U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
( X ) QUARTERLY REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 17, 1995
( ) TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to
---------- ----------
Commission File No. 0-15030
WINTER SPORTS, INC.
(Exact name of small business issuer as specified in its charter)
Montana 81-0221770
(State of Incorporation) (I.R.S. Employer I.D. No.)
P. O. Box 1400, Whitefish, Montana 59937
(Address of principal executive offices) zip code
Issuer's telephone number, including area code (406) 862-1900
(Former name, former address & former fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months, and (2) has been
subject to such filing requirements for the past 90 days. Yes ( X ) No ( )
As of October 26, 1995, the number of shares outstanding of the issuer's common
stock, no par value, was 932,948.
Transitional Small Business Disclosure Format Yes ( ) No ( X )
WINTER SPORTS, INC. AND SUBSIDIARY COMPANIES
INDEX
Page No.
PART 1 FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets 3
At:
September 17, 1995
September 18, 1994
May 31, 1995
Condensed Consolidated Statements of Operations 4
For The Periods:
June 1, 1995 - September 17, 1995
June 1, 1994 - September 18, 1994
Condensed Consolidated Statements of Cash Flows 5
For The Periods:
June 1, 1995 - September 17, 1995
June 1, 1994 - September 18, 1994
Notes to Condensed Consolidated Financial Statements 6-8
Management's Discussion and Analysis of Financial
Conditions 9-10
PART II OTHER INFORMATION
Item 1. Legal Proceedings 11
Item 4. Submission of matters to a vote
of security holders 11
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
WINTER SPORTS, INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
September 17, September 18, May 31,
1995 1994 1995
ASSETS (Unaudited) (Unaudited) (Note 2)
- - ------------------------------- --------------- --------------- -----------
CURRENT ASSETS
Cash & cash equivalents $ 142,488 $ 130,694 $ 382,519
Receivables 102,770 127,600 77,792
Receivables - related parties 42,926 6,874 6,535
Income tax refund receivable 360,455 685,827 38,662
Current deferred tax asset 23,440 18,148 23,440
Inventories 341,752 146,133 343,054
Prepaid Expenses 66,652 83,876 152,228
--------- --------- ---------
TOTAL CURRENT ASSETS 1,080,483 1,199,152 1,024,230
PROPERTY AND EQUIPMENT
Property & equipment, at cost 18,550,298 18,140,989 18,503,716
Less accumulated depreciation 8,276,869 7,444,956 8,264,151
10,273,429 10,696,033 10,239,565
Construction in progress 719,829 1,079,254 791,732
Land and development costs 2,239,802 2,285,701 1,965,357
--------- --------- ---------
NET PROPERTY AND EQUIPMENT 13,233,060 14,060,988 12,996,654
OTHER ASSETS 139,537 287,853 247,987
TOTAL ASSETS $14,453,080 $15,547,993 $14,268,871
LIABILITIES & STOCKHOLDERS' EQUITY
- - ----------------------------------
CURRENT LIABILITIES
Accounts payable 311,461 547,081 471,978
Accounts payable - related parties 10,800 5,577 250,675
Employee compensation and
related expenses 224,449 213,010 226,601
Taxes other than payroll & income 225,599 206,546 136,562
Income taxes payable 108,594
Short-term revolving credit line 2,720,900
Current portion of long-term debt 896,313
Interest Payable 19,680 39,245 5,037
Deposits and other unearned revenue 527,732 540,440 68,537
Other current liabilities 2,250 2,376 2,254
---------- --------- ---------
TOTAL CURRENT LIABILITIES 1,321,971 5,171,488 1,270,238
LONG-TERM DEBT (less current
portion) 3,821,162 1,957,313 3,169,291
DEFERRED INCOME TAXES 1,337,202 1,214,060 1,337,202
--------- --------- ---------
TOTAL LIABILITIES 6,480,335 8,342,861 5,776,731
STOCKHOLDERS' EQUITY
Preferred stock (950 shares 24,500 24,500 24,500
authorized; $100 par value;
cumulative; outstanding 245,245
and 245)
Common stock (5,000,000 shares 2,978,597 2,356,489 2,978,597
authorized; no par value; out-
standing 932,948, 897,399 and
932,948)
Additional paid-in capital 20,519 20,519 20,519
Retained earnings 4,949,129 4,803,624 5,468,524
--------- --------- ---------
TOTAL STOCKHOLDERS' EQUITY 7,972,745 7,205,132 8,492,140
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $14,453,080 $15,547,993 $14,268,871
The accompanying notes are an integral part of these condensed financial
statements
WINTER SPORTS, INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Quarter and Year to Date
For The For The
Period Period
6/1/95 6/1/94
to to
9/17/95 9/18/94
------- -------
REVENUE
