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 8, 1996
( ) 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
----- ----
As of January 20, 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:
December 8, 1996
December 10, 1995
May 31, 1996
Condensed Consolidated Statements of Operations
For The Periods:
September 16, 1996 - December 8, 1996
September 18, 1995 - December 10, 1995
June 1, 1996 - December 8, 1996
June 1, 1995 - December 10, 1995
Condensed Consolidated Statements of Cash Flows
For The Periods:
June 1, 1996 - December 8, 1996
June 1, 1995 - December 10, 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.
CONDENSED CONSOLIDATED BALANCE SHEETS
December 8, December 10, May 31,
1996 1995 1996
ASSETS (Unaudited) (Unaudited) (Note 2)
------ ------------ ------------ ------------
CURRENT ASSETS
Cash and cash equivalents $ 311,988 $ 283,785 $ 87,424
Receivables (Net of reserve for 214,986 331,386 107,542
bad debts of $8,390, $0 and
$42,043 respectively)
Receivables - related parties 54,390 12,867 23,750
Income tax refund receivable 633,324 792,006 128,948
Current deferred tax asset 38,042 23,440 38,042
Inventories 669,281 766,260 424,500
Prepaid expenses 80,083 113,227 170,172
------------ ----------- -----------
TOTAL CURRENT ASSETS 2,002,094 2,322,971 980,378
----------- ----------- -----------
PROPERTY AND EQUIPMENT
Property and equipment, at cost 18,420,754 18,550,298 18,436,526
Accumulated depreciation (8,745,521) (8,287,604) (8,742,075)
---------- ----------- -----------
9,675,233 10,262,694 9,694,451
Construction in progress 952,136 947,734 762,831
Land and development costs 2,242,083 2,247,611 1,916,719
----------- ---------- -----------
NET PROPERTY AND EQUIPMENT 12,869,452 13,458,039 12,374,001
---------- ----------- -----------
OTHER ASSETS 336,092 137,911 336,396
TOTAL ASSETS $15,207,638 $15,918,921 $13,690.775
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 911,166 $ 855,654 $ 421,544
Accounts payable - related parties 7,373 7,560 11,489
Employee compensation and 258,015 275,337 120,870
related expenses
Taxes other than payroll and income 127,561 141,817 138,727
Dividends payable 544,134
Interest payable 2,959 13,478 42,577
Deposits and other unearned income 2,985,080 2,390,924 183,711
Other current liabilities 2,248 2,187 1,684
----------- ----------- -----------
TOTAL CURRENT LIABILITIES 4,838,536 3,686,957 920,202
LONG-TERM DEBT 1,884,651 3,571,773 2,792,060
DEFERRED INCOME TAXES 1,379,508 1,337,202 1,379,508
----------- ----------- -----------
TOTAL LIABILITIES 8,102,695 8,595,932 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 3,560,874 3,560,874 3,560,874
authorized; no par value;
969,918, 932,948 & 969,918
outstanding)
Additional paid-in capital 20,519 20,519 20,519
Retained earnings 3,499,050 3,717,096 4,993,112
----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY 7,104,943 7,322,989 8,599,005
----------- ----------- -----------
TOTAL LIABILITIES AND EQUITY $15,207,638 $15,918,921 $13,690,775
=========== =========== ===========
The accompanying notes are an integral part of these financial statements
WINTER SPORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Second Quarter Year To Date
9/16/96 9/18/95 6/1/96 6/1/95
to to to to
12/8/96 12/10/95 12/8/96 12/10/95
----------- ----------- ---------- ------------
REVENUE
Lifts $ 419,940 $ 264,135 $ 641,501 $ 490,883
Food, beverage and retail 106,749 107,214 522,924 494,799
Equipment rental and repair 22,817 18,336 29,637 21,779
Lodging 12,793 17,898 75,330 71,472
Lease, management and other
fees 69,924 78,536 218,657 239,442
Lease, management and other 52,655 57,493 108,174 134,241
fees - related parties
Real estate sales - net 332,000 0 332,000 27,140
----------- ---------- ----------- --------
TOTAL REVENUE 1,016,879 543,612 1,928,224 1,479,756
----------- ---------- ----------- ---------
COSTS AND EXPENSE
Direct expenses - lifts 418,759 281,744 678,970 558,666
Direct expenses - lifts 6,146 0 6,146 0
- related parties
Cost of food, beverage & retail 45,777 47,323 201,591 187,075
Cost of real estate sales 123,558 574 123,558 2,222
Payroll and related expenses 479,176 555,132 1,031,885 1,264,121
Direct expenses 198,990 220,920 462,567 493,474
Direct expenses - related party 25,524 4,625 25,524 9,625
Marketing 174,208 244,526 294,863 314,214
Depreciation and amortization 12,095 12,194 27,495 28,446
General and administrative 187,311 176,234 436,398 405,414
General and administrative
- related party 2,286 13,023 19,330 24,456
----------- ----------- ----------- ---------
TOTAL COSTS AND EXPENSES 1,673,830 1,556,295 3,308,327 3,287,713
----------- ----------- ----------- ---------
OPERATING (LOSS) (656,952) (1,012,683 (1,380,104)(1,807,957)
----------- ----------- ---------- ----------
OTHER INCOME (EXPENSE)
Interest income 2,119 239 3,446 2,362
Interest expense (52,963) (62,255) (121,667) (144,826)
Gain (loss) on disposal of assets (2,353) 0 (7,125) 10,065
Other (Expense) (379) (23) (77,801) (23)
----------- ----------- --------- ---------
TOTAL OTHER INCOME (EXPENSE) (53,497) (62,040) (203,148) (132,423)
