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, 1997
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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)
1702 E. Highland, Ste. 312
- ------------------------------
Phoenix, AZ 85016
- ------------------------------- ---------------------------------
(Address of principal executive (Zip Code)
office)
Issuer's telephone number, including area code (602) 266-0001
--------------
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 July 31, 1997.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Summarized Financial Information
INTERNATIONAL LEISURE HOSTS, LTD.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
June March
30, 1997 31, 1997
----------- -----------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash & cash equivalents $ 278,917 $ 48,258
Accounts receivable 16,586 31,828
Accounts receivable (affiliate) 9,800
Income tax refund receivable 227,404 146,404
Merchandise inventories 194,720 118,418
Prepaid expenses and other 33,254 17,045
----------- -----------
Total current assets 750,881 371,753
----------- -----------
PROPERTY AND EQUIPMENT:
Buildings and improvements on leased land 5,700,227 5,700,227
Equipment 1,618,469 1,644,002
Leasehold improvements 310,000 310,000
Construction in process 326,166 213,899
----------- -----------
Total property and equipment 7,954,862 7,868,128
Less accumulated depreciation and amortization 2,940,205 2,879,362
----------- -----------
Property and equipment - net 5,014,657 4,988,766
----------- -----------
DEPOSITS 2,478 2,478
----------- -----------
TOTAL $ 5,768,016 $ 5,362,997
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable:
Trade $ 315,533 $ 128,027
Construction 82,414 29,226
Accrued liabilities 114,074 79,347
Accrued liabilities (affiliate) 163,209 163,209
Advance deposits 368,301 159,791
Current portion of long-term debt 574,250 489,500
----------- -----------
Total current liabilities 1,617,781 1,049,100
DEFERRED INCOME TAXES 196,589 196,589
LONG-TERM DEBT 420,750 445,500
----------- -----------
Total liabilities 2,235,120 1,691,189
----------- -----------
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 2,947,198 3,086,110
Common stock in treasury - at cost, 23,796 shares (77,912) (77,912)
----------- -----------
Total shareholders' equity 3,532,896 3,671,808
----------- -----------
TOTAL $ 5,768,016 $ 5,362,997
=========== ===========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
INTERNATIONAL LEISURE HOSTS, LTD.
CONSOLIDATED STATEMENTS OF INCOME
For the three months ended
June 30,
---------------------------------
1997 1996
---------------- ---------------
REVENUES:
Sales of merchandise $344,757 $335,343
Room, cabin and trailer space rentals 347,258 289,164
Interest 42 189
Other income 66,522 36,727
---------------- ---------------
Total revenues 758,579 661,423
---------------- ---------------
COSTS AND EXPENSES:
Cost of merchandise 221,936 202,200
Operating 612,739 416,313
General & administrative 36,989 111,622
Depreciation and amortization 84,741 63,857
Interest expense 22,086 1,021
---------------- ---------------
Total costs and expenses 978,491 795,013
---------------- ---------------
LOSS BEFORE INCOME TAXES (219,912) (133,590)
INCOME TAX BENEFIT (81,000) (48,300)
---------------- ---------------
NET LOSS ($138,912) ($85,290)
================ ===============
NET LOSS PER COMMON SHARE ($ .20) ($ .12)
================ ===============
See notes to consolidated financial statements.
