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 December 10, 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 January 19, 1996, the number of shares outstanding of the issuer's common
stock, no par value, was 969,918.
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:
December 10, 1995
December 11, 1994
May 31, 1995
Condensed Consolidated Statements of Operations 4
For The Periods:
September 17, 1995 - December 10, 1995
September 18, 1994 - December 11, 1994
June 1, 1995 - December 10, 1995
June 1, 1994 - December 11, 1994
Condensed Consolidated Statements of Cash Flows 5
For The Periods:
June 1, 1995 - December 10, 1995
June 1, 1994 - December 11, 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 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11-12
Signatures 12
WINTER SPORTS, INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
December 10, December 11, May 31,
1995 1994 1995
ASSETS (Unaudited) (Unaudited) (Note 2)
- -------------------------------- ----------- ----------- --------
CURRENT ASSETS
Cash & cash equivalents $ 283,785 $ 507,861 $ 382,519
Receivables 331,386 89,231 77,792
Receivables - related parties 12,867 32,574 6,535
Income tax refund receivable 792,006 602,786 38,662
Current deferred tax asset 23,440 18,148 23,440
Inventories 766,260 300,181 343,054
Prepaid Expenses 113,227 100,060 152,228
--------- --------- ---------
TOTAL CURRENT ASSETS 2,322,971 1,650,841 1,024,230
PROPERTY AND EQUIPMENT
Property & equipment, at cost 18,550,298 18,361,473 18,503,716
Less accumulated depreciation 8,287,604 7,453,985 8,264,151
10,262,694 10,907,488 10,239,565
Construction in progress 947,734 499,190 791,732
Land and development costs 2,247,611 2,767,468 1,965,357
---------- ---------- ----------
NET PROPERTY AND EQUIPMENT 13,458,039 14,174,146 12,996,654
OTHER ASSETS 137,911 255,936 247,987
TOTAL ASSETS $15,918,921 $16,080,923 $14,268,871
LIABILITIES & STOCKHOLDERS' EQUITY
- ----------------------------------
CURRENT LIABILITIES
Accounts payable $ 855,654 $ 382,130 $ 471,978
Accounts payable - related parties 7,560 4,100 250,675
Employee compensation and
related expenses 275,337 312,255 226,601
Taxes other than payroll & income 141,817 100,321 136,562
Income taxes payable 108,594
Interest payable 13,478 5,037
Deposits and other unearned
revenue 2,390,924 2,654,456 68,537
Other current liabilities 2,187 2,393 2,254
--------- --------- ---------
TOTAL CURRENT LIABILITIES 3,686,957 3,455,655 1,270,238
LONG-TERM DEBT 3,571,773 4,488,362 3,169,291
DEFERRED INCOME TAXES 1,337,202 1,214,059 1,337,202
--------- --------- ---------
TOTAL LIABILITIES 8,595,932 9,158,076 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 3,560,874 2,978,597 2,978,597
authorized; no par value; out-
standing 969,918, 897,399 and
932,948)
Additional paid-in capital 20,519 20,519 20,519
Retained earnings 3,717,096 3,899,231 5,468,524
--------- --------- ---------
TOTAL STOCKHOLDERS' EQUITY 7,322,989 6,922,847 8,492,140
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $15,918,921 $16,080,923 $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)
Second Quarter Year to Date
For The For The For The For The
Period Period Period Period
9/18/95 9/19/94 6/1/95 6/1/94
to to to to
12/10/95 12/11/94 12/10/95 12/11/94
-------- -------- -------- --------
REVENUE
Lifts $ 264,135 $ 551,239 $ 490,883 $ 767,764
Food, beverage and retail 107,214 165,882 494,799 578,823
Lodging 17,898 22,519 71,472 80,889
Lease, management & other fees 96,872 145,599 261,221 390,656
Lease, management & other fees:
related parties 57,493 19,200 134,241 37,200
Real estate sales - net 986,699 27,140 1,292,470
------- --------- --------- ---------
TOTAL OPERATING REVENUE 543,612 1,891,138 1,479,756 3,147,802
COSTS AND EXPENSES
Direct expenses - lifts 281,744 389,386 558,666 627,758
Cost of food, beverage & retail 47,323 50,621 187,075 185,063
Cost of real estate sales 574 506,809 2,222 644,301
Payroll and related expenses 555,132 597,946 1,264,121 1,363,596
Direct expenses 220,920 217,231 493,474 478,833
Direct expenses - related party 4,625 5,461 9,625 16,673
Marketing 244,526 212,604 314,214 455,497
Marketing - related party 6,000
Planning, development & consulting 56
Depreciation and amortization 12,194 69,445 28,446 87,645
General and administrative 176,234 233,211 405,414 519,546
General and administrative:
related parties 13,023 21,360 24,456 55,576
--------- --------- --------- ---------
TOTAL COSTS AND EXPENSES 1,556,295 2,304,074 3,287,713 4,440,544
OPERATING (LOSS) (1,012,683) (412,936) (1,807,957) (1,292,742)
OTHER INCOME (EXPENSE)
Interest income 239 559 2,362 727
Interest expense (62,255) (71,504) (144,826) (204,462)
Gain (loss) on disposal of asset 10,065 (10,486)
Other expense (24) (24)
-------- -------- --------- ---------
TOTAL OTHER INCOME (EXPENSE) (62,040) (70,945) (132,423) (214,221)
(LOSS) BEFORE TAXES (1,074,723) (483,881) (1,940,380) (1,506,963)
Recovery of income taxes (431,411) (208,725) (777,673) (602,786)
---------- ----------- ----------- ----------
NET (LOSS) $(643,312) $(275,156) $(1,162,707) $(904,177)
(LOSS)PER COMMON SHARE $(0.66) $(0.28)* $(1.20) $(0.93)*
WEIGHTED AVERAGE SHARES
OUTSTANDING 969,918 969,918* 969,918 969,918*
*Restated to retroactively reflect a 4% stock dividend effective November 29,
1995.
