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 February 22, 2004
|_| 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| No |_|
As of March 26, 2004 the number of shares outstanding of the issuer's common
stock, no par value, was 988,668.
Transition Small Business Disclosure Format Yes |_| No |X|
WINTER SPORTS, INC.
INDEX
Page No.
PART I. FINANCIAL STATEMENTS
Item 1. Financial Statements
Condensed Consolidated Balance Sheets 3 - 4
At:
February 22, 2004(Unaudited)
February 23, 2003(Unaudited)
May 31, 2003
Condensed Consolidated Statements of Operations 5 - 6
For the periods:
December 1, 2003 - February 22, 2004(Unaudited)
December 2, 2002 - February 23, 2003(Unaudited)
June 1, 2003 - February 22, 2004(Unaudited)
June 1, 2001 - February 23, 2003(Unaudited)
Condensed Consolidated Statements of Cash Flows 7
For the periods:
June 1, 2003 - February 22, 2004(Unaudited)
June 1, 2002 - February 23, 2003(Unaudited)
Notes to Condensed Consolidated Financial Statements 8 - 11
Item 2. Management's Discussion and Analysis
of Financial Conditions 12 - 22
Item 3. Controls and Procedures 23
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 24
Item 5. Other Information 24
Item 6. Exhibits and Reports on Form 8-K 24
Signatures 25
Page 2 of 29
WINTER SPORTS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
2/24/04 2/23/03 5/31/03
(Unaudited) (Unaudited) See Note 2
------------------------------------------------
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 2,676,569 $ 1,477,509 $ 475,288
Cash - restricted 0 0 76,595
Receivables 907,140 752,891 209,339
Receivables - related parties 33,603 178,283 65,855
Interest receivable - related parties 27,348 47,849 68,110
Income tax refund receivable 0 325,180 290,163
Current deferred tax asset 36,514 30,832 36,514
Inventories 677,885 726,651 560,634
Prepaid expenses 541,965 499,582 450,523
------------ ------------ ------------
TOTAL CURRENT ASSETS 4,901,024 4,038,777 2,233,021
------------ ------------ ------------
PROPERTY AND EQUIPMENT
Property and equipment, at cost 31,705,669 29,697,516 29,996,638
Accumulated depreciation and amortization (18,437,977) (16,884,868) (17,515,325)
------------ ------------ ------------
13,267,692 12,812,648 12,481,313
Construction in progress 835,669 869,211 765,141
Land and development costs 7,159,309 7,196,498 7,157,338
------------ ------------ ------------
NET PROPERTY AND EQUIPMENT 21,262,670 20,878,357 20,403,792
------------ ------------ ------------
INVESTMENT IN LLCs 712,035 (133,442) (239,023)
------------ ------------ ------------
Goodwill - net of amortization 158,469 158,469 158,469
------------ ------------ ------------
OTHER ASSETS 891,516 701,179 970,253
------------ ------------ ------------
TOTAL ASSETS $ 27,925,714 $ 25,643,340 $ 23,526,512
============ ============ ============
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 1,472,020 $ 1,426,600 $ 556,496
Accounts payable - related parties 4,500 12,339 4,666
Employee compensation and related expenses 487,516 420,584 201,403
Taxes other than income and payroll 107,816 79,505 95,009
Income taxes payable 699,136 0 0
Interest payable 26,088 78,501 44,903
Interest payable - related parties 5,846 0 34,062
Current deferred tax liability 28,314 0 28,314
Current portion-long term debt 47,487 45,304 45,304
Deposits and other unearned income 2,033,473 1,613,126 2,193,551
Other current liabilities 16,050 2,898 2,898
------------ ------------ ------------
TOTAL CURRENT LIABILITIES 4,928,246 3,678,857 3,206,606
LONG-TERM DEBT, less current portion 8,465,128 8,989,581 7,539,876
OTHER LONG-TERM LIABILITIES 112,805 0 0
DEFERRED INCOME TAXES 2,448,191 2,478,928 2,448,191
------------ ------------ ------------
TOTAL LIABILITIES 15,954,370 15,147,366 13,194,673
------------ ------------ ------------
Page 3 of 29
STOCKHOLDERS' EQUITY
Common stock (5,000,000 shares authorized;
no par value; 988,668 shares outstanding) 3,887,676 3,887,676 3,887,676
Retained earnings 8,083,668 6,608,298 6,444,163
------------ ------------ ------------
TOTAL STOCKHOLDERS' EQUITY 11,971,344 10,495,974 10,331,839
------------ ------------ ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 27,925,714 $ 25,643,340 $ 23,526,512
============ ============ ============
The accompanying notes are an integral part of these financial statements.
