United States
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q A
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTER ENDED JANUARY 26, 1997
_____________________________
Commission File Number 333-9763
_____________________________
ASC East, Inc.
(Exact name of registrant as specified in its charter)
Maine 01-0503382
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
P.O. Box 450
Bethel, Maine 04217
(Address of principal executive office) (Zip Code)
(207) 824-5196
(Registrant's telephone number, including area code)
Original 10Q filed under American Skiing Company
(Former name, former address and former fiscal year, if changed since
last report.)
Indicated by checkmark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes [X] No [ ]
The number of shares outstanding of each of the issuer's classes of
common stock was 978,300 shares of common stock $.01 par value
outstanding as at January 26, 1997.
[PAGE]
ASC East, Inc. and Subsidiaries
Table of Contents
Part I - Financial Information ......................................1
Item 1 Financial Statements ........................................2
Condensed Consolidated Statement of Operations
(Unaudited) for the Three Months 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 July 28, 1996 ...........4
Condensed Consolidated Statement of Cash Flows
(Unaudited) for the Six Months Ended January 26, 1997
and January 28, 1997 ...........................................6
Notes to (Unaudited) Condensed Consolidated Financial Statements ....8
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operation ................................17
General ............................................................17
Liquidity and Capital Resources ....................................17
Changes in Results of Operations ...................................18
Changes in Financial Condition .....................................21
Part II Other Information ..........................................23
i[PAGE]
ASC East, Inc. and Subsidiaries
Part I - Financial Information
Item 1
Financial Statements
This Form 10-Q A is filed by ASC East, Inc. 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 ASC
East, Inc., the subsidiary registrants listed above and its non-
guarantor wholly-owned subsidiaries Ski Insurance Company, Mountain
Water Company, Club Sugarbush, Inc., Grand Summit Resort Properties,
Inc., and Killington West, Ltd. on a consolidated basis.
1[PAGE]
ASC East, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations
(In thousands except share and per share amounts)
For the Three Months Ended
January 26, 1997 January 28, 1996
(Unaudited) (Unaudited)
Net revenues:
Resort $59,418 $26,451
Real estate 1,740 4,307
--------- -------
Total net revenues 61,158 30,758
Operating expenses:
Resort 38,995 15,002
Real estate 935 3,219
Marketing, general and administrative 7,709 2,927
Depreciation & amortization 7,344 2,500
--------- -------
Total operating expenses 54,983 23,648
--------- -------
Income from operations 6,175 7,110
Interest expense 5,557 783
--------- -------
Net income before provision for income taxes 618 6,327
Provision (benefit) for income tax expense 235 (329)
Net income $383 $6,656
========= =======
Net income per common share (note 6) $0.39
=========
Retained earnings, beginning of the period $7,838 $24,270
Subtract: distributions 0 (205)
Add: Net income 383 6,656
--------- -------
Retained earnings, end of period $8,221 $30,721
========= =======
See accompanying Notes to (Unaudited) Condensed Consolidated Financial
Statements.
2[PAGE]
ASC East, Inc. and Subsidiaries
Condensed Consolidated Statement of Operations
(in thousands except share and per share amounts)
For the Six Months Ended
January 26, 1997 January 28, 1996
(Unaudited) (Unaudited)
Net revenues:
Resort $71,146 $30,941
Real estate 3,309 4,694
------- ------
Total net revenues 74,455 35,635
Operating expenses:
Resort 54,029 20,317
Real estate 1,967 3,480
Marketing, general and administrative 12,501 5,464
Depreciation & amortization 8,871 2,827
------- ------
Total operating expenses 77,368 32,088
------- ------
Income (loss) from operations (2,913) 3,547
Interest expense 13,071 1,453
------ ------
Net income (loss) before provision
for income taxes (15,984) 2,094
Benefit for income tax expense (6,074) (448)
------- -------
Net income (loss) $(9,910) $2,542
======= ======
Net loss per common share (note 6) $(10.13)
=======
Retained earnings, beginning of
the period $18,131 $28,726
Subtract: Distributions - (547)
Add: Net income (loss) (9,910) 2,542
------ -------
Retained earnings, end of period $8,221 $30,721
====== ======
See accompanying Notes to (Unaudited) Condensed Consolidated
Financial Statements.
