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 JANUARY 26, 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 January 26, 1997.<PAGE>
American Skiing Company and Subsidiaries
Table of Contents
Part I - Financial Information.....................1
Item 1 Financial Statements .......................2
Condensed Consolidated Statement of Operations
(Unaudited) for the Quarters Ended January 26, 1997
and January 28, 1996..........................2
Condensed Consolidated Statement of Operations
(Unaudited) for the Six Months Ended January 26, 1997
and January 28, 1996..........................3
Condensed Consolidated Balance Sheet
(Unaudited) as of January 26, 1997 and January 28, 1996
4
Condensed Consolidated Balance Sheet
(Unaudited) as of January 26, 1997 and July 28, 1996 6
Condensed Consolidated Statement of Cash Flows
(Unaudited) for Six Months Ended January 26, 1997
and January 28, 1997..........................8
Notes to (Unaudited) Condensed Consolidated Financial Statements
10
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operation..............12
General...........................................12
Liquidity and Capital Resources...................12
Changes in Results of Operations..................13
Changes in Financial Condition....................16
Part II Other Information.........................21
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 Company
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.
1<PAGE>
American Skiing Company and Subsidiaries
Condensed Consolidated Statement of Operations
For the three Months
Ended
January 26, January 28,
1997 1996
(Unaudited) (Unaudited)
Revenues
Skiing, lodging and other $64,533,000 $26,451,000
operations
Real Estate 1,740,000 4,307,000
Total Revenues 66,273,000 30,758,000
Expenses
Cost of 28,852,000 14,184,000
Operations
Real Estate & Payroll 3,491,000 1,118,000
Taxes
Utilities 6,392,000 2,450,000
Insurance 1,838,000 469,000
S. G. & A. 7,096,000 2,927,000
Depreciation & 7,344,000 2,500,000
Amortization
Total Operating 55,013,000 23,648,000
Expenses
Income From Operations 11,260,000 7,110,000
Interest 5,478,000 783,000
Net Income before provision 5,782,000 6,327,000
for income taxes
Provision for Income Tax
Expense (benefit) 2,197,000 (329,000)
Net Income 3,585,000 6,656,000
2<PAGE>
American Skiing Company and Subsidiaries
Net income per common share $3.66
(note 5)
Retained Earnings, beginning 4,636,000 24,270,000
of the period
Subtract: 0 (205,000)
Distributions
Add: Net Income 3,585,000 6,656,000
Retained earnings, end $8,221,000 $30,721,000
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 Six Months Ended
January 26, January 28,
1997 1996
(Unaudited) (Unaudited)
Revenues
Skiing, lodging and other $76,074,000 $30,941,000
operations
Real Estate 3,309,000 4,694,000
Total Revenues 79,383,000 35,635,000
Expenses
Cost of 44,842,000 18,615,000
Operations
Real Estate & Payroll 5,246,000 1,487,000
Taxes
Utilities 7,726,000 2,810,000
Insurance 3,110,000 885,000
S. G. & A. 12,501,000 5,464,000
Depreciation & 8,871,000 2,827,000
Amortization
Total Operating 82,296,000 32,088,000
Expenses
Income (Loss) From (2,913,000) 3,547,000
Operations
Interest 13,071,000 1,453,000
Net Income (Loss) before (15,984,000) 2,094,000
provision for income taxes
Provision for Income Tax (6,074,000) (448,000)
Expense(benefit)
Net Income (Loss) (9,910,000) 2,542,000
4<PAGE>
American Skiing Company and Subsidiaries
Net income per common share ($10.13)
(note 5)
Retained Earnings, beginning 18,131,000 28,726,000
of the period
Subtract: 0 (547,000)
Distributions
Subtract: Net (Loss) (9,910,000) 2,542,000
Income
Retained earnings, end $8,221,000 $30,721,000
of period
See accompanying Notes to (Unaudited) Condensed
Consolidated Financial Statements.
