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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
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FORM 10-KSB
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/X/ ANNUAL REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999
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or
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/ / TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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Commission file number 1-3753
UNITED PARK CITY MINES COMPANY
(Name of small business issuer in its charter)
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DELAWARE 87-0219807
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
P. O. BOX 1450, PARK CITY, UTAH 84060
(Address of principal executive (Zip Code)
offices)
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Issuer's telephone number, including area code (435) 649-8011
Securities registered under Section 12(b) of the Act:
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TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
Common Stock, $0.01 Par Value New York Stock Exchange
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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/
Issuer's revenues for its most recent fiscal year. $3,041,425
Based on the closing sales price on March 3, 2000, the aggregate market
value of the voting stock held by nonaffiliates of the registrant was
$16,074,837. For purposes of this computation, voting stock directly held by
officers and directors of the registrant and holders of more than 10% of the
registrant's capital securities 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 was
3,249,411 on March 3, 2000.
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DOCUMENTS INCORPORATED BY REFERENCE
The definitive Proxy Statement for the 2000 Annual Meeting of Stockholders,
which will be filed with the Securities and Exchange Commission within 120 days
after December 31, 1999, is incorporated by reference in Part III of this Form
10-KSB.
Transitional Small Business Disclosure Format (Check
One): Yes / / No /X/
Exhibit Index on Page 33
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PART I
ITEM 1. DESCRIPTION OF BUSINESS
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
leasing, 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.
United Park completed construction of a mine tour attraction at its Ontario
Mine facilities near Park City, Utah and opened the attraction to the public on
December 15, 1995. The mine tour attraction was operated by the Company's wholly
owned subsidiary Park City Silver Mine Adventure, Inc. and combined an
underground mine tour with extensive historical exhibits that depict the mining
heritage of the Park City area. On November 1, 1999, the Company made the
decision to discontinue all mine tour operations. (Refer to Item 6. Management's
Discussion and Analysis or Plan of Operation)
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 8,300 acres of land. Of
this land, United Park leases to ski resort operators approximately 5,300 acres
of its surface estate for skiing. (See "Resort Agreements.") However, United
Park has the right to sell certain portions of the leased properties, subject to
the lessees' rights 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.
In the third quarter of 1995, Blue Ledge Corporation ("Blue Ledge"), a
wholly owned subsidiary of the Company, received approval for the annexation and
master plan of a proposed single family lot subdivision, Hidden Meadows, on
approximately 258 acres of land adjacent to the Company's Morning Star Estates
subdivision. The Hidden Meadows subdivision is a 45 lot subdivision, which was
developed during 1995. Blue Ledge sold thirty-four lots in the Hidden Meadows
subdivision from 1995 through 1998. Blue Ledge sold another four lots in the
subdivision during 1999. Blue Ledge expects to sell the balance of the Hidden
Meadows subdivision lots in 2000.
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 Street Development Company
(collectively "Deer Valley"), and Wells Fargo Bank, N.A. The Settlement
Agreement 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 the balance of United Park's
interest in the surface estate within the Deer Valley Ski Lease. Both United
Park and Deer Valley's opportunities concerning the parcels of land currently
under the Deer Valley Ski Lease are contingent upon construction plan approvals
by the appropriate government agencies.
During 1993, the Company actively worked on the design of a real estate
development project known as Flagstaff Mountain Resort. The Company requested
annexation and master plan approval for the
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project from Park City during 1994. The Company refined and improved the master
plan and vigorously pursued approval for the project during 1995, 1996 and the
first half of 1997. As provided by Utah statutes, the Company also pursued its
development opportunities for this project in Summit County pursuant to an
application which the Company filed in 1996.
In the third quarter of 1997, the Company submitted to Wasatch County a
master plan for the development of a golf course and a 260-unit development in
the Bonanza Flats area of Wasatch County and pursued approval for this project
known as Bonanza Mountain Resort.
During the second quarter of 1998, the Company combined its Bonanza Mountain
Resort project into the master plan of the Flagstaff Mountain project and
pursued the necessary approvals for the two projects with Park City and Wasatch
County as one master planned project. The Company received from Park City
approval of the parameters by which Park City would annex and approve the master
plan for the Company's Flagstaff Mountain Resort project during the third
quarter of 1998. The annexation occurred in July of 1999 when an Annexation and
Development Agreement was signed with Park City. As currently planned, Flagstaff
Mountain Resort will feature a village concept with a 200-room hotel, a mix of
multi-family uses of condominiums and townhouses totaling 420 units, 75,000
square feet of commercial space and 54 single-family dwellings. Bonanza Mountain
Resort will include 160 single family homesites, 100 multi family development
sites, and a resort golf course. During 2000 the Company will be working with
Park City on Flagstaff Mountain final construction plans and anticipates
completing the master plan for Bonanza Mountain Resort with Wasatch County.
In July 1999, the Company signed a Letter of Understanding with
Arizona-based DMB Associates, Inc. to pursue a joint venture partnership to
develop Flagstaff Mountain and Bonanza Mountain Resorts. DMB is an experienced
real estate development company with the personnel and financial resources
needed to develop the Company projects in a quality manner. The Company
anticipates completing a definitive agreement with DMB during the first half of
2000.
In conjunction with another developer, the Company completed a master plan
for twelve lots on its properties which adjoin the other developer's project
known as Deer Crest. The Company received the necessary approvals to develop and
market eight of those twelve lots during 1998 and sold four of the approved lots
during the fourth quarter of 1998 and another lot was sold in 1999. The
remaining three approved lots are expected to be sold during 2000. The
unfinished eight lot development work of about $500,000, with a performance bond
in place, is expected to be completed in 2000. United Park in the first quarter
of 2000 established a construction loan to fund these improvements. The Company
received the necessary approvals to develop the remaining four master planned
lots during 1999, with marketing and development to commence during the first
half of 2000.
During 1997, the Company received a master plan approval for 354 residential
unit equivalents on another portion of its property which overlooks the
Jordanelle Reservoir in the vicinity of Keetley, Utah. The Company prepared and
submitted detailed development plans for a portion of this new project during
1998, and is pursuing final approvals for this development project.
During the first quarter of 1998, the Company acquired the assets of New
Quincy Mining Company (hereinafter "New Quincy") and Lucky Bill Mining Company
(hereinafter "Lucky Bill"). The assets of New Quincy and Lucky Bill consisted of
approximately 212 acres of land within the area of the Company's Flagstaff
Mountain Resort project. This acquisition of land enhanced the Company's
development opportunities with the project. The Company exchanged 203,700 shares
of its capital stock for the land.
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
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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. The Company
occasionally sells parcels of land outside of its development areas, as
opportunities become available.
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, and 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.
The Park City real estate market has been consistently good during the past
several years and the Company expects the Park City real estate market to
improve in the future.
The International Olympic Committee has chosen the Salt Lake City
metropolitan area, including Park City, to host the 2002 Winter Olympic Games.
The Company believes that the national and international exposure of the Park
City area before, during and after the 2002 Winter Olympic Games will favorably
impact real estate values within and around the Park City area.
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 8,300 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 three principal shafts and four adits used 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 cost of
compliance with various governmental regulations.
