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 5, 1999
( ) 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 JANUARY 10, 2000 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:
DECEMBER 5, 1999
DECEMBER 6, 1998
MAY 31, 1999
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS:
SEPTEMBER 13, 1999 - DECEMBER 5, 1999
SEPTEMBER 14, 1998 - DECEMBER 6, 1998
JUNE 1, 1999 - DECEMBER 5, 1999
JUNE 1, 1998 - DECEMBER 6, 1998
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE PERIODS:
JUNE 1, 1999 - DECEMBER 5, 1999
JUNE 1, 1998 - DECEMBER 6, 1998
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
12/5/99 12/6/98 5/31/99
(UNAUDITED) (UNAUDITED) SEE NOTE 2
___________ ___________ __________
ASSETS
CURRENT ASSETS
CASH AND CASH EQUIVALENTS $ 458,522 $ 790,200 $ 236,132
CERTIFICATES OF DEPOSIT 72,079 0 7,125
RECEIVABLES (NET OF RESERVE FOR
BAD DEBTS OF $17,680, $11,090
AND $17,128, RESPECTIVELY) 75,510 70,351 81,278
RECEIVABLES - RELATED PARTY 12,573 25,007 14,882
INCOME TAX REFUND RECEIVABLE 381,434 1,087,805 190,753
CURRENT DEFERRED TAX ASSET 24,516 51,767 24,516
INVENTORIES 669,773 627,932 411,870
PREPAID EXPENSES 175,577 208,167 229,448
_________ _________ _________
TOTAL CURRENT ASSETS 1,869,984 2,861,229 1,196,004
PROPERTY AND EQUIPMENT
PROPERTY AND EQUIPMENT, AT COST 23,729,766 22,451,483 23,693,174
ACCUMULATED DEPRECIATION
AND AMORTIZATION (12,017,121)(10,846,353) (11,992,377)
___________ __________ __________
11,712,645 11,605,130 11,700,797
CONSTRUCTION IN PROGRESS 1,726,913 5,762,571 419,568
LAND AND DEVELOPMENT COSTS 3,501,262 2,217,268 4,090,262
NET PROPERTY AND EQUIPMENT 16,940,820 19,584,969 16,210,627
OTHER ASSETS 413,224 279,643 420,443
____________ ___________ ___________
TOTAL ASSETS $ 19,224,028 $22,725,841 $17,827,074
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
ACCOUNTS PAYABLE $ 1,016,203 $ 1,388,053 $ 452,800
ACCOUNTS PAYABLE -
RELATED PARTIES 4,041 0 7,998
EMPLOYEE COMPENSATION AND
RELATED EXPENSES 233,431 267,484 173,302
TAXES OTHER THAN
PAYROLL AND INCOME 170,544 8,968 149,064
INCOME TAXES PAYABLE 0 0 50
INTEREST PAYABLE 11,146 13,129 0
CURRENT PORTION OF
LONG-TERM DEBT 53,902 2,768,639 24,347
DEPOSITS & OTHER UNEARNED INCOME 2,218,050 1,657,812 911,467
OTHER CURRENT LIABILITIES 7,071 1,871 4,953
_________ _________ _________
TOTAL CURRENT LIABILITIES 3,714,388 6,105,956 1,723,981
LONG-TERM DEBT, LESS CURRENT
PORTION 6,811,302 8,000,000 6,589,369
DEFERRED INCOME TAXES 1,470,564 1,361,554 1,470,564
__________ __________ _________
TOTAL LIABILITIES 11,996,254 15,467,510 9,783,914
SHAREHOLDERS' EQUITY
COMMON STOCK (5,000,000 SHARES
AUTHORIZED; NO PAR VALUE;
1,008,368, 1,008,368 AND
1,008,368 SHARES OUTSTANDING) 4,099,174 4,099,174 4,099,174
ADDITIONAL PAID-IN CAPITAL 20,519 20,519 20,519
RETAINED EARNINGS 3,108,081 3,138,638 3,923,467
____________ ___________ ___________
TOTAL SHAREHOLDERS' EQUITY 7,227,774 7,258,331 8,043,160
____________ ___________ ___________
TOTAL LIABILITIES AND EQUITY $ 19,224,028 $22,725,841 $17,827,074
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
9/13/99 9/14/98 6/1/99 6/1/98
TO TO TO TO
12/5/99 12/6/98 12/5/99 12/6/98
_______ _______ _______ _______
REVENUE
LIFTS $ 158,521 $ 226,804 $ 400,219 $ 461,837
