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 2, 1997
( ) TRANSITION REPORT UNDER SECTION 13 OF 15(d) OF THE EXCHANGE ACT
For the transition period from to
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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)
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
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As of April 16, 1997 the number of shares outstanding of the issuer's common
stock, no par value, was 1,008,368.
Transition Small Business Disclosure Format Yes No x
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WINTER SPORTS, INC.
INDEX
Page No.
PART I.FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets
At:
March 2, 1997
March 3, 1996
May 31, 1996
Condensed Consolidated Statements of Operations
For The Periods:
December 9, 1996 - March 2, 1997
December 11, 1995 - March 3, 1996
June 1, 1996 - March 2, 1997
June 1, 1995 - March 3, 1996
Condensed Consolidated Statements of Cash Flows
For The Periods:
June 1, 1996 - March 2, 1997
June 1, 1995 - March 3, 1996
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.
CONDENSED CONSOLIDATED BALANCE SHEETS
March 2, March 3, May 31,
1997 1996 1996
ASSETS (Unaudited) (Unaudited) (Note 2)
------ ------------ ------------ -------------
CURRENT ASSETS
Cash and cash equivalents $ 201,014 $ 313,252 $ 87,424
Receivables (Net of reserve for 436,227 220,653 107,542
bad debts of $10,488, $0 and
$42,043 respectively)
Receivables - related parties 18,803 35,913 23,750
Income tax refund receivable 0 14,333 128,948
Current deferred tax asset 38,042 23,440 38,042
Inventories 509,102 546,002 424,500
Prepaid expenses 208,725 132,841 170,172
----------- ----------- -----------
TOTAL CURRENT ASSETS 1,411,913 1,286,434 980,378
PROPERTY AND EQUIPMENT
Property and equipment, at cost 18,462,575 18,655,242 18,436,526
Accumulated depreciation (9,408,303) (8,839,104) (8,742,075)
----------- ----------- -----------
9,054,272 9,816,138 9,694,451
Construction in progress 1,733,556 934,604 762,831
Land and development costs 2,206,240 2,248,626 1,916,719
----------- ----------- -----------
NET PROPERTY AND EQUIPMENT 12,994,068 12,999,368 12,374,001
OTHER ASSETS 339,859 137,452 336,396
----------- ----------- -----------
TOTAL ASSETS $14,745,840 $14,423,254 $13,690,775
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable $ 848,959 $ 675,797 $ 421,544
Accounts payable - related parties 48,483 12,513 11,489
Employee compensation and 336,554 328,765 120,870
related expenses
Taxes other than payroll and income 189,328 206,462 138,427
Income taxes payable 169,422 107,715 0
Interest payable 0 6,461 42,577
Deposits and other unearned income 1,052,086 848,720 183,711
Other current liabilities 2,382 2,187 1,684
----------- ----------- -----------
TOTAL CURRENT LIABILITIES 2,647,214 2,188,620 920,202
LONG-TERM DEBT 1,869,861 2,250,000 2,792,060
DEFERRED INCOME TAXES 1,379,508 1,337,202 1,379,508
----------- ----------- -----------
TOTAL LIABILITIES 5,896,583 5,775,822 5,091,770
STOCKHOLDERS' EQUITY
Preferred stock (950 shares 24,500 24,500 24,500
authorized; $100 par value;
4% cumulative; 245, 245 &
245 outstanding)
Common stock (5,000,000 shares 4,099,174 3,560,874 3,560,874
authorized; no par value;
1,008,368, 932,948 & 969,918
outstanding)
Additional paid-in capital 20,519 20,519 20,519
Retained earnings 4,705,064 5,041,539 4,993,112
----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY 8,849,257 8,647,432 8,599,005
----------- ----------- -----------
TOTAL LIABILITIES AND EQUITY $14,745,840 $14,423,254 $13,690,775
The accompanying notes are an integral part of these financial statements.
