United States
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q/A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED OCTOBER 27, 1996
_____________________________
Commission File Number 333-9763
_____________________________
ASC East, Inc.
(Exact name of registrant as specified in its charter)
Maine 01-0503382
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
P.O. Box 450
Bethel, Maine 04217
(Address of principal executive office) (Zip Code)
(207) 824-5196
(Registrant's telephone number, including area code)
(Original 10-Q filed under American Skiing Company)
(Former name, former address and former fiscal year, if changed since
last report.)
Indicated by checkmark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 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 [ ]
The number of shares outstanding of each of the issuer's classes of
common stock was 978,300 shares of common stock $.01 par value
outstanding as at October 27, 1996.
[PAGE]
ASC East, Inc. and Subsidiaries
Table of Contents
Part I - Financial Information ..............................1
Item 1. Financial Statements ...............................2
Condensed Consolidated Statement of Operations
(Unaudited) for Three Months Ended October 27, 1996
and October 29, 1995 ...................................2
Condensed Consolidated Balance Sheet
(Unaudited) as of October 27, 1996 and July 28, 1996.....3
Condensed Consolidated Statement of Cash Flows
(Unaudited) for Three Months Ended October 27, 1996
and October 29, 1995 ....................................5
Notes to Condensed Consolidated Financial Statements
(Unaudited) .............................................7
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operation .....................11
General ................................................11
Liquidity and Capital Resources ........................20
Changes in Results of Operations .......................21
Changes in Financial Condition .........................22
Part II - Other Information .................................24
Item 6 Exhibits ........................................24
i[PAGE]
ASC East, Inc. and Subsidiaries
Part I - Financial Information
Item 1
Financial Statements
This Form 10-Q/A is filed by the ASC East Inc. for itself and its
following wholly-owned subsidiaries:
Sunday River Skiway Corporation Sunday River, Ltd.
Sunday River Transportation Perfect Turn, Inc.
Grand Summit Resort Properties, Inc. Sugarbush Resort Holdings, Inc.
Mountain Wastewater Treatment, Inc. Sugarbush Leasing Company
Sugarbush Restaurants, Inc. Cranmore, Inc.
LBO Hotel Co. S-K-I Limited
Killington, Ltd. Mount Snow, Ltd.
Waterville Valley Ski Area, Ltd. Sugarloaf Mountain Corporation
Killington Restaurants, Inc. Dover Restaurants, Inc.
Resort Technologies, Inc. Resort Software Services, Inc.
Mountainside Sugartech
Deerfield Operating Company Pico Ski Area Management Company
Killington West, Ltd. Mountain Water Company
Ski Insurance Club Sugarbush
As used herein the term the "Company" means and refers to ASC East,
Inc. and the subsidiary registrants listed above on a consolidated
basis.
The 12% senior subordinated notes due 2006 and the 13 3/4%
subordinated discount notes due 2007 are fully and unconditionally
guaranteed by the Company and all of its subsidiaries with the exception
of Ski Insurance, Killington West, Ltd., Mountain Water Company, and
Club Sugarbush, Inc. (the Non-Guarantors)
1[PAGE]
ASC East, Inc. and Subsidiaries
Part I - Financial Information
Item 1. Financial Statements
Condensed Consolidated Statement of Operations
(In thousands, except share and per share amounts)
For the three months ended
October 27, 1996 October 29, 1995
(Unaudited) (Unaudited)
Net revenues
Resort $11,728 $4,490
Real estate 1,569 387
Total net
revenues 13,297 4,877
Operating expenses
Resort 15,034 5,315
Real estate 1,032 261
Marketing,general and
administrative 4,792 2,537
Depreciation and
amortization 1,527 327
Total operating expenses 22,385 8,440
Loss from operations (9,088) (3,563)
Interest expense 7,514 670
Net loss before benefit for
income taxes (16,602) (4,233)
Benefit for income taxes (6,309) (119)
Net loss (10,293) (4,114)
Net loss per weighted average
common share outstanding,
(note 6) $(10.52)
Retained earnings, beginning
of the period $18,131 $28,726
Distributions - (342)
Net loss (10,293) (4,114)
Retained earnings, end 7,838 24,270
of period
See accompanying notes to condensed consolidated financial
statements.
2[PAGE]
ASC East, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
(In thousands, except share and per share amounts)
October 27, 1996 July 28, 1996
(Unaudited)
Assets
Current assets
Cash and cash equivalents $ 3,889 $ 4,087
Restricted cash 14,674 14,497
Accounts
receivable 2,387 2,458
Income taxes receivable 8,366 -
Inventory 5,587 5,025
Assets held for resale 15,785 14,921
Prepaid expenses 3,828 3,371
Other current assets 2,890 2,975
Total current assets 57,406 47,334
Property and equipment, net 233,582 227,470
Long-term investments 4,841 4,343
Goodwill 6,498 6,540
Deferred
financing costs 7,647 7,911
Other assets 6,651 5,134
Total assets $316,625 $298,732
3[PAGE]
ASC East, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
(In thousands, except share and per share amounts)
October 27, 1996 July 28,1996
(Unaudited)
Liabilities and Shareholders' Equity
Current liabilities
Line of credit and current
portion of long- $ 34,671 $ 22,893
term debt
Accounts payable and
other current liabilities 16,547 13,406
Income taxes payable 630 671
Demand note,
shareholder 4,754 5,375
Deposits and deferred revenue 10,677 3,541
Accrued interest 4,708 1,491
Other accrued expenses 5,240 1,660
Total current liabilities 77,227 49,037
Long-term debt, excluding current
portion 189,152 187,827
Deferred income taxes 33,272 30,695
Minority interest - 2,492
Other long-term liabilities 5,364 6,778
Total liabilities 305,015 276,829
Shareholders'Equity
Common stock, par value
$.01 per share;
10,000,000 shares
authorized; 978,300
shares issued and
outstanding 10 10
Additional paid in
capital 3,762 3,762
Retained earnings 7,838 18,131
Total shareholders'equity 11,610 21,903
Total liabilities and
shareholders' equity $316,625 $298,732
See accompanying notes to condensed consolidated financial
statements.