Lifts $ 226,748 $ 216,525
Food, beverage and retail 387,585 412,941
Lodging 53,574 58,370
Lease, management and other fees 164,921 245,057
Lease, management and other fees - related parties 73,628 18,000
Real estate sales - net 29,688 305,771
------- --------
TOTAL OPERATING REVENUE 936,144 1,256,664
COSTS AND EXPENSES
Direct expenses - lifts 276,922 238,372
Cost of food, beverage and retail 139,752 134,442
Cost of real estate sales 1,648 137,492
Payroll and related expenses 708,989 786,650
Direct expenses 272,554 255,690
Direct expenses - related party 5,000 6,000
Marketing 69,688 242,893
Planning, development and consulting 56
Depreciation and amortization 16,252 18,200
General and administrative 229,180 272,655
General and administrative - related parties 11,433 44,020
--------- ---------
TOTAL COSTS AND EXPENSES 1,731,418 2,136,470
OPERATING (LOSS) (795,274) (879,806)
OTHER INCOME (EXPENSE)
Interest Income 2,123 167
Interest Expense (82,571) (132,958)
Gain (loss) on disposal of asset 10,065 (10,486)
-------- ---------
TOTAL OTHER INCOME (EXPENSE) (70,383) (143,277)
(LOSS) BEFORE TAXES (865,657) (1,023,083)
Recovery of income taxes (346,262) (394,061)
--------- ---------
NET (LOSS) $(519,395) $(629,022)
(LOSS)PER COMMON SHARE $ (0.56) $ (0.67) *
WEIGHTED AVERAGE SHARES OUTSTANDING 932,948 932,948 *
*Restated to retroactively reflect stock dividend effective November 22, 1994
The accompanying notes are an integral part of these condensed financial
statements.
WINTER SPORTS, INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
Quarter and Year-To-Date
For The For The
Period Period
6/1/95 6/1/94
to to
9/17/95 9/18/95
------- -------
NET CASH (USED IN) OPERATING ACTIVITIES $ (764,269) $ (853,571)
------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Surety deposit 59,170 (59,170)
Property and equipment acquisitions (186,803) (131,739)
--------- ---------
NET CASH (USED IN) INVESTING ACTIVITIES (127,633) (190,909)
--------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowing under line of credit 1,159,900
Proceeds from draws on long-term revolver 2,052,427
Principal payments on line of credit (205,000)
Principal payments on long-term revolver (1,400,556)
Principal payments on long-term debt (10,729)
Principal payments on capital lease obligations (166)
------------ ------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 651,871 944,005
----------- -----------
Net (decrease) in cash and cash equivalents (240,031) (100,475)
Cash and cash equivalents at beginning of period 382,519 231,169
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 142,488 $ 130,694
SUPPLEMENTAL DISCLOSURES OF CASH PAID YEAR-TO-DATE FOR:
Interest (net of capitalized) $ 67,928 $ 100,045
Income Taxes (net of refunds) $ 84,124 $ -0-
The accompanying notes are an integral part of these condensed financial
statements.
WINTER SPORTS, INC. AND SUBSIDIARY COMPANIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - BASIS OF PRESENTATION
The financial statements included herein are condensed according to 10-QSB
reporting requirements. They do not contain all information required by
generally accepted accounting principles to be included in a set of audited
financial statements. Accordingly, the financial statements should be read in
conjunction with the Notes to Consolidated Financial Statements contained in the
Company's Annual Report for the year ended May 31, 1995.
In the opinion of Management, the accompanying condensed consolidated financial
statements contain all adjustments (consisting solely of normal recurring
accruals) necessary for a fair presentation of the interim periods presented.
Certain amounts in the September 18, 1994 financial statements have been
reclassified to conform with the September 17, 1995 presentation.
NOTE 2 - May 31, 1995
The balance sheet at May 31, 1995 has been condensed from the audited financial
statements at that date.
NOTE 3 - EARNINGS (L0SS) PER COMMON SHARE
Earnings (Loss) per share is computed based on net income (loss) after deducting
dividends paid on preferred stock of $0 and $0 for the quarters ended September
17, 1995 and September 18, 1994, respectively. The weighted average number of
shares outstanding were 932,948 and 932,948 for the quarters ended September 17,
1995 and September 18, 1994, respectively. Shares outstanding and per share
amounts at September 18, 1994 have been restated to reflect a 4% dividend
effective November 22, 1994.
