GREAT AMERICAN RECREATION, INC.
PO BOX 848, MCAFEE, NJ 07428
(201) 828-2000 - MAIN
(201) 209-3303 - ACCOUNTING
September 22, 1995
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549
RE: Great American Recreation, Inc.
File No. 0-9949
Gentlemen:
Enclosed please find an original copy of Form 10-QSB for the
first quarter ended July 31, 1995 which is being electronically sent to
your office.
By copy of this letter, I shall notify the appropriate parties.
Very truly yours,
GREAT AMERICAN RECREATION, INC.
_______________________________
Joseph R. Bellantoni
Vice President and CFO
JRB:jm
enclosures
via: electronic transmission
cc: William S. Clarke, Esq. Mortenson & Associates, P.C.
5 Independence Way 340 North Avenue
Princeton, NJ 08540 Cranford, NJ 07016
NASD, Inc. Ms. Elaine Park Warren
1835 K Street, N.W. NASD
Washington, DC 20006 1735 K Street, NW
Washington, DC 20006
SECURITIES & EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM-10QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
For quarter ended July 31, 1995 Commission file
number 0-9949
GREAT AMERICAN RECREATION, INC.
(exact name of registrant as specified in its charter)
New Jersey
22-2381071
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
P.O. Box 848, McAfee, New Jersey 07428
(address of principal executive offices) (zip code)
(201) 827-2000
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(D) of the
Securities Exchange Act of 1934 during the preceding twelve
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO ___
Indicate the number of shares outstanding of each of the issuer's
classes of common stock as of the close of the period covered by
this report.
Common stock $.01 par, shares outstanding at September 15, 1995,
54,616,903.
THIS REPORT CONTAINS A TOTAL of 28 PAGES
PAGE 1 of 2
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GREAT AMERICAN RECREATION, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
JULY 31, 1995 & APRIL 30, 1995
UNAUDITED
JULY 31, 1995 APRIL 30, 1995
(SEE NOTE BELOW)
Current assets:
Cash $ 823,404 $ 137,586
Other receivables, net 984,151 1,857,344
Prepaid and other assets 435,013 299,225
Current assets 2,242,568 2,294,155
Noncurrent assets:
Receivable from Princeton 13,000,000 13,000,000
Other assets 542,348 543,375
Property, plant and equipment, net 51,001,032 50,589,935
Noncurrent assets 64,543,380 64,133,310
Total assets $ 66,785,948 $ 66,427,465
=========== ==========
NOTE: The balance sheet at April 30, 1995, has been taken
from the audited financial statements at that date and condensed.
SEE ACCOMPANYING NOTES
PAGE 2 of 2
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
GREAT AMERICAN RECREATION, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET
JULY 31, 1995 & APRIL 30, 1995
UNAUDITED
JULY 31, 1995 APRIL 30,1995
(SEE NOTE BELOW)
Current liabilities:
Accounts payable $ 3,846,774 $ 4,413,380
Accrued liabilities 12,431,663 11,881,573
Deferred revenue and
other liabilities 209,562 152,769
Debt 36,812,782 36,804,776
Current liabilities 53,300,781 53,252,498
Noncurrent liabilities:
Debt 5,597,826 5,490,760
Total liabilities 58,898,607 58,743,258
Commitments and contingencies (Note 6)
Redeemable preferred
stock (2,005 aggregate
liquidation value $8,350,000) 2,242,001 2,172,352
Stockholders' equity:
Cumulative, convertible preferred
stock: $1 par value; authorized
5,000,000 shares issued 578,009
at July 31, 1995 and 601,404 at
April 30, 1995 578,009 601,404
Series B convertible preferred
stock $1 par value; issued 12,500
shares at July 31, 1995 and at
April 30, 1995 12,500 12,500
Common stock:
$.01 par value; authorized
100,000,000 shares issued
54,607,518 at July 31,1995
and 54,420,358 at
April 30, 1995 546,075 544,204
Paid in capital in excess
of par value 41,837,889 42,031,908
Retained earnings since
elimination of deficit of
$31,017,247 in April 30,
1992 quasi-reorganization (37,265,059) (37,614,087)
Less: common stock in treasury,
at cost, 2,378 shares (64,074) (64,074)
Total stockholders' equity 5,645,340 5,511,855
Total liabilities and
stockholders'Equity $ 66,785,948 $ 66,427,465
============ ===========
NOTE: The balance sheet at April 30, 1995, has been taken
from the audited financial statements at that date and condensed.
SEE ACCOMPANYING NOTES
PAGE 3 of 2
GREAT AMERICAN RECREATION, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
THREE MONTHS ENDED JULY 31, 1995 & JULY 31, 1994
UNAUDITED
THREE MONTHS ENDED
JULY 31, 1995 JULY 31, 1994
Revenue:
Admission $ 3,823,686 $ 4,004,849
Food & beverage 1,196,886 1,302,318
Other 1,436,695 1,853,048
Total revenue 6,457,267 7,160,215
Cost of Operations:
Admission 1,940,277 2,884,443
Food & beverage 697,765 810,922
Other 610,268 821,576
3,248,310 4,516,941
Selling, General
& Administrative 1,062,646 1,227,992
Interest 1,385,160 982,592
Amortization of financing costs -0- 7,413
Dividend income from Princeton -0- (380,751)
Depreciation and Amortization 237,011 262,647
Reserve on advances to Princeton 175,112 -0-
6,108,239 6,616,834
349,028 543,381
Income taxes -0- -0-
Net Income $ 349,028 $ 543,381
Less: preferred stock dividend
requirements -0- 281,480
Net income applicable to common
stockholders $ 349,028 $ 261,901
=========== ===========
Per Common Share:
Net Income $ 0.01 $ 0.01
=========== ===========
Weighted average number of
common shares used in
computing earnings per share 54,513,112 41,058,357
SEE ACCOMPANYING NOTES
PAGE 4 of 28
GREAT AMERICAN RECREATION, INC. & SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
THREE MONTHS ENDED JULY 31, 1995 & JULY 31, 1994
UNAUDITED
THREE MONTHS ENDED
JULY 31, 1995 JULY 31, 1994
Cash flows from operating activities:
Income advances and
from operations $ 349,028 $ 543,381
Adjustments to reconcile net loss to net
cash (used in) provided by continuing
operations:
Depreciation and amortization 237,011 262,647
Amortization of financing costs -0- 7,413
Reserve on advances and investment in
unconsolidated subsidiary 170,107 128,198
Dividend income paid-in-kind -0- (380,751)
Reserve on advances and dividend
and interest income relating to
Princeton 1,293,287 -0-
Change in assets and liabilities:
Prepaid and other assets charges (134,761) (116,415)
Other receivables 873,193 (594,221)
Investment advances to unconsolidated
subsidiary (170,107) (129,834)
Receivable from Princeton (1,293,287) (2,179,545)
Accounts payable & accrued
liabilities (162,410) 463,087
Deferred revenue and other
liabilities 56,793 388,300
Net cash provided by (used)
in operations 1,218,854 (1,607,740)
