UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street
Washington, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2000
-------------
Commission File No. 0-3858
--------
INTERNATIONAL LEISURE HOSTS, LTD.
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Wyoming 86-0224163
------------------------------- ---------------------------------
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
3207 S. Hardy Drive
Tempe, AZ 85282
- --------------------------------------- ----------
(Address of principal executive office) (Zip Code)
Issuer's telephone number, including area code (480) 829-7600
--------------
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act during the 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days:YES [X] NO [ ]
State the number of shares outstanding of each of the issuer's classes of common
stock as of the close of the latest practicable date. There were 694,477 shares
of $.01 par value common stock outstanding as of June 30, 2000.
Page 1 of 12
PART I - FINANCIAL INFORMATION
ITEM 1 - Summarized Financial Information
INTERNATIONAL LEISURE HOSTS, LTD.
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
June March
30, 2000 31, 2000
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 394,412 $ 306,354
Accounts receivable 16,286 130,436
Income tax refund receivable 31,800
Merchandise inventories 231,095 100,936
Prepaid expenses and other 31,136 17,466
----------- -----------
Total current assets 704,729 555,192
----------- -----------
PROPERTY AND EQUIPMENT:
Buildings and improvements 6,248,824 6,248,824
Equipment 1,731,040 1,701,557
Leasehold improvements 325,600 325,600
Construction in process 384,100 294,176
----------- -----------
Total property and equipment 8,689,564 8,570,157
Less accumulated depreciation and amortization 2,685,269 2,592,796
----------- -----------
Property and equipment - net 6,004,295 5,977,361
----------- -----------
TOTAL $ 6,709,024 $ 6,532,553
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable under line of credit from related party $ 1,460,000 $ 1,460,000
Accounts payable:
Trade 181,864 105,291
Related party 21,093 70,563
Income taxes payable 59,851
Accrued liabilities 102,316 49,371
Advance deposits 379,502 149,151
----------- -----------
Total current liabilities 2,144,775 1,894,227
DEFERRED INCOME TAXES 178,076 178,076
----------- -----------
Total liabilities 2,322,851 2,072,303
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 2)
SHAREHOLDERS' EQUITY:
Preferred stock, $5 par value - authorized, 100,000 shares;
none issued
Common stock, $.01 par value - authorized, 2,000,000 shares;
issued, 718,373 shares 7,184 7,184
Additional paid-in capital 656,426 656,426
Retained earnings 3,801,275 3,875,352
----------- -----------
4,464,885 4,538,962
Less common stock in treasury - at cost, 23,916 shares (78,712) (78,712)
----------- -----------
Shareholders' equity - net 4,386,173 4,460,250
----------- -----------
TOTAL $ 6,709,024 $ 6,532,553
=========== ===========
See notes to unaudited condensed consolidated financial statements
Page 2 of 12
INTERNATIONAL LEISURE HOSTS, LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
For the three months ended
June 30,
-------------------------
2000 1999
--------- ---------
REVENUES:
Sales of merchandise $ 358,289 $ 355,823
Room, cabin and trailer space rentals 309,846 332,358
Other rentals and income 45,676 47,741
Interest 2,410 1,443
--------- ---------
Total revenues 716,221 737,365
--------- ---------
COSTS AND EXPENSES:
Cost of merchandise 212,232 216,049
Operating 419,008 419,254
General and administrative 36,024 30,746
General and administrative - related party 35,155 28,881
Net loss on asset disposals 1,015 2,050
Depreciation and amortization 91,256 106,830
Interest - related party 27,408 20,206
--------- ---------
Total costs and expenses 822,098 824,016
--------- ---------
Loss before income taxes (105,877) (86,651)
Benefit for income taxes (31,800) (9,332)
--------- ---------
NET LOSS $ (74,077) $ (77,319)
========= =========
NET LOSS PER COMMON SHARE - Basic $ (0.11) $ (0.11)
========= =========
See notes to unaudited condensed consolidated financial statements
Page 3 of 12
INTERNATIONAL LEISURE HOSTS, LTD.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Three months ended June 30,
---------------------------
2000 1999
--------- ---------
OPERATING ACTIVITIES:
Net loss ($ 74,077) ($ 77,319)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 91,256 106,830
Net loss on asset disposals 1,015 2,050
Changes in assets and liabilities:
Accounts receivable 114,150 8,709
Income tax refund receivable (31,800) (22,500)
Merchandise inventories (130,159) (131,219)
Prepaid expenses and other (13,670) (8,239)
Accounts payable - trade 76,573 193,066
