UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street
Washington, D.C. 20549
Form 10-QSB
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended June 30, 1996
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Commission File No. 0-3858
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INTERNATIONAL LEISURE HOSTS, LTD.
- --------------------------------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Wyoming 86-0224163
- ------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2525 E. Camelback, Ste. 275
- -------------------------------
Phoenix, AZ 85016
- ------------------------------- ---------------------------------
(Address of principal executive (Zip Code)
office)
Issuer's telephone number, including area code (602) 955-6100
--------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the 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
------- -------
State the number of shares outstanding of each of the issuer's classes of common
stock as of the close of the latest practicable date. There were 694,587 shares
of $.01 par value common stock outstanding as of August 6, 1996.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Summarized Financial Information
INTERNATIONAL LEISURE HOSTS, LTD.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June March
30, 1996 31, 1996
----------------- ------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 156,577 $ 49,645
Accounts receivable 6,676 5,633
Accounts receivable (affiliate) 4,800 4,800
Merchandise inventories 253,895 167,004
Prepaid income taxes 129,592 81,292
Prepaid expenses and other 11,436 11,021
----------------- ------------------
Total current assets 562,976 319,395
----------------- ------------------
PROPERTY AND EQUIPMENT:
Buildings, equipment and improvements 6,277,539 6,231,814
Construction in process 368,968 301,876
Less accumulated depreciation and amortization (2,653,049) (2,589,192)
----------------- ------------------
Property and equipment - net 3,993,458 3,944,498
DEPOSITS 2,478 2,478
----------------- ------------------
$4,558,912 $4,266,371
================= ==================
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank line of credit $ 75,000 $
Accounts payable 264,167 119,262
Accrued liabilities 72,764 44,350
Advance deposits 269,447 139,935
----------------- ------------------
Total current liablilites 681,378 303,547
DEFERRED INCOME TAXES 177,852 177,852
----------------- ------------------
Total liablilites 859,230 481,399
----------------- ------------------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Preferred stock $5 par value - authorized 100,000 shares;
issued, none
Common stock $.01 par value - authorized 2,000,000 shares;
issued, 718,373 shares 7,184 7,184
Additional paid-in capital 656,426 656,426
Retained earnings 3,113,584 3,198,874
Common stock in treasury - at cost, 23,696 shares (77,512) (77,512)
----------------- ------------------
Total shareholders' equity 3,699,682 3,784,972
----------------- ------------------
$4,558,912 $4,266,371
================= ==================
</TABLE>
See notes to consolidated financial statements.
2
<PAGE>
INTERNATIONAL LEISURE HOSTS, LTD.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the three months ended
June 30,
--------------------------------------
1996 1995
----------------- -----------------
<S> <C> <C>
REVENUES:
Sales of merchandise $ 369,751 $ 319,214
Room, cabin & trailer space rentals 289,164 273,249
Interest 189 7,634
Other income 2,319 4,855
----------------- -----------------
Total revenues 661,423 604,952
----------------- -----------------
COSTS & EXPENSES:
Cost of merchandise 202,200 173,245
Operating 416,313 385,518
General & administrative 112,643 106,759
Depreciation & amortization 63,857 29,462
----------------- -----------------
Total costs and expenses 795,013 694,984
----------------- -----------------
LOSS BEFORE INCOME TAX (133,590) (90,032)
INCOME TAX BENEFIT (48,300) (31,500)
----------------- -----------------
NET LOSS ($ 85,290) ($ 58,532)
================= =================
NET LOSS PER COMMON SHARE ($0.12) ($0.08)
================= =================
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
INTERNATIONAL LEISURE HOSTS, LTD.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED JUNE 30, 1996
<TABLE>
<CAPTION>
Common Stock Additional
----------------------------- Paid-In Retained Treasury
Shares Amount Capital Earnings Stock
------------ ------------- ------------ -------------- -------------
<S> <C> <C> <C> <C> <C>
Balance, March 31, 1996 718,373 $7,184 $656,426 $3,198,874 ($77,512)
Net loss (85,290)
============ ============= ============ ============== =============
Balance, June 30, 1996 718,373 $7,184 $656,426 $3,113,584 ($77,512)
============ ============= ============ ============== =============
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
INTERNATIONAL LEISURE HOSTS, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended June 30,
---------------------------------------
1996 1995
------------------ ------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Loss ($85,290) ($58,532)
Adjustment to reconcile net loss to cash
provided by (used in) operating activities:
Depreciation and amortization 63,857 29,462
Changes in assets and liabilities:
Accounts receivable (1,043) (24,266)
Merchandise inventories (86,891) (110,745)
Prepaid income tax (48,300) (31,500)
Prepaid expenses and other (415) (12,648)
Accounts payable 144,905 (46,660)
Accrued liabilities 28,414 (12,380)
Advance deposits 129,512 164,732
------------------ ------------------
Net cash provided by (used in)
operating activities 144,749 (102,537)
------------------ ------------------
INVESTING ACTIVITIES:
Purchases of property and equipment (112,817) (553,094)
Sale of marketable investment securities 300,000
Cash segregated for construction of
replacement property 116,758
------------------ ------------------
Net cash used in investing activities (112,817) (136,336)
------------------ ------------------
FINANCING ACTIVITIES:
Proceeds from Bank Line of Credit 75,000
------------------ ------------------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 106,932 (238,873)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 49,645 573,279
------------------ ------------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 156,577 $ 334,406
================== ==================
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
INTERNATIONAL LEISURE HOSTS, LTD.