Page 4 of 29
WINTER SPORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
Third Quarter Year to Date
---------------------------- ----------------------------
12/1/03 12/2/02 6/1/03 6/1/02
to to to to
2/22/04 2/23/03 2/22/04 2/23/03
----------- ----------- ----------- -----------
REVENUE
Lifts $ 3,708,406 $ 3,317,722 $ 4,119,602 $ 3,654,811
Retail 579,740 478,924 867,912 718,290
Equipment rental & repair 328,297 369,521 381,774 421,422
Lodging 108,030 71,923 225,415 153,798
Lease, management & other fees 1,362,691 1,112,369 2,187,047 1,919,736
Lease, management & other fees -
related parties 254,317 112,390 482,454 156,540
----------- ----------- ----------- -----------
TOTAL REVENUE 6,341,481 5,462,849 8,264,204 7,024,597
----------- ----------- ----------- -----------
OPERATING COSTS AND EXPENSES
Direct expenses - lifts 912,568 857,716 1,559,105 1,463,042
Depreciation - lifts 532,213 535,225 532,213 535,225
Cost of retail 364,350 268,645 566,645 420,102
Payroll & related expenses 1,281,721 1,100,886 3,020,564 2,422,316
Direct expenses 523,430 370,598 1,233,440 972,676
Direct expenses - related parties 3,247 3,246 15,604 9,738
Marketing 249,891 250,870 849,225 685,290
Marketing - related parties 0 3,679 0 1,527
Depreciation & amortization 410,844 405,184 440,952 434,435
General & administrative 446,718 353,037 1,728,121 903,109
General & administrative -
related parties 14,167 19,744 30,572 31,342
----------- ----------- ----------- -----------
TOTAL OPERATING COSTS AND EXPENSES 4,739,149 4,168,830 9,976,441 7,878,802
----------- ----------- ----------- -----------
OPERATING INCOME (LOSS) 1,602,332 1,294,019 (1,712,237) (854,205)
----------- ----------- ----------- -----------
OTHER INCOME (EXPENSE)
Interest income 146 0 6,078 0
Interest income-related parties 0 17,494 43,946 52,994
Interest expense (56,456) (79,737) (181,866) (158,709)
Interest expense-related parties (4,851) (3,061) (43,946) (63,849)
Sale of land 0 0 0 925,989
Unrecognized gross profit on land sale 0 0 0 (862,891)
Cost of land sale 0 0 0 (63,098)
Gain on land sale-previously
Unrecognized 1,809,632 0 3,149,265 141,938
Equity in Earnings-LLCs 750,355 (21,588) 994,201 220,965
Gain on disposal of assets 4,232 13,622 73,284 15,652
Other income (expense) (1,850) (18,673) (1,652) (25,530)
----------- ----------- ----------- -----------
TOTAL OTHER INCOME (EXPENSE) 2,501,208 (91,943) 4,039,310 183,461
----------- ----------- ----------- -----------
INCOME(LOSS)BEFORE INCOME TAX 4,103,540 1,202,076 2,327,073 (670,744)
Provision (recovery) of income tax 1,647,843 480,722 989,299 (268,406)
----------- ----------- ----------- -----------
INCOME(LOSS)BEFORE MINORITY INTEREST $ 2,455,697 $ 721,354 $ 1,337,774 $ (402,338)
MINORITY INTEREST IN SUBSIDIARY LOSS 3,247 0 133,354 0
----------- ----------- ----------- -----------
INCOME(LOSS)BEFORE CUMULATIVE EFFECT OF
A CHANGE IN ACCOUNTING PRINCIPAL 2,458,944 721,354 1,471,128 (402,338)
Cumulative effect of a change in
Accounting principal 168,377 0 168,377 0
----------- ----------- ----------- -----------
NET INCOME(LOSS) $ 2,627,321 $ 721,354 $ 1,639,505 $ (402,338)
=========== =========== =========== ===========
Page 5 of 29
EARNINGS(LOSS) PER COMMON SHARE $ 2.66 $ .73 $ 1.66 $ (.41)
=========== =========== =========== ===========
The accompanying notes are an integral part of these financial statements.
Page 6 of 29
WINTER SPORTS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOW
6/1/03 6/1/021
to to
2/22/04 2/23/03
----------- -----------
NET CASH PROVIDED BY (USED IN)OPERATING ACTIVITIES $ 2,901,547 $ (482,053)
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sales of assets 69,417 272,660
Proceeds from restricted cash account 76,595 0
Option payment on land (15,000) (15,000)
Purchase of land 0 (888,058)
Property and equipment acquisitions (1,756,530) (1,156,965)
----------- -----------
NET CASH (USED IN) INVESTING ACTIVITIES (1,625,518) (1,787,363)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from draws on long-term revolver 9,258,890 6,763,113
Loan fees paid 0 (15,000)
Principal payments on long-term revolver (8,286,151) (3,742,832)
Payments on term loan (47,487) (42,890)
Option proceeds on land purchase 0 44,204
----------- -----------
NET CASH PROVIDED BY FINANCING ACTIVITIES 925,252 3,006,595
----------- -----------
Net increase in cash and cash equivalents 2,201,281 737,179
Cash and cash equivalents at beginning of period 475,288 740,330
----------- -----------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 2,676,569 $ 1,477,509
=========== ===========
SUPPLEMENTAL DISCLOSURES OF CASH PAID YEAR-TO-DATE FOR:
Interest (net of capitalized interest) $ 274,747 $ 185,621
Income taxes (net of refunds) $ 0 $ 0
The accompanying notes are an integral part of these financial statements.
Page 7 of 29
WINTER SPORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
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. The interim condensed consolidated financial statements
are prepared by management and are unaudited. 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, 2003.
In the opinion of Management, the accompanying condensed consolidated financial
statements contain all adjustments (consisting of normal recurring accruals)
necessary for the fair presentation of the interim periods presented.
Certain amounts in the February 23, 2003 financial statements have been
reclassified to conform to the February 22, 2004 presentation.
NOTE 2 - May 31, 2003
The balance sheet at May 31, 2003 has been condensed from the audited financial
statements of that date.
NOTE 3 - SEASONAL NATURE OF OPERATIONS
The Company's operations are highly seasonal in nature. Revenues, earnings and
cash flow are generated principally from the winter operation 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 revenue during the Company's main
periods of business. The Company also generates revenues from the sale of real
estate that is ongoing throughout the fiscal year. Therefore, the results of
operations for the interim and year-to-date periods ended February 22, 2004 and
February 23, 2003 are not necessarily indicative of the results to be expected
for the full year.
NOTE 4 - LEGAL PROCEEDINGS AND CONTINGENCIES
From time to time, the Company has been a defendant in unrelated lawsuits filed
by individuals who are each seeking damages of specified amounts, for alleged
personal injuries resulting from accidents occurring on the Company's property
or while participating in recreational activities. The Company's insurance
carrier provides defense and coverage for these claims and the Company's
participation has been limited to its policy deductible. Such amounts are
charged to General and Administrative expense upon settlement.
