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 14, 1997
( ) TRANSITION REPORT UNDER SECTION 13 OF 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)
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 24, 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]
WINTER SPORTS, INC.
INDEX
Page No.
PART I. FINANCIAL STATEMENTS
Condensed Consolidated Balance Sheets
At:
September 14, 1997
September 15, 1996
May 31, 1997
Condensed Consolidated Statements of Operations
For The Periods:
June 1, 1997 - September 14, 1997
June 1, 1996 - September 15, 1996
Condensed Consolidated Statements of Cash Flows
For The Periods:
June 1, 1997 - September 14, 1997
June 1, 1996 - September 15, 1996
Notes to Condensed Consolidated Financial Statements
Management's Discussion and Analysis of Financial Conditions
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
WINTER SPORTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
9/14/97 9/15/96 5/31/97
ASSETS (Unaudited) (Unaudited) (Note 2)
----------- ----------- --------
CURRENT ASSETS
Cash and cash equivalents $ 91,776 $ 91,844 $ 122,322
Receivables (Net of reserve
for bad debts of $41,982,
$8,390 and $41,982) 166,415 144,886 111,650
Receivables - Related Party 5,548 28,959 20,529
Income tax refund receivable 203,530 473,963 0
Current deferred tax asset 55,020 38,042 55,020
Inventories 394,455 394,471 409,916
Prepaid expenses 89,896 76,382 162,323
--------- --------- --------
TOTAL CURRENT ASSETS 1,006,640 1,248,547 881,760
PROPERTY AND EQUIPMENT
Property and equipment, at cost 18,948,287 18,427,771 18,908,457
Accumulated depreciation ( 9,764,531) ( 8,737,639) ( 9,750,111)
------------ ------------ -----------
9,183,756 9,690,132 9,158,346
Construction in progress 3,516,269 591,027 1,460,769
Land and development costs 2,191,795 2,227,859 2,213,523
---------- ---------- ----------
NET PROPERTY AND EQUIPMENT 14,891,820 12,509,018 12,832,638
OTHER ASSETS 303,685 337,400 304,811
TOTAL ASSETS $16,202,145 $14,094,694 $14,019,209
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Account payable $ 1,052,898 $ 338,859 $ 494,476
Accounts payable - related parties 12,114 4,720 8,981
Employee compensation and
related expenses 188,354 168,864 160,180
Taxes other than payroll and income 220,130 211,940 140,249
Income taxes payable 0 0 157,323
Interest payable 11,349 9,875 0
Deposits and other unearned income 626,180 481,960 244,543
Other current liabilities 2,382 2,247 2,379
--------- --------- ---------
TOTAL CURRENT LIABILITIES 2,113,407 1,218,465 1,208,131
LONG-TERM DEBT 4,233,616 3,421,668 2,644,050
DEFERRED INCOME TAXES 1,343,227 1,379,508 1,343,227
--------- --------- ---------
TOTAL LIABILITIES 7,690,250 6,019,641 5,195,408
STOCKHOLDERS' EQUITY
Preferred stock (950 shares
authorized; $100 par value;
4% cumulative; 245, 245 and
245 shares outstanding) 24,500 24,500 24,500
Common stock (5,000,000 shares
authorized; no par value;
1,008,368, 969,918 and 1,008,368
shares outstanding) 4,099,174 3,560,874 4,099,174
Additional paid-in capital 20,519 20,519 20,519
Retained earnings 4,367,702 4,469,430 4,679,608
---------- ---------- ----------
TOTAL STOCKHOLDERS' EQUITY 8,511,895 8,075,323 8,823,801
TOTAL LIABILITIES AND EQUITY $16,202,145 $14,094,964 $14,019,209
The accompanying notes are an integral part of these financial statements
WINTER SPORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Quarter and Year-To-Date
6/ 1/97 6/ 1/96
to to
9/14/97 9/15/96
------- -------
REVENUE
Lifts $ 238,098 $ 221,561
Food, beverage and retail 344,728 416,175
Equipment rental and repair 13,595 6,820
Lodging 52,211 62,537
Lease, management and other fees 134,227 148,734
Lease, management and other fees - related parties 26,454 55,519
Real estate sales - net 582,792 0
--------- ---------
TOTAL REVENUE 1,392,105 911,346
OPERATING COSTS AND EXPENSES
Direct expenses - lifts 254,924 260,211
Cost of food, beverage and retail 132,956 155,814
Cost of real estate sales 136,926 0
Payroll and related expenses 569,937 552,709
Direct expenses 281,785 263,577
Marketing 227,584 120,655
Depreciation and amortization 15,548 15,400
General and administrative 224,563 249,087
General and administrative - related parties 2,511 17,044
--------- ---------
TOTAL OPERATING COSTS AND EXPENSES 1,846,734 1,634,497
OPERATING (LOSS) (454,629) (723,151)
OTHER INCOME (EXPENSE)
Interest Income 1,410 1,247
Interest Expense (61,710) (68,704)
Gain (loss) on disposition of assets 0 (4,772)
Other income (expense) 2 (77,422)
------- --------
TOTAL OTHER INCOME (EXPENSE) (60,298) (149,651)
(LOSS) BEFORE INCOME TAXES (514,927) (872,802)
Recovery of income taxes (203,021) (349,120)
----------- -----------
NET (LOSS) $ (311,906) $ (523,682)
(LOSS) PER COMMON SHARE $ (0.31) $ (0.52)*
WEIGHTED AVERAGE SHARES OUTSTANDING 1,008,368 1,008,368 *
*Restated to retroactively reflect 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)
Quarter and Year To Date
