observe a multi-media presentation. The mine tour
attraction is operated by the Company's wholly owned subsidiary Park City
Silver Mine Adventure, Inc. and has been well received by the public. The mine
tour attraction was opened to the public on December 15, 1995.
TITLE TO PROPERTIES
United Park has obtained certified abstracts of title on virtually all of
its patented mining claims and fee lands. In general, these abstracts contain
all recorded documents appearing in the chain of title to the particular
property from the original notice of location or patent through the conveyance
into United Park. With respect to fee properties acquired during the past 20
years, however, the seller has generally provided United Park a policy of
title insurance. Although United Park has generally not obtained title
opinions from independent legal counsel or policies of title insurance on its
properties, management has satisfied itself as to title matters either by in-
house reviews of abstracts by Company personnel or by purchasing policies of
title insurance on selected properties on an "as sold" or "as needed" basis.
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United Park's unpatented, lode mining claims are generally located on small
"open" areas between its patented mining claims. Under applicable law, United
Park does not hold fee title to these unpatented claims, as is the case with
its patented mining claims, but rather holds equitable and beneficial title to
the mineral estate subject to the paramount title of the United States and to
the requirements of maintaining the claims imposed by applicable federal and
state laws and regulations. United Park maintains files for each of these
unpatented, lode mining claims documenting its compliance with these
requirements for the location and maintenance of the unpatented claims. The
claim files have been reviewed by Company personnel for completeness and
compliance, but no title opinions have been obtained on these properties from
independent legal counsel. Policies of title insurance generally are not
available for unpatented mining claims prior to the time a patent conveying
fee title to the claim is issued by the United States.
Although it has not conducted an examination of the public records affecting
its properties and has not obtained title opinions or policies of title
insurance covering all of its properties, United Park is not aware of any
encumbrances, other than utility and access easements or rights of way, placed
upon the properties by United Park or otherwise affecting the properties.
RESORT AGREEMENTS
From 1963 to 1971, United Park operated a ski resort in Park City, Utah, on
the surface of portions of its properties not used in connection with its
mining operations. Effective January 1, 1971, United Park entered into certain
interrelated agreements ("Resort Agreements") whereby United Park agreed to
sell and lease its ski resort properties to Treasure Mountain Resort Company,
which later changed its name to Greater Park City Company ("GPCC"). The Resort
Agreements were amended in 1975 and were subject to litigation which commenced
in 1986 and was settled on November 13, 1995.
As part of the Resort Agreements, the Water Rights Purchase Agreement, dated
January 1, 1971, as amended, provided for the sale of certain water rights by
United Park to GPCC, and United Park perpetually reserved to itself, from some
of the water rights which it sold to GPCC, the right to use the first 2,850
gallons of water per minute for mining, milling, and related purposes.
In addition, United Park entered into three leases with GPCC. These leases
have been amended from time to time. The leases, which together cover the
surface of approximately 5,300 acres of land, permit the operation of ski
lifts and ski runs on the leased land. The term of each lease has been
extended to April 30, 2011 by notice to the Company. The lessees have the
right to extend each lease for two additional periods of 20 years each.
Certain portions of the Company's surface interest in the property subject to
the leases may be sold by United Park subject to the lessee's right of first
refusal. Under the extension provisions, the leases require the lessees to pay
rent to United Park annually at the greater of $0.50 per acre per year or (a)
1.0% of the first $100,000 of gross lift revenue, plus 0.5% of gross lift
revenue in excess of $100,000, annually through the fiscal year ending April,
2011; (b) 2.0% of the first $100,000 of gross lift revenue, plus 1.0% of gross
lift revenue in excess of $100,000, annually for fiscal years 2012 through
2031; and (c) 3.0% of the first $100,000 of gross lift revenue, plus 1.5% of
gross lift revenue in excess of $100,000, annually for fiscal years 2032
through 2051. The Deer Valley and Park City resort operators paid United Park
for the 1993-94 ski season a total of $129,032, and for the 94-95 ski season,
a total of $148,875.
EMPLOYEES
United Park and its subsidiary Park City Silver Mine Adventure, Inc. employ
a total of thirty-three full- time employees in their operations. United Park
maintains a staff of nine full-time salaried employees in the Ontario #3
office. In addition, United Park maintains a staff of three full-time salaried
employees and sixteen full-time hourly employees, each of whom is an
experienced underground miner, for its mine maintenance operations. Park City
Silver Mine Adventure, Inc. maintains a staff of five full-time employees and
an average of thirty part-time leased employees.
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LEGAL PROCEEDINGS
As of March 26, 1996, United Park was a party to the following legal
proceedings:
UNITED STATES OF AMERICA V. 106.79 ACRES OF LAND, UNITED PARK CITY
MINES COMPANY, ET AL.
Civil No. 88-C-0231W, United States District Court for the District of
Utah
In March 1988, the United States of America filed a complaint in
condemnation against United Park in order to take properties under power of
eminent domain for the Jordanelle Dam and Reservoir and for relocation of
highways in connection with the construction of the Jordanelle Dam and
Reservoir. United Park has filed an answer to the complaint in condemnation in
order to protect its rights and obtain just compensation. As a condition to
the exercise of the power of eminent domain, the United States deposited
$460,850 with the Registry of the court for the use and benefit of the
landowner. Pursuant to a stipulation of the parties and order of the court,
the deposited $460,850 and accrued interest was distributed to United Park;
however, the stipulation and order provide that none of United Park's defenses
raised in its answer are waived by its receipt of the deposited funds. When a
final judgment is entered in this condemnation case, the final compensation
awarded to United Park may be adjusted.
CHARLES FRANK GILLMOR, ET AL. V. UNITED PARK CITY MINES COMPANY, ET AL.
Civil No. 94-030-0087QT, Third Judicial District Court, Summit County,
Utah
In the third quarter of 1994, Charles Frank Gillmor and Nadine Gillmor
("Gillmors") filed a complaint in an action to quiet title against United
Park, Blue Ledge, and others, as defendants, in which the Gillmors claimed an
interest in a number of properties, including a prescriptive easement over,
and title to, a portion of Lot 1 of the Morning Star Estates subdivision, a
prescriptive easement over another parcel of property owned by Blue Ledge, and
title by adverse possession to the surface estate of portions of property
owned by Blue Ledge. After the death of Charles Frank Gillmor, Nadine Gillmor
("Gillmor") filed numerous amendments to the Gillmor complaint, and United
Park and Blue Ledge responded to the amended complaint by filing an answer
denying Gillmor's claims. Blue Ledge also filed a counterclaim against Gillmor
for causes of action to: (1) quiet title in the name of Blue Ledge to the
surface estate of those portions of the property to which Gillmor has filed a
claim; (2) declare that Gillmor has no right, title or interest in or to any
portion of the real property comprising the Morning Star Estates subdivision
as recorded on the subdivision plat with Summit County, Utah; and (3) declare
that Gillmor has no right to an easement across Lot 1 of the Morning Star
Estates subdivision, Summit County, Utah.