Cash flows from investing activities:
payments
Additions to properties (648,108) (2,021,331)
Net cash used in investing
activities (648,108) (2,021,331)
Cash flows from financing activities:
Additional borrowings 152,340 681,600
Repayment of borrowings (37,268) (51,364)
Costs in connection with
exchange offering -0- (290,403)
Net cash provided by financing
activities 115,072 339,833
Net increase (decrease) in cash 685,818 (3,289,238)
Cash balance at beginning of period 137,586 4,335,361
Cash balance at end of period $ 823,404 $ 1,046,123
========== ==========
SEE ACCOMPANYING NOTES
PAGE 5 of 28
GREAT AMERICAN RECREATION, INC. & SUBSIDIARIES
SUPPLEMENTARY SCHEDULE OF NON-CASH
THREE MONTHS ENDED JULY 31, 1995 & JULY 31, 1994
UNAUDITED
THREE MONTHS ENDED
JULY 31, 1995 JULY 31, 1994
Non-cash operating, investing
& financing activities:
Common stock and
Paid In Capital $ -0- $ 5,169,628
Subordinated Debentures -0- (5,169,628)
Net non-cash operating, investing
and financing activities $ -0- $ -0-
=========== ===========
SEE ACCOMPANYING NOTES
PAGE 6 of 28
GREAT AMERICAN RECREATION, INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JULY 31, 1995 & JULY 31, 1994 (UNAUDITED)
NOTE 1 - Basis of Presentation
The condensed consolidated balance sheet as of July 31, 1995, the
condensed consolidated statement of operations for the three
months ended July 31, 1995 and 1994, and the condensed
consolidated statement of cash flows for the periods then ended
are unaudited and reflect all normal and recurring adjustments
which are, in the opinion of management, necessary for a fair
presentation of such data. Results of operations for the three
months ended July 31, 1995 and 1994 are not necessarily
indicative of the results which may be expected for any other
interim period or for the year taken as a whole. These
statements should be read in conjunction with Form 10-KSB for
fiscal 1995, which is on file with the Securities and Exchange
Commission.
NOTE 2 - Reclassification
Certain fiscal 1996 items have been reclassified to conform with
the fiscal 1995 presentation.
NOTE 3 - Quasi-Reorganization
On April 30, 1992, the Board of Directors of the Company and its
subsidiaries approved a corporate readjustment of their accounts,
effected in the form of a quasi-reorganization, which resulted in
the adjustment of assets and liabilities to estimated fair values
and elimination of the accumulated deficit, effective April 30,
1992. The Company had implemented the quasi-reorganization at
that time since it had completed its reorganizations with
respect to real estate development activities, raised substantial
new capital and completed the necessary restructuring which will
permit the concentration of efforts on recreational activities.
The net amount of such revaluation adjustments together with the
accumulated deficit as of the date thereof, was transferred to
paid-in capital in accordance with the accounting principles
applicable to quasi-reorganizations. The adjustments include
writedowns of certain deferred costs and other intangibles not
considered to have future value, revaluations of land,
depreciable assets, receivables and adjustments to deferred
gains, deferred revenue and debt.
The quasi-reorganization resulted in a significant write-up of
non-depreciable assets with a significant write-down of
depreciable assets based upon an independent appraisal. The
result was a substantial improvement in reported net income in
the absence of any improvement in operating performance. The
effect of the quasi-reorganization in future financial statements
is to reduce depreciation and amortization expense by
approximately $4,072,000 per year. These reductions and changes
have had a material effect on the comparability of current
financial statements as compared with those for years ending
through April 30, 1992.
PAGE 7 of 28
GREAT AMERICAN RECREATION, INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JULY 31, 1995 & JULY 31, 1994 (UNAUDITED)
NOTE 4 - Investment in Princeton-New York Parent, Inc.
On June 15, 1989, the Company entered into an Agreement and Plan
of Merger whereby the Company's real estate and spa operations
were combined under the control of a corporation, Princeton-New
York Parent, Inc., ("Princeton"), which is partially owned by a
director of the Company. Under the original terms of the
transaction, the Company received 30% of the stock of the
affiliated corporation and received 5% of the gross revenues
realized from the sale of residential units developed and sold on
the land presently owned by the combined entities. In addition,
the affiliated corporation assumed certain indebtedness of the
former real estate subsidiary of the Company and had agreed to
reimburse the Company's net operating costs of the former
subsidiaries from the date of the plan to divest to the closing
of the transaction, which totaled approximately $6,400,000, and,
furthermore, had agreed to pay to the Company an additional
$2,100,000. The Company received an $8.5 million note for the
cost of reimbursement and the purchase price of the subsidiaries
which was payable over a maximum of ten years, with interest
at prime plus 2 1/2%, payable quarterly.
On April 30, 1992, the board of directors of the Company and
Princeton authorized the conversion of the Company's 30% equity
interest in Princeton, along with its receivables and its
entitlement to 5% of residential unit sales revenue of Princeton
into a preferred stock investment. The conversion to preferred
stock was made to improve Princeton's financial condition and
recognize the long-term nature of the Company's investment in
Princeton. The investment in preferred stock is accounted for
under the cost method commencing April 30, 1992. Under this
method of accounting, the Company will include dividends paid by
Princeton on the preferred stock in income when received. The
Company will no longer include a share of Princeton's income
or losses in its income statement. In the year ended April 30,
1992, the Company included a charge against income of $2,361,000
as its share of Princeton's net loss.
The preferred stock has a liquidation value of $17,231,388 at
July 31, 1995, and a dividend rate of 10%. Dividends are
cumulative and can be paid-in-kind with additional preferred
stock or, at the option of Princeton, in cash.
PAGE 8 of 28
GREAT AMERICAN RECREATION, INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JULY 31, 1995 & JULY 31, 1994 (UNAUDITED)
NOTE 4 - Investment in Princeton-New York Parent, Inc.