NOTE 5 - NOTES PAYABLE
The Company entered into a loan agreement with Bank of America National Trust
and Savings Association in January, 2003. The agreement provides for a
$13,500,000 revolving reducing line of credit, which matures on May 31, 2009.
The agreement contains many of the same covenants as the previous one; a health
ratio, a debt service coverage ratio, restrictions on investments, disposition
of assets, capital expenditures, outside borrowing and payment of dividends.
Each May 31, the amount available under the line reduces by $1,200,000. At
February 22, 2004, $6,328,091 was unused and available under the instrument. At
February 23, 2003 $5,851,124 was unused and available under the instrument. The
loan bears interest at or below Bank of America's prime rate.
Page 8 of 29
WINTER SPORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
NOTE 5 - NOTES PAYABLE(CONTINUED)
During the third quarter of 2002, the Company purchased 120 acres adjacent to
the Company's eastern boundary for $2,040,000. The purchase was funded by the
company borrowing $1,428,000 from Whitefish Credit Union, a related party. This
loan, with a maturity date of January 1, 2007, has five annual payments of
$125,000 each January beginning with January 1,2003. This loan carries an
interest rate to be reviewed annually and set at Wall Street Prime +1%, with a
floor of 5% and a cap of 8.5%. The long-term portion of the amount owing on the
Whitefish Credit Union loan as of February 22, 2004 was $1,293,218.
NOTE 6 - BUSINESS SEGMENT INFORMATION
The Company operates in two segments, the operation of a resort area and real
estate investment. Winter Sports is involved in operations in the resort
industry to develop and provide recreational and related services to guests.
Also included in Winter Sports segment reporting is the Company's other wholly
owned subsidiary, Big Mountain Water Company. This entity is the local water
supplier for the resort area. Big Mountain Development Corporation participates
in various LLC activities as described in Note 7. The Company evaluates the
performance of its two segments primarily by evaluating the income from
operations of each segment. The Company must be able to react to weather
conditions and changing traveling habits for the resort segment. The real estate
investment segment, or BMDC, is also evaluated primarily by its income from
operations and also by the income received through the Equity in Earnings - LLCs
(see Note 7).
Financial information by industry segment for the second quarters of 2004 and
2003 are summarized as follows:
Winter Sports BMDC Consolidated
------------- ----------- ------------
Third Quarter
Quarter Ended 2/22/04
Total revenue $ 6,320,539 $ 20,942 $ 6,341,481
Operating profit(loss) $ 1,633,351 $ (31,019) $ 1,602,332
Depreciation and amortization $ 938,037 $ 5,020 $ 943,057
Gain on sale of land previously unrecognized $ 1,809,632 $ 0 $ 1,809,632
Identifiable assets $ 23,300,768 $ 4,624,946 $ 27,925,714
Capital expenditures $ 660,439 $ 0 $ 660,439
Quarter Ended 2/23/03
Total revenue $ 5,440,420 $ 22,429 $ 5,462,849
Operating profit $ 1,327,999 $ (33,980) $ 1,294,019
Depreciation and amortization $ 935,367 $ 5,042 $ 940,409
Gain on sale of land previously unrecognized $ 0 $ 0 $ 0
Identifiable assets $ 22,123,248 $ 3,520,092 $ 25,643,340
Capital expenditures $ 1,202,936 $ 0 $ 1,202,936
6/1/03 to 2/22/04
Total revenue $ 8,195,108 $ 69,096 $ 8,264,204
Operating profit(loss) $ (1,601,709) $ (110,528) $ (1,712,237)
Depreciation and amortization $ 956,432 $ 16,733 $ 973,165
Gain on sale of land previously unrecognized $ 3,149,265 $ 0 $ 3,149,265
Identifiable assets $ 23,300,768 $ 4,624,946 $ 27,925,714
Capital expenditures $ 1,756,530 $ 0 $ 1,756,530
Page 9 of 29
WINTER SPORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
6/1/02 to 2/23/03
Total revenue $ 6,958,973 $ 65,624 $ 7,024,597
Operating profit (loss) $ (731,246) $ (122,959) $ (854,205)
Depreciation and amortization $ 952,851 $ 16,809 $ 969,660
Gain on sale of land previously unrecognized $ 141,938 $ 0 $ 141,938
Identifiable assets $ 22,123,248 $ 3,520,092 $ 25,643,340
Capital expenditures $ 2,045,023 $ 0 $ 2,045,023
NOTE 7 - INVESTMENT IN LLCs
The Company's subsidiary, Big Mountain Development Corporation has become a
member of four limited liability companies, Northern Lights LLC, Morning Eagle
LLC, The Glades LLC and Moose Run II LLC. In each of these LLCs, the subsidiary
does not participate in the day-to-day operating activities of these entities,
nor does it guarantee any debt. The manager of each LLC prepares an annual plan
for approval of all members as to the type of development that is envisioned for
the tract of land owned by the LLC. The Company's subsidiary receives a portion
of the profit from each of these entities. The profit is residual, if any, of
the sales of real estate product over the costs of developing that product,
including marketing. The Company's subsidiary is accounting for these
investments under the equity method of accounting, as it will receive 60% of the
residual profit generated in each LLC, except for Morning Eagle LLC in which it
will receive 22% of any residual profit. However during the third quarter ended
February 22, 2004, the Company's subsidiary, Big Mountain Development
Corporation has consolidated Moose Run II LLC under the provisions of FIN 46 and
is no longer accounting for this investment under the equity method.
As a result of FIN 46, the Company has evaluated its subsidiary's investment in
each of these limited liability companies to determine whether these entities
meet the definition of Variable Interest Entities under this provision. If the
Company's subsidiary, Big Mountain Development Corporation, is determined to be
the primary beneficiary of any of these LLC's, the Company would then be
required to consolidate that entity, rather than reporting on the equity method
as has been done in the past.
