SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QA
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED APRIL 27, 1997
_____________________________
Commission File Number 333-9763
_____________________________
American Skiing Company
(Exact name of registrant as specified in its charter)
Maine 01-0503382
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. Box 450
Bethel, Maine 04217
(Address of principal executive office) (Zip Code)
(207) 824-5196
(Registrant's telephone number, including area code)
NOT APPLICABLE
(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 April 27,
1997.[PAGE]
American Skiing Company and Subsidiaries
Table of Contents
Part I - Financial Information .....................2
Item 1 Financial Statements .......................2
Condensed Consolidated Statement of Operations
(Unaudited) for the Three Months Ended April 27, 1997
and April 28, 1996 ............................3
Condensed Consolidated Statement of Operations
(Unaudited) for the Nine Months Ended April 27, 1997
and April 28, 1996 ...........................4
Condensed Consolidated Balance Sheet (Assets)
(Unaudited) as of April 27, 1997 and
July 28, 1996..................................5
Condensed Consolidated Balance Sheet (Liabilities and
Stockholders' Equity)(Unaudited) as of April 27, 1997
and July 28, 1996..............................6
Condensed Consolidated Statement of Cash Flows
(Unaudited) for Nine Months Ended April 27, 1997
and April 28, 1996 ............................7
Notes to (Unaudited) Condensed Consolidated Financial
Statements ........................................9
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operation ..............13
General ...........................................13
Liquidity and Capital Resources ...................13
Changes in Results of Operations ..................14
Changes in Financial Condition ....................17
Part II Other Information .........................19
i[PAGE]
American Skiing Company and Subsidiaries
Part I - Financial Information
Item 1
Financial Statements
This Form 10-Q is filed by the American Skiing Company for
itself and its following wholly-owned subsidiaries:
Sunday River Skiway Corporation Sunday River, Ltd.
Sunday River Transportation Perfect Turn, Inc.
Sugarbush Resort Holdings, Inc. LBO Holding, Inc.
Mountain Wastewater Treatment, Inc. Sugarbush Leasing Company
Sugarbush Restaurants, Inc. Cranmore, Inc.
Grand Summit Resort Properties, Inc. S-K-I Limited
(f/k/a LBO Hotel Co.) Mount Snow, Ltd.
Sugarloaf Mountain Corporation Killington, Ltd.
Waterville Valley Ski Area, Ltd. Dover Restaurants, Inc.
Killington Restaurants, Inc. Mountainside
Resort Technologies, Inc. Sugartech
Resort Software Services, Inc. Pico Ski Area Management
Deerfield Operating Company
As used herein the term the "Company" means and refers
to American Skiing Company, the subsidiary registrants listed
above and its non-registrant wholly-owned subsidiaries Ski
Insurance Company, Mountain Water Company, LBO Development
Company and Killington West, Ltd. on a consolidated basis.
2[PAGE]
American Skiing Company and Subsidiaries
Condensed Consolidated Statement of Operations
For the three Months Ended
April 27, 1997 April 28, 1997
(Unaudited) (Unaudited)
Revenues
Skiing, lodging and other
operations $81,673,000 $26,342,000
Real Estate 2,674,000 4,788,000
Total Revenues 84,347,000 31,130,000
Expenses
Cost of Operations 27,612,000 5,432,000
Cost Of Real Estate
Sales & Ops 2,167,000 4,806,000
Real Estate & Payroll
Taxes 4,429,000 286,000
Utilities 4,493,000 2,273,000
Insurance 1,447,000 873,000
S. G. & A. 9,097,000 4,919,000
Depreciation &
Amortization 8,075,000 2,788,000
Total Operating Expenses 57,320,000 21,377,000
Income From Operations 27,027,000 9,753,000
Interest 5,325,000 854,000
Income before provision for
income taxes 21,702,000 8,899,000
Provision for Income Tax
Expense 8,623,000 1,452,000
Net Income $13,079,000 $7,447,000
Net income per common share $13.37
(note 6)
Retained Earnings, beginning
of the period $8,221,000 $30,721,000
Subtract: Distributions 0 (1,539,000)
Add: Net Income 13,079,000 7,447,000
Retained earnings, end
of period $21,300,000 $36,629,000
See accompanying Notes to (Unaudited) Condensed
Consolidated Financial Statements.