<PAGE>
INTERNATIONAL LEISURE HOSTS, LTD.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE THREE MONTHS ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
Common Stock Additional
------------------------------ Paid-in Retained Treasury
Shares Amount Capital Earnings Stock
<S> <C> <C> <C> <C> <C>
BALANCE, MARCH 31, 1997 718,373 $7,184 $656,426 $3,086,110 ($77,912)
Net loss (138,912)
------------- -------------- ---------------- --------------- ----------------
BALANCE, JUNE 30, 1997 718,373 $7,184 $656,426 $2,947,198 ($77,912)
============= ============== ================ =============== ================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
INTERNATIONAL LEISURE HOSTS, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three months ended June 30,
-----------------------------------
1997 1996
---------------- -----------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Loss ($138,912) ($85,290)
Adjustments to reconcile net income (loss) to cash
provided by operating activities:
Depreciation and amortization 84,741 63,857
Gain on disposal of property and equipment (8,059)
Changes in assets and liabilities:
Accounts receivable 15,242 (1,043)
Accounts receivable (affiliate) 9,800
Merchandise inventories (76,302) (86,891)
Prepaid income taxes (81,000) (48,300)
Prepaid expenses and other (16,209) (415)
Accounts payable 187,506 144,905
Accrued liabilities 34,727 28,414
Advance deposits 208,510 129,512
---------------- -----------------
Net cash provided by operating activities 220,044 144,749
---------------- -----------------
INVESTING ACTIVITIES:
Purchases of property and equipment (131,109) (112,817)
Proceeds from disposal of property and equipment 28,536
Cash and accounts payable segregated for construction
of replacement property 53,188
---------------- -----------------
Net cash used in investing activites (49,385) (112,817)
---------------- -----------------
FINANCING ACTIVITIES:
Borrowings from bank line of credit, net 60,000 75,000
---------------- -----------------
NET INCREASE IN CASH AND
CASH EQUIVALENTS 230,659 106,932
CASH AND CASH EQUIVALENTS,
BEGINNING OF YEAR 48,258 49,645
---------------- -----------------
CASH AND CASH EQUIVALENTS,
END OF YEAR $278,917 $156,577
================ =================
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION - Cash paid for interest $22,086 $1,021
================ =================
</TABLE>
See notes to consolidated financial statements.
<PAGE>
INTERNATIONAL LEISURE HOSTS, LTD.
---------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Three Month Periods Ending June 30, 1997 and 1996
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,
1997 are not necessarily indicative of the results that may be expected for the
year ending March 31, 1998. 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, 1997.
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
The Company operates 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.
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 range from 5 years to 40 years for such assets.
Leasehold improvements are amortized using the straight-line method over the
lesser of the estimated useful life of the related asset or the term of the
lease.
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 loss 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 694,577 for the quarter ended June 30, 1997 and
694,677 shares for the quarter ended June 30, 1996.
<PAGE>
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 - 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 approximate fair values due to the short-term
maturities or market rates of interest.
Reclassifications - Certain reclassifications have been made to the 1996
financial statements to conform to the 1997 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 plus building additional employee housing
and a new employee dining facility, then the cost is estimated to be between
$2,400,000 and $2,800,000 depending on the number of employee housing units and
the extent of additional improvements required by the NPS. If the Company builds
new lodging units to replace the 54-unit riverside motel, the additional cost to
build these units will be between $1,000,000 and $1,200,000. This would result
in a total cost of relocation and new construction combined of between
$3,400,000 and $4,000,000.
The fee expense to the NPS 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, 1997 and 1996, this fee amounted to
$14,130 and $11,753, 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. In addition, the business of Flagg
Ranch is susceptible to weather conditions and unfavorable trends in the economy
as a whole. 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 National Park 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.
On May 20, 1997, the Fund for Animals, Biodiversity Legal Foundation et. al.
filed a lawsuit against the NPS challenging the action of the NPS regarding
winter use of Yellowstone and Grand Teton National Parks. The plaintiffs have
asked the Federal Court to stop winter activities, primarily snowmobiling and
related snow grooming, until environmental impacts are documented. If the
Federal Court were to suspend or
<PAGE>
terminate winter activities in Yellowstone National Park, then Flagg Ranch would
have to suspend or discontinue its winter operations.
3. TRANSACTIONS WITH AFFILIATED COMPANIES AND RELATED
PARTIES
Included in operating expenses and general and administrative expenses for the
quarters ended June 30, 1997 and 1996, are management fees and administrative
expenses of approximately $71,000, and $91,000, respectively, paid to affiliated
companies. All affiliated companies referred to in these financial statements
are owned by family members of Elizabeth A. Nicoli, who are the majority owners
of the Company.