Moose Run II LLC was entered into in November, 2001. This entity sold land to
another developer for a lump sum plus a portion of the gross proceeds of any
sales. The Company has determined that the Company's subsidiary, Big Mountain
Development Corporation, is the primary beneficiary of this variable interest
entity and has consolidated this entity. As a result, the company is recognizing
the cumulative effect of a change in accounting principal of $168,377 due to the
change from the equity method of accounting to the consolidation of this entity.
The Glades Development LLC was entered into in April, 2003. This entity is
involved in a project for single family home sites. The total assets of this
entity were $1,014,777 and total liabilities $553,692 as of February 22, 2004.
The Company's maximum exposure to loss is the ratable portion of income/loss.
The Company has determined that the Company's subsidiary, Big Mountain
Development Corporation, is not the primary beneficiary of this entity.
Therefore, it will not be consolidated, but rather reported under the equity
method.
Page 10 of 29
WINTER SPORTS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
Morning Eagle LLC was formed in June, 2002. This entity is involved in a project
to construct 49 condominiums and over 10,000 of commercial space. The total
assets of this entity were $1,471,829 and total liabilities $104,744 as of
February 22, 2004. The Company's maximum exposure to loss is the ratable portion
of income/loss. The Company has determined that the Company's subsidiary, Big
Mountain Development Corporation, is not the primary beneficiary of this entity.
Therefore, it will not be consolidated, but rather reported by the equity
method. Prior to the quarter ended February 22, 2004 the Company had not
recognized activity related to this entity due to the provisions of the LLC
agreement.
The following information summarizes the activity of the LLCs through February
22, 2004:
ASSETS
Land held for development and sale $ 1,951,535
Cash 499,598
Other Assets 60,664
-----------
$ 2,511,797
===========
LIABILITIES AND EQUITY
Notes and other payables $ 661,736
Equity 1,850,061
-----------
$ 2,511,797
===========
Net Loss from sales $ (28,262)
===========
Page 11 of 29
WINTER SPORTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
All statements, other than statements of historical fact contained herein
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended(the "Securities Act") and Section 27A of the
Securities Exchange Act of 1934, as amended(the "Exchange Act"). These forward
statements are not based on historical facts, but rather reflect the Company's
current expectations concerning future results and events. Similarly, statements
that describe the Company's objectives, plans or goals are or may be
forward-looking statements. Such forward-looking statements involve a number of
risks and uncertainties. The Company has tried wherever possible to identify
such statements by using words such as "anticipate," "assume," "believe,"
"expect," "intend," "plan," and words and terms similar in substance in
connection with any discussion of operating or financial performance. In
addition to factors discussed above, other factors that could cause actual
results, performances or achievements to differ materially from those projected
include, but are not limited to, the following: general business and economic
conditions, both regionally and nationally; weather and snow conditions; the
changes in the visitation habits of travelers as a result of September 11th,
related events thereafter and the Canadian exchange rate; and other factors
listed from time-to-time in the Company's documents filed by the Company with
the Securities and Exchange Commission. The forward-looking statements included
in the document are made only as of the date of this document and under Section
27A of the Securities Act and Section 21E of the Exchange Act, the Company does
not have or undertake any obligations to publicly update any forward-looking
statements to reflect subsequent events or circumstances.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The Company's discussion and analysis of its financial condition and results of
operations are based upon the Company's consolidated financial statements, which
have been prepared in accordance with generally accepted accounting principles.
The Company believes certain accounting policies to be critical due to the
estimation process involved in each. The Company records season pass revenue as
it is earned. The Company has a ticketing system which scans the ticket of each
person who accesses the chair lifts. A portion of the season pass revenue is
recognized as revenue each day that the pass holder accesses the lifts. Property
management associated revenue is recognized when the guest checks out and/or at
the end of each accounting cycle, whichever occurs first on a unit by unit
basis. The Company, under a development agreement with Hines Resorts, will from
time to time sell parcels of land. The Company is recognizing any gain on the
sale of these parcels under the cost recovery method. The Company chose this
method because the sale of land during the current fiscal year has been
accomplished through a note which is subordinate to other loans of the
purchasing entity. Under this method, the gain is unrecognized until such time
as the basis of the land and the associated costs of the sale have been
recovered. Revenue from these entities is being recognized under the equity
method. The Company's subsidiary, Big Mountain Development Corporation, does not
have day-to-day management control of these LLCs and does not guarantee any
borrowings of the LLCs. Depreciation is computed using the straight-line method
for book purposes using the applicable useful life of the asset. For tax
purposes, the Company uses the appropriate tax life as defined in the Internal
Revenue Code. The Company recognizes deferred tax assets and liabilities based
on the differences between the financial statement carrying amounts and the tax
bases of assets and liabilities. The Company regularly reviews its deferred tax
assets for recoverability and establishes a valuation allowance based on
historical income, projected future taxable income, and expected timing of the
reversal of existing temporary differences.
Page 12 of 29
WINTER SPORTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
The Company adopted FASB 142 at the beginning of the 2003 fiscal year. Under
this FASB, goodwill and intangible assets deemed to have indefinite lives are no
longer amortized, instead being subject to impairment tests at least annually.
Other intangible assets will continue to be amortized over their contractual
lives. An impairment test of the lodging reporting unit reported no impairment
of the goodwill as of the end of the fiscal year 2003.
Statement of Financial Accounting Standards No. 143 was adopted by the Company
in 2003. Under this standard, asset retirement and the obligations associated
with the retirement of tangible long-lived assets will change. This statement
will not have a material effect on the Company's financial statements as
presented.
The Company adopted FASB 144 at the beginning of the 2003 fiscal year. This
standard sets forth guidelines for accounting and reporting for the impairment
of long-lived assets and for long-lived assets to be disposed of. This
pronouncement will not have a material effect on the financial statements as
presented.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS 146 requires that a liability for a cost
that is associated with an exit or disposal activity be recognized when the
liability is incurred. SFAS 146 also establishes that fair value is the
objective for the initial measurement of the liability. SFAS 146 is effective
for exit or disposal activities that are initiated after December 31, 2002. The
Company did not have any such activities during the current year.