3[PAGE]
American Skiing Company and Subsidiaries
Condensed Consolidated Statement of Operations
For the Nine Months Ended
April 27, 1997 April 28, 1996
(Unaudited) (Unaudited)
Revenues
Skiing, lodging and other
operations $157,747,000 $57,283,000
Real Estate 5,983,000 9,482,000
Total Revenues 163,730,000 66,765,000
Expenses
Cost of Operations 69,741,000 24,047,000
Cost of Real Estate
Sales & Ops 4,880,000 4,806,000
Real Estate and Payroll
Taxes 9,675,000 1,773,000
Utilities 12,219,000 5,083,000
Insurance 4,557,000 1,758,000
S. G. & A. 21,598,000 10,383,000
Depreciation &
Amortization 16,946,000 5,615,000
Total Operating Expenses 139,616,000 53,465,000
Income from Operations 24,114,000 13,300,000
Interest 18,396,000 2,307,000
Income Before Provision for
Income Taxes 5,718,000 10,993,000
Provision for Income
Tax Expense 2,549,000 1,004,000
Net Income $3,169,000 $9,989,000
Net income per common share
(note 6) $3.24
Retained Earnings, beginning
of the period $18,131,000 $28,726,000
Subtract: Distributions 0 (2,086,000)
Add: Net Income 3,169,000 9,989,000
Retained earnings, end
of period $21,300,000 $36,629,000
See accompanying Notes to (Unaudited) Condensed
Consolidated Financial Statements.
4[PAGE]
American Skiing Company and Subsidiaries
Condensed Consolidated Balance Sheet
April 27, 1997 July 28, 1996
(Unaudited)
ASSETS
Current Assets
Cash and Short-term Investments $2,417,000 $4,087,000
Investments Held in Escrow 9,297,000 14,497,000
Accounts Receivable 4,952,000 2,458,000
Inventories 6,380,000 5,025,000
Assets Held for Resale 0 14,921,000
Prepaid Expenses 2,039,000 3,371,000
Property Developed for Resale 9,070,000 0
Other Current Assets 2,242,000 2,975,000
Total Current Assets 36,397,000 47,334,000
Property and Equipment, net 241,013,000 227,470,000
Long Term Investments 4,199,000 4,343,000
Goodwill 7,595,000 6,540,000
Prepaid Loan Fees 7,119,000 7,911,000
Other Assets 6,445,000 5,134,000
TOTAL ASSETS $302,768,000 $298,732,000
5[PAGE]
American Skiing Company and Subsidiaries
Condensed Consolidated Balance Sheet
April 27, 1997 July 28,1996
(Unaudited)
LIABILITIES & STOCKHOLDERS EQUITY
Current
Liabilities
Current portion of Long-
term Debt $13,280,000 $22,893,000
Accounts Payable and
Accrued Expenses 14,683,000 15,066,000
Federal Income Tax Payable 401,000 671,000
Due to Stockholder 1,966,000 5,375,000
Deposits and other
Unearned Revenue 3,135,000 3,541,000
Accrued Interest 5,043,000 1,491,000
Total Current Liabilities 38,508,000 49,037,000
Long-Term Debt 194,882,000 187,827,000
Deferred Income Taxes -
Long-term 34,645,000 30,695,000
Minority Interest 0 2,492,000
Other Long-Term Liabilities 9,661,000 6,778,000
TOTAL LIABILITIES 277,696,000 276,829,000
Stockholders' Equity
Common Stock 10,000 10,000
Paid In Capital 3,762,000 3,762,000
Retained Earnings 21,300,000 18,131,000
Total Equity 25,072,000 21,903,000
TOTAL LIABILITIES AND EQUITY $302,768,000 $298,732,000
See accompanying Notes to (Unaudited) Condensed
Consolidated Financial Statements.