6/ 1/97 6/ 1/96
to to
9/14/97 9/15/96
------- -------
NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: $ 276,057 $ (473,857)
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of assets 0 8,276
Property and equipment acquisitions (1,896,168) (159,607)
---------- ---------
NET CASH (USED IN) INVESTING ACTIVITIES (1,896,168) (151,331)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from draws on long-term revolver 2,372,513 1,420,104
Principal payments on long-term revolver (782,947) (790,496)
--------- ---------
NET CASH PROVIDED BY FINANCING ACTIVITIES 1,589,566 629,608
Net (decrease) in cash and cash equivalents (30,545) 4,420
Cash and cash equivalents at beginning of period 122,322 87,424
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 91,777 $ 91,844
SUPPLEMENTAL DISCLOSURES OF CASH PAID YEAR-TO-DATE FOR:
Interest (net of capitalized interest) $ 49,784 $ 101,407
Income taxes (net of refunds) $ 157,323 $ (4,106)
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, 1997.
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 September 15, 1996 financial statements have been
reclassified to conform with the September 14, 1997 presentation.
NOTE 2 - May 31, 1997
The balance sheet at May 31, 1997 has been condensed from the audited financial
statements at that date.
NOTE 3 - (LOSS) PER COMMON SHARE
(Loss) per common share is based on net income (loss) after deducting dividends
paid on preferred stock of $0 and $0 for the quarters ended September 14, 1997
and September 15, 1996, respectively. The weighted average number of shares
outstanding were 1,008,368 and 1,008,368 for the quarters ended September 14,
1997 and September 15, 1996, respectively. Shares outstanding and per share
amounts at September 15, 1996 have been restated to reflect a 4% stock dividend
effective December 27, 1996.
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 September 14, 1997 and September 15,
1996 are not necessarily indicative of the results to be expected for the full
year.
NOTE 5 - LEGAL PROCEEDINGS AND CONTINGENCIES
The Company is a defendant in unrelated lawsuits filed by individuals who are
each seeking damages of specified amounts, for alleged personal injuries
resulting from accidents occurring on the Company's property or while skiing.
The Company's insurance carrier provides defense and coverage for these claims
and the Company's participation has been limited to its policy deductible. Such
amounts are charged to General and Administrative expense upon settlement.
One of the personal injury lawsuits has asserted a claim for punitive damages.
The Company's insurance carrier does not provide coverage for punitive damages.
Outside counsel for the Company has advised that at this stage in the
proceedings they cannot offer an opinion as to the probable outcome or estimate
the amount or range of a potential loss.
As of September 14, 1997, the Company had not received a final determination
from the U.S. Forest Service (USFS) regarding the USFS's audit of the Company's
records for the fees paid to the USFS for fiscal years 1992, 1993, 1994 and
1995. No provision has been made for adjustments, if any, that may result from
the final determination.
NOTE 6 - NOTE PAYABLE
The Company currently has a loan agreement with Bank of America National Trust
and Savings Association, doing business as Seafirst Bank (Seafirst). The
agreement provides for an $8,750,000 revolving, reducing line of credit which
matures on June 1, 2007. The agreement contains covenants that require minimum
net worth, a 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 $650,000. At September
14, 1997 $4,516,384 was unused of the $8,750,000 available under the instrument.
At September 15, 1996 $3,078,332 was unused of the $6,500,000 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 quarters of 1997 and 1996 is summarized as follows:
Ski Area Real Estate Consolidated
Quarter Ended 9/14/97
Net sales $ 807,314 $ 584,792 $ 1,392,106
Operating profit(loss) $ (847,050) $ 392,421 $ (454,628)
Depreciation and amortization $ 9,640 $ 5,908 $ 15,548
Identifiable assets $13,658,322 $ 2,543,823 $16,202,145
Capital expenditures $ 1,896,168 $ 0 $ 1,896,168
Quarter Ended 9/15/96
Net sales $ 909,345 $ 2,000 $ 911,345
Operating (loss) $ (681,144) $ (42,008) $ (723,152)
Depreciation and amortization $ 10,100 $ 5,300 $ 15,400
Identifiable assets $12,606,478 $ 1,488,486 $14,094,964
Capital expenditures $ 159,607 $ 0 $ 159,607
WINTER SPORTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
For the For the
Period Period
6/ 1/97 6/ 1/96
to to
9/14/97 9/15/96
------- -------
Gross Revenues $ 1,392,106 $ 900,345
Net Loss $ (311,906) $ (523,682)
(Loss) per Common Share $ (.31) $ (.52)*
Total Assets $16,202,145 $14,094,964
Long-Term Debt less current portion $ 4,233,616 $ 3,421,668
*Restated to retroactively reflect stock dividend effective December 27, 1996.
