SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
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 Number)
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 April 28, 1996........5
Condensed Consolidated Balance Sheet (Liabilities and
Stockholders' Equity)(Unaudited) as of April 27, 1997
and April 28, 1996.........................................6
Condensed Consolidated Balance Sheet (Assets)
(Unaudited) as of April 27, 1997 and July 28, 1996.........7
Condensed Consolidated Balance Sheet (Liabilities and
Stockholders' Equity)(Unaudited) as of April 27, 1997
and July 28, 1996..........................................8
Condensed Consolidated Statement of Cash Flows
(Unaudited) for Nine Months Ended April 27, 1997
and April 28, 1996 ........................................9
Notes to (Unaudited) Condensed Consolidated Financial
Statements .....................................................11
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 ......................................23
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.
LBO Holding, Inc. Sugarbush Resort Holdings,
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.
Killington, Ltd. Sugarloaf Mountain
Corporation
Waterville Valley Ski Area, Ltd. Dover Restaurants, Inc.
Killington Restaurants, Inc. Resort Software Services,
Inc.
Resort Technologies, Inc. Sugartech
Mountainside 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 27, 1996
(Unaudited) (Unaudited)
Revenues
Skiing, lodging and other $86,288,000 $26,342,000
operations
Real Estate 1,886,000 4,788,000
Total Revenues 88,174,000 31,130,000
Expenses
Cost of Operations 29,828,000 5,432,000
Cost Of Real Estate 2,061,000 4,806,000
Sales & Ops
Real Estate & Payroll 4,252,000 286,000
Taxes
Utilities 4,468,000 2,273,000
Insurance 2,189,000 873,000
S. G. & A. 8,595,000 4,919,000
Depreciation & 8,558,000 2,788,000
Amortization
Total Operating Expenses 59,951,000 21,377,000
Income From Operations 28,223,000 9,753,000
Interest 5,316,000 854,000
Income before provision for 22,907,000 8,899,000
income taxes
Provision for Income Tax 8,705,000 1,452,000
Expense
Net Income $14,202,000 $7,447,000
Net income per common share $14.52
(note 5)
Retained Earnings, beginning $8,221,000 $30,721,000
of the period
Subtract: Distributions 0 (1,539,000)
Add: Net Income 14,202,000 7,447,000
Retained earnings, end $22,423,000 $36,629,000
of period
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 $162,361,000 $57,283,000
operations
Real Estate 5,195,000 9,482,000
Total Revenues 167,556,000 66,765,000
Expenses
Cost of Operations 71,055,000 24,047,000
Cost of Real Estate 5,675,000 4,806,000
Sales & Ops
Real Estate and Payroll 9,498,000 1,773,000
Taxes
Utilities 12,194,000 5,083,000
Insurance 5,299,000 1,758,000
S. G. & A. 21,096,000 10,383,000
Depreciation & 17,429,000 5,615,000
Amortization
Total Operating Expenses 142,246,000 53,465,000
Income from Operations 25,310,000 13,300,000
Interest 18,387,000 2,307,000
Income Before Provision for 6,923,000 10,993,000
Income Taxes
Provision for Income Tax Expense 2,631,000 1,004,000
Net Income $4,292,000 $9,989,000
Net income per common share $4.39
(note 5)
Retained Earnings, beginning of $18,131,000 $28,726,000
the period
Subtract: Distributions 0 (2,086,000)
Add: Net Income 4,292,000 9,989,000
Retained earnings, end $22,423,000$36,629,000
of period
See accompanying Notes to (Unaudited) Condensed
Consolidated Financial Statements.