5<PAGE>
American Skiing Company and Subsidiaries
Condensed Consolidated Balance Sheet
January 26, January 28, 1996
1997
(Unaudited) (Unaudited)
ASSETS
Current Assets
Cash and Short-term $3,441,000 $1,504,000
Investments
Investment held in 7,257,000 0
escrow
Accounts 2,947,000 4,649,000
Receivable
Income Taxes 6,074,000 0
Receivable
Inventories 6,728,000 2,298,000
Assets Held for Resale 0 0
Prepaid 3,618000 935,000
Expenses
Other Current 2,252,000 0
Assets
Total Current Assets 32,317,000 9,386,000
Property and 237,845,000 79,231,000
Equipment, net
Deferred Tax 858,000 1,044,000
Asset
Long term Investment 6,925,000 0
Goodwill 7,657,000 0
Prepaid Loan 7,099,000 0
Fees
Other Assets 3,737,000 324,000
TOTAL ASSETS $296,438,000 $89,985,000
See accompanying Notes to (Unaudited) Condensed Consolidated
Financial Statements.
6<PAGE>
American Skiing Company and Subsidiaries
Condensed Consolidated Balance Sheet
January 26, January 28, 1996
1997
(Unaudited) (Unaudited)
LIABILITIES & STOCKHOLDERS EQUITY
Current
Liabilities
Current portion of Long-term $8,383,000 $8,581,000
Debt
Accounts Payable and accrued 16,880,000 6,952,000
expenses
Federal Income Tax Payable 657,000 (146,000)
Due to Shareholder 4,754,000 0
Deposits and other Unearned 12,433,000 3,981,000
Revenue
Accrued Interest 1,586,000 0
Other Accrued Expenses 18,438,000 2,290,000
Total Current 63,131,000 21,658,000
Liabilities
Long-Term Debt 184,559,000 34,027,000
Deferred Income Taxes - 31,916,000 0
Long-term
Minority Interest 0 0
Other Long-Term Liabilities 4,839,000 1,803,000
TOTAL LIABILITIES 284,445,000 57,488,000
Stockholders'
Equity
Common Stock 10,000 116,000
Paid In Capital 3,762,000 1,660,000
Retained Earnings
8,221,000 30,721,000
Total Equity
11,993,000 32,497,000
TOTAL LIABILITIES AND EQUITY $296,438,000 $89,985,000
See accompanying Notes to (Unaudited) Condensed Consolidated
Financial Statements.
7<PAGE>
American Skiing Company and Subsidiaries
Condensed Consolidated Balance Sheet
January 26, July 28,
1997 1996
(Unaudited)
ASSETS
Current Assets
Cash and Short-term Investments $3,441,000 $4,087,000
Investments Held in Escrow 7,257,000 14,497,000
Accounts 2,947,000 2,458,000
Receivable
Income Taxes Receivable 6,074,000 0
Inventories 6,728,000 5,025,000
Assets Held for Resale 0 14,921,000
Prepaid Expenses 3,618,000 3,371,000
Other Current 2,252,000 2,975,000
Assets
Total Current Assets 32,317,000 47,334,000
Property and Equipment, net 237,845,000227,470,000
Deferred Tax Asset 858,000 0
Long Term Investments 6,925,000 4,343,000
Goodwill 7,657,000 6,540,000
Prepaid Loan Fees 7,099,000 7,911,000
Other Assets 3,737,000 5,134,000
TOTAL ASSETS $296,438,000$298,732,000
8<PAGE>
American Skiing Company and Subsidiaries
Condensed Consolidated Balance Sheet
January 26, July 28,
1997 1996
(Unaudited)
LIABILITIES & STOCKHOLDERS EQUITY
Current
Liabilities
Current portion of Long- $8,383,000 $22,893,000
term Debt
Accounts Payable 16,880,000 13,406,000
Federal Income Tax Payable 657,000 671,000
Due to Stockholder 4,754,000 5,375,000
Deposits and other 12,433,000 3,541,000
Unearned Revenue
Accrued Interest 1,586,000 1,491,000
Other Accrued Expenses 18,438,000 1,660,000
Total Current 63,131,000 49,037,000
Liabilities
Long-Term Debt 184,559,000 187,827,000
Deferred Income Taxes - 31,916,000 30,695,000
Long-term
Minority Interest 0 2,492,000
Other Long-Term 4,839,000 6,778,000
Liabilities
TOTAL LIABILITIES 284,445,000 276,829,000
Stockholders'
Equity
Common Stock 10,000 10,000
Paid In Capital 3,762,000 3,762,000
Retained Earnings 8,221,000 18,131,000
Total Equity 11,993,000 21,903,000
TOTAL LIABILITIES AND EQUITY $296,438,000$298,732,000
See accompanying Notes to (Unaudited) Condensed
Consolidated Financial Statements.