6[PAGE]
American Skiing Company and Subsidiaries
Condensed Consolidated Statement of Cash Flows
For the Nine Months Ended
April 27, 1997 April 28, 1996
Cash flows from operating activities: (Unaudited) (Unaudited)
Net Income (Loss) $3,169,000 $9,989,000
Non-cash items included in net income (loss)
depreciation and amortization 19,099,000 5,615,000
Deferred Income taxes 3,950,000 655,000
Cash flows from operating
activities before changes in assets
liabilities 26,218,000 16,259,000
Change in assets and liabilities
Decrease (Increase) in investments
held in escrow 5,200,000 0
Decrease (Increase) in Accounts
Receivable (2,494,000) (337,000)
Decrease (Increase) in Income Taxes
Receivable 0 0
Decrease (Increase) in inventories (1,355,000) (219,000)
Decrease (Increase) in assets held
for resale 13,721,000 0
Decrease (Increase) in prepaid expenses 1,332,000 (109,000)
Decrease (Increase) in other current
assets 733,000 2,604,000
Decrease (Increase) in Other Assets (1,311,000) (8,059,000)
Increase (Decrease) accounts payable (383,000) (1,250,000)
Increase (Decrease) income taxes
payable (270,000) 349,000
Increase (Decrease) in deposits and
unearned revenue (406,000) 313,000
Increase (Decrease) in other accrued
Interest 3,552,000 0
Increase (Decrease) in other long term
liabilities 2,883,000 0
Cash flow provided by operating activities
after change in assets and liabilities 47,420,000 9,551,000
Cash flows from investing activities:
Additions to Property and Equipment (22,661,000) (22,232,000)
Investments in Property Developed for
Resale (9,070,000) 0
Purchase of ski resort minority
interest (2,492,000) 0
Sale/(Purchase) of long term investments 144,000 0
Net cash provided (Used) for investing
activities (34,079,000) (22,232,000)
7[PAGE]
American Skiing Company and Subsidiaries
Cash flows from financing activities:
Net (reductions) proceeds in revolving
credit agreement (11,839,000) 12,590,000
Reductions in Note payable to
Shareholder (3,409,000) 0
Distributions to Shareholder 0 (1,579,000)
Payments of other long-term debt, net (7,535,000) 0
Additions to other long term debt 7,772,000 877,000
Net cash provided (used) for in
financing activities (15,011,000) 11,888,000
Net increase (decrease) in cash and
short term investments (1,670,000) (793,000)
Cash and short term investments at
beginning of year 4,087,000 1,362,000
Cash and short term investments at end
of period $2,417,000 $569,000
See accompanying Notes to (Unaudited) Condensed Consolidated
Financial Statements.
8[PAGE]
American Skiing Company and Subsidiaries
Notes to (Unaudited) Condensed Consolidated Financial
Statements
1. Amendments to 10Q: During the course of a SAS 71
review by the Company's independent accountants in connection
with the filing of an S-1 Registration Statement, certain
adjustments and reclassifications were noted. This 10QA is
being filed to incorporate those adjustments and
reclassifications in the 10Q. The principal
reclassifications were for property developed for resale,
accrued interest reclassified as long-term debt and accrued
income taxes reclassified to deferred income taxes. The
principal adjustments (which reduced income by $1,123,000)
were to remove a receivable of $750,000 which was deemed to
be "contingent" to record costs associated with a new
affinity card program ($282,000) and to increase the income
tax rate from 38% to 44.6% ($82,000).
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 April 27,
1997 and July 28, 1996, the results of operations for the
quarter and nine months ended April 27, 1997 and April 28,
1996, and statement of cash flows for the nine months ended
April 27, 1997 and April 28, 1996. 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 S-4 filed with
the Securities and Exchange Commission November 22, 1996.
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 April 27, 1997.
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
Required
Cash $7,540,000
Accounts Receivable, net 1,625,000
Inventory 3,271,000
Prepaid expenses 2,153,000
Property and equipment, net 162,545,000
Long-term investments 3,893,000
Goodwill 7,754,000
Other assets 2,156,000
9[PAGE]
Total Assets $190,937,000
Accounts payable and accrued expenses $(16,567,000)
Other liabilities (5,301,000)
Minority interest (2,600,000)
Debt acquired (34,029,000)
Deferred income taxes (27,820,000)
Total liabilities $(86,317,000)
Total $104,620,000
The following amounts are presented for comparison
purposes and reflect all pro forma adjustments required to
give effect to the acquisition of SKI, Ltd. and the offerings
as if they had occurred on August 1, 1995.