4<PAGE>
American Skiing Company and Subsidiaries
Condensed Consolidated Balance Sheet
April 27, 1997 April 28, 1996
(Unaudited) (Unaudited)
ASSETS
Current Assets
Cash and Short-term $2,417,000 $569,000
Investments
Investment held in 9,297,000 522,000
escrow
Accounts Receivable 5,649,000 1,651,000
Inventories 6,483,000 1,600,000
Prepaid Expenses 2,341,000 679,000
Other Current Assets 1,934,000 125,000
Total Current Assets 28,121,000 5,146,000
Property and 248,540,000 81,255,000
Equipment, net
Deferred Tax Asset 0 264,000
Long term Investment 8,630,000 0
Goodwill 7,593,000 0
Prepaid Loan 7,119,000 0
Fees Other Assets 3,729,000 8,446,000
TOTAL ASSETS $303,732,000 $95,111,000
See accompanying Notes to (Unaudited) Condensed Consolidated
Financial Statements.
5<PAGE>
American Skiing Company and Subsidiaries
Condensed Consolidated Balance Sheet
April 27, 1997 April 28, 1996
(Unaudited) (Unaudited)
LIABILITIES & STOCKHOLDERS EQUITY
Current Liabilities
Current portion of Long-term $13,342,000 $3,359,000
Debt
Accounts Payable and accrued 11,177,000 4,071,000
expenses
Federal Income Tax Payable 3,138,000 652,000
Due to Shareholder 1,938,000 176,000
Deposits and other Unearned 3,538,000 1,063,000
Revenue
Accrued Interest 6,125,000 0
Other Accrued Expenses 4,567,000 529,000
Total Current Liabilities 43,825,000 9,850,000
Long-Term Debt 187,879,000 46,286,000
Deferred Income Taxes - 31,213,000 0
Long-term
Other Long-Term Liabilities 14,620,000 0
TOTAL LIABILITIES 277,537,000 56,136,000
Stockholders'
Equity
Common Stock 10,000 116,000
Paid In Capital 3,762,000 2,230,000
Retained Earnings 22,423,000 36,629,000
Total Equity 26,195,000 38,975,000
TOTAL LIABILITIES AND EQUITY $303,732,000 $95,111,000
See accompanying Notes to (Unaudited) Condensed
Consolidated Financial Statements.
6<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 5,649,000 2,458,000
Inventories 6,483,000 5,025,000
Assets Held for Resale 0 14,921,000
Prepaid Expenses 2,341,000 3,371,000
Other Current Assets 1,934,000 2,975,000
Total Current Assets 28,121,000 47,334,000
Property and Equipment, net 248,540,000 227,470,000
Long Term Investments 8,630,000 4,343,000
Goodwill 7,593,000 6,540,000
Prepaid Loan Fees 7,119,000 7,911,000
Other Assets 3,729,000 5,134,000
TOTAL ASSETS $303,732,000 $298,732,000
7<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- $13,342,000 $22,893,000
term Debt
Accounts Payable 11,177,000 13,406,000
Federal Income Tax Payable 3,138,000 671,000
Due to Stockholder 1,938,000 5,375,000
Deposits and other 3,538,000 3,541,000
Unearned Revenue
Accrued Interest 6,125,000 1,491,000
Other Accrued Expenses 4,567,000 1,660,000
Total Current Liabilities 43,825,000 49,037,000
Long-Term Debt 187,879,000 187,827,000
Deferred Income Taxes - 31,213,000 30,695,000
Long-term
Minority Interest 0 2,492,000
Other Long-Term Liabilities 14,620,000 6,778,000
TOTAL LIABILITIES 277,537,000 276,829,000
Stockholders' Equity
Common Stock 10,000 10,000
Paid In Capital 3,762,000 3,762,000
Retained Earnings 22,423,000 18,131,000
Total Equity 26,195,000 21,903,000
TOTAL LIABILITIES AND EQUITY $303,732,000 $298,732,000
See accompanying Notes to (Unaudited) Condensed
Consolidated Financial Statements.
