<PAGE> 1
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------
(Mark One) FORM 10-QSB
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarter Ended Commission File Number 0-2374
July 31, 1996
CRYSTAL MOUNTAIN, INC.
(Exact name of registrant as specified in its charter)
ONE CRYSTAL MOUNTAIN BLVD.
CRYSTAL MOUNTAIN, WASHINGTON 98022
(address of principal executive offices)
Washington 91-0683256
(State of Incorporation) (IRS Employer Identification Number)
(360) 825-3865
(Telephone number)
Indicate by check mark whether the registrant 1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and 2) has been subject to such filing
requirements for the past 90 days.
Yes (X) No ( )
At July 31, 1996, 26,609 shares of $50 par value Class A common stock and 710
shares of $20 par value Class B common stock were outstanding.
<PAGE> 2
CRYSTAL MOUNTAIN, INC.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
<S> <C>
PART I Financial Information
Item 1 Financial Statements
Balance Sheet 3
Statement of Income 4
Statement of Cash Flows 5
Notes to Financial Statements 6
Item 2 Management's Discussion and Analysis of Financial Condition
and Results of Operations 7-8
PART II Other Information
Item 6 Exhibit Index 9-10
Signatures 11
</TABLE>
<PAGE> 3
PART I -- FINANCIAL INFORMATION
ITEM 1 -- FINANCIAL STATEMENTS
CRYSTAL MOUNTAIN, INC.
BALANCE SHEET
(Unaudited)
ASSETS
<TABLE>
<CAPTION>
31-Jul 31-Jul
1996 1995
---------- ----------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 137,000 $ 169,000
Short-term investments 121,000 112,000
Accounts receivable 28,000 44,000
Inventories 127,000 116,000
Prepaid expenses 73,000 36,000
---------- ----------
Total current assets 486,000 477,000
LAND IMPROVEMENTS, BUILDINGS AND EQUIPMENT, net 7,598,000 7,766,000
OTHER ASSETS 122,000 95,000
---------- ----------
TOTAL ASSETS $8,206,000 $8,338,000
========== ==========
LIABILITIES AND STOCKHOLDER'S EQUITY
CURRENT LIABILITIES
Accounts payable 225,000 101,000
Accrued liabilities 482,000 390,000
Interest payable 29,000 29,000
Deferred income 49,000 24,000
Current portion of term debt and leases 250,000 257,000
---------- ----------
Total current liabilities 1,035,000 801,000
LONG-TERM DEBT AND CAPITAL LEASE OBLIGATIONS,
net of current portion 4,592,000 4,142,000
DEFERRED INCOME TAX -- 55,000
---------- ----------
Total liabilities 5,627,000 4,998,000
STOCKHOLDERS' EQUITY
Common stock --
Class A, $50 par value per share,
90,000 shares authorized, 26,609 issued
and outstanding 1,331,000 1,331,000
Class B, $20 par value per share,
25,000 shares authorized, 710 issued
and outstanding 14,000 14,000
Additional paid-in capital 505,000 505,000
Retained earnings 729,000 1,490,000
---------- ----------
Total stockholders' equity 2,579,000 3,340,000
---------- ----------
TOTAL LIABILITIES & EQUITY $8,206,000 $8,338,000
========== ==========
</TABLE>
See accompanying notes to financial statements.
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<PAGE> 4
CRYSTAL MOUNTAIN, INC.
STATEMENT OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
For the Three Months Ended
31-Jul
--------------------------
1996 1995
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<S> <C> <C>
REVENUES
Mountain operations $ 96,000 $ 132,000
Food services 113,000 122,000
---------- -----------
209,000 254,000
---------- -----------
EXPENSES
Mountain operations 340,000 394,000
Food services 140,000 163,000
General and administrative 372,000 398,000
Depreciation and amortization 236,000 261,000
Interest 88,000 83,000
---------- -----------
1,176,000 1,299,000
---------- -----------
Income (loss) before income taxes (967,000) (1,045,000)
Income tax benefit (expense) -- --
---------- -----------
NET INCOME (LOSS) $ (967,000) $(1,045,000)
========== ===========
NET EARNINGS PER COMMON SHARE $ (35.40) $ (38.25)
========== ===========
WEIGHTED AVERAGE SHARES
OUTSTANDING 27,319 27,319
---------- -----------
</TABLE>
See accompanying notes to financial statements.