4[PAGE]
ASC East, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(In thousands)
For the three months ended
October 27, 1996 October 29, 1995
Cash flows from operating activities: (Unaudited) (Unaudited)
Net loss $ (10,293) $ (4,114)
Adjustments to reconcile net loss to net
cash
provided by operating activities:
Depreciation and amortization 1,527 327
Deferred income taxes (5,789) -
Decrease (increase) in assets:
Restricted cash (177) -
Accounts receivable 71 147
Inventories (562) (487)
Assets held for resale (166)
Prepaid expenses (457) (628)
Other current assets 85 -
Other assets 904 -
Increase (decrease) inliabilities:
Accounts payable 3,141 1,143
Income taxes payable (41) (443)
Deposits and deferred revenue 7,136 2,595
Accrued interest 3,217 -
Other accrued expenses 3,580 2,617
Net cash flow provided by
operating activities 2,342 991
Cash flows from investing activities:
Capital expenditures (7,333) (8,793)
Additions to Assets held for resale (3,285) (1,523)
Purchase of ski resort minority
interest (2,492) -
Long-term investments (498) -
Other 2
Net cash used in investing activities $ (13,608) $ (10,314)
8[PAGE]
ASC East, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows (continued)
(In thousands)
For the three months ended
October 27, 1996 October 29, 1995
(Unaudited) (Unaudited)
Cash flows from financing activities:
Reductions in note payable to
shareholder (621) -
Distributions to shareholder - (342)
Additions to long-term debt 11,689 9,637
Net cash provided by financing
activities 11,068 9,295
Net increase (decrease) in cash and cash
equivalents (198) (28)
Cash and cash equivalents, beginning of
period 4,087 1,671
Cash and cash equivalents, end of
period $ 3,889 $ 1,643
See accompanying notes to condensed consolidated financial
statements.
6[PAGE]
ASC East, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
1. Amendments to 10-Q: During the process of compiling the
information required to file the10-Q as of and for the three months ended
October 26, 1997, certain adjustments and reclassifications were made to
the previously filed information in the 10-Q as of and for the three
months ended October 27, 1996. The following schedule shows the effects
on the information as originally stated and filed:
<TABLE>
Restatement of the statement of operations for the three months
ended October 27, 1996
(In thousands)
<CAPTION>
Amounts as
originally stated Reclassifications Purchase Correction Amounts as
in the October 27, 1996 Accounting clerical restated in
10-Q filed with the SEC Adjustment error the 10-Q filed
on 10-Jan-97 with the SEC 10-Dec-97
<S> <C> <C> <C> <C> <C>
Net revenues:
Resort 11,541 $ (3,076) $ (1,037) $ 4,300 $ 11,728
Real estate 1,569 1,569
13,110 (3,076) (1,037) 4,300 13,297
Operating expenses:
Resort 19,319 (3,076) (1,209) 15,034
Real estate 1,032 1,032
Marketing, general
and administrative 5,405 (613) 4,792
Depreciation
and amortization 1,527 1,527
Total operating
expenses 27,283 (3,076) (1,822) (22,385)
Income (loss) from
operations (14,173) - 785 4,300 (9,088)
Interest expense 7,593 (79) 7,514
Net income (loss)
before provision for
income taxes (21,766) - 864 4,300 (16,602)
Provision for income (8,271) 328 1,634 (6,309)
(benefit)
Net income (loss) (13,495) - 536 2,666 (10,293)
Net income (loss) per
weighted average
common share outstanding (13.79) - 0.55 2.72 (10.52)
Retained earnings,
beginning of period 18,131 18,131
Net loss (13,495) 536 2,666 (10,293)
Retained earnings,
end of period $ 4,636 $ - $ 36 $ 2,666 $ 7,838
</TABLE>
7[PAGE]
Notes to Condensed Consolidated Financial Statements
<TABLE>
Restatement of Condensed Consolidated Balance Sheet as of October 27,
(In thousands, except share and per
<CAPTION>
Amounts as
originally stated Reclassifications Purchase Correction Amounts as
in the October 27, 1996 Accounting clerical restated in
10-Q filed with the SEC Adjustment error the 10-Q filed
on 10-Jan-97 with the SEC 10-Dec-97
<S> <C> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 3,889 $ $ $ $ 3,889
Restricted cash 14,674 14,674
Accounts receivable 2,387 2,387
Income taxes receivable 8,366 8,366
Inventory 5,587 5,587
Assets held for resale 14,921 864 15,785
Prepaid expenses 3,828 3,828
Other current assets 2,890 2,890
Total current assets 56,542 864 57,406
Property and equipment net 233,582 233,582
Long-term investments 4,841 4,841
Goodwill 6,498 6,498