8<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) $4,292,000 $9,989,000
Non-cash items included in net income (loss)
depreciation and amortization 17,429,000 5,615,000
Deferred Income taxes 518,000 655,000
Cash flows from operating
activities before 22,239,000 16,259,000
Changes in assets and liabilities
Change in assets and liabilities
Decrease (Increase) in investments 5,200,000 0
held in escrow
Decrease (Increase) in Accounts (3,191,000) (337,000)
Receivable
Decrease (Increase) in Income Taxes 0 0
Receivable
Decrease (Increase) in inventories (1,458,000) (219,000)
Decrease (Increase) in assets held for
resale 13,721,000 0
Decrease (Increase) in prepaid expenses 1,030,000 (109,000)
Decrease (Increase) in other current 1,041,000 2,604,000
assets
Decrease (Increase) in Other Assets 1,405,000 (8,059,000)
Increase (Decrease) accounts payable (2,229,000) 100,000
Increase (Decrease) income taxes payable 2,467,000 349,000
Increase (Decrease) in deposits and (3,000) 313,000
unearned revenue
Increase (Decrease) in other accrued 4,634,000 0
Interest
Increase (Decrease) in other accrued 2,907,000 (1,350,000)
expenses
Cash flow provided by operating activities
after change in assets and liabilities 47,763,000 9,551,000
Cash flows from investing activities:
Additions to Property and Equipment (23,110,000) (22,232,000)
Investments in Assets held for resale (14,450,000) 0
Purchase of ski resort minority interest (2,492,000) 0
Purchase of long term investments (4,287,000) 0
Net cash provided (Used) for investing (44,339,000) (22,232,000)
activities
9<PAGE>
American Skiing Company and Subsidiaries
Cash flows from financing activities:
Net (reductions) proceeds in revolving (11,498,000) 12,590,000
credit agreement
Reductions in Note payable to (3,437,000) 0
Shareholder
Distributions to Shareholder 0 (1,579,000)
Additions to long term debt 9,841,000 877,000
Net cash provided (used) for in (5,094,000) 11,888,000
financing activities
Net increase (decrease) in cash and (1,670,000) (793,000)
short term investments
Cash and short term investments at 4,087,000 1,362,000
beginning of year
Cash and short term investments at end $2,417,000 $569,000
of period
See accompanying Notes to (Unaudited) Condensed Consolidated
Financial Statements.
10<PAGE>
American Skiing Company and Subsidiaries
Notes to (Unaudited) Condensed Consolidated Financial
Statements
1. 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, July 28, 1996, and April 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.
2. 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
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
11<PAGE>
American Skiing Company and Subsidiaries
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
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.
3. Income Taxes. The provision for taxes on income 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.
4. 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.
5. 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.
6. 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.
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) 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 (b) a comparison of
financial condition between the quarter ended and the first
nine months of fiscal 1997 as compared to the quarter ended
and the first nine months of fiscal 1996, 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 $4,292,000 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
$14,202,000). As anticipated, the Company reduced
utilization of its senior credit facility by $11,498,000 to
$28,462,000. Management expects utilization of its senior
credit facility to increase by the close of the fourth
13<PAGE>
American Skiing Company and Subsidiaries
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
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 $8,500,000 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 fourth quarter of fiscal 1997. No
commitment has been received as of the date hereof. No
contractual commitments to proceed with the construction of
the three hotels has been established as of the date hereof.
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 $86,288,000 for the third quarter of fiscal
1997. The $59,946,000 increase is due primarily from the
addition of the SKI Resorts & the Pico Ski Resort. There was
approximately $3,200,000 increase in revenues attributable to
the pre-merger resorts and the Company's general activities.
Revenues from real estate operations decreased from
$4,788,000 for the third quarter of fiscal 1996 to $1,886,000
14<PAGE>
American Skiing Company and Subsidiaries
for the third quarter of fiscal 1997. This $2,902,000
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 nearly all of the
third quarter real estate operations revenue.
2. Cost of Operations: Cost of operations increased
from $5,432,000 for the third quarter of fiscal 1996 to
$29,828,000 for the third quarter of fiscal 1997. This
$24,396,000 increase was primarily due to the acquisition of
the SKI Resorts.