The Company, from time to time, performs tunnel maintenance and repair work
for other entities on a contract basis. It has performed work for Park City in
the Judge Tunnel and the Spiro Tunnel since 1991. The Company anticipates
continued contract work in 2000.
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.
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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, 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. In response to the comments submitted by United Park, the EPA determined
not to list the site on the NPL in a final rule published February 11, 1991, in
the FEDERAL REGISTER. On February 7, 1992, the EPA again proposed the listing of
the Richardson Flat Tailings site to the NPL. In April 1992, the Company again
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. United Park is currently
negotiating with the EPA regarding the possibility of performing a voluntary
remedial investigation and feasibility study ("RI/FS") to determine if any
remedial action may be warranted at Richardson Flat. The Company has accrued its
best estimate of costs to complete the RI/FS at Richardson Flat. Since these
negotiations have not reached their conclusion nor the study performed, the
Company cannot estimate the potential costs, if any, that may be required beyond
the RI/FS (Refer to Item 6. Management's Discussion and Analysis or Plan of
Operation).
United Park is unable to predict when, if ever, it will be economically
feasible for it 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
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 recent
construction of the Jordanelle Dam and Reservoir in the Bonneville Unit of the
Central Utah Project ("CUP"). The Jordanelle Reservoir covers 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 was filled ahead of schedule in 1996. 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 has 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, through a wholly owned subsidiary, The Weber Coal Company
("Weber Coal") owned 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 did
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 has leased the surface of its properties for
grazing and permitted natural gas to be stored under the surface, but did not
receive material revenue from these activities. During 2000 the Company expects
to liquidate Weber Coal.
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The Company does not currently have any plans for additional exploration or
development of these oil and gas properties.
MINE TOUR ATTRACTION
During 1995, the Company, assisted by an outside consultant, finalized the
design, development and construction of a mine tour attraction at some of its
mining facilities. The mine tour attraction was opened to the public on December
15, 1995, and operated through November 1, 1999 at which time the Company made
the decision to discontinue all mine tour operations because of unprofitable
operating results. The mine tour attraction was located at the Ontario Mine and
included historical 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 mine tour attraction was operated by the
Company's wholly owned subsidiary Park City Silver Mine Adventure, Inc.
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 for 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. As amended 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 lessees' rights
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 1997-98
ski season a total of $176,105, and for the 1998-99 ski season, a total of
$180,263.
EMPLOYEES
United Park employs a total of twenty-two 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 six
full-time salaried employees and seven full-time hourly employees, each of whom
is an experienced underground miner, for its mine maintenance operations.
ITEM 2. DESCRIPTION OF PROPERTY
In addition to the following description, please refer to Item 1.
Description of Business under the headings "Real Estate," "Mine Maintenance" and
"Resort Agreements."
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THE WEBER COAL COMPANY
The Weber Coal Company, a wholly owned subsidiary of United Park City Mines
Company, owned approximately 811 acres of fee land east of Coalville, Utah.
Historically, Weber Coal was a coal producer, but the mines were plugged and
abandoned in the 1950's. Weber Coal had leased the surface of its properties for
grazing and permitted natural gas to be stored under the surface, but did not
receive material revenue from these activities. The Company has made the
decision to liquidate Weber Coal by transferring all of its assets, properties
and liabilities to the Company.
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
to 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.
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 those discussed under "Legal Proceedings" and those
utility and access easements or rights of way either placed upon the properties
by United Park or otherwise affecting the properties.
ITEM 3. LEGAL PROCEEDINGS
As of March 7, 2000 United Park was a party to the following legal
proceedings:
UNITED STATES OF AMERICA V. 107.28 ACRES OF LAND, UNITED PARK CITY MINES
COMPANY, ET AL.
Civil No. 2:88-C-0231B, 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 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.
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The United States and United Park are presently attempting, by negotiation
and court-annexed mediation, to resolve approximately fifteen issues in the
condemnation, all of which affect the issue of just compensation. It is
anticipated that these issues and the issue of just compensation will be
resolved through court-annexed mediation within the year 2000. When a settlement
is reached and a final order 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 had 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.
On 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 real property.
On June 18, 1996, Gillmor filed a motion for summary judgment to quiet title
in the name of Gillmor to the surface estate of the disputed real property. On
July 16, 1996, Blue Ledge filed a detailed memorandum in opposition to Gillmor's
motion for summary judgment. On September 18, 1996, Gillmor filed a notice of
withdrawal of Gillmor's motion for summary judgment. While Gillmor has filed
notices to take additional depositions in this case, the notices for such
depositions have been continued without date. Therefore, Gillmor has not taken
any additional depositions or conducted any additional discovery in this case
since Gillmor's withdrawal of Gillmor's motion for summary judgment in 1996. No
trial date has been set in this case.
By letter dated January 7, 2000, Gillmor's counsel notified United Park's
counsel that Gillmor had sold her alleged interest in the disputed real property
and had also transferred her remaining cause of action in this litigation to the
purchaser of her interest. United Park's counsel has not been contacted by the
purchaser of Gillmor's alleged interest in the disputed real property, and it is
not known if the purchaser will choose to pursue this lawsuit.
SANDRA SHELTON V. PARK CITY SILVER MINE ADVENTURE, INC., UNITED PARK CITY
MINES COMPANY, ET AL.
Civil No. 2:99-CV-883C, United States District Court for the District of
Utah
In the second quarter of 1999, Sandra Shelton, a former employee of Park
City Silver Mine Adventure, Inc. ("PCSMA"), filed a complaint against PCSMA,
United Park, and former employees of PCSMA, alleging violations of the Civil
Rights Act of 1964 and the Fair Labor Standards Act ("FLSA"). PCSMA and United
Park moved for dismissal of the complaint on the basis that Shelton had failed
to exhaust the required administrative remedies for her discrimination claims.
The court granted dismissal of the complaint, without prejudice, in favor of
PCSMA and United Park.
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In the fourth quarter of 1999, Shelton filed a new complaint against PCSMA,
United Park, and former employees of PCSMA, alleging intentional infliction of
emotional distress, negligent employment practices, and violation of the Utah
Anti-Discrimination Act. The complaint seeks $500,000 for the intentional and/or
negligent infliction of emotional distress, $250,000 in compensatory damages,
actual damages in an amount to be proven at trial and to be an on-going account,
punitive damages in the amount of $500,000, and attorneys' fees.
In December 1999, a defendant, who is a former employee of PCSMA, moved for
dismissal of all claims based upon a lack of subject matter jurisdiction, and
Shelton opposed the former employee's motion by arguing that Shelton is claiming
a violation of the federal Violence Against Women Act. On January 7, 2000, PCSMA
and United Park also moved to dismiss all claims in the complaint based on the
lack of subject matter jurisdiction and moved to dismiss the Utah
Anti-Discrimination Act claim on the additional ground that it failed to state a
claim for which relief can be granted. Shelton has not responded to PCSMA's and
United Park's motion to dismiss. It is unclear how the court will rule on the
defendants' motions to dismiss.
UNITED PARK CITY MINES V. STICHTING MAYFLOWER MOUNTAIN FONDS, ET AL.
