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 7, 1997
( ) 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)
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 N0
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As of January 20, 1998 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 7, 1997
December 8, 1996
May 31, 1997
Condensed Consolidated Statements of Operations
For The Periods:
September 15, 1997 - December 7, 1997
September 16, 1996 - December 8, 1996
June 1, 1997 - December 7, 1997
June 1, 1996 - December 8, 1996
Condensed Consolidated Statements of Cash Flows
For The Periods:
June 1, 1997 - December 7, 1997
June 1, 1996 - December 8, 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
December 7, December 8, May 31,
1997 1996 1997
ASSETS (Unaudited) (Unaudited) Note 2
------ ----------- ----------- -----------
CURRENT ASSETS
Cash and cash equivalents $ 294,122 $ 311,988 $ 122,322
Certificates of deposit 249,000 0 0
Receivables (Net of reserve for
bad debts of $16,539, $0 and
$42,043 respectively) 101,834 214,986 111,650
Receivables - related parties 18,845 54,390 20,529
Income tax refund receivable 651,418 633,324 0
Current deferred tax asset 55,020 38,042 55,020
Inventories 651,362 669,281 409,916
Prepaid expenses 152,679 80,083 162,323
----------- ----------- -----------
TOTAL CURRENT ASSETS 2,174,280 2,002,094 881,760
----------- ----------- -----------
PROPERTY AND EQUIPMENT
Property and equipment, at cost 18,931,439 18,420,754 18,908,457
Accumulated depreciation (9,760 145) (8,745,521) (9,750,111)
----------- ----------- -----------
9,171,294 9,675,233 9,158,346
Construction in progress 5,280,679 952,136 1,460,769
Land and development costs 2,193,210 2,242,083 2,213,523
----------- ----------- -----------
NET PROPERTY AND EQUIPMENT 16,645,183 12,869,452 12,832,638
----------- ----------- -----------
OTHER ASSETS 296,440 336,092 304,811
----------- ----------- -----------
TOTAL ASSETS $19,115,903 $15,207,638 $14,019,209
=========== =========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Accounts payable $ 1,339,234 $ 911,166 $ 494,476
Accounts payable - related parties 18,531 7,373 8,981
Employee compensation and
related expenses 236,058 258,015 160,180
Taxes other than payroll and income 152,517 127,561 140,249
Income taxes payable 0 0 157,323
Dividends payable 0 544,134 0
Interest payable 7,616 2,959 0
Deposits and other unearned income 2,353,322 2,985,080 244,543
Other current liabilities 1,740 2,248 2,379
----------- ----------- -----------
TOTAL CURRENT LIABILITIES 4,109,018 4,838,536 1,208,131
LONG-TERM DEBT 5,814,192 1,884,651 2,644,050
DEFERRED INCOME TAXES 1,343,227 1,379,508 1,343,227
----------- ----------- -----------
TOTAL LIABILITIES 11,266,437 8,102,695 5,195,408
----------- ----------- -----------
STOCKHOLDERS' EQUITY
Preferred stock (950 shares
authorized; $100 par value
4% cumulative; 245, 245 &
245 outstanding) 24,500 24,500 24,500
Common stock (5,000,000 shares
authorized; no par value;
1,008,368, 969,918 & 1,008,368
outstanding) 4,099,174 3,560,874 4,099,174
Additional paid-in capital 20,519 20,519 20,519
Retained earnings 3,705,273 3,499,050 4,679,608
----------- ----------- -----------
TOTAL STOCKHOLDERS' EQUITY 7,849,466 7,104,943 8,823,801
----------- ----------- -----------
TOTAL LIABILITIES AND EQUITY $19,115,903 $15,207,638 $14,019,209
=========== =========== ===========
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
-------------- ------------
9/14/97 9/16/96 6/1/97 6/1/96
to to to to
12/7/97 12/8/96 12/7/97 12/8/96
---------- ----------- ---------- ---------
REVENUE
Lifts $ 308,354 $ 419,940 $ 546,451 $ 641,501
Food, beverage and retail 68,443 106,749 413,172 522,924
Equipment rental and repair 16,015 22,817 29,610 29,637
Lodging 10,499 12,793 62,711 75,330
Lease, management and other fees 91,418 69,924 225,646 218,657
Lease, management and other fees
- related parties 14,182 52,655 40,636 108,174
Real estate sales 0 332,000 582,792 332,000
----------- ----------- ---------- ---------
TOTAL REVENUE 508,911 1,016,878 1,901,018 928,223
----------- ----------- ---------- ---------
COSTS AND EXPENSE
Direct expenses - lifts 340,647 424,905 595,380 685,116
Cost of food, beverage & retail 21,329 45,777 154,286 201,591
Cost of real estate sales 0 123,558 137,116 123,558
Payroll and related expenses 463,615 479,176 1,033,552 1,031,885
Direct expenses 215,229 198,990 497,013 462,567
Direct expenses - related party 0 25,524 0 25,524
Marketing 191,303 174,208 418,887 294,863
Marketing - related party 3,788 0 3,788 0
Depreciation and amortization 15,441 12,095 30,989 27,495
General and administrative 225,327 187,311 449,891 436,398
General and administrative
- related party 2,913 2,286 5,424 19,330
----------- ----------- ---------- ---------
TOTAL COSTS AND EXPENSES 1,479,592 1,673,830 3,326,326 3,308,327
----------- ----------- ---------- ---------
OPERATING (LOSS) (970,681) (656,952) (1,425,308)(1,380,104)
----------- ----------- ---------- ---------
OTHER INCOME (EXPENSE)
Interest income 0 2,199 1,246 3,446
Interest expense (82,650) (52,963) (144,360) (121,667)