Cost of real estate operations decreased from $4,806,000
for the third quarter of fiscal 1996 to $2,061,000 for the
third quarter of fiscal 1997. This $2,745,000 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.
3. 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.
4. Insurance: Insurance increased from $873,000 for
the third quarter of fiscal 1996, to $2,189,000 for the third
quarter of fiscal 1997. The $1,316,000 increase is mostly
due to the acquisition of the SKI Resorts. There was a
reduction in insurance expense in the pre-merger resorts of
approximately $500,000.
5. Selling, General, & Administrative: Selling,
General, & Administrative expense increased from $4,919,000
for third quarter of fiscal 1996, to $8,595,000 for the
third quarter of fiscal 1997. This $3,676,000 increase is
entirely due to the addition of the SKI Resorts.
6. Depreciation & Amortization: Depreciation &
Amortization increased from $2,788,000 for the third quarter
of fiscal 1996, to $8,558,000 for the third quarter of fiscal
1997. This $5,770,000 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.
7. Interest: Interest increased from $854,000 for the
third quarter of fiscal 1996, to $5,316,000 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.
8. Income Tax Expense: Income tax expense increased
from $1,452,000 for the third quarter of fiscal 1996, to
$8,705,000 for the third quarter of fiscal 1997. The reason
for the significant increase of $7,253,000 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
15<PAGE>
American Skiing Company and Subsidiaries
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 $162,361,000 for the nine months ended April 27,
1997. The $105,078,000 increase is due in part to the
addition of the SKI Resorts and the Pico Ski Resort, which
accounts for an increase of $104,000,000. The divestiture
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 $1,700,000 was generated from the Company's more
general activities.
Revenues from real estate operations decreased from
$9,482,000 for the nine months ended April 28, 1996 to
$5,195,000 for the nine months ended April 27, 1997. This
$4,287,000 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.
2. Cost of Operations: Cost of operations increased
from $24,047,000 for the first nine months of fiscal 1996 to
$71,055,000 for the first nine months of fiscal 1997. This
$47,008,000 increase was primarily due to the acquisition of
the SKI Resorts.
Cost of real estate operations increased from $4,806,000
for the first nine months of fiscal 1996 to $5,675,000 for
the first nine months of fiscal 1997. This $869,000 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.
3. 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.
4. Utilities: Utilities expense increased from
$5,083,000 for the first nine months of fiscal 1996, to
$12,194,000 for the first nine months of fiscal 1997. The
total increase of $7,111,000 was entirely from the addition
of the SKI Resorts.
16<PAGE>
American Skiing Company and Subsidiaries
5. Insurance: Insurance increased from $1,758,000 for
the first nine months of fiscal 1996, to $5,299,000 for the
first nine months of fiscal 1997. The $3,541,000 increase is
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.
6. Selling, General, & Administrative: Selling,
General, & Administrative expense increased from $10,383,000
for the first nine months of fiscal 1996, to $21,096,000 for
the first nine months of fiscal 1997. This $10,713,000
increase is entirely due to the addition of the SKI Resorts
and increased marketing activities.
7. Depreciation & Amortization: Depreciation &
Amortization increased from $5,615,000 for the first nine
months of fiscal 1996, to $17,429,000 for the first nine
months of fiscal 1997. This $11,814,000 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.
8. Interest: Interest increased from $2,307,000 for
the first nine months of fiscal 1996, to $18,387,000 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.
9. Income Tax Expense: Income tax expense increased
from $1,004,000 for the first nine months of fiscal 1996, to
$2,631,000 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 April 28, 1996.
1. Cash and Short Term Investments: Cash and Short
term investments increased $1,848,000 from April 28, 1996 to
April 27, 1997. This increase is primarily due to the
inclusion of the pre-merger resorts.