The Company leases snowmobiles under short-term leases from an affiliated
company. As of June 30, 1997 the Company owed the affiliated company $163,209
relating to this lease from the prior year. As of July 31, 1997, this liability
has been paid in full.
4. LONG-TERM DEBT
Long-term debt as of June 30, 1997 consists of the following:
<TABLE>
<S> <C>
Bank credit facility which provides maximum borrowings of $500,000, draw
period extended from September 30, 1996 to September 30, 1997, monthly
interest payments at prime plus .5% (9% at June 30, 1997), principal
payments begin October 30, 1997 in 60 equal monthly installments,
maturity date of September 30, 2002, collateralized by all accounts, an
assignment of the Contract and all improvements made to Flagg Ranch
property. $495,000
Additional bank credit facility which provides maximum borrowings of
$500,000, due September 30, 1997, monthly interest payments at prime plus
.5% (9.0% at June 30, 1997), collateralized by all accounts, an
assignment of the Contract and all improvements made to Flagg Ranch
property. 500,000
--------------
Total 995,000
Less current portion 574,250
--------------
Long-term debt - net $420,750
==============
Annual maturities of long-term debt as of June 30 are as follows:
1998 $574,250
1999 99,000
2000 99,000
2001 99,000
2002 99,000
Thereafter 24,750
=============
Total $995,000
=============
</TABLE>
<PAGE>
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The statements contained in this Report regarding management's anticipation of
the Company's facility completion schedules, quality of facilities, fulfillment
of National Park Service requirements, consumer response to marketing efforts,
ability to offset inflation and adequacy of financing, constitute
"forward-looking" statements within the meaning of the Private Securities
Litigation Reform Act of 1995. Management's anticipation is based upon
assumptions regarding levels of competition, acceptance of facilities by
consumers, favorable weather conditions, ability to complete facility
construction, the market in which the Company operates, the stability of the
economy and stability of the regulatory environment. Any of these assumptions
could prove inaccurate, and therefore there can be no assurance that the
forward-looking information will prove to be accurate.
The Company's net loss for the first quarter ended June 30, 1997, was $139,000
($.20 per share). This compares to a net loss of $86,000 ($.12 per share) for
the quarter ended June 30, 1996. The $53,000 decline in income was due primarily
to increased costs associated with operating the new facilities at Flagg Ranch.
Changes to the Company's revenues and expenses for the quarters ended June 30,
1997 and June 30, 1996 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 1997 increased by $97,000 or 15% from 1996. Of this increase,
$73,000 was from motel and cabin rentals, $19,000 from food services, $15,000
from float trip revenue, $8,000 from horse rental revenue and $7,000 in
miscellaneous income. Decreases of $15,000 in RV park rentals, $8,000 in Gift
shop sales, and $2,000 in grocery store sales offset the above increases. The
primary reason for the increase in motel and cabin rentals is the additional 42
new cabin units which opened in December 1996. This represents approximately a
40% increase in available rental units over last year. The primary reason for
the decline in RV park rentals was a decline in the number of recreational
vehicle and tent sites available for rent to the public. On a temporary basis,
approximately twenty-five recreational vehicle sites and one tent site are being
utilized by construction workers and employees during the construction of new
facilities at Flagg Ranch.
Expenses
- --------
The ratio of cost of merchandise sold to sales of merchandise was 64% in 1997 as
compared to 60% in 1996. Operating expenses increased by $196,000 or 47% in 1997
as compared to 1996. The ratio of operating expenses to total revenue increased
to 80% in 1997 from 63% in 1996. The primary increase in operating expenses was
a $90,000 increase in labor costs. This was partially attributable to the early
adoption of the increase in the minimum wage which will take effect on September
1, 1997. In addition, the labor costs increased due to the 42 additional new
lodging units. Other increases in operating expenses included $36,000 related to
river float trips and horseback riding operations, $17,000 in repairs and
maintenance, $12,000 in supplies, $8,000 in utilities,
<PAGE>
$6,000 in insurance, $5,000 in advertising, $4,000 in property taxes and $18,000
in other miscellaneous expenses. The revenues from river float trips and
horseback riding operations were up 72% in the first quarter resulting in the
related increases in operating expenses. The other increases in operating
expenses related primarily to the increased costs associated with the new 42
cabin units combined with costs associated with flood control due to the
unusually high levels of the Snake River this past spring.