FOOD, BEVERAGE & RETAIL 63,706 86,892 398,723 445,457
EQUIPMENT RENTAL
& REPAIR 21,401 16,899 42,155 37,530
LODGING 7,504 10,963 60,013 66,634
LEASE, MANAGEMENT
& OTHER FEES 103,253 94,911 472,338 281,221
LEASE, MANAGEMENT & OTHER
FEES-RELATED PARTIES 21,325 14,667 47,723 35,214
REAL ESTATE SALES 1,015,890 0 1,787,240 0
_________ _______ _________ _________
TOTAL REVENUE 1,391,600 451,136 3,208,411 1,327,893
COSTS AND EXPENSES
DIRECT EXPENSES - LIFTS 361,408 301,569 609,157 514,635
COST OF FOOD, BEVERAGE
& RETAIL 30,010 35,444 147,749 173,686
COST OF REAL ESTATE SALES 448,902 0 818,830 0
PAYROLL & RELATED
EXPENSES 503,430 537,280 1,086,232 1,142,049
DIRECT EXPENSES 234,252 232,018 719,977 517,095
DIRECT EXPENSES -
RELATED PARTIES 30,043 1,347 30,343 1,347
MARKETING 203,379 357,999 457,870 588,835
MARKETING -
RELATED PARTIES 0 468 0 1,059
DEPRECIATION AND
AMORTIZATION 11,772 11,446 26,604 26,706
GENERAL & ADMINISTRATIVE 172,616 190,654 406,849 444,703
GENERAL & ADMINISTRATIVE
- RELATED PARTIES 294 2,861 3,531 15,527
_________ _________ _________ _________
TOTAL COSTS AND EXPENSES 1,996,106 1,671,086 4,307,142 3,425,642
_________ _________ _________ _________
OPERATING (LOSS) (604,506)(1,219,950) (1,098,731) (2,097,749)
OTHER INCOME (EXPENSE)
INTEREST INCOME 3,919 3,872 4,155 9,322
INTEREST EXPENSE (116,449) (129,261) (242,893) (273,761)
GAIN (LOSS) ON DISPOSAL
OF ASSETS 4,645 24,899 4,645 24,899
OTHER INCOME (EXPENSE) 57,849 200,111 136,059 300,418
_______ _______ _______ _______
TOTAL OTHER INCOME (EXPENSE) (50,036) 99,621 (98,034) 60,878
________ _________ _________ _________
(LOSS) BEFORE INCOME TAXES (654,542)(1,120,329) (1,196,765) (2,036,871)
(RECOVERY OF) INCOME TAXES (257,561) (448,076) (381,434) (814,733)
__________ _________ __________ __________
NET (LOSS) $ (396,981) $(672,253) $ (815,331)$(1,222,138)
NET(LOSS)PER COMMON SHARE $ (0.39) $ (0.67)$ (0.81) $ (1.22)
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE FINANCIAL STATEMENTS
WINTER SPORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
(UNAUDITED)
6/1/99 6/1/98
TO TO
12/5/99 12/6/98
_______ _______
NET CASH (USED IN) OPERATING ACTIVITIES: $ 43,455 $(3,642,217)
CASH FLOWS FROM INVESTING ACTIVITIES:
PURCHASE OF CERTIFICATES OF DEPOSIT (72,079) 0
REDEMPTION OF CERTIFICATES OF DEPOSIT 7,125 249,000
PROCEEDS FROM SALE OF ASSETS 4,645 34,899
PROPERTY AND EQUIPMENT ACQUISITIONS (36,592) (434,521)
_______ ________
NET CASH (USED IN) INVESTING ACTIVITES (96,901) (150,622)
CASH FLOWS FROM FINANCING ACTIVITIES:
PROCEEDS FROM DRAWS ON LONG-TERM REVOLVER 3,238,677 3,370,132
PROCEEDS FROM DRAWS ON CONSTRUCTION LOAN 0 2,606,915
PRINCIPAL PAYMENTS ON TERM LOAN (517,776) 0
PRINCIPAL PAYMENTS ON LONG-TERM REVOLVER (2,445,065) (1,544,013)
__________ __________
NET CASH PROVIDED BY FINANCING ACTIVITIES 275,836 4,433,034
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 222,390 640,195
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 236,132 150,005
__________ ___________
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 458,522 $ 790,200
SUPPLEMENTAL DISCLOSURES OF CASH PAID YEAR-TO-DATE FOR:
INTEREST (NET OF CAPITALIZED INTEREST) $ 232,643 $ 263,135
INCOME TAXES (NET OF REFUNDS) $ (190,574)$ (1,875)
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, 1999.