2. Investments Held in Escrow: Investments held in
escrow increased from $522,000 on April 28, 1996 to
$9,297,000 on April 27, 1997. The increase in this asset
results from two factors:
17<PAGE>
American Skiing Company and Subsidiaries
(a) The Company was required to establish a debt
service escrow of $7.3 million in connection
with the issuance of the Company's Senior
Subordinated Notes due 2006; and
(b) Included in this asset is approximately
$1,200,000 of escrow deposits the Company has
received in conjunction with the sale of
quartershare units.
3. Accounts Receivable: Accounts receivable increased
from $1,651,000 on April 28, 1996 to $5,649,000 on April 27,
1997. The increase of $3,998,000 is comprised of a
$2,500,000 increase from the acquisition of the SKI Resorts,
$750,000 resulting from the sale of Bear Mountain by
Fibreboard Corporation, and approximately $700,000
attributable to operations at the pre-merger resorts.
4. Inventories: Inventories increased from $1,600,000
as of April 28, 1996 to $6,483,000 as of April 27, 1997.
This increase of $4,833,000 is principally due to the
acquisition of the SKI Resorts, and the leasing of a high
volume retail operation at the base of the access road of
Killington Ski Resort.
5. Prepaid Expenses: Prepaid expenses increased from
$679,000 as of April 28, 1996, to $2,341,000 as of April 27,
1997. $1,200,000 of this increase is from the acquisition of
the SKI Resorts and $500,000 results from expenses incurred
in producing future quartershare sales.
6. Other Current Assets: Other current assets
increased from $125,000 as of April 28, 1996 to $1,934,000 as
of April 27, 1997. This $1,809,000 increase is related to
the addition of the SKI Resorts.
7. Property, Plant, & Equipment, net: Plant Property
and Equipment, net increased from $81,255,000 as of April 28,
1996 to $248,540,000 as of April 27, 1997. This increase of
$167,285,000 is from the following:
(a) $150,000,000 from the acquisition of the SKI
Resorts;
(b) $14,500,000 from the construction of
quartershare hotel projects;
(c) $22,000,000 in capital projects related to the
resorts; and
(d) $19,500,000 of depreciation.
8. Long Term Investments: Long Term Investments
increased from $0 as of April 28, 1996 to $8,630,000 as of
April 27, 1997. This asset is comprised of long-term
investments constituting (a) reserves for SKI Insurance
Company, which are approximately $5,800,000, and (b) a
$2,800,000 note receivable received in the divestiture of
Waterville Ski Resort and Cranmore Ski Resort.
18<PAGE>
American Skiing Company and Subsidiaries
9. Goodwill: Goodwill increased from $0 as of April
28, 1996 to $7,593,000 as of April 27, 1997. The increase is
entirely related to the acquisition of the SKI Resorts.
10. Prepaid Loan Fees: Prepaid Loan Fees increased
from $0 as of April 28, 1996 to $7,119,000 as of April 27,
1997. These one-time expenditures were related to the
acquisition of SKI. This asset is stated net of
amortization.
11. Other Assets: Other Assets decreased from
$8,446,000 as of April 28, 1996, to $3,729,000 as of April
27, 1997. This decrease of $4,717,000 results from the SKI
acquisition. As of April 28, 1996 this asset included stock
purchases of approximately $800,000 and a deposit on the
acquisition of SKI of $5,000,000. Net of these two items was
an actual $1,000,000 increase related to the addition of the
SKI Resorts.
12. Current Portion of Long Term Debt: Current
portion of long term debt increased from $3,359,000 as of
April 28, 1996 to $13,342,000 as of April 27, 1997 , an
increase of $9,983,000. The increase is primarily from the
Company's increase in its senior credit facility, the
structure of the facility and required levels of periodic
repayments.
13. Accounts Payable & Accrued Expenses: Accounts
Payable and Accrued expenses increased from $4,071,000 as of
April 28, 1996 to $11,177,000 as of April 27, 1997, a
$7,106,000 increase. $6,600,000 of the increase is related to
the acquisition of the SKI resorts and the remaining increase
results from favorable supplier credit terms and additional
operations, including Pico Ski Resort and other new retail
operations.