Pro forma Revenue for the nine months ended April 27,1996 $157,506,000
Pro forma net income for the nine months ended April 27,1996 $ 3,918,000
Pro forma EPS for the nine months ended April 27, 1996 $4.00
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.
On November 27, 1996, pursuant to a consent decree with
the United States Department of Justice ("DOJ"), the Company
10[PAGE]
American Skiing Company and Subsidiaries
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 $161,000.
4. Income Taxes. The provision for taxes on income is
based on a projected annual effective tax rate of 44%.
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
ownership and operation of ski resorts.
6. Net Income per Common Share. Net income per common
share figures are based on the average shares outstanding
during the third quarter of fiscal 1997 and the three
quarters ended April 27, 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 quarter or the nine months
ended April 28, 1996.
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 $2,909,000 in
cash and $1,626,000 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 Notes and Subordinated
Notes are fully and unconditionally guaranteed by ASC and
all of its subsidiaries with the exception of LBO Development
Company, Ski Insurance Company, Killington West Ltd.,
Mountain Water Company, and Club Sugarbush, Inc., (the "Non-
11[PAGE]
American Skiing Company and Subsidiaries
Guarantors"). Prior to the Acquisition and issuance of the
notes on June 28, 1996, the bank loan agreements were
collateralized by virtually all of the assets of the
companies comprising American Skiing Company. the Guarantor
Subsidiaries are wholly-owned subsidiaries of ASC and the
guarantees are full, unconditional, and joint and several.
The Non-Guarantors are individually and in the aggregate
not significant to the financial position and results of
operations of the Company. Following is summarized combined
information regarding such Non-Guarantors:
As of April 27, 1997 As of July 28, 1996
Current Assets $11,876,000 $1,380,000
Non-current assets 10,799,000 7,200,000
Total assets $22,675,000 $8,580,000
Current liabilities $ 2,072,000 $1,226,000
Non-current liabilities 8,054,000 4,847,000
Total liabilities $ 10,126,000 $6,073,000
For the 9 Months For the Year Ended
Ended April 27, 1997 July 28, 1996
Revenues $ 2,512,000 $ 280,000
Cost of Sales 2,602,000 147,000
Operating Income (90,000) 133,000
Net Income (59,000) 67,300
12[PAGE]
American Skiing Company 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 discussion of changes in financial condition from the end
of the 1996 fiscal year through the quarter ended and the
nine months ended April 27, 1997, and (iii) the results of
operations for the quarter ended and the first nine months of
fiscal 1997 as compared to the corresponding quarter ended
and the first nine months of fiscal 1996.
This discussion contains forecast information items that
are "forward-looking statements" as defined in 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. Actual results have varied materially
and unpredictably 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.
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
quarters. The third quarter historically generates the most
substantial portion of revenues. Operating losses are
expected in the first and fourth quarters.
The first nine months of fiscal 1997 generated net
income of $3,169,000 this reflects the impact of cash flow
from operations substantially exceeded fixed charges for the
period, as expected for the third quarter (Net Income of
$13,079,000). As anticipated, the Company reduced
utilization of its senior credit facility by $11,839,000 to
$28,462,000. Management expects utilization of its senior
credit facility to increase by the close of the fourth
quarter due to seasonal operations and utilization of the
senior credit facility to begin funding the Company's summer
1997 capital improvement program. The Company expects to
13[PAGE]
American Skiing Company and Subsidiaries
undertake and complete approximately $32 million of capital
improvements at its resorts beginning during the fourth
quarter of fiscal 1997 and concluding during the second
quarter of fiscal 1998.
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 remainder of 1997 fiscal year,
the first and second quarters of fiscal 1998 and fund its
1997 summer capital improvement program.
2. Capital Resources. As of June 1, 1997, the Company
received a requested increase under its senior credit
facility to the $65 million level based upon results of its
operations for the nine months ended April 27, 1997. The
Company's estimated $32 million capital improvement plan for
summer 1997 consists of lift, snow making and base facility
improvements at each of its resorts. The capital program will
be funded through the Company's senior credit facility.