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 6, 1998 FINANCIAL STATEMENTS HAVE BEEN
RECLASSIFIED TO CONFORM WITH THE DECEMBER 5, 1999 PRESENTATION.
NOTE 2 - MAY 31, 1999
THE BALANCE SHEET AT MAY 31, 1999 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 FOR BOTH QUARTERS ENDED DECEMBER 5, 1999 AND
DECEMBER 6, 1998. ALL OF THE COMPANY'S OUTSTANDING PREFERRED STOCK WAS
REDEEMED IN MAY 1998. THE WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING WERE 1,008,368 AND 1,008,368 FOR THE QUARTERS ENDED
DECEMBER 5, 1999 AND DECEMBER 6, 1998.
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 AND YEAR-TO-DATE PERIODS ENDED DECEMBER 5, 1999 AND
DECEMBER 6, 1998 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 A LAWSUIT FILED BY THREE INDIVIDUALS WHO ARE
SEEKING DAMAGES OF AN UNSPECIFIED AMOUNT, FOR ALLEGED PERSONAL INJURIES
RESULTING FROM ACCIDENTS OCCURRING ON THE COMPANY'S PROPERTY. THE COMPANY
INTENDS TO VIGOROUSLY DEFEND THE CLAIMS. THE COMPANY'S INSURANCE CARRIER
PROVIDES DEFENSE AND COVERAGE FOR THIS CLAIM AND THE COMPANY'S PARTICIPATION HAS
BEEN LIMITED TO ITS POLICY DEDUCTIBLE. SUCH AMOUNTS ARE CHARGED TO GENERAL AND
ADMINISTRATIVE EXPENSE UPON SETTLEMENT.
NOTE 6 - NOTES 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 A $9,750,000 REVOLVING REDUCING LINE OF CREDIT THAT
MATURES ON JUNE 1, 2008. THE AGREEMENT CONTAINS COVENANTS THAT REQUIRE MINIMUM
NET WORTH, A FIXED CHARGE COVERAGE RATIO AND RESTRICTS 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 5, 1999 $2,599,546 WAS UNUSED OF THE $9,000,000 AVAILABLE UNDER THE
INSTRUMENT. AT DECEMBER 6, 1998 $1,750,000 WAS UNUSED OF THE $9,750,000
AVAILABLE UNDER THE INSTRUMENT. THE LOAN BEARS INTEREST AT OR BELOW SEAFIRST'S
PRIME RATE.
THE COMPANY ALSO HAD A LOAN AGREEMENT WITH WHITEFISH CREDIT UNION FOR FINANCING
OF THE CONSTRUCTION OF A MIXED-USE CONDOMINIUM PROJECT. THE AGREEMENT PROVIDED
FOR A $3,900,000 CONSTRUCTION LOAN DUE AND PAYABLE ON SEPTEMBER 1, 1999. AT
DECEMBER 6, 1998 $1,132,020 WAS UNUSED AND AVAILABLE FOR BORROWING UNDER THE
INSTRUMENT. THE LOAN BEARS INTEREST AT PRIME PLUS 0.5%. ON AUGUST 31, 1999 THE
COMPANY CONVERTED THE REMAINING BALANCE OF THE CONSTRUCTION LOAN INTO A FIFTEEN-
YEAR TERM LOAN WITH A THREE-YEAR BALLOON. AT DECEMBER 5, 1999 THE BALANCE OF
THE TERM LOAN WAS $464,750. THE TERM LOAN BEARS INTEREST AT NEW YORK PRIME,
ADJUSTED QUARTERLY.