As of March 25, 1996, the court dismissed with prejudice Gillmor's claims to
various easements and any ownership interest in the Morning Star Estates
subdivision, and Blue Ledge's counterclaims against Gillmor regarding
Gillmor's claim to an easement across, and ownership interest in, the Morning
Star Estates subdivision. Therefore, Gillmor's sole remaining claim and Blue
Ledge's sole remaining counterclaim in this lawsuit concern the ownership of
the surface estate of certain portions of property.
STEVEN MEGUR AND SUSAN MEGUR V. UNITED PARK CITY MINES COMPANY, BLUE
LEDGE CORPORATION, ET AL.
Civil No. 94-C-1026B, United States District Court for the District of
Utah
On October 26, 1994, Steven and Susan Megur ("Megurs") filed a complaint
against United Park, Blue Ledge, Coleman Land Company, Inc., and others, as
defendants, in which the Megurs claim United Park and Blue Ledge committed
fraud against Megurs by reason of the prescriptive easement previously claimed
by the Gillmors across Lot 1 of the Morning Star Estates subdivision. The
Megurs also claim negligent misrepresentation against Coleman Land Company,
Inc., the real estate listing agent for Blue Ledge in the Morning Star Estates
subdivision, and against United Park and Blue Ledge, by reason of the
prescriptive easement previously claimed by the Gillmors across Lot 1. Susan
Megur purchased Lot 1 of the Morning Star Estates subdivision from Blue Ledge.
The Megurs seek damages against all of the defendants in the amount of
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$937,838 general damages and $3,000,000 punitive damages. In their answers,
United Park, Blue Ledge and the Coleman Land Company, Inc. have denied the
claims made by the Megurs. The case is set for trial in September, 1996. Based
upon review of the facts to date, management and its legal counsel do not
believe there is a significant likelihood of an unfavorable outcome to this
litigation for United Park and Blue Ledge.
MARKET FOR UNITED PARK'S STOCK
The common stock of United Park City Mines Company, $.01 par value, is
traded on the New York Stock Exchange under the symbol "UPK." As of March 18,
1996, United Park had 2,700,250 outstanding shares of common stock held by
approximately 1,120 stockholders of record. During the third quarter of 1995,
United Park conducted a reverse stock split and, prior to conducting the
reverse stock split, had 54,006,503 shares of common stock outstanding during
the first two quarters of 1995 and all of 1994. The following table sets forth
the high and low sales price for United Park's common stock during the last
two years, as reported in the consolidated transaction reporting system and as
adjusted for the reverse stock split.
<TABLE>
<CAPTION>
1995 1994
--------------- --------------
HIGH LOW HIGH LOW
------- ------- ------- ------
<S> <C> <C> <C> <C>
First Quarter............................... $ 7.500 $ 7.500 $10.000 $7.500
Second Quarter.............................. $22.500 $ 7.500 $10.000 $7.500
Third Quarter............................... $16.000 $11.260 $ 7.500 $7.500
Fourth Quarter.............................. $14.500 $ 6.125 $ 7.500 $5.000
</TABLE>
Since its incorporation, United Park has not paid a dividend on its common
stock and it does not expect to pay a dividend in the near future.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Real Estate Development
Blue Ledge developed approximately 175 acres of land located north of the
Deer Valley Ski Area near Park City, Utah during 1993. This land was
subdivided into twelve single family estate lots ("Morning Star Estates") and
annexed into the city of Park City. During 1994, Blue Ledge sold five of the
twelve lots within the Morning Star Estates subdivision and in 1995, sold an
additional two lots within the subdivision. Four lots were sold in a previous
year. The sales totaled $1,550,000 in 1995 and $2,030,000 in 1994. Selling
expenses and commissions in 1995 totaled $129,170 and in 1994 totaled
$136,739. Deferred development costs of $810,674 and $896,181 were allocated
to lot sales in 1995 and 1994, respectively. Therefore, Blue Ledge recognized
profit of $610,156 in 1995 and $997,080 in 1994. The majority of the cash
generated from these sales was used to pay for subdivision improvements on
this and other developments. At December 31, 1995, there were total deferred
development costs of $209,206 remaining for Morning Star Estates subdivision.
The remaining one lot was sold for $387,000 during February 1996.
During 1995, Blue Ledge developed a 258 acre parcel of land adjacent to the
Morning Star Estates subdivision. This project is known as Hidden Meadows and
includes forty-five improved building lots. Blue Ledge sold eleven lots in the
Hidden Meadows subdivision for $2,809,600 during 1995 and received deposits of
$103,000 on contracts to purchase three additional lots. Selling expenses and
commissions totaled $213,667. The estimated total cost of the Hidden Meadows
subdivision is approximately $4,690,000, including land costs of $1,037,000,
and of that figure, $1,231,768 was allocated to lot sales in 1995. Through
December 31, 1995, substantially all such costs had been incurred and paid.
The Company recognized profit from Hidden Meadows lot sales of $1,364,165 in
1995. Proceeds from these sales were used to pay for subdivision improvements,
repay loans which financed the improvements and fund operations.
In July 1995, Blue Ledge obtained financing from a local bank totaling
$5,576,483, consisting of a development loan of $3,154,260 and two standby
letters of credit totalling $2,422,223 for the Hidden Meadows project. The
loan matures and is payable in full on July 13, 1996 and the letters of credit
expire on January 1, 1997. $2,550,615 was drawn against the loan during 1995
and interest on the outstanding balance is paid monthly. The interest rate on
the loan is 1 1/2 percent above the bank's prime lending rate (8 1/2% at
December 31, 1995). Principal payments made by Blue Ledge from the proceeds
from the lot sales totaled $2,251,700 leaving an unpaid principal balance of
$298,915 on the loan at December 31, 1995. The loan is collateralized by the
land and improvements of the Hidden Meadows subdivision. Blue Ledge is
actively marketing the remaining thirty-one Hidden Meadows lots at prices
ranging from $125,000 to $400,000 and expects to sell fifteen lots in 1996.
Blue Ledge obtained an additional $1,000,000 loan from the same bank in
December, 1995. At December 31, 1995, no funds had been drawn against this
loan. Borrowings will bear interest at 1 1/2 percent over the bank's prime
lending rate (8.5% at December 31, 1995) and will be collateralized by the
remaining land and improvements of the Hidden Meadows development. This loan
will be due December 1, 1996 and will be used to fund operations and
developments as needed.
Pursuant to the terms of an agreement dated November 6, 1992, between United
Park and Royal Street Land Company, Deer Valley Resort Company, Royal Street
of Utah, Royal Street Development Company (collectively "Deer Valley"), and
Wells Fargo Bank, N.A., United Park has the opportunity to develop, without
the encumbrance of the Deer Valley Ski Lease, certain parcels of land which
are currently subject to the Deer Valley Ski Lease. The agreement further
provides Deer Valley the opportunity to acquire United Park's interest in the
surface estate to the balance of the land within the Deer Valley Ski Lease.