The Company, through its wholly-owned subsidiary Grand
Summit Resort Properties, Inc., substantially completed
construction of the Grand Summit Attitash/Bear Peak, a 105
unit quartershare condominium hotel located at the
Attitash/Bear Peak Resort in Bartlett, New Hampshire, during
the third quarter of fiscal 1997, at a cost of approximately
$13.5 million funded through an $8.5 million construction loan
provided by Key Bank of Maine and the remainder through cash
provided by the Company. The Company, through its wholly-
owned subsidiary Grand Summit Resort Properties, Inc.,
expects to commence construction of three additional
quartershare condominium hotels at the Sunday River,
Killington and Mount Snow resorts during the fourth quarter
of fiscal 1997. Commencement of construction of the hotels
is conditioned upon closing upon financing for those
projects. The costs of the hotels is estimated at $68
million. The entire cost of the hotels is expected to be
funded through borrowing by the Grand Summit Resort
Properties, Inc. subsidiary without recourse to American
Skiing Company, or any of its other subsidiaries. The
Company expects to receive a commitment for financing the
full cost of the hotels from Textron Financial Corporation by
the close of the first quarter of fiscal 1998.
Changes In Results of Operations
Changes for the Third Quarter of Fiscal 1997
compared to the Third Quarter of Fiscal 1996.
1. Skiing & Lodging Revenues: Revenues from
operations increased from $26,342,000 for the third quarter
of fiscal 1996 to $81,673,000 for the third quarter of fiscal
1997. The $55,331,000 increase is due primarily from the
addition of the SKI Resorts & the Pico Ski Resort. There was
approximately $2,450,000 increase in revenues attributable to
the pre-merger resorts and the Company's general activities.
2. Real Estate Revenues: Revenues from real estate
operations decreased from $4,788,000 for the third quarter of
fiscal 1996 to $2,674,000 for the third quarter of fiscal
1997. This $2,114,000 decrease is primarily due to all
quartershares at the Summit Hotel at Sunday River being
entirely sold by July, 1996. The Company completed
construction of the new Grand Summit Hotel in Bartlett, New
Hampshire in the Spring of 1997 and began closing on sales of
quartershares on April 6, 1997. As of April 27, 1997 the
Grand Summit Hotel at Attitash closed over $1.8 million of
sales, which accounts for most of the third quarter real
estate operations revenue.
3. Cost of Operations Skiing & Lodging: Cost of
operations increased from $5,432,000 for the third quarter of
fiscal 1996 to $27,612,000 for the third quarter of fiscal
1997. This $22,180,000 increase was primarily due to the
acquisition of the SKI Resorts.
4. Cost of Operations Real Estate: Cost of real estate
operations decreased from $4,806,000 for the third quarter of
fiscal 1996 to $2,167,000 for the third quarter of fiscal
1997. This $2,639,000 decrease is primarily due to
decreased sales. There is also approximately $500,000 of
pre-construction expenses related to the quartershare hotel
projects that have not commenced construction.
5. Real Estate, Payroll & other Taxes: This item
increased predominantly due to the addition of the SKI
Resorts. Expenses at the Company's pre-merger resorts were
comparable to the prior year during the same nine month
period.
6. Utilities. Utilities expense increased from
2,273,000 for the third quarter of fiscal 1996, to 4,493,000
for the third quarter of fiscal 1997. The total increase of
2,220,000 was entirely from the addition of the SKI Resorts.
7. Insurance: Insurance increased from $873,000 for
the third quarter of fiscal 1996, to $1,447,000 for the third
quarter of fiscal 1997. The $574,000 increase is mostly due
14[PAGE]
American Skiing Company and Subsidiaries
to the acquisition of the SKI Resorts. There was a reduction
in insurance expense in the pre-merger resorts of
approximately $500,000.
8. Selling, General, & Administrative: Selling,
General, & Administrative expense increased from $4,919,000
for third quarter of fiscal 1996, to $9,097,000 for the
third quarter of fiscal 1997. This $4,178,000 increase is
entirely due to the addition of the SKI Resorts.
