UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
450 Fifth Street
Washington, D.C. 20549
Form 10-QSB
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 31, 1995
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Commission File No. 0-3858
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INTERNATIONAL LEISURE HOSTS, LTD.
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(Exact name of Registrant as specified in its charter)
Wyoming 86-0224163
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(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
2525 E. Camelback, Ste. 275 Phoenix, AZ 85016
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(Address of principal executive (Zip Code)
office)
Issuer's telephone number, including area code (602) 955-6100
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
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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 697,677 shares
of $.01 par value common stock outstanding as of February 5, 1996.
PART I - FINANCIAL INFORMATION
ITEM 1. Summarized Financial Information
INTERNATIONAL LEISURE HOSTS, LTD.
CONSOLIDATED BALANCE SHEETS
December March
31, 1995 31, 1995
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ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 45,171 $ 573,279
Marketable investment securities 300,000
Accounts receivable 19,923 10,855
Merchandise inventories 198,700 114,515
Prepaid income taxes 92,476 15,147
Prepaid expenses and other 49,145 6,338
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Total current assets 405,415 1,020,134
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CASH SEGREGATED FOR CONSTRUCTION OF
REPLACEMENT PROPERTY 116,758
PROPERTY AND EQUIPMENT
Buildings, equipment and improvements 6,222,426 2,807,179
Construction in process 252,700 2,841,521
Less accumulated depreciation and amortization (2,489,946) (2,357,201)
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Property and equipment - net 3,985,180 3,291,499
DEPOSITS 2,478 2,478
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$ 4,393,073 $ 4,430,869
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LIABILITIES & SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 165,099 $ 476,423
Accrued liabilities 66,553 63,005
Advanced deposits 206,389 106,520
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Total current liablilites 438,041 645,948
DEFERRED INCOME TAXES 180,852 180,852
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Total liabilities 618,893 826,800
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COMMITMENTS AND CONTINGENCIES (Note 3)
SHAREHOLDERS' EQUITY:
Preferred stock, $5 par value - authorized 100,000 shares;
issued, none
Common stock $.01 par value - authorized 2,000,000 shares;
issued, 718,373 shares 7,184 7,184
Additional paid-in capital 656,426 656,426
Retained earnings 3,173,082 2,999,687
Common stock in treasury, at cost - 20,696 and 19,875 shares (62,512) (59,228)
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Total shareholders' equity 3,774,180 3,604,069
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$ 4,393,073 $ 4,430,869
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See notes to the consolidated financial statements.
INTERNATIONAL LEISURE HOSTS, LTD.
CONSOLIDATED STATEMENTS OF INCOME
For the nine months ended For the three months ended
December 31, December 31,
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1995 1994 1995 1994
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REVENUES:
Sales of merchandise $1,414,067 $1,460,827 $ 79,186 $ 101,406
Room, cabin & trailer space rentals 1,403,444 1,125,883 41,475 65,452
Snowmobile rentals 15,569 133,150 15,569 133,150
Interest 18,229 63,827 5,450 18,491
Other income 118,638 19,419 583 16,213
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Total Revenue 2,969,947 2,803,106 142,263 334,712
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COSTS & EXPENSES:
Cost of merchandise 790,201 866,561 63,275 69,690
Operating 1,404,495 1,024,136 332,058 307,400
General & administrative 406,109 327,210 111,687 106,894
Depreciation & amortization 132,745 57,774 51,459 19,824
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Total costs and expenses 2,733,550 2,275,681 558,479 503,808
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Income (loss) before income tax 236,397 527,425 (416,216) (169,096)
Provision for income tax 63,002 177,531 (161,498) (56,969)
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NET INCOME (LOSS) $ 173,395 $ 349,894 ($ 254,718) ($ 112,127)
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NET INCOME (LOSS) PER COMMON SHARE $ 0.25 $ 0.50 ($ 0.37) ($ 0.16)
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See notes to consolidated financial statements
INTERNATIONAL LEISURE HOSTS, LTD.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
FOR THE NINE MONTHS ENDED DECEMBER 31, 1995
Additional
Common Stock Paid-In Retained Treasury
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Shares Amount Capital Earnings Stock
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Balance, March 31, 1995 718,373 $ 7,184 $ 656,426 $2,999,687 ($ 59,228)
Purchases of common stock (3,284)
Net Income 173,395
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Balance December 31, 1995 718,373 $ 7,184 $ 656,426 $3,173,082 ($ 62,512)
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See notes to consolidated financial statements.