Case No. 000500087, Fourth Judicial District Court, Wasatch County, State
of Utah
In February, 2000, United Park City Mines filed a partition action against
Stichting Mayflower Mountain Fonds and Stichting Mayflower Recreational Fonds
seeking partition of certain patented mining claims owned by United Park City
Mines Company and the Stichting entities as tenants in common. The patented
mining claims consist of approximately 340 acres of high mountain forest and
meadowland located in Wasatch and Summit Counties. The partition action also
names as defendants other entities, which may claim an interest in the real
property. The Stichting entities were served on March 2, 2000, and their answers
are due on March 23, 2000.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to a vote of the Company's shareholders
through the solicitation of proxies or otherwise during the fourth quarter of
the fiscal year ended December 31, 1999 and subsequent to year end through the
date of this filing.
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The common stock of United Park, $.01 par value, is traded on the New York
Stock Exchange under the symbol "UPK." As of March 3, 2000, United Park had
3,249,411 outstanding shares of common stock held by approximately 1,064
stockholders of record. 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.
<TABLE>
<CAPTION>
1999 1998
------------------- -------------------
HIGH LOW HIGH LOW
-------- -------- -------- --------
<S> <C> <C> <C> <C>
First Quarter....................... $33.5000 $24.3750 $37.8750 $25.5000
Second Quarter...................... $37.3125 $32.0000 $35.8125 $29.8750
Third Quarter....................... $32.2500 $28.1250 $30.5000 $27.6250
Fourth Quarter...................... $29.3750 $27.7500 $30.2500 $24.6250
</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.
9
<PAGE>
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
This Form 10-KSB may contain trend information and forward-looking
statements that involve risks and uncertainties. The actual results of
operations of the Company could differ materially from the Company's historical
results of operations and those discussed in such forward-looking statements as
a result of certain factors set forth in this section and elsewhere in this
Form 10-KSB, including information incorporated by reference.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW
The Company's Consolidated Statements of Cash Flows reflect that $2,196,377
in net cash was used by operating activities during 1999 including $1,104,581 in
net cash used for deferred real estate development costs related primarily to
Flagstaff Mountain and Bonanza Mountain Resorts. If a definitive agreement is
completed with DMB the joint venture partnership will pursue the continued
development and funding of Flagstaff Mountain and Bonanza Mountain Resorts.
United Park expects the level of year 2000 expenditures on deferred real estate
development costs on various other projects to be dependant on cash
availability.
The Company's 1999 cash position decreased by $2,843,402 including cash used
for deferred real estate development costs of $1,104,581 and cash used for the
discontinued operation of $378,035. The Company used funds from its cash
balances and its cash flow to fund its operations, capital asset additions and
the development of its real estate projects during 1999. The Company spent
$530,935 on capital expenditures in 1999 and expects additional capital
expenditures at reduced levels of activity through 2000
During 1998, $1,205,954 in net cash was provided by operating activities
offset in part by net cash used for deferred real estate development costs of
$1,563,083, and for the discontinued operation of $453,207. The Company used
funds from its cash balances and its cash flow to fund its operations.
REAL ESTATE DEVELOPMENT
Management's plans and activities in real estate constitute the major
components in the overall plans for the Company's future. (Refer to "Item 1.
Description of Business" for the complete background on real estate
development.)
As currently planned, Flagstaff Mountain Resort will feature a village
concept with a 200-room hotel, a mix of multi-family uses of condominiums and
townhouses totaling 420 units, 75,000 square feet of commercial space and 54
single-family dwellings. Bonanza Mountain Resort will include 160 single-family
homesites, 100 multi family development sites, and a resort golf course. During
2000 The Company will be working with Park City on Flagstaff Mountain final
construction plans and anticipates completing the master plan approval of
Bonanza Mountain Resort with Wasatch County.
In July 1999, The Company signed a Letter of Understanding with Arizona
based DMB Associates, Inc. ("DMB") to pursue a joint venture partnership to
develop Flagstaff Mountain and Bonanza Mountain Resorts. DMB is an experienced
real estate development company with the personnel and financial resources
needed to develop the Company projects in a quality manner. The Company
anticipates completing a definitive agreement with DMB during the first half of
2000.
Along with another developer, the Company completed a master plan for twelve
lots on its properties, which adjoin the other developer's project, which is
known as Deer Crest. The Company received the necessary approvals for eight of
the twelve lots in this project and began marketing these eight lots in the
fourth quarter of 1998. Blue Ledge sold four of the approved eight lots during
the last quarter of 1998 and another lot was sold in 1999. The Company expects
to sell the remaining three approved lots during 2000.
10
<PAGE>
The Company has received the necessary approvals to develop the other four
master planned lots during 1999 and marketing and development will commence
during the first half of 2000.
In 1997, the Company pursued and received a master plan approval for 354
residential unit equivalents on a portion of its property in the vicinity of
Keetley, Utah. This property overlooks the Jordanelle Reservoir. During 1998,
the Company prepared and submitted detailed development plans, and is actively
pursuing final approval for these new development projects.
The Company has also examined several of its other real estate parcels and
believes that 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.
MINE MAINTENANCE
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. The Company expended $2,215,327
in its mine maintenance activities including the regular mine maintenance of
$1,585,327 and the Richardson Flat RI/ FS recognition of $630,000 during 1999
and regular mine maintenance of $1,310,616 during 1998. The Company anticipates
similar expenditures as compared to 1999 regular mine maintenance during 2000.
In 1991, the Company entered into an agreement with Park City to perform
tunnel maintenance work in the Spiro Tunnel and the Judge Tunnel, which tunnels
supply some of Park City's culinary water. This contract provided revenue of
$209,290 during 1999 and $66,694 during 1998. Additional work will be performed
in the tunnels during 2000. The work involves reinforcement of the tunnels to
avoid possible cave-ins which may restrict the flow of water.
United Park continues to remain in compliance under all of its environmental
and regulatory permits. A portion of United Park's mining property, known as
"Richardson Flat Tailings," was proposed by the United States Environmental
Protection Agency ("EPA") on June 24, 1988, by notice published in the FEDERAL
REGISTER, to 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 response to the comments
submitted by United Park, the EPA determined not to list the site on the NPL in
a final rule published February 11, 1991, in the FEDERAL REGISTER.
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 the Comprehensive
Environmental Response, Compensation, and Liability Act ("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.
11
<PAGE>
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 Utah Pollutant Discharge Elimination System ("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 currently negotiating with the
EPA regarding the possibility of performing a voluntary remedial investigation
and feasibility study ("RI/FS") to determine if any remedial action may be
warranted at Richardson Flat. The Company has accrued $630,000 as its best
estimate of costs to complete the RI/FS at Richardson Flat which is expected to
be incurred over the next three years. Since these negotiations have not reached
their conclusion nor the study performed, the Company cannot estimate the
potential costs, if any, that may be required beyond the RI/FS. The Company has
engaged in the study and evaluation of the development of a recreation complex
in the area of Richardson Flat. It is believed that through the development of
the recreation complex, any remedial issues which might be identified during the
study or the development related to the Richardson Flat Tailings site could be
resolved. However, should substantial remediation be required at the site beyond
the scope of such development and should United Park be designated as a
potentially responsible party and it is later determined that United Park is a
responsible party liable for remediation, those costs could be substantial to
the Company.