Both United Park's and Deer Valley's opportunities concerning these parcels of
land currently under the Deer Valley Ski Lease are contingent upon master plan
approval by Park City and acceptance of the master plan by United Park.
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<PAGE>
If Park City does not approve the master plan or if the Company does not
accept the master plan, the land within the Deer Valley Ski Lease will remain
encumbered by the Deer Valley Ski Lease. If master plan approval is obtained
and accepted, the Deer Valley Ski Lease will be terminated. The Company could
then proceed to develop those certain parcels of land which were formerly
encumbered by the Deer Valley Ski Lease and would convey the balance of the
surface estate of the land formerly encumbered by the Deer Valley Ski Lease to
Deer Valley. With the appropriate approvals, the positive impact upon the
Company's real estate development could be substantial.
The Company has also examined several of its other real estate parcels and
believes that economic real estate development potential exists on these
properties, if the necessary agreements and approvals are obtained. The
Company will continue to pursue development of these properties as the
opportunities arise.
While the Board of Directors is of the opinion that the current value of the
Company's real property is in excess of its book value, the Board of Directors
believes that by holding the property for future sale or development, the
property's value will increase as the real estate market continues to improve
in the Park City area and funds are more readily available to finance real
estate development. Management believes that the recorded costs associated
with land and real estate on the balance sheet will be recoverable through the
sale and development of the related properties.
Water
Prior to 1974, the Company was involved in extensive litigation with Salt
Lake City Municipal Corporation regarding ownership of the water rights to
certain water emanating from the Spiro Tunnel, a tunnel in the Park City area
which is owned by the Company. Under a settlement agreement dated March 20,
1974, the Company received, among other things, a right of first refusal to
purchase surplus water from Salt Lake City Municipal Corporation's water right
in the Spiro Tunnel. On December 6, 1991, United Park exercised its right of
first refusal to purchase 1,000 acre-feet of surplus water from Salt Lake City
Municipal Corporation's water right in the Spiro Tunnel on the same terms and
conditions as such surplus water was offered by Salt Lake City Municipal
Corporation to Park City in an October 8, 1991 Water Supply Agreement.
In an agreement dated January 23, 1992, United Park assigned its right of
first refusal as to the October 8, 1991 Water Supply Agreement to Park City.
United Park also agreed that in the event it acquires rights in water of the
Spiro Tunnel now owned by Salt Lake City Municipal Corporation, Park City
shall have the first right to acquire those rights under terms and conditions
specified in the agreement. In the agreement, Park City accepted these rights
from United Park as full satisfaction of United Park's obligation to dedicate
water rights to Park City as a direct or indirect condition of the annexation
to or development in Park City of all of the real property currently owned by
United Park. The Company believes that the elimination of the obligation to
dedicate water rights to Park City as a condition for development of the
Company's land in Park City has enhanced the Company's ability to proceed with
development of its real estate.
In the second quarter of 1995, the Company finalized a settlement with a
third party regarding shared costs for tunnel maintenance work which the
Company had performed. The Company received water rights with a market value
of at least $400,000 which the Company will utilize in future operations, and
$350,000 in cash which the Company has used in its operations. The water
rights are reflected on the Company's Consolidated Balance Sheet as "Water
rights." The total settlement amount of $750,000 was recorded as "Other"
revenue on the Company's Consolidated Statement of Operations.
Mine Maintenance
In 1991, the Company entered into an agreement with Park City to perform
tunnel maintenance work in the Spiro Tunnel and the Judge Tunnel, tunnels
which supply some of Park City's culinary water. This contract provided
revenue of $116,862 during 1995 and $113,101 during 1994. Additional work will
be performed in the
10
<PAGE>
tunnels during 1996. The work involves reinforcement of the tunnels to avoid
possible cave-ins which may restrict the flow of water.
The Company incurs direct costs associated with maintaining and holding the
Company's mining properties. These costs include, but are not limited to,
costs for water treatment and pumping, tunnel maintenance, security, equipment
and building maintenance, utilities, fuel, payroll, insurance, property taxes,
other taxes, and compliance with various regulations. Due to intensified
efforts in its tunnel maintenance activities, the Company expended $1,030,289
in its mine maintenance activities during 1995 and $1,144,401 during 1994.
On February 7, 1992, the United States Environmental Protection Agency
("EPA") again proposed the listing of the Richardson Flat Tailings site, a
portion of which is owned by United Park, for the National Priorities List
("NPL"). See "Business and Properties--Mine Maintenance" for a complete
description of the proposed listing. This site was previously proposed for the
NPL on June 24, 1988, and the site was dropped from consideration for the NPL
on February 11, 1991, in response to the comments submitted by United Park. In
April 1992, the Company submitted written comments opposing the EPA's listing
on a number of substantive and procedural grounds. The EPA has neither
responded to United Park's comments nor finalized its proposal to list the
site. Inclusion of a site on the NPL does not establish that the EPA will
necessarily require remedial action for the site. Listing on the NPL does not
establish that any remedial action by the EPA or any private party is
necessary nor does listing determine any liability for the cost of any
remediation at the site. Based upon the facts and information available,
management and its legal counsel believe the possibility of a material
liability to the Company resulting from this proposed listing is remote. The
EPA, United Park, and/or other potentially responsible parties may perform
more detailed studies at the site to determine what remediation, if any, is
necessary. Management is not now able to predict whether the Richardson Flat
Tailings site will be listed on the NPL and, if it is listed, whether
additional studies at the site will be necessary and, if those additional
studies are performed, whether remedial actions will be required. Should
substantial remediation be required at the site and should United Park be
designated a potentially responsible party and it is determined that United
Park is a responsible party liable for remediation, those costs could be
substantial to the Company.
As United Park currently conducts its mine maintenance operations and under
current reclamation statutes and regulations, United Park is not liable for
reclamation costs associated with its mining properties. However, if United
Park ever elects to cease its mine maintenance operations, the Company may
choose to permanently restrict access to its mines. If management chooses to
perform certain elective reclamation of its surface areas disturbed by past
mining operations, management believes that such reclamation and access
restriction costs would be minimal.
The Company established a system of monitoring water flows in the Company's
mines to gather data on water flows before the Jordanelle Reservoir began to
fill, while the reservoir is filling, and after the Jordanelle Reservoir is
completely filled. See "Business and Properties--Mine Maintenance" for a
complete discussion of the Jordanelle Dam project. The Company believes that
its mines may be inundated by the impounded water in the Jordanelle Reservoir
seeping underground through existing faults and fissures. This underground
seepage may necessitate additional pumping and water treatment costs. The
potential flooding of the mines may also impact the economic feasibility of
future mining operation or activities. The Company intends to pursue the
administrative and legal remedies available to it and such other remedies as
may be necessary to protect its property rights.