(Loss) on disposal of assets (8,391) (2,353) (8,391) (7,125)
Other (Expense) (48,254) (379) (48,088) (77,801)
----------- ----------- ---------- ----------
TOTAL OTHER INCOME (EXPENSE) (139,295) (53,496) (199,593) (203,147)
----------- ----------- ---------- ----------
(LOSS) BEFORE INCOME TAXES (1,109,976) (710,448) (1,624,901)(1,583,251)
(Recovery of) income taxes (447,547) (284,202) (650,566) (633,323)
----------- ----------- ---------- ----------
NET (LOSS) $ (662,429) $ (426,246) $ (974,335) $(949,928)
=========== =========== ========== =========
(LOSS) PER COMMON SHARE $ (0.66) $ (0.42)* $ (0.97) $ (0.94)*
=========== =========== ========== ========
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
------------------------
6/1/97 6/1/96
to to
12/7/97 12/8/96
----------- -----------
NET CASH (USED IN) OPERATING ACTIVITIES: $ 57,905 $ (164,312)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Advances to affiliates 0 (15,750)
Purchase of certificates of deposit (249,000) 0
Proceeds from sale of assets 1,324 10,037
Property and equipment acquisitions (2,808,571) (512,819)
----------- -----------
NET CASH (USED IN) INVESTING ACTIVITIES (3,056,247) (518,532)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from draws on long-term revolver 5,152,691 2,720,838
Principal payments on long-term revolver (1,982,549) (1,813,430)
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 3,170,142 907,408
----------- -----------
Net increase (decrease) in cash and
cash equivalents 171,800 224,564
Cash and cash equivalents at beginning of period 122,322 87,424
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 294,122 $ 311,988
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH PAID YEAR-TO-DATE FOR:
Interest (net of capitalized interest) $ 136,166 $ 161,286
Income taxes (net of refunds) $ 157,532 $ (128,948)
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 December 8, 1996 financial statements have been
reclassified to conform with the December 7, 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 December 7, 1997 and
December 8, 1996, respectively. The weighted average number of shares
outstanding were 1,008,368 and 1,008,368 for the quarters ended December 7, 1997
and December 8, 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 December 7, 1997 and December 8, 1996
are not necessarily indicative of the results to be expected for the full year.
NOTE 5 - LEGAL PROCEEDINGS AND CONTINGENCIES
During the quarter ended December 7, 1997 the Company settled its unrelated
lawsuits filed by individuals who were seeking damages for alleged personal
injuries resulting from accidents occurring on the Company's property. The
amounts of the settlements have been charged to General & Administrative
expenses in the quarter ended December 7, 1997.
During the quarter ended December 7, 1997, the Company 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. The amount of the final determination was $34,891 and was
charged to Direct Expenses - Lifts in the quarter ended December 7, 1997.
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 December 7,
1997 $2,935,808 was unused of the $8,750,000 available under the instrument. At
December 8, 1996 $4,615,349 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 12/7/97
Net sales $ 505,411 $ 3,500 $ 508,911
Operating (loss) $ (931,001) $ (39,679) $ (970,680)
Depreciation and amortization $ 11,010 $ 4,431 $ 15,441
Identifiable assets $16,145,299 $ 2,970,605 $19,115,904
Capital expenditures $ 912,403 $ 0 $ 912,403
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
6/1/97 to 12/7/97
Net sales $ 1,312,725 $ 588,292 $ 1,901,017
Operating (loss) $(1,778,051) $ 352,742 $(1,425,309)
Depreciation and amortization $ 20,650 $ 10,339 $ 30,989
Identifiable assets $16,145,299 $ 2,970,605 $19,115,904
Capital expenditures $ 2,808,571 $ 0 $ 2,808,571
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
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
12/7/97 12/8/96
----------- ----------
Gross Revenues $ 1,901,018 $ 1,928,228
Net (Loss) $ (974,335) $ (949,928)
(Loss) Per Common Share $ (0.97) $ (0.94)*
Total Assets $19,115,908 $15,207,637
Long-Term Debt less current portion $ 5,814,192 $ 1,884,651
*Restated to retroactively reflect a 4% stock dividend effective December 27,
1996
RESULTS OF OPERATIONS, SECOND QUARTER AND YEAR-TO-DATE
Revenues
- --------
Revenues for the second quarter ending December 7, 1997 were $508,911, a decline
of $507,967 or 50% over the same quarter of the prior year. The decline is due
primarily to a lack of real estate sales coupled with a slow start to the
beginning of the Company's winter season. The Company does not expect the
absence of real estate sales to continue into the future and feels the lack of
real estate sales in this quarter to be highly unusual. Although the second
quarter incorporates only 10 days of winter season operation, the lack of
comprehensive snow coverage allowed for a limited opening at the beginning of
the season. Consequently, all revenue components of the ski area business
segment experienced a decline from the prior year's quarter.