As United Park has currently conducted its mine maintenance operations and
under current reclamation statutes and regulations, in management's opinion,
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 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 was filled ahead of schedule in
1996. 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 has 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.
YEAR 2000 REVIEW
The Company has not experienced any disruptions from year 2000 date related
computer problems. All of its mission-critical and non-mission-critical systems
are functioning properly. In addition, the Company is not aware of any year 2000
problems associated with any of its suppliers, partners, or entities in other
business relationships.
12
<PAGE>
MINE TOUR ATTRACTION--DISCONTINUED OPERATION
Effective November 1, 1999, the Company's Board of Directors made a
strategic decision to focus the Company's efforts on real estate development and
to terminate the unprofitable business activity of its wholly owned subsidiary,
Park City Silver Mine Adventure, Inc. ("PCSMA"). Where applicable, the assets
that can be utilized in other segments of the Company's operations have been
reallocated to those segments. However, because of the unique nature of the
assets, the salvage value is estimated to be negligible and the book value of
the assets have been so adjusted. (See note 5 of the Consolidated Financial
Statements)
The results of the PCSMA's operations have been classified as discontinued
operation for all of the periods presented in the Consolidated Statement of
Operations. The discontinued operation has also been segregated for all periods
presented in the Consolidated Statements of Cash Flows.
RESULTS OF OPERATIONS
1999 CONTINUING OPERATIONS COMPARED WITH 1998
The Company experienced a net operating loss of $2,220,822 for 1999 and a
net operating profit of $1,039,985 for 1998. The net loss for 1999 is primarily
the result of lower than expected lot sales in the Hidden Meadows subdivision
and the Deer Crest development and of increased mine maintenance and
administrative costs. The net profit for 1998 resulted from higher lot sales in
the Hidden Meadows subdivision and the Deer Crest development.
Revenue in 1999 totaled $1,881,871, a decrease of 67% over 1998 revenues.
The decrease in revenues is the result of decreased lot sales in the Company's
development projects.
Blue Ledge sold four lots in the Hidden Meadows subdivision during 1999.
During 1998, Blue Ledge sold nine lots in the Hidden Meadows subdivision.
In 1999, Blue Ledge sold one lot in the Deer Crest development. There were
four lots sold during 1998.
Interest income decreased $18,121 or 14% during 1999 when compared with
1998. The decrease is the net result of smaller cash balances available for
investment, offset in part by increased interest rates during 1999.
The Company, from time to time, performs tunnel maintenance and repair work
for other entities on a contract basis. It has performed work for Park City in
the Judge Tunnel and the Spiro Tunnel since 1991. The Company anticipates
continued contract work in 2000. Contract services when compared with 1998 has
increased 214% during 1999 as a result of the Company's mine crews being more
available to perform work as needed during the year. The Company anticipates
that a similar amount of contract revenue will be earned during 2000.
The Company's other income increased 78% during 1999 when compared with 1998
as a result of a new water contract.
Mine maintenance and administrative costs increased approximately 69% during
1999, when compared with the same period in 1998. The increase was due primarily
to property taxes and accrued remediation costs of $630,000 partially offset by
a reduction of other costs.
1999 DISCONTINUED OPERATION COMPARED WITH 1998
With a continuing need to draw greater numbers of visitors for the Silver
Mine Adventure to become profitable, during 1999 management decided the required
expenditures exceeded the potential for future profitability. Also, management
decided that the resources of the Company should be focused on real estate
development. These factors resulted in the discontinuing of the operation
effective November 1,
13
<PAGE>
1999. The results of the Park City Silver Mine Adventure's operations have been
classified as discontinued operation. The 1999 operations resulted in a total
loss of $4,356,080 including a loss of $3,855,923 from disposal of discontinued
operation and writing off the related assets and operating losses of $500,157.
The 1998 operations resulted in a total loss of $390,990 net of income tax
benefit (Refer to footnote 4. Income taxes).
OUTLOOK
The Company believes that its existing capital resources and anticipated
cash flows from operations will provide it with sufficient funds to meet its
anticipated capital and operating requirements for 2000. The Company's cash
outflow should improve with the closing of the Silver Mine Tour attraction.
Blue Ledge anticipates selling the remaining building lots in the Hidden
Meadows subdivision which is expected to provide cash of approximately $400,000
during 2000. As the development of the Hidden Meadows subdivision is
substantially complete, Blue Ledge does not expect to incur any substantial
additional costs with this subdivision. The 2000 projection is to sell 70% of
the Blue Ledge's remaining lots in the Deer Crest project providing net cash of
approximately $2,900,000 after development costs. If the sale of those lots does
not occur as anticipated the Company has various other parcels of real estate
that management believes could be marketed or used as collateral for borrowings
to provide the cash flows necessary to fund its on-going operations and
development costs in 2000.
The Company believes that a definitive agreement will be completed during
the first half of 2000 with DMB and that the joint venture partnership will
pursue the continued development and funding of Flagstaff Mountain and Bonanza
Mountain Resorts. United Park expects the level of year 2000 expenditures on
deferred real estate development costs of various other projects to be dependant
on cash availability (Refer to Item 1. Description of Business--Real Estate).
IMPACT OF RECENTLY ISSUED ACCOUNTING STANDARDS:
The Company has reviewed all recently issued Accounting Standards and does
not believe that any of the Standards will have a material effect upon the
financial statements of the Company.