Deferred financing costs 7,647 7,647
Other assets 6,651 6,651
Total Assets 315,761 $ - $ 864 $ - $ 316,625
</TABLE>
[PAGE]8
<TABLE>
Restatement of Condensed Consolidated Balance Sheet as of October
(In thousands, except share and per share
<CAPTION>
Amounts as
originally stated Reclassifications Purchase Correction Amounts as
in the October 27, 1996 Accounting clerical restated in
10-Q filed with the SEC Adjustment error the 10-Q filed
on 10-Jan-97 with the SEC
10-Dec-97
<S> <C> <C> <C> <C> <C>
Liabilities and shareholders' current
liabilities
Line of credit and current portion
of long- term debt $ 34,671 $ - $ - $ - $ 34,671
Accounts payable and other -
current liabilities 16,547 16,547
Income taxes payable 630 630
Demand note, shareholder 4,754 4,754
Deposits and deferred revenue 14,977 (4,300) 10,677
Accrued interest 4,708 4,708
Other accrued expenses 5,240 5,240
Total current liabilities 81,527 - - $ (4,300) $ 77,227
Long-term debt, excluding
current portion 189,152 189,152
Deferred income taxes 31,310 328 1,634 33,272
Minority interest
Other long-term liabilities 5,364 5,364
Total liabilities 307,353 _ 328 (2,666) 305,015
Shareholders'Equity
Common stock, par
value $.01 per share;
10,000,000 shares authorized;
978,300 outstanding
shares issued and outstanding 10 10
Additional paid in capital 3,762 3,762
Retained earnings 4,636 536 2,666 7,838
Total shareholders' equity 8,408 - 536 2,666 11,610
Total liabilities and shareholders' $ 315,761 $ _ $ 864 $ - $ 316,625
</TABLE>
9[PAGE]
ASC East, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
<TABLE>
Restatement of Condensed Consolidated Statement of Cash Flows
ended October 27, 1996
(Unaudited)
(In thousands)
<CAPTION>
Amounts as
originally stated Reclassifications Purchase Correction Amounts as
in the October 27, 1996 Accounting clerical restated in
10-Q filed with the SEC Adjustment error the 10-Q filed
on 10-Jan-97 with the SEC
on 10-Dec-97
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities
Net loss $ (13,495) $ 536 $ 2,666 $ (10,293)
Adjustments to reconcile net loss
to net cash (used in) provided by
operating activities:
Depreciation and amortizaiton 1,527 1,527
Deferred income taxes 615 (8,366) 328 1,634 (5,789)
Decrease (increase) in assets:
Restricted cash (177) (177)
Accounts receivable 71 71
Income taxes recevied (8,366) 8,366 -
Inventories (562) (562)
Assets held for resake - - -
Prepaid expenses (457) (457)
Other current assets 85 85
Other assets 904 904
Increase (decrease) in liabilities:
Accounts payable 3,141 3,141
Income taxes payable (41) (41)
Deposits and deferred revenue 11,436 (4,300) 7,136
Accrued interest 3,217 3,217
Other accrued exepenses 3,580 3,580
Net cash flow (used in) provided
by operatiing activities 1,478 - 864 - 2,342
Cash flows from investing activities:
Capital expenditures (7,333) (7,333)
Additions to Assets held for resale (2,421) (3,285)
Purchase of ski resort minority
interest (2,492) (864) (2,492)
Long-term investments (498) (498)
Other -
Net cash used in investing
activities $ (12,744) $ - $ (864) $ - $ (13,608)
</TABLE>
ASC East, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
<TABLE>
Restatement of Condensed Consolidated Statement of Cash Flows for the three months
ended October 27, 1996
(Unaudited)
(In thousands)
<CAPTION>
Amounts as
originally stated Reclassifications Purchase Correction Amounts as
in the October 27, 1996 Accounting clerical restated in
10-Q filed with the SEC Adjustment error the 10-Q filed
on 10-Jan-97 with the SEC
on 10-Dec-97
<S> <C> <C> <C> <C> <C>
Cash flows from from financing
activities:
Reductions in note payable to
shareholder $ (621) $ - $ - $ - $ (621)
Distributions to shareholder
Additions to long-term debt 11,689 11,689
Net cash provided by financing
activities 11,068 - - _ 11,068
Net increase (decrease) in cash
and cash equivalents (198) - - _ (198)
Cash and cash equivalents,
beginning of period 4,087 4,087
Cash and cash equivalents, end
of period $ 3,889 $ _ $ - $ - $ 3,889
</TABLE>
11[PAGE]
ASC East, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Reclassifications - Certain amounts related to the accounting for
insurance expense, sales of parcels of land and sales taxes were
incorrectly classified in the October 27, 1996 Form 10-Q as originally
filed. Such amounts have been reclassified to the appropriate
components in the accompanying Form 10-Q/A.