(continued)
The following represents an analysis of the receivables activity
between the Company and Princeton and their affiliates:
JULY 31, 1995 APRIL 30, 1995
Balance at the beginning
of the period $ 25,542,727 $ 19,043,748
Cash advanced to Princeton 255,328 1,512,958
Cash payments from Princeton (1,541,404) (4,931,184)
Net Cash Activity (1,286,075) 3,418,226
Expenses paid by the Company
on behalf of Princeton 1,619,770 9,311,332
Expenses paid by Princeton on
behalf of the Company (158,583) (1,687,158)
Net Expense Activity 1,461,187 7,624,174
Interest accrued on outstanding
receivable balance 697,897 2,293,031
Balance at the end of the
period $ 26,415,736 $ 25,542,727
=========== ===========
At April 30, 1995, as a consequence of the Princeton Investors'
bankruptcy proceeding and First Fidelity's refusal to grant a
non-disturbance agreement in connection with the sale of
long-term contractual rights to use amenities on the Company's
and Princeton's properties, the Company's aggregate investment of
$12,060,888 in the preferred stock of Princeton was fully
reserved. In addition, the Company has adjusted the carrying
value of its outstanding receivable balance with Princeton at
April 30, 1995 to $13,000,000, which is net of a reserve
allowance of $12,542,727. All future advances to Princeton by the
Company will be fully reserved. For the three months ended July
31, 1995, the Company recorded an additional reserve allowance of
$873,009 for advances made to Princeton.
NOTE 5 - Related Party Transactions
A director of the Company is also a principal in Princeton.
Princeton was billed for services rendered by the Company, and
these amounts were mutually agreed upon by the management of both
companies. Upon the sale of the Company's real estate businesses
to this company (see Note 4), the Company has continued to
provide certain support services including payroll, marketing and
staffing essentially on a cost basis. In the first three months
of fiscal 1996 and 1995, approximately $890,000 and $1,082,000 of
costs associated with these activities have been billed with an
off-setting reduction to the appropriate Company expense.
PAGE 9 of 28
GREAT AMERICAN RECREATION, INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JULY 31, 1995 & JULY 31, 1994 (UNAUDITED)
NOTE 6 - Commitments and Contingencies
General
Effective May 15, 1995, the Company obtained a general liability
insurance policy insuring the Company against loss in the
aggregate amount of $4,000,000 per occurrence and $4,000,000 in
the aggregate during the policy year. The policies provide for a
deductible whereby the Company is obligated to pay the first
$250,000 of claims during the policy year. The Company has
obtained a bond to cover the first $250,000 of liability. Prior
to May 15, 1995, the Company did not carry general liability
insurance covering it from liability to patrons to its Action
park and ski area.
By reason of that absence of liability insurance, the Company
will be required to pay out of its own resources any claims it is
ultimately determined to be liable for resulting from injuries to
patrons in its Action Park and ski area which occurred prior to
May 15, 1995. At July 31, 1995, the Company had accrued
approximately $3,714,000 for uninsured liability claims, an
amount considered adequate by Management. Such sum has not been
funded and in view of the Foreclosure Proceeding and the
Company's current financial condition, the Company may be unable
to pay the claims of those persons sustaining personal injuries
and, possibly, its other obligations. The Company discontinued
its liability insurance coverage in 1986 by reason of the
substantial general increases in liability insurance premiums
throughout the insurance industry which made insurance coverage
prohibitively expensive for the Company.
By reasons of the sale of certain subsidiaries on November 1,
1989 (Note 4) and the requirements of a debt refinancing with
First Fidelity on June 28, 1990, the Company is contingently
liable at July 31, 1995 on approximately $8.8 million of the debt
and other liabilities of these former subsidiaries under various
loan guarantees that survived the sale and certain cross-default
provisions of certain debt instruments. Accordingly, a default
by these former subsidiaries is a default under the Company's
debt agreements.
Litigation
On May 17, 1995 First Fidelity commenced (the Foreclosure Action)
against the Company, substantially all of its subsidiaries,
Princeton and its subsidiaries and others alleging that the
indebtedness owing to First Fidelity by the Company and Princeton
is in default and seeking to foreclose on certain real and
personal assets which are collateral for the obligations of the
Company and its subsidiaries and Princeton and its subsidiaries.
First Fidelity is also seeking certain other relief in the
action. The assets involved in the Foreclosure Action
constitutes substantially all of the assets of the Company and
its subsidiaries as well as of Princeton and its subsidiaries. A
director of the Company is also an officer, director and
principal shareholder of Princeton and the agreements and other
instruments evidencing the obligations of the Company and its
subsidiaries and Princeton
PAGE 10 of 28
GREAT AMERICAN RECREATION, INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JULY 31, 1995 & JULY 31, 1994 (UNAUDITED)
NOTE 6 - Commitments and Contingencies (continued)
Litigation (continued)
and its subsidiaries to First Fidelity contain cross-default
provisions whereby a default by the Company, any of its
subsidiaries, Princeton or any of its subsidiaries under any of
their obligations to First Fidelity constitutes a default of each
of the other obligors under their obligations to First Fidelity.
In addition, each of the Company and Princeton have guaranteed
the obligations of the other and their respective subsidiaries
to First Fidelity. First Fidelity claims the Company and its
subsidiaries owe it, as of May 15, 1995, an aggregate of
approximately $16,240,000 plus interest, counsel fees and other
costs as permitted by the relevant loan documents and that
Princeton and its subsidiaries owe it, as of May 15, 1995,
an aggregate of approximately $2,738,000 plus interest, counsel
fees and other costs as permitted by the relevant loan documents.
The Company claims that the principal amount owing by the Company
at July 31, 1995 was $14,900,000 and Princeton on that date was
$2,330,520.
The Company and Princeton and their subsidiaries have filed an
answer denying the material allegations of the Complaint and
setting forth a counterclaim asserting, among other things, that
First Fidelity engaged in bad faith and misconduct and breached
its fiduciary duties to the defendants in failing to provide
certain construction financing relating to a condominium project
of a subsidiary of Princeton, refused to grant non-disturbance
agreements to the Company and a subsidiary of Princeton in
connection with the sale of long-term contractual rights to use
amenities on the property by a joint venture between the Company
and Princeton all of which were critical to the defendants'
ability to perform under their obligations to First Fidelity and
to meet the Company's other obligations.
If First Fidelity is successful in the Foreclosure Action it will
succeed to the ownership of substantially all of the Company's
assets without any assumption of the Company's liabilities. The
Company believes that its equity in the assets which are the
subject of the Foreclosure Action exceeds the amount First
Fidelity claims it is owed by both the Company and Princeton.
However, there can be no assurance as to the outcome of the
Foreclosure Action (or any of the other legal proceedings to
which the Company is a party) and thereby there can be no
assurance that the Company will not be forced to commence a
reorganization proceeding under the Federal Bankruptcy Laws or
may not be forced into liquidation by its creditors. Under such
circumstances there can be no assurance that after paying all
outstanding secured and other indebtedness ranking senior there
will be any assets available for distribution to the Company's
holders of its outstanding subordinated debentures or
shareholders or that such holders will retain any equity or
subordinated debt interest in the Company following any
reorganization proceeding. A consent order has been entered into
the litigation whereby the Company has agreed not to disburse any
monies other than for the payment of ordinary business expenses
without the consent of First Fidelity and further provides that
the Company cannot enter into any agreement, pursuant to which it
or any subsidiary would incur any payment obligation outside of
the ordinary course of business.