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)
For The For The
Period Period
6/1/95 6/1/94
to to
12/10/95 12/11/94
-------- --------
NET CASH (USED IN) PROVIDED BY
OPERATING ACTIVITIES $ (65,876) $ 928,986
------------ -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Surety deposit 59,335 (55,535)
Advances to affiliates (2,850)
Master plan (543)
Property and equipment acquisitions (484,838) (447,568)
--------- ---------
NET CASH (USED IN) INVESTING ACTIVITIES (428,896) (503,103)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowing under line of credit 2,218,900
Proceeds from draws on long-term revolver 3,337,386 5,038,362
Principal payments on line of credit (3,434,900)
Principal payments on long-term debt (3,414,355)
Principal payments on long-term revolver (2,934,904) (550,000)
Payment of dividends (6,444) (7,032)
Principal payments on capital lease obligations (166)
------------ ------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES 396,038 (149,191)
Net (decrease) increase in cash
and cash equivalents (98,734) 276,692
Cash and cash equivalents at beginning of period 382,519 231,169
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 283,785 $ 507,861
SUPPLEMENTAL DISCLOSURES OF CASH PAID YEAR-TO-DATE FOR:
Interest (net of capitalized) $ 136,384 $ 160,181
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 on Form 10-KSB 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 December 11, 1994 financial statements have been
reclassified to conform with the December 10, 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
(Loss) per share is computed based on net income (loss) after deducting
dividends paid on preferred stock of $980 and $980 for the quarters ended
December 10, 1995 and December 11, 1994, respectively. The weighted average
number of shares outstanding were 969,918 and 969,918 for the quarters ended
December 10, 1995 and December 11, 1994, respectively. Shares outstanding and
per share amounts at December 11, 1994 have been restated to reflect a 4% stock
dividend effective November 29, 1995.
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 December 10, 1995 and December 11, 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 30, 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. Each June 1, the amount available under the line reduces by
$750,000. At December 10, 1995, $3,678,227 was unused of the $7,250,000
available under the instrument. The loan agreement bears interest at or below
the institutions' prime rate.
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
second quarter and first two quarters of 1995 and 1994 is summarized as follows:
Ski Area Real Estate Consolidated
Second Quarter
For the Period
9/18/95 to 12/10/95:
Net Sales $ 541,716 $ 1,896 $ 543,612
Operating (Loss) $ (978,157) $ (34,526) $(1,012,683)
Depreciation & amortization $ 7,712 $ 4,482 $ 12,194
Identifiable assets $14,351,963 $1,566,958 $15,918,921
Capital expenditures $ 298,035 $ -0- $ 298,035
For the Period
9/19/94 to 12/11/94:
Net Sales $ 904,439 $ 986,699 $ 1,891,138
Operating (Loss) Income $ (744,903) $ 331,967 $ (412,936)
Depreciation & amortization $ 66,600 $ 2,845 $ 69,445
Identifiable assets $14,082,401 $1,998,522 $16,080,923
Capital expenditures $ 220,153 $ 95,676 $ 315,829
Year to Date
For the Period
6/1/95 to 12/10/95:
Net Sales $ 1,448,172 $ 31,584 $ 1,479,756
Operating (Loss) $(1,715,616) $ (92,341) $(1,807,957)
Depreciation & amortization $ 17,988 $ 10,458 $ 28,446
Identifiable assets $14,351,963 $1,566,958 $15,918,921
Capital expenditures $ 484,838 $ -0- $ 484,838
For the Period
6/1/94 to 12/11/94:
Net Sales $ 1,855,332 $1,292,470 $ 3,147,802
Operating (Loss) Income $(1,611,735) $ 318,993 $(1,292,742)
Depreciation & amortization $ 83,698 $ 3,947 $ 87,645
Identifiable assets $14,082,401 $1,998,522 $16,080,923
Capital expenditures $ 318,804 $ 128,764 $ 447,568
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
12/10/95 12/11/94
-------- --------
Net Revenues $ 1,479,756 $ 3,147,802
Net (Loss) $(1,162,707) $ (904,177)
(Loss) per Common Share $ (1.20) $ (0.93)*
Total Assets $15,918,921 $16,080,923
Long-Term Debt less current portion $ 3,571,773 $ 4,488,362
*Restated to retroactively reflect a 4% stock dividend effective November 29,
1995.