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 1999 AND 2000 IS SUMMARIZED AS FOLLOWS:
SKI AREA REAL ESTATE CONSOLIDATED
________ ___________ ____________
QUARTER ENDED 12/5/99
TOTAL REVENUE $ 349,616 $1,041,984 $ 1,391,600
OPERATING PROFIT (LOSS) $(1,128,347) $ 523,841 $ (604,506)
DEPRECIATION AND AMORTIZATION $ 6,698 $ 5,075 $ 11,772
IDENTIFIABLE ASSETS $15,129,331 $4,094,697 $19,224,028
CAPITAL EXPENDITURES $ 568,123 $ 0 $ 568,123
QUARTER ENDED 12/6/98
TOTAL REVENUE $ 451,136 $ 0 $ 451,136
OPERATING PROFIT (LOSS) $(1,152,513) $ (67,437) $ (1,219,950)
DEPRECIATION AND AMORTIZATION $ 7,633 $ 3,813 $ 11,446
IDENTIFIABLE ASSETS $16,034,969 $6,690,872 $ 22,725,841
CAPITAL EXPENDITURES $ 186,412 $ 0 $ 186,412
6/1/99 TO 12/5/99
TOTAL REVENUE $ 1,346,377 $1,862,034 $ 3,208,411
OPERATING PROFIT (LOSS) $(1,983,219) $ 884,488 $ (1,098,731)
DEPRECIATION AND AMORTIZATION $ 15,246 $ 11,358 $ 26,604
IDENTIFIABLE ASSETS $15,129,331 $4,094,697 $ 19,224,028
CAPITAL EXPENDITURES $ 568,123 $ 0 $ 568,123
6/1/98 TO 12/6/98
TOTAL REVENUE $ 1,327,893 $ 0 $ 1,327,893
OPERATING PROFIT (LOSS) $(1,942,092) $ (155,657) $ (2,097,749)
DEPRECIATION AND AMORTIZATION $ 17,809 $ 8,897 $ 26,706
IDENTIFIABLE ASSETS $16,034,969 $6,690,872 $ 22,725,841
CAPITAL EXPENDITURES $ 434,521 $ 0 $ 434,521
WINTER SPORTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
FOR THE PERIOD
6/ 1/99 6/ 1/98
TO TO
12/5/99 12/6/98
_______ _______
GROSS REVENUES $ 3,208,411 $ 1,327,893
NET LOSS $ (815,331) $ (1,222,138)
LOSS PER COMMON SHARE $ (0.81) $ (1.22)
TOTAL ASSETS $19,224,028 $ 22,725,841
LONG-TERM DEBT LESS CURRENT PORTION $ 6,811,302 $ 8,000,000
RESULTS OF OPERATIONS, SECOND QUARTER AND YEAR-TO-DATE
REVENUES
REVENUES FOR THE SECOND QUARTER ENDING DECEMBER 5, 1999 WERE $1,391,600, AN
INCREASE OF $940,464 OR 208% OVER THE SAME QUARTER OF THE PRIOR YEAR. THE
INCREASE IS DUE PRIMARILY TO REAL ESTATE SALES OF $1,015,890 COMPARED TO NO REAL
ESTATE SALES DURING THE SAME QUARTER LAST YEAR. LIFT REVENUES FOR THE QUARTER
WERE DOWN $68,283 OR 30% FROM LAST YEAR'S SECOND QUARTER. LACK OF EARLY SEASON
SNOWFALL ALSO RESULTED IN A DECREASE IN LODGING REVENUE, DOWN $3,458 OR 32% FOR
THE SECOND QUARTER OF 2000 COMPARED TO THE SECOND QUARTER OF 1999.
FOOD AND BEVERAGE REVENUES WERE $63,706 FOR THE SECOND QUARTER OF 2000 COMPARED
TO $86,892 IN 1999. THIS DECREASE OF $23,186 OR 27% IS PRIMARILY DUE TO A SHIFT
IN MANAGEMENT OF SOME OF THE FOOD AND BEVERAGE OPERATIONS OF THE RESORT FROM THE
REGISTRANT TO A NATIONAL FOOD CONCESSIONAIRE. ALTHOUGH CONTRACTS WERE STILL
UNDER NEGOTIATION AT THE END OF THE QUARTER, THE CONCESSIONAIRE WAS RESPONSIBLE
FOR SOME OF THE FOOD AND BEVERAGE OPERATIONS AT THE START OF THE SKI SEASON.
THIS SHIFT IN MANAGEMENT WILL RESULT IN FUTURE FOOD AND BEVERAGE REVENUES
SPECIFIC TO THOSE OPERATIONS BEING RECORDED AS `LEASE, MANAGEMENT AND OTHER
FEES' DURING THE COURSE OF THE CONTRACTS.
YEAR-TO-DATE TOTAL REVENUE IS UP $1,880,518 OR 142% OVER 1999. THIS IS
PRIMARILY DUE TO REAL ESTATE SALES OF $1,787,240 YEAR-TO-DATE IN 2000 COMPARED
TO NO REAL ESTATE SALES DURING THE FIRST TWO QUARTERS OF 1999. LEASE,
MANAGEMENT AND OTHER FEES ARE ALSO UP 64% OR $203,627 OVER LAST YEAR AT THIS
TIME. PROPERTY MANAGEMENT AND RESERVATION FEES AS WELL AS SUMMER CONCERT
REVENUE CONTRIBUTED TO THIS INCREASE. LIFT REVENUE YEAR-TO-DATE LAGS BEHIND
LAST YEAR BY $61,618 OR 13% DUE TO THE WEAK OPENING OF THE SKI SEASON. FOOD AND
BEVERAGE REVENUES ARE ALSO OFF BY $46,734 OR 10.5% DOWN FROM LAST YEAR-TO-DATE.