RESULTS OF OPERATIONS, FIRST QUARTER AND YEAR-TO-DATE
Revenues
- --------
Total revenues for the first quarter that ended September 14, 1997 were
$1,392,106, an increase of $480,761 or 53% from the quarter that ended September
15, 1996. Real estate sales accounted for the increase as the Company sold 4
single-family lots in its Sunrise Ridge Subdivision. The Company had no real
estate sales in the first quarter of the prior year. Food, Beverage and Retail
sales decreased by 17% as the Company hosted only one major concert performance
in the quarter compared to four major concerts in the same quarter last year.
Equipment Rental revenue nearly doubled from the previous quarter as the
company's mountain bike operations continued to grow.
Operating Expenses
- ------------------
Total operating costs and expenses in the quarter ended September 14, 1997
increased by 13% or $212,237 from the prior year. The increase was attributable
to increases in the cost of Real Estate Sales and an increase in Marketing
expenses. The Company has expanded its Marketing efforts in an attempt to both
increase its market share in its Northwest and Mid-West markets and recapture
its declining Canadian market. The Company expects to continue its expanded
marketing efforts into the future.
Other Expenses
- --------------
Interest expense for the quarter ended September 14, 1997 was $61,710, a
decrease of $6,994 or 10% lower than the first quarter last year. Despite
slightly higher interest rates, the Company was able to maintain debt levels
that were lower than the levels from last year for most of the first quarter.
The Company expects to see higher interest charges in the future as it completes
its debt financed $3.5 million capital improvement program in the second quarter
of this year. Interest expense for fiscal 1998 and fiscal 1997 is net of
construction period interest of $10,733 and $2,103, respectively.
The first quarter net loss of $311,906 was $211,776, or 40% less than the same
quarter last year.
A loss for the first quarter 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 $(1,106,676) which is a decrease
over the prior year's $30,082. The decline was due to a decrease in refundable
income taxes resulting from the lower net loss and an increase in Accounts
Payable relating to the Company's capital improvement plan.
Total liabilities of $7,690,249 represents 90% of stockholders' equity at
September 14, 1997, up from $6,019,141 or 75% of stockholders' equity at
September 15, 1996.
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 requirements and capital
acquisitions. The Company has a revolving, reducing credit agreement which
provides financial resources allowing the Company to meet short-term operating
needs and fund capital expenditures. The $8.75 million agreement reduces
available capacity by $650,000 each June 1. At September 14, 1997, there was
$4,233,616 borrowed with $4,516,384 of unused capacity of the $8,750,000
available at that date.
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 4. Submission of Matters to a Vote of Security Holders
At the regular Annual Meeting of Shareholders held on October 14, 1997, the
Shareholders reelected 7 current directors and 2 new directors to 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:
ELECTION OF DIRECTORS
VOTES FOR VOTES WITHHELD
Charles R. Abell 700,913 286,123
Brian T. Grattan 854,862 334,109
Dennis L. Green 905,078 360,501
Charlie Grenier 973,923 0
C. Richard Hughes 575,092 302,595
Jerry James 863,741 0
Michael T. Jenson 814,328 287,776
Darrel R. Martin 908,271 305,638
Michael J. Muldown 782,778 306,001
Calvin S. Robinson 850,218 332,238
Paul D. Watson 127,707 364,412
RATIFICATION OF JORDAHL & SLITER CPAs AS INDEPENDENT AUDITORS
VOTES FOR 896,697
VOTES AGAINST 15,369
ABSTENTIONS 1,214
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
No reports on Form 8-K were filed during the quarter ended
September 14, 1997.
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: October 28, 1997 /s/Michael J. Collins
Michael J. Collins
President & Chief Executive Officer
(Principal Executive Officer)
Date: October 28, 1997 /s/Joann M. Gould
Joann M. Gould
Controller & Assistant Secretary
(Principal Accounting Officer)
Date: October 28, 1997 /s/Thomas E. Cullen
Thomas E. Cullen
Treasurer
(Principal Financial Officer)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from 10-QSB dated
9/14/97 and is qualified in its entirety by reference to such 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> SEP-14-1997
<CASH> 91,776
<SECURITIES> 0
<RECEIVABLES> 213,945
<ALLOWANCES> 41,982
<INVENTORY> 394,455
<CURRENT-ASSETS> 1,006,640
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<BONDS> 4,233,616
0
24,500
<COMMON> 4,099,174
<OTHER-SE> 4,388,221
<TOTAL-LIABILITY-AND-EQUITY> 16,202,145
<SALES> 927,520
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<CGS> 269,882
<TOTAL-COSTS> 1,846,734
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<INTEREST-EXPENSE> 61,710
<INCOME-PRETAX> (514,927)
<INCOME-TAX> (203,021)
<INCOME-CONTINUING> (311,906)
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<NET-INCOME> (311,906)
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