14. Income Taxes Payable: Income taxes payable
increased from $652,000 as of April 28, 1996 to $3,138,000 as
of April 27, 1997. The increase is related to certain
taxable income generated by the Company, which in the
previous year did not constitute taxable income due to
certain of the companies' status as "S" corporations for
Federal and State income tax purposes.
15. Due to Shareholder: Due to Shareholder increased
from $176,000 as of April 28, 1996 to $1,938,000 as of April
27, 1997. The increase relates to the $5,200,000 note
payable to Leslie B. Otten that was established to fund Mr.
Otten's personal tax liability generated by income at certain
of the pre-merger resorts, which were "S" corporations for
Federal and State income tax purposes. As of April 27, 1997
$3,400,000 of Mr. Otten's prior year tax liability had been
funded.
16. Deposits and Unearned Revenue: Deposits and
unearned revenue increased from $1,063,000 as of April 28,
1996 to $3,538,000 as of April 27, 1997, an increase of
$2,475,000. This increase is from the acquisition of the SKI
Resorts ($1,200,000) and from the pre-sale of hotel
quartershares units ($1,200,000).
17. Accrued Interest: Accrued Interest increased from
$0 as of April 28, 1996 to $6,125,000 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.
19<PAGE>
American Skiing Company and Subsidiaries
Interest payments are made semi-annually on the senior
subordinated notes.
18. Other Accrued Expenses: Other accrued expenses
increased from $529,000 as of April 28, 1996 to $4,567,000 as
of April 27, 1997. The majority of the $4,038,000 increase
is related to the acquisition of the SKI Resorts. The rest of
the increase is attributable principally to the expenses
incurred in pursuing quartershare hotel development, with
minor increases in the pre-merger resorts.
19. Long Term Debt: Long term debt increased from
$46,286,000 as of April 28, 1996 to $187,879,000 as of April
27, 1997. The increase is from the acquisition of the SKI
Resorts and the summer 1996 capital program.
20. Deferred Income Taxes: Deferred income taxes
increased from $0 as of April 28, 1996 to $31,213,000 as of
April 27, 1997. The increase of $31 million in deferred
income taxes is attributable to three principal sources:
1. Approximately $6 million of the increase relates to
several subsidiaries that were previously "S">
Corporations for Federal and State income tax
purposes losing their "S"> status as a result of
becoming subsidiaries of the Company;
2. SKI, Ltd. carried approximately $10 million of
deferred taxes into the Company; and
3. Approximately $15.3 million of the increase relates
to a basis adjustment in conjunction with the
purchase of the SKI Resorts. Assets were adjusted
upward to equal the purchase price in accordance
with generally accepted accounting principles for
financial reporting purposes, while those same
assets were not adjusted for tax reporting
purposes.
21. Other Long Term Liabilities: Other Long Term
Liabilities increased from $0 as of April 28, 1996 to
$14,620,000 as of April 27, 1997. This increase results
from the addition and acquisition of the SKI Resorts.
22. Paid in Capital: Paid in capital increased $1.5
million. The increase resulted from capital contributed to
the Company on a pre-merger basis.
23. Retained Earnings: Retained Earnings decreased
$14.2 million from April 28, 1996 to April 27, 1997. The
decrease is attributable to the following factors:
(a) $5.2 million from the establishment of the
note payable to Mr. Otten to Fund "S"
corporation tax liability;
20<PAGE>
American Skiing Company and Subsidiaries
(b) $2.1 million from the payment of estimated tax
payments on behalf of Mr. Otten associated
with the tax liability generated by the
companies that were previously "S"
corporations;
(c) $6.9 million net loss for the period from
April 29, 1996 to April 27, 1997.