14
<PAGE>
ITEM 7. FINANCIAL STATEMENTS
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
United Park City Mines Company:
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of operations, changes in stockholders' equity and cash
flows present fairly, in all material respects, the financial position of United
Park City Mines Company and subsidiaries (the "Company") at December 31, 1999,
and the results of their operations and their cash flows for each of the two
years in the period ended December 31, 1999, in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
/s/ PRICEWATERHOUSECOOPERS LLP
PRICEWATERHOUSECOOPERS LLP
Salt Lake City, Utah
March 23, 2000
15
<PAGE>
UNITED PARK CITY MINES COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<S> <C>
ASSETS
Cash and cash equivalents................................... $ 1,035,845
Accounts receivable......................................... 78,239
Prepaid expenses............................................ 112,863
Inventories................................................. 73,702
Deferred income taxes....................................... 270,068
Other....................................................... 1,206
-----------
1,571,923
-----------
Real estate:
Hidden Meadows development................................ 556,807
Deer Crest development.................................... 392,482
Deferred development costs--other......................... 3,078,811
-----------
4,028,100
-----------
Property and equipment:
Mine shaft, buildings, and equipment...................... 3,986,570
Construction-in-progress.................................. 261,313
Resort facilities......................................... 58,077
Less accumulated depreciation............................. (3,738,848)
-----------
567,112
Land less accumulated depletion of $1,062,190............... 13,458,002
Water rights................................................ 400,000
-----------
14,425,114
-----------
Total assets................................................ $20,025,137
===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
16
<PAGE>
UNITED PARK CITY MINES COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1999
<TABLE>
<S> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable............................................ $ 225,707
Accrued liabilities......................................... 1,046,836
Net liabilities--discontinued operation..................... 48,095
-----------
1,320,638
Accrued remediation costs................................... 630,000
-----------
Total liabilities......................................... 1,950,638
-----------
Commitments and contingencies (Notes 7 and 8)
Stockholders' equity:
Capital stock, $.01 par value:
Authorized: 3,750,000 shares
Issued: 3,249,411 shares................................ 32,494
Capital in excess of par value............................ 41,982,640
Accumulated deficit....................................... (23,756,851)
-----------
18,258,283
Less cost of treasury stock: 1,294 shares................. (183,784)
-----------
Total stockholders' equity.............................. 18,074,499
-----------
Total liabilities and stockholders' equity.................. $20,025,137
===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
17
<PAGE>
UNITED PARK CITY MINES COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Revenues:
Lot sales................................................. $ 1,292,750 $5,359,000
Contract services......................................... 209,290 66,694
Interest.................................................. 108,714 126,835
Royalties and rentals..................................... 194,696 173,105
Other..................................................... 76,421 43,028
----------- ----------
1,881,871 5,768,662
----------- ----------
Expenses:
Cost of lot sales and selling expense..................... 689,028 1,956,288
General and administrative costs.......................... 954,437 798,135
Mine maintenance and administrative costs................. 2,215,327 1,310,616
Contract services costs................................... 140,484 40,037
Depreciation.............................................. 88,233 132,645
Interest.................................................. 5,792 43,995
Other..................................................... 8,400
----------- ----------
4,101,701 4,281,716
----------- ----------
Income (loss) from continuing operations before income
taxes..................................................... (2,219,830) 1,486,946
Income tax provision........................................ (992) (446,961)
----------- ----------
Income (loss) from continuing operations.................... (2,220,822) 1,039,985
----------- ----------
Discontinued operation (see note 5):
Loss from discontinued operation (less applicable income
tax benefit of $232,598 for 1998 and $0 for 1999)....... (500,157) (390,990)
Loss on disposal of discontinued operation, including
provision of $20,354 for operating losses during
phase-out period (less applicable income tax benefit of
$0 for 1999)............................................ (3,855,923) --
----------- ----------
Loss from discontinued operation............................ (4,356,080) (390,990)
----------- ----------
Net income (loss)........................................... $(6,576,902) $ 648,995
=========== ==========
Basic and diluted net income (loss) per share:
Income (loss) from continuing operations.................. $ (0.68) $ 0.32
Loss from discontinued operation.......................... (1.34) (0.12)
----------- ----------
Basic and diluted........................................... $ (2.02) $ 0.20
=========== ==========
Weighted average shares outstanding:
Basic..................................................... 3,249,411 3,222,065
Diluted................................................... 3,249,411 3,255,398
=========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
18
<PAGE>
UNITED PARK CITY MINES COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
CAPITAL 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, 1997... 3,045,711 $30,457 $36,455,441 $(17,828,944) 1,294 $(183,784) $18,473,170
Issue of stock for land........ 203,700 2,037 5,527,199 5,529,236
Net income..................... -- -- -- 648,995 -- -- 648,995
--------- ------- ----------- ------------ ----- --------- -----------
Balance at December 31, 1998... 3,249,411 $32,494 $41,982,640 $(17,179,949) 1,294 $(183,784) $24,651,401
Net loss....................... -- -- -- (6,576,902) -- -- (6,576,902)
--------- ------- ----------- ------------ ----- --------- -----------
Balance at December 31, 1999... 3,249,411 $32,494 $41,982,640 $(23,756,851) 1,294 $(183,784) $18,074,499
========= ======= =========== ============ ===== ========= ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
19
<PAGE>
UNITED PARK CITY MINES COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $(6,576,902) $ 648,995
----------- -----------
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation............................................ 88,233 132,645
Deferred income taxes................................... 205,134
Increase (decrease) from changes in:
Accounts receivable................................... (30,904) 42,831
Prepaid expenses, inventories and other assets........ (13,334) 25,810
Subdivision development costs......................... 413,420 1,386,025
Deferred development costs--other..................... (1,104,581) (1,563,083)
Accounts payable and accrued liabilities.............. 275,262 64,157
Other................................................. 28,294 (10,000)
Accrued remediation costs............................. 630,000 --
Noncash charges and working capital changes of
discontinued operation................................ 4,094,135 273,440
----------- -----------
Total adjustments................................... 4,380,525 556,959
----------- -----------
Net cash provided by (used in) operating
activities........................................ (2,196,377) 1,205,954
----------- -----------
Cash flows from investing activities:
Construction-in-progress.................................. (25,345) (35,975)
Capital expenditures...................................... (505,590) (490,272)
Investing activities of discontinued operation............ (116,090) (103,059)
----------- -----------
Net cash used in investing activities............... (647,025) (629,306)
----------- -----------
Cash flows from financing activities:
Costs related to issuing stock for land................... -- (47,052)
----------- -----------
Net cash used in financing activities............... -- (47,052)
----------- -----------
Net increase (decrease) in cash and cash equivalents........ (2,843,402) 529,596
Cash and cash equivalents-beginning of period............... 3,890,474 3,360,878
----------- -----------
Cash and cash equivalents-end of period:
Total cash and cash equivalents........................... 1,047,072 3,890,474
Less discontinued operation............................... (11,227) (77,877)
----------- -----------
Cash and cash equivalents from continuing operations-end of
period.................................................... $ 1,035,845 $ 3,812,597
=========== ===========
Supplemental Disclosure of Cash Flow Information:
Cash paid during the periods presented for interest (net
of interest capitalized of $0 in 1999 and 1998)......... $ 5,792 $ 43,995
=========== ===========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
During 1998, the Company acquired land in exchange for 203,700 shares of the
Company's capital stock with a value of $5,576,287.
20
<PAGE>
UNITED PARK CITY MINES COMPANY AND SUBSIDIARIES
NOTES TO THE 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 operated a mine tour
attraction near Park City, which was opened in 1995 and closed November 1, 1999.
The Company believes that cash and cash equivalents at December 31, 1999
plus cash flows from the sale of lots in the Hidden Meadows subdivision and the
Deer Crest project will be sufficient to fund its on-going operations in 2000.
If the sale of those lots does not occur as anticipated the Company has various
other parcels of real estate that management believes could be marketed or used
as collateral for borrowings to provide the cash flows necessary to fund its
on-going operations and development costs in 2000.
B. CASH AND 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 and one located in Wilmington, Delaware
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 using the difference between the
financial statement and tax bases of assets and liabilities based on 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.
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........................................ 3-20 years
</TABLE>
Upon the sale or retirement of property and equipment, any gain or loss on
disposition is reflected in the consolidated statement of operations and the
related asset cost and accumulated depreciation are removed from the respective
accounts.
21
<PAGE>
UNITED PARK CITY MINES COMPANY AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
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 is 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 market 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. The Company believes that it has no current
requirements to incur reclamation costs on any of its real estate properties.
However, should the Company pursue development of certain land parcels in the
future, it could incur material environmental costs related to preparing those
parcels of land for 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.