In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"),an
interpretation of FASB Statement No. 5, "Accounting for Contingencies." This
interpretation elaborates on the disclosures to be made by a guarantor in its
interim and annual financial statements about its obligations under certain
guarantees that it has issued. The initial recognition and initial measurement
provisions of FIN 45 are applicable on a prospective basis to guarantees issued
or modified after December 31, 2002, irrespective of the guarantor's fiscal
year-end. The disclosure requirements of FIN 45 are effective for financial
statements of interim or annual periods ending after December 15, 2002. The
adoption of this standard had no material impact on the Company's financial
statements.
In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest
Entities. FIN 46 explains the concept of a variable interest entity and requires
consolidation by the primary beneficiary where the variable interest entity does
not have sufficient equity at risk to finance its activities without additional
subordinated financial support from other parties. FIN 46 also required an
investor with a majority of the variable interests in a variable interest entity
to consolidate the entity and also requires majority and significant variable
interest investors to provide certain disclosures. This interpretation applies
immediately to variable interest entities created after January 31, 2003, and
was to apply in the first fiscal year or interim period beginning after June 15,
2003 for variable interest entities in which an enterprise holds a variable
interest that it acquired before February 1, 2003. In December 2003, the FASB
deferred the implementation date for FIN 46 to financial statements for the
first period ending after December 15, 2003. This deferral only applies to VIEs
that existed prior to February 1, 2003. Subsequent to January 31, 2003,
Page 13 of 29
WINTER SPORTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
the Company's subsidiary, Big Mountain Development Corporation, became a member
in Glades Development LLC. The Company believes that Glades Development LLC is a
variable interest entity; however it has determined that the Company is not the
primary beneficiary and under FIN 46, the Company will not consolidate the
entity. Prior to January 31, 2003 the same subsidiary became a member in Moose
Run II LLC, Northern Lights LLC and Morning Eagle LLC. The Company has
determined that under FIN 46, Moose Run II LLC is a variable interest entity and
the Company's subsidiary, Big Mountain Development Corporation, is the primary
beneficiary. Therefore, Big Mountain Development Corporation has consolidated
Moose Run II LLC, which had been previously accounted for under the equity
method, according to the implementation provision. See Note 7 for the required
disclosures.
In December 2003, the FASB published a revision to FIN 46, to clarify some of
the provisions of FIN 46 and to exempt certain entities from its requirements.
Under the revised FIN 46, application is required in financial statements of
public entities that have interests in variable interest entities for periods
ending after December 15, 2003. Application by public entities for all other
types of variable interest entities is required in financial statements no later
than for periods ending after March 15, 2004.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity". SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity, and
requires that financial instruments within its scope, many of which currently
are classified as equity, be classified as liabilities or, in some
circumstances, assets. SFAS No. 150 is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
first interim period beginning after June 15, 2003. The Company has not had any
material transactions of this nature since the adoption of this standard.
For the For the
Period Period
6/1/03 6/1/02
to to
2/22/04 2/23/03
----------- ------------
Gross Revenue $ 8,264,204 $ 7,024,597
Net Income (Loss) $ 1,639,505 $ (402,338)
Income(Loss) per Common Share $ 1.66 $ (.41)
Total Assets $27,925,714 $ 25,643,340
Long-Term Debt $ 8,465,128 $ 8,989,581
Page 14 of 29
WINTER SPORTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS, THIRD QUARTER AND YEAR-TO-DATE
Revenues
Total revenues for the third quarter were $6,341,481, an increase of $878,632 or
16% from the same quarter of the prior year. The increase is due primarily to an
increase in Lift revenue of 12% over the same time last year. The Resort
experienced snowfall earlier in the year compared with last year. The Resort is
seeing higher visitation levels over the previous year due to better snow
conditions. Guests are booking their visits closer to the arrival date and are
utilizing the internet to compare snowfall levels and various amenities that the
Resort has to offer.
The Company also experienced an increase in Lease, management and other fees of
$250,322 over the third quarter of the previous year. This increase is due to an
increase in revenue generated from property management fees. The Company has
experienced an increase in its destination visitors from the previous year who
are staying at the Resort.
Lease, management and other fees - related parties increased to $254,317 during
the third quarter of the current fiscal year compared to $112,390 during the
third quarter last year. The Company received a fee from the sale of lots in a
single family home neighborhood to be used towards the costs of developing a
conference center facility at the Resort. This revenue was received from the
Glades LLC in which the Company's subsidiary, Big Mountain Development
Corporation is a member. The Company expects to recognize this type of revenue
in the fourth quarter, but to a lesser extent.
Lease, management and other fees - related parties is expected to continue to
increase throughout the current fiscal year as the Company will perform
administrative functions for the Big Mountain Club and also for some of the
homeowner associations which are related parties. Some of the administrative
functions which the Company performs include accounting and human resource
services, property management services as well as maintenance services.
Year to date revenue, as of February 22, 2004 was $8,264,204, an 18% increase
over last year at the same time.
Operating Costs and Expenses
Total operating costs and expenses increased by $570,319 14% from the same
quarter of the previous year. The increase is due in part to the increased costs
the Company is incurring to effect a reverse stock split as announced in
September, 2003. These costs include fees for consultants, attorneys and
independent public accountants. The Company continues to take steps to mitigate
the effect of increasing insurance premiums by increasing the level of risk
management at the Resort, considering deductible levels and the effect of being
a public company in the insurance market. The Company also experienced increases
in consultants and legal expenses related to researching the costs/benefits of
continuing as a publicly traded company under the Securities and Exchange
Commission.