Mine Tour Attraction
The Company finalized the design and completed construction of the mine tour
attraction during 1995. The mine tour attraction, known as Park City Silver
Mine Adventure, is located at the Ontario Mine and operated by the Company's
wholly owned subsidiary Park City Silver Mine Adventure, Inc. The project
included the remodeling and renovation of more than 30,000 square feet of
building space above ground and the construction in that building of history
and mining exhibits, multi-media presentations, computer interactive programs,
dioramas, a theater, and pictorial displays, along with a gift shop and a food
concession. The project also
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<PAGE>
included construction underground which consisted of rehabilitation of shafts
and tunnels along with the constuction of specially designed cages, a mine
train, exhibits and a multi-media presentation. The Company capitalized a
total of $4,402,901 in connection with the development and construction of the
mine tour attraction.
Resort Litigation
On November 13, 1995, a Stipulation and Motion for Dismissal With Prejudice
was entered into in order to obtain an Order dismissing all remaining claims
in United Park City Mines Company v. Greater Park City Company, et al., Civil
No. C86-3347, Third Judicial District Court, Salt Lake County, Utah. An Order
of Dismissal With Prejudice disposing of all remaining claims was signed by
the Court and also filed on November 13, 1995, thereby finally terminating all
of the remaining aspects of this litigation. Consequently, the Company does
not anticipate legal fees in connection with this litigation during 1996.
Cash Flow
The Company's Consolidated Statement of Cash Flows shows net cash used by
operating activities of $385,918 during 1995. In 1995, the Company used
existing cash balances and some of the proceeds from the sale of lots to fund
its operations.
The Company's Consolidated Statement of Cash Flows indicates net cash used
by operating activities of $702,160 during 1994. In 1994, the Company used
existing cash balances and some of the proceeds from a rights offering to fund
its operations.
The Company's cash position decreased by $3,072,870 during 1995. The Company
used funds from its cash balances to fund the development and construction of
its mine tour attraction and also used lot sales and loans to finance
development of its real estate projects. Of the total loan proceeds of
$2,550,615, all but $298,915 was repaid during 1995 using proceeds from lot
sales. The Company spent $2,702,520 on real estate development and $2,985,867
on capital expenditures in 1995 and does not expect similar levels of capital
activity in 1996 because Hidden Meadows is fully developed and no other
projects have yet been approved.
RESULTS OF OPERATIONS
1995 Compared with 1994
Revenue in 1995 totaled $5,638,562, an increase of 97% over 1994 revenues.
The increase in revenues is primarily the result of increased lot sales in
Blue Ledge's real estate development projects, Hidden Meadows and Morning Star
Estates, and the settlement with a third party regarding shared costs for
tunnel maintenance work which United Park had performed.
During 1994, Blue Ledge sold five of the twelve Morning Star Estates lots
and in 1995, sold another two of the twelve Morning Star Estates lots. Blue
Ledge recognized a profit of $997,080 or 49% on gross sales of $2,030,000 in
1994 and recognized a profit of $610,156 or 39% on gross sales of $1,550,000,
in 1995. The lower gross profit percentage in 1995 is the result of increased
costs associated with holding the lots. These sales accounted for 71% of the
Company's total revenue during 1994 and 27% of the Company's total revenue
during 1995.
Blue Ledge sold eleven lots in the Hidden Meadows subdivision and recognized
a profit of $1,364,165 or 49% on gross sales of $2,809,600 during 1995. These
sales accounted for 50% of the Company's total revenue for 1995. Blue Ledge
did not sell any Hidden Meadows lots in 1994.
The Company experienced a net loss of $702,392 for 1994 and a net income of
$773,276 for 1995. The net income is primarily the result of increased lot
sales, a settlement with a third party regarding shared costs for tunnel
maintenance work which United Park had performed and the effect of recognition
of the net change in the valuation allowance regarding the recognition of the
expected utilization of net operating loss carryforwards.
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During December 1995, Park City Silver Mine Adventure, Inc. received $81,029
in revenues and experienced $231,219 in operating expenditures. These revenues
were for only fifteen days of operations and the expenses reflect some one-
time/non-recurring marketing costs not anticipated to continue.
The Company sold one parcel of land outside of its development areas during
1994 for a total of $400,000. Land cost of $86,200 was allocated to this sale
based upon the relative fair value of this parcel in relation to all other
lands owned by the Company. Other costs of $6,813 were incurred for this sale.
No such sale was transacted during 1995.
General and administrative expense increased 25% during 1995 when compared
with 1994. The increase is primarily due to costs associated with increased
staff and wages for various projects, costs associated with operating the
Company's corporate offices in Park City, Utah and increased insurance costs
primarily related to the mine tour attraction.
The Company experienced an increase of 62% in legal fees for the Resort
Litigation in 1995 in order to respond to the Counterclaim and Motion for
Sanctions filed by GPCC, and to file an Amended Complaint and a Stipulation
and Motion for Dismissal With Prejudice in order to finally dispose of all of
the remaining aspects of this litigation.
Outlook
The Company believes that its existing capital resources and cash flows from
operations are sufficient to meet its anticipated capital and operating
requirments for 1996.
The Company expects that its wholly owned subsidiary Park City Silver Mine
Adventure, Inc. will cover the direct costs of its operations in 1996 and add
to the Company's cash flows in the future.
The Company believes that it will continue to incur development costs in
gaining approval for its Flagstaff Mountain of Deer Valley project and expects
to continue funding those costs through its cash flows. As development
opportunities with other parcels of the Company's real estate arise, the
Company intends to pursue those opportunities and will fund such development
through its cash flows and borrowings.
Blue Ledge anticipates completing fifteen sales of building lots in the
Hidden Meadows subdivision during 1996. As the development of the subdivision
is substantially complete, Blue Ledge does not expect to incur substantial
additional costs with this development. During the first quarter of 1996, Blue
Ledge has an additional three lots under contract to sell and expects to close
those lots in the near future.
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS
During 1995, the Company completed the construction of the mine tour
attraction at a total cost of $4.4 million, which utilizes portions of the
existing mine shaft, buildings and equipment. With the establishment of this
mine tour attraction in 1995, the Company assesses recoverability of the
remaining net book value of mine related assets based principally on the
future net tour attraction revenues. Based on the Company's assessment of
anticipated net revenues from the mine tour attraction, there does not appear
to be any impairment of the mine and mine tour attraction net assets.
Additionally, the Company expects the future net revenues from real estate
sales to be in excess of the net carrying amount of land and land development
costs. Therefore, the Company does not anticipate a material impact to the
Company's financial statements when Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to be Disposed Of" is adopted effective January 1, 1996.