3[PAGE]
ASC East, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
(in thousands)
January 26, 1997 July 28, 1996
(Unaudited) (Unaudited)
ASSETS
Current assets
Cash and short-term investments $3,441 $4,087
Investments held in escrow 7,257 14,497
Accounts receivable 2,947 2,458
Income taxes receivable 6,074 -
Inventory 6,728 5,025
Assets held for resale - 14,921
Prepaid expenses 3,618 3,371
Other current assets 2,252 2,975
------- -------
Total current assets 32,317 47,334
Property and equipment, net 237,845 227,470
Deferred tax asset 858 -
Long-term investments 6,925 4,343
Goodwill 7,657 6,540
Prepaid loan fees 7,099 7,911
Other assets 3,737 5,134
------- -------
Total assets $296,438 $298,732
======= =======
See accompanying Notes to (Unaudited) Condensed Consolidated
Financial Statements.
4[PAGE]
ASC East, Inc. and Subsidiaries
Condensed Consolidated Balance Sheet
(in thousands)
January 26,1997 July 28, 1996
(Unaudited) (Unaudited)
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities
Current portion of long-term debt $8,383 $22,893
Accounts payable 16,880 13,406
Federal income tax payable 657 671
Due to stockholder 4,754 5,375
Deposits and other unearned revenue 12,433 3,541
Accrued interest 1,586 1,491
Other accrued expenses 18,438 1,660
------ ------
Total current liabilities 63,131 49,037
Long-term debt 184,559 187,827
Deferred income taxes, long-term 31,916 30,695
Minority interest - 2,492
Other long-term liabilities 4,839 6,778
------- -------
Total liabilities 284,445 276,829
Stockholders' equity
Common stock 10 10
Paid in capital 3,762 3,762
Retained earnings 8,221 18,131
------ ------
Total equity 11,993 21,903
------- -------
Total liabilities and equity $296,438 $298,732
======= =======
See accompanying Notes to (Unaudited) Condensed Consolidated
Financial Statements.
5[PAGE]
ASC East, Inc. and Subsidiaries
Condensed Consolidated Statement of Cash Flows
(in thousands)
For the Six Months Ended
January 26, 1997 January 28, 1996
Cash flows from operating activities (Unaudited) (Unaudited)
Net income (loss) $(9,910) $2,542
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Depreciation and amortization 8,871 2,827
Deferred income taxes 363 -
Decreases (increases) in assets:
Investments held in escrow 7,240 -
Accounts receivable (489) (3,335)
Income taxes receivable (6,074) -
Inventory (1,703) (917)
Assets held for resale 14,921 -
Prepaid expenses (247) (365)
Other current assets 723 -
Other assets 197 63
Increases (decreases) in liabilities:
Accounts payable and other accrued expenses 20,252 3,392
Income taxes payable (14) (448)
Deposits and unearned revenue 8,892 3,444
Accrued interest 95 -
------- -------
Cash flow provided by operating activities 43,117 7,203
Cash flows from investing activities:
Additions to property and equipment (18,351) (15,991)
Purchase of ski resort minority interest (2,492) -
Purchase of long-term investment (2,582) -
-------- -------
Net cash used in investing activities (23,425) (15,991)
See accompanying Notes to (Unaudited) Condensed Consolidated Financial
Statements.
6[PAGE]
ASC East, Inc. and Subsidiaries
Cash flows from financing activities:
Reductions in note payable to shareholder (621) (186)
Distributions to shareholder - (547)
Additions (reductions) to long-term debt (19,717) 9,354
------- -------
Net cash provided by (used in) financing
activities (20,338) 8,621
Net decrease in cash and short-term
investments (646) (167)
Cash and short-term investments at
beginning of year 4,087 1,671
------ -------
Cash and short-term investments at $3,441 $1,504
end of period ====== =======
See accompanying Notes to (Unaudited) Condensed Consolidated
Financial Statements.