Page 15 of 29
WINTER SPORTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
Year to date operating costs and expenses have increased 27% or $2,097,639
compared to the previous fiscal year. General and administrative expenses
increased during the first quarter of this year due to the recognition of 66
2/3% of the start-up expenditures for the Big Mountain Club LLC. This entity was
organized as a non-equity members club, which has certain privileges at the
Resort and also at a near-by golf club, which is now known as Big Mountain Golf
Club. The Company views these expenditures as one-time non-recurring expenses.
The Company has also incurred additional expenses related to insurance costs.
The insurance market continues to harden as a result of September 11, 2001 and
the overall experience ratings of insurance companies. The Company expects this
trend to continue during the next fiscal year.
Direct expenses - related parties is $3,247 for the third quarter of this fiscal
year and $15,604 for the 2004 fiscal year, compared with $3,246 during the third
quarter of last fiscal year and $9,738 for the 2003 fiscal year. These expenses
are homeowner association dues for units owned by the Company that are managed
by the property management company. The expense is expected to increase during
the current fiscal year due to the acquisition of the commercial space in the
Morning Eagle facility, in which condominium association dues will be paid.
General and administrative expenses - related parties is $14,167 during the
second quarter of this fiscal year and $30,572 for the 2004 fiscal year compared
to $19,744 during the third quarter of the last fiscal year and $31,342 for the
2003 fiscal year. During the current fiscal year, the Company is incurring
expenses paid to a related party for services performed during the interim until
a permanent Chief Executive Officer is selected. Other related party expenses in
this area include charitable donations to entities whose boards include Company
Board members.
Income from Operations
Income from operations for the resort during the third quarter of this fiscal
year was $1,633,351 compared with $1,327,999 during the third quarter of last
year. The increase is due to additional revenue generated from lifts and
property management from the increased visitation to the Resort this season.
Income from operations for the real estate investment segment has remained
consistent with last year at this time. For the three quarters ending February
22, 2004 the real estate investment segment had a loss from operations of
$(110,528) compared with $(122,959) for the same period ending February 23,
2003.
Other Income
The Company's subsidiary, Big Mountain Development Company, is a member of
Morning Eagle LLC, Moose Run II LLC, Glades LLC and Northern Lights LLC. In each
of these LLCs, the subsidiary does not participate in the day-to-day operating
activities of these entities, nor does it guarantee any debt of the entities.
The manager of each LLC prepares an annual plan for approval of all members as
to the type of development that is envisioned for the tract of land owned by the
LLC. The Company's subsidiary receives a portion of the profit from each of
these entities. The profit is the residual, if any, of the sales of real estate
product over the costs of developing that product, including marketing. The
Company's subsidiary is accounting for these investments under the equity method
of
Page 16 of 29
WINTER SPORTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
accounting, as it will receive 60% of the residual profit generated in each of
these LLCs, except for Morning Eagle LLC in which it will receive 22% of an
residual profit. As of February 22, 2004, the Company's subsidiary has
recognized income of $994,201, which is found on the Income Statement labeled,
"Equity in Earnings-LLCs".
Beginning in the second quarter of fiscal year 2004, the Company recognized a
portion of the gain from the sale of land to Hines Resorts. This gain is being
recognized under the cost recovery method. Under this method, the gain is
unrecognized until such time as the basis of the land and the associated costs
of the sale have been recovered. During the third quarter, the Company
recognized $1,809,632. It is expected that the Company will recognize an
additional $200,000 of this revenue during the fourth quarter of fiscal year
2004 as proceeds are received.
During the first quarter of the current year, the Company sold a small tract of
land to the state of Montana as a right of way. The State is purchasing small
tracts of land along the Big Mountain Road, so that in the near future the road
leading to the Resort will become wider, removing many of the hairpin turns
along the way.
Interest income - related parties of $43,946 is comparable to that of the same
period during the last fiscal year of $52,994. The small decrease is due to the
notes being paid off during the third quarter of this fiscal year. This income
is earned from notes receivable from the limited liability companies which hold
the note for the sale of land to Hines Resorts.
Other Expenses
Interest expense for the quarter ended February 22, 2004 was $56,456, a decrease
of $23,281, or 29%. Year-to-date interest expense increased by $23,157 or 15%
during the first three quarters of 2004 versus the same three quarters of the
prior year. These increases are due to increased borrowings on the company's
line of credit.
Interest expense - related parties decreased from $63,849 at the end of the
third quarter 2003 to $43,946 at the end of the current quarter. This interest
is due to the related party note with the Whitefish Credit Union as described in
Note 5.
During June, 2003, the Company entered into two interest rate swaps. These swaps
were entered into for periods of three and four years, respectively, at one
million dollars each. The objective of the hedge is to eliminate the variability
of cash flows in the interest payments for the debt, the sole source of which is
due to changes in the LIBOR benchmark interest rate. Changes in the cash flows
of the interest rate swap are expected to exactly offset the changes in cash
flows(i.e., changes in interest rate payments) attributable to fluctuations in
the LIBOR.
Page 17 of 29
WINTER SPORTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
Minority Interest in Subsidiary Loss
The Company filed Form 8K in July, 2003 in which it was announced that another
entity had joined the Big Mountain Club LLC. With the addition of this new
entity, Winter Sports will retain 66 2/3% ownership of the Club and the new
entity will have the remaining percentage. The Minority Interest of $133,354, in
net loss of consolidated subsidiary represents 33% of the interest in the net
loss of the Big Mountain Club LLC, which is owned by another entity unrelated to
the Company.
Cumulative Effect of Change in Accounting Principal
The Company's subsidiary, Big Mountain Development Corporation has consolidated
Moose Run II LLC under the provisions of FIN 46 (Note 7). As a result, the
Company is recognizing the cumulative effect of a change in accounting principal
of $168,377 due to the change from the equity method of accounting to the
consolidation of the entity.