Purchase accounting adjustment - In connection with the acquisition of
S-K-I, Ltd. (Note 3), the Company entered into a consent decree with the
United States Department of Justice and agreed to divest its Waterville
Valley and Mt. Cranmore resorts within 90 days after the closing of the
S-K-I, Ltd. purchase (the "Holding Period"). The Company incorrectly
recorded a net loss of $536,000 incurred in connection with the
operation of the two resorts during the Holding Period in the statement
of operations in the October 27, 1996 form 10-Q as originally filed. The
accompanying form 10-Q/A includes an adjustment to properly reflect the
net carrying value of the related assets to be disposed of in the
balance sheet and remove the impact of such items on the statement of
operations.
12[PAGE]
ASC East, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
Correction of clerical error - The Company sells season passes to its
customers during its fiscal year which allows individuals to ski at its
resorts for the entire ski season. As the ski season extends generally
from November to April, the Company recognizes revenue pertaining to the
season passes in the related second and third quarters of its fiscal
year. Therefore, revenues from season passes in the Company's fourth
and first quarters are deferred until the revenue is earned in the
second and third quarters. The Company incorrectly deferred certain
season pass revenue totaling $4.3 million twice in preparing its
condensed consolidated financial statements included in the October 27,
1996 form 10-Q as originally filed. The Company has adjusted the
amounts in the accompanying form 10-Q/A to properly state the deferral
of season pass revenues.
2. General. In the opinion of the Company, the accompanying
unaudited condensed consolidated financial statements contain all
adjustments necessary to present fairly, the financial position of the
Company as of October 27, 1996 and July 28, 1996, the results of
operations for the three months ended October 27, 1996 and October 29,
1995, and the statement of cash flows for the three months ended October
27, 1996 and October 29, 1995. All adjustments are of a normal
recurring nature. The unaudited condensed consolidated financial
statements should be read in conjunction with the following notes and
the consolidated financial statements in the Amendment No. 2 to the form
S-4 filed with the Securities and Exchange Commission on November 22,
1996.
This discussion contains forecasted information that are "forward
looking statements" as defined by the Federal Private Securities
Litigation Reform Act of 1995. All such forward looking information is
necessarily only estimated. There can be no assurance that actual
results will not differ from expectations.
Factors that could cause actual results to differ materially
include, among other matters, changes in state or federal law; future
economic conditions; earnings-retention and dividend-payout policies;
developments in the regulatory and competitive environments in which the
Company operates; and other circumstances that could affect anticipated
revenues and costs.
3. Acquisition of S-K-I. On June 28, 1996, the Company acquired
S-K-I Limited, including all its subsidiaries (the "S-K-I Group"), for a
total purchase price, including direct costs, of $104.6 million plus
liabilities assumed (excluding deferred taxes) of $58.5 million for all
of the shares outstanding of S-K-I Limited common stock (the
"Acquisition"). Pursuant to the transaction, S-K-I Limited became a
wholly-owned subsidiary of the Company. The acquisition was accounted
for using the purchase accounting method. The consolidated financial
statements contained herein reflect the results of operations of the
acquired S-K-I Group subsequent to June 28, 1996 and include the balance
sheet accounts of the acquired S-K-I Group at July 28, 1996, and October
27, 1996.
13[PAGE]
ASC East, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
The purchase price was allocated to the fair value of S-K-I
Limited's assets and liabilities at the date of acquisition as follows:
Fair Value of Net
Assets Acquired
Cash $7,540
Accounts receivable, net 1,625
Inventory 3,271
Prepaid expenses 2,153
Property and equipment, net 163,745
Long-term investments 3,893
Goodwill 6,554
Other assets 2,156
Total assets $190,937
Accounts payable and accrued expenses $(16,567)
Other liabilities (5,301)
Minority interest (2,600)
Debt acquired (34,029)
Deferred income taxes (27,820)
Total liabilities $(86,317)
Total $104,620
Concurrent with the closing of the Acquisition, the stockholder
contributed all of his outstanding capital stock of the corporations
comprising the Sunday River, Sugarbush, Attitash/Bear Peak and Mt.
Cranmore resorts to the Company.
As of the date of the Acquisition, S-K-I Limited owned 51% of the
outstanding stock of Sugarloaf Mountain Corporation ("Sugarloaf"). On
August 30, 1996, the Company purchased the remaining 49% minority
interest in Sugarloaf for $2.0 million cash and payment of a $600,000
prepayment penalty related to certain indebtedness of Sugarloaf. Up to
$1 million additional purchase price may be paid pursuant to an earnings
based formula covering the period from August 31, 1996 through November
30, 2002.
14[PAGE]
ASC East, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
On November 27, 1996, pursuant to a consent decree with the United
States Department of Justice ("DOJ"), the Company divested the
Waterville Valley and Mt. Cranmore resorts through an asset sale
generating a purchase price of $17,500,000, with $14,750,000 paid in
cash at closing and $2,750,000 paid by a note from the purchaser. The
assets held for sale of the Mt. Cranmore resort included in the
accompanying consolidated balance sheet as of July 28, 1996 are
approximately $4.4 million and the net income for the year ended July
28, 1996 of the Mt. Cranmore resort included in the accompanying
consolidated statement of operations is approximately $251,000. The
assets held for sale of the Waterville Valley resort included in the
accompanying consolidated balance sheet as of July 28, 1996 are
approximately $12.3 million and the net loss for the period June 28
through July 28, 1996 of the Waterville Valley resort included in the
accompanying consolidated statement of operations is approximately
$269,000.