H. NET INCOME (LOSS) PER SHARE
Basic net income (loss) per share was computed by dividing the net income
(loss) by the weighted average number of capital shares outstanding. Diluted net
income (loss) per share was computed by dividing the net income (loss) by the
sum of the weighted average number of capital shares and the effect of dilutive
unexercised stock options. For the year ended December 31, 1999, outstanding
stock options of 55,833 shares at an average price of $15.539 per share were not
included in the computation of net loss per share because the effect would have
been antidilutive. Capital stock options to purchase 33,333 shares at $6.874 per
share were outstanding during 1998 and were included in the computation of
diluted net income per share.
I. 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
22
<PAGE>
UNITED PARK CITY MINES COMPANY AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
1. SIGNIFICANT ACCOUNTING POLICIES: (CONTINUED)
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
J. STOCK-BASED COMPENSATION
The Company accounts for employee stock options in accordance with
Accounting Principles Board Opinion No. 25 ("APB 25"), "Accounting for Stock
issued to Employees." Under APB 25, the Company recognizes no compensation
expense related to employee stock options, as no options are granted at a price
below the market price on the day of grant.
In 1996, FAS No. 123, "Accounting for Stock-Based Compensation," became
effective for the Company. FAS No. 123, which prescribes the recognition of
compensation expense based on fair market value of options on the grant date,
allows companies to continue applying APB 25 if certain pro forma disclosures
are made assuming hypothetical fair value method application. See Note 9 for pro
forma disclosures required by FAS No. 123 plus additional information on the
Company's stock options.
K. ENVIRONMENTAL REMEDIATION COSTS
The Company accrues for losses associated with environmental remediation
obligations when such losses are probable and reasonably estimable. Those
accrued costs of future expenditures are not discounted to their present value.
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. 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 some of 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
23
<PAGE>
UNITED PARK CITY MINES COMPANY AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. SKI LEASES: (CONTINUED)
fifty cents per acre leased. Greater Park City Company and Deer Valley Resort
Company paid United Park for the 1997-98 ski season, a total of $176,105 and for
the 1998-99 ski season, a total of $180,263.
4. INCOME TAXES:
The income tax provision for the years ended December 31, 1999 and 1998
consists of the following:
<TABLE>
<CAPTION>
1999 1998
-------- ---------
<S> <C> <C>
CONTINUED OPERATIONS:
Current tax provision (benefit)............................ $992 $ (12,093)
Deferred tax provision..................................... -- 459,054
---- ---------
Continued operations income tax provision................ $992 $ 446,961
---- ---------
DISCONTINUED OPERATION:
Current tax provision (benefit)............................ $ -- $ --
Deferred tax benefit....................................... -- (232,598)
---- ---------
Discontinued operations income tax benefit............... $ -- $(232,598)
---- ---------
Total income tax provision................................. $992 $ 214,363
==== =========
</TABLE>
The reported provision for income taxes varies from the amount that would be
provided by applying the statutory U. S. Federal income tax rate to income
(loss) before taxes for the following reasons.
<TABLE>
<CAPTION>
1999 1998
----------- ---------
<S> <C> <C>
Federal statutory tax (benefit) provision............ $(2,235,809) $ 293,542
Increase (reduction) in taxes resulting from:
State income taxes (net of federal benefit)........ (216,481) 8,786
Alternative minimum tax............................ -- 8,829
Change in valuation allowance...................... 2,435,684 (150,649)
Other.............................................. 17,598 53,855
----------- ---------
Income tax provision................................. $ 992 $ 214,363
=========== =========
</TABLE>
As of December 31, 1999, the Company had net operating loss carryforwards
for federal and state income tax purposes of approximately $20,592,000 and
$9,075,000 respectively, which will expire between 2000 and 2019 if not used to
reduce future taxable income.
24
<PAGE>
UNITED PARK CITY MINES COMPANY AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. INCOME TAXES: (CONTINUED)
The components of the net deferred tax asset and liability as of December
31, 1999 are as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Tax net operating loss carryforwards...................... $ 7,300,684
Tax credit carryforwards.................................. 14,452
Charitable contributions carryover........................ 15,281
Accrued remediation costs................................. 234,990
Other..................................................... 1,102
Valuation allowance....................................... (7,288,530)
-----------
Total deferred tax asset................................ 277,979
Deferred tax liability:
Excess tax depreciation and amortization.................. (7,911)
-----------
Net deferred tax asset...................................... $ 270,068
===========
</TABLE>
The Company has recorded a deferred tax asset of $270,068 reflecting the
expected benefit from $7,300,684 in loss carryforwards, which expire in varying
amounts between 2000 and 2019. Realization is dependent on generating sufficient
taxable income prior to expiration of the loss carryforwards. Although
realization is not assured, management believes it is more likely than not that
all of the deferred tax asset will be realized as a result of future taxable
income. The amount of the deferred tax asset considered realizable, however,
could be reduced in the near term if estimates of future taxable income during
the carryforward period are reduced.
5. DISCONTINUED OPERATION:
Effective November 1, 1999, the Company's Board of Directors made a
strategic decision to focus the Company's efforts on real estate development and
to terminate business activity of its wholly owned subsidiary Park City Silver
Mine Adventure, Inc. ("PCSMA"), which to date had not achieved profitable
operations. Where applicable, the assets that can be utilized in other segments
of the Company's operations have been reallocated to those segments. However,
because of the unique nature of the assets, the salvage value is estimated to be
negligible and the book value of the asset has been so adjusted, resulting in a
write down of $3,855,923.
The results of the PCSMA's operations have been classified as a discontinued
operation for all of the periods presented in the Consolidated Statement of
Operations. The discontinued operation has also been segregated for all periods
presented in the Consolidated Statements of Cash Flows.
25
<PAGE>
UNITED PARK CITY MINES COMPANY AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. DISCONTINUED OPERATION: (CONTINUED)
Net assets of the discontinued operation (excluding intercompany balances,
which have been eliminated) are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
1999
-------------
<S> <C>
ASSETS:
Cash and cash equivalents................................. $ 11,227
Accounts receivable....................................... 3,499
--------
Total assets............................................ 14,726
--------
LIABILITIES:
Accounts payable.......................................... 61,980
Accrued liabilities....................................... 841
--------
Total liabilities....................................... 62,821
--------
Net liabilities--discontinued operation..................... $(48,095)
========
</TABLE>
Revenues of the discontinued operation were $1,159,554 and $1,484,510 for
the years ended December 31, 1999 and December 31, 1998, respectively.
6. INDUSTRY SEGMENTS:
During 1998, the Company adopted Statement of Financial Accounting Standard
No. 131, "Disclosures about Segments of an Enterprise and Related Information."
The Company's reportable segments are strategic business units that offer
different products and services. They are managed separately because each
business requires different technology and marketing strategies. The Company is
organized into the following industry segments and management accounts for
revenues from these activities separately and evaluates each of the following
segments based upon performance: Mine Maintenance, and Real Estate. The segment
data here presented does not include intersegment revenues or charges for
corporate overhead costs. As noted previously, effective November 1, 1999, the
Company discontinued the operations of the Silver Mine Adventure, which
previously was reported as a separate segment.