---------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three Month Periods Ending June 30, 1996 and 1995
The accompanying unaudited condensed and consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information and with the instructions to Form 10-QSB.
Accordingly, they do not include all of the information and notes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments and reclassifications considered
necessary for a fair and comparable presentation have been included and are of a
normal recurring nature. Operating results for the three months ended June 30,
1996 are not necessarily indicative of the results that may be expected for the
year ending March 31, 1997. The enclosed financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included in the Company's Annual Report on Form 10-KSB for the year ended March
31, 1996.
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements include the
accounts of International Leisure Hosts, Ltd., and Lewis & Clark Lodge, its
wholly-owned subsidiary (collectively, the "Company"). All intercompany
transactions and accounts have been eliminated in consolidation.
Marketable investment securities are carried at cost, which approximates fair
value. The fair values are estimated based on quoted market prices. Marketable
securities are managed as part of the Company's cash management program. The
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards ("SFAS") No. 115, which requires the classification of securities of
acquisition into one of three categories: available for sale, held to maturity
or trading. The Company has classified its securities as available for sale.
Merchandise inventories are stated at the lower of aggregate cost (first-in,
first-out basis) or market.
Property and equipment are stated at cost. Depreciation is computed over the
estimated useful lives, which ranges from 5 years to 40 years for such assets.
Amortization, by the straight-line method, of improvements to leased property is
based on the estimated useful lives of such assets.
Income taxes have been accounted for in accordance with SFAS No. 109, Accounting
for Income Taxes. Deferred income taxes have been provided for the temporary
differences between financial statement and income tax reporting on certain
transactions.
Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles necessarily requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Net income per common share is computed by dividing net income by the weighted
average number of common shares outstanding. The weighted average number of
<PAGE>
common shares outstanding was 694,677 for the quarter ended June 30, 1996 and
698,498 shares for the quarter ended June 30, 1995.
Business Segments - The Company considers its operations to be in one business
segment, the ownership and operation of Flagg Ranch, a full-service resort motel
and trailer park located in the John D. Rockefeller Jr. Memorial Parkway,
approximately four miles north of Grand Teton National Park and two miles south
of the southern entrance to Yellowstone National Park.
Statements of Cash Flows - For purposes of the consolidated statements of cash
flows, cash and cash equivalents represent cash in banks, money market funds,
and certificates of deposit with initial maturities of three months or less.
Estimated Fair Value of Financial Instruments - SFAS No. 107, Disclosures About
Fair Value of Financial Instruments was adopted for the year ended March 31,
1995. SFAS No. 107 requires disclosure of the estimated fair value of certain
financial instruments. The Company has estimated the fair value of its financial
instruments using available market data. However, considerable judgment is
required in interpreting market data to develop estimates of fair value. The use
of different market assumptions or methodologies may have a material effect on
the estimates of fair values. The carrying values of cash, receivables, lines of
credit, accounts payable, accrued expenses, and long-term debt and capital lease
obligations approximate fair values due to the short-term maturities or market
rates of interest.