9<PAGE>
American Skiing Company and Subsidiaries
Condensed Consolidated Statement of Cash Flows
For the Six Months
Ended
January 26, January 28,
1997 1996
Cash flows from operating activities: (Unaudited) (Unaudited)
Net Income (Loss) ($9,910,000) $2,542,000
Non-cash items included in net income (loss)
depreciation and amortization 8,871,000 2,827,000
Deferred Income taxes 363,000
Cash flows from operating
activities before (676,000) 5,369,000
changes in assets and liabilities
Change in assets and liabilities
Decrease (Increase) in investments 7,240,000 0
held in escrow
Decrease (Increase) in Accounts (489,000) (3,335,000)
Receivable
Decrease (Increase) in Income Taxes (6,074,000) 0
Receivable
Decrease (Increase) in inventories (1,703,000) (917,000)
Decrease (Increase) in assets held for resale 0
14,921,000
Decrease (Increase) in prepaid (247,000) (365,000)
expenses
Decrease (Increase) in other current 723,000 0
assets
Decrease (Increase) in Other Assets 197,000 63,000
Increase (Decrease) accounts payable 3,474,000 2,942,000
Increase (Decrease) income taxes (14,000) (448,000)
payable
Increase (Decrease) in deposits and 8,892,000 3,444,000
unearned revenue
Increase (Decrease) in other accrued 95,000 0
Interest
Increase (Decrease) in other accrued 16,778,000 450,000
expenses
Cash flow provided by operating activities after
change in assets and 43,117,000 7,203,000
liabilities
Cash flows from investing activities:
Additions to Property and Equipment (18,351,000) (15,991,000)
Additions to Assets held for resale 0 0
Purchase of ski resort minority (2,492,000) 0
interest
10<PAGE>
American Skiing Company and Subsidiaries
Purchase of long term investments (2,582,000) 0
Other 0 0
Net cash provided (Used) for investing (23,425,000) (15,991,000)
activities
11<PAGE>
American Skiing Company and Subsidiaries
Cash flows from financing activities:
Reductions in Note payable to (621,000) (186,000)
Shareholder
Distributions to Shareholder 0 (547,000)
Additions (Reductions) to long (19,717,000) 9,354,000
term debt
Net cash provided (used) for in (20,338,000) 8,621,000
financing activities
Net increase (decrease) in cash and (646,000) (166,000)
short term investments
Cash and short term investments at 4,087,000 1,671,000
beginning of year
Cash and short term investments at end $3,441,000 $1,504,000
of period
See accompanying Notes to (Unaudited) Condensed Consolidated
Financial Statements.
12<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 January 26, 1997, July 28, 1996, and January
28, 1996, the results of operations for the quarter and six
months ended January 26, 1997 and January 28, 1996, and statement
of cash flows six months ended January 26, 1997 and January 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 January 26, 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)
13<PAGE>
American Skiing Company and Subsidiaries
Total liabilities $(86,317,000)
Total $104,620,000
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 $269,000.
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.
14<PAGE>
American Skiing Company and Subsidiaries
5. Net Income per Common Share. Net income per common
share figures are based on the average shares outstanding during
the second quarter of fiscal 1997 and the two quarters ended
January 26, 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 six months ended January 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.
