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 September 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 694,577 shares
of $.01 par value common stock outstanding as of November 4, 1996.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Summarized Financial Information
INTERNATIONAL LEISURE HOSTS, LTD.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September March
30, 1996 31, 1996
--------------- ---------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 319,828 $ 49,645
Accounts receivable 13,839 5,633
Accounts receivable (affiliate) 4,800 4,800
Merchandise inventories 197,714 167,004
Prepaid income taxes 5,692 81,292
Prepaid expenses and other 25,740 11,021
--------------- ---------------
Total current assets 567,613 319,395
--------------- ---------------
PROPERTY AND EQUIPMENT:
Buildings, equipment and improvements 6,346,712 6,231,814
Construction in process 858,967 301,876
Less accumulated depreciation and amortization (2,716,906) (2,589,192)
--------------- ---------------
Property and equipment - net 4,488,773 3,944,498
DEPOSITS 2,478 2,478
--------------- ---------------
$5,058,864 $4,266,371
=============== ===============
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 149,585 $ 119,262
Accrued liabilities 452,691 44,350
Advanced deposits 70,850 139,935
--------------- ---------------
Total current liablilites 673,126 303,547
DEFERRED INCOME TAXES 177,852 177,852
--------------- ---------------
Total liabilities 850,978 481,399
--------------- ---------------
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 3,622,188 3,198,874
Common stock in treasury, at cost - 23,796 and 23,696 shares (77,912) (77,512)
--------------- ---------------
Total shareholders' equity 4,207,886 3,784,972
--------------- ---------------
$5,058,864 $4,266,371
=============== ===============
</TABLE>
See notes to the consolidated financial statements.
<PAGE>
INTERNATIONAL LEISURE HOSTS, LTD.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the six months ended For the three months ended
September 30, September 30,
--------------------------------- ------------------------------------
1996 1995 1996 1995
---------------- -------------- ---------------- -----------------
<S> <C> <C> <C> <C>
REVENUES:
Room, cabin & trailer space rentals $1,308,917 $1,361,969 $ 1,030,393 $ 1,088,720
Sales of merchandise 1,436,844 1,334,881 1,087,854 1,037,544
Interest 2,621 12,779 2,426 5,145
Other income 141,256 118,055 107,427 91,323
---------------- --------------- ---------------- -----------------
Total revenues 2,889,638 2,827,684 2,228,100 2,222,732
---------------- -------------- ---------------- -----------------
COSTS & EXPENSES:
Operating 1,073,474 1,072,437 657,733 698,104
Cost of merchandise 764,940 726,926 562,740 542,494
General & administrative 289,196 294,422 176,553 187,663
Depreciation & amortization 127,714 81,286 63,857 51,825
---------------- -------------- ---------------- -----------------
Total costs and expenses 2,255,324 2,175,071 1,460,883 1,480,086
---------------- -------------- ---------------- -----------------
Income before income tax 634,314 652,613 767,217 742,646
Provision for income tax 211,000 224,500 259,300 256,000
---------------- -------------- ---------------- -----------------
NET INCOME $ 423,314 $ 428,113 $ 507,917 $ 486,646
================ ============== ================ =================
NET INCOME PER COMMON SHARE $ 0.61 $ 0.61 $ 0.73 $ 0.70
================ ============== ================ =================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
INTERNATIONAL LEISURE HOSTS, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Six months ended September 30,
---------------------------------------
1996 1995
------------------ ------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 423,314 $ 428,113
Adjustment to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 127,714 81,286
Changes in assets and liabilities:
Accounts receivable (8,206) 570
Merchandise inventories (30,710) (47,909)
Prepaid income taxes 75,600 (50,703)
Prepaid expenses and other (14,719) (6,504)
Accounts payable 30,323 (272,122)
Accrued liabilities 408,341 222,354
Advance deposits (69,085) (26,149)
------------------ ------------------
Net cash provided by operating activities 942,572 328,936
------------------ ------------------
INVESTING ACTIVITIES:
Purchases of property and equipment (671,989) (634,574)
Sale of marketable investment securities 300,000
Cash segregated for construction of
replacement property 116,758
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Net cash used by investing activities (671,989) (217,816)
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FINANCING ACTIVITIES:
Common stock purchased for treasury (400) (2,700)
------------------ ------------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 270,183 108,420
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 49,645 573,279
------------------ ------------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 319,828 $ 681,699
================== ==================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
INTERNATIONAL LEISURE HOSTS, LTD.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE SIX MONTHS ENDED SEPTEMBER 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)
Purchases of common stock (400)
Net Income 423,314
------------ ------------ ------------- -------------- ------------
Balance, September 30, 1996 718,373 $7,184 $656,426 $3,622,188 ($77,912)
============ ============ ============= ============== ============
</TABLE>
See notes to consolidated financial statements.
<PAGE>
INTERNATIONAL LEISURE HOSTS, LTD.
---------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Six Month Periods Ending September 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 six months ended September
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.
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
common shares outstanding was 694,649 and 698,318 for the six months ended
September 30, 1996 and 1995 and 694,586 and 698,136 shares for the three months
ended September 30, 1996 and 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
<PAGE>
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.
Reclassifications - Certain reclassifications have been made to the 1995
financial statements to conform to the 1996 presentation.