26
<PAGE>
UNITED PARK CITY MINES COMPANY AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6. INDUSTRY SEGMENTS: (CONTINUED)
<TABLE>
<CAPTION>
MINE MAINT. REAL ESTATE OTHER TOTAL
DECEMBER 31, 1999: ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Revenue.................................... $ 311,977 $ 1,495,574 $ 74,320 $ 1,881,871
Operating income (loss)(1)................. (2,222,442) 535,419 (532,807) (2,219,830)
Identifiable assets........................ 780,659 17,331,851 1,912,627 20,025,137
Depreciation............................... 71,028 3,490 13,715 88,233
Capital expenditures, including deferred
real estate development costs............ 2,164 6,227 1,627,125 1,635,516
</TABLE>
<TABLE>
<CAPTION>
MINE MAINT. REAL ESTATE OTHER TOTAL
DECEMBER 31, 1998: ----------- ----------- ---------- -----------
<S> <C> <C> <C> <C>
Revenue.................................... $ 99,544 $ 5,529,048 $ 140,070 $ 5,768,662
Operating income (loss)(1)................. (1,451,573) 3,364,762 (426,243) 1,486,946
Identifiable assets........................ 824,823 16,364,709 4,460,190 21,649,722
Depreciation............................... 113,892 2,905 15,848 132,645
Capital expenditures, including deferred
real estate development costs............ 24,001 545,010 7,076,656 7,645,667
</TABLE>
- ------------------------
(1) Earnings before taxes
All of the segment revenues are derived from within the United States and
all segment assets are located in the United States. The Real Estate segment had
one customer in 1999 with revenues of $700,000 and four customers in 1998 with
total revenues of $3,500,000 which exceeded 10% of the Company's total revenues.
The real estate sales are one-time sales to various customers and are not
expected to reoccur to those customers due to the nature of real estate
transactions.
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.
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.
27
<PAGE>
UNITED PARK CITY MINES COMPANY AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. CONTINGENCIES: (CONTINUED)
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 the appropriate government agencies and acceptance of
the master plan by the Company.
If the appropriate government agencies do 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 the appropriate government agencies, the exchange of the
surface rights to the land by the Company for the termination of the Deer Valley
Ski Lease and the 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 surface rights to the land 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.
RICHARDSON FLAT
A portion of United Park's mining property, known as "Richardson Flat
Tailings," was proposed by the United States Environmental Protection Agency
("EPA") on June 24, 1988, by notice published in the FEDERAL REGISTER, to 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 response to the comments submitted by
United Park, the EPA determined not to list the site on the NPL in a final rule
published February 11, 1991, in the FEDERAL REGISTER.
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 the Comprehensive
Environmental Response, Compensation, and Liability Act ("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.
28
<PAGE>
UNITED PARK CITY MINES COMPANY AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. CONTINGENCIES: (CONTINUED)
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 Utah Pollutant Discharge Elimination System ("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 currently negotiating with the
EPA regarding the possibility of performing a voluntary remedial investigation
and feasibility study ("RI/FS") to determine if any remedial action may be
warranted at Richardson Flat. The Company has accrued $630,000 as its best
estimate of costs to complete the RI/FS at Richardson Flat. Since these
negotiations have not reached their conclusion or the study performed, the
Company cannot estimate the potential costs, if any, that may be required beyond
the RI/FS. The Company has engaged in the study and evaluation of the
development of a recreation complex in the area of Richardson Flat. It is
believed that through the development of the recreation complex, any remedial
issues that might be identified during the study or the development related to
the Richardson Flat Tailings site could be resolved. However, should substantial
remediation be required at the site beyond the scope of such development and
should United Park be designated as a potentially responsible party and it is
later determined that United Park is a responsible party liable for remediation,
those costs could be substantial to the Company.
As United Park has currently conducted its mine maintenance operations and
under current reclamation statutes and regulations, in management's opinion,
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.
8. RETIREMENT SAVINGS PLAN:
The Company has a contributory 401(k) Retirement Savings Plan covering all
employees who have completed three months of continuous service and have
attained the age of 21. Prior to the second quarter of 1999, one year of
continuous service was required to be eligible for this plan. 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 1999 and 1998 was $25,009 and $20,862,
respectively.
9. STOCK OPTION PLAN:
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
29
<PAGE>
UNITED PARK CITY MINES COMPANY AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. STOCK OPTION PLAN: (CONTINUED)
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.
Under the Employee Program, 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 Board will also set the terms and
conditions of the individual stock option grants under the Employee Program
within the framework of the Plan. Outstanding stock options must be exercised
during employment or within three months after termination (other than by reason
of death).
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 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). At
December 31, 1999, a total of 65,000 shares were available for grants of
additional options under the plan.
The option price with respect to each option will be determined by 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).
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 Board of Directors.
Presented below is a summary of stock option plan activity for the years
shown:
<TABLE>
<CAPTION>
WTD. AVG. OPTIONS WTD. AVG.
OPTIONS EXERCISE PRICE EXERCISABLE EXERCISE PRICE
-------- -------------- ----------- --------------
<S> <C> <C> <C> <C>
Balance, December 31, 1997....................... 33,333 $ 6.874 33,333 $ 6.874
Granted........................................ -- -- -- --
Exercised...................................... -- -- -- --
Cancelled...................................... -- -- -- --
------ ------- ------ -------
Balance, December 31, 1998....................... 33,333 $ 6.874 33,333 $ 6.874
Granted........................................ 22,500 28.375 22,500 28.375
Exercised...................................... -- -- -- --
Cancelled...................................... -- -- -- --
------ ------- ------ -------
Balance, December 31, 1999....................... 55,833 $15.539 55,833 $15.539
====== ======= ====== =======
</TABLE>
30
<PAGE>
UNITED PARK CITY MINES COMPANY AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. STOCK OPTION PLAN: (CONTINUED)
The following table summarizes information for options outstanding and
exercisable at December 31, 1999:
<TABLE>
<CAPTION>
OPTIONS OUTSTANDING AND
EXERCISABLE
-------------------------------
WTD. AVG. WTD. AVG.
RANGE OF PRICES NUMBER REMAINING LIFE EXERCISE PRICE
- --------------- -------- -------------- --------------
<S> <C> <C> <C>
$6.874 33,333 5 $ 6.874
28.375 22,500 9 28.375
------ -- -------
$6.874 - $28.375 55,833 7 $15.539
====== == =======
</TABLE>
PRO FORMA FAIR VALUE DISCLOSURES
Had compensation expense for the Company's stock options been recognized
based on fair market value on the grant date under the methodology prescribed by
FAS No. 123, the Company's income (loss) from continuing operations and earnings
(loss) per share for the two years ended December 31, would have been impacted
as shown in the following table.