NOTE 4 - SEASONAL NATURE OF OPERATIONS
The Company's operations are highly seasonal in nature. Revenues, earnings and
cash flow are generated principally from the winter operations of ski lifts and
related facilities. It is the Company's practice to recognize substantially all
of the year's depreciation expense in the third and fourth quarters in order to
better match expenses incurred in generating revenues during the Company's main
periods of business. The Company also generates revenues from the sale of real
estate which is ongoing throughout the fiscal year. Therefore, the results of
operations for the interim periods ended September 17, 1995 and September 18,
1994 are not necessarily indicative of the results to be expected for the full
year.
NOTE 5 - LEGAL PROCEEDINGS AND CONTINGENCIES
In April of 1994, the Company was issued a Citation and Notification of Penalty
by the Occupational Safety and Health Administration (OSHA), citing 14 alleged
violations of their regulations. The Company has filed a notice of intent to
contest the citation. All but one of the claimed violations have been
corrected. The remaining issue would impact the skiing industry nationwide, due
to the present design and manufacture of lift towers. The conflict is before
the Department of Labor in administrative law proceedings, with the trial date
currently set for January, 1996. A provision for the proposed penalties was
charged against income in the fourth quarter of 1994.
Big Mountain Development Corporation, a wholly owned subsidiary of the Company
has been named in a lawsuit filed by Construction Management Associates, which
built townhouses on behalf of Big Mountain Development Corp. In the suit,
Construction Management Associates seeks payment of $10,000 withheld by Big
Mountain Development due to defects and necessary repairs. Big Mountain
Development Corporation has counterclaimed against Construction Management
Associates asserting breach of contract and negligence claims. Also, Big
Mountain Development Company has brought a Third-Party Complaint against Cottle,
Graybeal, Yaw Architects, Ltd., the architectural firm which designed and
oversaw the construction project, for indemnification, contribution,
apportionment, breach of contract and negligence. This litigation is in its
initial stages, discovery has not begun and the district court has not yet
issued a scheduling order or set a trial date.
The Company has been named in a wrongful discharge lawsuit, with unspecified
damages, by a former employee. All pleadings have not yet been filed and
discovery has not begun. It is too early to determine what exposure, if any,
the Company may have.
NOTE 6. NOTES PAYABLE
On November 14, 1994 the Company completed a new loan agreement with Bank of
America Idaho N.A. (BOA) and Seattle First National Bank (Seafirst) providing an
$8.0 million revolving, reducing line of credit which matures June 1, 2002. The
agreement provides funds for seasonal working capital, capital projects and
restructure of long-term debt. The agreement contains covenants that require
minimum net worth and fixed charge coverage ratio and restrict investment,
disposition of assets, capital expenditures, outside borrowing and payment of
dividends. On November 30, 1994, proceeds from the loan were drawn to retire
all existing First Interstate Bank of Oregon (FIOR) long-term debt and FIOR
lines of credit balances. Each June 1, the amount available under the line
reduces by $750,000. At September 17, 1995, $3,428,838 was unused of the
$7,250,000 available under the instrument. The loan agreement bears interest at
or below the institutions' prime rate.
Previously, the Company had a loan agreement with First Interstate Bank of
Oregon, N.A. (FIOR) providing for a total of $3,500,000 revolving lines of
credit for the purpose of financing capital improvements and operating expenses.
That loan carried an interest rate of 1.25% above FIOR's prime rate and imposed
a commitment fee of 0.375% on the daily unused balance. At September 18, 1994,
$761,009 was available on the FIOR lines of credit.
NOTE 7. BUSINESS SEGMENT INFORMATION
The Company operates principally in two industries: the operation of a ski area
and the sale of real estate. Financial information by industry segment for the
first quarters of 1995 and 1994 is summarized as follows:
Ski Area Real Estate Consolidated
Quarter Ended 9/17/95
Net Sales $906,456 $29,688 $936,144
Operating (Loss) ($732,948) ($62,326) ($795,274)
Depreciation & amortization $10,276 $5,976 $16,252
Identifiable assets $12,913,986 $1,539,094 $14,453,080
Capital expenditures $186,803 -0- $186,803
Quarter Ended 9/18/94
Net Sales $950,893 $305,771 $1,256,664
Operating (Loss) ($862,534) ($17,272) ($879,806)
Depreciation & amortization $17,048 $1,152 $18,200
Identifiable assets $13,612,791 $1,935,202 $15,547,993
Capital expenditures $98,651 $33,088 $131,739
WINTER SPORTS, INC. AND SUBSIDIARY COMPANIES
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
For the For the
Period Period
6/1/95 6/1/94
to to
9/17/95 9/18/94
------- -------
Gross Revenues $ 936,144 $ 1,256,664
Net (Loss) $ (519,395) $ (629,022)
(Loss) per Common Share $ (.56) $ (.67)*
Total Assets $14,453,080 $15,547,993
Long-Term Debt less current portion $ 3,821,162 $ 1,957,313
*Restated to retroactively reflect stock dividend effective November 22, 1994.