----------- ----------- --------- ---------
(LOSS) BEFORE INCOME TAXES (710,449)(1,074,723)(1,583,252) (1,940,380)
Recovery of income taxes (284,203) (431,41) (633,624) (777,673)
---------- ---------- ---------- ---------
NET (LOSS) $ (426,246 $ (643,312 $ (949,928)$(1,162,707)
=========== ========== ========== ============
(LOSS) PER COMMON SHARE $ (.44) $ (.66) $ (.98) $ (1.20)
========= ========= ========= =========
WEIGHTED AVERAGE SHARES
OUTSTANDING 969,918 969,918 969,918 969,918
=========== ========== ========== ==========
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
12/8/96 12/10/95
----------- ------------
NET CASH (USED IN) OPERATING ACTIVITIES $ (164,312) $ (65,876)
CASH FLOWS FROM INVESTING ACTIVITIES:
Surety deposit 0 59,335
Advances to affiliates (15,750) (2,850)
Master plan 0 (543)
Proceeds from sale of assets 10,037 0
Property and equipment acquisitions (512,819) (484,838)
----------- -----------
NET CASH (USED IN) INVESTING ACTIVITIES (518,532) (428,896)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from draws on long-term revolver 2,720,838 3,337,386
Principal payments on long-term revolver (1,813,430) (2,934,904)
Payment of dividends 0 (6,444)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 907,408 396,038
----------- -----------
Net increase (decrease) in cash and (224,564) (98,374)
cash equivalents
Cash and cash equivalents at beginning of period 87,424 382,519
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 311,988 $ 283,785
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH PAID YEAR-TO-DATE FOR:
Interest (net of capitalized interest) $ 161,286 $ 136,384
Income taxes (net of refunds) $ (128,948) $ 84,124
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 December 10, 1995 financial statements have been
reclassified to conform with the December 8, 1996 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 - (LOSS) PER COMMON SHARE
(Loss) per common share is based on net income (loss) after deducting dividends
paid on preferred stock of $0 and $980 for the quarters ended December 8, 1996
and December 10, 1995, respectively. The weighted average number of shares
outstanding were 969,918 and 969,918 for the quarters ended December 8, 1996 and
December 10, 1995, 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 December 8, 1996 and December 10, 1995
are not necessarily indicative of the results to be expected for the full year.
NOTE 5 - LEGAL PROCEEDINGS AND CONTINGENCIES
The Company has been named in a wrongful discharge lawsuit, with unspecified
damages, by a former employee. All pleadings have been filed, and the trial
date has been set for January, 1997. It has not been determined what exposure,
if any, the Company may have.
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 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 8, 1996 $4,500,521 was unused of the
$6,500,000 available under the instrument. At December 10, 1995 $3,428,838 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 quarters of 1996 and 1995 is summarized as follows:
Ski Area Real Estate Consolidated
Second Quarter
Quarter Ended 12/8/96
Net sales $ 684,879 $ 332,000 $ 1,016,879
Operating income (loss) $ (836,800) $ 179,848 $ (656,952)
Depreciation and amortization $ 7,664 $ 4,431 $ 12,095
Identifiable assets $13,585,513 $ 1,622,126 $15,207,639
Capital expenditures $ 353,212 $ 0 $ 353,212
Quarter Ended 12/10/95
Net sales $ 541,716 $ 1,896 $ 543,612
Operating (loss) $ (978,157) $ (34,526) $(1,012,683)
Depreciation and 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
Year to Date
6/1/96 to 12/8/96
Net sales $ 1,596,224 $ 332,000 $ 1,928,224
Operating income (loss) $(1,517,945) $ 137,841 $(1,380,104)
Depreciation and amortization $ 17,764 $ 9,731 $ 27,495
Identifiable assets $13,585,513 $ 1,622,126 $15,207,639
Capital expenditures $ 512,819 $ 0 $ 512,819
6/1/95 to 12/10/95
Net sales $ 1,448,172 $ 31,584 $ 1,479,756
Operating (loss) $(1,715,616) $ (92,341) $(1,479,756)
Depreciation and 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
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
12/8/96 12/10/95
----------- --------------
Gross Revenues $ 1,928,224 $ 1,479,756
Net (Loss) $ (949,928) $(1,162,707)
(Loss) Per Common Share $ (.98) $ (1.20)
Total Assets $15,207,638 $15,918,921
Long-Term Debt less current portion $ 1,884,651 $ 3,571,773
RESULTS OF OPERATIONS, FIRST QUARTER AND YEAR-TO-DATE
Revenues
Revenues for the second quarter ending December 8, 1996 were $1,016,879, an
increase of $473,267 or 87% over the same quarter of the prior year. The
increase is due primarily to both increased real estate sales and increased lift
revenue. Real estate sales for the quarter were $332,000 compared to $0 in the
same quarter of the prior year. The Company has noticed an increase in the
demand in the regional real estate market and expects the demand to continue
into the third quarter. Lift revenue is up 59% over the second quarter of the
prior year due to favorable snow conditions. Total revenues year to date were
up 30% or $448,468 from last year, due primarily to increased real estate sales
and lift revenue.