15<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 six months
ended January 26, 1997, and (b) a comparison of financial
condition between the quarter ended and the first six months of
fiscal 1997 as compared to the quarter ended and the first six
months of fiscal 1996, and (iii) the results of operations for
the quarter ended and the first six months of fiscal 1997 as
compared to the corresponding quarter ended and the first six
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, electric utility restructuring,
including the ongoing state and federal activities; future
economic conditions; earnings-retention and dividend-payout
policies; developments in the legislative, regulatory, and
competitive environments in which the Company operates; and other
circumstances that could affect anticipated revenues and costs,
such as unscheduled maintenance or repair requirements and
compliance with laws and regulations.
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 six months of fiscal 1997 generated a net loss of
$9,910,000. Cash flow from operations was sufficient to cover
fixed charges for the period. As anticipated, the Company
reduced utilization of its senior credit facility by $29 million
from the close of the first quarter. Management expects to
reduce its utilization of its senior credit facility further to
16<PAGE>
American Skiing Company and Subsidiaries
approximately 15% of current availability by the close of the
third quarter.
The Company's liquidity was 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 were used to reduce indebtedness under the
Company's senior credit facility and availability on the senior
credit facility was reduced to $57.5 million at that time. In
accordance with its existing terms, the Company's senior credit
facility, was further reduced on January 15, 1997 to a maximum
availability of $50 million.
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 and first and
second quarters of fiscal 1998 and a significant summer capital
program.
2. Capital Resources. The Company's only material
commitments for capital expenditures as of January 26, 1997 were
completion of construction of the Grand Summit at Attitash/Bear
Peak, through its wholly-owned subsidiary Grand Summit Resort
Properties, Inc. The approximate $13.3 million cost of the Grand
Summit at Attitash/Bear Peak is funded through approximately
$4,500,000 in cash provided by the Company, and a $8,500,000
construction loan provided through Key Bank of Maine. 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.
The Company has requested that availability under its senior
credit facility be increased back to the $65 million level of
last year based upon results of its third quarter operations.
The Company does not anticipate any other 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 third quarter are known; however, the Company
expects to implement a capital program in a range of $20 million
to $30 million. The capital program is subject to funding, in
part, through the requested increase in the Company's senior
credit facility. Binding commitments for the increase in the
senior credit facility have not been received. Construction of
Grand Summit Hotels at up to four resorts scheduled for summer
1997 are expected to be funded through borrowings by the
Company's wholly-owned subsidiary, Grand Summit Resort
Properties, Inc., without recourse to American Skiing Company or
any of its other subsidiaries.
Changes in Results of Operations
17<PAGE>
American Skiing Company and Subsidiaries
Changes for the Second Quarter of Fiscal 1997 compared to the
Second Quarter of Fiscal 1996.
1. Revenues. Revenues from operations increased from
$26,451,000 in the second quarter of fiscal 1996 to $64,533,000
for the second quarter of fiscal 1997. The $38,082,000 increase
is due to the addition of $40,493,000 in revenues from the SKI
resorts, less $2.2 million in revenues generated by the divested
Cranmore resort during the same period in 1996.
Revenues from Real Estate decreased from $4,307,000 in the
second quarter of fiscal 1996 to 1,740,000 in the second quarter
of fiscal 1997. This $2,567,000 decrease is primarily due to all
quartershares at the Summit Hotel at Sunday River being fully
sold out in July, 1996. The Company expects to complete
construction of its new Grand Summit and Crown Club quartershare
hotel in Bartlett, New Hampshire in March, 1997 and begin to
close over $5.5 million of quartershare sales currently under
contract by the end of the third quarter.
2. Cost of Operations. Cost of operations increased from
$14,184,000 in the second quarter of fiscal 1996 to $28,852,000
in the second quarter of fiscal 1997. This increase resulted
principally from inclusion of cost of operations at the S-K-I
Resorts, fixed expenses and increases in snow making due to
unusually adverse weather conditions in the second quarter.
3. Real Estate and Payroll Taxes. This item increased
predominantly due to the addition of the S-K-I Resorts. Expenses
at the Company's Pre-Merger Resorts were comparable to the same
second quarter in fiscal 1996.