INTERNATIONAL LEISURE HOSTS, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine months ended December 31,
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1995 1994
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OPERATING ACTIVITIES:
Net Income $ 173,395 $ 349,894
Adjustment to reconcile net income to net cash
provided by (used in) operations:
Depreciation and amortization 132,745 57,774
Changes in assets and liabilities:
Accounts receivable (9,068) 51,880
Merchandise inventories (84,185) (8,267)
Prepaid expenses and other (42,807) (60,508)
Accounts payable (311,324) 336,012
Accrued liabilities 3,548 (47,855)
Advance deposits 99,869 150,594
Income taxes (77,329) (38,811)
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Net cash provided by (used in) operating activities (115,156) 790,713
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INVESTING ACTIVITIES:
Increase in property and equipment (3,415,247) (26,271)
Decrease (Increase) in construction in progress 2,588,821 (2,218,397)
Use of cash segregated for construction of
replacement property 116,758 916,790
Purchase of marketable investment securities (398,044)
Sale of marketable investment securities 300,000 1,542,892
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Net cash used by investing activities (409,668) (183,030)
FINANCING ACTIVITIES:
Common stock purchased for treasury (3,284)
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NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS (528,108) 607,683
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 573,279 95,505
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CASH AND CASH EQUIVALENTS,
END OF PERIOD $ 45,171 $ 703,188
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See notes to consolidated financial statements.
INTERNATIONAL LEISURE HOSTS, LTD.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
For the Nine Month Periods Ending December 31, 1995 and 1994
The accompanying unaudited condensed and 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 included and are of a
normal recurring nature. Operating results for the nine months ended December
31, 1995 are not necessarily indicative of the results that may be expected for
the year ending March 31, 1996. 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, 1995.
1. BASIS OF PRESENTATION AND SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation - The consolidated financial statements include the
accounts of International Leisure Hosts, Ltd., and Lewis & Clark Lodge, its
wholly-owned subsidiary (collectively, the "Company"). All intercompany
transactions and accounts have been eliminated in consolidation.
Marketable investment securities are carried at cost, which approximates fair
value. The fair values are estimated based on quoted market prices. Marketable
securities are managed as part of the Company's cash management program. The
Financial Accounting Standards Board issued Statement of Financial Accounting
Standards ("SFAS") No. 115, Accounting for Certain Investments in Debt and
Equity Securities, which the Company adopted in fiscal year 1995. SFAS No. 115
requires the classification of securities of acquisition into one of three
categories: available for sale, held to maturity or trading. The Company has
classified its securities as available for sale.
Merchandise inventories are stated at the lower of aggregate cost (first-in,
first-out basis) or market.
Property and equipment are stated at cost. Depreciation is computed primarily by
the straight-line method over the estimated useful lives of such assets.
Amortization, by the straight-line method, of improvements to leased property is
based on the shorter of the term of the applicable lease or the estimated useful
lives of such assets.
Income taxes were provided for under provisions of the Statement of Financial
Accounting Standards ("SFAS") No. 109.
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 698,121 and 698,498 for the nine months ended
December 31, 1995 and 1994 and 697,728 and 698,498 shares for the three months
ended December 31, 1995 and 1994.
Business Segments - The Company considers its operations to be in one business
segment, the ownership and operation of Flagg Ranch, 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.
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.
2. MARKETABLE INVESTMENT SECURITIES
Marketable investment securities consist of the following:
December 31, 1995 March 31,1995
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Cost Market Cost Market
Available for sale:
Variable rate muni bonds $ 0 $ 0 $300,000 $300,000
3. 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, 1999, the Company is required to move its existing 54-unit
riverside motel from its current location to the high ground above the river, to
provide for new employee housing and make certain other improvements. The cost
of making these improvements is estimated to be between $1,700,000 and
$2,000,000.
The fee expense under the Contract is calculated at 2% of gross receipts (as
defined), subject to review and possible adjustment every five years. The first
review period was scheduled for December 31, 1994; however, as of February 5,
1996, the NPS has not completed its review. Any changes to the fee will be
retroactive to January 1, 1995. For the nine months ended December 31, 1995 and
1994, this fee amounted to $56,000 and $52,000, respectively.
4. TRANSACTIONS WITH AFFILIATED COMPANIES AND RELATED
PARTIES
Included in general and administrative expenses for the nine months ended
December 31, 1995 and 1994, are management fees and administrative expenses of
approximately $321,000 and $234,000, respectively, paid to affiliated companies
owned by Anthony J. Nicoli and/or family members.
5. BANK CREDIT FACILITY
During fiscal 1995, the Company established a credit facility with a bank. The
credit facility provides for maximum borrowings of $500,000. The draw period
under the facility runs until September 30, 1996, and as of December 31, 1995,
there were no outstanding borrowings. Interest is payable monthly on the
outstanding principal balance at a rate equal to prime plus .50% (8.75% at
February 5, 1996). Commencing October 30, 1996, the principal shall be repaid in
36 equal monthly principal payments with a maturity date of September 30, 1999.
The credit facility is collateralized by all accounts, an assignment of the
Contract and all improvements the Company has made to the Flagg Ranch property.
ITEM 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The principal business of the Company is the ownership and operation of Flagg
Ranch Village ("Flagg Ranch"), 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
of Yellowstone National Park.