13
<PAGE>
LIST OF CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants......................................... F-1
Consolidated Financial Statements:
Consolidated Balance Sheet, December 31, 1995........................... F-2
Consolidated Statements of Operations for the years ended December 31,
1995 and 1994.......................................................... F-4
Consolidated Statements of Changes in Stockholders' Equity for the years
ended December 31, 1995 and 1994....................................... F-5
Consolidated Statements of Cash Flows for the years ended December 31,
1995 and 1994.......................................................... F-6
Notes to Consolidated Financial Statements.............................. F-7
</TABLE>
14
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of United Park City Mines Company:
We have audited the consolidated financial statements of United Park City
Mines Company and Subsidiaries, as listed on the index on page 14 of this
report. 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 in accordance with generally accepted auditing
standards. 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 disclosure in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of United Park
City Mines Company and Subsidiaries as of December 31, 1995 and the
consolidated results of their operations and their cash flows for the years
ended December 31, 1995 and 1994 in conformity with generally accepted
accounting principles.
Coopers & Lybrand L.L.P.
Salt Lake City, Utah
March 11, 1996
F-1
<PAGE>
UNITED PARK CITY MINES COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
ASSETS
<TABLE>
<S> <C>
Cash and cash equivalents.......................................... $ 373,723
Accounts receivable................................................ 45,654
Prepaid expenses................................................... 192,572
Inventories........................................................ 134,449
Deferred income taxes.............................................. 475,202
Other.............................................................. 23,757
-----------
1,245,357
-----------
Real estate:
Morning Star Estates development................................. 209,206
Hidden Meadows development....................................... 2,766,567
Deferred development costs--other................................ 716,894
-----------
3,692,667
-----------
Property and equipment:
Mine shaft, buildings, and equipment............................. 4,193,616
Mine tour attraction............................................. 4,402,901
Construction-in-progress......................................... 45,870
Resort facilities................................................ 58,077
Less accumulated depreciation.................................... (3,547,722)
-----------
5,152,742
Land less accumulated depletion of $1,062,190...................... 7,656,647
Water rights....................................................... 400,000
-----------
13,209,389
-----------
Total assets................................................... $18,147,413
===========
</TABLE>
--continued--
The accompanying notes are an integral part of the consolidated financial
statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
F-2
<PAGE>
UNITED PARK CITY MINES COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1995
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<S> <C>
Accounts payable.................................................... $1,488,566
Accrued liabilities................................................. 183,131
Deferred revenue.................................................... 103,000
Bank notes payable.................................................. 298,915
----------
Total liabilities................................................. 2,073,612
----------
Commitments and contingencies (Notes 7 and 8)
</TABLE>
<TABLE>
<S> <C>
Stockholders' equity:
Common stock, $.01 par value:
Authorized: 3,750,000 shares
Issued: 2,701,544 shares........................................ 27,015
Capital in excess of par value................................... 31,126,187
Accumulated deficit.............................................. (14,895,617)
-----------
16,257,585
Less cost of treasury stock: 1,294 shares........................ (183,784)
-----------
Total stockholders' equity....................................... 16,073,801
-----------
Total liabilities and stockholders' equity..................... $18,147,413
===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
F-3
<PAGE>
UNITED PARK CITY MINES COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
---------- ----------
<S> <C> <C>
Revenues:
Lot sales-Morning Star Estates........................ $1,550,000 $2,030,000
Lot sales-Hidden Meadows.............................. 2,809,600
Land sales............................................ 400,000
Mine tour attraction.................................. 81,029
Interest.............................................. 139,871 170,977
Royalties and rentals................................. 186,984 139,098
Contract services..................................... 116,862 113,101
Other................................................. 754,216 7,172
---------- ----------
5,638,562 2,860,348
---------- ----------
Expenses:
Cost of lot sales and selling expense-Morning Star
Estates.............................................. 939,844 1,032,920
Cost of lot sales and selling expense-Hidden Meadows.. 1,445,435
Cost of land sales.................................... 93,013
Mine tour attraction.................................. 231,219
General and administrative costs...................... 1,149,825 917,617
Litigation costs...................................... 217,034 129,715
Mine maintenance and administrative costs............. 1,030,289 1,144,401
Contract services costs............................... 100,169 94,968
Depreciation.......................................... 219,477 162,356
Interest.............................................. 491
---------- ----------
5,333,292 3,575,481
---------- ----------
Income (loss) from operations....................... 305,270 (715,133)
Gain on sale of assets.................................. 12,741
---------- ----------
Net income (loss) before income taxes............... 305,270 (702,392)
========== ==========
Income tax benefit.................................. 468,006
========== ==========
Net income (loss)................................... $ 773,276 $ (702,392)
========== ==========
Net income (loss) per share............................. $ 0.28 $ (0.26)
========== ==========
Weighted average number of shares outstanding........... 2,715,565 2,701,544
========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
F-4
<PAGE>
UNITED PARK CITY MINES COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY FOR THE YEARS ENDED
DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COMMON STOCK CAPITAL IN TOTAL TREASURY STOCK TOTAL
----------------- EXCESS OF ACCUMULATED ---------------- STOCKHOLDERS'
DESCRIPTION SHARES AMOUNT PAR VALUE DEFICIT SHARES AMOUNT EQUITY
----------- --------- ------- ----------- ------------ ------ --------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance at December 31,
1993................... 2,701,544 $27,015 $31,126,187 $(14,966,501) 1,294 (183,784) $16,002,917
Net loss................ (702,392) (702,392)
--------- ------- ----------- ------------ ----- --------- -----------
Balance at December 31,
1994................... 2,701,544 27,015 31,126,187 (15,668,893) 1,294 (183,784) 15,300,525
Net income.............. 773,276 773,276
--------- ------- ----------- ------------ ----- --------- -----------
Balance at December 31,
1995................... 2,701,544 $27,015 $31,126,187 $(14,895,617) 1,294 $(183,784) $16,073,801
========= ======= =========== ============ ===== ========= ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
F-5
<PAGE>
UNITED PARK CITY MINES COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
1995 1994
----------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)................................... $ 773,276 $ (702,392)
----------- ----------
Adjustments to reconcile net income (loss) to net
cash used by operating activities:
Depreciation....................................... 219,477 162,356
Gain on sale of asset.............................. (12,741)
Deferred income taxes.............................. (475,202)
Water rights received.............................. (400,000)
Increase (decrease) from changes in:
Restricted cash................................... 132,267 (132,267)
Accounts receivable............................... (5,477) 54,362
Prepaid expenses, inventory and other assets...... (209,862) (1,170)
Morning Star Estates cost of sales................ 810,674 896,181
Morning Star Estates development costs............ (32,476) (230,175)
Hidden Meadows cost of sales...................... 1,231,768
Hidden Meadows development costs.................. (2,268,307)
Deferred development costs--other................. (401,737) (735,704)
Cost of land sales................................ 86,200
Accounts payable, retentions payable and accrued
liabilities...................................... 136,681 (86,810)
Deferred income................................... 103,000
----------- ----------
Total adjustments................................ (1,159,194) 232
----------- ----------
Net cash used in operating activities............ (385,918) (702,160)
----------- ----------
Cash flows from investing activities:
Proceeds from sale of assets........................ 18,068
Capital expenditures................................ (2,985,867) (266,647)
----------- ----------
Net cash used in investing activities.............. (2,985,867) (248,579)
----------- ----------
Cash flows from financing activities:
Proceeds from bank note payable..................... 2,550,615
Principal payments on bank note payable............. (2,251,700) (33,037)
----------- ----------
Net cash provided (used) by financing activities... 298,915 (33,037)
----------- ----------
Net decrease in cash and cash equivalents............. (3,072,870) (983,776)
Cash and cash equivalents-beginning of period......... 3,446,593 4,430,369
----------- ----------
Cash and cash equivalents-end of period............... $ 373,723 $3,446,593
=========== ==========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the periods presented for: interest
(net of $28,928 and $0.00 capitalized)............. $ 491
=========== ==========
Supplemental Disclosure of Non-Cash Financing and
Investing Activities:
</TABLE>
During 1995, the Company reclassified $1,037,000 of land costs into the
Hidden Meadows development.