4. Utilities. Utilities expense increased from $2,450,000
for the second quarter of fiscal 1996 to $6,392,000 for the first
second quarter of fiscal 1997. The increase was primarily caused
by the inclusion of the S-K-I Resorts which accounted for
approximately 86% of the increase. The remaining 14% was
attributable to the Resorts experiencing unusually adverse
weather conditions requiring increased snowmaking and resurfacing
in December and January. Additionally, rate levels are
approximately 5% higher than the previous year at all resorts..
5. Insurance. Insurance increased from $469,000 in the
second quarter of fiscal 1996 to $1,838,000 for the second
quarter of fiscal 1997. This increase is attributable to the
inclusion of the S-K-I Resorts, notwithstanding a $760,000
reduction in insurance costs for the comparable period of fiscal
1996.
18<PAGE>
American Skiing Company and Subsidiaries
6. Selling, General and Administrative. SG&A expense
increased from $2,927,000 in the second quarter of fiscal 1996 to
$7,096,000 in the second quarter of fiscal 1997. 91% of the
increase resulted from the inclusion of the S-K-I Resorts. The
Company's Pre-Merger Resorts showed a 10% increase compared to
the same quarter of fiscal 1996. Increased marketing campaigns
and start up expenses of American Skiing Company accounted for
the increase.
7. Depreciation & Amortization. Depreciation and
amortization increased from $2,500,000 to $7,344,000 from the
second quarter of fiscal 1996 compared to the second quarter of
fiscal 1997. Approximately 92% of this increase relates to the
acquisition of the S-K-I Resorts and depreciation on
approximately $14 million in capital expenditures at the S-K-I
Resorts during the summer of 1996. The remaining 8% resulted
from capital improvements over last year at Pre-Merger Resorts.
8. Interest. Interest increased from $783,000 in the
second quarter of fiscal 1996 to $5,478,000 in the second 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.
9. Income Tax Expense. Income tax expense increased from
$329,000 benefit for the second quarter of fiscal 1996 to an
expense of $2,197,000 for the second quarter of fiscal 1997.
This increase is attributable principally to two factors: (i) the
conversion of the most successful Pre-Merger Resorts from "S"
corporations (which had no direct corporate income tax expense in
fiscal 1996 due to their "S" status), to "C" corporations for
federal income tax purposes, (ii) the inclusion of the net income
of the SKI Resorts for the quarter.
Changes in Results of Operations
Changes for the First Six Months of Fiscal 1997 compared to the
First Six Months of Fiscal 1996.
1. Revenues. Revenues increased from $35,635,000 in the
first six months of fiscal 1996 to $79,383,000 for the first six
months of fiscal 1997. The majority of this increase resulted
from including revenues generated by the S-K-I Group resorts (the
"S-K-I Resorts). The Pre-Merger Resorts showed a 16% reduction
in revenues, due to the divestiture of Cranmore and reduced real
estate revenues at Sunday River.
19<PAGE>
American Skiing Company and Subsidiaries
2. Cost of Operations. Cost of operations increased from
$18,615,000 in the first six months of fiscal 1996 to $44,842,000
in the first six months of fiscal 1997. This increase resulted
principally from inclusion of cost of operations at the S-K-I
Resorts, fixed expenses and increases in snowmaking resulting
from adverse weather conditions.
3. Real Estate and Payroll Taxes. This item increased
predominantly due to the addition of the S-K-I Resorts. Expenses
at the Company's Pre-Merger Resorts were less than 2% higher
comparable to the same six months in fiscal 1996.
4. Utilities. Utilities Expense increased from $2,810,000
for the first six months of fiscal 1996 to $7,726,000 for the
first six months of fiscal 1997. The increase was primarily
caused by the inclusion of the S-K-I Resorts which accounted for
approximately 85% of the increase. The remaining 15% was
attributable to experiencing unusually adverse weather conditions
requiring increased snowmaking and resurfacing in December and
January. Additionally, rate levels were approximately 5% higher
than the comparable period for fiscal 1996 at all resorts.
5. Insurance. Insurance increased from $885,000 in the
first six months of fiscal 1996 to $3,110,000 for the first six
months of fiscal 1997. This increase is attributable to
acquisition of the S-K-I Resorts, notwithstanding reductions in
insurance costs for those resorts over the comparable period of
fiscal 1996.