PAGE 11 of 28
GREAT AMERICAN RECREATION, INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JULY 31, 1995 & JULY 31, 1994 (UNAUDITED)
NOTE 6 - Commitments and Contingencies (continued)
Litigation (continued)
On June 23, 1995, First Fidelity commenced an action (the
"Guaranty Action") in the Superior Court of New Jersey, Law
Division - Morris County against the Company, its subsidiaries,
Princeton, its subsidiaries, Mr. Gene Mulvihill, a Director of
the Company, and others seeking to obtain a judgment against such
persons arising out of their guarantees of the indebtedness of
the Company and Princeton described above owing to First
Fidelity.
On September 13, 1995, a non-affiliated person entered into an
option agreement with First Fidelity to acquire from First
Fidelity the indebtedness of the Company and its affiliates owing
to First Fidelity, the related collateral and First Fidelity's
interest in the Foreclosure Action. The non-affiliated person
paid approximately $1,627,000 for the option which provides
for a final closing date of October 27, 1995. The consummation
of the option agreement is subject to the fulfillment of numerous
conditions and the delivery of various documents, including
releases and indemnification agreements from the Company and its
affiliates in favor of First Fidelity. There can be no assurance
that the First Fidelity indebtedness, and the related collateral
and Foreclosure Action will be acquired by the non-affiliated
person. that such person will not pursue the Foreclosure Action
or that the Company will be able to obtain from the
non-affiliated person any agreements favorable to the Company and
its future activities.
On August 7, 1995, American Stock Transfer and Trust Company, a
trustee under a Debenture Indenture dated as of June 12, 1991
under which there is outstanding $6,288,659 principal amount of
subordinated debentures due May 31, 2006, commenced a lawsuit in
the United States District Court for the District of New York
alleging that the Company had defaulted in the payment of
interest due on the debentures, that the entire principal amount
and accrued interest is now due and payable and seeking to
recover a judgment for such amount. The Company has filed an
answer in this litigation which, among other things, alleges that
the plaintiff is disqualified from so acting by reason of
conflicts of interest in fulfilling its duties to the debenture
holders and is thereby barred from maintaining this lawsuit.
There can be no assurance that the Company will be successful in
its defense of this litigation or that as a result of the
institution of this litigation that the Company will not be
compelled to commence a proceeding under Chapter XI of the
Federal Bankruptcy Laws.
On January 28, 1994, Parkway Power Corporation and certain of its
affiliated entities and Robert Morgenroth commenced a lawsuit in
the Law Division, Superior Court, Sussex County, New Jersey
against the Company, Great Mountain Development Corporation,
Princeton New York Investors, Inc., and a director of the Company
seeking the delivery of certain condominium units and to recover
the sum of $1.2 million alleging, among other things, that the
defendants have breached a settlement agreement resolving certain
litigation previously instituted by the plaintiffs. The Company
filed an answer and other responsive pleadings and believes it
has meritorious defenses to the claims asserted in the
litigation. The Company's belief is based on the facts that the
Company fully performed under the terms of the settlement
PAGE 12 of 28
GREAT AMERICAN RECREATION, INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JULY 31, 1995 & JULY 31, 1994 (UNAUDITED)
NOTE 6 - Commitments and Contingencies (continued)
Litigation (continued)
agreement and that it was the responsibility of Princeton New
York Investors, Inc. to deliver the condominium units to
plaintiffs and plaintiffs failed to enforce its rights against
Princeton New York Investors, Inc. The Company's belief is
supported by discussions with its counsel in the matter and the
Company has not obtained an opinion of counsel to support its
belief.
NOTE 7 - Income Taxes
In connection with the quasi-reorganization effected on April 30,
1992 (see Note 3), the Company has adopted Financial Accounting
Standards Board Statement No. 109, Accounting for Income Taxes,
effective on that date. The effect of the adoption had no
material effect on the financial statements.
NOTE 8 - Debt
Primary Lending Activity
On May 17, 1995, First Fidelity Bank, N.A. ("First Fidelity")
commenced ( the Foreclosure Action) against the Company,
substantially all of its subsidiaries, Princeton and its
subsidiaries and others alleging that the indebtedness owing to
First Fidelity by the Company and Princeton is in default and
seeking to foreclose on certain real and personal assets which
are collateral for the obligations of the Company and its
subsidiaries and Princeton and its subsidiaries. First Fidelity
is also seeking certain other relief in the action. The assets
involved in the Foreclosure Action constitutes substantially all
of the assets of the Company and its subsidiaries as well as of
Princeton and its subsidiaries. A director of the Company is
also an officer, director and principal shareholder of Princeton
and the agreements and other instruments evidencing the
obligations of the Company and its subsidiaries and Princeton and
its subsidiaries to First Fidelity contain cross-default
provisions whereby a default by the Company, any of its
subsidiaries, Princeton or any of its subsidiaries under any of
their obligations to First Fidelity constitutes a default of each
of the other obligors under their obligations to First Fidelity.
In addition, each of the Company and Princeton have guaranteed
the obligations of the other and their respective subsidiaries to
First Fidelity. First Fidelity claims the Company and its
subsidiaries owe it, as of May 15, 1995, an aggregate of
approximately $16,240,000 plus interest, counsel fees and other
costs as permitted by the relevant loan documents and that
Princeton and its subsidiaries owe it, as of May 15, 1995, an
aggregate of approximately $2,738,000 plus interest, counsel fees
and other costs as permitted by the relevant loan documents. The
Company claims that the principal amount owing by the Company at
July 31, 1995 was $14,900,000 and Princeton on that date was
$2,330,520.
The Company and Princeton and their subsidiaries have filed an
answer denying the material allegations of the Complaint and
setting forth a counterclaim asserting, among other things, that
First Fidelity engaged in bad faith and misconduct and breached
its fiduciary duties to the defendants in failing to provide
certain construction financing relating to a condominium project
of a
PAGE 13 of 2
GREAT AMERICAN RECREATION, INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JULY 31, 1995 & JULY 31, 1994 (UNAUDITED)
NOTE 8 - Debt (continued)
Primary Lending Activity (continued)
subsidiary of Princeton, refused to grant non-disturbance
agreements to the Company and a subsidiary of Princeton in
connection without the sale of long-term contractual rights to
use amenities on the property by a joint venture between the
Company and Princeton all of which were critical to the
defendants' ability to perform under their obligations to First
Fidelity and to meet the Company's other obligations.