WHILE SUMMER FOOD AND BEVERAGE REVENUE WAS STRONG, THE WEAK SKI SEASON START AS
WELL AS THE CHANGE IN MANAGEMENT OF SOME OF THE FOOD AND BEVERAGE OPERATIONS AS
NOTED ABOVE CONTRIBUTED TO THE DECREASE.
OPERATING EXPENSES
OPERATING COSTS AND EXPENSES INCREASED IN THE SECOND QUARTER BY $325,020 OR
19.5% FROM THE PRIOR YEAR. THE INCREASE IS A RESULT OF COST OF REAL ESTATE
SALES OF $448,902 COUPLED WITH COST SAVINGS IN MOST OTHER AREAS OF OPERATIONS.
EXCLUDING COSTS OF REAL ESTATE SALES, THE COMPANY'S YEAR-TO-DATE OPERATING
EXPENSES HAVE DECREASED BY 1.8% OVER THE PRIOR YEAR.
OTHER INCOME
OTHER INCOME IN THE SECOND QUARTER AND YEAR-TO-DATE FOR BOTH 1999 AND 2000
REFLECT REVENUES EARNED FROM SALES OF TIMBER ON THE COMPANY'S BASE AREA LANDS.
THE REVENUE RECEIVED IS OF A ONE-TIME NATURE, AS THE COMPANY DOES NOT EXPECT TO
HARVEST ANY MORE TIMBER IN THE NEAR FUTURE.
OTHER EXPENSES
INTEREST EXPENSE FOR THE QUARTER ENDED DECEMBER 5, 1999 WAS $116,449, A DECREASE
OF $12,812, OR 10% LOWER THAN THE SECOND QUARTER LAST YEAR. YEAR-TO-DATE
INTEREST EXPENSE FELL BY $30,868 OR 11%, DURING THE FIRST TWO QUARTERS OF 2000
VERSUS THE SAME TWO QUARTERS OF THE PRIOR YEAR. THESE DECREASES ARE DUE TO
LOWER LEVELS OF BORROWING ON THE COMPANY'S LINE OF CREDIT AND TERM LOAN, A
RESULT OF REAL ESTATE SALES AND A POSITIVE CASH FLOW FOR THE TWO QUARTERS ENDED
DECEMBER 5, 1999. THE YEAR-TO-DATE INTEREST EXPENSE OF $242,893 FOR FISCAL 2000
AND $273,761 FOR FISCAL 1999 IS NET OF CONSTRUCTION PERIOD INTEREST OF $3,100
AND $59,530 IN THE RESPECTIVE PERIODS.
THE SECOND QUARTER NET LOSS OF $396,981 WAS $275,272 OR 41% LESS THAN THE SAME
QUARTER LAST YEAR. THE YEAR TO DATE NET LOSS OF $815,331 WAS $406,806 OR 33%
LESS THAN DURING THE SAME TIME PERIOD LAST YEAR.
A LOSS FOR THIS INTERIM PERIOD 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 OF $(1,844,404) AT THE END OF THE SECOND QUARTER OF FISCAL 2000
IMPROVED FROM WORKING CAPITAL OF $(3,244,727) AT DECEMBER 6, 1998. THE CHANGE
WAS DUE PRIMARILY TO THE ADDITION OF A CONSTRUCTION LOAN FOR THE COMPANY'S
CONDOMINIUM PROJECT IN 1999. THE CONSTRUCTION LOAN WAS REFINANCED AS A TERM
LOAN ON AUGUST 31, 1999.
THE COMPANY DID NOT DECLARE ANY TYPE OF DIVIDEND IN FISCAL 2000 OR FISCAL 1999.