4. Income Taxes. The benefit for income taxes is based on a
projected annual effective tax rate of 38%. Deferred income taxes
include the cumulative reduction in current income taxes payable
resulting principally from the excess of depreciation reported for
income tax purposes over that reported for financial reporting purposes.
5. Seasonal Business. Results for interim periods are not
indicative of the results expected for the year due to the seasonal
nature of the Company's business which is development and operation of
ski resorts.
6. Net Loss per Common Share. Net loss per common share figures
are based on the average shares outstanding during the first quarter of
fiscal 1997 of 978,300. Prior to June 28, 1996 all of the Company's
outstanding common stock was owned by the same individual, and
accordingly earnings per share has not been presented for the three
months ended October 29, 1995.
7. Acquisitions. The Company purchased the Pico Ski Mountain
Resort on December 9, 1996. This resort is located in Sherburne,
Vermont in close proximity to the Killington resort. The purchase price
of the resort was $2.9 million in cash and $1.6 million present value of
contingent liabilities based upon the occurrence of certain future
events relating to the development and growth of the resort.
8. Guarantors of Debt. The 12% Senior Subordinated Notes and 13
3/4% Discount Subordinated Notes are fully and unconditionally guaranteed
by the Company and all of its subsidiaries with the exception of Grand
Summit Resort Properties, Inc., Ski Insurance, Killington West, Ltd.,
Mountain Water Company, and Club Sugarbush, Inc., (the "Non-
Guarantors"). Prior to the Acquisition and issuance of the Senior
Subordinated Notes and Discount Subordinated Notes on June 28, 1996, the
bank loan agreements were collaterized by virtually all of the assets of
the companies comprising the Company. The guarantor subsidiaries are
wholly-owned subsidiaries of the Company and the guarantees are full,
unconditional, and joint and several. The guarantor information for the
quarter ended October 27, 1996, is as follows:
15[PAGE]
ASC East, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
<TABLE>
Statement of Operations for the three month period ended October 27, 1996 (unaudited)
(in thousands)
<CAPTION>
Guarantor Non-Guarantor Eliminating Consolidated
ASC East Subsidiaries Subsidiaries Entries ASC East
<S> <C> <C> <C> <C> <C>
Net revenues
Resort $ 293 $ 11,219 $ 485 $ (269) $ 11,728
Real estate ---- 1,569 ---- ---- 1,569
Total net revenues 293 12,788 485 (269) 13,297
Expenses
Cost of operations ---- 14,914 389 (269) 15,034
Cost of real estate
sales and operations ---- 1,032 ---- ---- 1,032
Marketing, general
and administrative 324 4,455 13 ---- 4,792
Depreciation and
amortization 306 1,219 2 ---- 1,527
Total operating expenses 630 21,620 404 (269) 22,385
Income (loss) from
operations (337) (8,832) 81 ---- (9,088)
Interest expense 5,489 2,022 3 ---- 7,514
Net income (loss)before
provision (benefit)
for income taxes (5,826) (10,854) 78 ---- (16,602)
Provision (benefit)
(benefit) for income
taxes (3,569) (2,770) 30 ---- (6,309)
Net income (loss) $ (2,257) $ (8,084) $ 48 ---- $(10,293)
</TABLE>
16[PAGE]
ASC East, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
<TABLE>
Balance Sheet as of October 27, 1996 (unaudited)
(In thousands)
<CAPTION>
Guarantor Non-Guarantor Eliminating Consolidated
ASC East Subsidiaries Subsidiaries Entries ASC East
<S> <C> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents $ ----- $ 3,614 $ 275 $ ---- $ 3,889
Investments held in escrow 14,674 ---- ---- ---- 14,674
Accounts receivable ---- 479 1,908 ---- 2,387
Income taxes recceivable ---- 8,366 ---- ---- 8,366
Inventory ---- 5,442 145 ---- 5,587
Prepaid expenses ---- 3,822 6 ---- 3,828
Assets held for sale ---- 15,785 ---- ---- 15,785
Other current assets 1,056 1,834 ---- ---- 2,890
assets
Total current assets 15,730 39,342 2,334 ---- 57,406
Property and equipment, net ---- 230,120 3,462 ---- 233,582
Long-term investments ---- ---- 4,841 ---- 4,841
Goodwill 6,498 ---- ---- ---- 6,498
Prepaid loan fees 7,647 ---- ---- ---- 7,647
Other assets 64 6,587 ---- ---- 6,651
Intercompany 67,543 (98,890) 31,347 ---- ----
Investment in subsidiaries 123,142 141,831 ---- (264,973) ----
Total assets $220,624 $318,990 $ 41,984 $(264,973) $316,625
Liabilities and Shareholders'Equity
Current liabilities
Current portion of long-term debt $ 21,028 $ 13,066 $ 577 $ ---- $ 34,671
Accounts payable and accrued
expenses ---- 15,891 656 ---- 16,547
Federal income taxes payable ---- 527 103 ---- 630