Flagg Ranch undertook a major redevelopment plan during fiscal year ended March
31, 1995 which included construction of a new main lodge building, plus 50 new
cabin units. The grand opening of the new lodge and cabins was held June 17,
1995. The lodge, which replaces existing facilities, includes a restaurant,
lounge, gift shop, grocery store, front desk and gasoline station. The 50 new
cabin units replaced 42 rustic cabin units which will be removed from the
property.
Flagg Ranch, the principal business of the Company, is operated as a seasonal
resort. The two seasons generally coincide with the opening and closing dates of
Yellowstone and Grand Teton National Parks. The summer season runs from
approximately May 15 through October 15 and the winter season runs from
mid-December through mid-March.
Due to the Federal Government's inability to reach a budget agreement, all
National Parks were forced to shutdown on December 17, 1995. As a National Park
concessionaire, Flagg Ranch was forced to shutdown and remain closed until the
Parks reopened January 6, 1996. The economic impact of the shutdown was a
significant amount of lost revenue, particularly during the Christmas holiday
period. The Christmas holiday period has traditionally been Flagg Ranch's
busiest time of the winter season, usually operating at or near full occupancy.
Based on past history, budgets, and actual cancellations, we estimate the amount
of revenue lost during the shutdown was in excess of $300,000.
The Company had net income for the nine months ended December 31, 1995 of
$173,000 ($.25 per share). This compares to net income of $350,000 ($.50 per
share) for the nine months ended December 31, 1994. The $177,000 decline in
income was due to increased costs associated with opening and operating new
facilities at Flagg Ranch and the shutdown of the National Parks and its
concessionaires due to the Federal Government's budget impasse discussed in the
preceding paragraph. The operations for the first six months (the summer season)
were reviewed in the previous Form 10-QSB filed for September 30, 1995.
Operations for the winter season open in mid-December, therefore comparisons of
operations for nine months are not as meaningful as comparisons of the third
quarters. All references to years represent the quarters ended December 31 of
the stated year.
Revenues
Total revenues for the third quarter of 1995 decreased by $192,000 or 57% over
the same period in 1994 due to shutdown described in the preceding paragraph.
There were decreases in snowmobile rentals of $118,000, sales of merchandise of
$22,000, motel and cabin rentals of $24,000 and interest income of $13,000.
Costs and Expenses
The ratio of cost of merchandise sold to sales of merchandise increased from 69%
in 1994 to 80% in 1995. This ratio tends to fluctuate during the third quarter
when the sales volumes are small and the end of the summer season inventory
adjustments are made. The ratio for the nine month period ended December 31,
1995 is 56% compared to 59% for the prior year.
Operating expenses in the third quarter of 1995 increased $25,000. The most
significant increases were $34,000 in labor, $9,000 in operating supplies and
$16,000 in utilities. Decreases in snowmobile related expenses of $30,000 offset
the increases.
Depreciation increased by $32,000 in 1995 due to completion of the new lodge and
cabins.
Liquidity and Capital Resources
Working capital at December 31, 1995 is a negative $33,000 compared to a
positive $374,000 at March 31, 1995. The decline in working capital is due to
the Company using its working capital to fund the construction of certain
capital improvements. The Company began construction of an additional 42 cabin
units during the second quarter of fiscal 1996 which are scheduled to be
completed in fiscal 1997. The total cost of these additional units is estimated
between $1,300,000 and $1,400,000 of which $253,000 has been incurred as of
December 31, 1995.
The estimated total costs to be incurred for the entire construction planned for
the remainder of fiscal year 1996 through fiscal 2000 is between $3,000,000 and
$3,700,000. The Company intends to fund these improvements through existing cash
funds and cash generated from operations, plus a $500,000 bank credit facility
which can be drawn on through September 30, 1996. Cash generated from operations
was $1,001,000, $576,000 and $658,000 in fiscal years 1995, 1994 and 1993,
respectively. Cash generated from operations for the nine months ended December
31, 1994 was $791,000; whereas, cash used in operations was $115,000 for the
nine months ended December 31, 1995. The construction funds will have to be
obtained from outside sources to the extent they exceed cash generated from
operations and the $500,000 bank credit facility.
PART II - OTHER INFORMATION
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ITEM 1. Legal Proceedings
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None
ITEM 2. Changes in Securities
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None.
ITEM 3. Defaults upon Senior Securities
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None.
ITEM 4. Submission of Matters to a Vote of Securities Holders
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None
ITEM 5. Other Materially Important Events
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None
ITEM 6. Exhibits and Reports on Form 8-K
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None
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.
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(REGISTRANT)
DATE: 2/12/96 BY: /s/ John L. Bradley
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John L. Bradley
President
DATE: 2/12/96 BY: /s/ Mark G. Sauder
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Mark G. Sauder,
Chief Financial Officer