WINTER SPORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Third Quarter Year To Date
12/9/96 12/11/95 6/1/96 6/1/95
to to to to
3/2/97 3/3/96 3/2/97 3/3/96
---------- ----------- ----------- ---------
REVENUE
Lifts $ 3,257,827 $ 3,567,126 $ 3,899,328 $ 4,058,009
Food, beverage and retail 1,046,928 1,072,015 1,569,853 1,533,936
Equipment rental and repair 331,312 281,867 360,949 314,745
Lodging 96,517 112,147 171,847 183,619
Lease, management and
other fees 645,787 586,296 864,444 821,585
Lease, management and other fees
- related parties 17,873 45,460 126,046 205,633
Real estate sales - net 378,000 0 710,000 27,140
----------- ---------- ----------- -----------
TOTAL REVENUE 5,774,244 5,664,911 7,702,467 7,144,667
COSTS AND EXPENSE
Direct expenses - lifts 617,044 707,641 1,302,160 1,266,307
Depreciation - lifts 342,973 325,697 342,973 325,697
Cost of food, beverage
and retail 419,233 453,621 620,825 640,696
Cost of real estate sales 132,527 (500) 256,085 1,722
Payroll and related expenses 1,047,703 982,610 2,079,589 2,246,731
Direct expenses 389,509 350,487 852,076 843,961
Direct expenses:
related party 15,889 6,938 41,412 16,563
Marketing 250,095 179,468 544,958 493,682
Depreciation & amortization 321,118 228,555 348,613 257,001
General and administrative 192,217 160,004 628,616 565,418
General and administrative
- related party 15,187 12,180 34,514 36,636
----------- ----------- ----------- -----------
TOTAL COSTS AND EXPENSES 3,743,495 3,406,701 7,051,821 6,694,414
OPERATING INCOME 2,030,749 2,258,210 650,646 450,253
OTHER INCOME (EXPENSE)
Interest income 1,114 30 4,559 2,392
Interest expense (27,336) (48,415) (149,003) (193,242)
Gain (loss) on disposal
of assets 0 0 (7,125) 10,065
Other (Expense) 4,232 0 (73,570) (23)
----------- ---------- ----------- ----------
TOTAL OTHER INCOME (EXPENSE) (21,990) (48,385) (225,138) (180,808)
----------- ---------- ----------- -----------
INCOME BEFORE INCOME TAXES 2,008,759 2,209,825 425,507 269,445
Provision for income taxes 802,745 885,388 169,421 107,715
----------- ----------- ----------- -----------
NET INCOME $ 1,206,014 $ 1,324,437 $ 256,086 $ 161,730
INCOME PER COMMON SHARE $ 1.20 $ 1.31* $ .25 $ .16*
WEIGHTED AVERAGE SHARES
OUTSTANDING 1,008,368 1,008,368* 1,008,368 1,008,368*
*Restated to retroactively reflect a 4% stock dividend effective December 27,
1996.
The accompanying notes are an integral part of these financial statements
WINTER SPORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(Unaudited)
For the Period
6/1/96 6/1/95
to to
3/2/97 3/3/96
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NET CASH PROVIDED BY OPERATING ACTIVITIES $ 2,295,925 $ 1,262,313
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Surety deposit 0 59,438
Option deposit 0 (1,000)
Advances to affiliates (37,250) (2,850)
Payments from affiliates 34,000 0
Purchase of marketable securities (1,184)
Master plan 0 (543)
Proceeds from sale of assets 10,037 0
Property and equipment acquisitions (1,259,906) (460,891)
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NET CASH (USED IN) INVESTING ACTIVITIES (1,254,303) (405,846)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from draws on long-term revolver 4,223,320 5,090,406
Principal payments on long-term revolver (5,145,518) (6,009,696)
Payment of dividends (5,834) (6,444)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES (928,032) (925,734)
Net increase (decrease) in cash and 113,590 (69,267)
cash equivalents
Cash and cash equivalents at beginning of period 87,424 382,519
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 201,014 $ 313,252
SUPPLEMENTAL DISCLOSURES OF CASH PAID YEAR-TO-DATE FOR:
Interest (net of capitalized interest) $ 191,581 $ 191,817
Income taxes (net of refunds) $ (128,948) $ 84,265
The accompanying notes are an integral part of these financial statements
WINTER SPORTS, INC.
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, 1996.