Year to date revenues declined only 1% or $27,207 from the prior year. Lower
ski area segment revenues were offset by a $250,792 or 76% increase in real
estate sales from the prior year.
Operating Expenses
- ------------------
Operating costs and expenses declined in the second quarter. This decrease was
primarily due to the lack of real estate sales in the second quarter. The
Company is continuing efforts to reduce operating costs and will continue to do
so in the future.
Other Expenses
- --------------
Interest expense for the quarter ended December 7, 1997 was $82,650, an increase
of $29,687 or 56% higher than the second quarter last year. Interest expense
rose by $22,693 or 19% over the first two quarters versus the same quarters of
the prior year. These increases are due to higher interest rates and higher
levels of borrowing on the Company's line of credit due to the Company's large
capital expansion program during the first two quarters of the current fiscal
year. The year to date interest expense of $144,360 for fiscal 1998 and
$121,667 for fiscal 1997 is net of construction period interest of $19,323 and
$2,103 in the respective periods.
The second quarter net loss of $662,429 was $236,183 or 55% more than the same
quarter last year. The year to date net loss of $974,335 was $24,407 or 3% more
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 $(1,934,738) at the end of the second quarter of fiscal 1998
increased from working capital of $(2,836,442) at December 6, 1996. The
increase was primarily due to lower deferred lift revenue and no stock dividend
payable at December 7, 1997. The decrease in deferred lift revenue was due to
lower pre-season lift ticket sales. The Company has not declared any type of
dividend in fiscal 1998.
Notes receivable at December 8, 1997 were $14,050 compared to $142,202 at the
end of the second quarter in the prior year. This decrease is due primarily to
the acceptance of a short-term promissory note as part of a real estate sale in
the prior year.
Total liabilities of $11,266,437 represents 144% of stockholders' equity at
December 7, 1997, up from $8,102,694 or 114% of stockholders' equity at December
6, 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 cash requirements and capital
acquisitions. The Company has a revolving, reducing credit agreement which
provides flexible financial resources allowing the Company to meet short-term
needs and fund capital expenditures. The $8.75 million agreement reduces
available capacity by $650,000 each June 1. At December 7, 1997, there was
$5,814,192 borrowed with $2,935,808 of additional 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 5. Other Information
None
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 7, 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: January 21, 1998 /s/Michael J. Collins
- ----------------------- --------------------------------
Michael J. Collins
President & Chief Executive Officer
(Principal Executive Officer)
Date: January 21, 1998 /s/Joann M. Gould
- ----------------------- --------------------------------
Joann M. Gould
Controller & Assistant Secretary
(Principal Accounting Officer)
Date: January 21, 1998 /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
12/7/97 and is qualified in its entirety by reference to such 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-1998
<PERIOD-END> DEC-07-1997
<CASH> 543,122
<SECURITIES> 0
<RECEIVABLES> 137,218
<ALLOWANCES> 16,539
<INVENTORY> 651,362
<CURRENT-ASSETS> 2,174,280
<PP&E> 26,405,328
<DEPRECIATION> 9,760,145
<TOTAL-ASSETS> 19,115,903
<CURRENT-LIABILITIES> 4,109,018
<BONDS> 5,814,192
0
24,500
<COMMON> 4,099,174
<OTHER-SE> 3,725,792
<TOTAL-LIABILITY-AND-EQUITY> 19,115,903
<SALES> 995,964
<TOTAL-REVENUES> 1,901,018
<CGS> 291,402
<TOTAL-COSTS> 3,326,326
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 144,360
<INCOME-PRETAX> (1,624,901)
<INCOME-TAX> (650,566)
<INCOME-CONTINUING> (974,335)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (974,335)
<EPS-PRIMARY> (0.97)
<EPS-DILUTED> (0.97)
</TABLE>