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<PAGE> 5
CRYSTAL MOUNTAIN, INC.
STATEMENT OF CASH FLOWS
(Unaudited)
For the Three Months Ended
31-Jul
---------------------------
1996 1995
------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (Loss) $ (967,000) $ (1,045,000)
Adjustments to reconcile net
income (loss) to net cash
provided by operating
activities
Depreciation and amortization 236,000 261,000
Change in
Accounts receivable 52,000 6,000
Inventories (5,000) (12,000)
Prepaid expenses 19,000 14,000
Other assets (7,000) 11,000
Accounts payable (18,000) (75,000)
Accrued liabilities (65,000) (58,000)
Interest payable 5,000 9,000
Deferred income 1,000 (2,000)
-------- -------
(749,000) (891,000)
------- -------
CASH FLOWS FROM INVESTING ACTIVITIES
Change in short-term investments 0 0
Capital expenditures (49,000) (110,000)
------ -------
(49,000) (110,000)
------ -------
CASH FLOWS FROM FINANCING ACTIVITIES
Net borrowings on long-term debt 777,000 1,300,000
Principal payments of capital
leases - (3,000)
------- ---------
777,000 1,297,000
------- ---------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS (21,000) 296,000
CASH AND CASH EQUIVALENTS
Beginning of period 158,000 (128,000)
------- --------
End of period $ 137,000 $ 168,000
======= ========
SUPPLEMENTAL DISCLOSURE OF
CASH FLOW INFORMATION
Cash paid during the
period for interest $ 83,000 $ 74,000
======= =======
See accompanying notes to financial statements.
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CRYSTAL MOUNTAIN, INC.
NOTES TO FINANCIAL STATEMENTS
THREE MONTHS ENDED JULY 31 1996 AND 1995
(Unaudited)
NOTE 1 - SUMMARY OF FINANCIAL STATEMENT PRESENTATION
In the opinion of management, the financial statements include all
adjustments necessary to present fairly the changes in financial position and
results of operations for the interim periods reported.
Revenues are subject to material seasonal variations with approximately
90% of the Company's revenue recognized during the winter months of each fiscal
year. Interim operating results may not be taken as fairly representative of the
estimated results for a full fiscal year.
The financial statements should be read with reference to "management's
Discussion and Analysis of Financial Condition and Results of Operations"
contained herein and the "Notes to financial Statements" set forth in the
Company's 10-K filing for the year ended April 30, 1996.
NOTE 2 - PROVISION FOR INCOME TAX
There is no income tax provision for the interim periods reported
because the Company has significant net operating loss carryforwards which are
fully reserved.
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<PAGE> 7
PART I - FINANCIAL INFORMATION
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF PLAN OF OPERATIONS
THREE MONTHS ENDING JULY 31, 1996 COMPARED TO THREE MONTHS
ENDING JULY 31, 1995
Statements in this report covering future performance, developments,
expectations or events, constitute forward looking statements which are subject
to a number of risks and uncertainties which might cause actual results to
differ materially from stated expectations.
Effective March 20, 1996 the Board of Directors of Crystal Mountain, Inc.
approved the change of the Company's fiscal year from a September 30 year end,
to a new fiscal year end of April 30, (the fiscal year end used in its most
recent filing with the Securities and Exchange Commission). This form 10-QSB is
the first quarterly report filed under the new fiscal year. This change was made
to coincide with the end of the Company's primary operating season and to smooth
out the work flow for the staff throughout the year allowing the Company to
reduce overhead costs. The new fiscal quarters are July 31, October 30, and
January 31. The transition period report was the seven months ended April 30,
1996.
The Company generates most of its revenues (93%) during the winter months with
the vast majority of earnings occurring between December 20 and March 10. During
the late spring, summer and early fall, the Company offers scenic rides to the
summit of the mountain on two chairlifts, fine dining at the Summit House
Restaurant, and mountain biking, hiking, tennis, and disc golf. There are RV
hookups, a base area restaurant, both hotel and condominium accommodations
offering meeting rooms serving tourists and groups. Significant expenses are
incurred to prepare for the ski season during the summer and fall.