Due to shareholder ---- 4,754 ---- ---- 4,754
Deposits and deferred revenue ---- 10,663 14 ---- 10,677
Accrued interest 4,707 1 ---- ---- 4,708
Other accrued expenses ---- 1,687 3,553 ---- 5,240
Total current liabilities 25,735 46,589 4,903 ---- 77,227
Long-term debt 174,742 10,308 4,102 ---- 189,152
Deferred income (taxes) (1,170) 34,675 (233) ---- 33,272
Other long-term liabilities 1,671 1,510 2,183 ---- 5,364
Total liabilities 200,978 93,082 10,955 ---- 305,015
Shareholders' equity
Common stock 10 13,257 6,002 (19,259) 10
Additional paid-in capital 3,762 202,452 24,794 (227,246) 3,762
Retained earnings 15,874 10,199 233 (18,468) 7,838
Total shareholders' equity 19,646 225,908 31,029 (264,973) 11,610
Total liabilities and shareholders'
equity $220,624 $318,990 $ 41,984 $(264,973) $316,625
</TABLE>
17[PAGE]
ASC East, Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements
<TABLE>
Statement of Cash Flows for the Three Month Period Ended October 27,
1996
(Unaudited)
(In thousands)
<CAPTION>
Guarantor Non-Guarantor Eliminating Consolidated
Cash Flows from operating activities ASC East Subsidiaries Subsidiaries Entries ASC East
<S> <C> <C> <C> <C> <C>
Net Income (loss) $ (2,257) $ (8,084) $ 48 $ $ (10,293)
Depreciation and amortization 306 1,219 2 ----- 1,527
Deferred taxes ----- (6,477) 688 ----- (5,789)
Changes in assets and liabilities
Decrease (increase) in investment held
in escrow (177) ----- ----- ----- (177)
Decrease (increase) in accounts
receivable ----- 1,924 (1,853) ----- 71
Decrease (increase) in inventories ----- (432) (130) ----- (562)
Decrease (increase) in assets held
for resale ----- ------ ----- ----- -----
Decrease (increase) in prepaid expenses 1,056 (1,512) (1) ----- (457)
Decrease (increase) in other current
assets (1,056) 1,141 ----- ----- 85
Decrease (increase) in other assets (64) 5,492 607 (5,131) 904
Increase (decrease) in accounts payable
and accrued expenses (691) 3,589 3,823 ----- 6,721
Increase (decrease) in income taxes
payable ----- (144) 103 ----- (41)
Increase (decrease) in deposits
and unearned revenue ----- 7,908 (772) ----- 7,136
Increase (decrease) in other accrued
interest 3,599 (382) ----- ----- 3,217
Increase (decrease) in other
long-term liabilities ----- ----- ----- ----- -----
Decrease (increase) in due to affiliate (19,522) 22,560 (2,733) (305) -----
-------- -------- --------- ------- --------
Cash flow provided by (used) in
operating activities (18,806) 26,802 (218) (5,436) 2,342
Cash flows from investing activities
Capital expenditures ----- (5,002) (2,331) ----- (7,333)
Additions to assets held for resale ----- (3,285) ----- ----- (3,285)
Purchase of minority interest (2,492) ----- ----- ----- (2,492)
Sale/(purchase) of long term
investments ----- ----- (498) ----- (498)
-------- -------- --------- ------- --------
Cash provided (used) for investing
activities (2,492) (8,287) (2,829) ----- (13,608)
Cash provided (used) from financing
activities
Reductions in note payable to shareholder ----- (621) ----- ----- (621)
Net (reductions) proceeds in
revolving credit agreement ----- ----- ----- ----- -----
Reductions in other long-term
liabilities 21,298 (17,061) 2,016 5,436 11,689
-------- -------- --------- ------- --------
Net cash provided by (used) in
financing activities
21,298 (17,682) 2,016 5,436 11,068
-------- -------- --------- ------- --------
Net increase (decrease) in cash and
cash equivalents ----- 833 (1,031) ----- (198)
Cash and cash equivalents at
the beginning of the period ----- 2,781 1,306 ----- 4,087
-------- -------- --------- ------- --------
Cash and cash equivalents at the end
of the period $ ----- $ 3,614 $ 275 ----- 3,889
-------- -------- --------- ------- --------
</TABLE>
18[PAGE]
ASC East, Inc. and Subsidiaries
Item 2
Management's Discussion and Analysis of Financial
Condition and Results of Operations
General
Set forth below is management's discussion and analysis of (i ) the
liquidity and capital resources of the Company, (ii) changes in
financial condition of the Company, including (a) a discussion of
changes in financial condition from the end of the 1996 fiscal year
through the quarter ended October 27, 1996, and (iii) the results of
operations for the first quarter of fiscal 1997 as compared to the
corresponding quarter of fiscal 1996.
Liquidity and Capital Resources
1. Liquidity. The Company's business is highly seasonal, with the
vast majority of its annual revenues historically being generated in the
second and third fiscal quarters. Operating losses are expected in the
first and fourth fiscal quarters.