Accounts payable at December 31, 1995 included approximately $1,219,921
related to capital asset purchases.
The accompanying notes are an integral part of the consolidated financial
statements.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
F-6
<PAGE>
UNITED PARK CITY MINES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1. Significant Accounting Policies:
A. Principles of Consolidation
The consolidated financial statements include the accounts of United Park
City Mines Company (the "Company") and its wholly-owned subsidiaries.
The Company's current principal business is the development, sale, and lease
of real estate located near Park City, Utah. The Company has historically been
engaged in mining in Park City and is currently maintaining its mining
properties in an inactive status. In addition, the Company operates a mine
tour attraction near Park City which was opened in 1995.
The Company believes that cash flows from the sale of lots in the Hidden
Meadows subdivision will be sufficient to fund its on-going operations in
1996.
B. Cash Equivalents
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. Cash and cash
equivalents are deposited with one financial institution located in Salt Lake
City, Utah.
C. Income Taxes
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109 (SFAS 109), "Accounting for Income
Taxes." Deferred income taxes are provided for the difference between the
financial statement and tax bases of assets and liabilities using applicable
future tax rates. Investment tax credits are accounted for on the flow-through
method.
D. Property and Equipment
Property and equipment is recorded at cost. The investment in mines and
mining claims has been reduced by the gain on the 1971 sale of surface rights
used for resort operations. Management believes that the recorded costs
associated with land on the balance sheet will be recoverable through the sale
and development of the real estate.
Depreciation for assets purchased prior to 1983 has been computed over
estimated remaining useful lives of 10 years for mine equipment and buildings,
and 25 years for the mine shaft using the straight-line method of
depreciation.
Depreciation for assets purchased after 1982 has been computed on the
straight-line method of depreciation over the following useful lives:
<TABLE>
<S> <C>
Automobiles, equipment and furniture......................... 3-5 years
Real property and related improvements....................... 15 years
Mine tour attraction......................................... 5-20 years
</TABLE>
Upon the sale or retirement of property and equipment, any gain or loss on
disposition is reflected in the statement of operations and the related asset
cost and accumulated depreciation are removed from the respective accounts.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
F-7
<PAGE>
UNITED PARK CITY MINES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1. Significant Accounting Policies, continued:
The units-of-production method of depletion has been adopted based on
estimates of ultimate ore reserves and mine production. However, the provision
in any one year is limited by the royalty income received.
E. Mine Maintenance and Administrative Expenses
All costs pertaining to the maintenance and administration of the mine are
expensed as incurred.
F. Inventories
Material and supplies inventory for mine maintenance, and gift shop and
concessions inventory for the mine tour attraction are stated at the lower of
cost (first-in, first-out) or market.
G. Real Estate
All direct and indirect costs relating to the Company's real estate projects
are capitalized as incurred.
Revenue from the sale of real estate is recognized at the time title is
conveyed to the buyer, minimum down payment requirements are met, the terms of
any notes received satisfy continuing payment requirements, and there are no
requirements for continuing involvement by the Company with the property. When
it is determined that the earnings process is not complete, income is deferred
using the installment, cost recovery or deposit methods of accounting, as
appropriate.
Expenditures relating to the future development of real estate held by the
Company are deferred and shown as an asset on the balance sheet as they are
expected to be recoverable through future sales. The Company allocates
capitalized real estate development costs on a specific identification basis.
Common costs and amenities are allocated on a relative fair value basis. If
necessary, a valuation allowance is recorded to reflect an impairment in the
carrying value of deferred real estate development costs or land that is held
for sale, lease or development.
Management believes that the recorded costs associated with land and real
estate on the balance sheet will be recoverable through the sale and
development of the real estate.
The Company reports cash held to insure that subdivision utilities properly
function during the first year as restricted cash. Such cash is released to
the Company when the utilities are accepted by the municipality.
H. Income (Loss) Per Share
Income (loss) per share is computed using the weighted average number of
common and common equivalent shares outstanding for each period. Common stock
equivalents consist of common stock options. Common equivalent shares are
excluded from the computation when their effect is anti-dilutive. Primary and
fully diluted income (losses) per share are the same.
I. Reclassifications
Certain amounts from 1994 have been reclassified to conform to the current
year's presentation. These reclassifications had no effect on net loss, total
assets, total liabilities or stockholders' equity.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
F-8
<PAGE>
UNITED PARK CITY MINES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1. Significant Accounting Policies, continued:
J. Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
K. Stock Split
On March 1, 1995, the Board of Directors declared a one-for-twenty reverse
stock split of its shares of common stock. On May 23, 1995, the stockholders
voted on and approved the reverse stock split and the Company conducted the
reverse stock split during the third quarter of 1995. All references to number
of shares and per share amounts have been restated to reflect the effect of
the reverse stock split.
2. Mining Operations of the Company:
The Company is presently maintaining its inactive mine properties in Park
City, Utah. No actual mining operations have taken place since 1982.
The Company is unable to predict when, if ever, it will be economically
feasible for the Company or another company to resume mining operations on its
properties. The economic feasibility of resuming mining operations will depend
upon, among other things, an increase in metals prices and the resolution of
technical problems such as groundwater problems and certain milling
applications. The Company cannot currently predict the metals prices which
would allow for economic mining operations. If the Company or another operator
resumes active mining operations on the properties, it would be necessary to
update or acquire certain additional permits, licenses or approvals from the
appropriate governmental agencies. If necessary, a valuation allowance is
recorded to reflect an impairment in the carrying value of mining property and
equipment.