Inflation
- ---------
The Company expects that it will be able to offset increased costs and expenses,
principally labor, caused by inflation, by increasing prices on its services
with minimal effect on operations.
Liquidity and Capital Resources
- -------------------------------
During the fiscal year ended March 31, 1997 the Company incurred costs of
approximately $976,000 to substantially complete construction of the 42 new
cabins. When completed, the total cost of the cabins will be approximately
$1,320,000. In addition, the Company incurred costs of approximately $214,000
relating to construction of new laundry and maintenance facilities, employee
housing, and other improvements required under the NPS contract during the past
fiscal year. During the quarter ended June 30, 1997, the Company incurred costs
of $112,000 related to the above construction. As result, the working capital
decreased to a negative $867,000 at June 30, 1997 from a negative $118,000 at
June 30, 1996. The Company plans to incur additional costs of approximately
$103,000 in the second quarter related to the above construction projects.
The company plans to incur additional costs of between $3,400,000 and $4,000,000
prior to December 31, 1999 to construct new laundry and maintenance facilities,
new employee housing units, new motel units replacing the existing 54-unit
riverside motel complex and other improvements required under the NPS Contract.
The Company intends to fund these improvements through existing cash funds and
cash generated from operations, plus additional borrowings from lenders. Cash
generated from operations was $430,000, $139,000, and $766,000 in fiscal years
1997, 1996 and 1995, respectively. Cash generated from operations for the
quarter ended June 30, 1997 was $220,000. The Company has two credit facilities
with a bank. The first credit facility provides for maximum borrowings of
$500,000 with a draw period to September 30, 1997. Principal payments begin on
October 30, 1997 in 60 equal monthly installments, maturing on September 30,
2002. As of June 30, 1997 the Company had borrowed $495,000 on this credit
facility. The second credit facility provides for maximum borrowings of $500,000
and matures on September 30, 1997. As of June 30, 1997, the Company had borrowed
$500,000 on this 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
---------------------------------
Mark Sauder resigned as Chief Financial Officer,
Secretary and Treasurer effective August 5, 1997 and
was replaced by Daniel J. Ryan as Chief Financial
Officer and by F. Ray Evarts as Secretary and
Treasurer.
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: August 14, 1997 BY: /s/ Elizabeth A. Nicoli
------------------------- --------------------------------
Elizabeth A. Nicoli
Chairman of the Board and President
DATE: August 14, 1997 BY: /s/ F. Ray Evarts
------------------------- --------------------------------
F. Ray Evarts
Secretary/Treasurer
DATE: August 14, 1997 By: /s/ Daniel J. Ryan
------------------------- --------------------------------
Daniel J. Ryan
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-START> APR-01-1997
<PERIOD-END> JUN-30-1997
<EXCHANGE-RATE> 1
<CASH> 278,917
<SECURITIES> 0
<RECEIVABLES> 16,586
<ALLOWANCES> 0
<INVENTORY> 194,720
<CURRENT-ASSETS> 750,881
<PP&E> 7,954,862
<DEPRECIATION> 2,940,205
<TOTAL-ASSETS> 5,768,016
<CURRENT-LIABILITIES> 1,617,781
<BONDS> 0
0
0
<COMMON> 7,184
<OTHER-SE> 3,525,712
<TOTAL-LIABILITY-AND-EQUITY> 5,768,016
<SALES> 344,757
<TOTAL-REVENUES> 758,579
<CGS> 221,936
<TOTAL-COSTS> 956,405
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,086
<INCOME-PRETAX> (219,912)
<INCOME-TAX> (81,000)
<INCOME-CONTINUING> (138,912)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (138,912)
<EPS-PRIMARY> (.20)
<EPS-DILUTED> (.20)
</TABLE>