Accounts payable - related party (49,470) 34,208
Income taxes payable (59,851) (117,684)
Accrued liabilities 52,945 55,493
Advance deposits 230,351 191,054
--------- ---------
Net cash provided by operating activities 207,263 234,449
--------- ---------
INVESTING ACTIVITIES:
Purchases of property and equipment (126,705) (144,306)
Proceeds from sale of property and equipment 7,500 18,650
--------- ---------
Net cash used in investing activities (119,205) (125,656)
--------- ---------
FINANCING ACTIVITIES:
Common stock purchased for treasury (700)
--------- ---------
NET INCREASE IN CASH AND CASH EQUIVALENTS 88,058 108,093
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 306,354 296,291
--------- ---------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 394,412 $ 404,384
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION -
Cash paid for interest $ 35,180 $ 30,030
========= =========
See notes to unaudited condensed consolidated financial statements
Page 4 of 12
INTERNATIONAL LEISURE HOSTS, LTD.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
For the Three Month Periods Ended June 30, 2000 and 1999
The accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-QSB. Accordingly,
they do not include all of the information and notes required by generally
accepted accounting principles for complete financial statements. In the opinion
of management, all adjustments and reclassifications considered necessary for a
fair and comparable presentation have been made and are of a normal recurring
nature. Operating results for the three months ended June 30, 2000 are not
necessarily indicative of the results that may be expected for the year ending
March 31, 2001. The enclosed financial statements should be read in conjunction
with the consolidated financial statements and notes thereto included in the
Company's Annual Report on Form 10-KSB for the year ended March 31, 2000.
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
International Leisure Hosts, Ltd. (the "Company") operates in one business
segment, the ownership and operation of Flagg Ranch Resort, a full-service
resort motel and trailer park located in the John D. Rockefeller Jr. Memorial
Parkway, approximately four miles north of Grand Teton National Park and two
miles south of the southern entrance to Yellowstone National Park.
SIGNIFICANT ACCOUNTING POLICIES - The Company prepares its financial statements
in accordance with accounting principles generally accepted in the United States
of America. A summary of significant accounting policies is as follows:
a. MERCHANDISE INVENTORIES are stated at the lower of aggregate cost
(first-in, first-out basis) or market.
b. PROPERTY AND EQUIPMENT are stated at cost. Depreciation is computed by
straight-line and accelerated methods over the estimated useful lives,
which range from 5 to 40 years, for such assets. Leasehold improvements are
amortized using the straight-line method over the lesser of the estimated
useful life of the related asset or the term of the lease.
The Company reviews the carrying values of its long-lived assets and
identifiable intangibles for possible impairment whenever events or changes
in circumstances indicate that the carrying amount of assets to be held and
used may not be recoverable. For assets to be disposed of, the Company
reports long-lived assets and certain identifiable intangibles at the lower
of carrying amount or fair value less cost to sell.
c. INCOME TAXES - Deferred income taxes have been provided for the temporary
differences between financial statement and income tax reporting on certain
transactions.
d. USE OF ESTIMATES - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of
America necessarily requires management to make estimates and assumptions
Page 5 of 12
that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
e. NET INCOME PER COMMON SHARE - Basic net income per common share is computed
by dividing net income by the weighted average number of common shares
outstanding. The weighted average number of common shares outstanding was
694,477 and 694,560 shares for the three month periods ended June 30, 2000
and 1999, respectively. Diluted net income per share reflects potential
dilution that could occur from common shares issuable through stock
options, warrants or other convertible securities; however, the Company has
no dilutive securities.
f. STATEMENTS OF CASH FLOWS - For purposes of the consolidated statements of
cash flows, cash and cash equivalents represent cash in banks, money market
funds, and certificates of deposit with initial maturities of three months
or less.
g. ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS - The Company has estimated
the fair value of its financial instruments using available market data.