2. COMMITMENTS AND CONTINGENCIES
The Company receives its operating authorization from the National Park Service
("NPS"). The NPS Contract (the "Contract") which became effective on January 1,
1990, will expire on December 31, 2009. Under the terms of the Contract, prior
to December 31, 1999, the Company is required to move its existing 54-unit
riverside motel from its current location to the high ground above the river, to
provide for new employee housing and make certain other improvements. If the
Company chooses to meet these requirements by moving the riverside motel and
converting it into employee housing, then the cost is estimated to be $500,000.
If the Company builds new lodging units to replace the 54-unit riverside motel,
the additional cost to build these lodging units will be between $1,200,000 and
$1,500,000. This would result in a total cost for the relocation and new
construction combined of between $1,700,000 and $2,000,000.
The fee expense under the Contract is calculated at 2% of gross receipts (as
defined), subject to review and possible adjustment every five years. For the
quarters ended June 30, 1996 and 1995, this fee amounted to $11,753 and $11,610,
respectively.
Flagg Ranch faces competition from hotels, camping areas and trailer facilities
in Yellowstone and Grand Teton National Parks, as well as from a large number of
hotels and motels in Wyoming, Montana and Idaho offering some facilities which
are similar to those offered by Flagg Ranch. Business could be significantly
affected depending upon actions which might be taken by the NPS if cutbacks are
made to their budget. If the NPS decides to close Yellowstone for the winter
months, then Flagg Ranch would have to discontinue its winter operations. NPS
budget cutbacks could also negatively impact the length of the summer season and
the number of visitors to the parks and have a corresponding negative impact on
Flagg Ranch revenues. In addition, the business of Flagg Ranch is susceptible to
weather conditions and unfavorable trends in the economy as a whole.
<PAGE>
3. TRANSACTIONS WITH AFFILIATED COMPANIES AND RELATED PARTIES
Included in general and administrative expenses for the quarters ended June 30,
1996 and 1995, are management fees and administrative expenses of approximately
$91,000, and $89,000, respectively, paid to affiliated companies. All affiliated
companies referred to in these financial statements are owned by Anthony J.
Nicoli and/or family members, who are the majority owners of the Company.
4. BANK CREDIT FACILITY
During fiscal 1995, the Company established a credit facility with a bank. The
credit facility provides for maximum borrowings of $500,000. The draw period
under the facility runs until September 30, 1996 and as of June 30, 1996, there
were outstanding borrowings of $75,000. Interest is payable monthly on the
outstanding principal balance at a rate equal to prime plus .50% (8.75% at June
30, 1996). Commencing October 30, 1996, the principal shall be repaid in 36
equal monthly principal payments with a maturity date of September 30, 1999. The
credit facility is collateralized by all accounts, an assignment of the Contract
and all improvements the Company has made to the Flagg Ranch property. As of
August 6, 1996 there were no outstanding borrowings.
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company's net loss for the first quarter ended June 30, 1996, was $85,000
($.12 per share). This compares to a net loss of $59,000 ($.08 per share) for
the quarter ended June 30, 1995. The $26,000 decline in income was due primarily
to increased costs associated operating the new facilities at Flagg Ranch.
Changes to the Company's revenues and expenses for the quarters ended June 30,
1996 and June 30, 1995 are summarized below. All references to years represent
quarters ending June 30 of stated year.
Flagg Ranch, the principal business of the Company, is operated as a seasonal
resort. The two seasons coincide with the opening and closing dates of
Yellowstone and Grand Teton National Parks. The summer season runs from
approximately May 15 through October 15 and the winter season runs from late
December through mid-March. Therefore, the first quarter consists of only
forty-five days of operations.
Revenues
- --------
Total revenues for 1996 increased by $56,000 or 9% from 1995. Of the increase,
$17,000 was from grocery store sales, $11,000 from food services, $10,000 from
gift shop sales, $9,000 from RV park rentals, $7,000 from motel and cabin
rentals, $5,000 from float trip revenue and $4,000 from horse rental revenue. A
decrease of $7,000 in interest income offset the above increases.
Expenses
- --------
The ratio of cost of merchandise sold to sales of merchandise was 55% in 1996 as
compared to 54% in 1995. Operating expenses increased by $31,000 or 8% in 1996
as compared to 1995. The ratio of operating expenses to total revenue decreased
to 63% in 1996 from 64% in 1995. The primary increase in operating expenses was
a $37,000 increase in labor costs due to greater labor demands related to the
expanded and improved facilities. This increase was offset by a net decrease of
$6,000 in other direct operating expenses.