7[PAGE]
ASC East, Inc. and Subsidiaries
Notes to (Unaudited) Condensed Consolidated Financial Statements
1. Amendments to 10Q. During the process of compiling the
information required to file the first quarter of fiscal 1998, certain
adjustments and reclassifications were made to the previously filed
information for the first quarter of fiscal 1997 which has impacted the
second quarter of fiscal 1997. The following schedules show the effects
on the originally filed information for the second quarter of fiscal
1997.
<TABLE>
Restatement of the statement of operations for the three months ended
January 26, 1997 (in thousands except share and per share amounts)
<CAPTION>
Amounts as Amounts as
originally restated in
stated in the the 10Q
10Q filed Purchase Correction filed with
with the SEC Accounting of clerical the SEC
March 12, 1997 Reclassification Adjustment error February 17, 1998
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net revenues:
Resort $64,533 $(1,852) $1,037 $(4,300) $59,418
Real estate 1,740 - - - 1,740
________________________________________________________________________________
Total net revenues 66,273 (1,852) 1,037 (4,300) 61,158
Operating expenses:
Resort 39,638 (1,852) 1,209 - 38,995
Real estate 935 - - - 935
Marketing, general
and administrative 7,096 - 613 - 7,709
Depreciation and
amortization 7,344 - - - 7,344
________________________________________________________________________________
Total operating
expenses 55,013 (1,852) 1,822 - 54,983
Income (loss) from
operations 11,260 - (785) (4,300) 6,175
Interest expense 5,478 - 79 - 5,557
________________________________________________________________________________
Net income (loss)
before provision
(benefit) for income
taxes 5,782 - (864) (4,300) 618
Provision (benefit)
for income taxes 2,197 - (328) (1,634) 235
________________________________________________________________________________
Net income (loss) $3,585 $- $(536) $(2,666) $383
=================================================================================
Net income (loss)
per weighted average
common share
outstanding $3.66 $- $(0.55) $ (2.72) $0.39
=================================================================================
Retained earnings
beginning of period $4,636 $- $536 $2,666 $7,838
Add:net income (loss) 3,585 - (536) (2,666) 383
________________________________________________________________________________
Retained earnings
end of period $8,221 $- $- $- $8,221
=================================================================================
</TABLE>
8[PAGE]
ASC East, Inc. and Subsidiaries
<TABLE>
Restatement of the statement of operations for the six months ended
January 26,1997
(in thousands except share and per share amounts)
<CAPTION>
Amounts as Amounts as
originally stated restated in the
in the 10Q filed 10Q filed with
with the SEC the SEC
March 12, 1997 Reclassifications February 17, 1998
_____________________________________________________________
<S> <C> <C> <C>
Net revenues:
Resort $76,074 $(4,928) $71,146
Real estate 3,309 - 3,309
______________________________________________________________
Total net revenues 79,383 (4,928) 74,455
Operating expenses:
Resort 58,957 (4,928) 54,029
Real estate 1,967 - 1,967
Marketing, general
and administrative 12,501 - 12,501
Depreciation and
amortization 8,871 - 8,871
______________________________________________________________
Total operating expenses 82,296 (4,928) 77,368
Loss from operations (2,913) - (2,913)
Interest expense 13,071 - 13,071
______________________________________________________________
Net loss before
benefit for income taxes (15,984) - (15,984)
Benefit for income taxes (6,074) - (6,074)
______________________________________________________________
Net loss $(9,910) $- $(9,910)
==============================================================
Net loss per weighted
average common share
outstanding $(10.13) $- $(10.13)
==============================================================
Retained earnings
beginning of period $18,131 $- $18,131
Add: net loss (9,910) - (9,910)
Retained earnings end
of period $8,221 $- $8,221
______________________________________________________________
</TABLE>
Reclassifications - The Company has a captive insurance company and
charges the various subsidiaries for insurance coverage. These amounts
were incorrectly included in both resort revenues and resort operating
expenses. The Company sold various parcels of land in the first and
second quarter of fiscal 1997. The total sales price was recorded to
revenue with an equal and corresponding entry to resort operating
expenses. The Company incorrectly included the collection of sales tax
as an operating revenue and an operating expense. The total amount of
sales tax collected has been removed from both operating revenue and
operating expense.