If First Fidelity is successful in the Foreclosure Action it will
succeed to the ownership of substantially all of the Company's
assets without any assumption of the Company's liabilities. The
Company believes that its equity in the assets which are the
subject of the Foreclosure Action exceeds the amount First
Fidelity claims it is owed by both the Company and Princeton.
However, there can be no assurance as to the outcome of the
Foreclosure Action (or any of the other legal proceedings to
which the Company is a party) and thereby there can be no
assurance that the Company will not be forced to commence a
reorganization proceeding under the Federal Bankruptcy Laws or
may not be forced into liquidation by its creditors. Under such
circumstances there can be no assurance that after paying all
outstanding secured and other indebtedness ranking senior there
will be any assets available for distribution to the Company's
holders of its outstanding subordinated debentures or
shareholders or that such holders will retain any equity or
subordinated debt interest in the Company following any
reorganization proceeding. A consent order has been entered into
the litigation whereby the Company has agreed not to disburse any
monies other than for the payment of ordinary business expenses
without the consent of First Fidelity and further provides that
the Company cannot enter into any agreement, pursuant to which it
or any subsidiary would incur any payment obligation outside of
the ordinary course of business.
On September 13, 1995, a non-affiliated person entered into an
option agreement with First Fidelity to acquire from First
Fidelity the indebtedness of the Company and its affiliates owing
to First Fidelity, the related collateral and First Fidelity's
interest in the Foreclosure Action. The non-affiliated person
paid approximately $1,627,000 for the option which provides
for a final closing date of October 27, 1995. The consummation
of the option agreement is subject to the fulfillment of numerous
conditions and the delivery of various documents, including
releases and indemnification agreements from the Company and its
affiliates in favor of First Fidelity. There can be no assurance
that the First Fidelity indebtedness, and the related collateral
and Foreclosure Action will be acquired by the non-affiliated
person. that such person will not pursue the Foreclosure Action
or that the Company will be able to obtain from the
non-affiliated person any agreements favorable to the Company and
its future activities.
Other Secured Debt
In March 1989, the Company refinanced the mortgage on one of its
ski lodges in order to make available additional cash for
operations. The Company
PAGE 14 of 2
GREAT AMERICAN RECREATION, INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JULY 31, 1995 & JULY 31, 1994 (UNAUDITED)
NOTE 8 - Debt (continued)
Other Secured Debt(continued)
entered into a $5,000,000 mortgage, which was originally
scheduled to be repaid over five years ending March 1, 1994. The
mortgage has two participants with each participant originally
holding an equal share of the mortgage. Interest on the mortgage
is 12% for one participant's share of the loan, and 12 - 1/2%
for the other. This loan is guaranteed by certain
individuals, including a director of the Company. The Company
has been notified that because of First Fidelity continuing its
foreclosure proceeding, the participants of the mortgage will
commence a foreclosure action with respect to their first lien
position. The participants have advised the Company that
provided the Company remains current on its payment obligations
to the participants and First Fidelity does not move to a
Sheriff's Sale, the participants of this mortgage will forbear
from concluding this action for a period of six months from
August 1, 1995.
Subordinated Debentures
On August 7, 1995, American Stock Transfer and Trust Company, a
trustee under a Debenture Indenture dated as of June 12, 1991
under which there is outstanding $6,288,659 principal amount of
subordinated debentures due May 31, 2006, commenced a lawsuit in
the United States District Court for the District of New York
alleging that the Company had defaulted in the payment of
interest due on the debentures, that the entire principal amount
and accrued interest is now due and payable and seeking to
recover a judgment for such amount. The Company has filed an
answer in this litigation which, among other things, alleges that
the plaintiff is disqualified from so acting by reason of
conflicts of interest in fulfilling its duties to the
debentureholders and is thereby barred from maintaining this
lawsuit. There can be no assurance that the Company will be
successful in its defense of this litigation or that as a result
of the institution of this litigation that the Company will not
be compelled to commence a proceeding under Chapter XI of the
Federal Bankruptcy Laws.
As stated above, the Company is currently in default and a
lawsuit has been filed against the Company in connection with the
Company's 10% subordinated debentures due May 31, 2006 in the
principal amount of $6,288,659. In addition, the Company is
currently in default with respect to its 10% subordinated
debentures due January 7, 1996 in the principal amount of
$4,480,300; 15% subordinated debentures due August 1, 1995 in
the principal amount of $550,000; and 13% convertible
subordinated debentures due December 31, 1996 in the principal
amount of $1,455,500.
NOTE 9 - Going Concern
The Company's condensed consolidated financial statements are
prepared in conformity with generally accepted accounting
principals, which contemplates continuation of the Company as a
going concern. The Company had incurred a net loss for the
year ended April 30, 1995 of $38,568,811, of which
PAGE 15 of 28
GREAT AMERICAN RECREATION, INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JULY 31, 1995 & JULY 31, 1994 (UNAUDITED)
NOTE 9 - Going Concern (continued)
$37,448,566 represented unusual items. In addition, a
foreclosure action was commenced by First Fidelity on May 17,
1995, alleging the Company and substantially all of its
subsidiaries are in default on indebtedness owing
First Fidelity and is seeking to foreclose on certain real and
personal assets which are collateral for the obligations of the
Company and it subsidiaries. First Fidelity claims the Company
and its subsidiaries owe it, as of May 15, 1995, an aggregate of
approximately $16,240,000, plus interest, counsel fees and other
costs as permitted by the relevant loan documents, and that
Princeton, and its subsidiaries, owe it as of May 15,1995, an
aggregate of approximately $2,378,000, plus interest, counsel
fees, and other costs permitted by the relevant loan documents.
Many of the Company's debt instruments also contain cross-default
provisions whereby a default by the Company, or any of its
subsidiaries, constitutes a default of the related debt
instrument. Also, on August 7, 1995, American Stock Transfer and
Trust Company, a trustee under a Debenture Indenture dated as of
June 12, 1991 under which there is outstanding $6,288,659
principal amount of subordinated debentures, commenced a lawsuit
in the United States District Court for the District of New York
alleging that the Company had defaulted in the payment of
interest due on the debentures, that the entire principal amount
and accrued interest is now due and payable and seeking to
recover a judgment for such amount. The Company has filed an
answer in this litigation which, among other things, alleges that
the plaintiff is disqualified from so acting by reason of
conflicts of interest in fulfilling its duties to the
debentureholders and is thereby barred from maintaining this
lawsuit. There can be no assurances that as a result of the
institution of this litigation that the Company will not be
compelled to commence a proceeding under Chapter XI of the
Federal Bankruptcy Laws.