However, considerable judgment is required in interpreting market data to
develop estimates of fair value. The use of different market assumptions or
methodologies may have a material effect on the estimates of fair values.
The carrying values of cash, receivables, lines of credit, accounts
payable, and accrued expenses approximate fair values due to the short-term
maturities or market rates of interest.
h. NEW ACCOUNTING PRONOUNCEMENT - The Financial Accounting Standards Board
("FASB") issued SFAS No. 133, ACCOUNTING FOR DERIVATIVE INSTRUMENTS AND
HEDGING ACTIVITIES. The effective date of SFAS No. 133 is fiscal years
beginning after June 15, 2000. SFAS No. 133 establishes accounting and
reporting standards for derivative instruments, including certain
derivatives embedded in other contracts, and for hedging activities. It
requires that entities record all derivatives as either assets or
liabilities, measured at fair value. Management has not completed the aof
the effects SFAS No. 133 will have on its financial statements.
2. COMMITMENTS AND CONTINGENCIES
The Company receives its operating authorization from the National Park Service
("NPS"). The NPS Contract (the "Contract") which became effective on January 1,
1990, will expire on December 31, 2009. Under the terms of the Contract, prior
to December 31, 2002, the Company is required to move its existing 54-unit
riverside motel from its current location to the high ground above the Snake
River, to provide for new employee housing and make certain other improvements.
The Company has chosen to meet these requirements by moving the riverside motel
and converting it into employee housing, plus building additional employee
support facilities, which began in summer 1998, with expected completion in
summer 2002. The remaining cost of this relocation is estimated to be between
$165,000 and $415,000 depending on the number of employee housing units and the
extent of additional improvements required by the NPS.
Page 6 of 12
The Contract fee to the NPS is calculated at 2 percent of gross receipts (as
defined), subject to review and possible adjustment every five years. For the
three months ended June 30, 2000, and 1999, this fee amounted to $13,900, and
$14,350, respectively, which has been recorded as operating expense.
Flagg Ranch faces competition from hotels, camping areas and trailer facilities
in Yellowstone and Grand Teton National Parks, as well as from a large number of
hotels and motels in Wyoming, Montana and Idaho, offering some facilities which
are similar to those offered by Flagg Ranch. In addition, the business of Flagg
Ranch is susceptible to weather conditions and unfavorable trends in the economy
as a whole. Business could be significantly affected depending upon actions
which might be taken by the NPS if cutbacks are made to their budget. If the NPS
decides to close Yellowstone National Park for the winter months, then Flagg
Ranch would have to discontinue its winter operations. NPS budget cutbacks could
also negatively impact the length of the summer season and the number of
visitors to the Parks and have a corresponding negative impact on Flagg Ranch
revenues.
On May 20, 1997, the Fund for Animals, Biodiversity Legal Foundation et. al.
filed a lawsuit against the NPS challenging the action of the NPS regarding
winter use of Yellowstone and Grand Teton National Parks. The plaintiffs asked
the Federal Court to stop winter activities, primarily snowmobiling and related
snow grooming, until environmental impacts are documented. A settlement
agreement was reached that required the NPS to prepare an environmental impact
statement ("EIS") during which time period the Parks continued activities under
the then existing winter visitor-use plan.
Upon completion of the EIS, the NPS prepared a draft winter-use plan with
several alternatives. The NPS has indicated that the alternative which
eliminates snowmobiling from the Park is the preferred alternative.
They have also indicated that once the winter-use plan is adopted, there would
be a phase-in period of up to two years during which time the winter
snowmobiling operation could be continued. It is currently anticipated that the
NPS will adopt a final winter-use plan around October of 2000.
If the NPS goes forward with its plans to eliminate snowmobiling from
Yellowstone National Park, then Flagg Ranch would have to suspend or discontinue
winter operations completely. This would have a significant negative impact on
the revenues and financial results of the Company. During fiscal 2000, winter
operations accounted for approximately 27% of total revenues.