Purchase accounting adjustment - In connection with the acquisition
of S-K-I, Ltd. the Company entered into a consent decree with the United
States Department of Justice and agreed to divest the Waterville Valley
and Mt. Cranmore resorts within 90 days after the closing of the S-K-I,
Ltd. Purchase (the "Holding Period"). The Company had incorrectly
recorded a net loss of $536,000 incurred in connection with the operation
of the two resorts during the Holding Period in the statement of operations
in the October 27, 1996 Form 10-Q as originally filed. The Company
filed Form 10-Q/A for October 27, 1996 on December 10, 1997 which included
an adjustment to properly reflect the net carrying value of the related
assets to be disposed of in the balance sheet and remove the impact of
such items on the statement of operations. The accompanying Form 10-Q/A
properly includes the impact of this adjustment for the quarter ending
January 26, 1997.
Correction of clerical error - The Company sells season passes to
its customers during its fiscal year which allow individuals to ski at
its resorts for the entire season. As the ski season extends generally
from November to April, the Company recognizes revenue pertaining to
season passes in the related second and third quarter of its fiscal
year. Revenues from season passes in the Company's fourth and first
quarters are deferred until the revenue is earned in the second and
9[PAGE]
ASC East, Inc. and Subsidiaries
third quarters. The Company incorrectly deferred certain season pass
revenue totaling $4.3 million twice in preparing its condensed
consolidated financial statements included in the October 27,1996 Form
10-Q as originally filed, which it subsequently amended to properly
state the deferral of season pass revenues in the October 27, 1996 Form
10-Q/A filed on December 10, 1997. The Company has adjusted the
amounts in the accompanying Form 10-Q/A to properly state the
recognition of second quarter season pass revenues previously recorded
twice.
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
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 the statement of cash flows for the 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 Form 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 January
26, 1997.
10[PAGE]
ASC East, Inc. and Subsidiaries
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
___________
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 $17.5 million, with $14.8 million paid in
cash at closing and $2.7 million 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. 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.
11[PAGE]
ASC East, Inc. and Subsidiaries
4. 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.
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 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.
7. Acquisitions. The Company purchased the Pico Ski Mountain Resort
on December 9, 1996. This resort is located in Sherburne, Vermont in
close proximity to the Killington resort. The purchase price of the
resort was $2.9 million in cash and $1.6 million present value of
contingent liabilities based upon the occurrence of certain future
events relating to the development and growth of the resort.
8. Guarantors of Debt. The 12% Senior Subordinated Notes and the
13.75% Discount Subordinated Notes are fully and unconditionally
guaranteed by the Company and all of its subsidiaries with the exception
of Grand Summit Resort Properties, Inc., Ski Insurance, Killington West,
Ltd., Mountain Water Company, and Club Sugarbush, Inc., (the non-
guarantors). Prior to the acquisition and issuance of the Notes and
Subordinated Notes on June 28, 1996, the bank loan agreements were
collateralized by virtually all of the assets of the companies
comprising the Company. The guarantor subsidiaries are wholly-owned
subsidiaries of the company and the guarantees are fully, unconditional,
and joint and several. The guarantor information for the period ended
January 26, 1997, is as follows:
12[PAGE]
ASC East, Inc. and Subsidiaries
<TABLE>
Statement of operations for the six months ended January 26, 1997
(in thousands)
<CAPTION>
Guarantor Non-Guarantor Eliminating Consolidated
ASC East Subsidiaries Subsidiaries Entries ASC East
______________________________________________________________________
<S> <C> <C> <C> <C> <C>
Net revenues:
Resort $553 $70,091 $834 $(332) $71,146
Real estate - 3,309 - - 3,309
Total net revenues 553 73,400 834 (332) 74,455
Operating expenses:
Resort - 53,495 866 (332) 54,029
Real estate - 1,967 - - 1,967
Marketing, general
and administrative 1,643 10,835 23 - 12,501
Depreciation and
amortization 918 7,938 15 - 8,871
______________________________________________________________________
Total operating
expenses 2,561 74,235 904 (332) 77,368
Loss from operations (2,008) (835) (70) - (2,913)
Interest expense 9,838 3,230 3 - 13,071
______________________________________________________________________
Net loss before benefit
for income taxes (11,846) (4,065) (73) - (15,984)
Benefit for income
taxes (5,857) (190) (27) - (6,074)
______________________________________________________________________
Net loss $(5,989) $(3,875) $(46) $- $(9,910)
</TABLE>
13[PAGE]
ASC East, Inc. and Subsidiaries
<TABLE>
Balance Sheet at January 26, 1997
(in thousands)
<CAPTION>
ASC East Guarantor Non-Guarantor Eliminations Consolidated
Subsidiaries Subsidiaries ASC East
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S> <C> <C> <C> <C>
ASSETS
Current assets
Cash and short-term
investments $ - $3,243 $198 $ - $3,441
Investment held in escrow 7,020 235 2 - 7,257
Accounts Receivable - 2,675 272 - 2,947
Income taxes receivable 6,074 - - - 6,074
Inventory - 6,728 - - 6,728
Assets held for resale - - - - -
Prepaid expenses 1,665 1,951 2 - 3,618
Other current assets 392 1,860 - - 2,252
_______________________________________________________________________
Total current assets 15,151 16,692 474 - 32,317
Property and equipment, net - 231,331 6,514 - 237,845
Deferred tax asset 1,184 (753) 427 - 858
Long term investment - 3,029 3,896 - 6,925
Goodwill 7,657 - - - 7,657
Prepaid loan fees 7,099 - - - 7,099
Other assets - 1,660 2,077 - 3,737
Intercompany 38,230 (65,250) 27,020 - -
Investment in Subsidiaries 123,142 141,831 - (264,973) -
_______________________________________________________________________
Total assets $192,463 $328,540 $40,408 $(264,973) $296,438
=======================================================================
</TABLE>
14[PAGE]
ASC East, Inc. and Subsidiaries
<TABLE>
Balance Sheet at January 26, 1997
(in thousands)
<CAPTION>
ASC East Guarantor Non-Guarantor Eliminations Consolidated
Subsidiaries Subsidiaries ASC East
(Unaudited) (Unaudited) (Unaudited) (Unaudited) (Unaudited)
<S>
LIABILITIES & STOCKHOLDERS' <C> <C> <C> <C>
EQUITY
Current liabilities
Current portion of
long-term debt $ - $8,383 $ - $ - $8,383
Accounts payable
and accrued expenses - 16,838 42 - 16,880
Federal income tax payable - 546 111 - 657
Due to shareholder 4,754 - - 4,754
Deposits and other
unearned revenue - 12,419 14 - 12,433
Accrued interest 428 1,158 - - 1,586
Other accrued expenses 1,686 11,230 5,522 - 18,438
___________________________________________________________________
Total current liabilities 6,868 50,574 5,689 - 63,131
Long-term debt 169,681 10,713 4,165 - 184,559
Deferred income taxes -
long-term - 32,425 (509) - 31,916
Minority interest - - - - -
Other long-term liabilities - 4,711 128 - 4,839
___________________________________________________________________
Total liabilities 176,549 98,423 9,473 - 284,445
Stockholders' equity
Common stock 10 13,257 6,002 (19,259) 10
Paid in capital 3,762 202,452 24,794 (227,246) 3,762
Retained earnings 12,142 14,408 139 (18,468) 8,221
___________________________________________________________________
Total equity 15,914 230,117 30,935 (264,973) 11,993
___________________________________________________________________
Total liabilities
and equity $192,463 $328,540 $40,408 $(264,973) $296,438
====================================================================
</TABLE>
15[PAGE]
ASC East, Inc. and Subsidiaries
<TABLE>
Statement of cash flows for the six month period ended January 26,1997
(in thousands)
<CAPTION>
ASC East Guarantor Non-Guarantor Eliminations Consolidated
Subsidiaries Subsidiaries ASC East
<S> <C> <C> <C> <C> <C>
Cash flow from operating activities
Net loss $(5,989) $(3,875) $(46) - $(9,910)
Adjustments to reconcile
net loss to net cash
provide by (used in)
operating activities:
Depreciation and amortization 918 7,938 15 - 8,871
Deferred income taxes (14) 392 (15) - 363
Decreases (increases) in assets:
Investments held in escrow 7,477 (235) (2) - 7,240
Accounts receivable (272) (217) - (489)
Income tax receivable (6,074) - - - (6,074)
Inventory - (1,718) 15 - (1,703)
Assets held for resale - 14,921 - - 14,921
Prepaid expenses (609) 359 3 - (247)
Other current assets (392) 1,115 - - 723
Other assets - 6,798 (1,470) (5,131) 197
Increases (decreases) in liabilities:
Accounts payable and accrued expenses 995 14,079 5,178 - 20,252
Income taxes payable - (125) 111 - (14)
Deposits and unearned revenue - 9,664 (772) - 8,892
Accrued interest (680) 775 - - 95
Other long-term liabilities - - - - -
Due to affiliate 9,791 (11,080) 1,594 (305) -
_________________________________________________________________
Cash flow provided by
(used in) operating activities 5,423 38,736 4,394 (5,436) 43,117
Cash flow from investing activities
Additions to property and equipment (1,223) (11,732) (5,396) - (18,351)
Purchase of minority interest (2,492) - - - (2,492)
Sale/purchase of long-term
term investments - (3,029) 447 - (2,582)
_________________________________________________________________
Cash used in investing activities (3,715) (14,761) (4,949) - (23,425)
Cash flows from financing activities
Reduction in note payable to
shareholder 4,754 (5,375) - - (621)
Net proceeds (reductions) in
revolving credit agreement (6,462) (18,138) (553) 5,436 (19,717)
_________________________________________________________________
Net cash provided by (used in)
financing activities (1,708) (23,513) (553) 5,436 (20,338)
_________________________________________________________________
16[PAGE]
ASC East, Inc. and Subsidiaries
Net increase (decrease) in cash
and short-term investments - 462 (1,108) - (646)
Cash and short-term investments
at the beginning of the period - 2,781 1,306 - 4,087
_________________________________________________________________
Cash and cash equivalents at
the end of the period $- $3,243 $198 $- $3,441
</TABLE>
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 six months ended January 26, 1997, and 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 estimates.
Factors that could cause actual results to differ materially
include, among other matters, electric utility restructuring, including
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 $9.9
million. 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 approximately 15% of current availability by
the close of the third quarter.
17[PAGE]
ASC East, Inc. and Subsidiaries
The Company's liquidity was positively affected by the sale of the
Waterville Valley and Mount Cranmore resorts which closed November 27,
1996. The sale price for the resorts was $17.5 million, with $14.8
million 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 the 1997 fiscal year and the first and second quarters of
fiscal 1998 and a significant summer capital program.
2. Capital Resources. The Company's only material commitment for
capital expenditures as of January 26, 1997 was the completion of
construction of the Grand Summit Hotel 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 $4.5 million in cash provided by the
Company, and an $8.5 million 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 $2.9 million in borrowings
under the Company's senior credit facility and $1.6 million 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 ASC East, Inc.
or any of its other subsidiaries.
Changes in Results of Operations
Changes for the Second Quarter of Fiscal 1997 compared to the Second
Quarter of Fiscal 1996.
1. Resort revenues. Resort revenues increased from $26.5 million for
the second quarter of fiscal 1996 to $59.4 million for the second
quarter of fiscal 1997. The $32.9 million dollar increase in revenue is
attributable to the addition of the S-K-I group of resorts in fiscal
1997 due to the acquisition in June 1996.
18[PAGE]
2. Real estate revenues. Real estate revenues decreased $2.6 million
in the second quarter of fiscal 1997 as compared to the second quarter
of fiscal 1996. The decrease is attributable primarily to all the
quarter-shares 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 Hotel and Crown Club quarter-share hotel at the
Attitash/Bear Peak Resort in April 1997 and begin to close on the over
$5.5 million in quarter-share sales currently under contract by the end
of the third quarter.
3. Cost of resort operations. Cost of resort operations increased
from $15.0 million for the second quarter of fiscal 1996 to $39.0
million for the second quarter of fiscal 1997. The increase of $24.0
million, or 160%, is principally attributable to the inclusion of the S-
K-I group of resorts.
4. Cost of real estate operations. Cost of real estate operations
decreased $2.3 million in the second quarter of fiscal 1997. The
decrease is attributable primarily to all the quarter-shares at the
Summit Hotel at Sunday River being fully sold out in July 1996.