6. Selling, General and Administrative. SG&A expense
increased from $5,464,000 in the first six months of fiscal 1996
to $12,501,000 in the first six months of fiscal 1997. 94% of
the increase resulted from the inclusion of the S-K-I Resorts.
The Company's Pre-Merger Resorts showed a 10% increase compared
to the prior fiscal year's six months. Increased marketing
campaigns and start up expenses of American Skiing Company
accounted for the increase.
7. Depreciation & Amortization. Depreciation and
amortization increased from $2,827,000 to $8,871,000 from the
first six months of fiscal 1996 compared to the first six months
of fiscal 1997. Approximately 79% of this increase relates to
the acquisition of the S-K-I Resorts, and depreciation of the $14
million in capital expenditures made at those resorts during the
summer of 1996. The remainder resulted from capital improvements
over the last year at the Pre-Merger Resorts.
20<PAGE>
American Skiing Company and Subsidiaries
8. Interest. Interest increased from $1,453,000 in the
first six months of fiscal 1996 to $13,071,000 in the first six
months 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.
9. Income Tax Benefits. Income tax benefit increased from
$448,000 for the first six months of fiscal 1996 to $6,074,000
for the first six months of fiscal 1997 attributable to
seasonally related first quarter losses.
Changes in Financial Condition
Changes for the Second Quarter of Fiscal 1997 Compared to the
Second Quarter of Fiscal 1996.
1. Cash and Short Term Investments. Cash and short term
investments increased approximately $1.9 million. This increase
results from the inclusion of the S-K-I resorts and a reduction
in the cash from Pre-Merger Resort operations.
2. Investments Held in Escrow. The increase of $7.3 million
is wholly attributable to the interest escrow account required in
connection with the Company's 12% Senior Subordinated Notes due
2006.
3. Accounts Receivable. Accounts receivable decreased 37%
from $4,649,000 to $2,947,000 in fiscal 1997. Accounts
receivable at the Pre-Merger Resorts decreased 68% over the year
earlier period, principally due to the timing of condominium
association owner payments.
4. Income Taxes Receivable. The $6.1 million increase is
attributable to (i) the inclusion of the S-K-I Resorts and the
inclusion of their loss in the first six months and (ii) the
change in the federal income tax status of several subsidiaries
from "S" to "C" companies in connection with the merger.
5. Inventories. Inventory increased $4.4 million over the
prior year's second quarter end. The increase is principally due
to the inclusion of the S-K-I Resorts. There were minor
increases in the inventory at the Company's Pre-Merger Resorts of
approximately $340,000.
21<PAGE>
American Skiing Company and Subsidiaries
6. Prepaid Expenses. The increase of $2.7 million in
prepaid expenses is entirely attributable to the inclusion of the
S-K-I Resorts.
7. Other Current Assets. The $2.3 million in other current
assets is comprised of the current portion of prepaid loan fees,
the current portion of deferred taxes and other miscellaneous
current assets that relate entirely to post-merger transactions.
8. Property and Equipment, Net. Fixed assets increased
$158.6 million. The change can be broken down as follows. The
acquisition of the ski resorts increased the balance over $150
million. The divestiture of Cranmore accounts for a $3 million
decrease. Depreciation reduced the balance by approximately $14
million. Capital expenditures were approximately $18 million for
resort operations and approximately $7 million in hotel
development.
9. Long-Term Investments. Long-Term Investments increased
$6.9 million. This account is comprised of the long-term
investments constituting reserves of S-K-I Insurance Company
which are approximately $4.0 million and the $2.75 million note
received in conjunction with the divestiture of Cranmore and
Waterville.
10. Goodwill. The $7.6 million increase is attributable
entirely to the inclusion of the S-K-I Resorts.
11. Prepaid Loan Fees. The Company incurred $7.1 million in
loan fees related to the financing of the S-K-I Limited
acquisition. These fees represent a one-time non-recurring item.
Approximately $7.0 million is included in this account with the
balance included in "Other Current Assets."