Historically the summer recreational operations generated a loss when isolated
from the summer and fall ski season preparation costs. This and last summers
results have been negatively impacted by road construction on 10 miles of the
main highway to the resort. This construction is nearly complete and will be
completed before this winters ski season. In light of the road construction and
the previous years poor performance, management critically reviewed the summer
recreation operations and developed a plan that retained these operations while
getting them as close to break-even as possible. Thus far the results of these
actions have reduced losses from summer operations.
For the three months ended July 31, 1996, revenues are down $45,000 ( 17.7% )
from the prior year while total expenses were reduced $123,000 ( 7.5% )
resulting in a reduction of $78,000 ( 7.5% ) of net loss during the period.
Mountain Operations, Food Services, General and Administration, and Depreciation
Expense were all down 13.7%, 14.1%,
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<PAGE> 8
6.5%, and 9.6% respectively. Interest expense was up 6.0% due to higher
outstanding debt that resulted from last winters' poor performance.
The Company's total bank debt is $4,842,000 at July 31, 1996, up $450,000 from
$4,392,000 at July 31, 1995. Last winter we were unable to open for skiing until
December 15. This late opening combined with warm and wet weather resulted in
less skier visits and revenues. This did not allow us to pay down our debt as
far as the prior year. This is the third year now that the Company has faced
losses. The current bank line and investments are estimated to allow for summer
operations, summer maintenance programs, and preseason preparations for the 1996
- - 1997 ski season if we open for skiing by mid January 1997.
As stated in earlier reports the Company was evaluating alternatives and would
take several steps to regain profitability. The Company reorganized and
down-sized which has led to slightly better results for the three months ended
July 31, 1996, than the results of the prior year.
Management was also simultaneously investigating options that would involve a
capital infusion. On July 31, 1996, the Company signed a Letter of Intent with
Boyne USA, Inc. This understanding calls for the acquisition of the assets and
liabilities of the Company, together with a commitment from Boyne USA to invest
a minimum of $15 million of on-going capital improvements during the next ten
years, $8 million of which are to be made during the next five years. In
addition, Crystal Mountain shareholders will retain their lift privileges and,
following completion of the transaction, these lift privileges may be honored at
other Boyne USA ski areas. This event was reported as a subsequent event on the
transition report for the seven months ended April 30, 1996. The letter of
intent was filed as an exhibit with the transition report filing.
PART II - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS
The Company is not a party to any material pending legal proceedings, other than
ordinary routine litigation either incidental to the business or covered by the
Company's liability insurance.
-8-
<PAGE> 9
PART II - OTHER INFORMATION
ITEM 6 - EXHIBIT INDEX
Exhibit
Number
- -------
1.1 * Form of best efforts underwriting agreement
1.2 * Form of supplement to underwriting agreement
2.0 * Boyne USA, Inc. Letter of Intent to acquire Crystal Mountain,
Inc. dated July 31, 1996
3.1 * Articles of incorporation
3.2 * Bylaws
5.1 * Opinion of LeSourd & Patten, P.S.
5.2 * IRS determination letter as to the qualification of the 401(k)
plan
8.1 * Opinion of LeSourd & Patten, P.S.
8.2 * Opinion of LeSourd & Patten, P.S.
10.1 * Term note with Seattle Trust and Savings Bank dated August 14,
1985
10.2 * Term note with Seattle Trust and Savings Bank dated July 9, 1986
10.3 * Revolving promissory note with Seattle Trust and Savings Bank
dated March 1, 1987
10.4 * Loan agreement with Seattle Trust and Savings Bank dated June
30, 1985, with amendments
10.5 * Security agreement for liabilities to Seattle Trust and Savings
Bank
10.6 * Deed of trust, security agreement and assignment for term note
and revolving promissory note
10.7 * Employment contract with Thomas F. Leonard
10.8 * Thirty-year term special use United States Forestry Service
permit issued April 6, 1962
10.9 * Year-to-year United States Forest Service permit issued April 9,
1962
10.10 * Form of Escrow Agreement with Key Trust Company of the Northwest
10.11 * Form of Subscription Agreement with Harper, McLean & Co.