RESULTS OF OPERATIONS, FIRST QUARTER AND YEAR-TO-DATE
Revenues
Total revenues for the interim period from June 1, 1995 to September 17, 1995
were $936,144, a decrease of $320,520 or 26% under the interim period from June
1, 1994 to September 18, 1994. The decrease was primarily due to lower real
estate sales. Net real estate sales fell 90% or $276,083 to $29,688 from
$305,771 last year. During the quarter, no sales of the Company's lots were
completed due to the soft demand in the regional real estate market.
Operating Expenses
Total operating expenses fell 19% primarily due to the decline in real estate
sales and reduced marketing costs for the quarter. Several areas of the Company
benefited from the restructuring and cost management programs initiated during
the previous fiscal year. Payroll and related expense declined by $77,661 or
nearly 10%, while general and administrative costs declined by $51,290 or 18%.
Direct expenses - lifts increased by $38,550 or 16%, largely due to substantial
repairs to several of the Company's chairlifts.
Other Expenses
Interest expense for the period ended September 17, 1995 was $82,571, a decrease
of $50,387 or 38% from last year. The decrease is due to both lower interest
rates on the Company's new line of credit and a lower level of borrowing. Also,
the interest expense of $82,571 for the current year and $132,958 for the prior
year is net of capitalized construction period interest of $1,207 and $7,769 in
the respective periods.
The first quarter net loss of $519,395 was $109,627 or 17% less than the same
quarter last year. This was due largely to cost containment efforts.
A loss for this interim period in any year is not necessarily indicative of the
results to be expected for the entire year, but instead reflects the seasonal
nature of the Company's business. The Company's main periods of business are
from mid-November through mid-April. Historically, the first and second
quarters, especially, taken individually bear little comparative value.
Liquidity and Capital Resources
Working capital at the end of the quarter was ($241,488) which is an improvement
from the prior year's ($3,972,336). The increase was due primarily to
restructuring of the Company's debt facilities.
Total liabilities of $6,480,335 represents 81% of stockholders' equity at
September 17, 1995, down from $8,342,861 or 116% of stockholders' equity at
September 18, 1994.
Management continually evaluates the Company's cash and financing requirements.
Over the years, the Company has obtained favorable financing from financial
institutions when necessary to fund off-season cash requirements and capital
acquisitions. The Company has a reducing revolving credit agreement which
provides flexible financial resources allowing the Company to meet short-term
needs and fund capital expenditures. The $8.0 million agreement reduces
available capacity by $750,000 each June 1. At September 17, 1995, there was
$3,821,162 borrowed with $3,428,838 of additional unused capacity of the
$7,250,000 available at that date.
WINTER SPORTS, INC. AND SUBSIDIARY COMPANIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Note 5 to Condensed Consolidated Financial
statements of this Form 10-QSB, which is incorporated herein by
reference.
Item 4. Submission of Matters to a Vote of Security Holders
At the regular Annual Meeting of Shareholders held on October 10,
1995, the Shareholders reelected all current directors to additional
one year terms. Shareholders were entitled to cast nine votes for
each share of common stock held with cumulative voting allowed. The
table below summarizes voting results:
FOR WITHHELD
Charles R. Abell 700,760 501
Brian T. (Tim) Grattan 555,041 501
Dennis L. Green 551,551 501
Michael T. Jenson 683,342 501
Darrel R. (Bill) Martin 553,217 501
Michael J. Muldown 753,836 501
Calvin S. Robinson 552,762 501
W. E. Schreiber 552,008 501
Paul D. Watson 550,233 501
------- ---
Total Cast 5,452,750 4,509 5,457,259 65%
Not Voted 2,939,273 35%
Total Votes Available 8,396,532 100%
Item 5. Other Information
On October 20, 1995, the Board of Directors declared a 4% common
stock dividend. The stock dividend will be paid to owners of record
on November 6, 1995 and distributed November 29, 1995.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
None
b. Reports on Form 8-K
No reports on Form 8-K have been filed during the quarter ended
September 17, 1995.
WINTER SPORTS, INC. AND SUBSIDIARY COMPANIES
FORM 10-QSB
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
Winter Sports, Inc.
(Registrant)
Date: October 27, 1995 /s/ Michael J. Collins
Michael J. Collins
President & Chief Executive Officer
(Principal Executive Officer)
Date: October 27, 1995 /s/ Steven P. Benner
Steven P. Benner
Treasurer & Chief Financial Officer
(Principal Financial and
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This schedule contains summary financial information extracted from 10-QSB dated
9/17/95 and is qualified in its entirety by reference to such 10-QSB.
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