12. Other Assets. These items increased $3.4 million.
This increase is primarily from the inclusion of the S-K-I
Resorts. There were some minor increases at the Company's Pre-
Merger Resorts related to the costs of research and permitting
real estate development projects.
13. Accounts Payable and Accrued Expenses. Accounts
payable increased by $9.9 million due in major part to the
inclusion of the S-K-I Resorts. Accounts payable and accrued
expenses at the Pre-Merger Resorts increased approximately $1.4
million.
22<PAGE>
American Skiing Company and Subsidiaries
14. Due to Shareholder. This $4.7 million item is a note
payable to Leslie B. Otten established prior to the Acquisition
to fund Mr. Otten's personal tax liability generated by certain
of the Pre-Merger Resorts' federal income tax status as _S_
corporations.
15. Deposits and Unearned Revenue. This item is comprised
of season pass sales, multi day ticket products good at all the
resorts and deposits on future lodging visits. Of the $8.5
million increase, approximately $600,000 is attributable to
operation of the Pre-Merger Resorts, while the remainder is from
the inclusion of the S-K-I Resorts.
16. Accrued Interest. Accrued Interest increased $1.5
million. This increase is principally attributable to 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.
17. Long-Term Debt. Long-term debt increased by $150.5
million. The increase in long-term debt is directly attributable
to (i) the financing of the Acquisition, and (ii) the financing
of approximately $18 million in capital improvement at the
Company's resorts during the first six months.
18. Other Accrued Expenses. Other accrued expenses
increased $16.8 million. The increase is primarily from the
addition of the SKI Resorts and real estate leases and other
payments during the ski season that are determined as a
percentage of revenue.
19. Deferred Income Taxes. The increase of $32 million
dollars in deferred income taxes is attributable to three
principal sources: (i) approximately $6 million of the increase
relates to several subsidiaries that were previously _S_
corporations for federal income tax purposes losing their _S_
status as a result of becoming subsidiaries of the Company; (ii)
S-K-I Limited carried approximately $10 million of deferred taxes
into the merger; and (iii) approximately $15.3 million of the
increase relates to basis adjustment in conjunction with the
purchase of the S-K-I Resorts. Assets were adjusted upward to
equal the purchase price in accordance with generally accepted
accounting principles for financial reporting purposes, while
these same assets are not adjusted for tax reporting purposes.
20. Other Long-Term Liabilities. Other long term
liabilities increased $3.0 million. This is almost entirely
23<PAGE>
American Skiing Company and Subsidiaries
related to the acquisition of the S-K-I companies. Less than one
percent relates to the Pre-Merger Resorts.
21. Paid in Capital. Paid in capital increased $2.1
million. The increase results both from capital contributed to
the Company on a pre-merger basis and additional capital
contributed through purchase of investment units consisting of
both the Company's 13 /% Subordinated Discount Notes and its
common stock.
22. Retained Earnings. Retained earnings decreased $22.5
from January 28, 1996 to January 26, 1997. The decrease is
attributable to the following factors.
1) $5.2 million from the establishment of the note payable
to Mr. Otten to fund _S_ corporation tax liability;
2) $1.6 million from the payment of estimated tax payments
on behalf of Mr. Otten from tax liability generated from
companies that were previously S corporations.
3) $15.4 net loss for the period February 1, 1996 to January
28, 1997.
Changes in Financial Condition
Changes for the First Six months of Fiscal 1997 Compared to Year-
End Fiscal 1996.
1. Investments Held in Escrow. Investments held in escrow
decreased $7.2 million. This is entirely from the scheduled
interest payment on January 15, 1997 in connection with the
Company's 12% Senior Subordinated Notes due 2006.
2. Income Tax Received. The increase of $6.1 million are
attributable in full to the loss experienced by the Company in
the first six months of fiscal 1997.
3. Inventories. Inventories increased $1.7 million from
July 28, 1996 to January 26, 1997. This is primarily due to the
increase in inventory required during the operating season.
4. Assets Held for Resale. Assets held for resale
decreased $14.9 million. This is due to the divestiture of
Waterville and Cranmore as required by the consent decree with
the DOJ.