The Department of Labor ("DOL") has notified the Company, on behalf of current
and past employees, that additional overtime is due for the period beginning
November 1, 1997. Currently the Company pays overtime for any hours in excess of
48 during a one-week period. The Company, as well as other Park concessioners in
the area, have operated under an exemption that exists in the Fair Labor
Standards Act. The DOL has claimed that this exemption does not apply due to
conflicting language in the Contract Work Hours Safety Standard Act which
requires overtime to be paid to laborers and mechanics working on a government
contract after 40 hours worked during a week. If the DOL prevails, the estimate
of the additional expense to the Company ranges from $30,000 to $50,000. While
there is no guarantee, the Company believes it will not be subject to the
additional overtime payments.
Page 7 of 12
3. TRANSACTIONS WITH RELATED PARTIES
General and administrative - related party expenses for the three months ended
June 30, 2000 and 1999 represent management fees and administrative expenses
paid to related parties and totaled approximately $35,000, and $29,000,
respectively. Related parties during the three months ended June 30, 2000, and
1999 are owned by the Company's current majority owner, Robert Walker, or family
members. Related parties during the three month period ended June 30, 2000 also
include a company owned by the Company's current President, Michael P. Perikly.
The Company incurred borrowings under a line of credit agreement with a related
party (Note 4). Interest incurred for the three months ended June 30, 2000 and
1999 was $35,180 and $30,030, respectively.
At March 31, 2000, the Company recorded payables of $21,093 to related parties
for certain operating expenses paid by the related parties on behalf of the
Company.
4. NOTE PAYABLE UNDER LINE OF CREDIT
During October 1999, the Company renewed a line of credit agreement
("Agreement") with an affiliated company expiring September 30, 2000, which
provides for collateralized borrowings of up to $1,500,000 at an interest rate
of prime plus .5 percent. Borrowings under the Agreement are collateralized by
the assets and improvements of Flagg Ranch. The Company has borrowed $1,460,000
on this line of credit as of June 30, 2000. The terms of the Agreement contain,
among other provisions, requirements for maintaining minimum cash flows (as
defined in the Agreement) and places limitations on the Company's ability to
make loans. As of June 30, 2000, the Company was not in compliance with the
minimum cash flow requirement.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The statements contained in this Report regarding management's anticipation of
the Company's facility completion schedules, quality of facilities, fulfillment
of National Park Service requirements, consumer response to marketing efforts,
ability to offset inflation and adequacy of financing, constitute "forward
looking" statements within the meaning of the Private Securities Litigation
Reform Act of 1995. Management's anticipation is based upon assumptions
regarding levels of competition, acceptance of facilities by consumers,
favorable weather conditions, ability to complete facility construction, the
market in which the Company operates, the stability of the economy and stability
of the regulatory e Any of these assumptions could prove inaccurate, and
therefore there can be no assurance that the forward- looking information will
prove to be accurate.
The Company's net loss for the first quarter ended June 30, 2000 was $74,000
($.11 per share). This compares to a net loss of $77,000 ($.11 per share) for
the quarter ended June 30, 1999. The $3,000 decrease in loss is primarily due to
an increase in the income tax benefit, offset by a decrease in room, cabin and
trailer space rentals from the prior quarter. Changes in the Company's revenues
and expenses for the quarters ended June 30, 2000 and 1999 are summarized below.
All references to years, represent quarters ending June 30 of the stated year.
Page 8 of 12
Flagg Ranch, the principal business of the Company, is operated as a seasonal
resort. The two seasons coincide with the opening and closing dates of
Yellowstone and Grand Teton National Parks. The summer season runs from
approximately May 22 through October 8 and the winter season runs from late
December through mid-March. Therefore, the first quarter ended June 30, 2000
consists of only thirty-nine days of operations.
REVENUES
Total revenues for 2000 decreased by $21,000 or 3% from 1999. Of this decrease,
$18,000 was from motel and cabin rentals, $4,000 from RV park rentals, $5,000
from float trip revenue, $8,000 in gift shop sales and $3,000 in grocery store
sales. Increases of $1,000 from food services, $11,000 in gasoline sales, and
$5,000 in miscellaneous income offset the above decreases. The primary reason
for the decrease in cabin rentals as well as RV park rentals is due to a
decrease in the number of days of operation during the respective first quarters
from 45 days to 39 days. The primary reason for the decreases in the various
retail areas is due to fewer guests staying in the cabins and RV park. The
primary reason for the increase in gasoline sales is due to the higher per
gallon selling price of gasoline.