Liquidity and Capital Resources
- -------------------------------
During the past fiscal year the Company incurred costs of $885,000 to complete
construction of the lodge building and 50 cabin units which were completed in
May 1995, and to begin construction of 42 new cabin units which are scheduled to
be completed in October 1996. During the quarter ended June 30, 1996, the
Company incurred costs of $88,000 for the 42 new cabin units. As a result, the
working capital decreased to a negative $118,000 at June 30, 1996 from a
negative $91,000 at June 30, 1995. The Company plans to incur additional costs
between $1,000,000 and $1,100,000 in the second and third quarters to complete
the 42 new cabin units and other improvements required under the NPS Contract.
The total cost of these additional units is estimated between $1,300,000 and
$1,400,000.
The estimated costs to be incurred for the entire construction planned for
fiscal years 1996 through 2000 is between $3,000,000 and $3,700,000. The Company
intends to fund these improvements through existing cash funds and cash
generated from operations, plus a $500,000 bank credit facility which can be
drawn on through September 30, 1996. Cash generated from operations was
$139,000, $766,000 and $576,000 in fiscal years 1996, 1995 and 1994
respectively. Cash generated from operations for the quarter ended June 30, 1996
was $145,000. The construction funds will have to be obtained from
<PAGE>
outside sources to the extent they exceed existing working capital, cash
generated from operations and the $500,000 bank credit facility.
<PAGE>
PART II - OTHER INFORMATION
---------------------------
ITEM 1. Legal Proceedings
-----------------
None
ITEM 2. Changes in Securities
---------------------
None.
ITEM 3. Defaults upon Senior Securities
-------------------------------
None.
ITEM 4. Submission of Matters to a Vote of Securities Holders
-----------------------------------------------------
None
ITEM 5. Other Materially Important events
---------------------------------
Anthony J. Nicoli who is currently serving as the Chairman of
the Board and Treasurer was elected as President of the
Company on August 1, 1996 replacing John L. Bradley who served
as President from January 1991 to July 31, 1996, and is no
longer employed by the company.
Anthony J. Nicoli has served as Director since July 1968, and
has held as his principal occupation certain executive
positions with the Company. He also acts as a private
financial consultant and devotes a portion of his time to
other business interests.
Dennis J. Ray was elected as Vice President of the Company on
August 1, 1996. Mr. Ray is the son-in-law of Anthony J.
Nicoli. For the past two years, he has worked as a real estate
consultant for Nicoli Enterprises. Mr. Ray's experience also
includes working as a general manager for two years, and a
general sales manager for five years for numerous automotive
dealerships owned by the Richardson Investment Group.
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
None.
<PAGE>
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed by the undersigned, thereunto duly authorized.
INTERNATIONAL LEISURE HOSTS, LTD.
(REGISTRANT)
DATE: 8/13/96 BY: /s/ Anthony J. Nicoli
------------------------ -------------------------------------
Anthony J. Nicoli
Chairman of the Board and President
DATE: 8/13/96 BY: /s/ Mark G. Sauder
------------------------ -------------------------------------
Mark G. Sauder,
Chief Financial Officer
DATE: 8/13/96 By: /s/ Daniel J. Ryan
------------------------ -------------------------------------
Daniel J. Ryan
Chief Accountant
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. DOLLARS
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<EXCHANGE-RATE> 1
<CASH> 156,577
<SECURITIES> 0
<RECEIVABLES> 11,476
<ALLOWANCES> 0
<INVENTORY> 253,895
<CURRENT-ASSETS> 562,976
<PP&E> 6,646,507
<DEPRECIATION> 2,653,049
<TOTAL-ASSETS> 4,558,912
<CURRENT-LIABILITIES> 681,378
<BONDS> 0
0
0
<COMMON> 7,184
<OTHER-SE> 3,692,498
<TOTAL-LIABILITY-AND-EQUITY> 4,558,912
<SALES> 369,751
<TOTAL-REVENUES> 661,423
<CGS> 202,200
<TOTAL-COSTS> 795,013
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (133,590)
<INCOME-TAX> (48,300)
<INCOME-CONTINUING> (85,290)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (85,290)
<EPS-PRIMARY> (.12)
<EPS-DILUTED> (.12)
</TABLE>
