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 December 31, 1996
-----------------
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 Ave., Suite #312, Phoenix, AZ 85016
- ----------------------------------------------- --------------------
(Address of principal executive office) (Zip Code)
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 January 30, 1997.
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. Summarized Financial Information
INTERNATIONAL LEISURE HOSTS, LTD.
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
December March
31, 1996 31, 1996
----------------- ------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 127,085 $ 49,645
Accounts receivable 16,995 5,633
Accounts receivable (affiliate) 4,800 4,800
Merchandise inventories 219,346 167,004
Prepaid income taxes 5,692 81,292
Prepaid expenses and other 36,715 11,021
----------------- ------------------
Total current assets 410,633 319,395
----------------- ------------------
PROPERTY AND EQUIPMENT:
Buildings, equipment and improvements 6,382,233 6,231,814
Construction in process 1,304,442 301,876
Less accumulated depreciation and amortization (2,780,763) (2,589,192)
----------------- ------------------
Property and equipment - net 4,905,912 3,944,498
DEPOSITS 2,478 2,478
----------------- ------------------
$ 5,319,023 $ 4,266,371
================= ==================
LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Bank line of credit $ 330,000 $
Accounts payable 268,453 119,262
Accrued liabilities 400,210 44,350
Advance deposits 222,815 139,935
----------------- ------------------
Total current liabilities 1,221,478 303,547
DEFERRED INCOME TAXES 177,852 177,852
----------------- ------------------
Total liabilities 1,399,330 481,399
----------------- ------------------
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 3,333,995 3,198,874
Common stock in treasury - at cost, 23,796 and 23,696 shares (77,912) (77,512)
----------------- ------------------
Total shareholders' equity 3,919,693 3,784,972
----------------- ------------------
$ 5,319,023 $ 4,266,371
================= ==================
See notes to consolidated financial statements.
</TABLE>
2
<PAGE>
INTERNATIONAL LEISURE HOSTS, LTD.
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
For the nine months ended For the three months ended
December 31, December 31,
--------------------------------- --------------------------------
1996 1995 1996 1995
<S> <C> <C> <C> <C>
REVENUES:
Room, cabin & trailer space rentals $1,396,993 $1,403,444 $79,209 $41,475
Sales of merchandise 1,568,920 1,414,067 137,922 79,186
Snowmobile rentals 100,737 15,569 106,454 15,569
Interest 3,981 18,229 2,926 5,450
Other income 162,264 118,638 16,746 583
--------------- -------------- -------------- --------------
Total revenues 3,232,895 2,969,947 343,257 142,263
--------------- -------------- -------------- --------------
COSTS AND EXPENSES:
Operating 1,555,641 1,404,495 464,148 332,058
Cost of merchandise 898,964 790,201 134,024 63,275
General & administrative 401,598 406,109 112,402 111,687
Depreciation & amortization 191,571 132,745 63,857 51,459
--------------- -------------- -------------- --------------
Total costs and expenses 3,047,774 2,733,550 774,431 558,479
--------------- -------------- -------------- --------------
Income (loss) before income tax 185,121 236,397 (431,174) (416,216)
Provision for income tax 50,000 63,002 (161,000) (161,498)
--------------- -------------- -------------- --------------
NET INCOME (LOSS) $135,121 $173,395 ($270,174) ($254,718)
=============== ============== ============== ==============
NET INCOME (LOSS) PER COMMON SHARE $0.19 $0.25 ($0.39) ($0.37)
=============== ============== ============== ==============
</TABLE>
See notes to consolidated financial statements.
3
<PAGE>
INTERNATIONAL LEISURE HOSTS, LTD.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED DECEMBER 31, 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 135,121
--------------- --------------- -------------- --------------- ---------------
Balance, December 31, 1996 718,373 $7,184 $656,426 $3,333,995 ($77,912)
=============== =============== ============== =============== ===============
</TABLE>
See notes to consolidated financial statements.
4
<PAGE>
INTERNATIONAL LEISURE HOSTS, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine months ended December 31,
---------------------------------------
1996 1995
----------------- ------------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $135,121 $173,395
Adjustment to reconcile net income to cash
provided by operating activities:
Depreciation and amortization 191,571 132,745
Changes in assets and liabilities:
Accounts receivable (11,362) (9,068)
Merchandise inventories (52,342) (84,185)
Prepaid income tax 75,600 (77,329)
Prepaid expenses and other (25,694) (42,807)
Accounts payable 149,191 (311,324)
Accrued liabilities 355,860 3,548
Advance deposits 82,880 99,869
----------------- ------------------
Net cash provided by (used in) operating activities 900,825 (115,156)
----------------- ------------------
INVESTING ACTIVITIES
Purchases of property and equipment (1,152,985) (826,426)
Sale of marketable investment securities 300,000
Cash segregated for construction of
replacement property 116,758
----------------- ------------------
Net cash used in investing activities (1,152,985) (409,668)
----------------- ------------------
FINANCING ACTIVITIES
Proceeds from Bank Line of Credit 330,000
Common stock purchased for treasury (400) (3,284)
----------------- ------------------
Net cash provided by (used in) financing activities 329,600 (3,284)
----------------- ------------------
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 77,440 (528,108)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 49,645 573,279
----------------- ------------------
CASH AND CASH EQUIVALENTS,
END OF PERIOD $127,085 $45,171
================= ==================
</TABLE>
See notes to consolidated financial statements.
5
<PAGE>
INTERNATIONAL LEISURE HOSTS, LTD.