Accordingly, cost of real estate operations has decreased consistently
with real estate revenues.
5. Marketing, General and Administrative. M,G&A expense increased
from $2.9 million for the second quarter of fiscal 1996 to $7.7 million
for the second quarter of fiscal 1997. The inclusion of the S-K-I
Resorts accounts for 92% of the increase. The Company's Pre-Merger
Resorts showed a 8% increase compared to the same quarter of fiscal 1996
attributable to increased marketing campaigns and start up expenses of
the American Skiing Company.
6. Depreciation & Amortization. Depreciation and amortization
increased from $2.5 million for the second quarter of fiscal 1996 to
$7.3 million for 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 at the Pre-Merger Resorts.
7. Interest Expense. Interest expense increased from $.8 million for
the second quarter of fiscal 1996 to $5.6 million for the second quarter
of fiscal 1997. The increase was caused by additional indebtedness
issued in conjunction with the acquisition of S-K-I Ltd. and the
Company's summer 1996 capital improvement program.
8. Income Tax Expense. Income tax expense increased from a $.3
million benefit for the second quarter of fiscal 1996 to a provision of
$.2 million for the second quarter of fiscal 1997. This increase is
attributable principally to two factors: (i) the conversion of the most
profitable 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 S-K-I Resorts for the quarter.
19[PAGE]
ASC East, Inc. and Subsidiaries
Changes in Results of Operations
Changes for the First Six Months of Fiscal 1997 compared to the First
Six Months of Fiscal 1996.
1. Resort revenues. Resort revenues increased from $30.9 million for
the six months ended January 28, 1996 to $71.1 million for the six
months ended January 26, 1997. The increase of $40.2 million is
attributable to the addition of the S-K-I group of resorts in fiscal
1997 due to the acquisition in June 1996.
2. Real estate revenues. Real estate revenues decreased $1.4 million
for the six months January 26, 1997 as compared to the six months ended
January 28, 1996. The decrease is attributable primarily to all of the
quarter-share units at the Summit Hotel at Sunday River being fully sold
out in July 1996. The real estate revenue for the six months ended
January 26, 1997 is primarily attributable to the sales of Locke
Mountain townhouses at Sunday River Ski Resort. The Company expects to
complete construction of its new Grand Summit Hotel and Crown Club
quarter-share hotel at the Attitash Bear Peak Resort in April 1997 and
begin to close on the over $5.5 million in quarter-share sales currently
under contract by the end of the third quarter of fiscal 1997.
3. Cost of resort operations. Cost of resort operations increased
from $20.3 million for the six months ended January 28, 1996 to $54.0
million for the six months ended January 26, 1997. The increase of $33.7
million, or 166%, is attributable principally to the inclusion of the S-
K-I group resorts.
4. Cost of real estate operations. Cost of real estate operations
decreased $1.5 million for the six months ended January 26, 1997 as
compared to the six months ended January 28, 1996. The decrease is
attributable primarily to all the quarter-shares at the Summit Hotel at
Sunday River being fully sold out in July 1996. Accordingly, cost of
real estate operations has decreased consistently with real estate
revenues.
5. Marketing, General and Administrative. M,G&A expense increased
from $5.5 million in the first six months of fiscal 1996 to $12.5
million in the first six months of fiscal 1997. The inclusion of the S-
K-I Resorts accounts for 94% of the increase. The Company's Pre-Merger
Resorts showed an increase of 10% compared to the prior fiscal year's
six months attributable to new marketing campaigns and start up expenses
for the American Skiing Company.
6. Depreciation & Amortization. Depreciation and amortization
increased from $2.8 million to $8.9 million 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.
21[PAGE]
ASC East, Inc. and Subsidiaries
7. Interest Expense. Interest expense increased from $1.5 million in
the first six months of fiscal 1996 to $13.0 million 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 Ltd.
and the Company's summer 1996 capital improvement program.
8. Income Tax Benefits. Income tax benefit increased from $.4
million for the first six months of fiscal 1996 to $6.1 million for the
first six months of fiscal 1997 attributable to seasonally related first
quarter losses.
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 due to the scheduled interest payment on
January 15, 1997 in connection with the Company's 12% Senior
Subordinated Notes due 2006.