DEPOSITS AND OTHER UNEARNED INCOME IS $560,238 HIGHER THAN AT THE END OF THE
SECOND QUARTER OF THE PRIOR YEAR. THE INCREASE IS DUE TO THE COMPANY'S CREATION
OF A SPECIAL REDUCED PRICE SEASON PASS PRODUCT THAT RESULTED IN THE PRESEASON
SALE OF 7,727 PASSES FOR FISCAL 2000 COMPARED TO 1,433 PASSES SOLD PRESEASON IN
THE PRIOR YEAR. TOTAL LIABILITIES OF $11,996,254 REPRESENTS 166% OF
STOCKHOLDERS' EQUITY AT DECEMBER 5, 1999, DOWN FROM $15,467,510 OR 213% OF
STOCKHOLDERS' EQUITY AT DECEMBER 6, 1998.
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 $9.75 MILLION AGREEMENT REDUCES
AVAILABLE CAPACITY BY $750,000 EACH JUNE 1. AT DECEMBER 5, 1999 THERE WAS
$6,400,454 BORROWED WITH $2,599,546 OF UNUSED CAPACITY ON THE $9,000,000 LINE OF
CREDIT. AT DECEMBER 6, 1998, THERE WAS $8,000,000 BORROWED WITH $1,750,000 OF
UNUSED CAPACITY ON THE $9,750,000 LINE OF CREDIT. IN ORDER TO FINANCE THE
CONSTRUCTION OF A CONDOMINIUM PROJECT THE COMPANY OBTAINED A $3,900,000
CONSTRUCTION LOAN IN THE FORM OF A LINE OF CREDIT. THE LOAN MATURED ON
SEPTEMBER 1, 1999. AT DECEMBER 13, 1998, THERE WAS $2,767,980 BORROWED WITH
$1,132,020 OF UNUSED CAPACITY ON THE $3,900,000 CONSTRUCTION LOAN. ON AUGUST
31, 1999 THE COMPANY CONVERTED THE REMAINING BALANCE OF THE CONSTRUCTION LOAN
INTO A FIFTEEN-YEAR TERM LOAN WITH A THREE-YEAR BALLOON. AT DECEMBER 5, 1999
THE BALANCE OF THE TERM LOAN WAS $464,750.
YEAR 2000
THE YEAR 2000 ("Y2K") PROBLEM RELATES TO COMPUTER SYSTEMS AND EMBEDDED CHIPS
WITH PROGRAMMING CODES IN WHICH CALENDAR YEAR DATA IS ABBREVIATED TO ONLY TWO
DIGITS. AS A RESULT OF THIS DESIGN, SOME SYSTEMS COULD FAIL TO OPERATE OR FAIL
TO PRODUCE CORRECT RESULTS IN THE YEAR 2000 IF "00" IS INTERPRETED TO MEAN THE
YEAR 1900, RATHER THAN THE YEAR 2000. AS A RESULT, COMPANIES ARE AT RISK FOR
POSSIBLE MISCALCULATIONS OR FAILURES IN EITHER THEIR OWN SYSTEMS OR THE SYSTEMS
OF THIRD PARTIES, WHICH COULD CAUSE DISRUPTION IN BUSINESS OPERATIONS.
THE COMPANY HAS IMPLEMENTED A PROJECT (THE "PROJECT") TO ADDRESS THE Y2K ISSUES
THAT COULD AFFECT THE COMPANY'S BUSINESS, RESULTS OF OPERATIONS OR FINANCIAL
CONDITION. THE PROJECT ADDRESSES INFORMATION TECHNOLOGY ("IT") SYSTEMS AND
SOFTWARE APPLICATIONS AS WELL AS NON-IT SYSTEMS, INCLUDING BOTH THOSE USED
INTERNALLY BY THE COMPANY AND THOSE USED BY CERTAIN THIRD PARTIES WITH WHOM THE
COMPANY DOES BUSINESS. THE PROJECT IS ORGANIZED INTO SIX PHASES: (1) INVENTORY
OF ALL SYSTEMS AND APPLICATIONS OF THE COMPANY AS WELL AS THOSE OF CERTAIN
THIRD-PARTY SUPPLIERS AND SERVICE PROVIDERS TO IDENTIFY ALL POTENTIAL Y2K
PROBLEMS; (2) ASSESSMENT OF Y2K COMPLIANCE FOR EACH SYSTEM AND APPLICATION SO
IDENTIFIED; (3) CORRECTION/REMEDIATION OF THOSE SYSTEMS AND APPLICATIONS
DETERMINED NOT TO BE Y2K COMPLIANT; (4) TESTING OF CORRECTED/REMEDIATED SYSTEMS
AND APPLICATIONS; (5) IMPLEMENTATION OF NEW AND/OR CORRECTED SYSTEMS AND
APPLICATIONS; AND (6) CONTINGENCY PLANNING. THE COMPANY EXPECTS ALL OF ITS
INTERNAL SYSTEMS AND SOFTWARE APPLICATIONS TO BE Y2K COMPLIANT BEFORE JANUARY 1,
2000.