From time to time the Company performs underground tunnel maintenance and
repair services for other entities, principally Park City Municipal
Corporation.
3. Bank Financing:
In July 1995, the Company obtained a financing commitment from a local bank
totaling $5,576,483, consisting of a development loan of $3,154,260 and two
standby letters of credit totaling $2,422,223. Interest on outstanding
borrowings is paid monthly at 1 1/2 percent above the bank's prime lending
rate (8.5% at December 31, 1995). At December 31, 1995, the outstanding
principal balance on the loan was $298,915. Borrowings are collateralized by
the land and improvements of the Hidden Meadows development and are payable in
full on July 13, 1996. The letters of credit expire on January 1, 1997.
In December 1995, the Company obtained an additional $1,000,000 development
loan from the same bank. Borrowings will bear interest at 1 1/2 percent over
the bank's prime lending rate (8.5% at December 31, 1995), will be
collateralized by the remaining land and improvements of the Hidden Meadows
development, and will be due December 1, 1996. The Company had not drawn any
funds against the loan at December 31, 1995.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
F-9
<PAGE>
UNITED PARK CITY MINES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
4. Ski Leases:
The Company has leased certain surface rights representing approximately
5,273 acres to Greater Park City Company for use in its resort operations.
Greater Park City Company has assigned its rights in a separate lease to Deer
Valley Resort Company. The term of each lease has been extended to April 30,
2011 by notice to the Company. The lessees have the right to extend each lease
for two additional periods of 20 years each. Annual rentals are calculated as
a percent of Gross Ski Revenue as defined by the lease agreement and
subsequent amendments thereto, but not less than a minimum annual rental fee
of fifty cents per acre leased. Greater Park City Company and Deer Valley
Resort Company paid United Park for the 1993-94 ski season, a total of
$129,032 and for the 1994-95 ski season, a total of $148,875.
5. Income Taxes:
The income tax benefit for the year ended December 31, 1995 consists of the
following:
<TABLE>
<S> <C>
Current tax (provision)........................ $ (7,196)
Deferred tax benefit........................... 475,202
----------
$ 468,006
==========
</TABLE>
The Company recognized no tax benefit from the loss generated in 1994.
The reported benefit from income taxes for 1995 varies from the amount that
would be provided by applying the statutory U. S. Federal income tax rate to
income before taxes for the following reasons:
<TABLE>
<S> <C>
Federal statutory tax provision................ $ 103,792
Increase (reduction) in taxes resulting from:
State income taxes (net of federal benefit)... 10,074
Alternative minimum tax...................... 7,196
Change in valuation allowance................ (475,202)
Utilization of tax loss carryforward......... (114,411)
545
Other........................................ ---------
$(468,006)
Provision (benefit) for income taxes.......... =========
</TABLE>
At December 31, 1995 the Company has net operating loss carryforwards for
federal and state income tax purposes of approximately $12,676,000 and
$5,385,000, respectively, which will expire between 1996 and 2010 if not used
to reduce future taxable income.
The components of the net deferred tax asset as of December 31, 1995 are as
follows:
<TABLE>
<S> <C>
Deferred tax assets:
Tax net operating loss carryforwards......... $4,539,591
Tax credit carryforwards..................... 13,172
(3,997,758)
Valuation allowance.......................... ----------
Total deferred tax asset................... 555,005
Deferred tax liability:
(79,803)
Excess tax depreciation...................... ----------
$ 475,202
Net deferred tax asset....................... ==========
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
F-10
<PAGE>
UNITED PARK CITY MINES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
5. Income Taxes, continued:
The valuation allowance at December 31, 1995 has been provided to reduce the
total deferred tax assets to the amount which is considered more likely than
not to be realized. The net change in the valuation allowance for the year
ended December 31, 1995 was $628,937. The change relates primarily to a
reduction in the valuation allowance due to current year utilization of net
operating loss carryforwards, a revised estimate of the expected future
utilization of net operating loss carryforwards and the expiration of state
net operating loss carryforwards. A majority of the change in the valuation
allowance is due to expected future utilization of net operating loss
carryforwards through net income to be generated from sales of lots at the
Hidden Meadows and Morning Star Estates subdivisions or other property that
have occurred subsequent to year-end, or are anticipated through 1996. This
resulted in a reported tax benefit of $475,202 for 1995. The Company has not
assumed future net income on sales of property that has not been approved by
the applicable municipality.
The net change in the valuation allowance for the year ended December 31,
1995 was $66,004. The change relates primarily to that year's net operating
loss and the expiration of state net operating loss carryforwards.
6. Industry Segments:
The industry segments of the Company are defined as Mining, Real Estate,
Mine Tour and Corporate.
<TABLE>
<CAPTION>
DECEMBER 31, 1995: MINING REAL ESTATE MINE TOUR CORPORATE TOTAL
- ------------------ ---------- ----------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenue................. $ 116,862 $4,359,600 $ 81,029 $1,081,071 $5,638,562
Operating income (loss). (1,153,835) 1,773,805 (177,387) (137,313) 305,270
Identifiable assets..... 610,659 12,048,402 4,645,814 842,538 18,147,413
Depreciation............ (140,239) (27,197) (52,041) (219,477)
Capital expenditures,
including deferred real
estate development
costs.................. 143,375 2,702,520 4,009,812 52,601 6,908,308
<CAPTION>
DECEMBER 31, 1994: MINING REAL ESTATE MINE TOUR CORPORATE TOTAL
- ------------------ ---------- ----------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenue................. $ 113,101 $2,569,098 $ 178,149 $2,860,348
Operating income (loss). (1,237,264) 1,440,139 (905,267) (702,392)
Identifiable assets..... 626,161 11,165,762 3,823,697 15,615,620
Depreciation............ (110,996) (3,026) (48,334) (162,356)
Capital expenditures,
including deferred real
estate development
costs.................. 214,718 966,942 50,866 1,232,526
</TABLE>
Corporate revenue in 1995 includes $750,000 of cash and water rights
received in a settlement with a third party.
7. Contingencies:
Litigation and Settlement Agreement
In May 1986, the Company filed a lawsuit against Greater Park City Company
("GPCC"), Royal Street Land Company, Royal Street of Utah, and Deer Valley
Resort Company related to agreements which resulted in the restructuring of
Greater Park City Company in 1975 and later performance under these
agreements. The defendants filed counterclaims against the Company.
On November 13, 1995, an Order of Dismissal With Prejudice of all of the
Company's remaining claims and all of GPCC's claims was signed by the Court
and also filed, thereby finally disposing of all of the remaining aspects of
this litigation.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
F-11
<PAGE>
UNITED PARK CITY MINES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
7. Contingencies, continued:
On November 6, 1992, the Company entered into a Settlement Agreement and
Release ("Settlement Agreement") with Royal Street Land Company, Deer Valley
Resort Company, Royal Street of Utah, Royal Street Development Company
(collectively "Deer Valley"), and Wells Fargo Bank, N.A. In this Settlement
Agreement, the Company, Deer Valley, and Wells Fargo agreed, among other
things, to dismiss with prejudice the claims and counterclaims.