These factors create uncertainty whether the Company can continue
as a going concern. The Company's plans to mitigate the effects
of the uncertainties of the Company`s continued existence are: 1)
to seek to replace First Fidelity's debt with other long-term
debt financing with more favorable repayment terms; 2) to improve
profitability by reducing operating costs in fiscal 1996; 3) to
substantially reduce the Company's capital spending in fiscal
1996; 4) to offer the current bondholders incentives to convert
their interest bearing bonds for entitlements to the Company's
amenities, shares of stock in the Company and non-interest
bearing bonds of the Company; and 5) to continue to seek
additional funding through private sources to supplement the
Company's cash needs. Management believes that these plans can
be effectively implemented in the next twelve month period. The
Company's ability to continue as a going concern is dependent on
the implementation and success of these plans. The financial
statements do not include any adjustments in the event the
Company is unable to continue as a going concern.
PAGE 16 of 28
GREAT AMERICAN RECREATION, INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JULY 31, 1995 & JULY 31, 1994 (UNAUDITED)
NOTE 10 - Subsequent Events
The Company is currently in arrears on approximately $1,134,000
of dividend payments on its 10% Cumulative Preferred Stock.
On August 7, 1995, American Stock Transfer and Trust Company, a
trustee under a Debenture Indenture dated as of June 12, 1991
under which there is outstanding $6,288,659 principal amount of
subordinated debentures due May 31, 2006, commenced a lawsuit in
the United States District Court for the District of New York
alleging that the Company had defaulted in the payment of
interest due on the debentures, that the entire principal amount
and accrued interest is now due and payable and seeking to
recover a judgment for such amount. The Company has filed an
answer in this litigation which, among other things, alleges that
the plaintiff is disqualified from so acting by reason of
conflicts of interest in fulfilling its duties to the
debentureholders and is thereby barred from maintaining this
lawsuit. There can be no assurance that the Company will be
successful in its defense of this litigation or that as a result
of the institution of this litigation that the Company will not
be compelled to commence a proceeding under Chapter XI of the
Federal Bankruptcy Laws.
As stated above, the Company is currently in default and a
lawsuit has been filed against the Company in connection with the
Company's 10% subordinated debentures due May 31, 2006 in the
principal amount of $6,288,659. In addition, the Company is
currently in default with respect to its 10% subordinated
debentures due January 7, 1996 in the principal amount of
$4,480,300; 15% subordinated debentures due August 1, 1995 in
the principal amount of $550,000; and 13% convertible
subordinated debentures due December 31, 1996 in the principal
amount of $1,455,500.
On September 13, 1995, a non-affiliated person entered into an
option agreement with First Fidelity to acquire from First
Fidelity the indebtedness of the Company and its affiliates owing
to First Fidelity, the related collateral and First Fidelity's
interest in the Foreclosure Action. The non-affiliated person
paid approximately $1,627,000 for the option which provides
for a final closing date of October 27, 1995. The consummation
of the option agreement is subject to the fulfillment of numerous
conditions and the delivery of various documents, including
releases and indemnification agreements from the Company and its
affiliates in favor of First Fidelity. There can be no assurance
that the First Fidelity indebtedness, and the related collateral
and Foreclosure Action will be acquired by the non-affiliated
person. that such person will not pursue the Foreclosure Action
or that the Company will be able to obtain from the
non-affiliated person any agreements favorable to the Company and
its future activities.
PAGE 17 of 28
GREAT AMERICAN RECREATION, INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JULY 31, 1995 & JULY 31, 1994 (UNAUDITED)
A. LIQUIDITY & CAPITAL RESOURCES
The Company had net income applicable to common shareholders of
approximately $349,000 during the first three months of fiscal
1996. During this period, the Company's operations were funded
primarily as follows:
Three Months Ended July 31, 1995
During the three months ended July 31, 1995, the Company had net
income of approximately $349,000. Included in this net income is
depreciation and amortization of approximately $237,000, a
non-cash expense. After reflecting the net change in assets and
liabilities, resulting primarily from the decrease in other
receivables net cash provided by operations was approximately
$1,219,000. Investing activities included additions to properties
of approximately $648,000. Financing activities provided net
cash of approximately $116,000 during the fiscal year from
additional borrowings. Repayment of borrowings amounted to
approximately $37,000 during the three month period. Accordingly,
during the first three months of fiscal 1996 fiscal year the
Company's cash increased by approximately $686,000.
The Company's consolidated financial statements are prepared in
conformity with generally accepted accounting principals, which
contemplates continuation of the Company as a going concern. The
Company had incurred a net loss for the year ended April 30 1995
of $38,568,811, of which $37,448,566 represented unusual items.
In addition, a foreclosure action was commenced by First Fidelity
on May 17, 1995, alleging the Company and substantially all of
its subsidiaries are in default on indebtedness owing First
Fidelity and is seeking to foreclose on certain real and personal
assets which are collateral for the obligations of the Company
and its subsidiaries. First Fidelity claims the Company and its
subsidiaries owe it as of May 15, 1995, an aggregate of
approximately $16,240,000 plus interest, counsel fees and other
costs as permitted by the relevant loan documents, and that
Princeton, and its subsidiaries, owe it as of May 15, 1995, an
aggregate of approximately $2,378,000, plus interest, counsel
fees, and other costs as permitted by the relevant loan
documents. Many of the Company's debt instruments also contain
cross-default provisions whereby a default by the Company, or any
of its subsidiaries, constitutes a default of the related
debt instrument. Also, on August 7, 1995, American Stock
Transfer and Trust Company, a trustee under a Debenture Indenture
dated as of June 12, 1991 under which there is outstanding
$6,288,659 principal amount of subordinated debentures, commenced
a lawsuit in the United States District Court for the District of
New York alleging that the Company had defaulted in the payment
of interest due on the debentures, that the entire principal
amount and accrued interest is now due and payable and seeking to
recover a judgment for such amount. The Company is currently
consulting with counsel with respect to what actions should be
taken in responding to this litigation. There can be no assurance
that as a result of the institution of this litigation that the
Company will not be compelled to commence a proceeding under
Chapter XI of the Federal Bankruptcy Laws.
PAGE 18 of 2
GREAT AMERICAN RECREATION, INC. & SUBSIDIARIES
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
A. LIQUIDITY & CAPITAL RESOURCES(continued)
These factors create uncertainty whether the Company can continue
as a going concern. The Company's plans to mitigate the effects
of the uncertainties of the Company's continued existence are:
1) to seek to replace First Fidelity's debt with other long-term
debt financing with more favorable repayment terms; 2) to
improve profitability by reducing operating costs in fiscal 1996;
3) to substantially reduce the Company's capital spending in
fiscal 1996; 4) to offer the current bondholders incentives to
convert their interest bearing bonds for entitlements to the
Company's amenities, shares of stock in the Company and
non-interest bearing bonds of the Company; and 5) to continue to
seek additional funding through private sources to supplement
the Company's cash needs. Management believes that these plans
can be effectively implemented in the next twelve month period.