Net Income
The third quarter net income of $2,627,321 was $1,902,967 more than the same
quarter last year. This is due to the recognition of part of the gain on the
sale of land as described above. The year to date net income of $1,639,505 was
$2,041,843 more than during the same time period last year.
Most of the Company's business occurs during its fiscal third quarter, from
mid-November through mid-April. Due to the seasonal nature of the Company's
business, results in any one quarter are not necessarily indicative of the
results for the entire year.
LIQUIDITY AND CAPITAL RESOURCES
Working capital at the end of the third quarter of 2004 was $(27,222). This
represents a decrease of $387,142 from the end of the same quarter last year.
The decrease is primarily due to increases in income taxes payable due to the
increase in net income this year from last year. Prepaid expenses increased due
to the Company's insurance rates as a continuing residual effect nation-wide of
September 11.
Total liabilities of $15,954,370 represent 133% of stockholders' equity at
February 22, 2004 compared to $15,147,366 or 144% of stockholders' equity at
February 23, 2003.
Management continually evaluates the Company's cash and financing requirements.
Over the years, the Company has obtained favorable financing from financial
institutions when necessary to fund off-season cash requirements and capital
acquisitions. The Company has a reducing revolving credit agreement that
provides flexible financial resources allowing the Company to meet short-term
needs and fund capital expenditures. The $13.5 million agreement reduces
available capacity by $1,200,000 each May 31. At February 22, 2004, there was
$6,328,091 outstanding on the available line of credit.
Page 18 of 29
WINTER SPORTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
Management has held discussions with Bank of America representatives to reduce
the Company's line of credit. Currently the Company has a total line of credit
in the amount of $13.5 million. The Company secured this line of credit with the
thought that it would begin construction of a conference center in the village
core. The Company does not expect to begin construction of such a facility and
has decided to reduce its line instead of incurring fees which could be imposed
by the bank for not using all funds available to it. It is expected that the
line of credit will be reduced to a maximum of $9 million. The interest rate
terms are expected to remain the same.
The Company entered into an agreement with the landowner contiguous to the
Company's eastern boundary during fiscal year 2002. Under this agreement, the
Company obtained an option to purchase approximately 183.5 acres during the next
four years at a specified price. This parcel may be divided into no more than
three separate parcels and may be acquired in as many as three separate
closings. The Company is required to make specified options payments during the
time of this agreement. The first three option
payments will be credited proportionally to parcels as they are purchased. The
remaining option payments will not be applied to the purchase price of any
parcel. On December 30, 2002, the Company entered into a transaction to purchase
52 acres under this Option Agreement. The Company was able to apply $44,204 of
these option payments towards the purchase price of this land. The Company
announced this on Form 8-K on December 31, 2002.
Due to the seasonality of the business, liquidity varies. The first half of the
fiscal year is a time when capital improvements to the resort normally take
place. The summer season generates visitors, but not the same level of consumer
spending. Liquidity levels are lower at this point. The second half of the
fiscal year is a time of high liquidity. The resort experiences a higher visitor
level with a higher level of consumer spending. During the second half of the
fiscal year, debt levels incurred during the first half are reduced. The Company
is working towards increasing the level of visitors to the resort during the
summer and shoulder seasons to make this a year round resort. A conference
center is being analyzed as well as new activities appealing to all age groups
and ability levels. In this way the Company will be able to attract more
visitors, who spend more time at the resort. Financing of future development and
business opportunities is anticipated to include cash generated from operations,
issuance of additional debt and may also include additional equity financing.
The Company adopted FASB 142 at the beginning of the 2003 fiscal year. Under the
FASB, goodwill will no longer be permitted to be amortized. Instead, goodwill
and other intangibles will be subject to an annual test for impairment of value.
The Company does not expect this statement to have a material effect on the
financial statements.
Statement of Financial Accounting Standards No. 143 was adopted by the Company
during the 2003 fiscal year. Under this standard, asset retirement and the
obligations associated with the retirement of tangible long-lived assets will
change. This did not have an effect on the statements as presented.
The Company also adopted FASB 144 at the beginning of fiscal year 2003. This
standard sets forth guidelines for accounting and reporting for the impairment
of long-lived assets to be disposed of. This standard did not have an effect on
the financial statements as presented.
Page 19 of 29
WINTER SPORTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
In July, 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities." SFAS 146 requires that a liability for a cost
that is associated with an exit or disposal activity be recognized when the
liability is incurred. SFAS 146 also establishes that fair value is the
objective for the initial measurement of the liability. SFAS 146 is effective
for exit or disposal activities that are initiated after December 31, 2002. The
Company did not have any such activities during the current year.
In November 2002, the FASB issued FASB Interpretation No. 45 ("FIN 45"), an
interpretation of FASB Statement No. 5, "Accounting for Contingencies." This
interpretation elaborates on the disclosures to be made by a guarantor in its
interim and annual financial statements about its obligations under certain
guarantees that it has issued. The initial recognition and initial measurement
provisions of FIN 45 are
applicable on a prospective basis to guarantees issued or modified after
December 31, 2002, irrespective of the guarantor's fiscal year-end. The
disclosure requirements of FIN 45 are effective for financial statements of
interim or annual periods ending after December 15, 2002. The adoption of this
standard had no material impact on the Company's financial statements.
In January 2003, the FASB issued FIN 46, Consolidation of Variable Interest
Entities. FIN 46 explains the concept of a variable interest entity and requires
consolidation by the primary beneficiary where the variable interest entity does
not have sufficient equity at risk to finance its activities without additional
subordinated financial support from other parties. FIN 46 also required an
investor with a majority of the variable interests in a variable interest entity
to consolidate the entity and also requires majority and significant variable
interest investors to provide certain disclosures. This interpretation applies
immediately to variable inters entities created after January 31, 2003, and was
to apply in the first fiscal year or interim period beginning after June 15,
2003 for variable interest entities in which an enterprise holds a variable
interest that it acquired before February 1, 2003. In December 2003, the FASB
deferred the implementation date for FIN No. 46 to financial statements issued
for the first period ending after December 15, 2003. This deferral only applies
to VIEs that existed prior to February 1, 2003.