2. Income Tax Receivable. Income tax receivable increased $6.1
million. The increase is attributable in full to the loss experienced by
the Company in the first six months of fiscal 1997.
3. Inventory. Inventories increased $1.7 million. The increase is
due to the Company's seasonal operating cycle.
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 Department of Justice ("DOJ").
5. Property, Plant and Equipment. Increased $10.3 million,
attributable to capital expenditures of $18.7 million net of $8.4
million in depreciation expense.
6. Long Term Investment. Long term investments increased $2.6
million primarily due to the $2.7 million dollar note received in
conjunction with the divestiture of Waterville and Cranmore.
7. Goodwill. Goodwill increased $1.2 million. The increase is due to
a change in the purchase accounting related to the acquisition of S-K-I,
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. The decrease
is attributable to the development and sale of Locke Mountain Townhouses
at Sunday River.
21[PAGE]
9. Current Portion of Long-Term Debt. Current portion of long-term
debt decreased $14.5 million. This decrease is primarily attributable to
reductions in the Senior Credit Facility due to proceeds from the
divestiture of Waterville and Cranmore, and cash from operations.
10. Accounts Payable. Accounts payable increased $3.5 million. The
increase is attributable to increased operating expenses related to the
ski season.
11. Deposits and Unearned Revenue. Deposits and unearned revenue
increased $9.0 million. This increase is related to lodging deposits,
multi-day ticket products and unearned season pass revenue.
12. Other Accrued Expenses. Other accrued expenses increased $16.7
million. The increase is related to real estate leases and other
payments that are determined as a percentage of revenue.
13. Minority Interest. Minority interest decreased $2.5 million.
This is related to the Company's acquisition of the remaining 49% of
Sugarloaf. (See footnote number 2)
14. Other Long-Term Liabilities. Other long-term liabilities
decreased $2.0 million. This decrease is due to 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.
22[PAGE]
ASC East, Inc. and Subsidiaries
Part II - Other Information
Item 6
Exhibits
Included herewith is the Financial Data Schedule submitted as
Exhibit 27 in accordance with Item 601(c) of Regulation S-K.
SIGNATURES
Pursuant to the requirements of the Securities Exchange act of
1934, the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
AMERICAN SKIING COMPANY
Date: February 23, 1998 /s/ Thomas M. Richardson
Thomas M. Richardson
Senior Vice President Finance
Chief Financial Officer
(Principal Financial and
Accounting Officer)
Date: February 23, 1998 /s/ Christopher E. Howard
Christopher E. Howard
Chief Administrative Officer and
General Counsel
(Duly Authorized Officer)
23[PAGE]
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS
<FISCAL-YEAR-END> JUL-27-1997 JUL-27-1997
<PERIOD-END> JAN-26-1997 JAN-26-1997
<CASH> 3,441,000 3,441,000
<SECURITIES> 7,257,000 7,257,000
<RECEIVABLES> 2,947,000 2,947,000
<ALLOWANCES> 0 0
<INVENTORY> 6,728,000 6,728,000
<CURRENT-ASSETS> 32,317,000 32,317,000
<PP&E> 245,946,000 245,946,000
<DEPRECIATION> 8,101,000 8,101,000
<TOTAL-ASSETS> 296,438,000 296,438,000
<CURRENT-LIABILITIES> 63,131,000 63,131,000
<BONDS> 184,559,000 184,559,000
0 0
0 0
<COMMON> 10,000 10,000
<OTHER-SE> 11,983,000 11,983,000
<TOTAL-LIABILITY-AND-EQUITY> 296,438,000 296,438,000
<SALES> 61,158,000 74,455,000
<TOTAL-REVENUES> 61,158,000 74,455,000
<CGS> 47,639,000 68,497,000
<TOTAL-COSTS> 47,639,000 68,497,000
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 7,344,000 8,871,000
<INCOME-PRETAX> 618,000 (15,984,000)
<INCOME-TAX> 235,000 (6,074,000)
<INCOME-CONTINUING> 383,000 (9,910,000)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 383,000 (9,910,000)
<EPS-PRIMARY> .39 10.13
<EPS-DILUTED> .39 10.13
</TABLE>