The first quarter of fiscal 1997 generated a net loss of $10.3
million. Cash flow from operations was, as anticipated, insufficient to
cover fixed charges. The Company utilized its senior credit facility to
fund liquidity requirements, drawing 90% of the availability under that
facility as of October 27, 1996. The Company's liquidity was affected
by additional transaction costs associated with the acquisition of S-K-I
Limited and the timing of capital lease reimbursements.
The Company's liquidity will be positively affected by the sale of
the Waterville Valley and Mount Cranmore resorts which closed November
27, 1996. The purchase price for the resorts was $17,500,000, with
$14,750,000 paid in cash at closing. The net proceeds from the sale
will be used to reduce indebtedness under the Company's senior credit
facility, thereby increasing availability under that facility.
Management believes cash flow from second and third quarter
operations, combined with borrowings under its senior credit facility,
will be sufficient to meet its cash operating requirements for the 1997
fiscal year.
2. Capital Resources. The Company's only material commitments for
capital expenditures as of October 27, 1996 were (i) completion of
construction of the Grand Summit at Attitash/Bear Peak, through its
wholly-owned subsidiary LBO Hotel Co., (ii) completion of construction
of 5 new quad chairlifts at its Killington and Mt. Snow resorts and
(iii) the acquisition of the Pico Mountain Ski Resort adjacent to the
Killington resort in Sherburne, Vermont. Each capital commitment is
funded through a separate source. The approximate $13.3 million cost of
the Grand Summit at Attitash/Bear Peak is funded through cash provided
by the Company, and a $8,500,000 construction loan provided through Key
Bank of Maine. The chairlifts are funded through $7,000,000 of capital
lease commitments for the full cost of acquisition and installation.
The acquisition of the Pico Mountain Ski resort on December 9, 1996 was
funded through a combination of $2,909,000 in borrowings under the
Company's senior credit facility and $1,626,000 present value of seller
financing in the form of deferred and contingent purchase price.
19[PAGE]
Management's Discussion and Analysis of Financial
Condition and Results of Operations
The Company does not expect any material changes in the Company's
capital resources. The Company's capital improvement plan for summer
1997 will not be finalized until operating results for the second and
third 1997 fiscal quarters are known. Construction of Grand Summit
Hotels at up to four resorts scheduled for summer 1997 are expected to
be funded primarily through borrowings by the Company's wholly-owned
subsidiary, LBO Hotel Co., without recourse to the Company or any of its
restricted subsidiaries.
Changes in Results of Operations
Changes for the First Quarter of Fiscal 1997 compared to the First
Quarter of Fiscal 1996.
1. Revenues. Resort revenues increased from $4.5 million in the
first quarter of fiscal 1996 to $11.7 million for the first quarter of
fiscal 1997. The increase of $7.2 million is attributable to the
addition of the S-K-I resorts in June of 1996.
2. Real estate revenues. Real estate revenues increased from $.4
million for the first quarter of fiscal 1996 to $1.6 million for the
first quarter of fiscal 1997. The increase of $1.2 million is
attributable primarily to the sale of Locke Mountain townhouses at the
Sunday River Ski Resort. In the first quarter of fiscal 1997 the company
sold 6 units at an average price of $261,000. There were no similar
sales in the first quarter of fiscal 1996.
3. Cost of operations. Cost of resort operations increased from
$5.3 million for the first quarter of fiscal 1996 to $15.0 million for
the first quarter of fiscal 1997. Approximately $9.2 million of the $9.7
million increase is attributable to the addition of the S-K-I resorts.
The remaining increase is attributable to post merger costs associated
with reorganizing the company, increasing coordination between resorts,
and training new staff in preferred resort operating policies.
4.Cost of real estate operations. Cost of real estate operations
increased from $.3 million for the first quarter of fiscal 1996 to $1.0
million for the first quarter of fiscal 1997. The increase of $.7
million is attributable primarily to the costs associated with the
sales of Locke Mountain townhouses at the Sunday River Ski Resort.
5. Marketing, General and Administrative. MG&A expense increased
from $2.5 million in the first quarter of fiscal 1996 to $4.8 million in
the first quarter of fiscal 1997. The increase of $2.3 million is
attributable to the acquisition of the S-K-I Resorts. The Company's
Pre-Merger Resorts showed a 20% reduction compared to the prior fiscal
year's quarter, due to increased co-operative marketing campaigns.
20[PAGE]
ASC East, Inc. and Subsidiaries
Management's Discussion and Analysis of Financial
Condition and Results of Operations
6. Depreciation & Amortization. Depreciation and amortization
increased from $.3 million for the first quarter of fiscal 1996 to $1.5
million for the first quarter of fiscal 1997. Approximately 95% of this
increase relates to the acquisition of S-K-I Limited and the resulting
amortization of goodwill and prepaid loan fees. The remaining 5%
resulted from capital improvements over the last year at Pre-Merger
Resorts.
7. Interest. Interest increased from $.7 million in the first
quarter of fiscal 1996 to $7.5 million in the first quarter of fiscal
1997. The increase was caused by the increase in the Company's
indebtedness in conjunction with the acquisition of S-K-I Limited and
the Company's summer 1996 capital improvement program.