---------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Month Periods Ending December 31, 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 nine months ended December
31, 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 range 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 694,624 and 698,121 for the nine months ended
December 31, 1996 and 1995 and 694,577 and 698,498 shares for the three months
ended December 31, 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 December 31, 1996 and 1995, this fee amounted to $7,000 and
$4,000, 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 nine months ended
December 31, 1996 and 1995, are management fees and administrative expenses of
approximately $320,000, and $321,000, respectively, paid to affiliated
companies. All affiliated companies referred to in these financial statements
are owned by Elizabeth A. Nicoli and/or family members, who are the majority
owners of the Company.
The Company leases snowmobiles under short-term leases from an affiliated
company. For the nine months ended December 31, 1996 and 1995 snowmobile lease
expense totaled $42,000 each period and was included in accrued expenses.
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 December 31, 1996
there were outstanding borrowings of $330,000. Interest is payable monthly on
the outstanding principal balance at a rate equal to prime plus .50% (8.25% at
December 31, 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 January 30, 1997, there were outstanding borrowings of $495,000.
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
December 31, 1996, there were no outstanding borrowings. Interest is payable
monthly on the outstanding principal balance at a rate equal to prime plus .50%
(8.25% at December 31, 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 January 30, 1997 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 nine months ended December 31, 1996 was
$135,000 ($.19 per share). This compares to net income of $173,000 ($.25 per
share) for the nine months ended December 31, 1995. Changes to the Company's
revenues and expenses for the nine month period ended December 31, 1996 and
December 31, 1995 are summarized below. All references to years represent nine
month periods ending December 31 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.
In 1996 the National Parks opened on December 20, approximately 5 days later
than normal. In addition, extreme winter weather conditions caused the closure
of local airports, roads and the national parks for several days during the
Christmas holiday season. Based on actual cancellations, the estimated the
amount of revenue lost during this period is in excess of $70,000. Despite the
large number of cancellations, there was substantially no decrease in the amount
of operating expenses because the Company maintained staff levels necessary to
serve in-house guests, and respond to weather related emergencies.
In 1995, due to the Federal Government's inability to reach a budget agreement,
all national parks were forced to shutdown on December 17, 1995. As a national
park concessionaire, Flagg Ranch was forced to shutdown and remain closed until
the parks reopened on January 6, 1996. The economic impact of the shutdown was a
significant amount of lost revenue, particularly during the Christmas holiday
period.
Revenues
- --------
Total revenues for 1996 increased by $263,000 or 9% compared to 1995. Of the
increase, $85,000 was from snowmobile rentals, $70,000 from grocery store sales,
$52,000 from gift shop sales, $38,000 from food services, $15,000 in
miscellaneous income, $12,000 in transportation and other winter services,
$11,000 in horse rental revenue and $5,000 in float trip revenue. Decreases of
$14,000 in interest income, $6,000 in motel and cabin rentals and $5,000 in
gasoline sales offset the above increases.
Snowmobile rentals increased from $16,000 in December 1995 to $101,000 in
December 1996. The snowmobile rentals in 1995 were extremely low due to the 1995
national park shutdown. Total motel and cabin rental days increased from 11,662
in 1995 to 11,772 in 1996. The increase in grocery store and gift shop revenue
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 57% in 1996
compared to 56% in 1995. The ratio of operating expenses to total revenue was
48% in 1996 and 47% in 1995. Operating expenses as a whole increased $151,000
over the prior year. Included in operating expenses was an $81,000 increase in
labor due to the hiring of more
<PAGE>
experienced departmental managers and additional year round supervisors as Flagg
Ranch continues to upgrade the level of service and amenities afforded to its
guests. The national minimum wage increase went into effect in the third quarter
which contributed to the increase in labor costs. There were also increases in
utilities of $18,000, operating supplies of $19,000 and repairs and maintenance
of $33,000.
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 were
substantially complete in December 1996, and other related improvements. During
the nine months ended December 31, 1996, the Company incurred costs of
$1,003,000 for the above construction projects. As a result, working capital
decreased to a negative $811,000 at December 31, 1996 from a negative $33,000 at
December 31, 1995. The Company plans to incur additional costs of approximately
$200,000 in the fourth quarter 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.
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 (used in) operations for the nine months ended
December 31, 1996 and 1995 was $901,000 and ($115,000), 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: February 14, 1997 BY: /s/ Elizabeth A. Nicoli
------------------------------- ---------------------------------
Elizabeth A. Nicoli
Chairman of the Board and
President
DATE: February 14, 1997 BY: /s/ Mark G. Sauder
------------------------------- ---------------------------------
Mark G. Sauder,
Chief Financial Officer
DATE: February 14, 1997 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> 9-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-START> APR-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 127,085
<SECURITIES> 0
<RECEIVABLES> 21,795
<ALLOWANCES> 0
<INVENTORY> 219,346
<CURRENT-ASSETS> 410,633
<PP&E> 7,686,675
<DEPRECIATION> 2,780,763
<TOTAL-ASSETS> 5,319,023
<CURRENT-LIABILITIES> 1,221,478
<BONDS> 0
7,184
0
<COMMON> 0
<OTHER-SE> 3,912,509
<TOTAL-LIABILITY-AND-EQUITY> 5,319,023
<SALES> 1,568,920
<TOTAL-REVENUES> 3,232,895
<CGS> 898,964
<TOTAL-COSTS> 3,047,774
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 185,121
<INCOME-TAX> 50,000
<INCOME-CONTINUING> 135,121
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 135,121
<EPS-PRIMARY> .19
<EPS-DILUTED> .19
</TABLE>