RESULTS OF OPERATIONS, SECOND QUARTER AND YEAR-TO-DATE
Revenues
Total revenues for the second quarter from September 18, 1995 to December 10,
1995 were $543,612, a decrease of $1,347,526 (71%) over the same quarter of the
prior year. The decrease was due primarily to both lower real estate sales and
lower lift revenue. There were no real estate sales during the quarter, a
$986,699 decrease from the same quarter last year. The drop is due to the soft
demand in the regional real estate market. Lift revenue fell 52% or $287,104
due to unusually favorable snow conditions in the same quarter last year. Total
revenues year to date were down 53% or $1,668,046 from last year, due primarily
to lower real estate sales and lift revenue.
Operating Expenses
Total operating expenses fell 32% primarily due to the lack of real estate sales
and the effects of the restructuring and cost management system implemented in
the prior year. Direct expenses - lifts and costs of real estate sales fell
$107,642 and $506,235, respectively in conjunction with the decrease in revenues
in these areas.
Other Expenses
Interest expense for the quarter ended December 10, 1995 was $62,255, a decrease
of $9,249 or 13% lower than the second quarter last year. Interest expense fell
by $59,636 or 29% over the first two quarters versus the same quarters of the
prior year. The decrease was due to both lower interest rates and lower levels
of borrowing on the line of credit. The year to date interest expense of
$144,826 for fiscal 1995 and $204,462 for fiscal 1994 is net of capitalized
construction period interest of $4,393 and $19,786 in the respective periods.
The second quarter net loss of $643,312 was $368,156 or 134% more than the same
quarter last year. Year to date the net loss of $1,162,707 was $258,530 (29%)
larger than during the same time period last year.
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 of $(1,363,986) at the end of the second quarter of 1995
increased from working capital of $(1,804,814) at December 11, 1994. This
increase was primarily due to increased receivables and inventory. At December
10, 1995 accounts receivable was $331,386, an increase of $242,155 (271%) from
December 11, 1994. This increase is due to a payment from a lift ticket vendor
that had not been received at December 10, 1995. The payment was received
shortly after the end of the quarter. During the current fiscal year the
Company assumed operations of a ski shop. In prior years the business had been
operated by a lessee. Consequently, inventory at December 10, 1995, the
beginning of the ski shop's operating season, increased by 155% from $300,181 to
$766,260.
Accounts payable at December 10, 1995 was $855,654, a 124% increase from
December 11, 1994. This increase was due to the increase in inventory
associated with the assumption of the ski shop operation. Total liabilities of
$8,595,932 represents 117% of stockholders' equity at December 10, 1995, down
from $9,158,076 or 132% of stockholders' equity at December 11, 1994. Common
stock increased to $3,560,874 at December 10, 1995 from $2,978,597 at May 31,
1995 due to the issuance of a 4% stock dividend effective November 29, 1995.
Shares issued under the stock dividend amounted to 36,970 shares.
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 December 10, 1995, there was
$3,571,773 borrowed with $3,678,227 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 5. Other Information
On October 20, 1995, the Board of Directors declared a 4% common
stock dividend. The stock dividend was paid to owners of record
on November 6, 1995 and distributed November 29, 1995. Shares issued
under the stock dividend amounted to 36,970 shares.
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
December 10, 1995.
c. Financial Data Schedule
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: January 22, 1996 /s/ Michael J. Collins
Michael J. Collins
President & Chief Executive Officer
(Principal Executive Officer)
Date: January 22, 1996 /s/ Thomas E. Cullen
Thomas E. Cullen
Manager of Finance and Development
(Principal Financial and Accounting
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<LEGEND>
This schedule contains summary financial information extracted from 10-QSB dated
December 10, 1995 and is qualified in its entirety by reference to such 10-QSB.
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> DEC-10-1995
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<CASH> 283,785
<SECURITIES> 0
<RECEIVABLES> 344,253
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0
24,500
<OTHER-SE> 3,737,615
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<INCOME-PRETAX> (1,940,380)
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