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 March 3, 1996
( ) 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 March 22, 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
At:
March 3, 1996
March 5, 1995
May 31, 1995
Condensed Consolidated Statements of Operations
For The Periods:
December 11, 1995 - March 3, 1996
December 12, 1994 - March 5, 1995
June 1, 1995 - March 3, 1996
June 1, 1994 - March 5, 1995
Condensed Consolidated Statements of Cash Flows
For The Periods:
June 1, 1995 - March 3, 1996
June 1, 1994 - March 5, 1995
Notes to Condensed Consolidated Financial Statements
Management's Discussion and Analysis of Financial
Conditions
PART II OTHER INFORMATION
Item 1. Legal Proceedings
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
WINTER SPORTS, INC. AND SUBSIDIARY COMPANIES
CONDENSED CONSOLIDATED BALANCE SHEETS
March 3, March 5, May 31,
1996 1995 1995
ASSETS (Unaudited) (Unaudited) (Note 2)
- -------------------------------- ----------- ----------- --------
CURRENT ASSETS
Cash & cash equivalents $ 313,252 $ 383,106 $ 382,519
Receivables 220,653 184,001 77,792
Receivables - related parties 35,913 6,535
Income tax refund receivable 14,333 38,662
Current deferred tax asset 23,440 18,148 23,440
Inventories 546,002 231,795 343,054
Prepaid Expenses 132,841 146,360 152,228
--------- --------- ---------
TOTAL CURRENT ASSETS 1,286,434 963,410 1,024,230
PROPERTY AND EQUIPMENT
Property & equipment, at cost 18,655,242 18,500,825 18,503,716
Less accumulated depreciation 8,839,104 8,079,260 8,264,151
---------- ---------- ----------
9,816,138 10,421,565 10,239,565
Construction in progress 934,604 629,970 791,732
Land and development costs 2,248,626 2,426,700 1,965,357
---------- ---------- ----------
NET PROPERTY AND EQUIPMENT 12,999,368 13,478,235 12,996,654
OTHER ASSETS 137,452 215,848 247,987
----------- ----------- -----------
TOTAL ASSETS $14,423,254 $14,657,493 $14,268,871
LIABILITIES & STOCKHOLDERS' EQUITY
- ----------------------------------
CURRENT LIABILITIES
Accounts payable $ 675,797 $ 667,529 $ 471,978
Accounts payable - related parties 12,513 250,675
Employee compensation and
related expenses 328,765 384,864 226,601
Taxes other than payroll & income 206,462 164,408 136,562
Income taxes payable 107,715 359,443 108,594
Interest payable 6,461 5,037
Deposits and other unearned
revenue 848,720 963,267 68,537
Other current liabilities 2,187 4,756 2,254
--------- --------- ---------
TOTAL CURRENT LIABILITIES 2,188,620 2,544,267 1,270,238
LONG-TERM DEBT 2,250,000 2,539,150 3,169,291
DEFERRED INCOME TAXES 1,337,202 1,214,059 1,337,202
---------- ---------- ----------
TOTAL LIABILITIES 5,775,822 6,297,476 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 5,041,539 5,336,401 5,468,524
--------- --------- ---------
TOTAL STOCKHOLDERS' EQUITY 8,647,432 8,360,017 8,492,140
--------- --------- ---------
TOTAL LIABILITIES AND
STOCKHOLDERS' EQUITY $14,423,254 $14,657,493 $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)
Third Quarter Year to Date
For The For The For The For The
Period Period Period Period
12/11/95 12/12/94 06/01/95 06/01/94
to to to to
03/03/96 03/05/95 03/03/96 03/05/95
-------- -------- -------- --------
REVENUE
Lifts $3,567,126 $3,634,801 $4,058,009 $4,402,565
Food, beverage and retail 1,072,015 854,179 1,533,936 1,427,066
Equipment rental and repair 281,867 72,293 314,745 78,229
Lodging 112,147 116,423 183,619 197,312
Lease, management & other fees 586,296 832,961 821,585 1,223,058
Lease, management & other fees:
related parties 45,460 63,457 205,633 101,216
Real estate sales - net 662,365 27,140 1,954,835
--------- ---------- --------- ---------