9. Depreciation & Amortization: Depreciation &
Amortization increased from $2,788,000 for the third quarter
of fiscal 1996, to $8,075,000 for the third quarter of fiscal
1997. This $5,287,000 increase is primarily due to the
addition of the SKI resorts. The remainder of the increase
results from capital improvements and the amortization of
goodwill and prepaid loan fees which did not exist prior to
the merger.
10. Interest: Interest increased from $854,000 for
the third quarter of fiscal 1996, to $5,325,000 for the
third quarter of fiscal 1997. The increase is attributable
to an increase in the Company's indebtedness in conjunction
with the acquisition of the SKI resorts and the Company's
Summer 1996 capital improvement program.
11. Income Tax Expense: Income tax expense increased
from $1,452,000 for the third quarter of fiscal 1996, to
$8,623,000 for the third quarter of fiscal 1997. The reason
for the significant increase of $7,171,000 is that certain of
the pre-merger resorts were not subject to tax at the
corporate level for Federal and State income tax purposes due
to their status as "S" corporations. In fiscal 1997 the
Company and all of its subsidiaries are subject to tax at the
corporate level.
Changes in Results of Operations
Changes for the First Nine Months of Fiscal 1997 compared to
the First Nine Months of Fiscal 1996.
1. Skiing & Lodging Revenues: Revenues from operations
increased from $57,283,000 for the nine months ended April
28, 1996 to $157,747,000 for the nine months ended April 27,
1997. The $100,464,000 increase is due in part to the
addition of the SKI Resorts and the Pico Ski Resort, which
accounts for an increase of $100,000,000. The divestiture
15[PAGE]
American Skiing Company and Subsidiaries
of Cranmore accounts for a decrease of revenues of
$1,700,000, and there was an increase in skiing & lodging
revenues at the pre-merger resorts of $1,000,000. An
additional $1,000,000 was generated from the Company's more
general activities.
2. Real Estate Revenues: Revenues from real estate
operations decreased from $9,482,000 for the nine months
ended April 28, 1996 to $5,983,000 for the nine months ended
April 27, 1997. This $3,499,000 decrease is primarily due to
all quartershares at the Summit Hotel at Sunday River being
fully sold out by July, 1996. The Company has completed
construction of the new Grand Summit Hotel located at the
Attitash/Bear Peak Ski Resort. The Company began closing on
quartershares sales at the Grand Summit at Attitash/Bear Peak
on April 6, 1997. As of April 27, 1997 the Grand Summit at
Attitash had closed over $1.8 million of quartershare sales.
3. Cost of Operations Skiing and Lodging: Cost of
operations increased from $24,047,000 for the first nine
months of fiscal 1996 to $69,741,000 for the first nine
months of fiscal 1997. This $45,694,000 increase was
primarily due to the acquisition of the SKI Resorts.
4. Cost of Operations Real Estate: Cost of real estate
operations increased from $4,806,000 for the first nine
months of fiscal 1996 to $4,880,000 for the first nine months
of fiscal 1997. This $74,000 increase is entirely due to
pre-construction activities on the hotel projects that have
not yet begun construction. The Company has incurred
approximately $1,000,000 of expenses related to the
quartershare hotel projects that have not begun construction.
5. Real Estate, Payroll & other Taxes: This item
increased predominantly due to the addition of the SKI
Resorts. Expenses at the Company's pre-merger resorts were
comparable to the prior year during the same nine month
period.
6. Utilities: Utilities expense increased from
$5,083,000 for the first nine months of fiscal 1996, to
$12,219,000 for the first nine months of fiscal 1997. The
total increase of $7,136,000 was entirely from the addition
of the SKI Resorts.
7. Insurance: Insurance increased from $1,758,000 for
the first nine months of fiscal 1996, to $4,557,000 for the
first nine months of fiscal 1997. The $2,799,000 increase is
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American Skiing Company and Subsidiaries
mostly due to the addition of the SKI Resorts. There was a
reduction in insurance expense in the pre-merger resorts of
approximately $1,000,000.