In the opinion of Management, the accompanying condensed consolidated financial
statements contain all adjustments (consisting of normal recurring accruals)
necessary for a fair presentation of the interim periods presented.
Certain amounts in the March 3, 1996 financial statements have been reclassified
to conform with the March 2, 1997 presentation.
NOTE 2 - May 31, 1996
The balance sheet at May 31, 1996 has been condensed from the audited financial
statements at that date.
NOTE 3 - EARNINGS PER COMMON SHARE
Earnings per common share is based on net income after deducting dividends paid
on preferred stock of $980 and $980 for the quarters ended March 2, 1997 and
March 3, 1996 respectively. The weighted average number of shares outstanding
were 1,008,368 and 1,008,368 for the quarters ended March 2, 1997 and March 3,
1996, respectively.
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 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 2, 1997 and March 3, 1996 are not
necessarily indicative of the results to be expected for the full year.
NOTE 5 - LEGAL PROCEEDINGS AND CONTINGENCIES
In January of 1997 the Company settled a wrongful discharge claim with a former
employee. The settlement provides for a one-time payment of cash and was
charged against income in the third quarter of the fiscal year ending May 31,
1997.
The Company is a defendant in a lawsuit filed by an individual who is seeking
damages of an unspecified amount for alleged personal injuries resulting from an
accident that occurred while skiing on the Company's property. The Company's
insurance carrier provides defense and coverage for these claims and the
Company's participation is limited to its policy deductible.
NOTE 6 - NOTE PAYABLE
The Company currently has a loan agreement with Bank of America Idaho, N.A. and
Seattle-First National Bank. The agreement provides for an $8,000,000
revolving, reducing line of credit which matures on June 1, 2002. The agreement
contains covenants that require minimum net worth, a fixed charge coverage ratio
and restrictions covering investments, 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 2, 1997
$4,515,311 was unused of the $6,500,000 available under the instrument. At March
3, 1996 $5,000,000 was unused of the $7,250,000 available under the instrument.
The loan 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
first three quarters of 1997 and 1996 is summarized as follows:
Ski Area Real Estate Consolidated
Third Quarter
Quarter Ended 3/2/97
Net sales $ 5,394,743 $ 379,500 $ 5,774,243
Operating income $ 1,828,833 $ 201,916 $ 2,030,749
Depreciation and amortization $ 659,660 $ 4,431 $ 664,091
Identifiable assets $12,488,858 $ 2,256,982 $14,745,840
Capital expenditures $ 747,087 $ 0 $ 747,087
Quarter Ended 3/3/96
Net sales $ 5,661,515 $ 3,396 $ 5,664,911
Operating (loss) $ 2,290,162 $ (31,952) $ 2,258,210
Depreciation and 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
Year to Date
6/1/96 to 3/2/97
Net sales $ 6,987,467 $ 715,000 $ 7,702,467
Operating income $ 309,794 $ 340,852 $ 650,646
Depreciation and amortization $ 677,424 $ 14,162 $ 691,586
Identifiable assets $12,488,858 $ 2,256,982 $14,745,840
Capital expenditures $ 1,259,906 $ 0 $ 1,259,906
6/1/95 to 3/3/96
Net sales $ 7,111,583 $ 33,084 $ 7,144,667
Operating income $ 571,142 $ (120,889) $ 450,253
Depreciation and 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
WINTER SPORTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
For the For the
Period Period
6/1/96 6/1/95
to to
3/2/97 3/3/96
----------- ----------
Gross Revenues $ 7,702,467 $ 7,144,667
Net Income $ 256,086 $ 161,730
Income Per Common Share $ .25 $ .16*
Total Assets $14,745,840 $14,423,254
Long-Term Debt less current portion $ 1,869,861 $ 2,250,000
*Restated to retroactively reflect a 4% stock dividend effective December 27,
1996.
RESULTS OF OPERATIONS, THIRD QUARTER AND YEAR-TO-DATE
Revenues
Total revenues for the third quarter were $5,774,243, an increase of $109,332
(2%) from the same quarter of the prior year. The increase was due to real
estate sales in the quarter of $378,000 compared to $0 in the third quarter of
last year. The Company has seen renewed interest in its real estate products
and expects the demand to continue in the future. Total revenues year to date
were up 8% or $557,800 from last year, again due primarily to increased real
estate sales. Lift revenue has declined by $158,681 from the prior year due
increased sales of the Company's pre-season lift vouchers. Sales of theses
vouchers increased by 76% from the prior year.