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 September 30, 1996 and 1995, this fee amounted to $54,000 and
$52,000, 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 six months ended
September 30, 1996 and 1995, are management fees and administrative expenses of
approximately $228,000, and $230,000, 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, 1997, and as of September 30, 1996
there were no outstanding borrowings. Interest is payable monthly on the
outstanding principal balance at a rate equal to prime plus .50% (8.75% at
September 30, 1996). Commencing October 30, 1997, the principal shall be repaid
in 60 equal monthly principal payments with a maturity date of September 30,
2002. 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 November 4, 1996, there were no outstanding borrowings.
During fiscal 1997, the Company established an additional line of credit
facility with the same bank, the credit facility provides for maximum borrowings
of $500,000. The line of credit matures on September 30, 1997, and as of
September 30, 1996, there were no outstanding borrowings. Interest is payable
monthly on the outstanding principal balance at a rate equal to prime plus .50%
(8.75% at September 30, 1996). 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 November 4, 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 income for the six months ended September 30, 1996 was
$423,000 ($.61 per share). This compares to net income of $428,000 ($.61 per
share) for the six months ended September 30, 1995. Changes to the Company's
revenues and expenses for the six month period ended September 30, 1996 and
September 30, 1995 are summarized below. All references to years represent six
month periods ending September 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.
Revenues
- --------
Total revenues for 1996 increased by $62,000 or 2% from 1995. Of the increase,
$61,000 was from grocery store sales, $41,000 from gift shop sales, $12,000 from
food services, $11,000 from horse rental revenue, $10,000 in miscellaneous
income, and $5,000 in float trip revenue. Decreases of $53,000 in motel and
cabin rentals, $15,000 in gasoline sales, and $10,000 in interest income offset
the above increases.
Total motel and cabin rental days decreased from 11,631 in 1995 to 10,968 in
1996. The number of visitors to the south entrance of Yellowstone National Park
decreased 3% in 1996, thereby contributing to the decline in 1996 occupancy. The
increase in grocery store and gift shop revenues was due to the Company's
increased emphasis on having tour buses stop at Flagg Ranch, plus in 1996 the
Company hired an experienced retail manager in order to expand and improve the
profitability of the retail segment.
Expenses
- --------
The ratio of cost of merchandise sold to sales of merchandise was 53% in 1996
compared to 54% in 1995. The ratio of operating expenses to total revenue
decreased to 37% in 1996 from 38% in 1995. Operating expenses as a whole
remained flat for 1996 compared to 1995. Included in operating expenses was a
$52,000 increase in labor due to the hiring of more experienced departmental
managers as Flagg Ranch continues to upgrade the level of service and amenities
afforded to its guests. Offsetting the increases in labor was a $51,000
reduction in utilities, insurance, operating supplies and other 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 new cabin units which were completed
in May 1995, and to begin construction of 42 new cabin units which are scheduled
to be completed in December 1996 and other related improvements. During the six
months ended September 30, 1996, the Company incurred costs of $557,000 for the
above construction projects. As a result, working capital decreased to a
negative $106,000 at September 30, 1996 from a positive $16,000 at September 30,
1995. The Company plans to incur additional costs between $700,000 and $800,000
in the third and fourth quarters to complete the above construction projects.
The total cost of these additional 42 cabin units and other related improvements
is between $1,400,000 to $1,500,000.
<PAGE>
The estimated costs to be incurred for the entire construction planned for
fiscal years 1997 through 2000 is between $3,000,000 and $4,000,000. The Company
intends to fund these improvements through existing cash funds and cash
generated from operations, plus the bank credit facilities totaling $1,000,000
which can be drawn on through September 1997. 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 six months ended September
30, 1996 and 1995 was $943,000 and $329,000, respectively. The construction
funds will have to be obtained from outside sources to the extent they exceed
cash generated from operations and the bank credit facilities of $1,000,000.
<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
---------------------------------
None
ITEM 6. Exhibits and Reports on Form 8-K
--------------------------------
A current report on Form 8-K was filed on November 5, 1996
stating that Anthony J. Nicoli, the director, Chairman and
President of the Company died on October 22, 1996. The new
Chairperson and President is Elizabeth A. Nicoli.
<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: November 14, 1996 BY: /s/ Elizabeth A. Nicoli
--------------------- -----------------------------------
Elizabeth A. Nicoli
Chairman of the Board and President
DATE: November 14, 1996 BY: /s/ Mark G. Sauder
--------------------- -----------------------------------
Mark G. Sauder,
Chief Financial Officer
DATE: November 14, 1996 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> 6-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> SEP-30-1996
<EXCHANGE-RATE> 1
<CASH> 319,828
<SECURITIES> 0
<RECEIVABLES> 18,639
<ALLOWANCES> 0
<INVENTORY> 197,714
<CURRENT-ASSETS> 567,613
<PP&E> 6,346,712
<DEPRECIATION> 2,716,906
<TOTAL-ASSETS> 5,058,864
<CURRENT-LIABILITIES> 673,126
<BONDS> 0
0
0
<COMMON> 7,184
<OTHER-SE> 4,200,702
<TOTAL-LIABILITY-AND-EQUITY> 5,058,864
<SALES> 1,436,844
<TOTAL-REVENUES> 2,889,638
<CGS> 764,940
<TOTAL-COSTS> 2,255,324
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 634,314
<INCOME-TAX> 211,000
<INCOME-CONTINUING> 423,314
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 423,314
<EPS-PRIMARY> .61
<EPS-DILUTED> .61
</TABLE>