(California and Washington residents)
10.12 * Form of Subscription Agreement (existing with shareholders
residing instates other than Washington and California)
10.13 * Loan Commitment from Key Bank of Puget Sound dated January 7,
1988
10.14 * Forty-year ski area term special use United States Forest
Service permit issued April 1, 1992
10.15 * Lease agreements between the Company and Zion Credit Corporation
dated September 30, 1993
10.16 * Lease agreement between the Company and national Lease Financing
Services dated June 7, 1994
10.17 * Term note with Settle First national Bank dated October 5, 1990
10.18 * Amendments to term note with Seattle First National Bank
10.19 * Letter dated October 24, 1994 from Seattle First National Bank
to the Company waiving certain matters related to term note
between Seattle First national Bank and the Company
-9-
<PAGE> 10
10.20 * Crystal Mountain 401(k) Retirement Savings Plan dated January 1,
1991
10.21 * Term note with Seafirst Bank dated September 14, 1995
10.22 * Lease agreement between the Company and the CIT Group/Equipment
Financing, Inc. dated December 7, 1994
10.23 * Employment agreement with Thomas F. Leonard dated February 2,
1995
10.24 * Deferred compensation plan and agreement with Thomas F. Leonard
dated February 2, 1995
10.25 * Employment agreement with Peter G. Gillis dated February 25,
1995
10.26 * Deferred compensation plan agreement with Peter G. Gillis dated
February 2, 1995
10.27 * Letter dated November 7, 1995 from Seattle First National Bank
to the Company waiving certain matters related to the term note
between Seattle First national Bank and the Company
10.28 * Amendments to term note with Seattle First National Bank dated
June 30, 1996
10.29 * Lease agreement between the Company and CIT Group/Equipment
Financing, Inc. November 14, 1995
10.30 * Employment agreement with Thomas F. Leonard effective May 1,
1996
10.31 * Employment agreement with George Schmidt effective May 1, 1996
10.32 * Employment agreement with Peter G. Gillis effective May 1, 1996
10.33 * Amendment for Term Special Use United States Forestry Service
Permit dated April 25, 1996
13.1 * Annual report to security holders dated September 30, 1994
13.2 * Annual report to security holders dated September 30, 1995
13.3 * Annual report to security holders dated April 30, 1996
15.1 * Letter of Langlow Tolles & Company, P.S. regarding unaudited
interim financial information
16.1 * Letter from the Registrant's former independent accountant
22.1 * Proxy Statement for annual meeting of shareholders
23.1 * Consent of LeSourd & Patten, P.S.
23.2 * Consent of Davis Wright & Jones
23.3 * Consent of Langlow Tolles & Company, P.S.
23.4 * Consent of Garvey, Schubert & Barer
24.1 * Power of attorney
27.1 * Financial Data Schedule Fiscal Year Ended September 30, 1995
27.2 * Financial Data Schedule Quarter Ended December 31, 1995
27.3 * Financial Data Schedule Quarter Ended March 31, 1996
27.4 * Financial Data Schedule Fiscal Year Ended April 30, 1996
27.5 Financial Data Schedule Quarter Ended July 31, 1996
28.1 * Master plan for Crystal Mountain Resort
* Previously Filed
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<PAGE> 11
CRYSTAL MOUNTAIN, INC.
Pursuant to the requirements of Section 13 or 15 (d) 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 on the 13th day of
September, 1996.
CRYSTAL MOUNTAIN, INC.
Date: September 13, 1996
By: \s\ Tom Leonard, President
Date: September 13, 1996
By: \s\ George Schmidt, Director of Finance & Systems
-11-
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> APR-30-1997
<PERIOD-START> MAY-01-1996
<PERIOD-END> JUL-31-1996
<EXCHANGE-RATE> 1
<CASH> 137,000
<SECURITIES> 121,000
<RECEIVABLES> 28,000
<ALLOWANCES> 0
<INVENTORY> 200,000
<CURRENT-ASSETS> 486,000
<PP&E> 18,403,000
<DEPRECIATION> 10,805,000
<TOTAL-ASSETS> 8,206,000
<CURRENT-LIABILITIES> 1,035,000
<BONDS> 4,592,000
0
0
<COMMON> 1,345,000
<OTHER-SE> 1,234,000
<TOTAL-LIABILITY-AND-EQUITY> 8,206,000
<SALES> 209,000
<TOTAL-REVENUES> 209,000
<CGS> 0
<TOTAL-COSTS> 1,088,000
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 88,000
<INCOME-PRETAX> (967,000)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (967,000)
<EPS-PRIMARY> 35.40
<EPS-DILUTED> 0
</TABLE>