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
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 $5,649,000 on April 27,
1997. The increase of $3,191,000 is comprised of a
$2,400,000 increase in connection with the operating cycle of
the Company and, $750,000 from the Company's more general
operations.
4. Inventories: Inventories increased from $5,025,000
as of July 28, 1996 to $6,483,000 as of April 27, 1997. This
increase of $1,458,000 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 $2,341,000 as of April 27,
1997. The decrease of $1,030,000 results from prepaid
expenditures that relate to the 96-97 operating season which
have been expensed in the normal course of business.
7. Other Current Assets: Other current assets
decreased from $2,975,000 as of July 28, 1996 to $1,934,000
as of April 27, 1997. This $1,041,000 decrease is from the
sale of properties held for resale that were classified as
"other current assets".
8. Property, Plant, & Equipment, net: Property, Plant
and Equipment, net increased from $227,470,000 as of July 28,
1996 to $248,540,000 as of April 27, 1997. This increase of
$21,070,000 results from the following:
21<PAGE>
American Skiing Company and Subsidiaries
(a) A reduction of $16.5 million from
depreciation;
(b) An increase of $14.5 million from the
construction and development of quartershare
hotel projects; and
(c) An increase of $23.1 million in capital
projects related to the resorts, and the
acquisition of the Pico Ski Resort.
9. Long Term Investments: Long Term Investments
increased from $4,343,000 as of July 28, 1996 to $8,630,000
as of April 27, 1997. This increase of $4,287,000 is
comprised of an increase of $1,400,000 in the long-term
investments held by SKI Insurance Company and a $2,800,000
note receivable in conjunction with the divestiture of
Waterville Ski Resort and Cranmore Ski Resort.
10. Goodwill: Goodwill increased from $6,540,000 as of
July 28, 1996 to $7,593,000 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.
11. Other Assets: Other assets decreased from
$5,134,000 as of July 28, 1996 to $3,729,000 as of April 27,
1997. This $1,405,000 decrease is from the normal operating
cycle of the Company and the usage of these assets during the
ski season.
12. Current Portion of Long Term Debt: Current
portion of long term debt decreased from $22,893,000 as of
July 28, 1997 to $13,342,000 as of April 27, 1997, a decrease
of $9,551,000. The decrease is primarily from the Company
reducing the revolving line of credit by over $11,000,000,
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.
13. Income Taxes Payable: Income taxes payable
increased from $671,000 as of July 28, 1996 to $3,138,000 as
of April 27, 1997. The increase is related to the taxable
income generated by the Company during the first nine months
of the 1997 fiscal year. Historically the Company has had
forth quarter losses that will reduce the amount payable.
14. Due to Shareholder: Due to Shareholder decreased
from $5,375,000 as of July 28, 1996 to $1,938,000 as of April
27, 1997. The decrease of $3,437,000 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.
15. Accrued Interest: Accrued Interest increased from
$1,491,000 as of July 28, 1996 to $6,125,000 as of April 27,
1997. This increase is principally attributable to the
22<PAGE>
American Skiing Company and Subsidiaries
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.
16. Other Accrued Expenses: Other accrued expenses
increased from $1,660,000 as of July 28, 1996 to $4,567,000
as of April 27, 1997. The increase in this account is from
the accrual of various operating leases, both new and
existing.
17. 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.
18. Other Long Term Liabilities: Other Long Term
Liabilities increased from $6,778,000 as of July 28, 1996 to
$14,620,000 as of April 27, 1997. This $7,842,000 increase
is from the addition of capital leases, future SKI stock
redemption liability, and SKI Insurance long term
liabilities.
19. Retained Earnings: Retained Earnings increased
$4.3 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
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: June 11, 1997 /s/ Thomas M. Richardson
Thomas M. Richardson
Senior Vice President Finance
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Date: June 11, 1997 /s/ Christopher E. Howard
Christopher E. Howard
Chief Administrative Officer
and General Counsel
(Duly Authorized Officer)
31<PAGE>
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