TOTAL OPERATING REVENUE 5,664,911 6,236,479 7,144,667 9,384,281
COSTS AND EXPENSES
Direct expenses - lifts 707,641 826,766 1,266,307 1,454,524
Depreciation - lifts 325,697 364,137 325,697 364,137
Cost of food, beverage & retail 453,621 282,894 640,696 467,957
Cost of real estate sales (500) 251,417 1,722 895,718
Payroll and related expenses 982,610 1,017,740 2,246,731 2,381,336
Direct expenses 350,487 374,110 843,961 862,567
Direct expenses - related party 6,938 0 16,563 11,000
Marketing 179,468 138,872 493,682 594,369
Planning, development & consulting 5,411 5,467
Depreciation and amortization 228,555 262,340 257,001 349,985
General and administrative 160,004 249,690 565,418 774,684
General and administrative:
related parties 12,180 11,425 36,636 63,602
--------- ---------- --------- ---------
TOTAL COSTS AND EXPENSES 3,406,701 3,784,802 6,694,414 8,225,346
OPERATING INCOME 2,258,210 2,451,677 450,253 1,158,935
OTHER INCOME (EXPENSE)
Interest income 30 1,217 2,392 1,944
Interest expense (48,415) (65,388) (193,242) (269,850)
Gain (loss) on disposal of asset 2,802 10,065 (7,684)
Other income 9,011 9,011
Other expense (23)
------- ------- -------- --------
TOTAL OTHER INCOME (EXPENSE) (48,385) (52,358) (180,808) (266,579)
------- ------- -------- --------
INCOME BEFORE TAXES 2,209,825 2,399,319 269,445 892,356
Provision for income taxes 885,388 962,229 107,715 359,443
---------- ---------- ----------- ----------
NET INCOME $1,324,437 $1,437,090 $ 161,730 $ 532,913
INCOME PER COMMON SHARE $ 1.37 $ 1.48* $ .17 $ .55*
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
3/3/96 3/5/95
------ ------
NET CASH PROVIDED BY
OPERATING ACTIVITIES $ 1,262,313 $ 2,801,992
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Surety deposit 59,438 (57,236)
Option deposit (1,000)
Advances to affiliates (2,850)
Master plan (543)
Property and equipment acquisitions (460,891) (494,416)
-------- --------
NET CASH (USED IN) INVESTING ACTIVITIES (405,846) (551,652)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from borrowing under line of credit 2,982,856
Proceeds from draws on long-term revolver 5,090,406 5,038,362
Principal payments on line of credit (6,698,068)
Principal payments on long-term debt (3,414,355)
Principal payments on long-term revolver (6,009,696) (550,000)
Payment of dividends (6,444) (7,032)
Principal payments on capital lease obligations (166)
----------- -----------
NET CASH (USED IN)
FINANCING ACTIVITIES (925,734) (2,098,403)
Net (decrease) increase in cash
and cash equivalents (69,267) 151,937
Cash and cash equivalents at beginning of period 382,519 231,169
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 313,252 $ 383,106
SUPPLEMENTAL DISCLOSURES OF CASH PAID YEAR-TO-DATE FOR:
Interest (net of capitalized) $ 191,817 $ 237,786
Income Taxes (net of refunds) $ 84,265 $ (291,766)
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 March 5, 1995 financial statements have been reclassified
to conform with the March 3, 1996 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 PER COMMON SHARE
Earnings per share is computed based on net income after deducting dividends
paid on preferred stock of $980 and $980 for the quarters ended March 3, 1996
and March 5, 1995, respectively. The weighted average number of shares
outstanding were 969,918 and 969,918 for the quarters ended March 3, 1996 and
March 5, 1995, respectively. Shares outstanding and per share amounts at March
5, 1995 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 March 3, 1996 and March 5, 1995 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. All but one of the claimed violations were
corrected previously and the remaining issue was settled prior to going to
trial.