Operating Expenses
Total operating expenses remained constant with the same quarter of the previous
year. When the costs of the real estate sold is removed, overall operating
expenses decreased by $100,721 or 3%. The Company is continuing efforts to trim
operating costs and will continue to do so in the future.
Other Expenses
Interest expense for the quarter ended December 8, 1996 was $52,963, a decrease
of $9,292 or 15% lower than the second quarter last year. Interest expense fell
by $23,159 or 16% over the first two quarters versus the same quarters of the
prior year. The decrease was due to lower interest rates and lower levels of
borrowing on the Company's line of credit. The year to date interest expense of
$121,667 for fiscal 1997 and $144,826 for fiscal 1996 is net of construction
period interest of $2,103 and $4,393 in the respective periods.
The second quarter net loss of $426,246 was $217,066 or 34% less than the same
quarter last year. Year to date the net loss of $949,828 was $212,779 or 18%
less than during the same time period last year.
A loss for this interim period an 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 $(2,836,442) at the end of the second quarter of fiscal 1997
decreased from working capital of $(1,363,986) at December 10, 1995. The
decrease was primarily due to higher deferred lift revenue and a stock dividend
the was unpaid at quarter end. The increase in deferred lift revenue was due to
higher preseason ticket sales. The stock dividend was declared and recorded
before the end of the second quarter but not distributed until early in the
third quarter. In prior years the Company had normally distributed any stock
dividend by the end of its second quarter.
Notes receivable at December 8, 1996 were $142,202 compared to $0 at the end of
the second quarter in the prior year. This increase is due primarily to the
acceptance of a short-term promissory note as part of a real estate sale. The
income tax refund receivable decreased from $766,260 at December 10, 1995 to
$633,324 at December 8, 1996 due to the decrease in the Company's year to date
net loss.
Total liabilities of $8,102,695 represents 114% of stockholders' equity at
December 8, 1996, down from $8,595,932 or 117% of stockholders' equity at
December 10, 1995.
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 8, 1996, there was
$1,884,651 borrowed with $4,500,521 of additional unused capacity of the
$6,500,000 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 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 will be distributed on December
27, 1996. Shares to be 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
December 8, 1996.
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: January 21, 1997 /s/Michael J. Collins
Michael J. Collins
President & Chief Executive Officer
(Principal Executive Officer)
Date: January 21, 1997 /s/Joann M. Gould
Joann M. Gould
Controller & Assistant Secretary
(Principal Accounting Officer)
Date: January 21, 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
12/8/96 and is qualified in its entirety by reference to such 10-QSB.
</LEGEND>
<CIK> 0000803003
<NAME> 10-QSB
<MULTIPLIER> 1
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1997
<PERIOD-END> DEC-08-1996
<CASH> 311,988
<SECURITIES> 0
<RECEIVABLES> 277,766
<ALLOWANCES> 8,390
<INVENTORY> 669,281
<CURRENT-ASSETS> 2,002,094
<PP&E> 21,614,973
<DEPRECIATION> 8,745,521
<TOTAL-ASSETS> 15,207,639
<CURRENT-LIABILITIES> 4,838,536
<BONDS> 1,884,651
0
24,500
<COMMON> 3,560,874
<OTHER-SE> 3,519,569
<TOTAL-LIABILITY-AND-EQUITY> 15,207,639
<SALES> 854,924
<TOTAL-REVENUES> 1,928,224
<CGS> 325,149
<TOTAL-COSTS> 3,308,327
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 121,667
<INCOME-PRETAX> (1,583,252)
<INCOME-TAX> (633,324)
<INCOME-CONTINUING> (949,928)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (949,928)
<EPS-PRIMARY> (.98)
<EPS-DILUTED> (.98)
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