The Company's ability to continue as a going concern is dependent
on the implementation and success of these plans. The financial
statements do not include any adjustments in the event the
Company is unable to continue as a going concern.
On May 17, 1995, First Fidelity Bank, N.A. ("First Fidelity")
commenced ( the Foreclosure Action) against the Company,
substantially all of its subsidiaries, Princeton and its
subsidiaries and others alleging that the indebtedness owing to
First Fidelity by the Company and Princeton is in default and
seeking to foreclose on certain real and personal assets which
are collateral for the obligations of the Company and its
subsidiaries and Princeton and its subsidiaries. First Fidelity
is also seeking certain other relief in the action. The assets
involved in the Foreclosure Action constitutes substantially all
of the assets of the Company and its subsidiaries as well as of
Princeton and its subsidiaries. A director of the Company is
also an officer, director and principal shareholder of Princeton
and the agreements and other instruments evidencing the
obligations of the Company and its subsidiaries and Princeton and
its subsidiaries to First Fidelity contain cross-default
provisions whereby a default by the Company, any of its
subsidiaries, Princeton or any of its subsidiaries under any of
their obligations to First Fidelity constitutes a default of each
of the other obligors under their obligations to First Fidelity.
In addition, each of the Company and Princeton have guaranteed
the obligations of the other and their respective subsidiaries to
First Fidelity. First Fidelity claims the Company and its
subsidiaries owe it, as of May 15, 1995, an aggregate of
approximately $16,240,000 plus interest, counsel fees and other
costs as permitted by the relevant loan documents and that
Princeton and its subsidiaries owe it, as of May 15, 1995, an
aggregate of approximately $2,738,000 plus interest, counsel fees
and other costs as permitted by the relevant loan documents. The
Company claims that the principal amount owing by the Company at
July 31, 1995 was $14,900,000 and Princeton on that date was
$2,330,520.
PAGE 19 of 28
GREAT AMERICAN RECREATION, INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JULY 31, 1995 & JULY 31, 1994 (UNAUDITED)
A. LIQUIDITY & CAPITAL RESOURCES (continued)
The Company and Princeton and their subsidiaries have filed an
answer denying the material allegations of the Complaint and
setting forth a counterclaim asserting, among other things, that
First Fidelity engaged in bad faith and misconduct and breached
its fiduciary duties to the defendants in failing to provide
certain construction financing relating to a condominium project
of a subsidiary of Princeton, refused to grant non-disturbance
agreements to the Company and a subsidiary of Princeton in
connection without the sale of long-term contractual rights to
use amenities on the property by a joint venture between the
Company and Princeton all of which were critical to the
defendants' ability to perform under their obligations to First
Fidelity and to meet the Company's other obligations.
If First Fidelity is successful in the Foreclosure Action it will
succeed to the ownership of substantially all of the Company's
assets without any assumption of the Company's liabilities. The
Company believes that its equity in the assets which are the
subject of the Foreclosure Action exceeds the amount First
Fidelity claims it is owed by both the Company and Princeton.
However, there can be no assurance as to the outcome of the
Foreclosure Action (or any of the other legal proceedings to
which the Company is a party) and thereby there can be no
assurance that the Company will not be forced to commence a
reorganization proceeding under the Federal Bankruptcy Laws or
may not be forced into liquidation by its creditors. Under such
circumstances there can be no assurance that after paying all
outstanding secured and other indebtedness ranking senior there
will be any assets available for distribution to the Company's
holders of its outstanding subordinated debentures or
shareholders or that such holders will retain any equity or
subordinated debt interest in the Company following any
reorganization proceeding. A consent order has been entered into
the litigation whereby the Company has agreed not to disburse any
monies other than for the payment of ordinary business expenses
without the consent of First Fidelity and further provides that
the Company cannot enter into any agreement, pursuant to which it
or any subsidiary would incur any payment obligation outside of
the ordinary course of business.
In March 1989, the Company refinanced the mortgage on one of its
ski lodges in order to make available additional cash for
operations. The Company entered into a $5,000,000 mortgage,
which was originally scheduled to be repaid over five years
ending March 1, 1994. The mortgage has two participants with
each participant originally holding an equal share of the
mortgage. Interest on the mortgage is 12% for one participant's
share of the loan, and 12 - 1/2% for the other. This loan
is guaranteed by certain individuals, including a director of the
Company. The Company has been notified that because of First
Fidelity continuing its foreclosure proceeding, the participants
of the mortgage will commence a foreclosure action with respect
to their first lien position. The participants have advised the
Company that provided the Company remains current on its payment
obligations to the participants and First Fidelity does not move
to a Sheriff's Sale, the participants of this mortgage will
forbear from concluding this action for a period of six months
from August 1, 1995.
PAGE 20 of 28
GREAT AMERICAN RECREATION, INC. & SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED JULY 31, 1995 & JULY 31, 1994 (UNAUDITED)
A. LIQUIDITY & CAPITAL RESOURCES (continued)
On August 7, 1995, American Stock Transfer and Trust Company, a
trustee under a Debenture Indenture dated as of June 12, 1991
under which there is outstanding $6,288,659 principal amount of
subordinated debentures due May 31, 2006, commenced a lawsuit in
the United States District Court for the District of New York
alleging that the Company had defaulted in the payment of
interest due on the debentures, that the entire principal amount
and accrued interest is now due and payable and seeking to
recover a judgment for such amount. The Company has filed an
answer in this litigation which, among other things, alleges that
the plaintiff is disqualified from so acting by reason of
conflicts of interest in fulfilling its duties to the
debentureholders and is thereby barred from maintaining this
lawsuit. There can be no assurance that the Company will be
successful in its defense of this litigation or that as a result
of the institution of this litigation that the Company will not
be compelled to commence a proceeding under Chapter XI of the
Federal Bankruptcy Laws.
As stated above, the Company is currently in default and a
lawsuit has been filed against the Company in connection with the
Company's 10% subordinated debentures due May 31, 2006 in the
principal amount of $6,288,659. In addition, the Company is
currently in default with respect to its 10% subordinated
debentures due January 7, 1996 in the principal amount of
$4,480,300; 15% subordinated debentures due August 1, 1995 in the
principal amount of $550,000; and 13% convertible subordinated
debentures due December 31, 1996 in the principal amount of
$1,455,500.