8. Selling, General, & Administrative: Selling,
General, & Administrative expense increased from $10,383,000
for the first nine months of fiscal 1996, to $21,598,000 for
the first nine months of fiscal 1997. This $11,215,000
increase is entirely due to the addition of the SKI Resorts
and increased marketing activities.
9. Depreciation & Amortization: Depreciation &
Amortization increased from $5,615,000 for the first nine
months of fiscal 1996, to $16,946,000 for the first nine
months of fiscal 1997. This $11,331000 increase is due to
the addition of the SKI resorts which accounted for
$10,500,000 of the increase. The remainder of the increase
results from capital improvements and the amortization of
goodwill and prepaid loan fees which did not exist prior to
the merger.
10. Interest: Interest increased from $2,307,000 for
the first nine months of fiscal 1996, to $18,396,000 for the
first nine months of fiscal 1997. This increase is
attributable to an increase in the Company's indebtedness in
conjunction with the acquisition of the SKI resorts and the
Company's Summer 1996 capital improvement program.
11. Income Tax Expense: Income tax expense increased
from $1,004,000 for the first nine months of fiscal 1996, to
$2,549,000 for the first nine months of fiscal 1997. Income
tax expense increased even though taxable income decreased
because certain of the pre-merger resorts were not subject to
tax at the corporate level during fiscal 1996 for Federal and
State income tax purposes due to their status as "S"
corporations. In fiscal 1997 the Company and all of its
subsidiaries are subject to tax at the corporate level.
Changes in Financial Condition
Changes as of April 27, 1997 compared to July 28, 1996.
1. Cash and Short Term Investments: Cash and short
term investments decreased $1,670,000 from July 28, 1996 to
April 27, 1997. The decrease results from the Company
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American Skiing Company and Subsidiaries
changing cash management practices to maximize reductions in
the Company's senior credit facility.
2. Investments Held in Escrow: Investments held in
escrow decreased $5,200,000 from July 28, 1996 to April 27,
1997. The reduction is primarily from the scheduled interest
payment made January 15, 1997 on the Company's 12% Senior
Subordinated Notes due 2006.
3. Accounts Receivable: Accounts receivable increased
from $2,458,000 on July 28, 1996 to $4,952,000 on April 27,
1997. The increase of $2,494,000 is attributable to the
operating cycle of the Company.
4. Inventories: Inventories increased from $5,025,000
as of July 28, 1996 to $6,380,000 as of April 27, 1997. This
increase of $1,355,000 results primarily from the long term
lease of a major retail operation at the base of the
Killington Ski Resort access road and the acquisition of the
Pico Ski Resort.
5. Assets Held for Resale: Assets held for resale
decreased $14.9 million due to divestiture of Waterville and
Cranmore Ski Resorts.
6. Prepaid Expenses: Prepaid expenses decreased from
$3,371,000 as of July 28, 1996, to $2,039,000 as of April 27,
1997. The decrease of $1,332,000 results from prepaid
expenditures that relate to the 96-97 operating season which
have been expensed in the normal course of business.
7. Property Developed for Resale: Property developed
for resale represents the costs associated with the completed
construction of the new Grand Summit Hotel in Bartlett, New
Hampshire. The Company began closing on sales of
quartershares on April 6, 1997.
8. Property, Plant, & Equipment, net: Property, Plant
and Equipment, net increased from $227,470,000 as of July 28,
1996 to $241,013,000 as of April 27, 1997. This increase of
$13,543,000 results from the following:
(a) A reduction of $16.9 million from
depreciation;
(b) An increase of $5.9 million from the
construction and development of quartershare
hotel projects; and
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American Skiing Company and Subsidiaries
(c) An increase of $24.5 million in capital
projects (including capital leases) related to
the resorts, including capital leases and the
acquisition of the Pico Ski Resort.
9. Goodwill: Goodwill increased from $6,540,000 as of
July 28, 1996 to $7,595,000 as of April 27, 1997. The
increase is from a change in purchase accounting related to
the acquisition of SKI, Ltd. This increase relates to the
divestiture of Waterville and Cranmore Ski Resorts and
classifying the expenses related to maintaining the
properties until sold, as required by the Department of
Justice consent decree, as a reduction in the purchase price
allocated to the assets divested. The increase is net of
amortization expense recognized during the nine month period
ended April 27, 1997.