THE INVENTORY AND ASSESSMENT PHASES OF THE PROJECT WERE COMPLETED AS OF OCTOBER
21, 1998 FOR ALL OF THE COMPANY'S INTERNAL SYSTEMS AND SOFTWARE APPLICATIONS.
THE COMPANY HAS DETERMINED THAT CERTAIN OF ITS SYSTEMS AND APPLICATIONS ARE
ALREADY Y2K COMPLIANT, AND THE COMPANY HAS BEGUN THE CORRECTION/REMEDIATION
PHASE WITH RESPECT TO ITS OTHER SYSTEMS AND APPLICATIONS. THE TESTING PHASE WILL
BE ONGOING AS HARDWARE OR SYSTEM SOFTWARE IS ADDED, REMEDIATED, UPGRADED OR
REPLACED.
THE COMPANY IS ALSO IN THE PROCESS OF IDENTIFYING AND CONTACTING THIRD PARTIES
WITH WHOM THE COMPANY HAS MATERIAL RELATIONSHIPS IN ORDER TO VERIFY THEIR Y2K
READINESS. THESE THIRD PARTIES INCLUDE UTILITY PROVIDERS, TELECOMMUNICATIONS
PROVIDERS, MANUFACTURERS OF SKI LIFTS, AS WELL AS SERVICE PROVIDERS SUCH AS
FINANCIAL INSTITUTIONS AND COMPANIES, WHICH PROVIDE EMPLOYEE BENEFITS SERVICES
TO THE COMPANY. THE FAILURE OF SUCH THIRD PARTIES TO CORRECT MATERIAL Y2K
PROBLEMS COULD RESULT IN AN INTERRUPTION IN, OR A FAILURE OF, CERTAIN NORMAL
BUSINESS ACTIVITIES OR OPERATIONS OF THE COMPANY, AND SUCH FAILURES COULD
MATERIALLY AND ADVERSELY AFFECT THE COMPANY'S RESULTS OF OPERATIONS, LIQUIDITY
AND FINANCIAL CONDITION.
THE PROJECT TIMETABLE ALLOWED SUFFICIENT TIME FOR THE COMPANY TO CONCLUDE THE
PROJECT PRIOR TO JANUARY 1, 2000.
THE TOTAL COST ASSOCIATED WITH THE PROJECT, INCLUDING THE REPLACEMENT COST OF
ANY NON-Y2K COMPLIANT SYSTEMS, SOFTWARE OR HARDWARE, IS NOT EXPECTED TO BE
MATERIAL TO THE COMPANY'S BUSINESS, RESULTS OF OPERATIONS OR FINANCIAL
CONDITION. COSTS INCURRED IN CONNECTION WITH THE PROJECT ARE EXPENSED AS
INCURRED, EXCEPT FOR THE COST OF REPLACEMENT SYSTEMS OR HARDWARE, WHICH WILL BE
CAPITALIZED AND DEPRECIATED OVER THEIR ESTIMATED USEFUL LIVES. PROJECT COSTS ARE
BEING FUNDED THROUGH OPERATING CASH FLOWS.
DUE TO THE GENERAL UNCERTAINTY INHERENT IN THE Y2K PROBLEM, RESULTING IN PART
FROM THE UNCERTAINTY OF THE Y2K READINESS OF THIRD-PARTY SUPPLIERS AND SERVICE
PROVIDERS, THE COMPANY IS UNABLE TO DETERMINE AT THIS TIME WHETHER THE
CONSEQUENCES OF Y2K FAILURES WILL HAVE A MATERIAL IMPACT ON THE COMPANY'S
RESULTS OF OPERATIONS, LIQUIDITY OR FINANCIAL CONDITION. HOWEVER, THE COMPANY
COULD BE MATERIALLY ADVERSELY AFFECTED BY A TEMPORARY INABILITY TO CONDUCT
BUSINESS IN THE ORDINARY COURSE FOR A PERIOD OF TIME AFTER JANUARY 1, 2000
THROUGH A FAILURE TO IDENTIFY AND REMEDIATE ALL ITS SUSCEPTIBLE SYSTEMS OR IF
THIRD-PARTY VENDORS AND SUPPLIERS WHOSE SYSTEMS AND OPERATIONS IMPACT THE
COMPANY DID NOT BECOME Y2K COMPLIANT IN TIME. THIS COULD RESULT IN THE INABILITY
TO OPERATE SKI LIFTS OR PROVIDE ESSENTIAL GUEST SERVICES ON SCHEDULE, WHICH
COULD CAUSE A DECREASE IN THE COMPANY'S REVENUES. COMPLETION OF THE ASSESSMENT
PHASE OF THE PROJECT IN PARTICULAR, THE ASSESSMENT OF THE Y2K READINESS OF ITS
CRITICAL VENDORS AND SERVICE PROVIDERS IS EXPECTED TO SIGNIFICANTLY REDUCE THE
COMPANY'S LEVEL OF UNCERTAINTY ABOUT THE Y2K PROBLEM. TO THE EXTENT THAT THIRD-
PARTY RESPONSES TO THE COMPANY'S Y2K COMPLIANCE QUESTIONNAIRES OR THE COMPANY'S
TESTING OF SUCH RESPONSES ARE UNSATISFACTORY, THE COMPANY WILL CREATE
CONTINGENCY PLANS WHICH COULD INCLUDE CHANGING VENDORS OR SERVICE PROVIDERS TO
THOSE WHO HAVE DEMONSTRATED Y2K READINESS.