8. Income Tax Benefits. Income tax benefit increased from $.1
million for the first quarter of fiscal 1996 to $6.3 million for the
first quarter of fiscal 1997. This significant increase is from two
main factors: (i) several of the Pre-Merger Resorts were owned by "S"
corporations that had no income tax expense or benefit, and (ii) the
loss generated in the first quarter by the S-K-I Resorts represents over
70% of the Companies' total loss for the quarter.
Changes in Financial Condition
Changes for the First Quarter of Fiscal 1997 Compared to Year-End Fiscal
1996.
1. Income Taxes Receivable. Income taxes receivable are
attributable in full to the first quarter loss experienced by the
Company.
2. Other Assets. Other assets increased $1.5 million, all of
which is attributable to the construction and development of various
real estate and hotel projects.
3. Current Portion of Long-Term Debt. Current portion of long-
term debt increased approximately $11.8 million (51.45%). The increase
reflects draw down under the Company's senior credit facility to fund
first quarter operating losses. The requirement that the Company pay
down its senior credit facility to a maximum outstanding balance of $25
million as of March 31, 1997, requires the increase to be classified as
current. Cash from operations during the second and third fiscal 1997
quarters are expected to be sufficient to satisfy the paydown
requirement.
4. Accounts Payable and other current liabilities. Accounts
payable reflect an increase of $3.1 million (23.43%). That increase is
attributable to normal purchasing patterns in which supplies and
inventory are acquired during the first quarter in preparation for
second and third quarter operations.
21[PAGE]
Management's Discussion and Analysis of Financial
Condition and Results of Operations
5. Deposits and other Unearned Revenue. The increase of
approximately $7.1 million reflects expected unearned deposits for
lodging and seasons pass sales for the 1996-1997 ski season.
6. Accrued Interest. Accrued interest increased by approximately
$3.2 million. The increase reflects scheduled accrual of interest on
the Company's $120 million senior subordinated notes due 2006 and $39
million subordinated discount notes due 2007. Interest payments are made
semi-annually on the senior subordinated notes.
7. Other Accrued Expenses. Accrued expenses increased $3.6
million from July 28, 1996 to October 27, 1996. This increase
represents increased operational activities related to the start of the
ski season.
8. Minority Interest. The reduction in minority interest of $2.5
million represents the acquisition of the minority interest in Sugarloaf
in August, 1996.
9. Other Long-Term Liabilities. The $1.4 million (-20.86%)
decrease in other long-term liabilities represents scheduled
amortization of capital leases and other long-term obligations.
10. Retained Earnings. The decrease of $10.3 million (56.77%) in
retained earnings is attributable to the seasonally related first
quarter loss of the Company and its subsidiaries.
22[PAGE]
ASC East, Inc. and Subsidiaries
Part II - Other Information
Item 6
Exhibits
Included herewith is the Financial Data Schedule submitted as
Exhibit 27 in accordance with Item 601(c) of Regulation S-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
ASC East, Inc. and Subsidiaries
Date: December 12, 1997 /s/ Thomas M. Richardson
Thomas M. Richardson
Senior Vice President Finance
Chief Financial Officer
(Principal Financial and Accounting Officer)
Date: December 12, 1997 /s/ Christopher E. Howard
Christopher E. Howard
Chief Administrative Officer
and General Counsel
(Duly Authorized Officer)
23[PAGE]
<TABLE> <S> <C>
<ARTICLE> 5
<RESTATED>
<CIK> 0001019293
<NAME> ASC EAST, INC.
<MULTIPLIER> 1
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 12-MOS
<FISCAL-YEAR-END> JUL-27-1997 JUL-28-1996
<PERIOD-START> JUL-29-1996 JUL-29-1995
<PERIOD-END> OCT-27-1996 JUL-28-1996
<CASH> 3,889,000 4,087,000
<SECURITIES> 14,674,000 14,497,000
<RECEIVABLES> 2,387,000 2,458,000
<ALLOWANCES> 0 0
<INVENTORY> 5,587,000 5,025,000
<CURRENT-ASSETS> 57,406,000 47,334,000
<PP&E> 255,540,000 248,207,000
<DEPRECIATION> 21,958,000 20,737,000
<TOTAL-ASSETS> 316,625,000 298,732,000
<CURRENT-LIABILITIES> 77,227,000 49,037,000
<BONDS> 189,152,000 146,792,000
0 0
0 0
<COMMON> 10,000 10,000
<OTHER-SE> 11,600,000 21,923,000
<TOTAL-LIABILITY-AND-EQUITY> 316,625,000 298,732,000
<SALES> 1,569,000 9,933,000
<TOTAL-REVENUES> 13,297,000 73,422,000
<CGS> 1,032,000 5,844,000
<TOTAL-COSTS> 22,385,000 41,799,000
<OTHER-EXPENSES> 0 18,072,000
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 7,514,000 4,699,000
<INCOME-PRETAX> (16,602,000) 1,561,000
<INCOME-TAX> (6,309,000) 3,906,000
<INCOME-CONTINUING> (10,293,000) (2,237,000)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (10,293,000) (2,237,000)
<EPS-PRIMARY> (10.52) (2.37)
<EPS-DILUTED> (10.52) (2.37)
</TABLE>