The Settlement Agreement provides the Company the opportunity to develop,
without the encumbrance of the Deer Valley Ski Lease, certain parcels of land
which are currently subject to the Deer Valley Ski Lease. The Settlement
Agreement further provides Deer Valley the opportunity to acquire the
Company's interest in the surface estate to the balance of the land within the
Deer Valley Ski Lease. Both the Company's and Deer Valley's opportunities
concerning those parcels of land covered under the Deer Valley Ski Lease are
contingent upon master plan approval by Park City Municipal Corporation and
acceptance of the master plan by the Company.
If Park City Municipal Corporation does not approve the master plan or if
the Company does not accept the master plan, the land within the Deer Valley
Ski Lease will remain encumbered by the Deer Valley Ski Lease. If master plan
approval is obtained and accepted, the Deer Valley Ski Lease will be
terminated. The Company could then proceed to develop those certain parcels of
land which were formerly encumbered by the Deer Valley Ski Lease and would
convey the balance of the surface estate of the land formerly encumbered by
the Deer Valley Ski Lease to Deer Valley.
Additionally, if and when the master plan is accepted by both the Company
and Park City Municipal Corporation, the exchange of the land surface rights
by the Company for the termination of the Deer Valley Ski Lease and right to
develop the land previously encumbered by the lease will represent an exchange
of similar productive assets. Accordingly, the Company will transfer its basis
in the land surface rights to the basis in the land to be developed that was
previously encumbered by the Deer Valley Ski Lease, with no gain or loss
recognized.
8. Retirement Savings Plan:
The Company has a contributory 401(k) Retirement Savings Plan covering all
employees who have completed one year of continuous service and have attained
the age of 21. Under the provisions of the Plan, the Company contributes $0.50
for each dollar contributed by eligible employees up to a limit of $1,000 per
employee per year. Company contributions are 100% vested after six years of
continuous service. Total Company expense for the plan in 1995 and 1994 was
$14,980 and $14,070, respectively.
9. Stock Options:
In 1993, the shareholders of the Company approved a stock option plan
("Plan") for key employees and consultants of the Company. Pursuant to the
terms of the Plan, as amended, 125,000 shares of the Company's $0.01 par value
common stock are reserved for issuance thereunder. The Plan consists of two
autonomous, separately administered programs: an "Employee Program" and a
"Consultant Program." The Employee Program is for key employees (including
employees who are members of the Company's Board of Directors), and the
Consultant Program is for consultants (including non-employee members of the
Board of Directors). Stock Options granted under the Employee Program are
intended to be Incentive Stock Options as defined in the Internal Revenue
Code, and stock options granted under the Consultant Program are intended to
be Non-statutory Stock Options.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
F-12
<PAGE>
UNITED PARK CITY MINES COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
- -------------------------------------------------------------------------------
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9. Stock Options, continued:
Under the Employee Program, a stock option committee ("Committee") of the
Board of Directors will, in its sole discretion, approve the grant of options
to key employees based upon the performance and contribution of each such key
employee and based upon the results achieved by the Company. The Committee
will also set the terms and conditions of the individual stock option grants
under the Employee Program within the framework of the Plan.
Under the Consultant Program, the entire Board of Directors will, in its
sole discretion, approve the grant of options to consultants, including
individual members of the Board of Directors. The Board of Directors will set
the terms and conditions of the individual stock option grants under the
Consultant Program, within the framework of the Plan.
No options may be granted under the Plan after June 10, 2003. Options
granted under the Plan are exercisable in such installments and for such
periods as specified by the Board of Directors and the Committee at the time
of grant, but may not be exercisable more than ten years after the date of
grant (five years for shareholders owning 10% or more of the Company's
outstanding stock).
The option price with respect to each option will be determined by the
Committee or the Board of Directors of the Company, but shall not be less than
100% of the fair market value of the common stock of the Company at the time
the option is granted (110% for a shareholder owning 10% or more of the
Company's outstanding stock).
Outstanding stock options must be exercised during employment or within
three months after termination (other than by reason of death) as to any
shares of Common Stock which the employee might have purchased as of the date
of termination.
The Plan provides that new stock options can be granted under the Plan to
holders of existing options in exchange for cancellation of the existing
options, in the sole discretion of the Committee or the Board of Directors.
Changes in stock options under the Company's incentive and non-statutory
stock option plan were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, 1994: SHARES PRICE RANGE PER SHARE
------------------ ------ ---------------------
<S> <C> <C>
Canceled..................................... 22,500 $ 0.420
Granted...................................... 37,500 6.874
Expired...................................... 15,000 $20.00--5.000
Outstanding at December 31, 1994............. 37,500 6.874
Exercisable.................................. 37,500 6.874
<CAPTION>
DECEMBER 31, 1995 SHARES PRICE RANGE PER SHARE
----------------- ------ ---------------------
<S> <C> <C>
Outstanding at December 31, 1995............. 37,500 $ 6.874
Exercisable.................................. 37,500 6.874
</TABLE>
At December 31, 1995, a total of 87,500 shares were available for grants of
additional options under the plan.
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F-13
<PAGE>
DIRECTORS
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ALAN L. GORDON* JOSEPH S. LESSER*
Vice President and Treasurer General Partner
Loeb Partners Realty Loeb Partners Realty
EDWIN L. OSIKA, JR. HANK ROTHWELL
Executive Vice President, Secretary, President and Chief Executive
and Treasurer Officer
United Park City Mines Company United Park City Mines Company
*Denotes Member of Audit Committee
OFFICERS
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HANK ROTHWELL EDWIN L. OSIKA, JR.
President and Chief Executive Executive Vice President, Secretary,
Officer and Treasurer
United Park City Mines Company United Park City Mines Company
CORPORATE ADDRESS AND TELEPHONE NUMBER
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United Park City Mines Company
P. O. Box 1450
1 1/2 Miles South of Park City on Highway 224
Park City, UT 84060
(801) 649-8011
TRANSFER AGENT AND REGISTRAR
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Address changes or questions on stock transfers should be directed to the
Transfer Agent:
First Chicago Trust Company of New York
30 West Broadway
New York, New York 10007-2192
(212) 791-6422
FORM 10-KSB
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A copy of the Company's 1995 Annual Report on Form 10-KSB (without exhibits)
will be provided without charge to shareholders upon written request to :
Corporate Secretary, United Park City Mines Company, P. O. Box 1450, Park
City, Utah 84060. Exhibits to the Form 10-KSB will be available upon advance
payment of reproduction costs at 25c per page.
SUBSIDIARIES
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Blue Ledge Corporation
The Weber Coal Company
Park City Silver Mine Adventure, Inc.