PAGE 21 of 28
GREAT AMERICAN RECREATION, INC. & SUBSIDIARIES
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
B. RESULTS OF OPERATIONS
Revenue from operations for the first three months of fiscal 1996
decreased $702,948 (9.82%), from the comparable fiscal 1995
period. Net income to common stockholders for the first three
months of fiscal 1995 was $349,028 ($0.01 per share) as compared
to net income available to common stockholders of $261,901 ($0.01
per share) in the comparable prior year period. Revenue
decreased from the comparable prior year three months as a result
of decreased attendance due to unfavorable weather conditions.
Costs of operations for the first three months of fiscal 1996
year decreased $1,268,631 (28.09%). The decrease in the first
quarter was directly attributed to the decrease in summer
attendance in addition to a decrease in the provision for
liability reserves.
Selling, general and administrative expenses for the first three
months of fiscal year 1996 decreased $165,346 (13.46%). The
decrease in the first three months of fiscal 1995 is attributed
to decreased marketing and advertising expenses.
The Company's interest expense from operations for the first
three months of fiscal 1996 increased $402,568 (40.97%). During
the first three months of fiscal 1996 the Company recorded
interest income from Princeton in the amount of $697,897 which
was fully reserved. During the first three months of fiscal
1995, the Company recorded interest income from Princeton in the
amount of $468,330 which was not reserved. The increase in
interest expense is primarily attributed to the Company's
determination that all advances to Princeton in excess of the
$13,000,000 carrying value of its receivables from Princeton will
be fully reserved. As a result, the Company no longer offsets
interest income from Princeton against the Company's interest
expense.
The Company recorded amortization of financing costs in the first
three months of fiscal 1996 of $-0- as compared to $7,413
recorded in the first three months of fiscal 1995.
The Company recorded dividend income from Princeton of $-0- for
the first three months of fiscal 1996 as compared to $380,751
recorded in comparable fiscal 1995 period. At April 30, 1995,
the Company determined that all advances in excess of its
$13,000,000 carrying value of its receivables from Princeton will
be fully reserved. Accordingly, $420,278 of dividend income
from Princeton was fully reserved in the first three months of
fiscal 1996.
Depreciation and amortization expense from operations for the
first three months of fiscal 1996 decreased $25,740 (9.76%).
During fiscal 1995, the Company wrote-off its goodwill relating
to the purchase of boxing interest. Accordingly, the Company no
longer amortizes this goodwill which was $49,688 in the first
quarter of fiscal 1995.
A director of the Company is also a principal in Princeton.
Princeton was billed for services rendered by the Company and
these amounts were mutually agreed upon by the management of both
companies. Upon the sale of the Company's real estate businesses
to this company, (see Note 4), the Company has continued to
provide certain support services including payroll,
PAGE 22 of 28
GREAT AMERICAN RECREATION, INC. & SUBSIDIARIES
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
B. RESULTS OF OPERATIONS (continued)
marketing and staffing essentially on a cost basis. In the first
three months of fiscal 1996 and 1995, approximately $890,000 and
$1,082,000 of costs associated with these activities have been
billed with an off-setting reduction to the appropriate Company
expense. At April 30, 1995, as a consequence of the Princeton
Investors' bankruptcy proceeding and First Fidelity's refusal to
grant a non-disturbance agreement in connection with the sale of
long-term contractual rights to use amenities on the Company's
and Princeton's properties, the Company's aggregate investment of
$12,060,888 in the preferred stock of Princeton was fully
reserved. In addition, the Company has adjusted the carrying
value of its outstanding receivable balance with Princeton at
April 30, 1995 to $13,000,000, which is net of a reserve
allowance of $12,542,727. All future advances to Princeton by the
Company will be fully reserved. For the three months ended July
31, 1995, the Company recorded an additional reserve allowance of
$873,009 for advances made to Princeton.
PAGE 23 of 28
GREAT AMERICAN RECREATION, INC. & SUBSIDIARIES
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
B. RESULTS OF OPERATIONS (continued)
No income taxes or benefits were provided in the first quarter of
fiscal 1996 due to the Company's net operating loss carry forward
from prior years.
PAGE 24 of 28
PART II OTHER INFORMATION
ITEM 6. EXHIBITS & REPORTS ON FORM 8-K
A. EXHIBITS:
Exhibit 11(a) and 11(b) Great American Recreation, Inc.
& Subsidiaries - Computation of Primary and Fully Diluted
Earnings per share for the three month period ended July 31, 1995
and July 31, 1994.
B. REPORTS ON FORM 8-K:
No current reports on Form 8-K were filed during the
fiscal quarter ended July 31, 1995.
PAGE 25 of 28
EXHIBIT 11(a)
GREAT AMERICAN RECREATION, INC. & SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
UNAUDITED
THREE MONTHS ENDED
JULY 31, 1995 JULY 31,1994
PRIMARY:
Average shares outstanding
disregarding exercise of
options, warrants and
conversion of debentures 54,513,938 41,058,357
Assumed conversion of stock
options and warrants based
on the Treasury stock method
using average market price -0- -0-
54,513,938 41,058,357
=========== ===========
Net income for primary earnings per share
computation $ 349,028 $ 261,901
=========== ===========
Earnings per common share:
Net income $0.01 $0.01
==== ====
Retained earnings and current net income were inadequate to cover
preferred stock dividend requirements for the three months ended
July 31, 1995. Accordingly, dividends were recorded as
liquidating dividends.
PAGE 26 of 28
EXHIBIT 11(b)
GREAT AMERICAN RECREATION, INC. & SUBSIDIARIES
COMPUTATION OF EARNINGS PER SHARE
UNAUDITED
THREE MONTHS ENDED
JULY 31, 1995 JULY 31, 1994
FULLY DILUTED:
Average shares outstanding
disregarding exercise of
options, warrants and
conversion of debentures 54,513,938 41,058,357
Assumed conversion of stock
options and warrants based
on the Treasury stock method
using average market price -0- 1,492,058
54,513,938 42,550,415
=========== ===========
Net income for fully diluted earnings per
share computation $ 349,028 $ 261,901
=========== ===========
Earnings per common share:
Net income $0.01 $0.01
==== ====
Retained earnings and current net income were inadequate to cover
preferred stock dividend requirements for the three months ended
July 31, 1995. Accordingly, dividends were recorded as
liquidating dividends.
PAGE 27 of 28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
GREAT AMERICAN RECREATION, INC.
/s/ Joseph R. Bellantoni
Joseph R. Bellantoni
Vice President of Finance September 22, 1995
PAGE 28 of 28
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
GREAT AMERICAN RECREATION, INC.
/s/ Joseph R. Bellantoni
Joseph R. Bellantoni
Vice President of Finance September 22, 1995
PAGE 28 of 28
<TABLE> <S> <C>
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2,242,001
590,509
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