10. Other Assets: Other assets increased from
$5,134,000 as of July 28, 1996 to $6,445,000 as of April 27,
1997. This $1,311,000 increase is from the addition of a
$2,750,000 note received in connection with the divestiture
of Waterville Ski Resort with a decrease in assets from the
normal operating cycle of the Company and the usage of these
assets during the ski season.
11. Current Portion of Long Term Debt: Current
portion of long term debt decreased from $22,893,000 as of
July 28, 1997 to $13,280,000 as of April 27, 1997, a decrease
of $9,613,000. The decrease is primarily from the Company
reducing the revolving line of credit by over $11,839,000,
with an increase in the current portion of long term debt of
$1,500,000 from the addition of approximately $8,000,000 of
capital leases.
12. Due to Stockholder: Due to Shareholder decreased
from $5,375,000 as of July 28, 1996 to $1,966,000 as of April
27, 1997. The decrease of $3,409,000 is due to the payment
of a portion of the Note during fiscal 1997. The Note was
established to fund Mr. Otten's personal tax liability
generated by certain of the pre-merger "S" corporation
resorts.
13. Accrued Interest: Accrued interest increased from
$1,491,000 as of July 28, 1996 to $5,043,000 as of April 27,
1997. This increase is principally attributable to the
scheduled accrual of interest on the Company's $120 million
senior subordinated notes due 2006 and other various
liabilities. Interest payments are made semi-annually on the
senior subordinated notes.
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American Skiing Company and Subsidiaries
14. Long-Term Debt: Long-term debt increased from
$187,827,000 as of July 28, 1996 to $194,882,000 as of April
27, 1997. The increase is mostly attributable to the
capitalization of various equipment leases signed during the
year.
15. Minority Interest: Minority interest decreased
$2.5 million. This is related to acquiring the remaining 49%
of Sugarloaf Ski Resort mentioned in footnote number 2.
16. Other Long Term Liabilities: Other Long Term
Liabilities increased from $6,778,000 as of July 28, 1996 to
$9,661,000 as of April 27, 1997. This $2,883,000 increase
is from the future SKI stock redemption liability, SKI
Insurance long term liabilities, and contingent liabilities
associated with the purchase of Pico Ski Mountain Resort.
17. Retained Earnings: Retained Earnings increased
$3.2 million from July 28, 1996 to April 27, 1997 and is
entirely attributable to the results from operations over the
same time period.
Part II - Other Information
Item 5
Other Information
On April 9, 1997 the Company entered into a non-binding
letter of intent to acquire substantially all the assets of
Wolf Mountain Resorts, L.C., which consist principally of the
Wolf Mountain Ski Resort located in Summit County, Utah. The
acquisition contemplated by the letter of intent provides for
the acquisition by purchase of substantially all the non-real
estate assets of Wolf Mountain Resorts, L.C. for a purchase
price of $7.7 million, and the establishment of a long term
lease with an initial term of 50 years and three 50-year
renewal terms for substantially all the real estate assets of
Wolf Mountain Resorts, L.C.
A definitive, binding purchase and sale agreement is
expected to be executed, delivered and become effective on or
about June 27, 1997. The closing of the acquisition is
expected to occur contemporaneously with the definitive
purchase and sale agreement becoming effective. The Company
has made the necessary filings under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended and has
received early termination of the waiting period under that
Act.
The Company is currently in the process of arranging
financing for both the acquisition and a summer 1997 capital
improvement program at the Wolf Mountain Resort involving an
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American Skiing Company and Subsidiaries
estimated $12 million to $18 million in lift, snowmaking and
base area improvements. No binding commitments for necessary
financing have been received as of the date hereof.
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.
AMERICAN SKIING COMPANY
Date: August 11, 1997 /s/ Thomas M. Richardson
Thomas M. Richardson
Senior Vice President Finance
Chief Financial Officer
(Principal Financial and Accounting
Officer)
Date: August 11, 1997 /s/ Christopher E. Howard
Christopher E. Howard
Chief Administrative Officer and
General Counsel
(Duly Authorized Officer)
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