Operating Expenses
Total operating expenses increased by $336,793 (10%) from the same quarter of
the previous year. This increase was attributable to the increase in the sales
of real estate the Company experienced during the same period. Year to date,
with the exception of the cost of real estate sales, operating expenses have
increased only 2% or $173,044. The Company is continuing its efforts to reduce
operating expenses while preserving its quality of products and services.
Other Expenses
Interest expense for the quarter ended March 2, 1997 was $27,336, a decrease of
$21,080 or 44% lower than the third quarter of last year. Interest expense fell
by $44,239 or 23% over the first three quarters of the current fiscal year. The
decrease was due to both lower interest rates and lower levels of interest
bearing debt for the first three quarters of the year. The year to date
interest expense of $149,003 for fiscal 1997 and $193,242 for fiscal 1996 is net
of capitalized construction period interest of $6,329 and $5,666 in the
respective periods.
The net income for the third of the current year of $1,206,014 was $118,423 or
9% less than during the same time period last year. Year to date net income of
$256,086 was $94,356 or 58% more than the prior 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 at the end of the third quarter of 1996 was $(1,235,300). This
represents a decrease of $333,114 from the end of the same quarter last year.
The decrease is primarily due to higher deferred revenue at the end of the third
quarter of the current year. Deferred revenue at the end of the third quarter
of the current year consists mainly of unused pre-season lift vouchers.
Total liabilities of $5,896,582 represent 67% of stockholders' equity at March
2, 1997 compared to $5,775,822 or 67% of stockholders' equity at March 3, 1996.
Common stock increased to $4,099,174 at March 2, 1997 from $3,560,874 at March
3, 1996 due to the issuance of a 4% stock dividend effective December 27, 1996.
Shares issued under the stock dividend amounted to 38,450 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 2, 1997, there was
$1,869,861 outstanding on the line of credit. A standby letter of credit in the
amount of $114,828 reduced the unused capacity of the line of credit to
$4,515,311 at March 2, 1997. 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.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to Note 5 to the Condensed Consolidated
Financial Statements of this Form 10-QSB, which is incorporated
herein by reference.
Item 5. Other Information
On November 20, 1996, the Company's Board of Directors declared a
4% common stock dividend. The stock dividend was paid to owners
of record on December 3, 1996 and was distributed on December 27,
1996. Shares issued under this stock dividend amount to 38,450 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 were filed during the quarter ended
March 2, 1997.
c. Financial Data Schedule
WINTER SPORTS, INC.
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 15, 1997 /s/Michael J. Collins
Michael J. Collins
President & Chief Executive Officer
(Principal Executive Officer)
Date: April 15, 1997 /s/Joann M. Gould
Joann M. Gould
Controller & Assistant Secretary
(Principal Accounting Officer)
Date: April 15, 1997 /s/Thomas E. Cullen
Thomas E. Cullen
Treasurer
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from 10-QSB dated
March 2, 1997 and is qualified in its entirety by reference to such 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> MAR-02-1997
<CASH> 201,014
<SECURITIES> 0
<RECEIVABLES> 465,518
<ALLOWANCES> 10,488
<INVENTORY> 509,102
<CURRENT-ASSETS> 1,411,913
<PP&E> 22,402,371
<DEPRECIATION> 9,408,303
<TOTAL-ASSETS> 14,745,840
<CURRENT-LIABILITIES> 2,647,213
<BONDS> 1,869,861
0
24,500
<COMMON> 4,099,174
<OTHER-SE> 750,083
<TOTAL-LIABILITY-AND-EQUITY> 14,745,840
<SALES> 2,279,853
<TOTAL-REVENUES> 7,702,467
<CGS> 876,910
<TOTAL-COSTS> 7,051,821
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 149,003
<INCOME-PRETAX> 425,508
<INCOME-TAX> 169,421
<INCOME-CONTINUING> 256,086
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<NET-INCOME> 256,086
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