24<PAGE>
American Skiing Company and Subsidiaries
5. Property, Plant and Equipment. Increased $10.4 million
and is from capital expenditures of $18.8 million net of $8.4
million in depreciation expense.
6. Long Term Investment. Long term investments increased
primarily from the $2.7 million dollar note received in
conjunction with the divestiture of Waterville and Cranmore.
7. Goodwill. Goodwill increased $1.1 million. Goodwill
increased from a change in the purchase accounting related to the
acquisition of SKI, Ltd. This increase relates to the
divestiture of Waterville and Cranmore and classifying the
expenses related to maintaining the properties until sold, as
required by the DOJ consent decree, as a reduction in the
purchase price allocated to the assets divested.
8. Other Assets. Other assets decreased $1.4 million
related to the development and sale of Locke Mountain Townhouses
at Sunday River.
9. Current Portion of Long Term Debt. Current portion of
long term debt decreased $14.5 million. This decrease is from
the divestiture of Waterville and Cranmore, and having cash from
operations applied against the senior credit facility.
10. Accounts Payable and Accrued Expenses. Accounts
payable and accrued expenses increased $3.5 million, which is
primarily related to the increase in operating expenses related
to the ski season.
11. Deposits and Unearned Revenue. Deposits and unearned
revenue increased $8.9 million. This increase is related to
lodging deposits, multi-day ticket products that can be used at
all the resorts and unearned season pass revenue.
12. Other Accrued Expenses. Other accrued expenses
increased $16.8 million. The increase in this account is
related to real estate leases and other payments during the ski
season that are determined as a percentage of revenue.
13. Minority Interest. Minority interest decreased $2.5
million. This is related to acquiring the remaining 49% of
Sugarloaf that is mentioned in the footnote number 2.
25<PAGE>
American Skiing Company and Subsidiaries
14. Other Long Term Liabilities. Other long term
liabilities decreased $1.9 million. This is primarily related to
the scheduled repayments of loans and capital leases.
15. Retained Earnings. Retained earnings decreased $9.9
million and is entirely related to the loss the Company
experienced during the first six months of operations for fiscal
year 1997.
26<PAGE>
American Skiing Company 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.
AMERICAN SKIING COMPANY
Date: March 12, 1997
Thomas M. Richardson
Senior Vice President Finance
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Date: March 12, 1997
Christopher E. Howard
Chief Administrative Officer
and General Counsel
(Duly Authorized Officer)
27<PAGE>
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<ARTICLE> 5
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 12-MOS
<FISCAL-YEAR-END> JUL-27-1997 JUL-27-1997 JUL-28-1996
<PERIOD-END> JAN-26-1997 JAN-26-1997 JUL-28-1996
<CASH> 3,441,000 3,441,000 4,087,000
<SECURITIES> 7,257,000 7,257,000 14,497,000
<RECEIVABLES> 2,947,000 2,947,000 2,458,000
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<INVENTORY> 6,728,000 6,728,000 5,025,000
<CURRENT-ASSETS> 32,317,000 32,317,000 47,334,000
<PP&E> 237,845,000 237,845,000 227,470,000
<DEPRECIATION> 0 0 0
<TOTAL-ASSETS> 296,438,000 296,438,000 298,732,000
<CURRENT-LIABILITIES> 63,131,000 63,131,000 49,037,000
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<SALES> 66,273,000 79,383,000 73,422,000
<TOTAL-REVENUES> 66,273,000 79,383,000 73,422,000
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<TOTAL-COSTS> 55,013,000 82,296,000 65,715,000
<OTHER-EXPENSES> 0 0 0
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<INTEREST-EXPENSE> 5,478,000 13,071,000 4,699,000
<INCOME-PRETAX> 5,782,000 (15,984,000) 1,561,000
<INCOME-TAX> 2,197,000 (6,074,000) 3,906,000
<INCOME-CONTINUING> 3,585,000 (9,910,000) (2,237,000)
<DISCONTINUED> 0 0 0
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<NET-INCOME> 3,585,000 (9,910,000) (2,237,000)
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