EXPENSES
The ratio of cost of merchandise sold to sales of merchandise was 59% and 61%,
respectively, in 2000 and 1999. Operating expenses remained constant in 2000 as
compared to 1999. The ratio of operating expenses to total revenue increased to
59% in 2000 from 57% in 1999.
INFLATION
The Company expects that it will be able to offset increases in costs and
expenses, principally labor, caused by inflation, by increasing prices on its
services with minimal effect on operations.
LIQUIDITY AND CAPITAL RESOURCES
During the last fiscal year, the Company continued work on a project to relocate
the riverside motel and other buildings located along the Snake River to higher
ground for use as employee dormitories as well as the construction of new
employee management housing. During the quarter ended June 30, 2000, the Company
incurred costs of approximately $86,000 related to the above construction
projects. In addition the Company has purchased new vehicles and other equipment
at a cost of $41,000. As a result, the working capital decreased to a negative
$1,440,000 at June 30, 2000 from a negative $1,339,000 at March 31, 2000.
The Company may incur additional costs of between $165,000 to $415,000 prior to
December 31, 2002 to finish relocating the employee housing units as required
under the NPS Contract.
The Company intends to fund these improvements through existing cash funds and
cash generated from operations. Cash generated from operations was $706,000,
$964,000, and $432,000 for the fiscal years ended 2000, 1999 and 1998,
respectively. Cash generated from operations for the quarters ended June 30,
2000 and 1999 was $207,000 and $234,000, respectively. The construction funds
will have to be obtained from outside sources to the extent they exceed cash
generated from operations. There is no guarantee that the Company will be able
to procure financing on favorable terms.
Page 9 of 12
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Department of Labor ("DOL") has notified the Company, on behalf of current
and past employees, that additional overtime is due for the period beginning
November 1, 1997. Currently the Company pays overtime for any hours in excess of
48 during a one-week period. The Company, as well as other Park concessioners in
the area, have operated under an exemption that exists in the Fair Labor
Standards Act. The DOL has claimed that this exemption does not apply due to
conflicting language in the Contract Work Hours Safety Standard Act which
requires overtime to be paid to laborers and mechanics working on a government
contract after 40 hours worked during a week. If the DOL prevails, the estimate
of the additional expense to the Company ranges from $30,000 to $50,000. While
there is no guarantee, the Company believes it will not be subject to the
additional overtime payments.
ITEM 2. CHANGES IN SECURITIES
None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
None.
ITEM 5. OTHER MATERIALLY IMPORTANT EVENTS
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
The following financial statements of International Leisure Hosts,
Ltd. are included in Part I, Item 1:
Page
----
Condensed Consolidated Balance Sheets -
June 30, 2000 (Unaudited) and March 31, 2000 2
Condensed Consolidated Statements of Operations -
3 months ended June 30, 2000 and 1999 (Unaudited) 3
Condensed Consolidated Statements of Cash Flows-
3 months ended June 30, 2000 and1999 (Unaudited) 4
Notes to unaudited condensed consolidated financial statements 5
Page 10 of 12
(b) The following exhibits are incorporated by reference as indicated:
3.1 By-Laws-Adopted June 22, 1992 - filed with Form 10-K dated
March 31, 1992
3.2 Articles of Incorporation - filed with Form 10-K dated
March 31, 1986, pages 32-41
10.1 United States Department of the Interior National Park
Service Contract - filed with Form 10-Q dated December 31, 1989
27 Financial Data Schedule - filed herewith
Page 11 of 12
In accordance with the requirements of the Exchange Act, the registrant caused
this report to be signed by the undersigned, thereunto duly authorized.
INTERNATIONAL LEISURE HOSTS, LTD.
(REGISTRANT)
DATE: August 1, 2000 BY: /s/ Robert L. Walker
-----------------------------------------
Robert L. Walker
Chairman and Chief Executive Officer
DATE: August 1, 2000 BY: /s/ Michael P. Perikly
-----------------------------------------
Michael P. Perikly
President and Principal Financial Officer
Page 12 of 12