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. 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 been filed and a trial dated
has been set for July, 1996. It has not been determined 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 March 3, 1996, $5,000,000 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 three quarters of 1996 and 1995 is summarized as
follows:
Ski Area Real Estate Consolidated
Third Quarter
For the Period
12/11/95 to 3/3/96:
Net Sales $ 5,661,515 $ 3,396 $ 5,664,911
Operating Income (Loss) $ 2,290,162 $ (31,952) $ 2,258,210
Depreciation & amortization $ 549,770 $ 4,482 $ 554,252
Identifiable assets $12,873,341 $ 1,549,913 $14,423,254
Capital expenditures $ 162,856 $ -0- $ 162,856
For the Period
12/12/94 to 3/5/95:
Net Sales $ 5,574,114 $ 662,365 $ 6,236,479
Operating Income $ 2,135,241 $ 316,436 $ 2,451,677
Depreciation & amortization $ 621,429 $ 5,048 $ 626,477
Identifiable assets $12,806,847 $ 1,850,646 $14,657,493
Capital expenditures $ 62,983 $ 20,504 $ 83,487
Year to Date
For the Period
6/1/95 to 3/3/96:
Net Sales $ 7,111,583 $ 33,084 $ 7,144,667
Operating Income (Loss) $ 571,142 $ (120,889) $ 450,253
Depreciation & amortization $ 567,757 $ 14,941 $ 582,698
Identifiable assets $12,873,341 $ 1,549,913 $14,423,254
Capital expenditures $ 460,891 $ -0- $ 460,891
For the Period
6/1/94 to 3/5/95:
Net Sales $ 7,429,446 $ 1,954,835 $ 9,384,281
Operating Income $ 621,689 $ 537,246 $ 1,158,935
Depreciation & amortization $ 705,125 $ 8,997 $ 714,122
Identifiable assets $12,806,847 $ 1,850,646 $14,657,493
Capital expenditures $ 381,787 $ 112,629 $ 494,416
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
3/3/96 3/5/95
------ ------
Net Revenues $ 7,144,667 $ 9,384,281
Net Income $ 161,730 $ 532,913
Income per Common Share $ .17 $ .55*
Total Assets $14,423,254 $14,657,493
Long-term Debt less current portion $ 2,250,000 $ 2,539,150
*Restated to retroactively reflect a 4% stock dividend effective November 29,
1995.
RESULTS OF OPERATIONS, THIRD QUARTER AND YEAR-TO-DATE
Revenues
Total revenues for the third quarter from December 11, 1995 to March 3, 1996
were $5,664,911, a decrease of $571,568 (9%) from the same quarter of the prior
year. The decrease was due primarily to no real estate sales during the
quarter, a $662,365 decrease from the same quarter last year. The drop is due
to the soft demand in the regional real estate market. The Company anticipates
this trend to continue through the fourth quarter of this fiscal year. Food,
beverage and retail increased by $217,836 (26%) over the same quarter last year.
The increase is due to the addition of a new retail sales outlet in the current
fiscal year. Equipment rental and repair increased by $209,574 (290%) over the
same quarter last year. The increase is due to the addition of a new ski rental
and repair shop in the current fiscal year. Lease, management and other fees
decreased by $246,665 (30%) due primarily to the loss of two lessees from the
prior year. Total revenues year to date were down 24% due primarily to lower
real estate sales and lower lease, management and other fees.
Operating Expenses
Total operating expenses for the quarter decreased by $378,101 (10%) due
primarily to the lack of real estate sales and the effects of the restructuring
and cost management system implemented in the prior year. The cost of food,
beverage and retail increased $170,727 in conjunction with the increase in
revenues in this area. The cost of real estate sales fell $251,917 due to the
lack of sales in this area.
Interest Expense
Interest expense for the quarter ended March 3, 1996 was $48,415, a decrease of
$16,973 or 26% lower than the third quarter last year. Interest expense fell by
$76,608 or 28% over the first three quarters versus the same quarters of the
prior year. The decrease was due to both lower interest rates and lower levels
of interest bearing debit. The year to date interest expense of $193,242 for
fiscal 1996 and $269,850 for fiscal 1995 is net of capitalized construction
period interest of $5,666 and $22,722 in the respective periods.