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
Reported income (loss) from continuing operations... $(2,220,822) $1,039,985
Pro forma income (loss) from continuing
operations........................................ (2,534,247) 1,039,985
Reported diluted earnings (loss) per share from
continuing operations............................. (0.68) 0.32
Pro forma diluted earnings (loss) per share from
continuing operations............................. (0.78) 0.32
</TABLE>
The fair value of options granted is estimated on the date of grant using
the Black-Scholes option-pricing model with the following assumptions:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Expected life of option..................................... 10 yrs --
Risk-free interest rate..................................... 6.0% --
Expected volatility of Company stock........................ 19.7% --
Expected dividend yield on Company stock.................... 0.0% --
</TABLE>
The weighted average fair value of options granted during 1999 and 1998 is
as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Fair value of each option granted....................... $ 13.93 $ --
Total number of options granted......................... 22,500 --
Total fair value of all options granted................. $313,425 $ --
</TABLE>
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not Applicable
31
<PAGE>
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
The information required by this item will be contained in the Company's
definitive Proxy Statement with respect to its Annual Meeting of Stockholders to
be held on May 23, 2000, under the captions "Election of Directors," "Executive
Officers" and "Security Ownership of Certain Beneficial Owners and
Management--Compliance with the Reporting Requirements of Section 16(a)," and is
incorporated by reference into this Annual Report.
ITEM 10. EXECUTIVE COMPENSATION
The information required by this item will be contained in the Company's
definitive Proxy Statement with respect to its Annual Meeting of Stockholders to
be held on May 23, 2000, under the caption "Executive Compensation" and is
incorporated by reference into this Annual Report.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by this item will be contained in the Company's
definitive Proxy Statement with respect to its Annual Meeting of Stockholders to
be held on May 23, 2000, under the caption "Security Ownership of Certain
Beneficial Owners and Management--Compliance with the Reporting Requirements of
Section 16(a)," and is incorporated by reference into this Annual Report.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Not Applicable
32
<PAGE>
ITEM 13. EXHIBITS AND REPORTS ON FOR 8-K
(a) The following exhibits are filed with this Form 10-KSB pursuant to Item
601 of Regulation S-B:
<TABLE>
<CAPTION>
REG. S-B SEQUENTIAL
REFERENCE PAGE
NUMBER DOCUMENT NUMBER
- --------------------- -------- ----------
<S> <C> <C>
3.1 Restated Certificate of Incorporation, as amended by (1)
Certificate of Amendment of Restated Certificate of
Incorporation
3.2 Amendment to Restated Certificate of Incorporation filed in (2)
Delaware on December 19, 1990
3.3 Amendment to Restated Certificate of Incorporation filed in (5)
Delaware on September 8, 1993
3.4 Amendment to Restated Certificate of Incorporation filed in (7)
Delaware on August 25, 1995
3.5 Bylaws (1)
10.1 Purchase Agreement dated January 1, 1971 between United Park (1)
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
10.2 Memorandum of Agreement dated June 23, 1975 among United (1)
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.
10.3 Substituted Escrow Agreement dated October 11, 1975 among (1)
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
10.4 Acquisition Agreement dated October 11, 1975 between Greater (1)
Park City Company and Royal Street Land Company
10.5 Resort Area Lease dated January 1, 1971 between United Park (1)
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
10.6 Crescent Ridge Lease dated January 1, 1971 between United (1)
Park City Mines Company and Greater Park City Company, as
amended by Crescent Ridge Lease dated May 1, 1975
10.7 Deer Valley Lease dated January 1, 1971 between United Park (1)
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
</TABLE>
33
<PAGE>
<TABLE>
<CAPTION>
REG. S-B SEQUENTIAL
REFERENCE PAGE
NUMBER DOCUMENT NUMBER
- --------------------- -------- ----------
<S> <C> <C>
10.8 Water Rights Purchase Agreement dated January 1, 1971 (1)
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 and between United Park (4)
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
10.10 Employment Agreement dated June 1, 1994 by and between (6)
United Park City Mines Company and Hank Rothwell
10.11 Incentive Stock Option Agreement dated June 27, 1994 by and (6)
between United Park City Mines Company and Hank Rothwell
10.12 Incentive Stock Option Agreement dated August 2, 1994 by and (6)
between United Park City Mines Company and Edwin L. Osika,
Jr.
10.13 Employment Agreement dated June 1, 1997 by and between (8)
United Park City Mines Company and Hank Rothwell
10.14 Agreement of Purchase and Sale of Assets between New Quincy (8)
Mining Company as Seller and United Park City Mines Company,
dated December 31, 1997
10.15 Agreement of Purchase and Sale of Assets between Lucky Bill (9)
Mining Company as Seller and United Park City Mines Company,
dated December 31, 1997
22.1 Subsidiaries of the Registrant (3)
27 Financial Data Schedule 37
99 Prospectus which is a part of the Form S-3, Amendment (10)
No. 1, dated April 8, 1998, filed by the Company with the
Securities and Exchange Commission
</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
34
<PAGE>
(7) Incorporated by reference from the Registrant's Form 8-K filed with the
Securities and Exchange Commission on September 7, 1995
(8) Incorporated by reference from the Registrant's Annual Report on
Form 10-KSB for the fiscal year ended December 31, 1999
(9) Incorporated by reference from the Registrant's Form 8-K filed with the
Securities and Exchange Commission on February 19, 1998
(10) Incorporated by reference from the Registrant's Form S-3, Amendment No. 1,
dated April 8, 1998, filed by the Company with the Securities and Exchange
Commission
(b) Reports on Form8-K:
None
35
<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.
<TABLE>
<S> <C> <C>
UNITED PARK CITY MINES COMPANY
(Registrant)
Date March 29, 2000 By: /s/ HANK ROTHWELL
-----------------------------------------
Hank Rothwell
PRESIDENT, CHIEF EXECUTIVE OFFICER, AND
DIRECTOR
</TABLE>
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.
<TABLE>
<CAPTION>
SIGNATURE CAPACITY DATE
--------- -------- ----
<C> <S> <C>
/s/ ALAN L. GORDON
------------------------------------------- Director March 29, 2000
Alan L. Gordon
/s/ JOSEPH S. LESSER
------------------------------------------- Director March 29, 2000
Joseph S. Lesser
/s/ HANK ROTHWELL
------------------------------------------- President, Chief Executive March 29, 2000
Hank Rothwell Officer, and Director
/s/ MICHAEL R. SALMOND
------------------------------------------- Chief Financial Officer March 29, 2000
Michael R. Salmond
</TABLE>
36
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF OPERATIONS FOR THE YEAR
ENDED DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,035,845
<SECURITIES> 0
<RECEIVABLES> 78,235
<ALLOWANCES> 0
<INVENTORY> 73,702
<CURRENT-ASSETS> 1,571,923
<PP&E> 4,305,960
<DEPRECIATION> 3,738,848
<TOTAL-ASSETS> 20,025,137
<CURRENT-LIABILITIES> 1,320,638
<BONDS> 0
0
0
<COMMON> 32,494
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 20,025,137
<SALES> 1,292,750
<TOTAL-REVENUES> 1,881,871
<CGS> 689,028
<TOTAL-COSTS> 689,028
<OTHER-EXPENSES> 3,412,673
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,792
<INCOME-PRETAX> (2,219,830)
<INCOME-TAX> 992
<INCOME-CONTINUING> (2,220,822)
<DISCONTINUED> (4,356,080)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (6,576,902)
<EPS-BASIC> (2.02)
<EPS-DILUTED> (2.02)
</TABLE>