In December 2003, the FASB published a revision to FIN 46, to clarify some of
the provisions of FIN 46 and to exempt certain entities from its requirements.
Under the revised FIN 46, application is required in financial statements of
public entities that have interests in variable interest entities for periods
ending after December 15, 2003. Application by public entities for all other
types of variable interest entities is required in financial statements no later
than for periods ending after March 15, 2004.
In May 2003, the FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of Both Liabilities and Equity". SFAS No. 150
establishes standards for how an issuer classifies and measures certain
financial instruments with characteristics of both liabilities and equity, and
requires that financial instruments within its scope, many of which currently
are classified as equity, be classified as liabilities or, in some
circumstances, assets. SFAS No. 150 is effective for financial instruments
entered into or modified after May 31, 2003, and otherwise is effective at the
first interim period beginning after June 15, 2003. The Company has not had any
material transactions of this nature since the adoption of this standard.
Page 20 of 29
WINTER SPORTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
Subsequent to year-end, the Company's Board of Directors accepted the
resignation of its President and Chief Executive Officer, Michael Collins. His
resignation was effective September 22, 2003. Since that time, Dennis Green has
served as Acting President and Chief Executive Officer. The Company entered into
a letter of intent with Fred Jones during February, 2004 to become President and
Chief Executive Officer of the Company. It is expected that he enter into a
contract and begin his tenure on or about April 1, 2004. Mr. Jones has
management experience at various ski resorts as well as experience in valuation
of ski resorts. The Board of Directors also eliminated two positions during the
month of February to reduce expenses and increase the efficiency of the Company.
The Board of Directors has continued its ongoing discussion regarding the
economic viability of the Company continuing to operate under the rules and
regulations of the Securities and Exchange Commission. In the last 18 months,
following the well publicized corporate scandals, the Securities and Exchange
Commission has implemented numerous regulations that are a significant new
burden on all public companies. In particular, the Sarbanes-Oxley Act of 2002
imposes further public reporting requirements and has had a dramatic effect on
the cost of Director and Officer (D & O) insurance premiums for companies whose
stock is registered under the Exchange Act. Winter Sports, a relatively small
company has the same reporting requirements as companies that are 10-100 times
larger. The Company has experienced a significant cost increase in the D & O
insurance premiums as well as in audit fees and reporting requirements. At this
time the Company anticipates that additional new reporting requirements may be
forth coming and may have a further burden on the Company.
The above costs which can be quantified also do not include the substantial
attention management must devote to compliance with federal securities laws that
would be inapplicable if the Company were to deregister its common stock under
the Exchange Act. The Board of Directors believes the intangible benefits that
would be derived if the management of the Company were allowed to focus
additional attention on operations and financial management would further
enhance Winter Sports financial performance and allow the Company to provide
improved services to its guests.
The Company announced on September 24, 2003 its intention to request shareholder
approval to enter into a going private transaction for the purposes of
deregistering with the Securities and Exchange Commission at the next annual
meeting. The Company has filed a preliminary proxy and related schedules with
the Securities and Exchange Commission, which is currently reviewing the
documents. The Company expects to set an annual meeting date once the Commission
has completed its review of the documents.
The Company has also purchased approximately 10,000 square feet of retail space
in the Morning Eagle Condominium building located in the center of the Village.
The Company has signed multi-year lease agreements with a candy store,
photography/retail store, snowboard/cafe shop, and a day spa. The Company also
moved its retail store called Big Mountain Sports into that venue and renamed it
Snow Ghost Outfitters. The lessees opened their stores during the first part of
December.
Page 21 of 29
WINTER SPORTS, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND
RESULTS OF OPERATIONS
The Company also opened the space where Big Mountain Sports was located and
converted it to a day lodge facility. The space has vending machines as well as
seating areas and small storage areas for the guests to use. As this facility
will be near the Chair 2 and Chair 6 area, it is believed that this facility
will be convenient for guests of all types to use.
Page 22 of 29
Item 3. Controls and Procedures
(a) Evaluation of disclosure controls and procedures. The Company's
Chief Executive Officer and Chief Financial Officer have concluded,
based on their evaluation within 90 days prior to the date of this
report, that the Company's disclosure controls and procedures are
adequate and effective in ensuring that material information
relating to the Company, which is required to be included in the
Company's filings with the SEC under the Securities Exchange Act of
1934, is made known to them.
(b) Changes in internal controls. During the last fiscal quarter, there
were no significant changes in the Company's internal controls or in
other factors that in management's examination could significantly
affect the Company's internal controls and procedures subsequent to
the date of the evaluation, including any corrective actions with
regards to significant deficiencies and material weaknesses.
Page 23 of 29
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
(a) Not applicable
(b) There have been no material changes to the procedures for
shareholders to nominate directors to the Company's Board.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits List
Number Document
------ --------
31.1 Certification of Chief Executive Officer required by Rule
13a-14(a) or Rule 15d-14(a).
31.2 Certification of Chief Financial Officer required by Rule
13a-14(a) or Rule 15d-14(a).
32.1 Certification of Chief Executive Officer required by Rule
13a-14(b) or Rule 15d-14(b) and Section 906 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
32.2 Certification of Chief Financial Officer required by Rule
13a-14(b) or Rule 15d-14(b) and Section 906 of the
Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the third quarter of fiscal
year 2004.
Page 24 of 29
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: March 31, 2004 /s/ Dennis L. Green
----------------------------------------
Dennis L. Green
Interim President and Chief Executive
Officer
(Principal Executive Officer)
Date: March 31, 2004 /s/ Jami M. Phillips
----------------------------------------
Jami M. Phillips
Chief Financial Officer and Treasurer
(Principal Financial Officer)
Page 25 of 29