The third quarter net income of $1,324,437 was $112,653 or 8% less than the same
quarter last year. Year to date the net income of $161,730 was $371,183 or 70%
less than during the same time period last year.
The Company's main periods of business occur in its fiscal third quarter, from
mid-November through mid-April. Due to the seasonal nature of the Company's
business, results in any one quarter are not necessarily indicative of the
results for the entire year.
Liquidity and Capital Resources
Working capital of $(902,186) at the end of the third quarter of 1996 increased
$678,671 from working capital of $(1,580,857) at March 5, 1995. During the
current fiscal year the Company assumed operations of a retail ski shop. In
prior years the business had been operated by a lessee. Consequently, inventory
at March 3, 1996 increased by 136% from $231,795 to $546,002.
Income taxes payable at March 3, 1996 decreased by $251,728 from last year.
Total liabilities of $5,775,822 represent 67% of stockholders' equity at March
3, 1996 down from $6,297,476 or 75% of stockholders' equity at March 5, 1995.
Common stock increased to $3,560,874 at March 3, 1996 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 amount of 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 March 3, 1996, there was
$2,250,000 borrowed with $5,000,000 of additional unused capacity of the
$7,250,000 available at that date. Financing of future development and business
opportunities is anticipated to include cash generated from operations, issuance
of additional debt and may also include additional equity financing.
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.
PRESS RELEASE DATED APRIL 8, 1996
WHITEFISH, MT, Monday, April 8, 1996 -- Winter Sports, Inc. (WSI),
owner and operator of The Big Mountain Ski and Summer Resort, confirmed today
that it has entered into discussions with representatives of the City of
Kellogg, Idaho, regarding possible acquisition of the Silver Mountain Ski Resort
assets. This follows several months of analysis and review by WSI.
The Silver Mountain Resort in Kellogg, Idaho was originally opened in 1968,
was extensively expanded in 1989-90, and boasts the world's longest single-stage
gondola. Five chairlifts and two day skier facilities are the other significant
components of the area. For the 1994-95 fiscal year the two resorts reported
the following results:
The Big Mountain Silver Mountain
Skier Visits 295,900 95,200
Gross Revenues $12,081,900 $3,389,400
Both resorts, like the Pacific Northwest ski industry in general,
experienced lower skier visits in the 1995-96 season.
WSI said it believes an acquisition would provide benefits to the
customers, local communities and employees of both ski operations, and for the
stockholders of WSI. These would include possible operating efficiencies and
sharing of technological expertise between the two resorts. Both would be
expected to operate winter and summer services and provide both day ticket and
season pass programs.
Winter Sports, Inc.'s stock is traded under the `WSKI'' designation on the
NASDAQ stock market. Since 1947, the corporation has continuously operated The
Big Mountain Ski & Summer Resort, and more recently, a related real estate
development subsidiary. It is one of the few publicly traded ski resort
companies in North America.
End of Press Release
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
March 3, 1996
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: April 16, 1996 /s/ Michael J. Collins
Michael J. Collins
President & Chief Executive Officer
(Principal Executive Officer)
Date: April 16, 1996 /s/ Thomas E. Cullen
Thomas E. Cullen
Manager of Finance and Development
(Principal Financial and Accounting
Officer)
<TABLE> <S> <C>
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<LEGEND>
This schedule contains summary financial information extracted from 10-QSB dated
March 3, 1996 and is qualified in its entirety by reference to such 10-QSB.
</LEGEND>
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<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1996
<PERIOD-END> MAR-03-1996
<CASH> 313,252
<SECURITIES> 0
<RECEIVABLES> 256,566
<ALLOWANCES> 0
<INVENTORY> 546,002
<CURRENT-ASSETS> 1,286,434
<PP&E> 21,838,472
<DEPRECIATION> 8,839,104
<TOTAL-ASSETS> 14,423,254
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24,500
<COMMON> 3,560,874
<OTHER-SE> 5,062,058
<TOTAL-LIABILITY-AND-EQUITY> 14,423,254
<SALES> 1,561,076
<TOTAL-REVENUES> 7,144,667
<CGS> 642,418
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