THE PROJECT IS AN ONGOING PROCESS AND THE ESTIMATES OF COSTS AND COMPLETION
DATES DESCRIBED ABOVE ARE SUBJECT TO CHANGE. AS OF JANUARY 10, 2000 NO
REDUCTION IN SERVICES WERE EXPERIENCED BY THE COMPANY OR ITS CUSTOMERS AS A
RESULT OF ANY Y2K RELATED PROBLEMS.
INFORMATION AND STATEMENTS CONTAINED HEREIN REGARDING THE COMPANY'S Y2K PROJECT
ARE "YEAR 2000 READINESS DISCLOSURES" AS DEFINED BY THE YEAR 2000 INFORMATION
AND READINESS DISCLOSURES ACT OF 1998, ENACTED ON OCTOBER 19, 1998.
FORWARD-LOOKING STATEMENTS
THIS REPORT CONTAINS FORWARD-LOOKING STATEMENTS REGARDING MATTERS THAT ARE
SUBJECT TO RISKS AND UNCERTAINTIES. FOR SUCH STATEMENTS, THE COMPANY CLAIMS THE
PROTECTION OF THE SAFE HARBOR FOR FORWARD-LOOKING STATEMENTS CONTAINED IN
SECTION 21E OF THE SECURITIES EXCHANGE ACT OF 1934, AS AMENDED. THE COMPANY'S
RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN EACH FORWARD-LOOKING
STATEMENT DUE TO VARIOUS FACTORS, WHICH ARE OUTSIDE THE COMPANY'S CONTROL.
WINTER SPORTS, INC.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
REFERENCE IS MADE TO NOTE 5 OF 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
3.1 ARTICLES OF INCORPORATION
3.2 BY-LAWS
NO REPORTS ON FORM 8-K WERE FILED DURING THE QUARTER ENDED
DECEMBER 5, 1999.
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 14, 2000 /S/MICHAEL J. COLLINS
MICHAEL J. COLLINS
PRESIDENT & CHIEF EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER)
DATE: JANUARY 14, 2000 /S/JOANN M. GOULD
JOANN M. GOULD
CONTROLLER & ASSISTANT SECRETARY
(PRINCIPAL ACCOUNTING OFFICER)
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from 10-QSB dated
December 5, 1999 and is qualified in its entirety by reference to such 10-QSB.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-END> DEC-5-1999
<CASH> 530,601
<SECURITIES> 0
<RECEIVABLES> 105,763
<ALLOWANCES> 17,680
<INVENTORY> 669,773
<CURRENT-ASSETS> 1,869,984
<PP&E> 23,729,766
<DEPRECIATION> 12,017,121
<TOTAL-ASSETS> 19,224,028
<CURRENT-LIABILITIES> 3,714,388
<BONDS> 6,811,302
0
0
<COMMON> 4,099,174
<OTHER-SE> 3,128,600
<TOTAL-LIABILITY-AND-EQUITY> 19,224,028
<SALES> 63,706
<TOTAL-REVENUES> 1,391,600
<CGS> 30,010
<TOTAL-COSTS> 1,996,106
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (116,449)
<INCOME-PRETAX> (654,542)
<INCOME-TAX> (257,561)
<INCOME-CONTINUING> (396,981)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (396,981)
<EPS-BASIC> (0.39)
<EPS-DILUTED> (0.39)
</TABLE>
